<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1996.
REGISTRATION NO. 333-2214
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 3
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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<S> <C> <C>
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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<S> <C>
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 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 3,852,500(1) $16.00(2) $61,640,000(2) $21,255(3)
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(1) Includes 502,500 shares as to which the Company has granted the U.S.
Underwriters an option to cover over-allotments, if any.
(2) Estimated solely for the purposes of calculating the registration fee.
(3) Of this fee, $19,927 was paid by the Company in connection with the original
filing of this Registration Statement on March 11, 1996.
----------------------
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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<PAGE> 2
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
------ ----------------------------------------- -----------------------------------------
<C> <S> <C>
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 20, 1996
PROSPECTUS
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<S> <C> <C>
LOGO 3,350,000 SHARES
WYNDHAM HOTEL CORPORATION
COMMON STOCK
</TABLE>
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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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<S> <C> <C> <C>
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
of Wyndham brand rooms added in
[GRAPH showing number of Wyndham brand comparison with those added by other
hotel rooms in 1993, 1994 and 1995 as upscale hotel companies (according to
10,660, 11,462 and 16,391, hotel room data compiled by Smith Travel
respectively.] 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
21%, 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. Industry data for 1995 food and
beverage margins are estimates.
<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 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 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 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 consistently deliver 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 recognition of
3
<PAGE> 11
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 69%,
$80.38 and $55.06, 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%
(estimate), 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 $10,820 (estimate), 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 16%, 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.
5
<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,
industry-wide percentage growth in demand for hotel rooms was nearly double
industry-wide percentage growth in supply (3.0% versus 1.6%). In the markets in
which the Company's hotels operate, 1995 percentage growth in demand outpaced
percentage growth in supply by .2%. In the 1996 First Quarter, however,
industry-wide percentage growth in supply exceeded industry-wide percentage
growth in demand by .1%, and in the markets in which the Company's hotels
operate, the percentage growth in supply exceeded the percentage growth in
demand by .2%. The Company believes that industry-wide quarterly data are not
necessarily indicative of a full year's results and that poor demand in January,
which was affected by severe seasonal weather, impacted the 1996 First Quarter
results.
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, one of which opened on May 15, 1996, two of which the
Company expects to open in the remainder of 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
7
<PAGE> 15
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.
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
8
<PAGE> 16
acquisition cost and $4.0 million of improvements to the Wyndham Rose Hall
Resort), the Company will have remaining proceeds of approximately $18.0
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."
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................................................... 16.2
Cash to fund operating and growth strategies(2)(3).................. 25.2
-----
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 73,264 122,686 16,942 19,868 32,972
Operating income................................. 7,094 12,337 14,626 16,889 4,977 6,742 8,405
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 5,073 3,018 5,167 5,634
Income taxes(3).................................. -- -- -- (2,004) -- -- (2,225)
Net income....................................... 1,654 6,265 7,949 3,069 3,018 5,167 3,409
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 ACTUAL PRO FORMA(1)
------------ -------- ------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................................. $ 4,160 $ 6,084 $ 33,103
Total assets........................................................................... 133,403 143,083 202,512
Long-term obligations including current portion........................................ 90,978 92,428 120,729
Total partners' capital and stockholders' equity....................................... 17,557 22,464 53,600
</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 $ 10,314
Net cash provided by operating activities........ 8,265 15,085 16,215 11,672 2,092 4,685 238
Net cash (used in) provided by investing
activities..................................... (9,758) (616) (21,343) 66,383 (4,489) (3,095) 84,722
Net cash provided by (used in) financing
activities..................................... 1,638 (11,676) 5,667 (50,706) 4,863 334 (56,017)
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 2.4x 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 new hotels (one of which opened on May 15, 1996,
and the other of which is 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
$53.6 million and its ratio of earnings to fixed charges was 2.2 to 1. The
Company's indebtedness is substantial in relation to its stockholders' 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. 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, there
can be no assurance that Smith Barney would not grant any such consent. See
"Shares Eligible for Future Sale."
20
<PAGE> 28
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 $18.0 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)................................................... 16.2
Cash to fund operating and growth strategies(3)(5)(6).................. 25.2
-------
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 $1.9 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) $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, (b) not reclassifying $.7 million of
restricted cash to cash and cash equivalents and (c) not considering $.6
million in transaction costs already paid as of March 31, 1996. These
reductions are offset by net projected lower indebtedness of .1 million that
will be repaid as part of the Formation and 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 $43.8 million ($50.8 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 $95.3 million, yielding estimated combined net proceeds from
the Offerings of $139.1 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 $18.0 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 $139.1 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 $17.2 million,
or $1.08 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 $45.6 million, or $2.38
per share. This represents an immediate increase in pro forma net tangible book
value of $1.30 per share to existing stockholders and an immediate dilution of
$12.62 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............. 1.08
Increase attributable to the Formation and the Offerings........... 1.30
---
Pro forma net tangible book value per share after giving effect to
the Formation and the Offerings.................................... 2.38
------
Dilution per share to new investors.................................. $12.62
======
</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% $ 66,204,512 56.9% $ 4.18
New investors................. 3,350,000 17% 50,250,000 43.1% $ 15.00
---------- ---- ---------- ----
Total............... 19,204,301 100% $116,454,512 100%
========== ==== ========== ====
</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 $ 33,103(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...................................... -- 66,012
Retained earnings............................................... -- 7,213
Receivables from affiliates..................................... (2,375) (1,242)
Notes receivable from stockholders.............................. -- (18,576)
---------- ---------
Total partners' capital and stockholders' equity........ 22,464 53,599
---------- ---------
Total capitalization.................................... $ 122,864 $ 174,328
========== =========
</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,
(ii) the sale/leaseback of the GHALP Properties to an unaffiliated REIT and
(iii) the repayment of indebtedness. 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
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 $ 29,614,797 (a) $(2,595,905)(p) $ 33,103,312
Cash, restricted....................... 2,932,921 (302,391)(b) 1,196,519(q) 3,827,049
Accounts receivable, net............... 13,623,182 -- 2,232,371(r) 15,855,553
Due from affiliates.................... 2,438,362 -- 152,389(s) 2,590,751
Inventories............................ 1,062,044 -- 189,754(r) 1,251,798
Deferred income taxes.................. -- 1,000,000 (c) -- 1,000,000
Other.................................. 529,892 -- 1,408,883(t) 1,938,775
------------ ------------ ----------- ------------
Total currents assets................ 26,670,821 30,312,406 2,584,011 59,567,238
Investment in an affiliate's hotel
partnership............................ 3,052,355 -- (3,052,355)(u) --
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) --(v) 84,948,054
Management contract costs, net........... 7,299,226 -- -- 7,299,226
Security deposits........................ -- -- 13,600,000(w) 13,600,000
Deferred income taxes.................... -- 16,000,000(c) -- 16,000,000
Other.................................... 9,054,385 1,613,574(e) 269,613(x) 10,937,572
------------ ------------ ----------- ------------
Total assets.................... $143,083,313 $ 46,027,357 $13,401,269 $202,511,939
============ ============ =========== ============
LIABILITIES AND PARTNERS' CAPITAL AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses............................. $ 9,210,678 $ (571,157)(f) $ 4,426,716(y) $ 13,066,237
Accounts payable and accrued expenses
due to affiliates.................... 900,363 -- -- 900,363
Deposits............................... 952,415 -- 605,790(z) 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)(aa) --
Current portion of capital lease
obligation........................... 387,944 -- -- 387,944
Due to affiliates...................... 2,337,876 (2,337,876)(g) --(bb) --
------------ ------------ ----------- ------------
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)(cc) 100,000,000
Capital lease obligation................. 20,340,917 -- -- 20,340,917
Deferred gain............................ -- -- 12,342,688(dd) 12,342,688
Other.................................... 4,512,755 (4,512,755)(i) -- --
------------ ------------ ----------- ------------
82,964,021 37,821,028 11,898,556 132,683,605
------------ ------------ ----------- ------------
Minority interest........................ 7,971,623 (7,971,623)(j) -- --
Partners' capital and stockholders'
equity:
Partners' capital...................... 24,838,632 (22,876,134)(k) (1,962,498)(ee) --
Preferred Stock........................ -- -- --
Common Stock........................... -- 192,043 (l) -- 192,043
Additional paid-in capital............. -- 66,012,469 (l) -- 66,012,469
Retained earnings...................... -- 7,212,863 (m) -- 7,212,863
Receivables from affiliates............ (2,374,601) 1,132,457 (n) -- (1,242,144)
Notes receivable from stockholders..... -- (18,575,646)(o) -- (18,575,646)
------------ ------------ ----------- ------------
Total partners' capital and
stockholders' equity.......... 22,464,031 33,098,052 (1,962,498) 53,599,585
------------ ------------ ----------- ------------
Total liabilities and
equity.................... $143,083,313 $ 46,027,357 $13,401,269 $202,511,939
============ ============ =========== ============
</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.................... 7,353,563 131,972(a) 7,485,535
Management fees -- affiliates...... 9,567,326 538,193(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...... 6,310,730 947,348(c) 7,258,078
Other.............................. 147,584 147,584
----------- ----------- ----------- ------------
Total operating costs and
expenses............... 73,264,356 2,247,348 47,174,623 122,686,327
----------- ----------- ----------- ------------
Operating income................... 14,625,352 (1,417,183) 3,680,666 16,888,835
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...... -- 726,040(p) 726,040
----------- ----------- ----------- ------------
Income before minority interests... 8,673,897 (6,343,095) 2,742,519 5,073,321
Income attributable to minority
interests........................ 724,415 (724,415)(g) --
----------- ----------- ----------- ------------
Income before income taxes......... $ 7,949,482 $ (5,618,680) 2,742,519 $ 5,073,321
Provision for income taxes......... -- (2,003,962)(h) (2,003,962)
----------- ----------- ----------- ------------
Net income......................... $ 7,949,482 $ (7,622,642) $ 2,742,519 $ 3,069,359
=========== =========== =========== ============
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................... 2,600,777 18,662(a) 2,619,439
Management fees -- affiliates..... 2,600,805 148,509(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 12,794,117(n) 22,970,064
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..... 1,661,200 248,416(c) 1,909,616
Other............................. 143,994 143,994
----------- ----------- ----------- ------------
Total operating costs
and expenses.......... 19,868,152 573,416 12,529,968 32,971,536
----------- ----------- ----------- ------------
Operating income.................. 6,741,894 (406,245) 2,068,997 8,404,646
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..... -- 181,510(p) 181,510
----------- ----------- ----------- ------------
Income before minority
interests....................... 5,760,429 (1,547,942) 1,421,654 5,634,141
Income attributable to minority
interests....................... 593,237 (593,237)(g) --
----------- ----------- ----------- ------------
Income before income taxes........ 5,167,192 (954,705) 1,421,654 5,634,141
Provision for income taxes........ -- (2,225,485)(h) (2,225,485)
----------- ----------- ----------- ------------
Net income........................ $ 5,167,192 $ (3,180,190) $ 1,421,654 $ 3,408,656
=========== =========== =========== ============
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.
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............................................. (13,781,589)(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
($3,805,861) and unaffiliated partners ($522,052) 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 (k) and (l).............. (19,856,000)(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)
-------------
$ 29,614,797
=============
(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 fees and expenses to be deferred which
relate to the issuance of the Notes and the $100.0 million
Revolving Credit Facility................................... $ 7,984,624(8)
Reversal of incurred transaction fees and expenses recorded
through March 31, 1996...................................... (5,148,955)(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)
-------------
$ 1,613,574
=============
(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) Adjustment to reflect payment of fees and expenses incurred
through March 31, 1996, which relate to the issuance of Common
Stock, $100.0 million of Notes and the $100.0 million Revolving
Credit Facility.................................................. $ 4,512,755(8)
=============
(j) 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)
=============
</TABLE>
35
<PAGE> 43
<TABLE>
<S> <C> <C>
(k) Adjustments to reflect a net decrease in partners' capital
consisting of:
Distribution of notes receivable proceeds........................ $ 1,132,457(6)
Reclassification of partners' capital to additional paid in
capital reflects the 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 ... 21,743,677(l)
------------
$ 22,876,134
============
(l) 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................................ 6,433,165(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.................. (1,887,677)(1)
Effect of recording deferred income taxes, in accordance with
SFAS 109, arising as a result of the Formation
transactions................................................ (3,000,000)(7)
------------
$(66,204,512)
============
Common Stock (19,204,301 shares of Common Stock at par value of
$.01)....................................................... (192,043)
Additional paid-in capital....................................... (66,012,469)
------------
(66,204,512)
============
(m) 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)
============
(n) Adjustment to reflect the collection of affiliated partnerships'
notes
receivable....................................................... $ (1,132,457)(6)
============
(o) 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>
36
<PAGE> 44
GHALP
<TABLE>
<S> <C> <C>
(p) 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 $1.7 million and a $13.6 million
security deposit, which will be held as retained funds
pursuant to the HPT sale/leaseback agreement................ 119,973,926(12)
Repayment of existing indebtedness including accrued interest.... (95,567,969)(13)
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
$.5 million represents a distribution by Garden Hotel
Partners, L.P. to its shareholders.......................... (30,051,000)(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............................... (584,790)(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)
-------------
$ (2,595,905)
============
(q) 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
============
(r) 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)
============
(s) 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
============
</TABLE>
37
<PAGE> 45
<TABLE>
<S> <C> <C>
(t) 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
============
(u) 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)
============
(v) 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
million step up representing the difference between the
acquired partners' equity balance and the purchase price of
approximately $29.5 million................................. $ 121,435,213(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... (121,435,213)(12)
-------------
$ 0
============
(w) Adjustment to reflect the security deposit, which will be held as
retained funds pursuant to the HPT sale/leaseback agreement...... $ 13,600,000(12)
============
(x) 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
============
(y) 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)
============
(z) 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)
============
(aa) 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)
============
</TABLE>
38
<PAGE> 46
<TABLE>
<S> <C> <C>
(bb) 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
=============
(cc) 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
=============
(dd) 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 $1.7 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..................................... $ (12,138,713)(12)
Increase in the deferred gain of GHALP as a result of acquiring
70% partnership interest in GHALP from an unrelated third
party....................................................... (203,975)(11)
-------------
$ (12,342,688)
=============
(ee) 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.................................... $ (29,575,000)(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
$.5 million represents a distribution by Garden Hotel
Partners, L.P. to its shareholders.......................... 30,051,000(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....................................................... 203,975(11)
-------------
$ 1,962,498
=============
</TABLE>
39
<PAGE> 47
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 debt and equity financing obtained.
(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 and
pursuant to the GHALP partnership agreements.
(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.
40
<PAGE> 48
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............................. $ 131,972 $ 18,662
=========== ============
Affiliated -- Management Fees............................... $ 538,193 $ 148,509
=========== ============
Unaffiliated -- Other....................................... $ 160,000 --
=========== ============
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............... $ 1,293,981 $ 323,495
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.............................. (96,344) (24,086)
------------ ---------------
$ 947,348 $ 248,416
=========== ============
(d) The pro forma combined statements do not include any
estimated interest earned on $27.0 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 and quarterly interest
earned would be approximately $1,350,000 and $337,500,
respectively.
(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>
41
<PAGE> 49
<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.................................................... $ (2,003,962) $(2,225,485)
=========== ============
(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>
42
<PAGE> 50
<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
$3.5 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 $13,873,175
Elimination of management and service fee expenses of GHALP,
net of deferred gain on sale of GHALP Properties of
$135,251 and $68,724 at December 31, 1995 and March 31,
1996, respectively..................................... (3,910,677) (1,079,058)
------------ ---------------
$ 48,915,052 $12,794,117
=========== ============
(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............................................. $ 726,040 $ 181,510
=========== ============
</TABLE>
43
<PAGE> 51
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 73,264 122,686 16,942 19,868 32,972
Operating income....... 5,030 8,419 7,094 12,337 14,626 16,889 4,977 6,742 8,405
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 5,073 3,018 5,167 5,634
Pro forma income
taxes(3)............. -- -- -- -- -- (2,004) -- -- (2,225)
Net income (loss)...... (2,049) 163 1,654 6,265 7,949 3,069 3,018 5,167 3,409
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>
44
<PAGE> 52
<TABLE>
<CAPTION>
AS OF MARCH 31,
AS OF DECEMBER 31, --------------------
---------------------------------------------------- PRO FORMA
1991 1992 1993 1994 1995 1996 1996(1)
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 3,086 $ 682 $ 827 $ 3,619 $ 4,160 $ 6,084 $ 33,103
Total assets................................ 113,426 108,647 113,465 113,276 133,403 143,083 202,512
Long-term obligations, including current
portion................................... 90,881 87,064 88,410 84,161 90,978 92,428 120,729
Total partners' capital and stockholders'
equity (deficit).......................... (9,075) (7,303) (1,488) 1,716 17,557 22,464 53,600
</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%.
45
<PAGE> 53
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
46
<PAGE> 54
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> 55
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 Officers' 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, this component of
compensation expense will not 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 7.4%, 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> 56
Pro forma hotel expenses increased by 125.7%, or $12.8 million, to $23.0
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, 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 7.4%, 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 15.0%, or
approximately $248,000, to $1.9 million in 1996 from $1.7 million in historical
1996, primarily reflecting the additional amortization of approximately $323,000
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 24.7%, or $1.7 million, to $8.4 million in 1996 from $6.7 million
in historical 1996.
Pro forma interest expense increased by 54.0%, 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 $829,000 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 $12.4 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 $2.2 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
34.0%, or $1.8 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> 57
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 15.0%, or
approximately $947,000, to $7.3 million in 1995 from $6.3 million in historical
1995, primarily reflecting the additional amortization of $1.3 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 15.5%, 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 $726,000 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
61.4%, or $4.9 million, to $3.1 million in 1995 from $7.9 million in historical
1995.
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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 0.2
----- ----- ----- ----- -----
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 (0.1) 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 $21.9 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 27.7% 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> 59
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 flat at 39.1% in 1996 and 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 13.1%, 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 11.5%, 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> 60
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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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 $139.1 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 $18.0 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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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.
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BUSINESS
Wyndham Hotel Corporation is a 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 $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 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. Industry-wide percentage growth in room demand
exceeded industry-wide percentage growth of new room supply by 2.0%, 2.6%, 2.8%
and 1.4% in 1992, 1993, 1994 and 1995, respectively. In the markets in which the
Company's hotels operate, 1995 percentage growth in demand outpaced percentage
growth in supply by .2%. In the 1996 First Quarter, however, industry-wide
percentage growth in supply exceeded industry-wide percentage growth in demand
by .1%, and in the markets in which the Company's hotels operate, the percentage
growth in supply exceeded the percentage growth in demand by .2%. The Company
believes that industry-wide quarterly data are not necessarily indicative of a
full year's results and that poor demand in January, which was affected by
severe seasonal weather, impacted the 1996 First Quarter results. 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.
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 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 1.9%, 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
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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 AND
SUPPLY GROWTH(1)
UPSCALE HOTELS:
REVPAR GROWTH(1)
(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.
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
brand name that is nationally recognized as being synonymous with 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 consistently deliver quality hotel
products and services throughout its hotel
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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.
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
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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 69%, $80.38 and $55.06, 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.
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."
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<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% 69%
1996 First Quarter................................... 72% 64%
ADR:(4)
1993................................................. $ 76.39 $ 74.19
1994................................................. 80.16 77.19
1995................................................. 84.38 80.38
1996 First Quarter................................... 95.92 85.06
REVPAR:(5)
1993................................................. 51.31 49.71
1994................................................. 56.09 52.57
1995................................................. 60.99 55.06
1996 First Quarter................................... 69.03 54.69
Gross operating profit margin:(6)
1993................................................. 32% 30%
1994................................................. 34% 31%
1995................................................. 36% 33%(7)
1996 First Quarter................................... 37% *
Food and beverage margin:(8)
1993................................................. 29% 17%
1994................................................. 31% 18%
1995................................................. 31% 21%(7)
1996 First Quarter................................... 28% *
Gross operating profit per available room:(9)
1993................................................. $ 9,612 $ 8,397
1994................................................. 11,417 9,364
1995................................................. 12,547 10,820(7)
1996 First Quarter................................... 3,570 *
</TABLE>
---------------
* 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) Gross operating profit margin data, food and beverage margin data and gross
operating profit per available room data for 1995 are estimates.
(8) Food and beverage margin represents food and beverage operating profit as a
percentage of food and beverage revenues.
(9) Gross operating profit per available room represents gross operating profit
divided by total available rooms for the period.
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<PAGE> 72
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 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."
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<PAGE> 73
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 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.
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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 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
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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 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
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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 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."
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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 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.
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<PAGE> 78
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 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
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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 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.
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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. The first hotel, Wyndham New Orleans Riverfront Hotel (the
"Riverfront Hotel"), is a Wyndham Hotel located in New Orleans, Louisiana that
contains 202 hotel rooms and approximately 1,800 square feet of meeting space.
This hotel opened on May 15, 1996. The second hotel, Wyndham Old San Juan Hotel
& Casino (the "San Juan Hotel"), which is currently under construction, 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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<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 and San
Juan hotels are Fall 1996, Fall 1996 and first quarter 1997, respectively.
The Riverfront opened on May 15, 1996.
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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<PAGE> 84
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> 85
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.
The Company has no current plans to undertake further steps, other than
those described in the Recent Environmental Assessments, to assess environmental
liabilities with respect to hotel properties owned, leased, managed or
franchised by it. These Recent Environmental Assessments were performed by a
highly qualified environmental engineering firm, and were performed in
accordance with a scope of work that meets and exceeds the "Standard Practice
for Environmental Site Assessments: Phase I Environmental Site Assessment
Process," Designation E1527, promulgated by the American Society for Testing and
Materials. In the majority of the reports, the consultant concluded that no
further investigation of any material environmental issue is warranted and the
Company concurs with this conclusion. The Company does intend to follow the
recommendations contained in the Recent Environmental Assessments concerning
management practices and on-site conditions at two sites, implementation of an
operations and maintenance plan with respect to asbestos containing materials at
two sites, and registration of drywells at several sites. The Company does not
believe that any of these issues are material.
The Company has no current plans to assess any potential environmental
liabilities at managed or franchised properties. The Company believes that no
assessment is warranted because the risk of environmental liability being
imposed on it for environmental issues at hotel properties that it does not own
or lease, but merely manages or franchises, is lower. The Company believes the
risk of environmental liability is lower for three principal reasons. First,
because the nature of hotel management does not involve the handling of
hazardous substances, except in small, manageable quantities found in consumer
products and used for janitorial or maintenance purposes, the Company's
management activities are unlikely to create or contribute to an environmental
problem. The possibility of creating or contributing to an environmental problem
is even more remote in connection with a franchised hotel property because the
Company is not even present on the property. Second, because the Company is
unlikely to have created or contributed to an environmental problem at a hotel
property, the Company believes that, from a legal standpoint, it would either
have a defense
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to any claim for liability arising from an environmental problem not caused or
contributed to by it, or it would have an effective right of contribution under
various environmental statutes against the owner of the managed or franchised
property. In addition, in nearly all of its management agreements, the Company
is indemnified by the owner against all environmental problems not caused or
created by the Company. Third, the Company believes that the managed and the
franchised hotels are being operated in material compliance with environmental
laws. Based on its experience with managing many of the properties over a number
of years, the Company believes that it is aware of the environmental conditions
at these sites and of the types of issues that may arise at other sites, and
that it can appropriately manage any environmental issues that may arise from
operations in the future. Therefore, because the risk of liability arising from
the existence of an environmental problem at a managed or franchised property is
lower, the Company does not believe that the assessment of these properties is
warranted.
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.............. 43 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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<PAGE> 102
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 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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<PAGE> 104
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> 105
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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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 later of (i) six months prior to the date the annual retainer or,
if applicable, the first portion thereof, is to be paid to the Non-Employee
Director or (ii) the last day of the calendar year. Each election or change of
election will be effective as of the later of (i) six months following the
election, or (ii) January 1 following the election. The Non-Employee Director
may elect 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. A Non-Employee Director also may file an election
within 30 days after the date that such director is elected or appointed to the
Board of Directors, to be effective six months following the election.
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
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participate in the Retainer Plan. The Retainer Plan Committee will administer
the Retainer Plan in accordance with its terms.
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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<PAGE> 110
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.
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<PAGE> 111
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> 112
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
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<PAGE> 113
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
provides or expects to provide hotel management services to the following Hotel
Partnerships owning Wyndham hotels in which Crow
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<PAGE> 114
Family 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. (The Riverfront hotel opened on May 15, 1996.)
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.
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<PAGE> 115
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
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<PAGE> 116
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.
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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."
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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 letter agreement, the
Company has undertaken to use its best efforts to obtain for General Electric in
the Offering an allocation of shares of Common Stock equal to $2.5 million
divided by the initial public offering price. 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
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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 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. 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, there can be no assurance that Smith Barney
would not grant any such consent.
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.
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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 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,
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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);
(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
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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 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
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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;
(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
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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
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."
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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 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
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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."
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
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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, (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
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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 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
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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 (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.
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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.
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.
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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.
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
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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.
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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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> 135
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> 136
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> 137
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> 138
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> 139
"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> 140
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
133
<PAGE> 141
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.
134
<PAGE> 142
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> 143
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> 144
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 9,054,385
------------ ------------ ------------
Total assets............................. $113,276,354 $133,403,073 $143,083,313
============ ============ ============
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 affiliates.............................. 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
Other.............................................. -- -- 4,512,755
------------ ------------ ------------
84,404,668 77,787,396 82,964,021
------------ ------------ ------------
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 $143,083,313
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-3
<PAGE> 145
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 7,353,563 1,784,134 2,600,777
Management fees -- affiliates...... 6,316,897 7,371,893 9,567,326 1,620,094 2,600,805
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 -- affiliates........ -- -- 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 3,126,152
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> 146
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....................................................... 14,795,273
Capital distributions....................................................... (10,931,622)
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....................................................... 4,791,169
Capital distributions....................................................... (4,980,322)
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> 147
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 23,026 118,976
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) (2,904,097)
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
affiliates.................................... -- 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) (402,214) (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) (267,777) (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 14,795,273 9,060,457 4,791,169
Partners' capital distributions................... (4,662,068) (7,727,741) (10,931,622) (1,573,656) (4,980,322)
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 affiliates................. (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) (1,280,413) (1,036,955)
Repayments on capital lease obligations........... (22,410) (279,594) (125,836) (90,228) (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> 148
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> 149
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> 150
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.
At March 31, 1996, the Company had incurred costs associated with the
Offerings of $4,512,755 included in other assets and accrued in other
liabilities.
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> 151
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> 152
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 in
2000....................................................... -- 1,278,000
---------- ----------
$ -- $7,673,690
========== ==========
</TABLE>
F-11
<PAGE> 153
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> 154
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> 155
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> 156
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> 157
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 range of losses resulting from the ultimate
resolution of the aforementioned claim cannot be determined.
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> 158
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 $8.1 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> 159
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> 160
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> 161
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 March 31, 1996, and for the years ended December 31, 1993, 1994 and
1995 and three months ended March 31, 1996 were as follows:
CONDENSED COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents.................... $ 2,469,263 $ 3,707,735 $ 5,552,723
Cash, restricted as to use................... -- 2,595,172 2,630,530
Accounts receivable, net..................... 8,596,452 10,095,095 12,656,520
Other........................................ 5,092,051 5,243,464 3,651,032
----------- ----------- -----------
Total current assets................. 16,157,766 21,641,466 24,490,805
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.................... 47,594,394 47,320,281 46,933,016
Management contract costs, net................. 1,181,274 7,578,968 7,299,226
Other.......................................... 660,660 1,067,913 7,786,094
----------- ----------- -----------
Total assets......................... $68,562,804 $90,329,859 $99,721,345
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable and accrued liabilities..... $ 9,563,689 $ 6,599,900 $ 6,443,668
Deposits..................................... 1,401,024 1,913,836 980,963
Current portion of long-term debt and capital
lease obligations......................... 3,525,160 3,428,763 3,434,439
Due to affiliates............................ 1,035,207 1,453,800 1,200,000
----------- ----------- -----------
Total current liabilities............ 15,525,080 13,396,299 12,059,070
----------- ----------- -----------
Payable to affiliates.......................... 3,841,788 2,626,656 1,767,985
Payable to minority interest................... 202,920 218,052 222,052
Long-term debt and capital lease obligations... 31,163,361 40,659,163 42,349,714
Other.......................................... -- -- 4,512,755
----------- ----------- -----------
35,208,069 43,503,871 48,852,506
----------- ----------- -----------
Minority interest.............................. 6,653,971 7,378,386 7,971,623
----------- ----------- -----------
Partners' capital:
Receivables from affiliates.................. (1,829,252) (1,927,314) (2,230,851)
Partners' capital............................ 13,004,936 27,978,617 33,068,997
----------- ----------- -----------
Total partners' capital.............. 11,175,684 26,051,303 30,838,146
----------- ----------- -----------
Total liabilities and partners'
capital............................ $68,562,804 $90,329,859 $99,721,345
=========== =========== ===========
</TABLE>
See note to the condensed combined financial information.
F-20
<PAGE> 162
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED 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.................................... $44,069,417 $55,611,624 $65,523,432 $16,659,417 $21,144,537
----------- ----------- ----------- ----------- -----------
Operating costs and expenses................ 35,426,502 42,659,540 51,210,290 11,682,950 14,009,093
Depreciation and amortization............... 2,960,287 3,327,691 3,929,052 879,511 1,068,899
Other....................................... 310,583 175,047 104,612 (57,584) 95,460
----------- ----------- ----------- ----------- -----------
Total operating costs and
expenses......................... 38,697,372 46,162,278 55,243,954 12,504,877 15,173,452
----------- ----------- ----------- ----------- -----------
Operating income............................ 5,372,045 9,449,346 10,279,478 4,154,540 5,971,085
Interest expense, net....................... (4,441,841) (4,193,713) (3,815,845) (1,037,945) (888,705)
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............ 2,354,602 6,896,191 8,532,916 3,710,141 5,911,233
Income (loss) attributable to minority
interests................................. (210,638) 186,134 724,415 508,062 593,237
----------- ----------- ----------- ----------- -----------
Net income......................... $ 2,565,240 $ 6,710,057 $ 7,808,501 $ 3,202,079 $ 5,317,996
=========== =========== =========== =========== ===========
</TABLE>
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities............................... $ 5,022,051 $11,823,312 $13,143,427 $ 766,906 $ 4,177,309
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment....... (1,592,110) (1,819,845) (2,917,076) (307,471) (360,785)
Investments in management contracts...... (687,707) (285,387) (4,346,391) -- (23,039)
Notes and other receivables from
affiliates............................. -- (7,673,690) (3,818,883) (35,572)
Notes receivable......................... -- -- (2,450,587) -- --
Other.................................... 5,390 1,902,851 (3,080,122) (197,976) (2,223,328)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities.... (2,274,427) (202,381) (20,467,866) (4,324,330) (2,642,724)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Partners' contributed capital............ 4,709,297 1,780,738 13,710,768 9,060,457 4,579,075
Partners' capital distributions.......... (3,259,246) (6,368,330) (10,671,717) (1,367,846) (4,806,691)
Distribution made to withdrawing
partner................................ -- (2,577,483) -- --
Decrease in payable to affiliate......... 253,921 (1,035,207) (1,215,132) (119,160) (1,162,208)
Proceeds from long-term borrowings....... -- -- 13,600,000 -- 2,500,000
Repayments on long-term borrowings....... (4,070,916) (3,578,109) (4,074,759) (731,446) (750,062)
Repayments on capital lease
obligations............................ (22,410) (279,595) (125,836) (90,228) (53,711)
Other.................................... (315,159) (218,637) (82,930) 3,783) 4,000
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities............................. (2,704,513) (9,699,140) 8,562,911 6,755,560 310,403
----------- ----------- ----------- ----------- -----------
Increase in cash and cash equivalents...... 43,111 1,921,791 1,238,472 3,198,136 1,844,988
Cash and cash equivalents at beginning of
year..................................... 504,361 547,472 2,469,263 2,469,263 3,707,735
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of year... $ 547,472 $ 2,469,263 $ 3,707,735 $ 5,667,399 $ 5,552,723
=========== =========== =========== =========== ===========
</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> 163
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> 164
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 affiliates.............................. -- 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> 165
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> 166
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> 167
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 affiliates........................... -- -- (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> 168
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.
Interim Financial Information
The balance sheet as of March 31, 1996, the statement of partners' capital
for the three months then ended, and the statements of operations and cash flows
for the three months ended March 31, 1995 and 1996, have been prepared by the
Partnership 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 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.
F-27
<PAGE> 169
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
F-28
<PAGE> 170
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain amounts previously reported have been reclassified to conform with
the current year presentation.
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>
F-29
<PAGE> 171
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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>
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
F-30
<PAGE> 172
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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> 173
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> 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 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...... 44
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 46
Business.............................. 60
Management............................ 92
Certain Relationships and
Transactions........................ 103
Principal Stockholders................ 111
Shares Eligible for Future Sale....... 112
Description of Indebtedness........... 113
Description of Capital Stock.......... 119
Certain U.S. Tax Consequences to
Non-U.S. Stockholders............... 124
Underwriting.......................... 127
Legal Matters......................... 129
Experts............................... 130
Additional Information................ 130
Glossary.............................. 131
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> 175
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 20, 1996
PROSPECTUS
<TABLE>
<S> <C> <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> 176
================================================================================
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...... 44
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 46
Business.............................. 60
Management............................ 92
Certain Relationships and
Transactions........................ 103
Principal Stockholders................ 111
Shares Eligible for Future Sale....... 112
Description of Indebtedness........... 113
Description of Capital Stock.......... 119
Certain U.S. Tax Consequences to
Non-U.S. Stockholders............... 124
Underwriting.......................... 127
Legal Matters......................... 129
Experts............................... 130
Additional Information................ 130
Glossary.............................. 131
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> 177
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..................................................... $ 21,255
NASD Filing Fee.......................................................... 6,279
New York Stock Exchange Listing Fee...................................... 149,773
Transfer Agent and Registrar Fees........................................ 3,000
Blue Sky and Related Fees (including counsel fees)....................... 40,794*
Accountants' Services and Expenses....................................... 793,596*
Legal Services and Expenses.............................................. 682,164*
Directors' and Officers' Insurance....................................... 228,280
Printing and Engraving Fees.............................................. 597,000*
Governmental Filings..................................................... 149,572
Real Estate Related Expenses............................................. 74,587
Miscellaneous............................................................ 169,365*
----------
TOTAL.......................................................... $2,915,665*
==========
</TABLE>
---------------
* Estimated.
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> 178
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.
+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.
</TABLE>
II-2
<PAGE> 179
<TABLE>
<S> <C>
+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]
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]
</TABLE>
II-3
<PAGE> 180
<TABLE>
<S> <C>
10.8 -- [Intentionally Omitted]
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, as revised.
10.19(c) -- Non-Employee Directors' Retainer Stock Plan, as revised.
+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.
</TABLE>
II-4
<PAGE> 181
<TABLE>
<S> <C>
+10.29 -- Form of Indemnification Agreement by and between Certain Officers,
Directors and Stockholders of Certain Liquor Corporations and Wyndham
Hotel Company Ltd.
10.30 -- Form of Senior Secured Revolving Credit Agreement among Wyndham Hotel
Corporation, The Lenders Party Thereto and Bankers Trust Company.
21.1 -- List of subsidiaries of the Company, as revised.
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.
27.1 -- Financial Data Schedule.
</TABLE>
---------------
+ 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> 182
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 20th 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 20, 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> 183
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> 184
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> 185
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> 186
<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 -- [Intentionally Omitted]
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> 187
<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, as revised.
10.19(c) -- Non-Employee Directors' Retainer Stock Plan, as revised.
+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.
10.30 -- Form of Senior Secured Revolving Credit Agreement among Wyndham Hotel
Corporation, The Lenders Party Thereto and Bankers Trust Company.
21.1 -- List of subsidiaries of the Company, as revised.
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.
27.1 -- Financial Data Schedule.
</TABLE>
---------------
+ Filed Previously.
<PAGE> 1
EXHIBIT 10.17
LPRH Draft 5-16-96
Waiver and Contribution Agreement
as of May 24, 1996
Wyndham Hotel Corporation
2001 Bryan Street, Suite 2300
Dallas, Texas 75201
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-1 (File No.
333-2214) (as supplemented or amended prior to the execution and delivery of
this agreement, the "Registration Statement") of Wyndham Hotel Corporation, a
Delaware corporation (the "Company"). Capitalized terms used herein without
definition shall have the meanings ascribed to such terms in the prospectus
(the "Prospectus") included in the Registration Statement.
In connection with the Formation, the undersigned has acquired
unregistered shares of Common Stock, par value $.01 per share (the "Restricted
Shares"), of the Company in exchange for certain assets (the "Investment").
The undersigned understands that (i) the offer and sale of the Restricted
Shares issued pursuant to the Formation were not registered under the
Securities Act of 1933, as amended (the "Securities Act"), and (ii) the failure
to register such offer and sale could result in the undersigned having certain
rights under the federal securities laws, including a right to rescind the
Investment.
For the benefit of the Company and in consideration of, among other
things, the Company's consummation of the Investment, the undersigned (i)
hereby waives any and all rights that the undersigned now has or may hereafter
have to rescind the Investment on the basis that the offer and sale of the
Restricted Shares issued pursuant to the Formation were not registered (the
"Waiver") and (ii) agrees that if the Waiver is deemed void or unenforceable
for any reason including, without limitation, Section 14 of the Securities Act,
then the entire beneficial interest in all property and amounts received by the
undersigned in any action to rescind the Investment (regardless of whether such
action was initiated by the undersigned) or otherwise received by the
undersigned as damages for failure to register the offer and sale of the
Restricted Shares under the Securities Act, will be promptly paid over and
contributed by the undersigned to the Company (or, if the Company so requests,
to a subsidiary of the Company), for no
<PAGE> 2
Wyndham Hotel Corporation
as of May 24, 1996
Page 2
additional consideration from the Company, other than the Restricted Shares
originally issued pursuant to the Formation.
The undersigned hereby consents to the disclosure of this agreement in
the Prospectus.
Very truly yours,
[Existing Owner]
By:
------------------------------
Name:
-------------------------
Title:
------------------------
<PAGE> 1
EXHIBIT 10.19(b)
WYNDHAM HOTEL CORPORATION
1996 LONG TERM INCENTIVE PLAN
1. Purpose
The WYNDHAM HOTEL CORPORATION 1996 LONG TERM INCENTIVE PLAN
(the "1996 Plan") has been established by WYNDHAM HOTEL CORPORATION (the
"Corporation") to:
(a) Attract and retain key executives and other key
employees;
(b) Motivate participating employees, by means of
appropriate incentives, to achieve long-range goals;
(c) Provide incentive compensation opportunities that are
competitive with those of other corporations; and
(d) Further identify the interests of eligible employees
with those of the Corporation's other Stockholders through compensation
alternatives based on the Corporation's Common Stock;
and thereby promote the long-term financial interest of the Corporation,
including the growth in value of the Corporation's equity and enhancement of
long-term Stockholder return.
2. Scope
Awards under the 1996 Plan may be granted in the form of (i)
incentive stock options ("incentive stock options") as provided in Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), (ii)
non-qualified stock options ("non-qualified options") (unless otherwise
indicated, references in the 1996 Plan to "options" include incentive stock
options and non-qualified options), (iii) shares of the Common Stock, $.01 par
value per share, of the Corporation (the "Common Stock") that are restricted as
provided in paragraph 12 hereof ("restricted shares") or (iv) units valued
based upon the long-term performance of the Corporation as determined pursuant
to paragraph 13 hereof ("performance units"). Options may be accompanied by
stock appreciation rights ("rights"). Rights may also be granted without
accompanying options. The maximum aggregate number of performance units,
shares of Common Stock with respect to which options and restricted shares are
granted, and rights granted without accompanying options, which may be awarded
from time to time under the 1996 Plan shall be 2,133,811 (subject to adjustment
as described in paragraph 16 hereof). The maximum number of shares of Common
Stock with respect to which incentive stock options, non-qualified options,
restricted shares and performance units
<PAGE> 2
may be granted in any one year to any employee shall not exceed 500,000.
Shares of Common Stock with respect to which awards are granted may be, in
whole or in part, authorized and unissued shares, authorized and issued shares
held in the treasury of the Corporation, or issued shares reacquired by the
Corporation, as the Board of Directors of the Corporation (the "Board of
Directors") shall from time to time determine. If for any reason (other than
surrender of options or Deemed Options (as herein defined) upon exercise of
rights as provided in paragraph 9 hereof) any shares as to which an option has
been granted cease to be subject to purchase thereunder, or any restricted
shares are forfeited to the Corporation, or any right issued without
accompanying options terminates or expires without being exercised, then the
shares in respect of which such option or right was granted, or such restricted
shares, shall become available for subsequent awards under the 1996 Plan to the
extent permitted by the Code and other applicable law.
3. Effective Date
The 1996 Plan shall become effective on April 18, 1996 and,
unless sooner terminated pursuant to the terms hereof, the Plan shall terminate
on December 31, 2005. The 1996 Plan (and each award granted under the 1996
Plan) will become null and void unless the 1996 Plan is approved no later than
April 17, 1997 by the affirmative vote of the holders of a majority of the
shares of voting stock of all classes of the Corporation present, or
represented, and entitled to vote at a meeting of Stockholders of the
Corporation at which a majority of the outstanding shares of the Corporation's
voting stock is voted on the proposal to approve the 1996 Plan. The agreement
relating to each award granted under the 1996 Plan prior to approval of the
Plan by Stockholders as aforesaid shall expressly provide that such award will
not be exercisable or payable prior to such approval and that such award will
become null and void unless the 1996 Plan is approved by the Stockholders as
aforesaid no later than April 17, 1997.
4. Administration
(a) The 1996 Plan shall be administered, construed and
interpreted by the Board of Directors of the Corporation; provided, that the
Board of Directors, in its discretion, may delegate any or all of its
authority, powers and discretion under the 1996 Plan to the Compensation
Committee of the Board of Directors. (All references herein to the "Committee"
shall be deemed to refer exclusively to the Compensation Committee or any
successor thereto of the Board of Directors of the Corporation.)
Notwithstanding anything in this paragraph 4 to the contrary, upon the date of
the first registration of an equity security of the Corporation under Section
12 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), or any
successor statute, all authority to exercise discretion with respect to
participation in the 1996 Plan by persons who are (i) "officers" within the
meaning of the applicable Securities and Exchange Commission rules and
regulations relating to Section 16 of the 1934 Act, or any successor statute,
(ii) directors of the
-2-
<PAGE> 3
Corporation, and/or (iii) beneficial owners of more than ten percent (10%) of
any class of equity securities of the Corporation who are otherwise eligible to
participate in the 1996 Plan, and the timing, pricing, amounts and other terms
and conditions of awards granted under the 1996 Plan to such officers,
directors and beneficial owners, shall be vested in (i) the Board of Directors
of the Corporation if all of the members of the Board are disinterested persons
within the meaning ascribed to such term in Rule 16b-3 promulgated under the
1934 Act, or within any successor definition or under any successor rule
("disinterested persons"), or (ii) the Committee, if consisting of two (2) or
more directors each of whom is a disinterested person.
(b) With respect to persons subject to Section 16 of the
1934 Act, transactions under the 1996 Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To
the extent any provision of the 1996 Plan or action by the Board of Directors
or the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Board of Directors or the
Committee, as applicable.
(c) The Board of Directors shall have plenary authority
in its sole discretion and subject to the express provisions of the 1996 Plan,
to grant options, to determine the purchase price of the Common Stock covered
by each option (the "exercise price"), the term of each option and to change
the same, the class or classes of shares of Common Stock to be covered by each
option, the Employees (as defined in paragraph 5 hereof) to whom, and the time
or times at which, options shall be granted and the number of shares to be
covered by each option; to designate options as incentive stock options or
non-qualified options and to determine which options shall be accompanied by
rights; to grant rights without accompanying options; to determine the
Employees to whom and the time or times at which such rights shall be granted
and the exercise price, term, and number of shares of Common Stock covered by
any Deemed Option (as defined in paragraph 9 hereof) corresponding thereto; to
grant restricted shares and performance units and to determine the term of the
restricted period and appropriate long-term objectives and other conditions
applicable to such restricted shares or performance units, the Employees to
whom and the time or times at which restricted shares or performance units
shall be granted and the number of restricted shares or performance units to be
covered by each grant; to interpret the 1996 Plan; to prescribe, amend and
rescind rules and regulations relating to the 1996 Plan; to determine the terms
and provisions of the option agreements, and the right, restricted share and
performance unit agreements entered into in connection with awards under the
1996 Plan; to prepare and distribute in such manner as the Board of Directors
determines to be appropriate information concerning the 1996 Plan, and to make
all other determinations deemed necessary or advisable for the administration
of the 1996 Plan. The Board of Directors may delegate to one or more of its
members or to one or more agents such administrative duties as it may deem
advisable, and the Board of Directors or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render
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<PAGE> 4
advice with respect to any responsibility the Board of Directors or such person
may have under the 1996 Plan; provided, however, that except as authorized in
paragraph 4(a) above, the Board of Directors shall not delegate its authority
to construe and interpret the 1996 Plan, to determine which Employees may
participate in the 1996 Plan, or its authority to make grants of options,
restricted shares, performance units and rights.
(d) If appointed, the Committee shall function as
follows. The Committee may adopt such rules as it deems necessary, desirable
or appropriate. The Committee may act at a meeting or in writing without a
meeting. The Committee shall elect one of its members as chairman, appoint a
secretary (who may or may not be a Committee member, as the case may be) and
advise the Board of Directors of such actions. The secretary shall keep a
record of all minutes and forward all necessary communications to the
Corporation. A majority of the Committee shall constitute a quorum. All
decisions of the Committee shall be made by a vote of not less than a majority
of the Committee members present at a meeting of the Committee at which a
quorum is present or by a written consent signed by all of the members of the
Committee. A dissenting Committee member who, within a reasonable time after
he has knowledge of any action or failure to act in accordance with the
preceding sentence, registers his dissent in writing delivered to the other
Committee members and to the Board of Directors, shall not be responsible for
any such action or failure to act.
(e) All usual and reasonable expenses of the Committee
shall be paid by the Corporation, and no member shall receive compensation with
respect to his services for the Committee except as may be authorized by the
Board of Directors. The Board of Directors and the Committee may employ
attorneys, consultants, accountants or other persons, and the Board of
Directors, the Committee, the Corporation and its officers and directors shall
be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Board of Directors or the Committee in good faith shall be final and
binding upon all Employees who have received awards, the Corporation and all
other interested persons. No member of Board of Directors or the Committee
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the 1996 Plan or awards made
thereunder, and the Corporation shall indemnify and hold harmless each member
of the Board of Directors or the Committee against all loss, cost, expenses or
damages, occasioned by any act or omission to act in connection with any such
action, determination or interpretation under or of the 1996 Plan, consistent
with the Corporation's certificate of incorporation and bylaws.
(f) Subject to such limitations or restrictions as may be
imposed by the Code or other applicable law, the Board of Directors may grant
to an Employee who has been granted an award under the 1996 Plan or any other
benefit plan maintained by the Corporation or any of its subsidiaries, or any
predecessor or successor thereto, in exchange
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<PAGE> 5
for the surrender and cancellation of such prior award, a new award with such
terms and conditions as the Board of Directors may deem appropriate consistent
with the provisions of the 1996 Plan.
5. Eligibility; Factors To Be Considered in Granting Awards
(a) Awards shall be granted only to persons who are
employees of the Corporation or one or more of its subsidiaries (as defined
below) and either are officers of, or in the opinion of the Board of Directors
hold key positions in or for, the Corporation or any subsidiary ("Employees").
In determining the Employees to whom awards shall be granted, the number of
shares and class or classes of Common Stock with respect to which each award
shall be granted, the number of performance units granted by each award, and
the terms and conditions of each award, the Board of Directors shall take into
account the nature of the Employee's duties, his or her present and potential
contributions to the growth and success of the Corporation, and such other
factors as the Board of Directors shall deem relevant in connection with
accomplishing the purposes of the 1996 Plan. The chief executive officer of
the Corporation shall assist the Board of Directors in this determination by
making recommendations. An Employee who has been granted an award or awards
under the 1996 Plan may be granted an additional award or awards, subject to
such limitations as may be imposed by the Code on the grant of incentive stock
options or other applicable law.
(b) For purposes of this 1996 Plan, the term "subsidiary"
means any corporation (other than the Corporation) during any period of which
fifty percent (50%) or more of the total combined voting power of all classes
of stock is owned, directly or indirectly, by the Corporation. For purposes of
this 1996 Plan, the term "affiliate" shall have the same meaning as in Rule
12b-2 promulgated under the 1934 Act.
6. Option Price; Fair Market Value
The per share exercise price of each option for shares of
Common Stock shall be determined by the Board of Directors, but shall be one
hundred percent (100%) of the Fair Market Value on the date the option is
granted unless the Board of Directors expressly determines otherwise, subject
to the requirements for incentive stock options set forth in paragraph 10
hereof. For purposes of this 1996 Plan, the term "Fair Market Value per Share"
as of any date shall mean, except as provided in paragraph 9(d) hereof, for
shares of Common Stock with respect to which restricted shares, options and
rights shall be granted, the closing price of such Common Stock on such date
(or if there are no sales on such date, on the next preceding date on which
there were sales), as reported on the New York Stock Exchange Composite Tape,
or if such Common Stock is not listed or admitted to trading on the New York
Stock Exchange, as reported on the principal consolidated transaction reporting
system for the principal national securities exchange on which the
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<PAGE> 6
Common Stock is listed or admitted to trading, or if such Common Stock is not
listed or admitted to trading on any national securities exchange, the closing
price of such Common Stock as reported on the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), or if such Common Stock is not listed or admitted to trading on the
NASDAQ National Market System, the last quoted sales price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the NASDAQ System or such other system
as may then be in use, or if such Common Stock is not reported on any such
system and is not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in such Common Stock selected by the
Board of Directors, or if no such market maker is making a market in such
Common Stock, the fair value of such Common Stock as determined in good faith
by the Board of Directors by applying generally recognized principles of
valuing closely-held securities; provided, however, that in any event the Fair
Market Value per Share shall be appropriately adjusted to reflect events
described in paragraph 16 hereof. The Board of Directors shall determine the
date on which an option is granted, provided that such date is consistent with
the Code and any applicable rules or regulations thereunder; in the absence of
such determination, the date on which the Board of Directors adopts a
resolution granting an option shall be considered the date on which such option
is granted, provided the Employee to whom the option is granted is promptly
notified of the grant and a written option agreement is duly executed as of the
date of the resolution. The exercise price so determined shall also be
applicable in connection with the exercise of any related right.
7. Term of Options
The term of each option granted under the 1996 Plan shall be
as the Board of Directors shall determine, but in no event shall any option
have a term of more than ten (10) years from the date of grant, subject to
earlier termination as provided in paragraphs 14 and 15 hereof. If the holder
of an incentive stock option owns Common Stock possessing more than ten percent
(10%) of the combined voting power of all classes of stock of the Corporation
or any subsidiary, the term of such incentive stock option shall not exceed
five (5) years from the date of grant.
8. Exercise of Options
(a) Subject to the provisions of this 1996 Plan and
unless otherwise provided in the option agreement, an option granted under the
1996 Plan shall become one hundred percent (100%) vested at the earliest of the
Employee's retirement from active employment at or after Retirement Age (as
defined in paragraph 14 hereof) or the Employee's death or total and permanent
disability (as defined in paragraph 15 hereof). Prior to becoming one hundred
percent (100%) vested, each option shall become exercisable in such cumulative
installments and upon such events as the Board of Directors may
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<PAGE> 7
determine in its sole discretion. Subject to the foregoing, the unvested
portion of any option or right granted under the 1996 Plan shall be forfeited
on the date the Employee ceases to be an Employee of the Corporation. The
Board of Directors may also, in its sole discretion, accelerate the
exercisability of any option or installment thereof at any time.
(b) An option may be exercised at any time or from time
to time (subject, in the case of an incentive stock option, to such
restrictions as may be imposed by the Code), as to any or all full shares of
Common Stock as to which the option has become exercisable; provided, however,
that an option shall not be exercised at any time as to less than fifty (50)
shares (or less than the number of shares of Common Stock as to which the
option is then exercisable, if that number is less than fifty (50) shares).
(c) At the time of exercise of any option, the per share
exercise price of such option shall be paid in full for each share of Common
Stock with respect to which such option is exercised. Payment may be made in
cash or, with the approval of the Board of Directors, in shares of the Common
Stock, valued at the Fair Market Value per Share on the date of exercise. If
the Corporation shall have a class of its Common Stock registered pursuant to
Section 12 of the 1934 Act, an option holder may also make payment at the time
of exercise of an option for such class of Common Stock by delivering to the
Corporation a properly executed exercise notice together with irrevocable
instructions to a broker approved by the Corporation that upon such broker's
sale of shares with respect to which such option is exercised, it is to deliver
promptly to the Corporation the amount of sale proceeds necessary to satisfy
the option exercise price and any required withholding taxes (subject to the
provisions of paragraph 19 hereof).
(d) Notwithstanding any other provision in the 1996 Plan
to the contrary, no option may be exercised prior to the expiration of six (6)
months from the date of the award thereof.
(e) Upon the exercise of an option or portion thereof in
accordance with the 1996 Plan, the option agreement and such rules and
regulations as may be established by the Board of Directors, the holder thereof
shall have the rights of a Stockholder with respect to the Common Stock issued
as a result of such exercise.
9. Award and Exercise of Rights
(a) The Board of Directors may grant a right as a primary
right or an additional right (each as defined in this paragraph) in the manner
set forth in this paragraph 9. A right granted in connection with an option
may be granted either at the time the option is granted or, in the case of an
option that is not an incentive stock option, thereafter at any time prior to
the exercise, termination or expiration of such option. Each right shall be
subject to the same terms and conditions as the related option or Deemed Option
(as
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<PAGE> 8
defined in paragraph 9(b)) and shall be exercisable only to the extent the
option or Deemed Option is exercisable. Notwithstanding any other provision in
the 1996 Plan to the contrary, no right, with or without an underlying option,
shall be exercisable for cash by an Employee who is subject to the provisions
of Section 16(b) of the 1934 Act (an "Insider") prior to the expiration of six
(6) months from the date the right is awarded.
(b) A primary right may be awarded by the Board of
Directors either alone or in connection with any option granted under the 1996
Plan. Each primary right granted without a corresponding option shall
nevertheless be deemed for certain purposes described in this paragraph 9 to
have been accompanied by an option (a "Deemed Option"). A Deemed Option shall
have no value, and no shares of Common Stock (or other consideration) shall be
delivered upon exercise thereof, but such Deemed Option shall serve solely to
establish the terms and conditions of the corresponding primary right. At the
time of grant of a primary right not granted in connection with an option, the
Board of Directors shall set forth the terms and conditions of the
corresponding Deemed Option. The terms and conditions of such Deemed Option
shall include all terms and conditions that at the time of grant are required,
and, in the discretion of the Board of Directors, may include any additional
terms and conditions that at such time are permitted, to be included in options
granted under this 1996 Plan. A primary right shall entitle the Employee to
surrender unexercised the related option or Deemed Option (or any portion or
portions thereof that the Employee determines to surrender) and to receive in
exchange, subject to the provisions of the 1996 Plan and such rules and
regulations as from time to time may be established by the Board of Directors,
a payment having an aggregate value equal to (i) the excess of (A) the Fair
Market Value per Share on the exercise date over (B) the per share exercise
price of the option or Deemed Option, multiplied by (ii) the number of shares
of Common Stock subject to the option, Deemed Option or portion thereof that is
surrendered. Surrender of an option or Deemed Option or portion thereof in
exchange for a payment as described in this paragraph is referred to as the
"exercise of a primary right." Upon exercise of a primary right, payment shall
be made in the form of cash, shares of Common Stock, or a combination thereof,
as elected by the Employee, provided that the Board of Directors shall have
sole discretion to approve or disapprove the election of an Insider to receive
all or part of a payment in cash (which approval or disapproval may be given at
any time after the election to which it relates); and, provided, further, that
the election by an Insider to receive cash in whole or in part upon exercise of
a primary right shall be made only during a "window period" (as defined in
paragraph 9(d) hereof). Shares of Common Stock paid upon exercise of a primary
right will be valued at the Fair Market Value per Share on the exercise date.
Cash will be paid in lieu of any fractional share of Common Stock based upon
the Fair Market Value per Share on the exercise date. Subject to paragraph 19
hereof, no payment will be required from the Employee upon exercise of a
primary right.
(c) An additional right may be awarded by the Board of
Directors in connection with any option granted under the 1996 Plan. An
additional right shall entitle
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<PAGE> 9
the Employee to receive, upon the exercise of a related option, a cash payment
equal to (i) the product determined by multiplying (A) the excess of (x) the
Fair Market Value per Share on the date of exercise of the related option over
(y) the option price per share at which such option is exercisable by (B) the
number of shares of Common Stock with respect to which the related option is
being exercised, multiplied by (ii) a percentage factor (which may be any
percentage factor equal to or greater than ten percent (10%) and equal to or
less than one hundred percent (100%)) as determined by the Board of Directors
at the time of the grant of such additional right or as determined in
accordance with a formula for determination of such percentage factor
established by the Board of Directors at the time of the grant of such
additional right. If no percentage factor or formula is otherwise specified by
the Board of Directors at the time of grant of such additional right, the
percentage factor shall be deemed to be one hundred percent (100%). The Board
of Directors at any time, or from time to time, after the time of grant may in
its discretion increase such percentage factor (or amend such formula so as to
increase such factor) to not more than one hundred percent (100%).
(d) Solely for purposes of paragraphs 9(b) and 9(c), with
respect to exercises of rights (other than rights that relate to an incentive
stock option) by an Insider, during any period commencing on the third business
day following the date of release for publication of any annual or quarterly
summary statements of the Corporation's sales and earnings and ending on the
twelfth business day following such date (a "window period"), the Board of
Directors may prescribe, by rule of general application, such other measure of
Fair Market Value per Share as the Board of Directors may, in its sole
discretion, determine, but not in excess of the highest sale price of the
Common Stock during such window period as reported on the New York Stock
Exchange Composite Tape, or as further determined as set forth in paragraph 6
hereof; provided, however, that the Fair Market Value per Share shall be
appropriately adjusted to reflect events described in paragraph 16 hereof. In
the case of rights that relate to an incentive stock option, the Board of
Directors may prescribe a similar measure of Fair Market Value per Share;
provided, however, that such measure shall not exceed the maximum amount that
would be permissible under Code Section 422 without disqualifying such option
as an incentive stock option under Code Section 422 or causing such option not
to be considered fully exercised within the meaning of Code Section 422.
(e) Upon exercise of a primary right, the number of
shares of Common Stock subject to exercise under the related option or Deemed
Option shall automatically be reduced by the number of shares of Common Stock
represented by the option, Deemed Option or portion thereof surrendered.
Shares of Common Stock subject to options, Deemed Options or portions thereof
surrendered upon the exercise of rights shall not be available for subsequent
awards under the 1996 Plan.
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(f) A right related to an incentive stock option may only
be exercised if the Fair Market Value per Share on the exercise date (as
determined pursuant to paragraph 6 and without regard to paragraph 9(d) hereof)
exceeds the exercise price of the option per share of Common Stock.
(g) If neither the right nor, in the case of a right
(whether primary or additional) with a related option, the related option, is
exercised before the end of the day on which the right ceases to be
exercisable, such right shall be deemed exercised as of such date and, subject
to paragraph 19 hereof, a payment in the amount prescribed by paragraph 9(b) or
paragraph 9(c), as the case may be, shall be paid to the Employee in cash.
10. Incentive Stock Options
(a) The Board of Directors shall designate the Employees
to whom incentive stock options, as described in Section 422 of the Code or any
successor section thereto, are to be awarded under the 1996 Plan and shall
determine the class or classes and the number of shares of Common Stock to be
covered by each incentive stock option. Incentive stock options shall be
awarded only to Employees of the Corporation. In no event shall the aggregate
Fair Market Value of all Common Stock (determined at the time the option is
awarded) with respect to which incentive stock options are exercisable for the
first time by an individual during any calendar year (under all plans of the
Corporation and its subsidiaries) exceed $100,000.
(b) The purchase price of a share of Common Stock under
each incentive stock option shall be determined by the Board of Directors;
provided, however, that in no event shall such price be less than one hundred
percent 100% of the Fair Market Value Per Share as of the date of grant or one
hundred ten percent (110%) of such Fair Market Value Per Share if the holder of
the incentive stock option owns Common Stock possessing more than ten percent
(10%) of the combined voting power of all classes of stock of the Corporation
or any subsidiary.
(c) Except as provided in paragraphs 14 and 15 hereof, no
incentive stock option shall be exercised at any time unless the holder thereof
is then an Employee of the Corporation or one of its subsidiaries. For this
purpose, "subsidiary" shall include, as under Treasury Regulations Section
1.421-7(h)(3)-(4), example (3), any corporation that is a subsidiary of the
Corporation during the entire portion of the requisite period of employment
during which it is the employer of the holder.
(d) In the event of amendments to the Code or applicable
rules or regulations relating to incentive stock options subsequent to the date
hereof, the Corporation may amend the provisions of the 1996 Plan, and the
Corporation and the Employees holding
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<PAGE> 11
such incentive stock options may agree to amend outstanding option agreements
to conform to such amendments.
11. Non-Transferability of Options and Rights
Options and rights granted under the 1996 Plan shall not be
transferable otherwise than by will or the laws of descent and distribution, or
pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder, and options and rights shall be exercisable during the
lifetime of the Employee only by the Employee or by the Employee's guardian or
legal representative (unless such exercise would disqualify an option as an
incentive stock option).
12. Award and Delivery of Restricted Shares
(a) At the time an award of restricted shares is made,
the Board of Directors shall establish a period or periods of time (each a
"Restricted Period") applicable to such award that shall not be more than ten
(10) years. Each award of restricted shares may have a different Restricted
Period or Restricted Periods. The Board of Directors may, in its sole
discretion, at the time an award is made, provide for the incremental lapse of
Restricted Periods with respect to a portion or portions of the restricted
shares awarded, and for the lapse or termination of restrictions upon all or
any portion of the restricted shares upon the satisfaction of other conditions
in addition to or other than the expiration of the applicable Restricted
Period. The Board of Directors may also, in its sole discretion, shorten or
terminate a Restricted Period or waive any conditions for the lapse or
termination of restrictions with respect to all or any portion of the
restricted shares. Notwithstanding the foregoing, all restrictions shall lapse
or terminate with respect to all restricted shares upon the Employee's death,
total and permanent disability (as defined in paragraph 15 hereof), or
retirement from active employment at or after the Retirement Age (as defined in
paragraph 14 hereof).
(b) At the time a grant of restricted shares is made to
an Employee, a stock certificate representing a number of shares of Common
Stock equal to the number of such restricted shares shall be registered in the
Employee's name but shall be held in custody by the Corporation for such
Employee's account. The Employee shall generally have the rights and
privileges of a Stockholder as to such restricted shares, including, without
limitation, the right to vote such restricted shares, except that, subject to
the earlier lapse or termination of restrictions as herein provided, the
following restrictions shall apply: (i) the Employee shall not be entitled to
delivery of the stock certificate evidencing restricted shares until the
expiration or termination of the Restricted Period applicable to such shares
and the satisfaction of any other conditions prescribed by the Board of
Directors; (ii) none of the shares then subject to a Restricted Period shall be
sold, transferred, assigned, pledged, or
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<PAGE> 12
otherwise encumbered or disposed of during the Restricted Period applicable to
such shares and until the satisfaction of any other conditions prescribed by
the Board of Directors; and (iii) all of the shares then subject to a
Restricted Period shall be forfeited and all rights of the Employee to such
restricted shares shall terminate without further obligation on the part of the
Corporation if the Employee ceases to be an Employee of the Corporation or any
of its subsidiaries before the expiration or termination of such Restricted
Period and the satisfaction of any other conditions prescribed by the Board of
Directors applicable to such restricted shares. Dividends in respect of
restricted shares shall be currently paid; provided, however, that in lieu of
paying currently a dividend of shares of Common Stock in respect of restricted
shares, the Board of Directors may, in its sole discretion, register in the
name of an Employee a stock certificate representing such shares of Common
Stock issued as a dividend in respect of restricted shares, and may cause the
Corporation to hold such certificate in custody for the Employee's account
subject to the same terms and conditions as such restricted shares. Upon the
forfeiture of any restricted shares, such forfeited restricted shares shall be
transferred to the Corporation without further action by the Employee. The
Employee shall have the same rights and privileges, and be subject to the same
restrictions, with respect to any shares received pursuant to paragraph 16
hereof.
(c) Upon the expiration or termination of the Restricted
Period applicable to such shares and the satisfaction of any other conditions
prescribed by the Board of Directors or at such earlier time as provided for
herein, the restrictions applicable to the shares subject to such Restricted
Period shall lapse and a certificate for a number of shares of Common Stock
equal to the number of restricted shares with respect to which the restrictions
have expired or terminated shall be delivered, free of all such restrictions,
except any that may be imposed by law, to the Employee or the Employee's
Beneficiary (as defined in paragraph 14(b)). The Corporation shall not be
required to deliver any fractional share of Common Stock but shall pay to the
Employee or the Employee's Beneficiary, in lieu thereof, the product of (i) the
Fair Market Value per Share (determined as of the date the restrictions expire
or terminate) and (ii) the fraction of a share to which such Employee would
otherwise be entitled. Subject to paragraph 19 hereof, no payment will be
required from the Employee upon the issuance or delivery of any Common Stock
upon the expiration or termination of a Restricted Period with respect to
restricted shares.
13. Award of Performance Units
(a) At the time an award of performance units is made,
the Board of Directors shall prescribe a range of long-term financial or other
performance objectives, including minimum, maximum and target objectives of the
Corporation ("long-term objectives") during the Incentive Period (as defined in
paragraph 13(c) hereof) applicable to such performance units, and shall
determine a range of dollar values of each performance unit associated with
such range of long-term earnings objectives. If the minimum long-term
objective prescribed by the Board of Directors for any performance unit is not
achieved or
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<PAGE> 13
exceeded, then such performance unit shall have no value and no amount shall be
payable with respect thereto. If such minimum long-term objective is achieved
or exceeded, then the dollar value of all performance units to be paid with
respect thereto shall be based upon the level of long-term objective achieved,
subject to any maximum performance unit value imposed by the Board of
Directors. If during the course of an Incentive Period there shall occur
significant events that were not foreseen in establishing the minimum long-term
objective for such Incentive Period and which the Board of Directors expects to
have a substantial effect on such objective during such Incentive Period, in
its discretion, the Board of Directors may revise such objective.
(b) Any Employee who is an Employee of the Corporation or
a subsidiary as of the Valuation Date (as defined in paragraph 13(c)) with
respect to performance units that have been previously awarded to him, shall,
if the minimum long-term objective specified in paragraph 13(a) is met, be
eligible to receive a cash award equal to the value of such performance units
determined pursuant to such paragraph 13(a) as of the Valuation Date applicable
thereto. Payment of such cash award shall be made as soon as practicable
following the Valuation Date of such performance units. Except as otherwise
provided in paragraph 14 hereof, any performance units awarded to an Employee
during his employment period for which the Incentive Period has not ended shall
be forfeited upon the date such employment terminates, and he shall not be
entitled to any payment in respect thereof.
(c) For purposes of the 1996 Plan,
(i) the "Incentive Period" with respect to a
performance unit shall be a period beginning on the date such performance unit
is granted and lasting for such period, not shorter than two (2) years nor
longer than ten (10) years, as the Board of Directors shall designate; and
(ii) the "Valuation Date" means the last day of
the Incentive Period for a performance unit.
14. Termination of Employment; Termination for Cause
(a) In the event that the employment of an Employee to
whom an option or right has been granted under the 1996 Plan terminates for any
reason (except pursuant to an authorized leave of absence for military or
government service as determined by the Board of Directors or as set forth in
paragraph 15 hereof), such Employee shall have a period of ninety (90) days
following termination of employment in which to exercise any then vested
options or rights under the 1996 Plan, and at the end of the 90-day period, all
rights of such Employee under any then outstanding option or right shall
terminate and shall be forfeited immediately as to any unexercised portion
thereof.
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(b) Unless otherwise determined by the Board of
Directors, if an Employee to whom performance units have been granted ceases to
be an Employee of the Corporation or of a subsidiary prior to the end of the
Incentive Period with respect to such performance units for any reason other
than death, total and permanent disability or retirement from active employment
at or after the Retirement Age, the Employee shall immediately forfeit all such
performance units. If an Employee to whom performance units have been granted
terminates employment by reason of retirement on or after the Retirement Age,
total and permanent disability or death, he shall, if the minimum long-term
objectives specified in paragraph 13(a) hereof are met, be eligible to receive
a cash award equal to the value of such performance units, determined pursuant
to such paragraph 13(a) and payable as soon as practicable following the
Valuation Date of such performance units. If the Employee terminates
employment due to his death or if an Employee who retires from active
employment on or after his Retirement Age or terminated employment due to total
and permanent disability dies prior to receipt of any such payment, then his
designated Beneficiary (as defined below) shall, if the minimum long-term
objectives specified in paragraph 13(a) are met, be entitled to receive a cash
award equal to the value of such performance units, determined pursuant to such
paragraph 13(a), and payable as soon as practicable following the Valuation
Date of such performance units. In the event that the person designated by the
Employee as his Beneficiary shall not be living at the time, or if no
designation has been made, then the payment of such cash award shall be made to
the estate of the Employee. An Employee's Retirement Age ("Retirement Age")
hereunder is sixty (60). An Employee's "Beneficiary" is a person or persons
(natural or otherwise) designated by such Employee, pursuant to a written
instrument executed by such Employee and filed with the Board of Directors, to
receive any benefits payable hereunder in the event of such Employee's death.
(c) Awards granted under the 1996 Plan shall not be
affected by any change of duties or position so long as the holder continues to
be an Employee of the Corporation or any subsidiary thereof. Any option or
right, restricted share or performance unit agreement, and any rules and
regulations relating to the 1996 Plan, may contain such provisions as the Board
of Directors shall approve with reference to the determination of the date
employment terminates and the effect of leaves of absence. Any such rules and
regulations with reference to any option agreement shall be consistent with the
provisions of the Code and any applicable rules and regulations thereunder.
Nothing in the 1996 Plan or in any award granted pursuant to the 1996 Plan
shall confer upon any Employee any right to continue in the employ of the
Corporation or any subsidiary or interfere in any way with the right of the
Corporation or any subsidiary to terminate such employment at any time.
(d) Notwithstanding the foregoing provisions of this
paragraph 14, the Committee may provide in the terms of any agreement or award
granted under the 1996 Plan that, if an Employee's employment terminates for
"cause," as defined in such
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<PAGE> 15
agreement or award, that all options, restricted stock or awards will be
forfeited immediately upon such termination.
15. Death or Total and Permanent Disability of Employee
If an Employee to whom an option or right has been granted
under the 1996 Plan shall die or suffer a total and permanent disability while
employed by the Corporation or a subsidiary, such option or right may be
exercised, to the extent that the Employee was entitled to do so at the
termination of employment (including by reason of death or total and permanent
disability), as set forth herein (subject to any restrictions set forth in
paragraph 9 with respect to Insiders) by the Employee, legal guardian of the
Employee (unless such exercise would disqualify an option as an incentive stock
option), a legatee or legatees of the Employee under the Employee's last will,
or by the Employee's personal representatives or distributees, whichever is
applicable, at any time within twelve (12) months after the date of the
Employee's death or total and permanent disability, but in no event later than
the date on which the option or right terminates. Notwithstanding the above,
if an Employee who terminates employment by reason of total and permanent
disability shall die, a legatee or legatees of such Employee under the
Employee's last will, or the executor of such Employee's estate, shall only
have the right to exercise such option or right, to the extent that the
Employee was entitled to do so at the termination of employment, during the
period ending twelve (12) months after the date of the Employee's termination
of employment by reason of total and permanent disability. For purposes
hereof, "total and permanent disability" shall have the meaning set forth in
Code Section 22(e)(3) or any successor provision thereto.
16. Adjustments upon Changes in Capitalization, etc.
Notwithstanding any other provision of the 1996 Plan, the
Board of Directors shall make or provide for such adjustments to the 1996 Plan,
to the number and classes of shares available thereunder, to the terms and
number of shares of Common Stock or other securities available, and/or to the
purchase price of a share of Common Stock or other securities available under,
any outstanding options, rights, restricted shares or performance units as it
shall deem appropriate to prevent dilution or enlargement, including
adjustments in the event of changes in the outstanding Common Stock by reason
of stock dividends, split-ups, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, separations, reorganizations, liquidations
and the like. In the event of any offer to holders of Common Stock generally
relating to the acquisition of their shares, the Board of Directors shall make
such adjustment as it deems equitable in respect to outstanding options,
rights, restricted shares and performance units, including revision of
outstanding options, rights, restricted shares and performance units so that
they may be exercisable or redeemable for or payable in the consideration
payable in the acquisition transaction. Any such
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<PAGE> 16
determination by the Board of Directors shall be conclusive. Any fractional
shares resulting from such adjustments to options, rights, or restricted shares
shall be eliminated.
17. Business Combinations.
The following provisions shall apply unless an Employee's
written agreement evidencing an award of options, rights, restricted shares or
performance units under the 1996 Plan provides otherwise. In the event that,
while any options, rights, restricted shares or performance units are
outstanding under the 1996 Plan, there shall occur (a) a merger or
consolidation of the Corporation with or into another corporation in which the
Corporation shall not be the surviving corporation, (b) a dissolution of the
Corporation, (c) a transfer of all or substantially all of the assets of the
Corporation in one transaction or a series of related transactions to one or
more other persons or entities, (d) any "person" or "group" (as those terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Act")), other than Excluded Persons and any Excluded Group, becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Act), directly or
indirectly, of securities of the Corporation representing 45% or more of the
combined voting power of the Corporation's then outstanding securities, or (e)
during any period of two consecutive years commencing on or after June 1, 1996,
individuals who at the beginning of the period constituted the Board (together
with any new directors whose election by such Board or whose nomination for
election by the Stockholders of the Corporation 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 at least a majority of the Board
of Directors then in office, then, with respect to each option, right,
restricted share and performance unit outstanding immediately prior to the
consummation of such transaction, if provision is not otherwise made in writing
in connection with such transaction and without the necessity of any action by
the Board of Directors, each such option, right, restricted share or
performance unit shall terminate, but (A) the holder of any outstanding option
shall be entitled, immediately prior to the effective date of such transaction,
to exercise such option to purchase the number of shares of Common Stock that
are then vested and exercisable; (B) the holder of any right shall be entitled,
immediately prior to the effective date of such transaction, to exercise such
right to the extent that the related option or Deemed Option is exercisable at
such time in accordance with its terms; (C) the holder of any additional rights
shall be entitled to receive, to the extent that the related option is
exercised immediately prior to the effective date of such transaction, the full
amount of cash he would have been entitled to receive if the related option had
been exercised to such extent, to the extent that such additional rights are
then vested; (D) the holder of any restricted shares shall be entitled to
receive a stock certificate representing a number of shares of Common Stock
equal to the number of restricted shares with respect to which the applicable
restrictions have previously lapsed or terminated; provided, however, that for
purposes of this provision, a portion of the applicable Restricted Period for
each award of restricted shares, equal to (i) the number of
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<PAGE> 17
completed years during the Restricted Period, divided by (ii) the Restricted
Period, shall be deemed to have lapsed immediately prior to the effective date
of such transaction; and (E) the recipient of any performance unit shall be
entitled, immediately prior to the effective date of such transaction, to
receive the then vested value under such unit. The unexercised portion of any
option, right, Deemed Option or any additional right relating to the
unexercised portion of a related option shall be deemed cancelled and
terminated as of the effective date of such transaction. Any restricted shares
that remain suspect to restrictions as of the effective date of such
transaction shall be forfeited. Notwithstanding the foregoing, the Board of
Directors may provide that upon the occurrence of such events as the Board of
Directors shall deem appropriate, any or all outstanding options, rights,
restricted shares and performance units shall become fully vested and
exercisable or that they shall remain outstanding subject to any adjustments
contemplated by paragraph 16. The term "Excluded Persons" means each of (i)
Trammell or Margaret Crow, or any lineal descendant of Trammell and Margaret
Crow, or any trust of which not less than 75% of the beneficial interests are
held by Trammell or Margaret 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 Trammell or
Margaret Crow or such descendants, (ii) Wynopt Investment Partnership Level II,
a Delaware limited partnership ("Wynopt II"), or Wynopt Investment Partnership,
a Delaware limited partnership ("Wynopt"), or an "affiliate" (as such term is
defined in Rule 12b-2 under the Act) 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 owners of the outstanding equity interests
of Wynopt II and Wynopt as of the effective date of the Plan and (y) the
business and affairs of which are controlled by Donald J. McNamara, Robert A.
Whitman and Daniel A. Decker or any of them, or (iii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Corporation.
The term "Excluded Group" means a "group" (as defined above) that includes one
or more Excluded Persons, provided that the voting power of the Corporation's
outstanding voting securities "beneficially owned" (as defined above) 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 securities "beneficially owned" by such "group."
18. Termination and Amendment
The Board of Directors of the Corporation shall have the right
to amend, suspend or terminate the 1996 Plan at any time; provided, however,
that an amendment shall be subject to Stockholder approval if such approval is
required by Rule 16b-3 promulgated under the 1934 Act or under any successor
rule, the Code or the rules of any securities exchange or market system on
which securities of the Corporation are listed or admitted to trading at the
time such amendment is adopted. The Board of Directors may delegate to the
Committee all or any portion of its authority under this paragraph 18. If the
1996 Plan is terminated, the terms of the 1996 Plan shall, notwithstanding such
termination,
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<PAGE> 18
continue to apply to awards granted prior to such termination. In addition, no
suspension, termination, modification or amendment of the 1996 Plan may,
without the consent of the Employee to whom an award shall theretofore have
been granted, adversely affect the rights of such Employee under such award.
19. Withholding Tax
(a) The Corporation shall have the right to deduct from
all amounts paid in cash in consequence of the exercise of an option or right,
or the settlement of a performance unit, under the 1996 Plan any taxes required
by law to be withheld with respect to such cash payments. Subject to paragraph
19(c) below, where an Employee or other person is entitled to receive shares of
Common Stock pursuant to the exercise of an option or a right pursuant to the
1996 Plan, the Corporation shall have the right to require the Employee or such
other person to pay to the Corporation the amount of any taxes that the
Corporation is required to withhold with respect to such shares, or, in lieu
thereof, to retain, or sell without notice, a sufficient number of such shares
to cover the amount required to be withheld. Upon the disposition (within the
meaning of Code Section 424(c)) of shares of Common Stock acquired pursuant to
the exercise of an incentive stock option prior to the expiration of the
holding period requirements of Code Section 422(a)(1), the Employee shall be
required to give notice to the Corporation of such disposition and the
Corporation shall have the right to require the Employee to pay to the
Corporation the amount of any taxes that are required by law to be withheld
with respect to such disposition.
(b) Upon termination of the Restricted Period with
respect to any restricted shares (or such earlier time, if any, as an election
is made by the Employee under Code Section 83(b), or any successor provisions
thereto, to include the value of such shares in taxable income), the
Corporation shall have the right to require the Employee or other person
receiving shares of Common Stock in respect of such restricted shares to pay to
the Corporation the amount of taxes that the Corporation is required to
withhold with respect to such shares of Common Stock or, in lieu thereof, to
retain or sell without notice a sufficient number of shares of Common Stock
held by it to cover the amount required to be withheld. The Corporation shall
have the right to deduct from all dividends paid with respect to restricted
shares the amount of taxes that the Corporation is required to withhold with
respect to such dividend payments.
(c) In the case of an Employee or other person who is
subject to Section 16 of the 1934 Act, all tax withholding obligations shall be
satisfied through the withholding or surrender of shares of Common Stock as
necessary to comply with Section 16 of the 1934 Act and the rules and
regulations thereunder or to obtain any exemption therefrom.
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<PAGE> 19
20. Written Agreements; Stock Legends
Each award of options, rights, restricted shares or
performance units shall be evidenced by a written agreement, executed by the
Employee and the Corporation, which shall contain such restrictions, terms and
conditions as the Board of Directors may require, and certificates evidencing
shares of Common Stock issued under the 1996 Plan shall have conspicuously
noted thereon such restrictions on transferability as the Corporation may
require in order to ensure compliance with applicable federal and state
securities laws and regulations.
21. Effect on Other Stock Plans
The adoption of the 1996 Plan shall have no effect on awards
made or to be made pursuant to other plans covering Employees of the
Corporation or its subsidiaries, or any predecessors or successors thereto.
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<PAGE> 1
EXHIBIT 10.19(c)
WYNDHAM HOTEL CORPORATION
NON-EMPLOYEE DIRECTORS' RETAINER STOCK PLAN
SECTION 1. PURPOSE. The purpose of the Wyndham Hotel Corporation
Non-Employee Directors' Retainer Stock Plan (the "Plan") is to provide to
non-employee directors of Wyndham Hotel Corporation (the "Company") the
opportunity to elect to receive all or a portion of their annual retainer fees
in the form of Common Stock of the Company, or to defer receipt of a portion of
such fees and have the deferred amounts treated as if invested in Common Stock.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms
shall have the meanings set forth below:
(a) "Annual Retainer" means the amounts payable by the Company to
a Non-Employee Director as an annual retainer for services as a director, but
does not include meeting fees or reimbursement for expenses, such retainer to
be payable in such increments and at such times as the Committee may establish
from time to time.
(b) "Beneficiary" means a person (including any trustee)
designated by a Participant to receive the benefits specified hereunder, in the
event of the Participant's death, or, if there is no surviving designated
Beneficiary, the Participant's estate.
(c) "Board of Directors" means the Board of Directors of the
Company.
(d) "Deferral Account" means the account established and
maintained by the Company for each Participant, which is to be credited, as
hereinafter set forth, with the portion of a Participant's Annual Retainer
which is deferred pursuant to the Plan, together with earnings thereon as
provided for herein. Amounts credited to a Participant's Deferral Account will
be deemed to have been invested in Stock, and therefore will be shown as a
number of Stock equivalents. Deferral Accounts will be maintained solely as
bookkeeping entries by the Company to evidence unfunded, generally
non-transferable obligations of the Company.
(e) "Fair Market Value" shall mean for shares of Stock, the
closing price of the Stock on such date (or if there are no sales on such date,
on the next preceding date on which there were sales), as reported on the
principal consolidated transaction reporting system for the principal national
securities exchange on which the Stock is listed or admitted to trading, or if
the Stock is not listed or admitted to trading on any national securities
exchange, the closing price of the Stock as reported on the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ"), or if the Stock is not listed or admitted to
trading on the NASDAQ National Market System, the last quoted sales price or,
if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the NASDAQ System or such other system
as may then be in use, or if the Stock is not reported on any such system and
is not
<PAGE> 2
listed or admitted to trading on any national securities exchange, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board of Directors, or if
no such market maker is making a market in the Common Stock, the fair value of
the Common Stock as determined in good faith by the Board of Directors.
During the period immediately preceding the Company's initial public
offering of its Common Stock pursuant to a Form S-1 Registration Statement
filed with the Securities and Exchange Commission, the "Fair Market Value" for
shares of Common Stock shall be the offering price per share of Common Stock as
set forth on the cover page of the prospectus contained in the Form S-1
Registration Statement as declared effective by the Securities and Exchange
Commission.
(f) "Non-Employee Director" means a member of the Board of
Directors who, on January 1 of any Plan Year (or such later date as he is first
elected or appointed to the Board of Directors), is not an employee of the
Company or any parent or subsidiary company.
(g) "Participant" means any Non-Employee Director who actually
participates in the Plan in any Plan Year.
(h) "Plan Year" means each year beginning on the first day of
January and ending on the 31st day of December; provided, however, that the
initial plan year shall commence on April 18, 1996 and end on December 31,
1996.
(i) "Stock" means Wyndham Hotel Corporation Common Stock, $0.01
par value per share.
SECTION 3. PARTICIPATION. Only Non-Employee Directors may
participate in the Plan. Participation in the Plan is voluntary. To
participate in the Plan for any Plan Year, a Non-Employee Director must make a
written election both (i) six months prior to the date the Annual Retainer, or,
if applicable, the first portion thereof, is to be paid to the Non-Employee
Director, and (ii) on or prior to December 31. Each election or change in
election will be effective as of the later of (i) six months following the
election, or (ii) January 1 following the election. Notwithstanding the
preceding, an initial election for a newly appointed or elected Non-Employee
Director may be filed with the Company not later than 30 days following the
date on which the individual was appointed or elected to the Company's Board of
Directors and shall be effective six months following the election.
Notwithstanding the preceding, elections that are filed with the Company prior
to May 18, 1996 shall be effective on the day they are received by the Company.
The Non-Employee Directors may elect either to (i) receive Stock in
lieu of cash for part or all of such Non- Employee Director's annual retainer,
or (ii) defer the receipt of all
<PAGE> 3
or part of such Non-Employee Director's annual retainer and have the deferred
amounts treated as if invested in Stock.
The election shall evidence the Non-Employee Director's acceptance of
the benefits and terms of the Plan, and set forth the elections described in
Section 5. All elections set forth therein shall be deemed to be continuing
and therefore applicable to subsequent Plan Years unless the Non-Employee
Director revokes the application or changes such elections by filing a
subsequent irrevocable election no later than December 31 of the Plan Year
immediately prior to January 1 of the Plan Year for which the new election is
to become effective.
SECTION 4. ADMINISTRATION.
(a) Administration. The Board of Directors shall from time to
time appoint two or more persons to administer the Plan out of those members of
the Board of Directors who have not been eligible to participate in the Plan
(the "Committee") and who shall not be eligible to participate in the Plan.
The Committee shall administer and enforce the Plan in accordance with its
terms, and shall have all powers necessary to accomplish those purposes,
including but not limited to the following:
(1) To compute and certify the amount and kind of benefits payable
to Participants and their Beneficiaries;
(2) To maintain or to designate any person or entity to maintain
all records necessary for the administration of the Plan;
(3) To make and publish such rules for the regulations of the Plan
as are not inconsistent with the terms hereof; and
(4) To provide for disclosure of such information, including
reports and statements to Participants or Beneficiaries, and
for the making of applications and elections by Participants
under the Plan as may be required by the Plan or otherwise
deemed appropriate by the Committee.
Any action of the Committee with respect to the Plan shall be conclusive and
binding upon all persons interested in the Plan except to the extent otherwise
specifically indicated herein. The Committee may appoint agents and delegate
thereto such powers and duties in connection with the administration of the
Plan as the Committee may from time to time prescribe.
(b) Compliance with Rule 16b-3. Other provisions of the Plan
notwithstanding, neither the Committee nor any other person (other than a
Participant acting in conformity with the terms of the Plan) shall have any
discretionary authority to make determinations regarding (i) eligibility to
become a Participant, (ii) the times when elections can be made,
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<PAGE> 4
when Stock will be issued or Stock equivalents credited to the Deferral
Accounts of Participants, or when distributions will be made, (iii) the portion
of a Participant's Annual Retainer that may be allocated to the acquisition of
Stock or Stock equivalents by Participants under the Plan, the calculation of
the amount of such Stock or Stock equivalents by Participants under the Plan,
the calculation of the amount of such Stock or Stock equivalents to be acquired
thereby, and the payment or deemed reinvestment of dividend equivalents, or
(iv) any other decisions under the Plan required by Rule 16b-3(b) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") to be afforded
exclusively to "disinterested persons" as defined thereunder. Transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successor under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, such provision or
action shall be deemed null and void to the extent permitted by law and deemed
advisable by the Committee.
(c) Annual Statement. The Committee shall furnish to each
Participant an annual statement indicating the number of Stock equivalents
credited to his Deferral Account as of the end of the preceding Plan Year.
SECTION 5. ELECTIONS BY PARTICIPANTS. Each Non-Employee Director who
elects to participate in this Plan for any Plan Year must irrevocably elect
until such time as a subsequent election is made in accordance with Section 3,
the following:
(a) Whether to receive payment of 0, 50% or 100% of his or her
Annual Retainer in the form of Stock under the Plan; and
(b) Whether to defer payment of any whole percentage up to 100% of
his or her Annual Retainer, to be credited to the
Participant's Deferral Account, to be deemed to be invested in
Stock and paid in accordance with Section 7 of the Plan; and
(c) Whether dividend equivalents, if any, on any amounts credited
to such Deferral Account shall be paid directly to the
Participant or credited to the Deferral Account and deemed to
be reinvested in Stock.
The combined percentage of the Annual Retainer to be paid in Stock and
deferred under the Plan shall not exceed 100% of the Annual Retainer for any
Plan Year. In the event the Annual Retainer is increased during any Plan Year,
a Participant's elections pursuant to Section 5 in effect for such Plan Year
shall apply to the amount of such increase.
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<PAGE> 5
SECTION 6. RECEIPT OF STOCK IN PAYMENT OF PORTION OF RETAINER.
(a) Transfer of Stock to Participant. The Company shall transfer
to a Participant who elects to receive all or a portion of the Annual Retainer
in the form of Stock under Section 5(a) hereof a number of shares of 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 paid (or otherwise would be paid but for the
election to receive Stock). No fractional shares shall be issued, however; in
lieu thereof, the cash Fair Market Value of any fractional share shall be paid
to Participant.
(b) Restrictions on Stock. As promptly as practicable after the
date or dates that the Annual Retainer is paid, a certificate representing the
shares of Stock elected to be received by a Participant hereunder shall be
issued in the name of the Participant. Upon issuance of such certificate, the
Participant shall be subject to all rights of a holder of Stock, including the
rights to vote such Stock and to receive dividends thereon, subject to the
following restrictions:
(1) If a restriction on the transferability of the Stock is, at
the time of issuance, required in order for the issuance and
delivery to the Participant (and any related election) to be
an exempt transaction under Rule 16b-3 under the Exchange Act,
then Stock issued to a Participant hereunder may not be sold
for at least six months after acquisition (or such shorter
period as may be required), other than by will or the laws of
descent and distribution or pursuant to a qualified domestic
relations order; and
(2) During any period in which the transferability of Stock is
restricted hereunder, the Company shall retain custody of any
certificate representing the Stock.
The Company shall impose such other restrictions on Stock transferred
to a Participant hereunder as it may deem advisable in order to comply with the
Securities Act of 1933, as amended, the requirements of any stock exchange or
automated quotation system upon which the Stock is then listed or quoted, any
state securities laws applicable to such a transfer, or any provision of the
Company's Articles of Incorporation or By-Laws or any binding contract to which
the Company is a party.
(c) Nature of Stock Transferred. The Stock to be transferred from
the Company to Participants hereunder may be either treasury shares or
authorized but unissued shares of the Company.
SECTION 7. DEFERRAL OF PORTION OF ANNUAL RETAINER.
(a) Crediting of Portion of Annual Retainer to Deferral Account of
Participant. The Company shall credit to the Deferral Account of a Participant
who elects to defer a portion of his Annual Retainer under Section 5(b) hereof
an amount, expressed as Stock
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<PAGE> 6
equivalents, equal to the number of shares of Stock having an aggregate Fair
Market Value equal to such portion of the Annual Retainer at the last trading
date prior to the date on which the Participant's Annual Retainer would
otherwise have been due. The amount of Stock equivalents credited to such
Deferral Account shall be carried to three decimal places, and shall include
any fractional share.
(b) Payment or Crediting of Dividend Equivalent. Whenever a cash
dividend is paid with respect to Stock, a Participant shall be entitled to the
amount equal in value to the amount of the dividend paid on a single share of
Stock multiplied by the number of Stock equivalents (including fractions)
credited to his Deferral Account as of the date of record for dividend
purposes. Such dividend equivalents shall, in accordance with the
Participant's election under Section 5(c), either be paid directly to the
Participant or shall be credited to the Participant's Deferral Account as an
amount, expressed as Stock equivalents, equal to the number of shares of Stock
having an aggregate Fair Market Value at the dividend payment date equal to the
value of such dividend equivalents.
(c) Adjustments to Deferral Accounts. The amount of Stock
equivalents in each Participant's Deferral Account shall be appropriately
adjusted upon the occurrence of any stock split, reverse stock split, or stock
dividend or other non-cash distribution. In the event of any other
extraordinary transaction affecting Stock after which Stock will no longer be
registered under Section 12 of the Exchange Act, Stock equivalents credited to
Deferral Accounts shall be converted into cash equivalents of equal value at
the date of such transaction, with interest equivalents paid or credited
thereafter on a monthly basis, at the prime rate of interest being charged by
NationsBank Texas, N.A. as in effect on the last business day of each month.
(d) Vesting. The interest of each Participant in any benefit
payable with respect to a Deferral Account hereunder shall be at all times
fully vested and non-forfeitable.
(e) Designation of Beneficiaries. Each Participant may designate
one or more Beneficiaries to receive the amounts distributable from the
Participant's Deferral Account under the Plan in the event of such
Participant's death. Such designations shall be made on forms provided by the
Company. A Participant may from time to time change his designated
Beneficiaries, without the consent of such Beneficiaries, by filing a new
designation in writing with the Company. The spouse of a Participant shall
join in any designation of Beneficiaries other than such spouse. The Company
may rely upon the Beneficiary designation last filed in accordance with the
terms of the Plan.
(f) Distributions Relating to Deferral Accounts. Distributions
from Deferral Accounts shall be made in shares of Stock equal to the number of
Stock equivalents in the Participant's Deferral Account. Except as set forth in
Section 7(g) below, the Company shall transfer to a Participant, as of the date
which is the third anniversary of the date upon which the retainer fee would
have been paid in cash to the Participant absent his deferral election (the
"Payment Date"), shares of Stock equal to the number of Stock equivalents
credited to
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<PAGE> 7
the Participant's Deferral Account. No fractional shares shall be issued,
however; in lieu thereof, the cash Fair Market Value of any fractional share
shall be paid to a Participant. As promptly as practicable after the Payment
Date, a certificate representing the shares of Stock shall be issued in the
name of the Participant. Upon issuance of such certificate, the Participant
shall be subject to all rights of a holder of Stock, including the rights to
vote such Stock and to receive dividends thereon, subject to the following
restrictions:
(1) If a restriction on the transferability of the Stock is, at
the time of issuance, required in order for the issuance and
delivery to the Participant (and any related election) to be
an exempt transaction under Rule 16b-3 under the Exchange Act,
then Stock issued to a Participant hereunder may not be sold
for at least six months after acquisition (or such shorter
period as may be required), other than by will or the laws of
descent and distribution or pursuant to a qualified domestic
relations order; and
(2) During any period in which the transferability of Stock is
restricted hereunder, the Company shall retain custody of any
certificate representing the Stock.
The Company shall impose such other restrictions on Stock transferred
to a Participant hereunder as it may deem advisable in order to comply with the
Securities Act of 1933, as amended, the requirements of any stock exchange or
automated quotation system upon which the Stock is then listed or quoted, any
state securities laws applicable to such a transfer, or any provision of the
Company's Articles of Incorporation or By-Laws or any binding contract to which
the Company is a party.
(g) Nature of Stock Transferred. The Stock to be transferred from
the Company to Participants hereunder may be either treasury shares or
authorized but unissued shares of the Company.
(h) Death; Change of Control. In the event the Participant dies
prior to receipt of the full distribution of benefits with respect to his
Deferral Account, the Company shall transfer to the Participant's
Beneficiaries, shares of Stock equal to the number of Stock equivalents
credited to the Participant's Deferral Account as of the date of the
Participant's death. Such transfer shall be made to the Participant's
Beneficiaries as promptly as practicable after such date, and shall be subject
to all of the provisions of paragraph 7(f) hereof.
In the event of a Change of Control of the Company, as defined
below, unless provision is otherwise made in writing in connection with the
transaction by the Committee, the Company shall pay to a Participant in cash,
in a single lump sum, an amount equal to the Fair Market Value of the Stock
equivalents credited to the Participant's Deferral Account as of the date of
such Change of Control. Such payment shall be made to the Participant as
promptly as practicable after such date. As used herein, a "Change of Control"
shall mean the occurrence of any one or more of the following events or similar
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<PAGE> 8
events in any single transaction or series of related transactions: (a) a
merger or consolidation of the Company with or into another corporation in
which the Company shall not be the surviving corporation, (b) a dissolution of
the Company, (c) a transfer of all or substantially all of the assets of the
Company in one transaction or a series of related transactions to one or more
other persons or entities, (d) if any "person" or "group" (as those terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Act")), other than Excluded Persons and any Excluded Group, becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Act), directly or
indirectly, of securities of the Company representing 45% or more of the
combined voting power of the Company's then outstanding securities, or (e)
during any period of two consecutive years commencing on or after June 1, 1996,
individuals who at the beginning of the period constituted the Board (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 at least a majority of the Board
of Directors then in office, unless the election of each director who was not a
director at the beginning of the period has been approved in advance by
directors representing at least two-thirds (2/3) of the directors then in
office who were directors at the beginning of the period. The term "Excluded
Persons" means each of (i) Trammell or Margaret Crow, or any lineal descendant
of Trammell and Margaret Crow, or any trust of which not less than 75% of the
beneficial interests are held by Trammell or Margaret 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 Trammell or Margaret Crow or such descendants, (ii) Wynopt Investment
Partnership Level II, a Delaware limited partnership ("Wynopt II"), or Wynopt
Investment Partnership, a Delaware limited partnership ("Wynopt"), or an
"affiliate" (as such term is defined in Rule 12b-2 under the Act) 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 owners of the
outstanding equity interests of Wynopt II and Wynopt as of the effective date
of the Plan and (y) the business and affairs of which are controlled by Donald
J. McNamara, Robert A. Whitman and Daniel A. Decker or any of them, or (iii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company. The term "Excluded Group" means a "group" (as defined above) that
includes one or more Excluded Persons, provided that the voting power of the
Company's outstanding voting securities "beneficially owned" (as defined above)
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 securities "beneficially owned" by such "group."
At the time of any payment with respect to a Participant's
Deferral Account, the balance of such account shall be reduced to reflect such
payment.
SECTION 8. AMENDMENTS TO THE PLAN, TERMINATION OF THE PLAN. The
Board of Directors of the Company may amend, alter, suspend, discontinue, or
terminate the Plan
-8-
<PAGE> 9
without the consent of Participants, shareholders, or any other person;
provided, however, that without the consent of a Participant, no such
amendment, alteration, suspension, discontinuation, or termination of the Plan
shall materially and adversely affect the rights of such Participant with
respect to any rights to payment of amounts credited to such Participant's
Deferral Account; and provided further, that provisions of the Plan relating to
(i) eligibility to become a Participant, (ii) the times when elections can be
made, when Stock will be issued or Stock equivalents credited to the Deferral
Accounts of Participants, or when distributions will be made, or (iii) the
portion of a Participant's Annual Retainer that may be allocated to the
acquisition of Stock or Stock equivalents to be acquired thereby, and the
payment or deemed reinvestment or dividend equivalents shall not be amended
more than once every six months (except to comport with changes in the Internal
Revenue Code or the rules thereunder). The Plan has no fixed termination date.
SECTION 9. GENERAL PROVISIONS.
(a) Limits on Transfer of Awards; Beneficiaries. No right or
interest of a Participant under the Plan shall be pledged, encumbered, or
hypothecated, shall be liable for or subject to any lien, obligation, or
liability of such Participant, or shall be assignable or transferable by a
Participant otherwise than by will or the laws of descent and distribution;
provided, however, that a Participant may designate Beneficiaries to receive
any payment or distribution under the Plan in the event of death of the
Participant. A Beneficiary, guardian, legal representative, or other person
claiming any rights under the Plan from or through any Participant shall be
subject to all terms and conditions of the Plan applicable to such Participant,
except to the extent the Plan otherwise provides with respect to such persons.
(b) Receipt and Release. Any payment to any Participant or
Beneficiary in accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims against the Company or the
Committee, and the Committee may require such Participant or Beneficiary, as a
condition to such payment, to execute a receipt and release to such effect.
(c) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payment not yet made to a Participant under
the Plan, nothing contained in the Plan shall give a Participant any rights
that are greater than those of a general creditor of the Company; provided,
however, that the Board of Directors may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan, which
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Board otherwise determines with the consent of each
affected Participant.
(d) No Rights of a Shareholder. No Participant shall have any of
the rights or privileges of a shareholder of the Company as a result of the
making of an election under Section 5 of this Plan until Stock is actually
issued pursuant to Sections 6 or 7 of the Plan.
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<PAGE> 10
(e) No Right to Continued Election as a Director. Nothing
contained in the Plan shall confer, and no establishment of or crediting of any
amounts to a Deferral Account shall be construed as conferring, upon any
Participant, any right to continue as a director, or to interfere in any way
with the right of the Company to increase or decrease the amount of the Annual
Retainer or any other compensation payable to Non-Employee Directors.
(f) Plan Expenses. All expenses and costs incurred in connection
with the operation of the Plan shall be borne by the Company.
(g) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Texas, without giving effect to
principles of conflicts of laws, and applicable federal law.
(h) Interpretation. Whenever necessary or appropriate in the
Plan, where the context admits, the singular term and the related pronouns
shall include the plural and the masculine gender shall include the feminine
gender.
(i) Successors and Assigns. This Plan shall inure to the benefit
of, and be binding upon, the parties hereto and their successors and assigns.
SECTION 10. EFFECTIVE DATE; SHAREHOLDER APPROVAL. The Plan shall be
effective as of April 18, 1996, subject to the requirement that the Plan be
approved by the affirmative vote of holders of shares representing a majority
of the number of votes present in person or represented by proxy at the Annual
Meeting of Shareholders of the Company to be held during 1996. Other
provisions of the Plan notwithstanding, until shareholders of the Company
approve the Plan, (i) Stock transferred to a Participant pursuant to Section 6
hereof shall not be transferable, (ii) such Stock shall be subject to
forfeiture by the Participant to the Company (without interest) in the event
shareholders fail to approve the Plan in accordance with the terms of this
Section 10, and (iii) no transfer of Stock with respect to any amount deferred
pursuant to Section 7 hereof shall be made. In the event shareholders fail to
approve the Plan and Stock is therefore forfeited and/or Deferral Accounts are
cancelled, the amount of Annual Retainers theretofore elected to be received in
the form of Stock or deferred under the Plan shall be paid to Participants in
cash, together with interest at the rate set forth in Section 7(c).
-10-
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DRAFT
05/16/96
================================================================================
SENIOR SECURED REVOLVING CREDIT AGREEMENT
DATED AS OF MAY 20, 1996
AMONG
WYNDHAM HOTEL CORPORATION,
AS BORROWER,
THE LENDERS PARTY HERETO
AND
BANKERS TRUST COMPANY,
AS AGENT
================================================================================
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WYNDHAM HOTEL CORPORATION
CREDIT AGREEMENT
TABLE OF CONTENTS
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SECTION 1
INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement; Pro Forma . . . 72
1.3 References to Articles, Sections, Exhibits, Schedules and Attachments . . . . . . . . . . . . . . . 72
1.4 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
1.5 Drafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
1.6 References to Persons Include Permitted Successors and Assigns . . . . . . . . . . . . . . . . . . . 72
1.7 References to Applicable Law and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
1.8 Herein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
1.9 Including Without Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
1.10 Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
1.11 Singular and Plural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
1.12 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 2
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS . . . . . . . . . . . . . . . . . 74
2.1 Commitments; Loans; Notes; the Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
2.2 Interest on the Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
2.4 Repayments and Prepayments; General Provisions Regarding Payments. . . . . . . . . . . . . . . . . . 83
2.5 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
2.6 Special Provisions Governing Eurodollar Rate Loans. . . . . . . . . . . . . . . . . . . . . . . . . 89
2.7 Increased Costs; Taxes; Capital Adequacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
2.8 Obligation of the Lenders to Mitigate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
2.9 Releases of Pool A Properties, Pool B Properties, Management Agreements and Servicing
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 3
LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . 99
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein. . . . . . . . . . . . 99
3.2 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
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3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit. . . . . . . . . . . . . . . . . 102
3.4 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
3.5 Indemnification; Nature of Issuing Lenders' Duties . . . . . . . . . . . . . . . . . . . . . . . . . 105
3.6 Increased Costs and Taxes Relating to Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 4
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 108
4.1 Conditions to Effectiveness of Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
4.2 Conditions to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
4.3 Conditions to Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
SECTION 5
COMPANY'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 122
5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries . . . . . . . . . . . 122
5.2 Authorization of Borrowing, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
5.3 Financial Condition; No Material Adverse Effect; Contingent Obligations . . . . . . . . . . . . . . 126
5.4 Properties; DAB Notes and Affiliate Notes; Agreements; Licenses . . . . . . . . . . . . . . . . . . 127
5.5 Litigation; Adverse Facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
5.6 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
5.7 Performance of Agreements; Materially Adverse Agreements. . . . . . . . . . . . . . . . . . . . . . 130
5.8 Governmental Regulation; Securities Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
5.9 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
5.10 Certain Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
5.11 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
5.12 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
5.13 Liens on the Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
5.14 Zoning; Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
5.15 Physical Condition; Encroachment; Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . 135
5.17 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
5.18 Environmental Reports; Engineering Reports; Appraisals; Market Studies . . . . . . . . . . . . . . . 136
5.19 No Condemnation or Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
5.20 Utilities and Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
5.21 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
5.22 Wetlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
5.23 Cash Management System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
5.24 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
5.25 Employment and Labor Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
5.26 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
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SECTION 6
COMPANY'S AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 139
6.1 Financial Statements and Other Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
6.2 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
6.3 Corporate Existence; Corporate Separateness etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 148
6.4 Taxes and Claims; Tax Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
6.5 Maintenance of Properties; Repair; Alteration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
6.6 Inspection; Lenders' Meeting; Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
6.7 Compliance with Laws, Authorizations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
6.8 Performance of Loan Documents and Related Documents . . . . . . . . . . . . . . . . . . . . . . . . 151
6.9 Payment of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
6.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
6.11 Casualty and Condemnation; Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
6.12 Renovations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
6.13 Brundage Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
6.14 Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
6.15 Cash Management System; Agent Rights; Application of Cash Flow; Depository Account Names . . . . . . 168
6.16 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
6.17 Deferred Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
6.18 Management of Properties; Servicing Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 172
6.19 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
6.20 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
SECTION 7
COMPANY'S NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 174
7.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
7.2 Liens and Related Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
7.3 Investments, Guaranties and Certain Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
7.4 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
7.5 Restricted Junior Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
7.6 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
7.7 Fundamental Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
7.8 Zoning and Contract Changes and Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
7.9 No Joint Assessment; Separate Lots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
7.10 Transactions with Affiliated Persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
7.11 Sales and Lease-Backs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
7.12 Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
7.13 Transfer of Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
7.14 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
7.15 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
7.16 Management Agreements, Servicing Agreements and Other Management Agreements . . . . . . . . . . . . 203
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7.17 Intellectual Property; Franchise Agreements; Other Jurisdictions . . . . . . . . . . . . . . . . . . 207
7.18 Material Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
7.19 Amendments of Credit Agreement, Other Indebtedness, Obligations, Certain Documents . . . . . . . . . 208
7.20 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
SECTION 8
EVENTS OF DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . . . 210
8.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
8.2 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
SECTION 9
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 219
9.1 Assignments and Participations in Loans and Letters of Credit. . . . . . . . . . . . . . . . . . . . 219
9.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
9.3 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
9.4 No Joint Venture or Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
9.5 Ratable Sharing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
9.6 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
9.7 Independence of Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226
9.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226
9.9 Survival of Representations, Warranties and Agreements. . . . . . . . . . . . . . . . . . . . . . . 226
9.10 Agent's Discretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226
9.11 Obligations Several; Independent Nature of the Lenders' Rights. . . . . . . . . . . . . . . . . . . 227
9.12 Remedies of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
9.13 Marshalling; Payments Set Aside. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
9.14 Maximum Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
9.15 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228
9.16 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228
9.17 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
9.18 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
9.19 Consent to Jurisdiction and Service of Process. . . . . . . . . . . . . . . . . . . . . . . . . . . 229
9.20 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
9.21 Counterparts; Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
9.22 Material Inducement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
9.23 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
9.24 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
9.25 Reliance by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
</TABLE>
(iv)
<PAGE> 6
EXHIBITS
I FORM OF REVOLVING NOTE
II FORM OF SWING LINE NOTE
III FORM OF NOTICE OF BORROWING
IV FORM OF NOTICE OF CONVERSION/CONTINUATION
V FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
VI FORM OF COMPLIANCE CERTIFICATE
VII FORM OF BORROWING BASE CERTIFICATE
VIII FORM OF SUBSIDIARY GUARANTY
IX FORM OF SECURITY AGREEMENT
X FORM OF TRADEMARK SECURITY AGREEMENT
XI FORM OF CASH MANAGEMENT LETTER
XII FORM OF OMNIBUS MANAGEMENT AND LIQUOR LICENSE AGREEMENT
XIII FORM OF ENVIRONMENTAL INDEMNITY
XIV FORM OF COLLATERAL ACCOUNT AGREEMENT
XV FORM OF OPINION OF LOAN PARTIES' COUNSEL
XVI FORM OF ADDITION CERTIFICATE
XVII FORM OF NOTICE OF RENOVATION/RESTORATION
XVIII FORM OF COMPLETION CERTIFICATE
XIX FORM OF MANAGEMENT AGREEMENT REPORT
XX MANAGEMENT AGREEMENT CRITERIA
XXI FORM OF CONFIDENTIALITY AGREEMENT
(v)
<PAGE> 7
SCHEDULES
1.1 PAYROLL SUBSIDIARIES
2.1A LENDERS' COMMITMENTS AND PRO RATA SHARES
4.1G POOL A GROUND LEASE ESTOPPEL
4.1H POOL B GROUND LEASE ESTOPPELS
4.1I MANAGEMENT AGREEMENT ESTOPPELS
4.1J SERVICING AGREEMENTS
4.1L MATERIAL LEASE ESTOPPELS
4.1S POOL A SECURED INDEBTEDNESS
4.1U AFFILIATE STOCK OWNERSHIP
5.1A ORGANIZATION AND CAPITALIZATION
5.1B GOOD STANDING
5.2C GOVERNMENT CONSENTS
5.3C CONTINGENT OBLIGATIONS
5.4A1 POOL A PROPERTIES
5.4A2 POOL B PROPERTIES
5.4A3 POOL C PROPERTIES
5.4B DAB NOTES AND AFFILIATE NOTES
5.4C POOL A GROUND LEASES
5.4D POOL B DOCUMENTS
5.4E MANAGEMENT AGREEMENTS
5.4F SERVICING AGREEMENTS
5.4G FRANCHISE AGREEMENTS
5.4H MATERIAL LEASES
5.4I LIQUOR LICENSES
5.5 LITIGATION
5.14A ZONING
5.15B REQUIRED CAPITAL EXPENDITURES
5.16 INSURANCE
5.21A INTELLECTUAL PROPERTY
5.22 WETLANDS
5.23 CASH MANAGEMENT SYSTEM
5.25 EMPLOYMENT AND LABOR AGREEMENTS
5.26B AFFILIATE INTERESTS
6.16B RENOVATION PLANS FOR ROSE HALL PROPERTY
6.17A DEFERRED MAINTENANCE
7.1(iv) POOL B OBLIGATIONS
7.2 PERMITTED ENCUMBRANCES
7.5 PERMITTED JUNIOR PAYMENTS
7.10A AFFILIATE TRANSACTIONS
(vi)
<PAGE> 8
SENIOR SECURED REVOLVING CREDIT AGREEMENT
This SENIOR SECURED REVOLVING CREDIT AGREEMENT is dated as of May 20,
1996 and entered into among WYNDHAM HOTEL CORPORATION, a Delaware corporation
(the "COMPANY"), THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (individually
referred to herein as a "LENDER" and collectively as the "LENDERS") and BANKERS
TRUST COMPANY ("BANKERS"), as agent for the Lenders (in such capacity, the
"AGENT").
R E C I T A L S
A. The Company and its Subsidiaries desire that the Lenders
provide certain loan facilities, the proceeds of which, together with the
proceeds of the Public Offerings, will be used for the general corporate
purposes of the Company and its Subsidiaries, which include but are not limited
to (i) the reimbursement of an Issuing Lender of any amounts drawn under any
Letter of Credit, (ii) the acquisition, ownership, renovation, restoration,
management, operation and disposition of upscale full service hotels, garden
style hotels and resort hotels located in the United States of America, (iii)
the provision of Investments in Joint Ventures formed to acquire such hotels
and (iv) the acquisition, extension, renewal or modification of Management
Agreements, Servicing Agreements and Other Management Agreements and the
provision of Investments in, and Guaranties of Indebtedness or other
obligations of, owners of Managed Properties.
B. The Subsidiaries of the Company that are Loan Parties desire
to guaranty the obligations of the Company under the Credit Agreement.
C. The Company and the other Loan Parties desire to grant Liens
in the Collateral in favor of the Agent to secure their respective obligations
under the Loan Documents.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Company, the Lenders and the
Agent agree as follows:
SECTION 1
INTERPRETATION
This Agreement and the other Loan Documents shall be construed and
interpreted in accordance with this Section 1.
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement and the other Loan
Documents shall have the following meanings when used herein with initial
capital letters:
<PAGE> 9
"ACQUISITION" means any acquisition by the Company, any Pool B
Subsidiary or any Pool C Subsidiary of any fee or ground leasehold interest in
any hotel property, including, without limitation, the acquisition by a Wholly
Owned Subsidiary of the Company of the fee interest in the Vinings Property.
"ACQUISITION AGREEMENTS" means, collectively, the agreements entered
into by the Company and any of its Subsidiaries in connection with an
Acquisition by (i) the Company or, if approved by the Agent in its sole
discretion, a Wholly Owned Subsidiary pursuant to subsection 7.15A(i), (ii) by
a Subsidiary of the Company pursuant to subsection 7.15A(ii), (iii) by any Pool
C Subsidiary pursuant to subsection 7.15A(iii) or (iv) by the Vinings
Subsidiary pursuant to subsection 7.15A(iv).
"ADDITIONAL FRANCHISE AGREEMENT" has the meaning assigned to that term
in subsection 7.17B.
"ADDITIONAL MANAGEMENT AGREEMENT" has the meaning assigned to that
term in subsection 7.16A(i).
"ADDITIONAL POOL A PROPERTY" has the meaning assigned to that term in
subsection 7.15A(i).
"ADDITIONAL POOL B PROPERTY" has the meaning assigned to that term in
subsection 7.15A(ii).
"ADDITION CERTIFICATE" means an Officers' Certificate, substantially
in the form attached hereto as Exhibit XVI, delivered to the Agent pursuant to
subsection 7.15A or subsection 7.16A.
"ADDITION DATE" means the following:
(i) with respect to any Pool A Property, Pool B Property,
Management Agreement or Servicing Agreement listed on Schedule 5.4A1,
5.4A2, 4.1I or 4.15, as the case may be, as of the Effective Date, the
Effective Date;
(ii) with respect to any Additional Pool A Property, any
Additional Pool B Property, or any Pool C Property (including the
Vinings Property) acquired after the Funding Availability Date in
accordance with subsection 7.15A, the latest to occur of (a) the date
on which the Acquisition of such Property is consummated, and (b) the
date on which all the conditions to such Acquisition set forth in
subsection 7.15(A)(i), (ii), (iii) or (iv), as the case may be, shall
have been satisfied with respect to such Property; and
(iii) with respect to any Additional Management Agreement,
Servicing Agreement or Other Management Agreement acquired or entered
into after the Funding Availability Date, in each case in accordance
with subsection 7.15A or 7.16A, as the case may be, the latest to
occur of (a) the date on which the acquisition of such
2
<PAGE> 10
Management Agreement or Other Management Agreement is consummated or
the effective date of such Additional Management Agreement, Servicing
Agreement or Other Management Agreement, as the case may be, and (b)
the date on which all the conditions to such acquisition or
effectiveness set forth in subsection 7.15A(i), (ii), (iii) or (iv) or
7.16A(i) or (ii), as the case may be, shall have been satisfied with
respect to such Management Agreement, Servicing Agreement or Other
Management Agreement.
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination
Date with respect to a Eurodollar Rate Loan, the rate per annum obtained by
dividing (i) the arithmetic average (rounded upward to the nearest 1/16 of one
percent) of the offered quotation, if any, to first class banks in the
interbank Eurodollar market by each of the Reference Lenders for U.S. dollar
deposits of amounts in same day funds comparable to the principal amount of the
Eurodollar Rate Loan of that Reference Lender for which the Adjusted Eurodollar
Rate is then being determined with maturities comparable to the Interest Period
for which such Adjusted Eurodollar Rate will apply as of approximately 10:00
A.M. (New York time) on such Interest Rate Determination Date by (ii) a
percentage equal to 100% minus the stated maximum rate of all reserve
requirements (including any marginal, emergency, supplemental, special or other
reserves) applicable on such Interest Rate Determination Date to any member
bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as
defined in Regulation D (or any successor category of liabilities under
Regulation D); provided, however, that if any Reference Lender fails to provide
the Agent with its aforementioned quotation then the Adjusted Eurodollar Rate
shall be determined based on the quotation(s) provided to the Agent by the
other Reference Lender(s).
"ADJUSTED STOCKHOLDERS' EQUITY" means, as of any date of
determination, the sum of (i) $200,000,000; plus (ii) the cumulative net income
(loss) of the Company and its Subsidiaries, determined in accordance with GAAP,
determined from December 31, 1995, to the last day of the calendar month ending
not less than 30 days before such date of determination; provided that the
calculation of Adjusted Stockholders' Equity shall exclude gains and losses,
together with any related provision for taxes on such gains and losses,
realized in connection with the sale or other permanent disposition of any
Property or other asset, and excluding any extraordinary gains and losses,
together with any related provision for taxes on such extraordinary gains and
losses; plus (iii) an amount equal to the aggregate net cash proceeds received
by the Company from the issue or sale of equity Securities of the Company on
and after the day following the initial closing under the Equity Offering of
the Public Offerings.
"ADJUSTMENT CONDITION" means, as of any date of determination, that:
(i) as of such date of determination, any unsecured
Indebtedness that is recourse to the Company shall have both at least
a "BBB" rating from S&P and a "Baa2" rating from Moody's;
(ii) as of such date of determination, the Senior Notes
shall have both at least a "BB+" rating from S&P and a "Ba1" rating
from Moody's; or
3
<PAGE> 11
(iii) as of the last day of the month preceding such date
of determination, the ratio of Total Consolidated Indebtedness to
Consolidated EBITDA (calculated for the 12 consecutive months ending
on the last day of such month) (a) is equal to or less than 3.0 to 1.0
and (b) shall not have been greater than 3.0 to 1.0 as of any date of
determination during the six months ending on the last day of such
month.
"AFFECTED LENDER" has the meaning assigned to that term in subsection
2.6C.
"AFFECTED LOANS" has the meaning assigned to that term in subsection
2.6C.
"AFFILIATE" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the 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 that Person, whether through the ownership of voting securities
or by contract or otherwise.
"AFFILIATE NOTES" means, collectively, the promissory notes of the
obligors and in the principal amounts listed on Schedule 5.4B annexed hereto.
"AFFILIATED OWNERS" means, collectively, the Joint Ventures and other
Persons, and the respective Affiliates thereof, in each of which the Loan
Parties and their respective Subsidiaries shall have made Investments following
the Effective Date, for whose benefit the Loan Parties and their respective
Subsidiaries shall have become liable with respect to Guaranties following the
Effective Date or to which the Loan Parties and their prospective Subsidiaries
shall have made payments following the Effective Date, in each case as
permitted by subsections 7.3(vi), (vii) and (viii), or from which Persons one
or more Pool B Properties shall have been leased by one or more Pool B
Subsidiaries in which the Loan Parties shall have made Investments permitted by
subsection 7.3(viii).
"AGENT" has the meaning assigned to that term in the introduction to
this Agreement and also means and includes any successor Agent hereunder.
"AGREEMENT" means this Credit Agreement dated as of the date first
written above among the Company, the Lenders and the Agent, as it may be
amended, restated, supplemented or otherwise modified from time to time.
"ALTA" means the American Land Title Association or any successor
thereto.
"APPLICABLE BASE RATE MARGIN" means, as of any date of determination,
a per annum rate equal to 1.00%; provided that the Applicable Base Rate Margin
shall be a per annum rate of .75% if and so long as any Adjustment Condition
shall occur and be continuing.
"APPLICABLE EURODOLLAR RATE MARGIN" means, as of any date of
determination, a per annum rate equal to 2.00%; provided that the Applicable
Eurodollar Rate Margin shall be a per
4
<PAGE> 12
annum rate of 1.75% if and so long as any Adjustment Condition shall occur and
be continuing.
"APPLICABLE LAWS" means, collectively, all statutes, laws, rules,
regulations, ordinances, orders, decisions, writs, judgments, decrees and
injunctions of Governmental Authorities (including Environmental Laws)
affecting the Company, any Loan Party or the Collateral or any part thereof
(including the acquisition, development, construction, Renovation, occupancy,
use, improvement, alteration, management, operation, maintenance, repair or
restoration thereof), whether now or hereafter enacted and in force, and all
Authorizations relating thereto, and all covenants, conditions and restrictions
contained in any instruments, either of record or known to the Company or any
other Loan Party, at any time in force affecting any Property or any part
thereof, including any such covenants, conditions and restrictions which may
(i) require improvements, repairs or alterations in or to such Property or any
part thereof or (ii) in any way limit the use and enjoyment thereof; for
purposes of usury, Applicable Laws means the law of the State of New York
applicable to maximum rates of interest.
"APPRAISAL" means, with respect to any Property, a written appraisal
of such Property prepared by an Appraiser and requested by the Agent pursuant
to subsection 6.6B or delivered to the Agent pursuant to subsection 4.1L,
7.15A(i) or (ii) in each case in form, content and methodology satisfactory to
the Agent and in compliance with all applicable legal and regulatory
requirements (including the requirements of Title XI of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, 12 U.S.C. Sections
3331, et seq., as amended (or any successor statute thereto), and the
regulations promulgated thereunder).
"APPRAISER" means Cushman & Wakefield, Hospitality Valuation Services,
Inc. or any other independent appraiser selected by the Agent and reasonably
acceptable to the Company who meets all regulatory requirements applicable to
the Agent and the Lenders, who is a member of the American Institute with a
national practice and who has at least 10 years experience with real estate of
the same type and in the geographic area of the Property to be appraised.
"APPROVED CAPITAL POLICY" means the Company's stated policy for the
capitalization of expenditures delivered to the Agent and the Lenders on or
before the Funding Availability Date pursuant to subsection 4.1R and, for
purposes of the calculation of Operating Expenses hereunder, shall include any
subsequent changes to such stated policy as shall be approved in writing by the
Agent, in its reasonable discretion.
"APPROVED ENVIRONMENTAL CONSULTANT" means Law Engineering and
Environmental Services, Inc. or any other qualified, independent environmental
consultant reasonably acceptable to the Agent.
"APPROVED MANAGEMENT FEES" has the meaning assigned to that term in
the definition of Management EBITDA.
5
<PAGE> 13
"ASSIGNMENT OF RENTS AND LEASES" means each Assignment of Rents and
Leases executed and acknowledged by the Loan Party thereto in favor of the
Agent for the benefit of the Agent and the Lenders in the form delivered on or
before the Funding Availability Date pursuant to subsection 4.1E(i), as any
such Assignment of Rents and Leases may be amended, restated, supplemented,
consolidated, extended or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"ATTRIBUTABLE INDEBTEDNESS" means, when used with respect to any sale
and leaseback transaction, as of any date of determination, the greater of (i)
the gross purchase price for the property subject to such transaction and (ii)
the present value (discounted at 10% per annum, compounded on a monthly basis)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such arrangement (including any period for which
such lease has been extended), as each such amount shall be reasonably
determined by the Company and certified to the Agent in an Officer's
Certificate of the Chief Executive Officer or the Chief Financial Officer of
the Company, together with the information utilized by the Company to make such
determination.
"AUTHORIZATION" means any authorization, approval, franchise, license,
variance, land use entitlement, sewer and waste water discharge permit, storm
water discharge permit, air pollution authorization to operate, certificate of
occupancy, municipal water and sewer connection permit, and any like or similar
permit now or hereafter required for the construction or Renovation of any
Improvements located on any Property or for the use, occupancy or operation of
any Property and all amendments, modifications, supplements and addenda
thereto.
"BANKERS" has the meaning assigned to that term in the introduction to
this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASE RATE" means, at any time, the rate per annum that is the higher
of (i) of the Prime Rate and (ii) the sum of (a) the Federal Funds Effective
Rate plus (b) 1/2 of 1.00%.
"BASE RATE LOANS" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"BEDROCK" means, collectively, [** WYNDHAM TO CONFIRM: **] Wynopt
Investment Partnership, L.P., a Delaware limited partnership, Wynopt Investment
Partnership Level II, L.P., a __________ limited partnership, Bedrock Hotel
Partners, L.L.C., a Delaware limited liability company, Bedrock Holdings
Partners, a Texas general partnership, Hampstead Investments, Inc., a Texas
corporation, Bedrock Hotel subsidiary, L.L.C., a Delaware limited liability
company, The Hampstead Group, L.L.C., a Texas limited liability company, and
Bedrock Partners Financing, L.P., a Delaware limited partnership, any holder of
5% or more of any class of equity Securities of any of the foregoing (in each
case as of the Funding Availability Date) and the respective Affiliates of each
of the foregoing, including, without limitation, Donald J. McNamara, Robert A.
Whitman and Daniel A. Decker.
6
<PAGE> 14
"BEDROCK INVESTMENT PROGRAM AGREEMENTS" means (i) the Investment
Agreement dated as of May 2, 1994 among The Hampstead Group, Inc., Wyndham
Hotel Company Ltd., the partners in Wyndham Hotel Company, Ltd. listed on the
signature pages thereto and Crow Family Partnership, L.P., as amended by a
letter agreement dated May 17, 1995, and (ii) the Investment Agreement dated as
of May 17, 1995 among Bedrock Hotel Partners, L.L.C., Bedrock Hotel Subsidiary,
L.L.C., The Hampstead Group, L.L.C., Bedrock Financing, L.P., Bedrock Holding
Partners, General Motors Hourly-Rate Employees Pension Trust and General Motors
Salaried Employees Pension Trust; as each such agreement may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"BORROWING BASE" means, as of any date of determination from and after
the Funding Availability Date through and including the Maturity Date, the
amount determined by the Agent as of the last day of the preceding month or, if
subsequent thereto, the most recent Addition Date or Release Date, that is
equal to the sum of the following:
(i) the sum of the Pool A Property Amounts in respect of
all Pool A Properties as of such date of determination; provided that
the calculation of the amount referred to in this clause (i) shall
exclude (a) the amount, if any, by which the Pool A Property Amount
with respect to any Pool A Property (other than the Rose Hall Property
and any Additional Pool A Property referred to in clause (c) below) as
of such date of determination otherwise exceeds 25% of the amount
determined pursuant to this clause (i) for such period, (b) the
amount, if any, by which the Pool A Property Amount with respect to
the Rose Hall Property as of such date of determination, otherwise
exceeds the correlative percentages of the amount determined pursuant
to this clause (i) indicated for the periods set forth below:
<TABLE>
<CAPTION>
PERIOD PERCENTAGE
<S> <C>
F.A. Date-12/31/96 35%
01/01/97-6/30/97 30%
07/01/97-Maturity Date 25%; and
</TABLE>
(c) if the Pool A Amount with respect to an Additional Pool A Property
exceeds 25% of the amount determined pursuant to this clause (i) as of
such Addition Date, the amount, if any, by which the Pool A Property
Amount with respect to such Additional Pool A Property otherwise
exceeds the amount that bears the same percentage relationship to the
amount determined pursuant to this clause (i) as of such date of
determination as the Pool A Property Amount with respect to such
Additional Pool A Property on the Addition Date with respect thereto
bears to the amount determined pursuant to this clause (i) as of such
Addition Date; plus
(ii) the lesser of (a) the sum of the Management Amounts
in respect of all Management Agreements and Servicing Agreements as of
such date of determination; provided that, assuming for the purpose of
calculating the amount referred to in this clause (a) that all
Servicing Agreements for the Pool A Properties (other than the Rose
7
<PAGE> 15
Hall Property) have been assigned the ranking 2 (as so contemplated by
the definition of Management Amount), the calculation of the amount
referred to in this clause (a) shall exclude the amount, if any, by
which the sum of the Management Amounts in respect of all Management
Agreements and Servicing Agreements as of such date of determination
for which the Agent has then specified the ranking 3 (as so
contemplated) exceeds the sum of the Management Amounts in respect of
the Management Agreements and Servicing Agreements as of such date of
determination for which the Agent has then specified ranking 1 or 2
(as so contemplated), and (b) the greater of (x) an amount equal to 66
2/3% of the amount determined pursuant to the preceding clause (i) and
(y) the amount by which $15,000,000 is greater than the amount
determined pursuant to the preceding clause (i);
provided, however, that, as of any date of determination, the amount calculated
pursuant to this definition of the Borrowing Base shall not be greater than the
following:
(x) if giving effect to the preceding clause (ii)(b)(y) does
not cause the amount calculated pursuant to this definition of the
Borrowing Base to be greater than the amount that would be so
calculated if effect were not given to such clause, then the amount so
calculated shall not be greater than the amount which, if multiplied
by the weighted average interest rate of all Loans then outstanding,
as determined by the Agent after taking into account the Interest Rate
Agreements then in effect, or, if no Loans are then outstanding, the
rate per annum that is the Adjusted Eurodollar Rate for Loans with an
initial Interest Period of one month plusthe Applicable Eurodollar
Rate Margin, in each case as of such date of determination (the
product obtained thereby being referred to in this definition of
Borrowing Base as the "ASSUMED INTEREST CHARGE"), would permit the
ratios of (a) Collateral EBITDA and (b) Collateral EBITDA-Cap. Ex, in
each case calculated for the 12 most recently completed calendar
months ending not less than 30 days before such date of determination,
to (c) the Assumed Interest Charge, to be equal to or greater than the
respective correlative ratios indicated for such period:
<TABLE>
<CAPTION>
RATIO RATIO
PERIOD (a):(c) (b):(c)
<S> <C> <C>
F.A. Date-12/31/96 4.00 to 1.0 3.65 to 1.0
01/01/97-12/31/97 4.25 to 1.0 3.80 to 1.0
01/01/98-12/31/98 4.50 to 1.0 4.00 to 1.0
01/01/99-Maturity Date 4.75 to 1.0 4.25 to 1.0; and
</TABLE>
(y) if giving effect to the preceding clause (ii)(b)(y)
causes the amount calculated pursuant to this definition of the
Borrowing Base to be greater than the amount that would be so
calculated if effect were not given to such clause, then the amount so
calculated shall not be greater than the amount which, if multiplied
by the Assumed Interest Charge, would permit the ratios of (A)
Collateral EBITDA and (B) Collateral EBITDA-Cap. Ex, in each case
calculated for the 12 most recently completed calendar months ending
not less than 30 days before such date of
8
<PAGE> 16
determination, to (C) the Assumed Interest Charge, to be equal to 5.0
to 1.0 and 4.75 to 1.0, respectively.
The Borrowing Base is subject to (1) reduction from time to time as provided in
subsections 2.4B(iii) and 2.9 and (2) adjustment from time to time as provided
in the definitions of Pool A Property Amount, Property EBITDA, Management
Amount and Management EBITDA, respectively.
"BORROWING BASE CERTIFICATE" means a certificate substantially in the
form annexed hereto as Exhibit VII delivered by the Company pursuant to Section
4 or subsection 6.1(iv).
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York or is a day on
which banking institutions located in such state are authorized or required by
law or other governmental action to close.
"CAPITAL EXPENDITURES" means, with respect to any Property, for any
period and as of any date of determination, the sum of (i) 3.50% of Property
Gross Revenues from such Property for such period plus (ii) the aggregate
amount, if any, in excess of 3.50% of Property Gross Revenues which is required
to be paid, deposited or reserved by the Company or any of its Subsidiaries in
respect of such Property for Capital Items pursuant to the Pool B Obligations
or the Pool C Obligations, as the case may be, for such period.
"CAPITAL ITEMS" means, with respect to any Property for any period and
as of any date of determination, the cost of capital repairs and replacements
of all or any portion of the Improvements or any other portion of such
Property, including (i) costs of tenant improvements and brokerage commissions
payable in connection with lease transactions at any Property, (ii) costs of
environmental audits and monitoring, environmental remediation work or any
other costs and expenses incurred with respect to compliance with Environmental
Laws, (iii) costs of any Restoration, (iv) costs of any Renovation, (v) costs
of FF&E, (vi) costs of appraisals, valuations, title insurance and inspections
and (vii) any other costs incurred in connection with the Properties that are
not included in Operating Expenses, in each case to the extent such costs would
be capitalized on a balance sheet in accordance with GAAP.
"CAPITAL LEASE" means, with respect to any Person, lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CAPITAL RESERVE ACCOUNT" means, collectively, one or more
interest-bearing accounts to be established and maintained by the Company at
the offices of the Agent located at 280 Park Avenue, New York, New York, each
in the name of "Bankers Trust Company, as Agent - Wyndham Hotel Corporation
Capital Reserve Account," with such additional identifying references in such
name as the Company and the Agent shall agree. Capital Reserve Accounts are
not, and do not include, Other Capital Reserve Accounts.
9
<PAGE> 17
"CAPITAL STOCK" means, with respect to any Person, any capital stock,
partnership or joint venture interests of such Person and shares, interests,
participations or other ownership interests (however designated) of any Person
and any rights (other than debt securities convertible into any of the
foregoing), warrants or options to purchase any of the foregoing.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CASH EQUIVALENTS" means, as of any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after
such date and having, at the time of the acquisition thereof, the highest
rating obtainable from either S&P or Moody's; (iii) commercial paper maturing
no more than one year from the date of creation thereof and having, at the time
of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1
from Moody's; (vi) Eurodollar deposits due within one year of any commercial
banks whose outstanding senior long-term debt securities are rate either A- or
higher by S&P or A-3 or higher by Moody's; (v) repurchase obligations with a
term of not more than 7 days for underlying securities of the types described
in clause (i) of this paragraph with any bank meeting the qualifications
specified in clause (vi) of this paragraph; (iv) certificates of deposit or
bankers' acceptances maturing within one year after such date and issued or
accepted by any Lender or by any commercial bank organized under the laws of
the United States of America or any state thereof or the District of Columbia
that (a) is at least "adequately capitalized" (as defined in the regulations of
its primary Federal banking regulator) and (b) has Tier 1 capital (as defined
in such regulations) of not less than $100,000,000; and (vii) shares of any
money market mutual fund that (a) has at least 95% of its assets invested
continuously in the types of investments referred to in clauses (i) and (ii)
above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or Moody's.
"CASH MANAGER" means Bank One, Texas, N.A., or any successor thereto
approved by the Agent.
"CASH MANAGER CASH MANAGEMENT AGREEMENT" means the letter agreement
substantially in the form of Exhibit XI annexed hereto and delivered pursuant
to subsection 4.1E(xi) by and among the Cash Manager, the Agent and the
Company.
"CASH MANAGEMENT LETTERS" means (i) the Cash Manager Cash Management
Agreement, (ii) each letter agreement among each Loan Party, its Subsidiaries
(if applicable), the financial institutions at which Deposit Accounts are
located pursuant to the Cash Management System and the Agent, in each case
substantially in the form of Exhibit XI annexed hereto with such changes as are
acceptable to the Agent, and (iii) all other agreements with or directions to
the financial institutions at which Deposit Accounts are located satisfactory
to the Agent, in either case pursuant to which, in accordance with subsection
6.15,
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<PAGE> 18
such financial institutions are to direct funds from such Deposit Accounts to
the Concentration Account.
"CASH MANAGEMENT SYSTEM" means the system of Deposit Accounts of Loan
Parties and their Subsidiaries pursuant to which all Receipts of Loan Parties
and such Subsidiaries are collected and distributed, all as described in
Schedule 5.23 annexed hereto, as it may be modified from time to time in
accordance with the terms hereof.
"CASH PROCEEDS" means, with respect to any sale or other disposition
or refinancing of any Property, Cash payments received from such sale or
disposition or refinancing.
"COLLATERAL" means, collectively, all property (including Capital
Stock), whether real, personal or mixed, tangible or intangible, owned or to be
owned or leased or to be leased or otherwise held or to be held by the Company
or any of its Subsidiaries (other than all property, whether real, personal,
mixed, tangible or intangible, owned or to be owned or leased or to be leased
or otherwise held or to be held by a Pool C Subsidiary) or in which the Company
or any of its Subsidiaries (other than a Pool C Subsidiary) has or shall
acquire an interest, to the extent of the Company's or such Subsidiary's
interest therein, now or hereafter granted, assigned, transferred, mortgaged or
pledged to the Agent and/or the Lenders or in which a Lien is granted to the
Agent and/or the Lenders to secure all or any part of the Obligations, whether
pursuant to the Security Documents or otherwise, including, without limitation,
the Mortgaged Properties, the Leases and Rents (other than those generated by
or related to a Pool C Property), the DAB Notes and rights under the Original
Acquisition Documents, the Acquisition Documents (other than Acquisition
Documents with respect to a Pool C Property) and the Management Agreements, and
any and all proceeds of the foregoing, but excluding the Excluded Assets.
"COLLATERAL ACCOUNT" has the meaning assigned to that term in the
Collateral Account Agreement.
"COLLATERAL EBITDA" means, for any period and as of any date of
determination, the sum of Total Pool A Property EBITDA and Management EBITDA,
in each case for such period.
"COLLATERAL EBITDA-CAP. EX", means, for any period and as of any date
of determination, the sum of Total Pool A Property EBITDA-Cap. Ex plus
Management EBITDA, in each case for such period.
"COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account Agreement
executed and delivered by the Company and the Agent on or before the Funding
Availability Date, substantially in the form of Exhibit XIV annexed hereto,
pursuant to which the Company may pledge cash to the Agent to secure the
obligations of the Company to reimburse Issuing Lenders for payments made under
one or more Letters of Credit as provided in Section 8, as such Collateral
Account Agreement may hereafter be amended, supplemented or otherwise modified
from time to time.
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<PAGE> 19
"COLLECTING AGENT(S)" has the meaning assigned to that term in
subsection 6.15B(i).
"COMMERCE LEASE" means the Sublease Agreement dated as of November 17,
1989 between Crow-Staley Commerce #1 Limited Partnership and Commerce Hotel
Partners Ltd. (which shall be succeeded in interest by the Company after giving
effect to the Formation as of the Funding Availability Date), with respect to
the Commerce Property, as such agreement may be amended, restated, supplemented
or otherwise modified from time to time in accordance with the terms thereof
and hereof.
"COMMERCE PROPERTY" means the real property (including the leasehold
created by the Commerce Lease), together with all Improvements thereon and all
fixtures attached thereto and all personal property used in connection
therewith, located in the City of Commerce, California and known, as of the
date of this Agreement, as the Commerce Wyndham Garden Hotel, as more
particularly described in Schedule 5.4A1 annexed hereto.
"COMMERCIAL LETTER OF CREDIT" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by the Company
or any of its Subsidiaries.
"COMMITMENT" means the commitment of a Lender to maintain or make
Loans pursuant to subsection 2.1A, and "COMMITMENTS" means such commitments of
all Lenders in the aggregate.
"COMMON STOCK" means the common stock of the Company, par value $.01
per share.
"COMPANY" has the meaning assigned to that term in the introduction to
this Agreement.
"COMPANY'S ADJUSTED EQUITY INTEREST" means, with respect to any Joint
Venture or other Person in which any Loan Party or any of its Subsidiaries
shall have made an Investment or for whose benefit such Loan Party or
Subsidiary shall have become liable with respect to a Guaranty, and as of any
date of determination, the aggregate fair market value of the equity and debt
Investments of the Loan Parties and their respective Subsidiaries in such Joint
Venture or other Person or any Subsidiary thereof as of such date of
determination, as reasonably determined by the Company and certified to the
Agent in an Officers' Certificate of the Chief Executive Officer or the Chief
Financial Officer of the Company to such effect, together with the information
utilized by the Company to make such determination; provided that, for the
purpose of calculating such amount, (i) the principal amount of any obligation
of such Joint Venture or other Person or Subsidiary thereof so Guaranteed shall
be deemed to be a debt Investment by such Loan Party or Subsidiary so
Guaranteeing such obligation and (ii) there shall be excluded from such amount
debt Investments made in such Joint Venture or other Person if both (a) there
shall not be outstanding any Indebtedness of any Subsidiary of such Joint
Venture or other Person that is not subordinate in right and time of payment to
such debt Investments and (b) such debt Investments (which, with respect to
debt Investments that are evidenced by Guaranties made by any Loan Party or any
of its subsidiaries, shall mean the Indebtedness so Guaranteed) rank pari passu
with all other Indebtedness of such Joint Venture
12
<PAGE> 20
or other Person that is not subordinate in right or time of payment to any
other Indebtedness of such Joint Venture or other Person or their respective
Subsidiaries and rank prior in right and time of payment to all equity
Securities of such Joint Venture or other Person outstanding from time to time.
"COMPARABLE COMPANIES" has the meaning assigned to that term in
subsection 7.6B.
"COMPLETION CERTIFICATE" means any notice of completion of a Major
Renovation/Restoration delivered to the Agent pursuant to subsection 6.11G,
6.12C or 7.16B.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of Exhibit VI annexed hereto delivered to the Agent by the Company pursuant to
subsection 6.1(vi).
"CONCENTRATION ACCOUNT" means the interest bearing account No.________
established and maintained in the name of the Agent at the offices of the Cash
Manager pursuant to the terms of the Security Agreement, to which all funds on
deposit in the Deposit Accounts included in the Cash Management System are
directed by the Agent in accordance with subsection 6.15.
"CONDEMNATION PROCEEDS" means all compensation, awards, damages,
rights of action and proceeds awarded to any Loan Party or any of its
Subsidiaries by reason of any Taking.
"CONSOLIDATED EBITDA" means, for any period, the remainder of the
following:
(i) the sum, without duplication, of (a) Total Property
EBITDA and Total Management EBITDA, in each case for such period, plus
(b) all revenue of the Company and its Subsidiaries for such period,
determined on a consolidated basis in conformity with GAAP, that was
not included in the calculation of Total Property EBITDA and Total
Management EBITDA for such period irrespective of whether such income
relates to the Properties, the Management Agreements, the Servicing
Agreements or the Other Management Agreements; provided that the
calculation of the amount referred to in this clause (i) shall exclude
(v) income expressly excluded from the definition of Property Gross
Revenue, (w) income resulting from the write-up of the value of
assets, (x) income from interest earned on the DAB Notes, the
Affiliate Notes or on other notes and receivables from affiliates
except to the extent actually paid in cash, (y) the income of a Joint
Venture and income accounted for by the equity method of accounting,
in each case except to the extent distributed to the Company or any of
its Subsidiaries, and increases or decreases in earnings attributable
to minority interests and (z) the income of any Person acquired in a
pooling of interests transaction before the date of acquisition; minus
(ii) all expenses, without duplication, of the Company and
its Subsidiaries (to the extent not deducted from the calculation of
Total Property EBITDA or Total Management EBITDA) for such period and
determined on a consolidated basis in accordance with GAAP, whether or
not such expenses relate to the Properties, the Management Agreements,
the Servicing Agreements or the Other Management
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<PAGE> 21
Agreements; provided that the calculation of the amount referred to in
this clause (ii) shall exclude the expenses expressly excluded from
the definitions of Operating Expenses, Property EBITDA and Management
EBITDA and any expense related to the charge off of amounts referred
to in clause (x) above previously recognized as revenue; plus
provided further, that the calculation of the amount referred to in this
definition of Consolidated EBITDA shall exclude the cumulative effect of
changes in accounting principles.
"CONSOLIDATED EBITDA-CAP EX" means, for any period, Consolidated
EBITDA minus Capital Expenditures with respect to all Properties.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum of the
following, without duplication: (i) total interest expense of the Company and
its Subsidiaries on a consolidated basis in conformity with GAAP with respect
to (a) all outstanding Indebtedness under this Agreement and the other Loan
Documents, (b) that portion of the Pool B Obligations that is classified as a
liability on a balance sheet in accordance with GAAP, (c) the Pool C
Indebtedness, (d) the FF&E Financing Indebtedness and (e) the Senior Notes;
plus (ii) the interest component of all amounts payable under Capital Leases,
including, without limitation, the WHI Lease; plus (iii) one-third of the
rental expense attributable to Operating Leases with respect to real property,
including, without limitation, the Commerce Lease and the HPT Leases and
one-third of the rental expense attributable to operating leases with respect
to personal property with an initial term, including any renewals at the option
of either party, in excess of one year; plus (iv) net payments, if any,
pursuant to Interest Rate Agreements; plus (v) the amortization of original
issue discount and deferred costs related to Interest Rate Agreements; plus
(vi) commissions, discounts and other fees and charges paid or accrued with
respect to letters of credit and bankers' acceptance financing; plus (vii)
interest expense attributable to that portion of the Indebtedness or other
obligations of a Person (other than the Company or any of its Subsidiaries)
that is Guaranteed by the Company or any of its Subsidiaries or for the payment
of which the Company or any of its Subsidiaries is responsible or liable,
directly or indirectly, primarily or contingently, whether by law, contract,
ownership of Securities or otherwise; plus (viii) the sum of the amounts that
are determined with respect to the Pool B Ground Leases entered into pursuant
to sale and lease-back transactions permitted by subsection 7.11, which amounts
shall, with respect to each such Pool B Ground Lease, be equal to the greater
of (a) an amount equal to interest that would have accrued on the Attributable
Indebtedness with respect to such sale and lease-back transaction, calculated
at a per annum interest rate equal to the Adjusted Eurodollar Rate Loans with
an initial Interest Period of one month plus the Applicable Eurodollar Rate
Margin, in each case as of such date of determination, and (b) the payment
under such Pool B Ground Lease; minus (ix) if Property EBITDA with respect to a
Property for such period shall be zero by reason of the effect of clause (v)(2)
to the proviso to the definition of Property EBITDA (and not for any other
reason), the sum of amounts determined with respect to all such Properties,
which amounts shall be equal to interest that would have accrued on the
principal amount of Indebtedness secured by a Lien on such Property paid by the
Loan Parties and their respective Subsidiaries from gross purchase price paid
to the Loan Parties and their respective Subsidiaries in consideration of such
sale or other permanent disposition, calculated at a per annum interest
14
<PAGE> 22
rate equal to the Adjusted Eurodollar Rate for Eurodollar Rate Loans with an
initial Interest Period of one month plus the Applicable Eurodollar Rate
Margin, in each case as of such date of determination.
"CONSOLIDATED TOTAL INDEBTEDNESS" means, as of any date of
determination, the sum of the following, without duplication: (i) all
Indebtedness of the Company and its Subsidiaries, determined on a consolidated
basis in conformity with GAAP; plus (ii) all other Indebtedness of the Company
and its Subsidiaries; plus (iii) all Capital Lease obligations; plus (iv) all
obligations owed for all or any part of the deferred purchase price of real
property and management contracts purchased by the Company or any of its
Subsidiaries and all indebtedness created or arising under any conditional sale
or title retention agreement with respect to real property purchased by the
Company and its Subsidiaries; plus (v) trade payables of the Company and its
Subsidiaries that by their terms are more than 90 days delinquent; plus (vi)
all Contingent Obligations of the Company and its Subsidiaries to make any
Investments, Guaranties or payments pursuant to subsection 7.3; plus (vii) all
Guaranties of the Company or any of its Subsidiaries and other obligations for
the payment of which the Company or any of its Subsidiaries is responsible or
liable, directly or indirectly, primarily or contingently, whether by law,
contract, ownership of Securities or otherwise, directly or indirectly, that
either (a) are in existence as of the Effective Date but not included in
Schedule 5.3 annexed hereto, (b) are in existence as of the Effective Date and
are specified in such Schedule as Guaranties to be included in this definition
of Consolidated Total Indebtedness, (c) became effective after the Effective
Date or (d) are modified after the Effective Date pursuant to this Agreement to
increase the amount thereof or to change the obligors with respect thereto or
both, provided that, for purposes of calculating the amount of Consolidated
Total Indebtedness, the amount of any guaranty subject to this clause (d) by
reason of the increase in the amount thereof shall be equal to the amount of
such increase; plus (viii) the maximum amount of all Letters of Credit minus
the sum of (a) the amount of Letters of Credit supporting other Indebtedness of
the Company or any of its Subsidiaries plus (b) the amount of Cash deposited
and held pursuant to the terms of the Collateral Account Agreement; plus (ix)
withdrawal liability or insufficiency under ERISA or under any qualified plan
or related trust; plus (x) Attributable Indebtedness; plus (xi) if any Senior
Notes are then outstanding, all other obligations of the Company and its
Subsidiaries that are included in any definition of Indebtedness contained in
the Senior Note Documents.
"CONTINGENT OBLIGATION" means, with respect to any Person, as of any
date of determination and without duplication, any direct or indirect
liability, contingent or otherwise, of that Person which has not been (or to
the extent that it has not been) paid or otherwise discharged with respect to
the following: (i) any Guaranty; (ii) any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings (including, with respect to the Company, Letters of
Credit); (iii) performance, surety and similar bonds in respect of any
Restoration, Renovation or other design, construction, restoration, renovation
or repair of any Improvements, in each case with respect to any Property,
Managed Property or other hotel property; (iv) other performance, surety and
appeal bonds; and (v) indemnification or contribution obligations of any
nature, including, without limitation, liabilities in respect of (a) agreements
providing for indemnification, adjustment of purchase price or similar
obligations or for Guaranties or letters of credit, surety bonds and
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<PAGE> 23
performance bonds securing any obligations of that Person pursuant to such
agreements, (b) environmental and "bad deed" indemnities and (c) the issuance
or sale of Securities of that Person. The amount of any Contingent Obligation,
as of any date of determination, shall be equal to the least of (x) the amount
of the obligation so Guaranteed or that otherwise may be required to be paid,
(y) the amount to which such Contingent Obligation is expressly limited and (z)
the maximum exposure under such Contingent Obligation as reasonably calculated
by Company and approved by Agent on its sole discretion; provided, however,
that if the Contingent Obligation is described in two or more of the clauses in
the preceding sentence, the amount of the Contingent Obligation is the sum of
the amounts with respect to such Contingent Obligation, as calculated in
accordance with the preceding clauses (x) and (y).
"CONTRACTUAL OBLIGATION" means, with respect to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, deed to secure debt, contract, lease, purchase order,
undertaking, agreement or other instrument to which that Person is a party or
by which it or any of its properties is bound or to which it or any of its
properties is subject, including, with respect to the Company or any of its
Subsidiaries, any provision of the Related Documents to which the Company or
such Subsidiary is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"CREDIT BID" means a bid in a foreclosure sale pursuant to a Mortgage
made by the Agent consisting of all or a portion of the outstanding amount of
the Obligations.
"CROW INTERESTS" means, collectively, (i) Mr. and Mrs. Trammell Crow,
any lineal descendant of Mr. and Mrs. Trammell Crow, or any trust of which not
less than [**75%**] of the beneficial interests are held by Mr. and Mrs.
Trammell Crow or such lineal descendants and (ii) any Joint Venture of which
not less than [**75%**] of the outstanding equity interests are owned directly
or indirectly by Mr. and Mrs. Trammell Crow or such lineal descendants, CF
Securities, L.P. and Mill Spring Holdings, Inc., The Trammel Crow 1994
Revocable Trust, Trammell S. Crow, Harlan R. Crow, the Trammell S. & Barbara
H. Crow Children's Trust, The Stuart M. Crow Management Trust, the Stuart M.
Crow Descendants' Trust, The Howard D. Crow Special Trust, Crow Family, Inc.,
The Howard D. Crow Irrevocable Family Branch Trust, The Harlan R. Crow
Irrevocable Family Branch Trust, The Trammell S. Crow Irrevocable Family Branch
Trust, The Stuart M. Crow Irrevocable Family Branch Trust, The Harlan R. Crow
Descendants' Trust and The Crow Long-Term Trust, any holder (as of the
Formation Date) of 5% or more of any class of equity Securities of any of the
foregoing Persons referred to in this clause (ii) and the respective Affiliates
of the Persons referred to in this clause (ii).
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designed to protect the Company or any of its
Subsidiaries against fluctuations in currency values.
"CWS" means CW Synergistech, L.P., a limited partnership proposed to
be formed by Trammel Crow Company and an entity owned by the Crow Interests and
the Senior
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<PAGE> 24
Executives, as described in the Debt Prospectus in the section entitled
"Certain Relationships and Transactions".
"CWS AGREEMENTS" means, collectively, the Service Agreement and Asset
Management Agreement, each dated as of __________, 1996 and between CWS and the
Company, each substantially in the form thereof that has been approved by the
Agent, together with such alterations therein as shall be approved by the
Agent, which approval may be granted, withheld, conditioned or delayed in its
sole discretion, as each such agreement may be amended, restated, supplemented
or otherwise modified from time to time in accordance with the terms thereof
and hereof.
"DAB NOTES" means, collectively, the promissory notes of the obligors
and in the principal amounts listed on Schedule 5.4B annexed hereto.
"DEBT OFFERING" means the public offering by the Company of Senior
Notes in an aggregate principal amount of $100,000,000 pursuant to the Debt
Offering Documents.
"DEBT OFFERING DOCUMENTS" means, collectively, the Debt Underwriting
Agreements, the Debt Registration Statement, the Indenture and each of the
other documents and agreements executed in connection with the Debt Offering,
as each such document and agreement may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof and
hereof.
"DEBT PROSPECTUS" means the prospectus relating to the Senior Notes in
the form included in the Debt Registration Statement or, if the prospectus
included in the Debt Registration Statement omits information in reliance on
Rule 430A under the Act and such information is included in prospectuses filed
with the Securities and Exchange Commission pursuant to Rule 424(b) under the
Securities Act, "Prospectus" means the prospectus relating to the Senior Notes
in the form included in the Debt Registration Statement as supplemented by the
addition of the Rule 430A information contained in the prospectus relating to
the Senior Notes filed with the Securities and Exchange Commission pursuant to
Rule 424(b).
"DEBT REGISTRATION STATEMENT" means Registration Statement (No.
333-2458) of the Company on Form S-1 and the prospectus included therein, as
filed with the Securities and Exchange Commission on March 15, 1996, as amended
by Amendment Nos. 1, 2 and 3 thereto, as filed with the Securities and Exchange
Commission on May 1, 1996, May 16, 1996 and May __, 1996, respectively,
together with the Debt Prospectus, and as each may be further amended or
supplemented from time to time, before or after the effectiveness thereof, with
respect to the Debt Offering.
"DEBT UNDERWRITING AGREEMENTS" means, collectively, the Underwriting
Agreements, each dated as of May __, 1996, among the Company, Smith Barney Inc.
and the other underwriters named therein, as each such agreement may be
amended, restated, consolidated, supplemented or otherwise modified from time
to time in accordance with the terms thereof and hereof, pursuant to which the
Senior Notes are proposed to be issued and sold in the Debt Offering.
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<PAGE> 25
"DEFAULT RATE" means the rate of interest payable pursuant to
subsection 2.2E.
"DEFERRED MAINTENANCE" means the deferred maintenance and repair in
respect of the Pool A Properties and the estimated cost thereof, each as set
forth in the Engineering Reports delivered by the Company pursuant to
subsection 4.1N and specified on Schedule 6.17A annexed hereto.
"DEFERRED MAINTENANCE ACCOUNT" means, collectively, one or more
interest-bearing accounts to be established and maintained by the Company at
the offices of the Agent located at 280 Park Avenue, New York, New York, each
in the name of "Bankers Trust Company, as Agent - Wyndham Hotel Corporation
Deferred Maintenance Account," with such additional identifying references in
such name as the Company and the Agent shall agree.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced, by a negotiable certificate of
deposit.
"DOLLARS" and the sign "$" mean the lawful money of the United States
of America.
"EFFECTIVE DATE" means the date on which this Agreement shall become
effective pursuant to subsection 9.21.
"ELIGIBLE ASSIGNEE" means (i) a Person that has entered into a
confidentiality agreement pursuant to subsection 9.24 and is (a) a commercial
bank organized under the laws of the United States of America or any state
thereof; (b) a savings and loan association or savings bank organized under the
laws of the United States of America or any state thereof; (c) a commercial
bank organized under the laws of any other country or a political subdivision
thereof; provided, however, that (x) such bank is acting through a branch or
agency located in the United States of America or (y) such bank is organized
under the laws of a country that is a member of the Organization for Economic
Cooperation and Development or a political subdivision of such country; and (d)
any other entity which is an "accredited investor" (as defined in Regulation D
under the Securities Act) which extends credit or buys loans as one of its
principal businesses including, but not limited to, insurance companies, mutual
funds and lease financing companies, in each case (under clauses (a) through
(d) above) that is reasonably acceptable to the Agent; and (ii) any Lender and
any Affiliate of any Lender; provided further, however, that each Eligible
Assignee under clauses (i)(a) through (i)(c) above shall have Tier 1 capital
(as defined in the regulations of its primary Federal banking regulator) of not
less than $100,000,000; provided further, however, that no Affiliate of the
Company or any other Person who, either directly or through one or more
Affiliates, owns or operates hotels as one of its primary business activities
shall be an Eligible Assignee (it being understood that the direct or indirect
ownership or operation of hotels as an activity incidental to customary lending
activities (whether pursuant to shared-appreciation loans upon the foreclosure
of any lien or other security interest or otherwise) shall not constitute a
"primary business activity" for the purposes of this definition of Eligible
Assignee).
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<PAGE> 26
"ELIGIBLE PARTICIPANT" means a Person that has entered into a
confidentiality agreement pursuant to subsection 9.24 and is not an Affiliate
of the Company or any other Person who, either directly or indirectly, owns or
operates hotels as one of its primary business activities (it being understood
that the direct or indirect ownership or operation of hotels as an activity
incidental to customary lending activities (whether pursuant to
shared-appreciation loans upon the foreclosure of any lien or other security
interest or otherwise) shall not constitute a "primary business activity" for
the purposes of this definition of Eligible Participant).
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is, or was at any time, maintained or
contributed to by the Company, any of its Subsidiaries, or any of their
respective ERISA Affiliates.
"ENGINEER" means Law Engineering and Environmental Services, Inc. or
such other reputable engineer approved by the Agent licensed as such in the
state in which the applicable Property in question is located.
"ENGINEERING REPORT" means, with respect to any Property, a written
report prepared by an Engineer, describing and analyzing the physical condition
of the Improvements of such Property, describing any necessary or recommended
repairs, estimating the cost of such repairs and otherwise in form and
substance reasonably satisfactory to the Agent.
"ENVIRONMENTAL CLAIM" means any accusation, allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any Governmental Authority or any other Person
for any damage, including personal injury (including sickness, disease or
death), tangible or intangible property damage, contribution, indemnity,
indirect or consequential damages, damage to the environment, damage to natural
resources, nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions, in each case relating to,
resulting from or in connection with Hazardous Materials and relating to the
Company, any of its Subsidiaries (including any Person who was a Subsidiary
prior to the Funding Availability Date) or any Property.
"ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity executed
and delivered by the Company, GHALP Corp., WHI, Rose Hall GP Corp., Rose Hall
GP and Rose Hall Partnership on or before the Funding Availability Date, and
thereafter by each other Subsidiary of the Company that becomes a party
thereto, in favor of the Agent and the Lenders, in substantially the form of
Exhibit XIII annexed hereto, as such agreement may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"ENVIRONMENTAL LAWS" means all statutes, laws, ordinances, orders,
rules, regulations, written guidelines, writs, judgments, decrees or
injunctions and the like relating to (i) environmental matters, including those
relating to fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the Hazardous Release or
threatened Hazardous Release of Hazardous Materials, (ii) the generation, use,
storage, transportation or disposal of Hazardous Materials, or (iii)
occupational safety and
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health, industrial hygiene, or the protection of human, plant or animal health
or welfare, in any manner applicable to any Loan Party or any of its
Subsidiaries or any of their properties, including the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Sections
9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections
1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections
6901, et seq.), the Federal Water Pollution Control Act ( 33 U.S.C. Sections
1251, et seq.), the Clean Air Act (42 U.S.C. Sections 7401, et seq.), the Toxic
Substances Control Act (15 U.S.C. Sections 2601, et seq.), the Solid Waste
Disposal Act (42 U.S.C. Sections 6901, et seq.), as amended by the Resource
Conservation and Recovery Act (42 U.S.C. Sections 6901, et seq.), the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Sections 136, et seq.),
the Occupational Safety and Health Act (29 U.S.C. Sections 651, et seq.) and
the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Sections
11001, et seq.), each as amended or supplemented, and rules and regulations,
policies and guidelines promulgated pursuant thereto and any analogous future or
present local, state and federal statutes and rules and regulations, policies
and guidelines promulgated pursuant thereto, each as in effect as of the date of
determination.
"EQUITY OFFERING" means the public offering by the Company of
approximately 3,852,000 shares of Common Stock pursuant to the Equity Offering
Documents, including 532,000 shares of Common Stock that may be issued and sold
pursuant to the exercise of the underwriters' overallotment option.
"EQUITY OFFERING DOCUMENTS" means, collectively, the Equity
Underwriting Agreements, the Equity Registration Statement and each of the
other documents and agreements executed in connection with the Equity Offering,
as each such document and agreement may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof and
hereof.
"EQUITY PROSPECTUS" means the prospectus relating to the Common Stock
in the form included in the Equity Registration Statement or, if the prospectus
included in the Debt Registration Statement omits information in reliance on
Rule 430A under the Act and such information is included in prospectuses filed
with the Securities and Exchange Commission pursuant to Rule 424(b) under the
Securities Act, "Prospectus" means the prospectus relating to the Common Stock
in the form included in the Equity Registration Statement as supplemented by
the addition of the Rule 430A information contained in the prospectus relating
to the Common Stock filed with the Securities and Exchange Commission pursuant
to Rule 424(b).
"EQUITY REGISTRATION STATEMENT" means Registration Statement (No.
333-2214) of the Company on Form S-1 and the prospectus included therein, as
filed with the Securities Exchange Commission on March 11, 1996, as amended by
Amendment Nos. 1, 2 and 3 thereto, as filed with the Securities and Exchange
Commission on May 1, 1996, May 14, 1996 and May __, 1996, respectively,
together with the Equity Prospectus, and as each may be further amended or
supplemented from time to time, before or after the effectiveness thereof, with
respect to the Equity Offering.
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"EQUITY UNDERWRITING AGREEMENTS" means, collectively, the Underwriting
Agreements, each dated as of May __, 1996, among the Company, Smith Barney Inc.
and the other underwriters named therein, as each such agreement may be
amended, restated, consolidated, supplemented or otherwise modified from time
to time in accordance with the terms thereof, pursuant to which 3,852,500
shares of Common Stock are proposed to be issued and sold in the Equity
Offering, including 502,500 shares of Common Stock that may be issued and sold
to cover over-allotments.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.
"ERISA AFFILIATE" means, with respect to any Person, (i) any
corporation which is, or was at any time, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code
of which that Person is a member; (ii) any trade or business (whether or not
incorporated) which is a member of a group of trades or businesses under common
control within the meaning of Section 414(c) of the Internal Revenue Code of
which that Person is a member; and (iii) any member of an affiliated service
group within the meaning of Section 414(m) or (o) of the Internal Revenue Code
of which that Person, any corporation described in clause (i) above or any
trade or business described in clause (ii) above is a member. Any former ERISA
Affiliate of any Loan Party or any of its Subsidiaries shall continue to be
considered an ERISA Affiliate of such Loan Party or such Subsidiary, within the
meaning of this definition with respect to the period during which such entity
was an ERISA Affiliate of such Loan Party or such Subsidiary and with respect
to liabilities arising after such period for which such Loan Party or such
Subsidiary could be liable under the Internal Revenue Code or ERISA.
"ERISA EVENT" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation), (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to
any Pension Plan (whether or not waived in accordance with Section 412(d) of
the Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan, (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA, (iv)
the withdrawal by any Loan Party, any of its Subsidiaries or any of their
respective ERISA Affiliates from any Pension Plan with two or more contributing
sponsors or the termination of any such Pension Plan resulting in liability
pursuant to Section 4063 or 4064 of ERISA, (v) the institution by the PBGC of
proceedings to terminate any Pension Plan, or the occurrence of any event or
condition which might constitute grounds under ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan, (vi) the
imposition of liability on any Loan Party or any of its Subsidiaries or any of
their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA
or by reason of the application of Section 4212(c) of ERISA, (vii) the
withdrawal by any Loan Party or any of its Subsidiaries or any of their
respective ERISA Affiliates in a complete or partial withdrawal
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(within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer
Plan if there is any potential liability therefor, or the receipt by any Loan
Party or any of its Subsidiaries or any of their respective ERISA Affiliates of
notice from any Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or
has terminated under Section 4041A or 4042 of ERISA, (viii) the occurrence of
an act or omission which could give rise to the imposition on any Loan Party or
any of its Subsidiaries or any of their respective ERISA Affiliates of fines,
penalties, taxes or related charges under Chapter 43 of the Internal Revenue
Code or under Section 409 or Section 502(c)(2), (i) or (l), or Section 4071 of
ERISA in respect of any Employee Benefit Plan, (ix) the assertion of a material
claim (other than routine claims for benefits) against any Employee Benefit
Plan other than a Multiemployer Plan or the assets thereof, or against any Loan
Party or any of its Subsidiaries or any of their respective ERISA Affiliates in
connection with any such Employee Benefit Plan, (x) receipt from the Internal
Revenue Service of notice of the failure of any Pension Plan (or any other
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue
Code, or the failure of any trust forming part of any Pension Plan to qualify
for exemption from taxation under Section 501(a) of the Internal Revenue Code
or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of
the Internal Revenue Code or pursuant to ERISA with respect to any Pension
Plan.
"EURODOLLAR RATE LOANS" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"EVENT OF DEFAULT" means each of the events set forth in subsection
8.1.
"EXCESS CASH FLOW" means, for any period, an amount equal to the
following:
(i) the sum of the following amounts for such period,
without duplication:
(a) all Property Gross Revenues and other
Receipts with respect to the Properties; plus
(b) all Management Fees and other Receipts under
the Management Agreements and the Other Management Agreements;
plus
(c) any other items reported as income on the
consolidated statement of operations of the Company and its
Subsidiaries, including, without limitation, (x) interest
income on the Properties' bank accounts or otherwise earned by
the Company or any of its Subsidiaries and (y) rebates or
refunds; plus
(d) Extraordinary Receipts of the Loan Parties
and any of their respective Subsidiaries; less
(ii) the sum of the following amounts for such period,
without duplication, in each case as approved in advance by the Agent:
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(a) all reasonable and customary Operating
Expenses for the Properties incurred in the ordinary course of
business, consistent with past practice; provided, however,
that for purposes of the calculation of Excess Cash Flow for
any period, (x) Operating Expenses shall include (1) scheduled
payments in respect of any Ground Lease and (2) only those
franchise fees then due and payable to Persons who are not
Affiliates of the Company and (y) Operating Expenses shall not
include any Management Fees with respect to the Properties;
(b) all expenses payable by Management Corp.
under Management Agreements and Other Management Agreements
that Management Corp. reasonably believes will be reimbursed
timely and in full by the other parties thereto;
(c) a reserve for Capital Items, in an amount not
to exceed the sum of (x) 3.50% of Property Gross Revenues for
each of the Properties for such period plus (y) the aggregate
additional amount, if any, required to be paid, deposited or
reserved by the Company for Capital Items or any of its
Subsidiaries in respect of the Pool B Properties and the Pool
C Properties pursuant to the Pool B Obligations or the Pool C
Obligations, as the case may be, for such period, in each case
as approved by the Agent, which approval shall not be
unreasonably withheld, conditioned or delayed, and all
expenditures from such reserves (to the extent included in the
amount calculated pursuant to clause (i) above for such
period);
(d) all scheduled payments of rent, principal or
interest with respect to the Pool B Obligations, the Pool C
Indebtedness and the FF&E Financing Indebtedness;
(e) federal, state and local taxes;
(f) Permitted Junior Payments by the Loan Parties
or any of their respective Subsidiaries; and
(g) reasonable and customary sales, general and
administrative expenses of the Company and its Subsidiaries
incurred in the ordinary course of business, consistent with
past practice.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"EXCLUDED ASSETS" means the rights of the Loan Parties under
Management Agreements and Other Management Agreements that, by their terms and
in accordance with general practice, cannot be pledged to the Agent.
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"EXCUSABLE DELAY" means a delay due to acts of God, governmental
restrictions, enemy actions, war, civil commotion, fire, casualty, strikes,
shortages of supplies or labor, work stoppages or other causes beyond the
reasonable control of the Company or any of its Affiliates, but lack of funds
shall not be deemed a cause beyond the reasonable control of the Company or any
of its Affiliates.
"EXTRAORDINARY RECEIPTS" means the proceeds to any Loan Party or any
of its Subsidiaries from such items as (i) sales, exchanges or other
dispositions of the assets of any Loan Party or any of its Subsidiaries other
than in the ordinary course of business thereof, (ii) damage recoveries and
casualty insurance proceeds (including Condemnation Proceeds or Insurance
Proceeds but other than the proceeds of business interruption insurance or
rental loss insurance), (iii) income derived from Securities and other property
acquired for investment except to the extent such Securities represent Cash
Equivalents, income from Joint Ventures and interest and distributions received
on account of Investments made under 7.3(vii), (iv) condemnation awards or
sales in lieu of and under the threat of condemnation (other than awards or
other payments for any Taking for temporary use), (v) debt or equity financing
or refinancing, and (vi) all other amounts of any nature paid to any Loan Party
or any of its Subsidiaries not arising out of the ordinary course of business
thereof.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by the Agent.
"FF&E" means, with respect to any Property or the offices of the
Company and its Subsidiaries, any furniture, fixtures and equipment, including
any beds, lamps, bedding, tables, chairs, sofas, curtains, carpeting, smoke
detectors, mini bars, paintings, decorations, televisions, telephones, radios,
desks, dressers, towels, bathroom equipment, heating, cooling, lighting,
laundry, incinerating, loading, swimming pool, landscaping, garage and power
equipment, machinery, engines, vehicles, fire prevention, refrigerating,
ventilating and communications apparatus, carts, dollies, elevators,
escalators, kitchen appliances, restaurant equipment, computers, reservation
systems, software, cash registers, switchboards, hotel cleaning equipment or
any other items of furniture, fixtures and equipment typically used in hotel
properties (including furniture, fixtures and equipment used in guest rooms,
lobbies, common areas, front desk, back office, bars, restaurants, kitchens,
laundries, concierge, bellman, recreation, amusement, landscaping, parking and
other areas of hotels) and any replacements of all or any portion of any of the
foregoing.
"FF&E FINANCING INDEBTEDNESS" means Indebtedness (other than any
Loans) incurred by the Company or any of its Subsidiaries for the financing or
refinancing of FF&E, including, without limitation, that portion of the
obligations with respect to a Capital Lease, conditional sale agreement or
similar arrangement that is classified as a liability on a balance sheet in
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<PAGE> 32
conformity with GAAP, and any refinancing, exchange or refunding thereof that
is permitted pursuant to subsection 7.1(iii).
"FORMATION" means, collectively, the transactions contemplated by the
Formation Agreement, the Hampstead Exchange Agreement and the Rose Hall
Transfer Agreement as described in the Debt Prospectus in the section entitled
"The Formation and the Financing Plan -- Formation Transactions" and as more
particularly described on Schedule 5.1F annexed hereto.
"FORMATION AGREEMENT" means the Formation Agreement dated as of March
10, 1996 among the Company and the other parties identified on the signature
pages thereof, as such agreement may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof and
hereof.
"FORMATION DATE" means the date on which the transactions constituting
the Formation shall be consummated, or, if there shall be more than one such
date, the date of the initial closing of the Public Offerings.
"FORMATION DOCUMENTS" means, collectively, the Formation Agreement,
the Hampstead Exchange Agreement, the Rose Hall Transfer Agreement, the
Registration Rights Agreement, the Stockholders' Agreement and each other
agreement or other document giving effect to the Formation, the Confidential
Offering Memorandum dated March 8, 1996 of the Company relating to the
Formation and the transactions contemplated by the foregoing agreements,
together with the exhibits and other attachments to such Memorandum, and each
opinion, agreement, assignment, deed, instrument, material certificate or other
material document delivered in connection therewith or pursuant thereto.
"FRANCHISE AGREEMENT" means each of the franchise agreements listed on
Schedule 4.1K annexed hereto, as each such agreement may be amended, restated,
supplemented or otherwise modified or replaced from time to time in accordance
with subsection 7.17C.
"FUNDING AVAILABILITY DATE" or "F.A. DATE" means the date on which
each of the conditions set forth in subsection 4.1 are satisfied.
"FUNDING DATE" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set forth
in 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, in each case as the
same are applicable to the circumstances as of the date of determination.
"GE OPTION" means the option of General Electric Pension Trust ("GE")
to acquire Common Stock, the exercise of which is reflected in a letter
agreement dated April 29, 1996
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between GE and the Company, as such agreement may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"GEORGIA INTANGIBLE TAX" means any and all mortgage recording taxes,
transfer taxes, general intangibles taxes, intangible recording taxes and
governmental stamp and other taxes, duties, imposts, assessments or charges
(including, without limitation, all interest and penalties thereon) payable to
the Tax Commissioner of Fulton County, Georgia or any other Governmental
Authority in the State of Georgia and arising out of or in connection with the
execution, delivery, filing, recordation or registration of, or performance
under, the Georgia Mortgages or any other Loan Document or the Aggregate
Taxable Borrowings.
"GHALP" means Garden Hotel Associates L.P. (also known as Garden Hotel
Associates Limited Partnership), a Texas limited partnership.
"GHALP II" means Garden Hotel Associates Two L.P. (also known as
Garden Hotel Associates II Limited Partnership), a Texas limited partnership.
"GHALP CORP." means GHALP Corporation, a Delaware corporation.
"GHALP SECURITY DEPOSIT" means the amount owed by HPTWN to GHALP Corp.
pursuant to Section 3.2 of the HPT Sale Agreement and Section 3.5 of the HPT
Leases, in each case as in effect as of the date of this Agreement.
"GOVERNMENTAL ACTS" has the meaning assigned to that term in
subsection 3.5A.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state,
county, municipality or other political subdivision or branch thereof, and any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including any agency,
board, central bank, commission, court, department or officer thereof.
"GREYSTAR AGREEMENTS" means the agreement or agreements between
Greystar Partnership and the Company with respect to the program between
Greystar Partnership and the Company for the management of "extended-stay"
hotel properties described in the Debt Prospectus in the second paragraph in
the section entitled "Business -- Growth Strategy -- II. Additional Growth
Opportunities -- New Lodging Products", as each such agreement may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof. Greystar Agreements do not include Other
Management Agreements with respect to such hotel properties.
"GREYSTAR PARTNERSHIP" means the partnership owned by Crow Funding
Interests. Trammell Crow Residential and Greystar Inc. described in the second
paragraph in the section entitled "Business -- Growth Strategy -- II.
Additional Growth Opportunities -- New Lodging Products".
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"GROUND LEASES" means, collectively, the Pool A Ground Lease and the
Pool B Ground Leases.
"GUARANTY" means, with respect to any Person, any obligation,
contingent or otherwise, of that Person which has not been (or to the extent
that it has not been) paid or otherwise discharged with respect to any
Indebtedness, Ground Lease, other lease, dividend or other obligation of any
other Person if the primary purpose or intent thereof by the Person incurring
the Contingent Obligation is to provide assurance to the obligee of such
obligation that such obligation of another will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of
such obligation will be protected (in whole or in part) against loss in respect
thereof. Guaranties shall include, without limitation, (i) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (ii) the obligation to
make take-or-pay or similar payments if required regardless of non- performance
by any other party or parties to an agreement, and (iii) any liability of such
Person for the obligation of another Person through any agreement (contingent
or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation
or any security therefor, or to provide funds for the payment or discharge of
such obligation (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise) or (b) to maintain the solvency or any
balance sheet item, level of income or financial condition of another Person
if, in the case of any agreement described under subclauses (a) or (b) of this
sentence, the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Guaranty shall be equal to the least of
(x) the amount of the obligation so guaranteed or otherwise supported, (y) the
amount to which such Guaranty is specifically limited and (z) the maximum
exposure under such Guaranty as reasonably calculated by the Company and
approved by the Agent in its sole discretion. Guaranties shall not include any
of the foregoing obligations to the extent that the same constitutes
Indebtedness under the definition thereof or is a Guaranty with respect
thereto. The term "Guarantee" used as a verb has a corresponding meaning.
"HAMPSTEAD EXCHANGE AGREEMENT" means the Exchange Agreement dated as
of March 10, 1996 among Wyndham Hotel Company Ltd., the Company, 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., as
such agreement may be amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms thereof and hereof.
"HARBOUR ISLAND LEASE" means the Lease and Assignment dated as of
March 1, 1988 between Lincoln Island Associates No. 1, Limited and WHI Limited
Partnership (which shall be succeeded in interest by WHI after giving effect to
the Formation as of the Formation Date), with respect to the Harbour Island
Property, as such agreement may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
"HARBOUR ISLAND PROPERTY" means the real property (including the
leasehold created by the Harbour Island Lease), together with all Improvements
thereon and all fixtures attached
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thereto and all personal property used in connection therewith, located in
Tampa, Florida and known, as of the date of this Agreement, as the Wyndham
Harbour Island Hotel, as more particularly described in Schedule 5.4A2 annexed
hereto.
"HAZARDOUS MATERIALS" means (i) any chemical, material or substance at
any time defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous waste",
"restricted hazardous waste", "infectious waste", "toxic substances",
"pollutant", "contaminant" or any other formulations intended to define, list
or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive
toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any
applicable Environmental Laws, (ii) any oil, petroleum, petroleum fraction or
petroleum derived substance, (iii) any drilling fluids, produced waters and
other wastes associated with the exploration, development or production of
crude oil, natural gas or geothermal resources, (iv) any flammable substances
or explosives, (v) any radioactive materials, (vi) asbestos in any form, (vii)
urea formaldehyde foam insulation, (viii) electrical equipment which contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty parts per million, (ix) pesticides, and (x) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any Governmental Authority or which may or could pose a hazard to the health
and safety of the owners, occupants or any Persons in the vicinity of the
Properties; provided, however, that Hazardous Materials shall not include any
materials in a non-hazardous form such as asphalt contained in road-surfacing
materials or hazardous materials customarily used in the operation of hotel
properties and properly stored and maintained.
"HAZARDOUS RELEASE" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or
outdoor environment (including the abandonment or disposal of any barrels,
containers or other receptacles containing any Hazardous Materials), or into or
out of any Property, including the movement of any Hazardous Material through
the air, soil, surface water, groundwater or property.
"HPT" means Hospitality Properties Trust, a Maryland real estate
investment trust.
"HPT AGREEMENTS" means, collectively, the HPT Sale Agreement, the
Agreement to Lease dated as of April 1, 1996 between HPT and GHALP II (as such
agreement has been amended by First Amendment to Purchase and Sale Agreement
and Agreement to Lease dated as of April 19, 1996 among GHALP, GHALP II, HPT
and HPTWN and Second Amendment to Agreement to Lease dated as of May 2, 1996
between GHALP II and HPTWN), the HPT Leases, the HPT Collateral Documents, the
Partnership Interest Pledge and Security Agreement dated as of May 3, 1996 from
Garden Hotel Partners LP and Garden Hotel Partners Two LP in favor of HPTWN,
the HPT Stock Pledge and the HPT Estoppel, as each such agreement may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
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"HPT COLLATERAL DOCUMENTS" means, collectively, the Collateral
Assignment of Leases, Contracts and Agreements dated as of May 3, 1996 between
GHALP II and HPTWN, the Assignment and Security Agreement dated as of May 3,
1996 between GHALP II and HPTWN and the Security Agreement dated as of May 3,
1996 between GHALP II and HPTWN, as each such agreement may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"HPT ESTOPPEL" means, collectively, the Ground Lessor Estoppel
Certificates and Agreements, in each case containing terms and conditions
satisfactory to the Agent in its sole discretion, that shall be executed and
delivered by HPTWN and acknowledged by the Company and the Agent.
"HPT LEASES" means, collectively, the Lease Agreements dated as of May
2, 1996 or May 3, 1996, as the case may be, between HPTWN and GHALP II, with
respect to the HPT Properties, as such agreements may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"HPT PROPERTIES" means, collectively, the Pool B Properties designated
as such on Schedule 1.1B annexed hereto.
"HPT SALE AGREEMENT" means the Purchase and Sale Agreement dated March
5, 1996 between GHALP and HPT, as amended by First Amendment to Purchase and
Sale Agreement and Agreement to Lease dated as of April 19, 1996 among GHALP,
GHALP II, HPT and HPTWN and by Second Amendment to Purchase and Sale Agreement
dated as of May 2, 1996 between GHALP and HPTWN, as such agreement may be
further amended, restated, supplemented or otherwise modified from time to time
in accordance with the terms thereof and hereof.
"HPT STOCK PLEDGE" means the Stock Pledge and Security Agreement to be
dated the date of the initial closing of the Public Offering from the Company
for the benefit of HPTWN, as such agreement may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"HPTWN" means HPTWN Corporation, a Delaware corporation.
"IMPOSITIONS" means all real property taxes and assessments, of any
kind or nature whatsoever, including, without limitation, vault, water and
sewer rents, rates, charges and assessments, levies, permits, inspection and
license fees and other governmental, quasi-governmental or nongovernmental
levies or assessments such as maintenance charges, owner association dues or
charges or fees resulting from covenants, conditions and restrictions affecting
the Properties, assessments resulting from inclusion of any Property in any
taxing district or municipal or other special district, any of which are
assessed or imposed upon the Property, or become due and payable, and which
create or may create a Lien upon the Property, or any part thereof. In the
event that any penalty, interest or cost for nonpayment of any Imposition
becomes due and payable, such penalty, interest or cost shall be included
within the term "Impositions".
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<PAGE> 37
"IMPROVEMENTS" means all buildings, structures, fixtures, tenant
improvements and other improvements of every kind and description now or
hereafter located in or on or attached to any Land, including all building
materials, water, sanitary and storm sewers, drainage, electricity, steam, gas,
telephone and other utility facilities, parking areas, roads, driveways, walks
and other site improvements; and all additions and betterments thereto and all
renewals, substitutions and replacements thereof.
"INDEBTEDNESS" means, with respect to any Person and without
duplication, to the extent required to be shown on a balance sheet prepared in
conformity with GAAP, (i) all indebtedness for money borrowed by that Person,
(ii) that portion of obligations with respect to Capital Leases that is
classified as a liability on a balance sheet in conformity with GAAP, (iii)
notes payable and drafts accepted representing extensions of credit whether or
not representing obligations for borrowed money, (iv) all obligations owed for
all or any part of the deferred purchase price of assets or services purchased
by that Person, which purchase price is fully earned (a) due more than six
months from the date of incurrence of the obligation in respect thereof or (b)
evidenced by a note or similar written instrument, (v) all indebtedness secured
by any Lien on any property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed by that Person
or is nonrecourse to the credit of that Person, except obligations for
Impositions which are not due and payable and Liens permitted pursuant to
subsection 6.9, (vi) obligations under Currency Agreements and Interest Rate
Agreements and (vii) that portion of any other obligation of that Person (other
than reservation and similar deposits received and held in the ordinary course
of business) that is classified as a liability on a balance sheet in conformity
with GAAP, which obligation is (a) due more than six months from the date of
incurrence thereof or (b) evidenced by a note or similar written instrument.
"INDEMNIFIED PERSON" has the meaning assigned to that term in
subsection 9.3.
"INDENTURE" means the Indenture dated as of May 24, 1996 between the
Company and Bank One, Columbus, N.A., as Trustee, pursuant to which the Company
shall issue the Senior Notes as such agreement may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"INSURANCE PROCEEDS" means all insurance proceeds, damages, claims and
rights of action and the right thereto under any insurance policies relating to
any portion of any Property.
"INSURANCE REQUIREMENTS" means all terms of any insurance policy
required hereunder covering or applicable to any Property or any part thereof,
all requirements of the issuer of any such policy, and all orders, rules,
regulations and other requirements of the National Board of Fire Underwriters
(or any other body exercising similar functions) applicable to or affecting any
Property or any part thereof or any use of any Property or any portion thereof.
"INTELLECTUAL PROPERTY" means, as of any date of determination, all
patents, trademarks, tradenames, copyrights, technology, know-how and processes
used in or necessary
30
<PAGE> 38
for the conduct of the business of the Loan Parties and their respective
Subsidiaries as conducted on such date of determination that are material to
the business, operations, condition (financial or otherwise) or prospects of
the Loan Parties and their Subsidiaries, taken as a whole, including any of the
foregoing licensed to the Loan Parties or any of their respective Subsidiaries
by other Persons.
"INTEREST PERIOD" has the meaning assigned to that term in subsection
2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect the Company or any of its
Subsidiaries against fluctuations in interest rates.
"INTEREST RATE DETERMINATION DATE" means each date for calculating the
Adjusted Eurodollar Rate for purposes of determining the interest rate in
respect of an Interest Period. The Interest Rate Determination Date shall be
the second Business Day prior to the first day of the related Interest Period
for any Loan.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"INVESTMENT" means, with respect to any Person or any of its
Subsidiaries, as of any date of determination and without duplication, (i) any
direct or indirect purchase or other acquisition (whether or not for
consideration) by such investing Person or Subsidiary of, or of a beneficial
interest in, any Securities of any other Person, (ii) any direct or indirect
redemption, retirement, purchase or other acquisition for value by such
investing Person or Subsidiary from any other Person (other than (a) a Person
with respect to which such investing Person or Subsidiary is a Wholly Owned
Subsidiary or (b) any other Wholly Owned Subsidiary of the Person referred to
in the preceding clause (a); provided that, in the case of the Company and its
Subsidiaries, such other Wholly Owned Subsidiary is a Loan Party and has
Guaranteed the Obligations), of any equity Securities of such investing Person
or Subsidiary, (iii) any direct or indirect loan, advance (other than advances
to officers, employees, consultants, accountants, attorneys and other advisors
and members of the Board of Directors of any Person for moving, entertainment
and travel expenses, drawing accounts and similar expenditures in each case
incurred in the ordinary course of business) or capital contribution by to any
other Person, including all indebtedness and accounts receivable from that
other Person that are not current assets or did not arise from sales to that
other Person in the ordinary course of business, (iv) any commitment or
obligation (including, without limitation, any obligation under or in
connection with a Management Agreement) to make any investment described in
clauses (i) through (iii) above and (v) any liability that is recourse to such
investing Person or Subsidiary or secured by any asset of such investing Person
or Subsidiary and that arises, by law, contract, ownership of Securities or
otherwise, directly or indirectly, as the result of or otherwise in connection
with the origination, continuation or termination of any investment described
in clauses (i) through (iv) above. The amount of any Investment, as of any date
of determination, shall be equal to (x) with respect to an Investment referred
to in clause (i) or (ii) of the preceding sentence, the remainder of (1) the
sum of original cost of such Investment plus the cost of all additions thereto
as of such date of determination, minus (2) the aggregate amount
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<PAGE> 39
paid to such Person or Subsidiary as a return of such Investment, provided,
that (A) the calculation of the amount referred to in this clause (2) shall
exclude all fees and other amounts (or the portion thereof) that shall
constitute interest, dividends or other amounts in respect of the return on
such Investment, as determined in accordance with GAAP, and (B) the calculation
of the amount referred to in this clause (i) shall exclude, all adjustments for
increases or decreases in value, and write-ups, write-downs or write-offs with
respect to such Investment, (y) with respect to an Investment referred to in
clause (iv) or (v) of the preceding sentence, the maximum aggregate liability
for which such investing Person or Subsidiary may become liable, by law,
contract, ownership of Securities or otherwise, with respect to such Investment
as of such date of determination, and (z) with respect to an Investment
described in two or more of clauses (i), (ii), (iii) and (iv), the sum of the
amounts with respect to such Investment, as calculated in accordance with the
preceding clauses (x) and (y), in each case as of such date of determination.
"IP CORP." means Wyndham IP Corporation, a Delaware corporation and a
Subsidiary of the Company.
"IP LICENSE AGREEMENTS" has the meaning assigned to that term in
subsection 5.21A.
"ISIS 2000" means ISIS 2000, a limited partnership to be formed by the
Crow Family Interests and the Senior Executives, as described in the Debt
Prospectus in the section entitled "Business Customers and Marketing Central
Reservation System".
"ISIS 2000 AGREEMENTS" means, collectively, the Service Agreement and
the Asset Management Agreement that shall be executed and delivered and between
ISIS 2000 and the Company, each substantially in the form thereof that has been
approved by the Agent, together with such alterations therein as shall be
approved by the Agent, which approval may be granted, withheld, conditioned or
delayed in its sole discretion, as each such agreement may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"ISSUING LENDER" means, with respect to any Letter of Credit, the
Lender which agrees or is otherwise obligated to issue such Letter of Credit,
determined as provided in subsection 3.1B(ii).
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
however, that in no event shall any Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"LAND" means the land located in the towns, counties and states listed
on Schedule 5.4A1 annexed hereto (and more particularly described in Exhibit A
to each Mortgage (other than the Mortgages with respect to the Ground Leases,
in which the applicable Land is described in Exhibit A-1 to each such
Mortgage)), Schedule 5.4A2 annexed hereto and Schedule 5.4A3 annexed hereto,
together with all strips and gores within or adjoining such property, all
estate, right, title, interest, claim or demand whatsoever of any Loan Party or
any
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<PAGE> 40
of its Subsidiaries in the streets, roads, sidewalks, alleys, and ways adjacent
thereto (whether or not vacated and whether public or private and whether open
or proposed), all vaults or chutes adjoining such land, all of the tenements,
hereditaments, easements, reciprocal easement agreements, rights pursuant to
any trackage agreement, rights to the use of common drive entries,
rights-of-way and other rights, privileges and appurtenances thereunto
belonging or in any way pertaining thereto, all reversions, remainders, dower
and right of dower, curtesy and right of curtesy, all of the air space and
right to use said air space above such property, all transferable development
rights arising therefrom or transferred thereto, all water and water rights
(whether riparian, appropriative or otherwise, and whether or not appurtenant)
and shares of stock evidencing the same, all mineral, mining, gravel,
geothermal, oil, gas, hydrocarbon substances and other rights to produce or
share in the production of anything related to such property, all drainage,
crop, timber, agricultural, and horticultural rights with respect to such
property, and all other appurtenances appurtenant to such property, including
without limitation, any now or hereafter belonging or in any way appertaining
thereto, and all claims or demands of such Loan Party or such Subsidiary,
either at law or in equity, in possession or expectancy, now or hereafter
acquired, of, in or to the same.
"LEASE" means each of the leases (other than the Ground Leases),
licenses, concession agreements, franchise agreements (other than the Franchise
Agreements) and other occupancy agreements and other agreements demising,
leasing or granting rights of possession or use or, to the extent of the
interest therein of any Loan Party or any of its Subsidiaries, any sublease,
subsublease, underletting or sublicense, which now or hereafter may affect any
Property or any part thereof or interest therein, including any agreement
relating to a loan or other advance of funds made in connection with any such
lease, license, concession agreement, franchise or other occupancy agreement
and such sublease, subsublease, underletting or sublicense, and every
amendment, restatement, supplement, consolidation or other modification of or
other agreement relating to or entered into in connection with such lease,
license, concession agreement, franchise or other occupancy agreement and such
sublease, subsublease, underletting or sublicense, and every Guaranty of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto, and any Guaranties of
leasing commissions.
"LENDER" and "LENDERS" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 9.1 and the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires.
"LETTER OF CREDIT" OR "LETTERS OF CREDIT" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders
for the account of the Company pursuant to subsection 3.1.
"LETTER OF CREDIT USAGE" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding plus
(ii) the aggregate amount of all drawings under Letters of Credit honored by
Issuing Lenders and not theretofore reimbursed
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<PAGE> 41
by the Company (including any such reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B).
"LIEN" means any lien (including any lien or security title granted
pursuant to any mortgage, deed of trust or deed to secure debt), pledge,
hypothecation, assignment, security interest, charge, levy, attachment,
restraint or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any agreement
to give any security interest) and any option, trust or other preferential
arrangement having the practical effect of any of the foregoing.
"LIQUOR LICENSES" means the licenses set forth on Schedule 5.4I
annexed hereto and each other license issued by the Department of Alcoholic
Beverage Control or similar state or local agency to any Loan Party or any of
its Subsidiaries or in respect of any Property, in each case in connection with
the sale of alcoholic beverages at any Property, as such Schedule may be
revised from time to time pursuant to subsection 7.15 or 7.16.
"LIQUOR OPERATIONS SERVICING AGREEMENTS" means, collectively, the
sub-management agreements entered into between Management Corp. and each Loan
Party (or Subsidiary of a Loan Party) that is a holder of a Liquor License in
the form delivered on or before the Funding Availability Date, as any such
sub-management agreement may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
"LOAN" and "LOANS" means one or more of the Revolving Loans or Swing
Line Loans or any combination thereof.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Subsidiary
Guaranty, the Notes, the Security Documents, the Environmental Indemnity, the
Letters of Credit (and any applications for, or reimbursement agreements or
other documents or certificates executed by the Company in favor of an Issuing
Lender relating to, the Letters of Credit), the Collateral Account Agreement
and any other documents entered into in connection with the Cash Management
System.
"LOAN PARTIES" means, collectively, the Company, Rose Hall GP Corp.,
Rose Hall GP, Rose Hall Partnership, Management Corp., IP Corp., GHALP Corp.,
WHI and any other Subsidiary of the Company which is or becomes a party to a
Loan Document.
"LOCAL ACCOUNTS" means, collectively, the Deposit Accounts listed on
Schedule 5.23 annexed hereto as "Local Accounts" and any other Deposit Account
established with respect to one or more Properties for the purpose of receiving
Receipts pursuant to subsection 6.15.
"MAJOR RENOVATION/RESTORATION" means, as of any date of determination,
any Renovation or Restoration of a Property or a Managed Property with respect
to which more than 20% of the rooms "available for sale" at the applicable
Property or Managed Property, as the case may be, have been, are scheduled to
be, or could reasonably be expected to be, "rooms out-of-order", as determined
in accordance with the Uniform System, during any
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<PAGE> 42
period of more than 30 consecutive days; provided that a Restoration related to
a casualty or Taking and conducted pursuant to and, as of such date of
determination, satisfying the conditions of subsection 6.11F is not a Major
Renovation/Restoration.
"MAJOR RENOVATION/RESTORATION REMOVAL PERIOD" means (i) with respect
to any Property, Managed Property or Other Managed Property, the period
commencing on the day that a Major Renovation/Restoration shall commence with
respect to such Property, Managed Property or Other Property or (ii) with
respect to any Management Agreement, Servicing Agreement or Other Management
Agreement, the period commencing on the day that a Major Renovation/Restoration
shall commence with respect to the related Managed Property, Property or Other
Managed Property, as the case may be, and in each case terminating on the day
that such Major Renovation/Restoration shall terminate with respect to such
Property, Managed Property or Other Managed Property, as the case may be, in
each case as such dates of commencement and termination shall be reasonably
determined by the Agent based on documentation received from the Company or
Management Corp. and on such other information as the Agent shall determine to
be relevant.
"MANAGED PROPERTIES" means, collectively, the real properties,
together with all Improvements thereon and all fixtures attached thereto and
all personal property used in connection therewith, that are managed by
Management Corp. or any of its Wholly Owned Subsidiaries pursuant to the
Management Agreements. Managed Properties do not include Properties or Other
Managed Properties.
"MANAGEMENT AGREEMENT REPORT" means a report substantially in the form
of Exhibit XIX annexed hereto delivered by the Company to the Agent pursuant to
subsection 4.1I or 7.16E, as such Exhibit may be amended from time to time as
may be agreed upon by the Company and the Agent.
"MANAGEMENT AGREEMENTS" means, collectively, the management agreements
and asset management agreements listed on Schedule 4.1I annexed hereto, as such
Schedule may be revised or supplemented from time to time pursuant to
subsection 2.9 or 6.1(iii), as any such management agreement or asset
management agreement may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
"MANAGEMENT AMOUNT" means, as of any date of determination, the
following:
(i) with respect to each Management Agreement or
Servicing Agreement (other than a Management Agreement referred to in
clause (ii) below), the product of (a) the applicable factor set forth
below with respect to the ranking specified by the Agent for such
Management Agreement or Servicing Agreement, as the case may be, as of
such date of determination in accordance with the criteria specified
in Exhibit XX annexed hereto, multiplied by (b) the Management EBITDA
for such Management Agreement or Servicing Agreement, as the case may
be, for the 12 most recently completed calendar months ending not less
than 30 days before such date of determination for which the Agent has
received the financial statements with respect to
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<PAGE> 43
such Management Agreement or Servicing Agreement required to be
delivered pursuant to subsection 6.1(ii) or subsection 7.16A(ii), as
the case may be:
<TABLE>
<CAPTION>
PERIOD RANKING
1 2 3 4
<S> <C> <C> <C> <C>
F.A. Date-12/31/96 3.0 2.5 2.0 0.0
01/01/97-12/31/97 2.9 2.4 1.8 0.0
01/01/98-12/31/98 2.8 2.3 1.6 0.0
01/01/99-Maturity Date 2.7 2.2 1.4 0.0; or
</TABLE>
(ii) with respect to any Management Agreement for a
Managed Property owned or leased by the Crow Interests or their
Affiliates that does not provide, for a remaining period of at least
three months from such date of determination, for either or both of
(a) the payment to the Management Corp. upon termination without cause
of a fee in an amount equal to not less than the Approved Management
Fees for the 12 most recently completed calendar months ending not
less than 30 days before such date of determination or (b) a
prohibition against the termination thereof upon the transfer of such
Managed Property, an amount equal to 50% of the amount that would be
calculated with respect thereto if such Management Agreement were
subject to clause (i) above;
provided that, the Management Amount with respect to such Management Agreement
for such period shall be zero if, on or before such date of determination (x)
any Loan Party or any of its Subsidiaries shall have received written notice
(or any other notice pursuant to the applicable agreement) from any other party
to such Management Agreement that such Management Agreement will be cancelled
or terminated before the scheduled date of expiration and such written notice
(or other notice) shall not have been rescinded or otherwise withdrawn or (y)
any Loan Party or any of its Subsidiaries shall have received written notice
from or on behalf of the transferor or transferee of the Managed Property
subject to such Management Agreement with respect to the execution of a
definitive agreement providing for the sale or other permanent disposition of
such Managed Property [**more than _____ days after the execution of such
agreement**] and such transferee shall not have agreed by written instrument
satisfactory in form and substance to the Agent to assume the obligations of
the transferor under such Management Agreement, arising after the date of
transfer; provided further, however, that (1) if a termination fee shall be
payable to the Company or Management Corp. upon the actual cancellation or
termination of a Management Agreement subject to clause (x) above as of such
date of determination or upon the closing of the sale or other permanent
disposition of a Managed Property subject to clause (y) above as of such date
of determination, then, as of such date of determination and each date of
determination thereafter (until such Management Agreement shall cease to be
subject to the preceding clause (x) or (y), as the case may be) the Management
Amount with respect to such Management Agreement shall be equal to the lesser
of (A) the termination fee that Management Corp. or any of its Wholly Owned
Subsidiaries reasonably expects, as of such date of determination, to receive
not later than 3 months following the occurrence of the event referred to in
the preceding clause (x) or (y), as the case may be, and (B) an amount equal to
50% of the Management Amount with respect to such Management Agreement if
effect were not given to the proviso and this further proviso
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<PAGE> 44
to the definition of Management Amount and (2) the aggregate Management Amount
with respect to all Management Agreements subject to the preceding clause (x)
or (y), as the case may be, calculated pursuant to the preceding clause (1) as
of such date of determination shall not exceed $1,000,000.
"MANAGEMENT CORP." means Wyndham Management Corporation, a Delaware
corporation and a Wholly Owned Subsidiary of the Company.
"MANAGEMENT EBITDA" means, with respect to any Management Agreement,
Servicing Agreement or Other Management Agreement, as the case may be, for any
period and as of any date of determination and calculated on the accrual basis
of accounting, whether a positive or negative number, the amount equal to the
remainder of the following:
(i) the aggregate amount of base, trade name and
incentive fees (collectively, "APPROVED MANAGEMENT FEES") that are
payable to the manager under such Management Agreement, Servicing
Agreement or Other Management Agreement, as the case may be, with
respect to such period, as determined by the Agent in its sole
discretion and without duplication; provided that the calculation of
the amount referred to in this clause (i) shall exclude, without
duplication, (a) all such fees or other amounts (or the portion
thereof) the current payment of which shall have been subject to any
actual deferral, suspension, set-off, prohibition, pay-over,
reduction, adjustment or other interruption of any nature pursuant to
any subordination provisions in such Management Agreement, Servicing
Agreement or Other Management Agreement, as the case may be, or the
provisions of any other agreement, instrument or other document to
which any party to such Management Agreement, Servicing Agreement or
Other Management Agreement, as the case may be, is a party or by which
any of their respective properties or assets are bound, (b) all such
fees or other amounts (or the portion thereof) that shall be subject
to reduction, repayment or adjustment in any subsequent period other
than normal year-end adjustments, (c) all such fees or other amounts
(or the portion thereof) that shall constitute payments of principal,
interest, dividends or other amounts in respect of the return of or
return on any Investment or Guaranty, as determined by the Agent in
its sole discretion, (d) all such fees or other amounts (or the
portion thereof) that are payable in consideration of or otherwise in
respect of the amendment, modification, extension, expiration,
cancellation or termination of such Management Agreement, Servicing
Agreement or Other Management Agreement, as the case may be, or
related agreements, (e) all such fees or other amounts (or the portion
thereof) that are payable in consideration of or otherwise in respect
of the performance of any service not directly related to the
management or operation of a hotel property, including, without
limitation, fees or other amounts payable for accounting, design,
construction purchasing and asset management services, (f) payments
(whether pursuant to reimbursement, indemnification and otherwise) of
costs and expenses incurred or paid by or on behalf of the manager in
connection with the performance of any obligations or the exercise of
any rights under such Management Agreement, Servicing Agreement or
Other Management Agreement, as the case may be, or any related asset
management agreement or other agreement to the extent not taken into
account in calculating Management Expenses for such period, including,
without limitation,
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<PAGE> 45
contributions, reimbursements and other payments in respect of
accounting administrative, tax, legal, finance, risk management and
disposition services, salaries and benefits of hotel employees,
marketing programs, research services, advertising and public
relations, national and local sales and marketing services, and
centralized reservations services; provided further, that (x) if the
terms on which the Approved Management Fees are calculated with
respect to such period or any subsequent period shall have been
modified as of such date of determination, then the amount of Approved
Management Fees that shall be included in the calculation of
Management EBITDA for such period for the purpose of calculating the
Management Amount with respect to such Management Agreement, Servicing
Agreement or Other Management Agreement, as the case may be (but not
for purposes of calculating any amount pursuant to subsections 7.6D,
7.6E, 7.6F and 7.6G), as of such date of determination shall not
exceed the amount of Approved Management Fees that would have been
payable to the manager under such Management Agreement, Servicing
Agreement or Other Management Agreement, as the case may be, with
respect to such period if such terms, as so modified, had been in
effect during the entire period; and (y) Approved Management Fees with
respect to such Management Agreement, Servicing Agreement or Other
Management Agreement, as the case may be, shall be included in the
calculation of Management EBITDA for such period only to the extent
that the Agent and Lenders shall have received the financial
statements for such Management Agreement or Servicing Agreement, as
the case may be, for such period required to be delivered on or before
such date of determination pursuant to subsection 6.1(ii) or
7.16A(i)(2), as the case may be; multiplied by
(ii) the Management Margin (A) if the following clause (B)
is not applicable is not applicable, determined with respect to the
four most recently completed calendar quarters ending not less than 30
days before such date of determination and (B) if Total Utilization is
not less than $50,000,000 as of such date of determination and the
Agent shall so elect by written notice to the Company, determined with
respect to the 12 most recently completed calendar quarters ending not
less than 30 days before such date of determination;
provided that:
(w) if the Addition Date with respect to such Management
Agreement, Servicing Agreement or Other Management Agreement shall
have occurred after the Funding Availability Date and after the
commencement of such period but before the termination of such period:
(1) for purposes of calculating the Management
Amount with respect to such Management Agreement or Servicing
Agreement, as the case may be, as of such date of
determination, Management EBITDA with respect to such
Management Agreement or Servicing Agreement, as the case may
be, for such period shall be the sum of (A) the Management
EBITDA which would have been generated for the portion of such
period commencing on the first day of such period and ending
on the day before such Addition Date if the
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<PAGE> 46
Management Agreement or Servicing Agreement had then been in
effect, as the same shall be determined based upon the
financial statements for such period required by subsection
7.16A to be delivered with respect to such Management
Agreement or Servicing Agreement, as the case may be, and such
other information with respect thereto that may be provided by
the Loan Parties and their respective Subsidiaries, subject to
such adjustments as may be required by the Agent in its sole
discretion, plus (B) Management EBITDA with respect to such
Management Agreement or Servicing Agreement, as the case may
be, for the portion of such period commencing on such Addition
Date and ending on the last day of such period, based upon the
financial statements for such period required to be delivered
on or before such date of determination pursuant to subsection
6.1(i), subject to such adjustments as may be required by the
Agent in its sole discretion; provided, however, that with
respect to each Management Agreement or Servicing Agreement
related to a Managed Property or Property, as the case may be,
for which a Major Renovation/Restoration shall occur, or shall
be scheduled to commence, on or before the first anniversary
of the Addition Date with respect thereto, Management EBITDA
with respect to such Management Agreement or Servicing
Agreement, as the case may be, for such period shall be zero;
(2) for purposes of calculating any amount
pursuant to subsection 6.14, 7.6D, 7.6E, 7.6F and 7.6G as of
such date of determination, Management EBITDA with respect to
such Management Agreement or Servicing Agreement, as the case
may be, Management EBITDA for such period shall be the sum of
(A) zero, for the portion of such period commencing on the
first day of such period and ending on the day before such
Addition Date, plus (B) Management EBITDA with respect to such
Management Agreement or Servicing Agreement, as the case may
be, for the portion of such period commencing on such Addition
Date and ending on the last day of such period, based upon the
results of operations of the Loan Parties and their respective
Subsidiaries with respect thereto during such period, as
reflected in the financial statements for such period required
to be delivered on or before such date of determination
pursuant to subsection 6.1(i), subject to such adjustments as
may be required by the Agent in its sole discretion;
(x) for purposes of calculating the Management Amount with
respect to such Management Agreement, Servicing Agreement or Other
Management Agreement, as the case may be, and any amount pursuant to
subsection 6.14 (but not for purposes of calculating any amount
pursuant to subsection 7.6D, 7.6E, 7.6F and 7.6G) as of such date of
determination, Management EBITDA for such period shall be zero if (1)
the Addition Date with respect to such Management Agreement, Servicing
Agreement or Other Management Agreement, as the case may be, shall not
have occurred on or before such date of determination, (2) on or
before such date of determination, such Management Agreement,
Servicing Agreement or Other Management Agreement, as the case may be,
shall have expired (without renewal or extension), been cancelled or
otherwise terminated, (3) on or before such date of determination, the
related Managed
39
<PAGE> 47
Property, Property or Other Managed Property, as the case may be,
shall have been sold or otherwise permanently disposed of and such
transferee shall not have agreed by written instrument satisfactory in
form and substance to the Agent to assume the obligations of the
transferor under such Management Agreement, Servicing Agreement, or
Other Management Agreement, as the case may be, arising after the date
of transfer, (4) to the knowledge of the Company, on such date of
determination there shall have occurred and be continuing any event or
condition which, with the giving of notice or the lapse of time or
both, would cause, or would permit (w) any party to such Management
Agreement, Servicing Agreement or Other Management Agreement, as the
case may be, to cause, the cancellation or other termination of such
Management Agreement, Servicing Agreement or Other Management
Agreement, as the case may be, (x) any holder of any Indebtedness (or
a trustee on behalf of such holders) secured by such Managed Property,
Property or Other Managed Property, as the case may be, to cause, such
Indebtedness to become or be declared due and payable prior to its
stated maturity, (y) any lessor under any Ground Lease or other ground
lease affecting such Managed Property, Property or Other Managed
Property as the case may be, to cause the termination of such Ground
Lease or other ground lease or (z) any of the foregoing Persons
referred to in this clause (4) or any other Person to cause, any
deferral, suspension, set-off, prohibition, pay-over, reduction,
adjustment or other interruption of any nature of any Approved
Management Fees pursuant to any subordination provisions in such
Management Agreement, Servicing Agreement or Other Management
Agreement, as the case may be, or the provisions of any other
agreement, instrument or other document to which any party to such
Management Agreement, Servicing Agreement or Other Management
Agreement, as the case may be, is a party or by which any of their
respective properties or assets are bound or (5) if such date of
determination shall occur during a Major Renovation/Restoration
Removal Period with respect to such Management Agreement, Servicing
Agreement or Other Management Agreement, as the case may be, and such
Management EBITDA would be a positive number if effect were not given
to this clause (x);
(y) if such date of determination shall occur during a
Voluntary Removal Period, then (1) for purposes of calculating the
Management Amount with respect to such Management Agreement or
Servicing Agreement, as the case may be, as of such date of
determination, Management EBITDA with respect to such Management
Agreement or Servicing Agreement, as the case may be, shall be zero
and (2) if the Management EBITDA with respect to such Management
Agreement, Servicing Agreement or Other Management Agreement for such
period would be a positive number if effect were not given to this
clause (y), for purposes of calculating any amount pursuant to
subsections 7.6D, 7.6E, 7.6F and 7.6G as of such date of
determination, Management EBITDA with respect to such Management
Agreement, Servicing Agreement or Other Management Agreement, as the
case may be, shall be zero; and
(z) for purposes of calculating the Borrowing Base (but not
for purposes of calculating any amount pursuant to subsections 7.6D,
7.6E, 7.6F and 7.6G), as of such date of determination, Management
EBITDA with respect to the Commerce Property
40
<PAGE> 48
shall be zero for such period if such date of determination shall
occur before the date, if any, on which the Company shall have
acquired the superior ground lease with respect to the Commerce
Property or on which the leasehold interest under the superior ground
lease with respect to the Commerce Property shall have been merged
with the Commerce Lease, in any case on terms satisfactory to the
Agent in its sole discretion.
"MANAGEMENT FEES" means, collectively, all hotel management fees
(however characterized, including base fees, trade name fees, incentive fees,
special incentive fees, termination fees and all fees in respect of liquor
license operations) and all other fees or charges payable to the manager for
the management and operation of a hotel property, the related land and the
improvements thereof.
"MANAGEMENT INFORMATION" means, with respect to the acquisition or
effectiveness of any Additional Management Agreement or Other Management
Agreement pursuant to subsection 7.16A(i) or (ii), as the case may be, the
following information:
(i) financial statements in respect of the related
Managed Property or Other Managed Property, as the case may be, for
the most recently completed three calendar years and for the completed
calendar months after the most recently completed calendar year, in
each case, to the extent such financial statements exist and can be
readily obtained by any Loan Party or any of its Subsidiaries;
(ii) copies of all other balance sheets and related
statements of operations and statements of cash flows of such Managed
Property or Other Managed Property, as the case may be, that are to be
delivered to any Loan Party or any of its Subsidiaries in connection
with such acquisition or effectiveness;
(iii) to the extent Renovation is then proposed for such
Additional Managed Property or Other Managed Property, as the case may
be, a preliminary project plan and a project budget for such Managed
Property or Other Managed Property, as the case may be;
(iv) (a) a comprehensive environmental audit with respect
to such Managed Property or Other Managed Property, as the case may
be, (which shall include a Phase I environmental audit and, if
necessary or desirable in the Agent's opinion; a Phase II
environmental audit), satisfactory in form and substance to the Agent,
conducted and certified by an Approved Environmental Consultant (the
Company shall certify as of the closing date of such Acquisition that,
as to any environmental audit delivered by the Company prior to such
closing date, to the Company's knowledge, the information contained in
such audit remains true, correct and complete), (b) a reliance letter
from such Approved Environmental Consultant with respect to each such
environmental audit addressed to the Agent and Lenders, which reliance
letter shall be satisfactory in form and substance to the Agent, (c)
evidence that all required approvals from all Governmental Authorities
having jurisdiction with respect to the environmental condition of
such Managed Property or Other Managed Property, as the case may be,
if any, have been obtained, and (d) such other environmental reports,
inspections and
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<PAGE> 49
investigations as the Agent shall, in its sole discretion, require,
prepared, in each instance, by an Approved Environmental Consultant,
which audits, approvals, reports, inspections and investigations shall
be satisfactory in form and substance to the Agent, in its sole
discretion;
(v) to the extent then available, copies (if available)
or drafts of such Additional Management Agreement, or Other Management
Agreement, as the case may be, agreements with respect to any related
Investment or Guaranty, letters of intent or other related agreements
entered into by any Loan Party or any of its Subsidiaries in
connection with such acquisition or effectiveness (it being understood
and agreed that, to the extent such agreements or letters of intent
have not been entered into in such time, copies of such agreements and
letters of intent shall be delivered reasonably promptly after the
execution thereof);
(vi) each market study with respect to such Managed
Property or Other Managed Property, as the case may be, in the
possession of, or that can readily be obtained by, any Loan Party or
any of its Subsidiaries;
(vii) a draft of the Addition Certificate with respect to
such Additional Management Agreement or Other Management Agreement, as
the case may be;
(viii) drafts of supplements to the Schedules to this
Agreement reflecting the acquisition or effectiveness of such
Additional Management Agreement or Other Management Agreement, as the
case may be; and
(ix) any other information relating to such Additional
Management Agreement or Other Management Agreement, as the case may
be, reasonably requested by the Agent.
"MANAGEMENT MARGIN" means as of any date of determination, 1.00 minus
a percentage obtained by dividing (x) the expenses of the Company and its
Consolidated Subsidiaries for any period, as reflected on the consolidated
statements of income delivered to Agent pursuant to subsection 5.3A or 6.1, as
the case may be, excluding expenses reflected as "hotel expenses" and
"depreciation and amortization", by (y) the consolidated revenues of the
Company and its Subsidiaries for such period, as reflected on the consolidated
statements of income delivered to the Agent pursuant to subsection 5.3A or 6.1,
as the case may be, increased by Management Fees paid pursuant to Service
Agreements, excluding revenues reflected as "hotel revenues", "service fees"
and "reimbursements"; provided however, as of any date of determination on or
before November 15, 1996 with respect to a period ending on a day on or before
September 30, 1996, the percentage shall be deemed to be forty-four percent
(44%) and, upon any date of determination which occurs after November 15, 1996,
the percentage shall never exceed fifty-five percent (55%).
"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.
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<PAGE> 50
"MARKET EQUITY CAPITALIZATION" means, with respect to any issuer and
as of any date of determination, the product of (i) the number of shares of
common stock of such issuer outstanding as of such date multiplied by (ii) the
average of the closing bid prices of such common stock on the principal
national securities exchange on which such common stock is listed or, if such
common stock is not so listed, on NASDAQ/NMS, as the case may be, for each of
the 30 consecutive trading days next preceding such date of determination (or
such shorter period during which such common stock shall have been publicly
traded until such time as it has been so traded for 30 consecutive trading
days); provided that the amount referred to in the preceding clause (ii) for
the Common Stock on the Formation Date shall be the initial offering price per
share of Common Stock pursuant to the Equity Offering.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, operations, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries, taken as a whole, or (ii) the impairment of the
ability of the Company and its Subsidiaries, taken as a whole, to perform, or
of the Agent or the Lenders to enforce, monetary Obligations or the material
impairment of the ability of any Loan Party to perform, or of the Agent or the
Lenders to enforce, non-monetary Obligations, including the obligations of any
Loan Party to perform, or of the Agent or the Lenders to enforce, any Security
Document.
"MATERIAL LEASE" means each Lease either (i) demising in excess of
5,000 square feet of the Improvements with respect to any Property or (ii)
generating in excess of 10% of the Property Gross Revenues with respect to any
Property or otherwise identified as a Material Lease by the Company pursuant to
subsection 4.1L.
"MATURITY DATE" means the earliest of (i) the date that is four years
from the Effective Date, (ii) the date as of which the Obligations shall have
become immediately due and payable pursuant to subsection 8.1 and (iii) the
date as of which the Obligations shall have become immediately due and payable
pursuant to subsection 2.4B(vii).
"MOODY'S" means Moody's Investors Service, Inc. or any successor to
the business thereof.
"MORTGAGE" means each Mortgage, Assignment of Rents, Security
Agreement and Fixture Filing and each Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing and each Deed to Secure Debt, Assignment
of Rents, Security Agreement and Fixture Filing executed and acknowledged by
the Loan Party thereto in favor of the Agent for the benefit of the Lenders
(or, in the case of a deed of trust, to a trustee for the benefit of the Agent
and the Lenders) in the form delivered on or before the Funding Availability
Date pursuant to subsection 4.1E(i), as each such agreement may be amended,
restated, supplemented, consolidated, extended or otherwise modified from time
to time in accordance with the terms thereof and hereof.
"MORTGAGED PROPERTY" has the meaning assigned to that term in the
Mortgages.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in
Section 3(37) of ERISA.
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<PAGE> 51
"NASDAQ/NMS" means the National Association of Securities Dealers
Automated Quotation System/National Market Securities.
"NET INSURANCE/CONDEMNATION PROCEEDS" means all Insurance Proceeds on
account of damage or destruction to any Pool A Property or any Pool B Property
or all Condemnation Proceeds in respect of any Pool A Property or any Pool B
Property, minus the reasonable cost, if any, of such recovery and of paying out
such proceeds, including reasonable attorneys' fees and costs allocable to
inspecting the Work and the plans and specifications therefor.
"NET SALES PRICE" means, with respect to any sale or other permanent
disposition by a Loan Party or any of its Subsidiaries of a Property, a
Management Agreement, Servicing Agreement, Other Management Agreement,
Franchise Agreement or other asset, the gross purchase price therefor less the
sum of (i) the amounts applied to the payment of Indebtedness or other
obligations secured by a Lien on such Property, Management Agreement, Servicing
Agreement Other Management Agreement, Franchise Agreement or other asset (other
than the Obligations), (ii) the reasonable out-of-pocket costs and expenses
incurred by such Loan Party or Subsidiary directly in connection with such sale
or other permanent disposition, including income taxes paid or estimated to be
actually payable as a result thereof, after taking into account any available
tax credits or deductions and any tax sharing arrangements (provided that the
amount of income taxes so estimated to be actually payable shall be approved by
the Agent, which approval shall not be unreasonably withheld), and (iii)
closing of adjustments contemplated and reserved.
"NET WORTH" means, as of any date of determination, the sum of the
capital stock and additional paid-in capital plus retained earnings (or minus
accumulated deficits) of the Company and its Subsidiaries determined in
conformity with GAAP.
"NOTES" means one or more of the Revolving Notes or Swing Line Note or
any combination thereof.
"NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit III annexed hereto delivered by the Company to the Agent pursuant to
subsection 2.1B with respect to a proposed borrowing hereunder.
"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in
the form of Exhibit IV annexed hereto delivered by the Company to the Agent
pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.
"NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice substantially
in the form of Exhibit V annexed hereto delivered by the Company to the Agent
pursuant to subsection 3.1B(i) with respect to the proposed issuance of a
Letter of Credit.
"NOTICE OF RENOVATION/RESTORATION" means a notice, substantially in
the form attached hereto as Exhibit XVII, delivered to the Agent pursuant to
subsection 6.11E, 6.12A, 7.15C or 7.16C.
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<PAGE> 52
"OBLIGATIONS" means, collectively, all obligations of every nature of
the Company or any of its Subsidiaries from time to time owed to the Agent or
Lenders or any of them under or in respect of the Loans and the Loan Documents,
whether for principal, interest, reimbursement of amounts drawn under Letters
of Credit, fees, commissions, expenses, indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by a person or persons
specified in this Agreement for such purpose or, in the absence of such
specification, by any of the Chief Executive Officer, Chief Financial Officer
or Chief Accounting Officer of such corporation; provided, however, that every
Officers' Certificate with respect to the compliance with a condition precedent
to the making of the Loan hereunder shall include (i) a statement that the
officer or officers making or giving such Officers' Certificate have read such
condition and any definitions or other provisions contained in this Agreement
relating thereto, (ii) a statement that, in the opinion of the signers, they
have made or have caused to be made such examination or investigation as is
necessary to enable them to express an informed opinion as to whether or not
such condition has been complied with, and (iii) a statement as to whether, in
the opinion of the signers, such condition has been complied with.
"OMNIBUS MANAGEMENT AND LIQUOR LICENSE AGREEMENT" means the Agreement
regarding Servicing Agreements and Liquor Licenses executed and delivered by
Management Corp., the Company and each other Loan Party thereto in favor of the
Agent on or before the Funding Availability Date pursuant to subsection
4.1E(i), and thereafter by each other Subsidiary of the Company that becomes a
party thereto, substantially in the form of Exhibit XII annexed hereto, as such
agreement may be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof and thereof.
"OPERATING ACCOUNT" means the interest bearing account of the Company
to be established and maintained by the Company with the Cash Manager at its
offices at __________, in the name of Wyndham Hotel Corporation - Operating
Account."
"OPERATING EXPENSES" means, for any period and as calculated on the
accrual basis of accounting, all expenses incurred by the Company or any of its
Subsidiaries during such period in connection with the ownership, management,
operation, cleaning, maintenance, ordinary repair or leasing of any Property,
including, without duplication:
(i) costs and expenses in connection with the cleaning,
ordinary repair, maintenance, decoration and painting of such
Property;
(ii) wages, benefits, payroll taxes, uniforms, insurance
costs and all other related expenses for employees of the Company
engaged in the management, operation, cleaning, maintenance, ordinary
repair and leasing of such Property and service to guests, customers,
Tenants, concessionaires and licensees of such Property;
(iii) the cost of all services and utilities with respect
to such Property, including all electricity, oil, gas, water, steam,
heating, ventilation, air conditioning,
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<PAGE> 53
elevator, escalator, landscaping, model furniture, answering services,
telephone maintenance, credit check, snow removal, trash removal and
pest extermination costs and expenses and any other energy, utility or
similar item and overtime services with respect to such Property;
(iv) the cost of building and cleaning supplies with
respect to such Property;
(v) insurance premiums required in order to maintain the
insurance policies required under this Agreement or any other Loan
Documents, FF&E Financing Indebtedness, Pool B Obligations or Pool C
Obligations, in each case with respect to such Property (which, in the
case of any policies covering multiple Properties, shall be allocated
among the Properties pro rata in proportion to the insured value of
the Properties covered by such policies);
(vi) legal, accounting, engineering and other fees, costs
and expenses incurred by or on behalf of the Company or such
Subsidiary in connection with the ownership, management, operation,
maintenance, ordinary repair and leasing of such Property, including
collection costs and expenses;
(vii) operating costs and expenses of security and security
systems provided to and/or installed and maintained with respect to
such Property;
(viii) operating costs and expenses of reservation systems,
internal telephone exchanges and key card systems with respect to such
Property;
(ix) costs and expenses of parking and valet services,
parking lot maintenance and ordinary parking lot repairs in respect of
such Property;
(x) costs and expenses of food and beverages with respect
to such Property;
(xi) real property taxes and assessments with respect to
such Property and the costs incurred in seeking to reduce such taxes
or the assessed value of such Property;
(xii) advertising, marketing and promotional costs and
expenses with respect to such Property;
(xiii) costs and expenses incurred in connection with lock
changes, storage, moving, market surveys, permits (and the application
or registration therefor) and licenses (and the application or
registration therefor) with respect to such Property;
(xiv) maintenance and cleaning costs related to guest and
customer amenities with respect to such Property;
(xv) costs and expenses of maintaining and repairing FF&E
(including the breakage or loss of any such FF&E) with respect to such
Property;
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<PAGE> 54
(xvi) franchise fees due and payable with respect to such
Property;
(xvii) payments due and payable under the Ground Lease with
respect to such Property, if applicable;
(xviii) actual reserves required under the Ground Lease with
respect to such Property, if applicable;
(xix) Management Fees with respect to such Property for
such period;
(xx) tenant improvements and leasing commissions with
respect to such Property accrued during such period;
(xxi) contributions by the Company or any of its
Subsidiaries to any merchants' association, whether as dues or
advertising costs or otherwise with respect to such Property;
(xxii) costs incurred pursuant to any reciprocal easement
agreement affecting such Property;
(xxiii) refunds the Company or any of its Subsidiaries must
pay to guests, customers, Tenants, concessionaires and licensees and
other occupants of such Property;
(xxiv) reserves (other than reserves required to be
deposited in the Capital Reserve Account) for such purposes and in
such amounts as the Company and the Agent may reasonably agree upon;
(xxv) costs and expenses of maintaining operating,
repairing and servicing vehicles, including fuel and insurance
premiums; and
(xxvi) all other ongoing expenses which in accordance with
the accrual basis of accounting should be included in the Company's or
any of its Subsidiaries' annual financial statements as operating
expenses of such Property.
Notwithstanding the foregoing, Operating Expenses shall not include, without
duplication, (a) non-cash equity participation expenses, (b) Consolidated Fixed
Charges, including such items included within the definition thereof as shall
apply to any Property or Properties with respect to which such Operating
Expenses are being determined, (c) income taxes, (d) depreciation, (e)
amortization, (f) principal or Release Prices, if any, due under the Loans or
the Notes or otherwise in connection with the Obligations, (g) principal, if
any, due in respect of the Pool B Obligations, the Pool C Indebtedness, FF&E
Financing Indebtedness and the Senior Notes, or (h) any other items that are
capitalized on the financial statements of the Company or any of its
Subsidiaries in conformity with GAAP or in accordance with the Approved Capital
Policy.
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<PAGE> 55
"OPERATING LEASE" means, with respect to any Person, lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is not accounted for as a capital lease on the balance
sheet of that Person.
"ORIGINAL ACQUISITION AGREEMENTS" means, collectively, the agreements
entered into before the Funding Availability Date by any Loan Party or any of
its Subsidiaries or any predecessor to any Loan Party or such Subsidiary in
connection with the acquisition of a Property, other than the Formation
Documents, under or with respect to which agreements the Company has any rights
or obligations as of the Funding Availability Date, as any such agreement may
be amended, restated, supplemented or otherwise modified from time to time.
"ORIGINAL ACQUISITION DOCUMENTS" means, collectively the Original
Acquisition Agreements and each certificate, opinion, agreement, assignment,
deed, instrument or other document delivered in connection therewith or
pursuant thereto.
"ORIGINAL FINANCING LETTER" means, collectively, the letter agreement
dated April 26, 1996 and the Indemnification Letter (as defined therein), in
each case, between Bankers, on the one part, and Wyndham Hotel Company Ltd. and
the Company, on the other part.
"OTHER CAPITAL RESERVE ACCOUNTS" means, collectively, accounts
required to be maintained by the Loan Parties and their respective Subsidiaries
pursuant to the terms of the Pool B Obligations and the Pool C Obligations, as
the case may be, for the deposit, reserve and disbursement of funds for Capital
Items in respect of the related Pool B Properties or Pool C Properties, as the
case may be. Other Capital Reserve Accounts are not Capital Reserve Accounts.
"OTHER MANAGED PROPERTIES" means, collectively, the real properties,
together with all Improvements and all fixtures attached thereto and all
personal property used in connection therewith, that are managed by Management
Corp. or any of its Subsidiaries pursuant to the Other Management Agreements.
Other Managed Properties do not include Properties or Managed Properties.
"OTHER MANAGEMENT AGREEMENTS" has the meaning stated in subsection
7.16A(ii), as any such management agreement may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"PARTNERSHIP SUBSIDIARIES" means, collectively, Rose Hall Partnership
and any other Partnership Subsidiary of the Company that is or becomes a Loan
Party.
"PAYMENT DATE" means the fifteenth day of each month, beginning June
15, 1996, or, if such fifteenth day is not a Business Day, the next succeeding
Business Day.
"PAYROLL SUBSIDIARIES" means the Subsidiaries listed on Schedule 1.1
annexed hereto and each other Subsidiary formed after the Effective Date solely
for the purpose of being the nominal employer of Persons providing services to
a Managed Property.
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<PAGE> 56
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto).
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue
Code or Section 302 of ERISA.
"PERMITTED ENCUMBRANCES" means the Liens shown on Schedule 7.2 annexed
hereto for such Property and, with respect to any Property (including any Pool
C Property), the following types of Liens (other than any such Lien imposed
pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by
ERISA):
(i) Liens for real property Taxes, assessments, vault
charges, water and sewer rents, and other Impositions the payment of
which is not, at the time, required by subsection 6.4;
(ii) the Leases in existence on the Effective Date and any
Leases entered into thereafter in accordance with the requirements of
the Loan Documents;
(iii) covenants, easements, rights-of-way, restrictions,
minor encroachments or other similar encumbrances not impairing the
marketability of such Property and not interfering, and which could
not reasonably be expected to interfere, with the use of the Property
for hotel purposes or with the ordinary conduct of the business of the
Company and its Subsidiaries;
(iv) Liens securing the Obligations;
(v) Liens that are bonded and thereby released of record
in a manner reasonably satisfactory to the Agent;
(vi) rights of guests to occupy rooms and of Tenants under
Leases;
(vii) all exceptions contained in any Title Policy approved
by the Agent with respect to the Acquisition of an Additional Pool A
Property, an Additional Pool B Property or a Pool C Property, as the
case may be.
"PERMITTED JUNIOR PAYMENTS" means payments in such amounts as
described in subsection 7.5 hereto.
"PERSON" means, collectively, natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and Governmental Authorities.
"POOL A GROUND LEASE" means each of the ground leases with respect to
the Pool A Properties listed on Schedule 4.1G annexed hereto, as such Schedule
may be revised or supplemented from time to time pursuant to subsection 2.9 or
7.15A(i), together with all right, title and interest of any Loan Party, as the
case may be, in and to the leasehold estate created
49
<PAGE> 57
pursuant to each such ground lease as each such ground lease may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"POOL A PROPERTIES" means, collectively, the hotel properties, the
Land on which they are located, the related Pool A Ground Leases and all
Improvements thereon and all fixtures attached thereto and all personal
property used in connection therewith, in each case as listed on Schedule 5.4A1
annexed hereto, as such Schedule may be revised or supplemented from time to
time pursuant to subsection 2.9 or 7.15A(i).
"POOL A PROPERTY AMOUNT" means, as of any date of determination, the
following:
(i) with respect to a Pool A Property (other than the
Rose Hall Property) listed on Schedule 5.4A1 annexed hereto as of the
Effective Date, the product of (a) the applicable factor set forth
below as of such date of determination multiplied by (b) the Property
EBITDA for such Pool A Property for the 12 most recently completed
calendar months ending not less than 30 days before such date of
determination for which the Agent has received the financial
statements with respect to such Properties required to be delivered
pursuant to subsection 6.1(i):
<TABLE>
<CAPTION>
PERIOD FACTOR
<S> <C>
F.A. Date-12/31/96 4.25
01/01/97-12/31/97 4.00
01/01/98-12/31/98 3.75
01/01/99-Maturity Date 3.50;
</TABLE>
provided that such Pool A Property Amount shall not be greater than an
amount equal to 55% of the value thereof specified in the Appraisal
with respect to such Pool A Property most recently approved by the
Agent on or before such date of determination; or
(ii) with respect to the Rose Hall Property, the product
of (a) the applicable factor set forth below as of such date of
determination multiplied by (b) the Property EBITDA for the Rose Hall
Property for the 12 most recently completed calendar months ending not
less than 30 days before such date of determination for which the
Agent has received the financial statements with respect to such
Property required to be delivered pursuant to subsection 6.1(i):
50
<PAGE> 58
<TABLE>
<CAPTION>
PERIOD FACTOR
<S> <C>
F.A. Date-12/31/96 3.25
01/01/97-12/31/97 3.00
01/01/98-12/31/98 2.75
01/01/99-Maturity Date 2.50;
</TABLE>
provided that such Pool A Property Amount shall not be greater than
the least of (1) the Pool A Property Amount with respect to the Rose
Hall Property as of the Funding Availability Date, (2) an amount equal
to 40% of the value thereof specified on the Appraisal with respect to
the Rose Hall Property most recently approved by the Agent on or
before such date of determination and (3) zero during any period in
which there shall have occurred and be continuing a material adverse
change in the business, operations, condition (financial or otherwise)
or prospects of Rose Hall Partnership that shall have resulted, or
could reasonably be expected to result, from the occurrence of events
or the existence of conditions that have not, or could not reasonably
be expected to, affect other resort hotels in the Caribbean of a type,
quality and character similar to that of the Rose Hall Property in
substantially the same manner and to substantially the same extent; or
(iii) with respect to each Additional Pool A Property
(other than an Additional Pool A Property referred to in the following
clause (iv)), the product of (a) the applicable factor specified from
time to time by the Agent, in its sole discretion, for such Additional
Pool A Property multiplied by (b) the Property EBITDA for such
Additional Pool A Property for the 12 most recently complete calendar
months ending not less than 30 days before the applicable date of
determination for which the Agent has received the financial
statements with respect to such Properties required to be delivered
pursuant to subsection 6.1(i) or 7.16A(i), as the case may be;
provided that such Pool A Property Amount shall not be greater than an
amount equal to 55% of the value thereof specified in the Appraisal
with respect to such Pool A Property most recently approved by the
Agent on or before such date of determination; or
(iv) with respect to each Additional Pool A Property for
which a Major Renovation/Restoration shall occur, or shall be
scheduled to commence, on or before the first anniversary of the
Addition Date with respect thereto, the amount that is equal to 35% of
the sum of (a) the cash purchase price therefor paid therefor by the
Company on or before such date of determination plus (b) the actual
cost of such Major Renovation/ Restoration paid by the Company on or
before such date of determination; provided that, as of any date of
determination after the completion of such Major
Renovation/Restoration that shall occur on or before the end of 12
complete calendar months ending not less than 30 days before the
applicable date of determination for which the Agent has received the
financial statements with respect to such Additional Pool A Property
required to be delivered pursuant to subsection 6.1(i), such Pool A
Property Amount shall not be greater than an amount equal to 35% of
the value thereof, on an as-completed basis, specified in the
Appraisal with respect to such Additional Pool A Property as of a date
not earlier than 30 days before such date of completion.
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<PAGE> 59
"POOL B DOCUMENTS" means, collectively, each Pool B Ground Lease,
agreement, Guaranty, instrument, promissory note or other document entered into
by any Loan Party or any of its Subsidiaries in connection with any Pool B
Obligation and set forth on Schedule 7.1(iv) annexed hereto, including, without
limitation, the HPT Agreements, the Harbour Island Lease (and, in the
circumstances referred to in the last sentence of subsection 7.15A(iv), the
Vinings Agreement and the Vinings Bond Documents), as each such Pool B Ground
Lease, agreement, Guaranty, instrument or other document may be amended,
restated, supplemented or otherwise modified from time to time), as such
Schedule may be revised from time to time pursuant to subsections 2.9,
7.15A(ii) and 7.15A(iv).
"POOL B GROUND LEASE" means each of the ground leases with respect to
the Pool B Properties listed on Schedule 4.1H annexed hereto, as such Schedule
may be revised from time to time pursuant to subsection 2.9.
"POOL B OBLIGATIONS" means, collectively, the obligations of the Loan
Parties and their respective Subsidiaries of every nature, from time to time
owed under or in respect of any Pool B Document, whether for rent, principal,
interest, fees, commissions, expenses, indemnification or otherwise.
"POOL B PROPERTIES" means, collectively, the hotel properties, the
Land on which they are located, the related Pool B Ground Leases and all
Improvements thereon and all fixtures attached thereto and all personal
property used in connection therewith, in each case as listed on Schedule 5.4A2
annexed hereto, as such Schedule may be revised or supplemented from time to
time pursuant to subsections 2.9, 7.15A(ii) and 7.15A(iv).
"POOL C DOCUMENTS" means, collectively, each agreement, Guaranty,
instrument, promissory note or other document entered into by any Loan Party or
any of its Subsidiaries in connection with any Pool C Obligations (including,
without limitation, any Pool C Indebtedness and, in the circumstances referred
to in the last sentence of subsection 7.15A(iv), the obligations of the Loan
Parties and their respective subsidiaries under or with respect to the Vinings
Agreement and the Vinings Indebtedness), as each such agreement, Guaranty,
instrument or other document may be amended, restated, supplemented or
otherwise modified from time to time pursuant to subsections 7.15(A)(iii) and
7.15A(iv).
"POOL C INDEBTEDNESS" has the meaning assigned to that term in
subsection 7.1(vii).
"POOL C OBLIGATIONS" means, collectively, the obligations of any of
the Loan Parties, any of their respective Subsidiaries and any of the Pool C
Subsidiaries, respectively, of any nature, from time to time owed in respect of
any Pool C Property, whether for principal, interest, fees, commissions,
expenses, indemnification or otherwise.
"POOL C PROPERTIES" means, collectively, the hotel properties, the
Land on which they are located and all Improvements thereon and all fixtures
attached thereto and all personal property used in connection therewith, in
each case as listed on Schedule 5.4A3 annexed hereto, as such Schedule may be
revised or supplemented from time to time pursuant to subsection 2.9,
7.15A(iii) and 7.15A(iv).
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<PAGE> 60
"POOL C SUBSIDIARY" means any Wholly Owned Subsidiary of the Company
created pursuant to subsection 7.7(iii) to own one or more Pool C Properties.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within the applicable grace
period.
"PRIME RATE" means the rate that Bankers announces from time to time
as its prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers or any other Lender may make
commercial loans or other loans at rates of interest at, above or below the
Prime Rate.
"PROPERTIES" means, collectively, from and after the respective dates
of Acquisition, each of the Pool A Properties, the Pool B Properties and the
Pool C Properties. Properties do not include Managed Properties or Other
Managed Properties.
"PROPERTY EBITDA" means, with respect to any Property, for any period
and as of any date of determination and calculated on the accrual basis of
accounting, whether a positive or negative number, the amount equal to the
remainder of the following:
(i) all Property Gross Revenues for such period in
respect of such Property; provided that Property Gross Revenues for
such period in respect of any Property shall be included in the
calculation of Property EBITDA for such period only to the extent that
the Agent and Lenders shall have received the financial statements for
such period required to be delivered on or before such date of
determination pursuant to subsection 6.1(i) or 7.15A, as the case may
be; minus
(ii) all Operating Expenses for such period with respect
to such Property, without duplication of items excluded from the
definitions of Property Gross Revenues; provided that (x) if the terms
of any expenses or other obligations with respect to which the
Operating Expenses are calculated for such period or any subsequent
period for the purpose of calculating the amount of the Borrowing Base
(but not for purposes of calculating any amount pursuant to
subsections 7.6D, 7.6E, 7.6F and 7.6G) of such date of determination
shall have been modified as of such date of determination, then the
amount of Operating Expenses that shall be included in the calculation
of Property EBITDA for such period shall not be less than the amount
of Operating Expenses that would have been calculated for such period
if such terms, as so modified, had been in effect during the entire
period, and (y) Management Fees included in the calculation of
Property EBITDA for such period with respect to such Property, shall
not be less than 5.0% of Property Gross Revenues for such period with
respect to such Property;
provided that:
(v) Property EBITDA with respect to any Property shall be
zero for such period if (1) the Addition Date with respect to such
Property shall not have occurred on or
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<PAGE> 61
before such date of determination or (2) such Property shall have been
sold or otherwise permanently disposed of or any Loan Party or any of
its Subsidiaries shall have executed a definitive agreement with
respect to the sale or other permanent disposition of such Property,
in each case on or before such date of determination, provided that
this subclause (2) shall not be given effect upon the execution of
such agreement with respect to (A) a Pool A Property if the proposed
Net Sales Price with respect to such sale or other permanent
disposition shall be greater than the aggregate amount of principal
and interest that would be required to be paid by the Company pursuant
to paragraphs (i) and (iii) of the definition of Release Price
(without giving effect to the proviso to such paragraph (iii)) if the
closing thereof were to occur on such date of determination and the
Servicing Agreement to which such Pool A Property is subject were to
terminate on such date, as such determination shall be specified by
written notice delivered to the Agent, together with the information
used by the Company to make such determination, (B) a Pool B Property
if the proposed Net Sales Price with respect to such sale other
permanent disposition by reason of such sale or other permanent
disposition shall be greater than the aggregate amount of principal
and interest that would be required to be paid by the Company pursuant
to paragraphs (ii) and (iii) of the definition of Release Price
(without giving effect to the proviso to such paragraph (iii)) if the
closing thereof were to occur on such date of determination and the
Servicing Agreement to which such Pool B Property is subject were to
terminate on such date, as such determination shall be specified in an
Officers' Certificate delivered to the Agent, together with the
information used by the Company to make such determination, and (C) a
Pool C Property if the proposed Net Sales Price with respect to such
sale or other permanent disposition by reason of such sale or other
permanent disposition shall be greater than the aggregate amount of
principal and interest that would be required to be paid by the
Company pursuant to paragraph (iii) of the definition of Release Price
(without giving effect to the proviso to such paragraph (iii)) if the
closing thereof were to occur on such date of determination and the
Servicing Agreement to which such Pool C Property is subject were to
terminate on such date, as such determination shall be specified in an
Officers' Certificate delivered to the Agent, together with the
information used by the Company to make such determination; provided
further that, for purposes of calculating any Net Sales Price pursuant
to this clause (v), the amount thereof shall be (1) increased or
reduced, as the case may be, to give effect to all adjustments that
are reasonably likely to be made thereto, whether before or after the
closing thereof, and to give effect to all modifications thereto from
time to time before the closing thereof by reason of such sale or
other permanent disposition and (2) reduced by an amount equal to the
appropriate amount to be provided by such Loan Party or Subsidiary as
a reserve, in accordance with generally accepted accounting
principles, after such sale or other permanent disposition, including,
without limitation, liabilities related to environmental matters and
liabilities under any indemnification obligations;
(w) if the Addition Date with respect to such Property shall
have occurred after the Funding Availability Date and after the
commencement of such period but before the termination of such period:
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<PAGE> 62
(1) for purposes of calculating the Property
Amount with respect to such Property (if such Property is a
Pool A Property) as of such date of determination, Property
EBITDA with respect to such Pool A Property for such period
shall be the sum of (A) Property EBITDA for the portion of
such period commencing on the first day of such period and
ending on the day before such Addition Date, as the same shall
be determined based upon the financial statements for such
period required by subsection 7.15A to be delivered with
respect to such Pool A Property and such other information
with respect thereto that may be provided by the Loan Parties
and their respective Subsidiaries, subject to such adjustments
as may be required by the Agent in its sole discretion, plus
(B) Property EBITDA with respect to such Pool A Property for
the portion of such period commencing on such Addition Date
and ending on the last day of such period, based upon the
financial statements for such period required to be delivered
on or before such date of determination pursuant to subsection
6.1(i), subject to such adjustments as may be required by the
Agent in order that revenues and expenses are allocated and
determined in the same manner as for Properties owned by the
Company during the entire period; months provided, however,
that with respect to each Additional Pool A Property for which
a Major Renovation/Restoration shall occur, or shall be
scheduled to commence, on or before the first anniversary of
the Addition Date with respect thereto, Property EBITDA with
respect to such Additional Pool A Property for such period be
zero; and
(2) for purposes of calculating any amount
pursuant to subsections 7.6D, 7.6E, 7.6F and 7.6G as of such
date of determination, Property EBITDA with respect to such
Property for such period shall be the sum of (A) zero, for the
portion of such period commencing on the first day of such
period and ending on the day before such Addition Date, plus
(B) Property EBITDA with respect to such Property for the
portion of such period commencing on such Addition Date and
ending on the last day of such period, based upon the results
of operations of the Loan Parties and their respective
Subsidiaries with respect thereto during such period, as
reflected in the financial statements for such period required
to be delivered on or before such date of determination
pursuant to subsection 6.1(i);
(x) except as provided to the contrary in the proviso to the
preceding clause (w)(1), if such date of determination shall occur
during a Major Renovation/Restoration Removal Period with respect to
such Property and the Property EBITDA with respect to such Property
for such period is a positive number, then (1) for purposes of
calculating the Property Amount with respect to such Property (if such
Property is a Pool A Property) and any amount pursuant to subsection
6.14 as of such date of determination, Property EBITDA with respect to
such Property for such period shall be zero and (2) for purposes of
calculating any amount pursuant to subsections 7.6D, 7.6E, 7.6F and
7.6G as of such date of determination, Property EBITDA with respect to
such Property for such period shall be equal to the product of (1) the
applicable factor set forth below as of such date of determination, as
determined by reference to the
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<PAGE> 63
percentage amount of the rooms "available for sale" at such Property
that have been, are scheduled to be, or could reasonably be expected
to be, "rooms out-of-order", as determined in accordance with the
Uniform System, during such Major Renovation/Restoration Removal
Period, multiplied by (2) the amount of Property EBITDA with respect
to such Property for such period as of such date of determination if
effect were not given to this clause (x):
<TABLE>
<CAPTION>
PERCENTAGE FACTOR
<S> <C>
0.00% - 19.99% 1.00
20.00% - 49.99% 0.75
50.00% - 74.99% 0.33
75.00%- 100.00% 0.00;
</TABLE>
(y) if such date of determination shall occur during a
Voluntary Removal Period, then (1) for purposes of calculating the
Property Amount with respect to such Property (if such Property is a
Pool A Property) as of such date of determination, Property EBITDA
with respect to such Pool A Property shall be zero and (2) if the
Property EBITDA with respect to such Property for such period would be
a positive number if effect were not given to this clause (y), for
purposes of calculating any amount pursuant to subsections 7.6D, 7.6E,
7.6F and 7.6G as of such date of determination, Property EBITDA with
respect to such Property shall be zero; and
(z) for purposes of calculating the Property Amount with
respect to the Commerce Property (but not for purposes of calculating
any amount pursuant to subsections 7.6D, 7.6E, 7.6F and 7.6G) as of
such date of determination, Property EBITDA with respect to the
Commerce Property shall be zero for such period if such date of
determination shall occur before the date, if any, on which the
Company shall have acquired the superior ground lease with respect to
the Commerce Property or the superior ground lease with respect to the
Commerce Property shall have been merged with the Commerce Lease, in
any case on terms satisfactory to the Agent in its sole discretion.
"PROPERTY GROSS REVENUE" means, for any period, all Receipts resulting
from the operation of such Property, including, without limitation, Rents or
other payments from guests and customers, Tenants, licensees and
concessionaires and business interruption and rental loss insurance payments;
provided that Property Gross Revenue shall be determined net of allowances in
accordance with the Uniform System and shall exclude (i) excise, sales, use,
occupancy and similar taxes and charges collected from guests or customers and
remitted to Governmental Authorities, (ii) gratuities collected for employees
of such Property, (iii) security deposits and other advance deposits, until and
unless same are forfeited to any Loan Party or Subsidiary thereof or applied
for the purpose for which collected, (iv) federal, state or municipal excise,
sales, use or similar taxes collected directly from patrons or guests or
included as part of the sales price of any goods or services, (v) interest
income on such Property's bank accounts, (vi) rebates, refunds or discounts
(including, without limitation, free or discounted accommodations) and (vii)
Extraordinary Receipts.
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"PROPERTY INFORMATION" means, with respect to any Acquisition of any
Additional Pool A Property pursuant to subsection 7.15A(i), any Additional Pool
B Property pursuant to subsection 7.15A(ii), any Pool C Property pursuant to
subsection 7.15A(iii) or the Vinings Property pursuant to subsection
7.15(A)(iv), the following information:
(i) financial statements in respect of such Property for
the most recently completed three calendar years and for the completed
calendar months after the most recently completed calendar year, in
each case, to the extent such financial statements exist and can be
readily obtained by any Loan Party or any of its Subsidiaries;
(ii) copies of all other consolidated balance sheets and
related statements of operations and statements of cash flows of such
Property that are to be delivered to any Loan Party or any of its
Subsidiaries in connection with such Acquisition;
(iii) to the extent any Renovation is then proposed for
such Property, a preliminary project plan and a project budget for
such Property which, as to a Pool A Property, shall be satisfactory in
form and substance to the Agent in its sole discretion;
(iv) (a) a comprehensive environmental audit with respect
to such Property (which shall include a Phase I environmental audit
and, if necessary or desirable in the Agent's opinion, a Phase II
environmental audit), satisfactory in form and substance to the Agent,
conducted and certified by an Approved Environmental Consultant (the
Company shall certify as of the closing date of such Acquisition that,
as to any environmental audit delivered by the Company prior to such
closing date, to the Company's knowledge, the information contained in
such audit remains true, correct and complete), (b) a reliance letter
from such Approved Environmental Consultant with respect to each such
environmental audit addressed to the Agent and Lenders, which reliance
letter shall be satisfactory in form and substance to the Agent, (c)
evidence that all required approvals from all Governmental Authorities
having jurisdiction with respect to the environmental condition of
such Property, if any, have been obtained, and (d) such other
environmental reports, inspections and investigations as the Agent
shall in its sole discretion require, prepared, in each instance, by
an Approved Environmental Consultant, which audits, approvals,
reports, inspections and investigations shall be satisfactory in form
and substance to the Agent, in its sole discretion;
(v) (a) a written Engineering Report with respect to such
Property dated not more than 90 days prior to the closing date and
prepared by an Engineer acceptable to the Agent, which Engineering
Report shall be satisfactory in form and substance to the Agent and
(b) a reliance letter from such Engineer with respect to each such
Engineering Report addressed to the Agent and Lenders, which letter
shall be in form and substance reasonably satisfactory to the Agent;
(vi) to the extent then available, copies (if available)
or drafts of the related Acquisition Agreements, all other purchase
agreements, letters of intent or other related agreements entered into
by any Loan Party or any of its Subsidiaries in connection with such
Acquisition (it being understood and agreed that, to the extent such
agreements or
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<PAGE> 65
letters of intent have not been entered into at such time, copies of
such agreements and letters of intent shall be delivered reasonably
promptly after the execution thereof);
(vii) a market study with respect to such Property as of a
date not earlier than 90 days before the proposed date of closing of
such Acquisition and copies of all other appraisals and market studies
with respect to such Property to the extent such appraisals and market
studies exist and can be readily obtained by any Loan Party or any of
its Subsidiaries;
(viii) a draft of the Addition Certificate with respect to
such Property;
(ix) drafts of supplements to the Schedules to this
Agreement reflecting the acquisition of such Property, the
Environmental Indemnity, the Security Agreement and the Omnibus
Management and Liquor License Agreement reflecting the acquisition of
such Property, as such Schedules may be required to be delivered
pursuant to proviso (e)(2) to subsection 7.15A(i), proviso (i)(4) to
subsection 7.15A(ii), proviso (g)(5) to subsection 7.15A(iii) or
proviso (g)(4) to subsection 7.15A(iv), as the case may be; and
(x) any other information relating to such Acquisition or
such Property reasonably requested by the Agent;
provided that Property Information (x) with respect to an Additional Pool B
Property shall exclude the information referred to in clauses (i) and (v) above
and (y) with respect to a Pool C Property (other than the Vinings Property)
shall exclude the information referred to in clause (v) above.
"PROPERTY SERVICING AGREEMENTS" means, collectively, the Servicing
Agreements entered into between Management Corp. or any of its Subsidiaries, on
the one part, and the Company and each of its Subsidiaries of the Company that
owns a fee or leasehold interest in any Property, on the other part, in the
form delivered to the Agent on or before the Funding Availability Date, as any
such Servicing Agreement may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
"PRO RATA SHARE" means, with respect to any Lender, as of any date of
determination (i) prior to the termination of the Revolving Commitments, that
Lender's Revolving Commitment and (ii) after the termination of the Revolving
Commitments, the sum of (a) the aggregate outstanding principal amount of the
Revolving Loans of that Lender, plus (b) in the event that Lender is an Issuing
Lender, the aggregate Letter of Credit Usage in respect of all Letters of
Credit issued by that Lender (in each case net of any participations purchased
by other Lenders in such Letters of Credit or any unreimbursed drawings
thereunder), plus (c) the aggregate amount of all participations purchased by
that Lender in any outstanding Letters of Credit or any unreimbursed drawings
under any Letters of Credit, plus (d) in the case of Swing Line Lender, the
aggregate outstanding principal amount of all Swing Line Loans (net of any
participations therein purchased by other Lenders), plus (e) the aggregate
amount of all participations purchased by that Lender in any outstanding Swing
Line Loans.
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"PUBLIC OFFERINGS" means, collectively, the Equity Offering and the
Debt Offering.
"PUBLIC OFFERING DOCUMENTS" means, collectively, the Equity Offering
Documents and the Debt Offering Documents.
"QUALIFIED CAPITAL STOCK" means, with respect to any Person, any
series or class of Capital Stock of that Person which may not be required to be
redeemed or repurchased, in whole or in part, by that Person or any of its
Subsidiaries, in whole or in part, at the option of the holder thereof, on or
prior to the Maturity Date, or not be convertible or exchangeable into or
exercisable for Capital Stock of the Company that is not Qualified Capital
Stock on or prior to the date that is one year and one day after the Maturity
Date; provided that Capital Stock will be deemed to be Qualified Capital Stock
if it may only be so redeemed or put solely in consideration of Qualified
Capital Stock.
"RECEIPTS" means, collectively, all cash, Cash Equivalents, checks,
notes, drafts and any items of payment or collection received, by or on behalf
of the Company or any of its Subsidiaries, or by any officers, employees or
agents of the Company or any of its Subsidiaries or other Persons acting for or
in concert with the Company or such Subsidiary to make collections on the
Company's or such Subsidiary's behalf in connection with or in any way relating
to the Company or such Subsidiary or the operation of the Company's or such
Subsidiary's business, including, without limitation, any proceeds received
from or pursuant to (i) any sales of, or loans against, accounts of the Company
or any of its Subsidiaries (other than the Loans pursuant to this Agreement or
Pool C Indebtedness), (ii) any disposition of assets (including, without
limitation, any disposition of assets permitted hereunder or consented to by
the Agent, but excluding amounts applied to the repayment of indebtedness or
other obligations secured by a Lien on the assets subject to such disposition)
or issuance or sale of equity Securities by the Company or any of its
Subsidiaries, (iii) the incurrence of Indebtedness by the Company or any of its
Subsidiaries and the issuance and sale by the Company or any of its
Subsidiaries of equity or debt Securities, in each case other than the
Obligations and other Indebtedness permitted by this Agreement, (iv) insurance
policies (other than liability insurance payable directly or indirectly to a
third party) maintained by the Company or any of its Subsidiaries, whether or
not the Agent is an additional insured or named as loss payee thereunder, (v)
the successful prosecution (including any settlement) of any claims, actions or
other litigation or proceeding by or on behalf of or against the Company or any
of its Subsidiaries and (vi) the Management Agreements (other than amounts
received by the Company or any of its Subsidiaries in respect of the Managed
Properties and other Managed Properties on behalf of, or as agent for, the
parties to the Management Agreements or Other Management Agreements other than
the Company and its Subsidiaries); it being understood and agreed that nothing
contained in this definition shall in any respect be deemed to permit any
transactions by the Company or any of its Subsidiaries otherwise restricted or
prohibited by this Agreement.
"REFERENCE LENDERS" means, collectively, Bankers and such other
Lenders as may from time to time be designated by Bankers.
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"REFUNDED SWING LINE LOANS" has the meaning assigned to that term in
subsection 2.1A(ii).
"REGISTER" has the meaning assigned to that term in subsection 2.1D.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement proposed to be dated as of the date of the initial closing of the
Public Offerings among the Company and the other parties identified on the
signature pages thereof, each substantially in the form thereof that has been
approved by the Agent, together with such alterations therein as shall be
approved by the Agent, which approval may be granted, withheld, conditioned or
delayed in its sole discretion, as such agreement may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"REGISTRATION STATEMENTS" means, collectively, the Equity Registration
Statement and the Debt Registration Statement.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REIMBURSEMENT DATE" has the meaning assigned to that term in
subsection 3.3B.
"RELATED DOCUMENTS" means, collectively, the Original Acquisition
Documents, the Acquisition Documents, the Management Agreements, the Franchise
Agreements, the IP License Agreements, the Ground Leases, the Material Leases,
the Pool B Documents, the Pool C Documents, the Senior Note Documents, the
Public Offering Documents, the Formation Documents, the GE Option, the ISIS
2000 Agreements, the CWS Agreements, the Wynright Agreements, the Greystar
Agreements and the Bedrock Investment Program Agreements.
"RELEASE" means any satisfaction, release, assignment instrument, deed
of reconveyance or similar instrument or instruments (each in recordable form
and otherwise in form reasonably satisfactory to the Company but without any
representation or warranty of the Agent or the Lenders) necessary and
sufficient to release any Collateral from the Lien of all applicable Security
Documents.
"RELEASE DATE" means the date of a release of the Lien of the Security
Documents on any Property pursuant to subsection 2.9.
"RELEASE PRICE" means, as calculated as of any Release Date, the
following:
(i) with respect to any Pool A Property, the amount that
is the greatest of the following:
(a) the amount equal to 125% of the Pool A
Property Amount with respect to such Pool A Property;
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<PAGE> 68
(b) in the event of a sale or other permanent
disposition of such Pool A Property, the amount equal to 85%
of the Net Sales Price for such Pool A Property;
(c) the amount necessary to ensure that the Total
Utilization shall not exceed the Borrowing Base in effect as
of such date after giving effect to (x) any reduction in the
Borrowing Base required pursuant to subsections 2.4B(iii) and
7.15B and (y) each other payment made as of the Release Date
pursuant to any other provision of this definition of Release
Price; and
(d) in the event of a casualty or Taking with
respect to such Pool A Property, the Insurance Proceeds or
Condemnation Proceeds, as the case may be, resulting
therefrom;
(ii) with respect to any Pool B Property, the amount that
is the greater of the following:
(a) the amount necessary to insure that the Total
Utilization shall not exceed the Borrowing Base in effect as
of such date after giving effect to (x) any reduction in the
Borrowing Base required pursuant to subsections 2.4B(iii) and
7.15B and (y) each other payment made as of the Release Date
pursuant to any other provision of this definition of Release
Price; and
(b) in the event of a casualty or Taking with
respect to such Pool B Property, the Insurance Proceeds or
Condemnation Proceeds, as the case may be, resulting
therefrom, net of the aggregate payments of Pool B Obligations
required to be made pursuant to the Pool B Documents in
respect of such casualty or Taking;
(iii) with respect to any Management Agreement, Servicing
Agreement, Other Management Agreement or Franchise Agreement, the
amount that is the greatest of the following:
(a) the amount equal to 100% of the Management
Amount with respect to such Management Agreement or Servicing
Agreement, as the case may be;
(b) the amount necessary to ensure that the Total
Utilization shall not exceed the Borrowing Base in effect as
of such date after giving effect to (x) any reduction in the
Borrowing Base required pursuant to subsections 2.4(B)(iii)
and 7.16B and (y) each other payment made as of the Release
Date pursuant to any other provision of this definition of
Release Price;
(c) in the event of a sale or other permanent
disposition of such Management Agreement, Servicing Agreement,
Other Management Agreement or Franchise Agreement, the amount
equal to 85% of the Net Sales Price for
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such Management Agreement, Servicing Agreement, Other
Management Agreement or Franchise Agreement, as the case may
be; and
(d) in the event of the expiration (without
renewal or extension), cancellation or other termination of
such Management Agreement, Servicing Agreement, Other
Management Agreement or Franchise Agreement, the aggregate
amount of termination fees and other amounts paid to the
manager (other than as reimbursement of expenses) under such
Management Agreement, Servicing Agreement, Other Management
Agreement or Franchise Agreement, as the case may be, in
connection therewith;
provided that, for the purposes of determining the Release Price with
respect to a Management Agreement, an Other Management Agreement or a
Franchise Agreement, that shall have been terminated by Management
Corp. or any of its Wholly Owned Subsidiaries for cause in accordance
with the terms thereof or by the other party thereto, and in either
case no termination fee is payable to Management Corp. or such Wholly
Owned Subsidiary in connection therewith, the amount determined with
respect to this clause (iii) shall be zero if the Company shall have
complied with subsection 2.9C(iv) with respect to such Management
Agreement, Other Management Agreement or Franchise Agreement on or
before the date that such Release Price is otherwise due and payable;
and
(iv) with respect to any item of Collateral not subject to
clause (i), (ii) or (iii) above, the amount that is the greater of the
following:
(a) the amount necessary to ensure that the Total
Utilization shall not exceed the Borrowing Base in effect as
of such date after giving effect to (x) any reduction in the
Borrowing Base required pursuant to subsections 2.4(B)(iii)
and 7.16B and (y) each other payment made as of the Release
Date pursuant to any other provision of this definition of
Release Price;
(b) in the event of a sale or other permanent
disposition of such item of Collateral, the amount equal to
100% of the Net Sales Price for such item or, if the release
of the Lien on such item of Collateral shall not be effected
in connection with the sale or other permanent disposition of
such item, 100% of the aggregate amount of termination fees
and other amounts paid to the Loan Parties and their
respective Subsidiaries in connection therewith;
provided that, for the purposes of determining the Release Price with
respect to the DAB Notes or the Affiliate Notes, the amount determined
with respect to this clause (iv) shall be zero if the Company shall
have complied with subsection 2.9C(iv) with respect to such item on or
before the date that such Release Price is otherwise due and payable.
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"RENOVATION" means the rebuilding, repair, restoration, refurbishment,
fixturing and equipping of the Improvements at a Property, a Managed Property
or an Other Managed Property.
"RENTS" means, collectively, all rents, issues, profits, royalties,
receipts, revenues, accounts receivable, security deposits and other deposits
(subject to the prior right of Tenants making such deposits) and income,
including room receipts, rack charges, vending machine receipts, food and
beverage receipts, concession fees and charges, public assembly room receipts,
fixed, additional and percentage rents, occupancy charges, operating expense
reimbursements, reimbursements for increases in taxes, sums paid by Tenants to
any Loan Party or any of its Subsidiaries to reimburse such Loan Party or such
Subsidiary for amounts originally paid or to be paid by such Loan Party or such
Subsidiary or such Loan Party's or such Subsidiary's agents or Affiliates for
which such Tenants were liable, as, for example, tenant improvements costs in
excess of any work letter, lease takeover costs, moving expenses and tax and
operating expense pass-throughs for which a Tenant is solely liable, parking,
valet, maintenance, common area, tax, insurance, utility and service charges
and contributions, proceeds of sale of electricity, gas, heating,
air-conditioning and other utilities and services, deficiency rents and
liquidated damages, and other benefits.
"RESTORATION" means the construction, design services, labor,
materials and other indirect costs and direct costs required to repair,
restore (including demolition), replace and rebuild all or any portion of a
Property or a Managed Property (or the Improvements thereof) following the
destruction, damage, loss or Taking thereof. The term "Restore" used as a verb
has a corresponding meaning.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of the Company now or hereafter outstanding, except a dividend payable
solely in shares of that class of stock to the holders of that class (and cash
in lieu of fractional shares in an aggregate amount not greater than $25,000),
(ii) any redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any equity
Securities, now or hereafter outstanding, of the Company or any of its
Subsidiaries that are not Wholly Owned Subsidiaries, including without
limitation, the purchase of any Securities pursuant to the Stockholders'
Agreement, (iii) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any now or
hereafter outstanding, of the Company or any of its Subsidiaries that are not
Wholly Owned Subsidiaries and (iv) any payment or prepayment of principal of,
premium, if any, or interest on, or redemption, purchase, retirement,
defeasance (including in substance or legal defeasance), sinking fund or
similar payment with respect to, any Indebtedness of the Company or any of its
Subsidiaries, including the Senior Notes, that is subordinated in right of
payment to the Obligations.
"REVOLVING COMMITMENTS" means, collectively, the commitments of the
Lenders to make Revolving Loans to the Company prior to the Revolving
Commitment Conversion Date pursuant to subsection 2.1A(i) and, on and after the
Revolving Commitment Conversion Date, to maintain such Revolving Loans pursuant
to subsection 2.1A(i).
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"REVOLVING COMMITMENT CONVERSION DATE" means the date that is the
third anniversary of the Effective Date.
"REVOLVING LOANS" means, collectively, the Loans made by the Lenders
to the Company pursuant to subsection 2.1A.
"REVOLVING NOTES" means, collectively, (i) the promissory notes of the
Company issued on or before the Funding Availability Date pursuant to
subsection 2.10(i) and (ii) any promissory notes issued by the Company pursuant
to the last sentence of subsection 10.1B(i) in connection with assignments of
the Revolving Loan Commitments and Revolving Loans of any Lenders, in each case
substantially in the form of Exhibit I annexed hereto, as they may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"ROSE HALL GP" means WHC Caribbean Limited, a Jamaica corporation and
the sole general partner of Rose Hall Partnership.
"ROSE HALL GP CORP." means WHC Rose Hall Limited, a Jamaica
corporation and the sole stockholder of Rose Hall GP.
"ROSE HALL PARTNERSHIP" means Rose Hall Associates Limited
Partnership, a Texas limited partnership.
"ROSE HALL PROPERTY" means the real property (including the fee
interest of Rose Hall Partnership in the hotel property and the leasehold
interest of Rose Hall Partnership in the golf course property adjacent
thereto), together with all Improvements thereon and all fixtures attached
thereto and all personal property used in connection therewith, located at
Montego Bay, Jamaica, and known, as of the date of this Agreement, as the
Wyndham Rose Hall Resort, as more particularly described on Schedule 5.4A1
annexed hereto.
"ROSE HALL TRANSFER AGREEMENT" means the Transfer Agreement dated as
of March 14, 1996 among the Company, Bank of Nova Scotia, The Bank of Nova
Scotia Jamaica Limited and Caribbean Hotel Management Company, as such
agreement may be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms thereof and hereof.
"SECURITIES" means any stock, shares, partnership interests, interests
in limited liability companies, voting trust certificates, certificates of
interest or participation in any profit-sharing agreement or arrangement,
options, warrants, bonds, debentures, notes or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of
the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
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"SECURITY AGREEMENT" means the Security and Pledge Agreement executed
and delivered by each Loan Party and the Agent on or before the Funding
Availability Date pursuant to subsection 4.1E(i), and thereafter by each other
Subsidiary of the Company that becomes a party thereto, in substantially the
form of Exhibit IX annexed hereto, pursuant to which such Loan Party will
pledge and grant a security interest in the Collateral described therein to
Agent for the benefit of the Agent and the Lenders, as such Security and Pledge
Agreement may be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms thereof and hereof.
"SECURITY DOCUMENTS" means, collectively, the Mortgages, the
Assignments of Rents and Leases, the Security Agreement, the Trademark
Agreement, the Cash Management Letters, the Omnibus Management and Liquor
License Agreement, the Tenant Subordination Agreements and all deeds of trust,
deeds to secure debt, mortgages, security agreements, pledge agreements,
assignments and all other instruments or documents (including UCC-1 financing
statements, fixture filings, amendments of financing statements or similar
documents required or advisable in order to perfect or maintain the Liens
created by the Security Documents) delivered by any Person pursuant to this
Agreement or any of the other Loan Documents, whether such delivery is prior
to, contemporaneous with or after delivery of this Agreement, in order to grant
to the Agent Liens in real, personal or mixed property of that Person, and to
maintain such Liens as each of the foregoing may be amended, restated,
consolidated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof. Security Documents do not
include this Agreement or the Notes.
"SENIOR EXECUTIVES" means, collectively, James D. Carreker, Leslie V.
Bentley, Eric A. Danziger, Anne L. Raymond and Stanley M. Koonce, Jr.
"SENIOR NOTE DOCUMENTS" means, collectively, (i) the Debt Underwriting
Agreements, the Senior Notes, the Indenture, the Senior Note Subsidiary
Guaranty and each agreement, instrument, certificate, opinion, or other
document executed and delivered by or on behalf of any Loan Party or any of its
Subsidiaries in connection with the issuance and sale of the Senior Notes in
the Debt Offering and (ii) each agreement, instrument, indenture, note,
certificate, opinion or other document executed and delivered by or on behalf
of any Person in connection with the issuance of any Securities referred to in
clause (ii) or (iii) of the definition of Senior Notes; in each case, as
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"SENIOR NOTES" means, collectively, (i) the senior subordinated notes
issued by the Company pursuant to the Indenture, (ii) any Securities issued by
any Person to a holder of any of the Securities referred to in this definition
of Senior Notes pursuant to an order of decree of a court of competent
jurisdiction and (iii) any Securities issued by any Person in connection with
any refinancing, exchange or refunding of any of the securities referred to in
this definition of Senior Notes; in each case with respect to securities
referred to in this definition of Senior Notes, as such securities are amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
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"SENIOR NOTE SUBSIDIARY GUARANTY" means the Guaranty of the Senior
Notes effected pursuant to Article _____ [**GUARANTY PROVISION**] of the
Indenture by each Loan Party (other than the Company) and each other Subsidiary
of the Company that becomes a party thereto in accordance with the terms
thereof and hereof, as amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms hereof and thereof.
"SERVICING AGREEMENTS" means, collectively, the Property Servicing
Agreements and the Liquor Operations Servicing Agreements listed on Schedule
4.1J annexed hereto, as such Schedule may be revised or supplemented from time
to time pursuant to subsection 2.9 or 7.16A(i), as any such agreement may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"STANDBY LETTER OF CREDIT" means any standby letter of credit or
similar instrument issued for the purpose of supporting any corporate purposes,
including (i) workers' compensation liabilities of the Company or any of its
Subsidiaries, (ii) the obligations of third party insurers of the Company or
any of its Subsidiaries arising by virtue of the laws of any jurisdiction
requiring third party insurers, and (iii) performance, payment, deposit or
surety obligations of the Company or any of its Subsidiaries, in any case if
required by law or governmental rule or regulation or in accordance with custom
and practice in the industry; provided that Standby Letters of Credit may not
be issued for the purpose of supporting (a) trade payables or (b) any
Indebtedness constituting "antecedent debt" (as that term is used in Section
547 of the Bankruptcy Code).
"STOCKHOLDERS' AGREEMENT" means the Stockholders' Agreement proposed
to be dated as of May 24, 1996 among the Company and each of the stockholders
listed on the signature pages thereof, each substantially in the form thereof
that has been approved by the Agent, together with such alterations therein as
shall be approved by the Agent, which approval may be granted, withheld,
conditioned or delayed in its sole discretion, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence
of any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and
policies thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof.
"SUBSIDIARY GUARANTOR" means each Loan Party under the Subsidiary
Guaranty.
"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty by each Loan Party
(other than the Company) and any other Subsidiary of the Company that becomes a
party thereto, substantially in the form of Exhibit VIII annexed hereto, as
such Subsidiary Guaranty may be
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amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"SURVEY" means, with respect to any Property, a current survey map
prepared by a surveyor licensed in the state in which such Property is located,
acceptable to the Agent, containing the legal description of such Property and
conforming, and certified by such surveyor to the Agent and the Lenders and the
Title Company as conforming, to the Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys for urban survey class as adopted by ALTA and
American Congress on Surveying & Mapping (1992 version), and showing, to the
extent practicable, all matters described in "Table A/Optional Survey
Responsibilities and Specifications" in such Minimum Standard Detail
Requirements; provided, however, that the survey need not meet the foregoing
requirements if the Title Company has eliminated the survey exception from the
Title Policies and all other exceptions to the Title Policies based upon such
survey are acceptable. Any such survey shall contain a certification by such
surveyor to the Agent and the Lenders stating whether the Property is located
in an area having special flood hazards as identified by the Federal Emergency
Management Agency.
"SWING LINE LENDER" means Bankers, or any Person serving as a
successor Agent hereunder, in its capacity as Swing Line Lender hereunder.
"SWING LINE COMMITMENT" means the commitment of Swing Line Lender to
make Swing Line Loans to the Company pursuant to subsection 2.1A(ii).
"SWING LINE LOANS" means, collectively, the Loans made by Swing Line
Lender to the Company pursuant to subsection 2.1A(ii).
"SWING LINE NOTE" means, collectively, (i) the promissory note of the
Company issued pursuant to subsection 2.1D(ii) on or before the Funding
Availability Date and (ii) any promissory note issued by the Company to any
successor Agent and Swing Line Lender pursuant to the last sentence of
subsection 9.5B, in each case, substantially in the form of Exhibit II annexed
hereto, as it may be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof and hereof.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., or any successor to the business thereof.
"TAKING" means the taking or appropriation (including by deed in lieu
of condemnation or by voluntary sale or transfer under threat of condemnation
or while legal proceedings for condemnation are pending) of any Property, or
any part thereof or interest therein, for public or quasi-public use under the
power of eminent domain, by reason of any public improvement or condemnation
proceeding, or in any other manner or any damage or injury or diminution in
value through condemnation, inverse condemnation or other exercise of the power
of eminent domain. The term "Taken" used as a verb has a correlative meaning.
"TAX" or "TAXES" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, on
whomsoever and wherever
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imposed, levied, collected, withheld or assessed by a Governmental Authority;
provided, however, that "TAX ON THE OVERALL NET INCOME" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person's principal office (and/or, in the case of any Lender, its lending
office) is located or in which that Person is deemed to be doing business on
all or part of the net income, profits or gains of that Person (whether
worldwide, or only insofar as such income, profits or gains are considered to
arise in or to relate to a particular jurisdiction, or otherwise).
"TENANT" means any Person liable by contract or otherwise to pay rent
or a percentage of income, revenue or profits pursuant to a Lease, and includes
a tenant, subtenant, lessee and sublessee.
"TENANT SUBORDINATION AGREEMENT" means any Subordination,
Non-Disturbance and Attornment Agreement executed and acknowledged by a Tenant,
the Company or any other Loan Party and the Agent, and reasonably satisfactory
in form and substance to the Agent, as each such agreement may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"TITLE COMPANY" means Chicago Title Insurance Company or such other
title company as may be selected by the Company and approved by the Agent in
its sole discretion.
"TITLE POLICIES" means, with respect to the Pool A Properties (other
than the Rose Hall Property), the paid mortgagee policies of title insurance in
the form of a 1970 ALTA loan policy (or other form of loan policy available in
the applicable state and acceptable to the Agent) and issued by the Title
Company.
"TOTAL ADJUSTED EQUITY INTERESTS" means, with respect to a Joint
Venture or other Person in which any Loan Party or any of its Subsidiaries
shall have made an Investment or for whose benefit such Loan Party or
Subsidiary shall have become liable with respect to a Guaranty following the
Effective Date, and as of any date of determination, the sum of (i) the
aggregate fair market value of the equity Securities of such Joint Venture or
other Person outstanding as of such date of determination plus (ii) the
aggregate fair market value of all debt Investments made by such Loan Party or
Subsidiary thereof, in each case as reasonably determined by the Company and
certified to the Agent in an Officers' Certificate of the Chief Executive
Officer or the Chief Financial Officer of the Company to such effect, together
with the information utilized by the Company to make such determination;
provided that, for the purpose of calculating such amount, there shall be
included and excluded, as the case may be, such debt Investments of the Loan
Parties and their respective Subsidiaries as shall be so included or excluded,
as the case may be, with respect to such Joint Venture or other Person or
Subsidiary thereof, as of such date of determination, in accordance with the
proviso to the definition of Company's Adjusted Equity Interest.
"TOTAL MANAGEMENT EBITDA" means, for any period and as of any date of
determination, the aggregate Management EBITDA for such period in respect of
all Management Agreements and Servicing Agreements and Other Management
Agreements.
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"TOTAL POOL A PROPERTY EBITDA" means, for any period and as of any
date of determination, the aggregate Property EBITDA in respect of all Pool A
Properties.
"TOTAL POOL A PROPERTY EBITDA-CAP. EX" means, for any period and as of
any date of determination, Total Pool A Property EBITDA minus Capital
Expenditures with respect to the Pool A Properties.
"TOTAL PROPERTY EBITDA" means, for any period and as of any date of
determination, the aggregate Property EBITDA for such period with respect to
all Properties.
"TOTAL UTILIZATION" means, as of any date of determination, the sum of
the following, without duplication:
(i) the Total Utilization of Revolving Commitments; plus
(ii) the sum of Guaranties of the Loan Parties and their
respective Subsidiaries either (a) that are in existence on the
Effective Date (1) but are not specified on Schedule 5.3 annexed
hereto, as approved by the Agent, or (2) are specified on Schedule 5.3
but the maximum estimated amounts specified therefor are greater than
the corresponding maximum estimated amounts specified therefor on
Exhibit E to the Original Financing Letter (provided that, with
respect to each Guaranty referred to in this subclause (2), the amount
of such Guaranty that shall be included in any calculation of Total
Utilization, shall be equal to the amount of such excess), or (b)
permitted by subsection 7.3(vi), (vii), (viii) or (ix) or subsection
7.4(ii)(a), in each case referred to in the preceding clauses (a) and
(b) which have not been paid or otherwise discharged as of such date
of determination; provided, that the Guaranties by Subsidiaries of the
Company of the Senior Notes shall not be included in the calculation
of Total Utilization; plus
(iii) the sum of (a) the excess of $4,000,000 over the
aggregate amount actually paid by or on behalf of the Rose Hall
Partnership for the Renovation of the Rose Hall Property after the
Effective Date and on or before such date of determination plus (b)
the excess of $60,000 over the sum of (x) the aggregate amount
actually paid by or on behalf of the Rose Hall Partnership on and
after the Effective Date for the remediation recommended in the
environmental audit with respect to the Rose Hall Property delivered
pursuant to subsection 4.1M or actually deposited by or on behalf of
Rose Hall Partnership in a segregated account for such purpose and not
withdrawn from such account and actually applied by or on behalf of
the Rose Hall Partnership for such purpose, in each case on or before
such date of determination, plus (y) the aggregate amount of the
indemnification obligations with respect to such remediation
expenditures owed to the Rose Hall Partnership by such Person or
Persons, pursuant to such indemnification agreement or agreements and
secured by such collateral, as in each case shall be approved by the
Agent, which approval may be withheld, conditioned or delayed in its
sole discretion; plus
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(iv) the aggregate costs for the Restoration of any Pool A
Property or Pool B Property pursuant to subsection 6.11G, in each case
as specified in the Restoration Budget therefor most recently
delivered to the Agent, for which payment has not been made, as
determined by the Agent in its sole discretion; plus
(v) the aggregate amount of principal, interest and other
amounts referred to in subsection 7.1(vii)(s)(3);
provided that the payment or discharge of such Guaranties and costs of
Restoration, and the amount of each such payment or discharge, shall be
determined by the Agent, in its sole discretion, after taking into account any
written notices and other information with respect thereto that may be provided
by the Company or its Subsidiaries to the Agent from time to time.
"TOTAL UTILIZATION OF REVOLVING COMMITMENTS" means, as of any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans (other than Revolving Loans made for the purpose of repaying
any Refunded Swing Line Loans or reimbursing the applicable Issuing Lender for
any amount drawn under any Letter of Credit but not yet so applied), plus (ii)
the Letter of Credit Usage, plus (iii) the aggregate principal amount of all
outstanding Swing Line Loans.
"TRADEMARK AGREEMENT" means the Trademark Security Agreement by the
Company, Management Corp. and IP Corp. in favor of the Agent for the benefit of
the Agent and the Lenders, in substantially the form of Exhibit X annexed
hereto, as such agreement may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
"TRANSFER" means any conveyance, assignment, sale, mortgaging,
encumbrance, pledging, hypothecation, granting of a security interest in,
granting of options with respect to or other disposition of (directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, and
whether or not for consideration or of record) all or any portion of any legal
or beneficial interest (i) in all or any portion of any Property, (ii) in any
right under a Management Agreement, including without limitation, the right to
receive payments of any amounts thereunder, or (iii) in any other assets of any
Loan Party or any of its Subsidiaries.
"UNDERWRITING AGREEMENTS" means, collectively, the Equity Underwriting
Agreements and the Debt Underwriting Agreements.
"UNIFORM SYSTEM" means the Uniform System of Accounts for Hotels, 8th
Revised Edition, 1986, as published by the Hotel Association of New York City,
as the same may be further revised from time to time.
"UNITED STATES OF AMERICA" means the 50 states of the United States of
America and Washington, D.C., but excluding any territories or possessions
thereof OTHER THAN THE COMMONWEALTH OF PUERTO RICO.
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"VININGS AGREEMENT" means the Sale and Purchase Agreement dated as of
March 5, 1996 between Overlook Vinings Inn and Conference Center Associates,
Ltd. and Wyndham Hotel Company, Ltd., as such agreement may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"VININGS BOND DOCUMENTS" means, collectively, the Vinings Bonds, the
Vinings Indenture, the Loan Agreement dated as of October 1, 1985 between the
Development Authority of Cobb County (the "AUTHORITY") and Overlook Vinings Inn
and Conference Center Associates, Ltd. ("VININGS OVERLOOK"), the Note dated
October 1, 1995, in the original principal amount of $9,675,000 made by Vinings
Overlook payable to the order of the Authority, and assigned by the Authority
without recourse to The Citizens and Southern National Bank (as predecessor to
NationsBank, N.A. (South), a national banking association (successor by merger
to NationsBank of Georgia, National Association, formerly known as The Citizens
and Southern National Bank), as Trustee under the Vinings Indenture, the Deed
to Secure Debt from Vinings Overlook to the Authority, The Mutual Benefit Life
Insurance Company, and the Trustee, dated as of October 1, 1985, as assigned by
Memorandum of Assignment from the Authority to the Trustee, dated as of October
1, 1985, the Agreement Regarding Interest and Charges dated November 26, 1985
between Vinings Overlook and the Authority, the Vinings Forbearance Agreement
and all other agreements entered into by Vinings Overlook in connection with
the Vinings Bonds, as each such agreement, instrument or other document may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"VININGS BONDS" means the $9,675,000 Development Authority of Cobb
County Industrial Development Revenue Bonds 1985 Series (Overlook Inn Project)
issued by the Development Authority of Cobb County pursuant to the Vinings
Indenture, as such securities are amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms hereof and thereof.
"VININGS FORBEARANCE AGREEMENT" means the Forbearance Agreement
referred to in Section 2.2 of the Vinings Agreement and proposed to be entered
into by NationsBank, N.A. (South), a national banking association successor by
merger to NationsBank of Georgia, National Association, formerly known as The
Citizens and Southern National Bank), as Trustee under the Vinings Indenture,
Overlook Vinings Inn and Conference Center Associates, Ltd., and Mutual Benefit
Life Insurance Company, in liquidation, in the form of Draft No. 5 (dated
October 19, 1995) reviewed by the Agent, with such alterations therein as shall
be approved by the Agent, which approval may be granted, withheld, conditioned
or delayed in its sole discretion, as such agreement may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"VININGS INDEBTEDNESS" means the Indebtedness and other obligations of
the Vinings Subsidiary, if any, created or evidenced by, or otherwise assumed
or otherwise incurred in connection with, the Vinings Bond Documents, as such
Indebtedness or other obligations may be refinanced, exchanged or refunded in
accordance with the terms thereof and hereof.
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"VININGS INDENTURE" means the Trust Indenture dated as of October 1,
1985, by and between the Development Authority of Cobb County and The Citizens
and Southern National Bank (predecessor to NationsBank, N.A. (South), a
national banking association), as Trustee, as amended, restated, supplemented
or otherwise modified from time to time in accordance with the terms hereof and
thereof.
"VININGS PROPERTY" means the real property, together with all
Improvements thereon and all fixtures attached thereto and all personal
property used in connection therewith, located in Atlanta, Georgia and known,
as of the date of this Agreement, as the Vinings Wyndham Garden Hotel.
"VININGS SUBSIDIARY" has the meaning assigned to that term in
subsection 7.15A(iv).
"VOLUNTARY REMOVAL PERIOD" means, with respect to any Property,
Managed Property, Other Managed Property, Management Agreement, Servicing
Agreement or Other Management Agreement, the period (i) commencing on the date
specified in an Officers' Certificate delivered to the Agent on or before such
date, provided that no such period may commence before the payment in full of
any amount required to be prepaid pursuant to subsection 2.4B(iv) if effect
were not given to an election duly made by the Company to defer such prepayment
pursuant to the second sentence of subsection 2.4B(iv), and (ii) terminating on
the earlier of (a) the date specified in such Officers' Certificate, which
shall be not less than 3 months after the date of such commencement, and (b)
the date on which the Company would have been required to make a prepayment
pursuant to subsection 2.4B(iv) if effect were not given to an election duly
made by the Company to defer such prepayment pursuant to the second sentence of
subsection 2.4B(iv). Except as provided in clause (ii)(b) of the preceding
sentence, the term of a Voluntary Removal Period may not be shortened, extended
or otherwise modified. The effectiveness of a Voluntary Removal Period with
respect to a condition or event specified in subsection 8.1 shall not
constitute or cause, or be deemed to constitute, a waiver by the Agent or the
Lenders of any other condition or event specified in subsection 8.1.
"WEL" means Wyndham Employees Ltd., a Texas limited partnership.
"WHI" means WH Interest, Inc., a Texas corporation.
"WHI LIMITED PARTNERSHIP" means WHI Limited Partnership, a Texas
limited partnership.
"WHOLLY OWNED" means, with respect to any Subsidiary of any Person, a
Subsidiary all of the outstanding equity Securities of which (other than any
director's qualifying shares, Investments by foreign nationals mandated by
Applicable Law or Investments by local residents mandated by Applicable Law in
connection with the issuance of a Liquor License) are owned directly or
indirectly by such Person.
"WORK" has the meaning assigned to that term in subsection 6.11F.
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"WYNRIGHT" means Wynright Insurance Corporation, a Bermuda
corporation.
"WYNRIGHT AGREEMENTS" means, collectively, the Insurance Policy dated
__________, 1996 and the Asset Management Agreement to be executed and
delivered by Wynright and the Company, each substantially in the form thereof
that has been approved by the Agent, together with such alterations therein as
shall be approved by the Agent, which approval may be granted, withheld,
conditioned or delayed in its sole discretion, as each such agreement may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
UNDER AGREEMENT; PRO FORMA.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by the Company to the Agent for distribution to the
Lenders pursuant to subsection 6.1 shall be prepared in accordance with GAAP as
in effect at the time of such preparation. Except as otherwise expressly
provided herein, calculations in connection with the definitions, covenants and
other provisions of this Agreement shall utilize accounting principles and
policies in conformity with those used to prepare the financial statements
referred to in subsection 5.3(i). For purposes of calculating the Borrowing
Base and any amount pursuant to subsections 6.14, 7.6D, 7.6E, 7.6F and 7.6G, as
of any date of determination and for any period, pro forma effect shall be
given to the consummation of the Formation, the Public Offerings and the
exercise of the GE Option, and the application of all proceeds therefrom, as if
such transactions shall have been consummated on the first day of such period.
1.3 REFERENCES TO ARTICLES, SECTIONS, EXHIBITS, SCHEDULES AND ATTACHMENTS.
All references appearing in a Loan Document to Articles, Sections,
subsections, clauses, Recitals, Exhibits, Schedules or Attachments are
references to the Articles, Sections, subsections, clauses and Recitals thereof
and to the Exhibits, Schedules or Attachments annexed to such Loan Document
unless expressly otherwise designated in such Loan Document. All references
appearing in a Loan Document to Exhibits, Schedules and Attachments are
references to such documents as initially annexed to such Loan Document or as
supplemented or revised in accordance with the terms of this Agreement or such
other Loan Document.
1.4 CAPTIONS.
All captions to any Article, Section, subsection, clause, Recital,
Exhibit, Schedule or Attachment in a Loan Document are used for convenience and
reference only and in no way define, limit or describe the scope or intent of,
or in any way affect, such Loan Document.
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1.5 DRAFTER.
No inference against or in favor of any party to any Loan Document
shall be drawn from the fact that such party or its counsel has drafted any
portion of any Loan Document.
1.6 REFERENCES TO PERSONS INCLUDE PERMITTED SUCCESSORS AND ASSIGNS.
Except as otherwise specified in a Loan Document, all references in
such Loan Document to any Person, other than the Company or any of its
Affiliates, shall be deemed to include the successors and assigns of such
Person.
1.7 REFERENCES TO APPLICABLE LAW AND CONTRACTS.
Except as otherwise specified in a Loan Document, all references in
such Loan Document to any Applicable Law or contracts specifically defined or
referred to therein, shall be deemed references to such Applicable Law or
contracts as may be amended, restated, supplemented, consolidated or otherwise
modified from time to time, or, in the case of any such contract, as the terms
thereof may be waived or modified, but only in the case of each such amendment,
waiver or modification of a contract, to the extent permitted by, and effected
in accordance with, the terms thereof and hereof and only to the extent such
amendment, waiver or modification of a contract is not prohibited by any of the
Loan Documents.
1.8 HEREIN.
The words "herein", "hereinabove", "hereinbelow", "hereof",
"hereunder" and words of similar import, when used in a Loan Document, shall
refer to such Loan Document as a whole.
1.9 INCLUDING WITHOUT LIMITATION.
The words "includes", "including" and similar terms used in any Loan
Document shall be construed as if followed by the words "without limitation".
1.10 GENDER.
Whenever the context so requires, the neuter gender includes the
masculine or feminine and the singular number includes the plural, and vice
versa.
1.11 SINGULAR AND PLURAL.
Any of the terms defined in a Loan Document may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
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1.12 KNOWLEDGE.
As used in this Agreement or in any other Loan Document, the phrases
"TO THE COMPANY'S ACTUAL KNOWLEDGE", "TO THE KNOWLEDGE OF THE COMPANY" and any
variations thereof shall mean, as of any date of determination and after due
inquiry, the actual knowledge or awareness, as of such date, of the persons who
occupy the offices of Chairman of the Board, Chief Executive Officer, President
- Wyndham Gardens Division, President - Wyndham Hotels and Resorts Division,
Executive Vice President and Chief Financial Officer, Executive Vice President,
Vice President - General Counsel, Vice President - Chief Information Officer,
Vice President - Development, Vice President - Marketing, Vice President -
Human Resources, Vice President - Corporate Controller, Vice President -
Technical Services, Secretary, Treasurer, vice presidents of operations and
regional directors of operations; provided, however, that the knowledge of a
vice president of operations or a regional director of operations shall be
imputed to the Company only with respect to matters affecting the region or the
Properties for which such vice president or regional director provides regional
or property management services. The Company represents and warrants that the
foregoing Persons have executive and administrative responsibility for the
Company and its assets and, in the performance of their duties in the ordinary
course of business, would customarily have knowledge of the matters referred to
herein.
SECTION 2
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; LOANS; NOTES; THE REGISTER.
A. COMMITMENTS.
(i) Revolving Commitments. Subject to the terms and
conditions of this Agreement and in reliance upon the representations
and warranties of the Company herein set forth, each Lender hereby
severally agrees, subject to the limitations set forth below with
respect to the maximum amount of Loans permitted to be outstanding
from time to time, to lend to the Company from time to time during the
period from the Funding Availability Date to but excluding the
Revolving Commitment Conversion Date, an aggregate amount not
exceeding such Lender's Pro Rata Share of the aggregate amount of the
Revolving Commitments to be used for the purposes identified in
subsection 2.5A. In addition, each Lender hereby agrees to maintain
as Revolving Loans, subject to the provisions of subsection 2.4, the
Revolving Loans of such Lender outstanding on the Revolving Commitment
Conversion Date during the period from the Revolving Commitment
Conversion Date to the Maturity Date; provided that, except with
respect to Revolving Loans made pursuant to subsection 3.3B to
reimburse an Issuing Lender, no Lender shall be required to make
additional Revolving Loans on or after the Revolving Commitment
Conversion Date. The amount of such payment shall not be reduced or
increased as the result of any payment pursuant to subsection 2.4B.
The original amount of each Lender's Revolving Commitment and such
Lender's Pro Rata Share is set forth opposite its name on Schedule
2.1A annexed hereto and the
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aggregate original amount of the Revolving Commitments is
$100,000,000; provided, however, that the Revolving Commitments of the
Lenders shall be adjusted to give effect to any assignments of the
Revolving Commitments pursuant to subsection 9.1; provided further,
however, that the amount of the Revolving Commitments shall be
automatically reduced by the amount of any reductions to the Revolving
Commitments made pursuant to subsection 2.4B(ii).
Each Lender's Revolving Commitment shall expire on the
Maturity Date and all Loans and all other amounts owed hereunder with
respect to the Loans and the Revolving Commitments shall be paid in
full no later than the Maturity Date; provided, however, that each
Lender's Revolving Commitment shall expire immediately and without
further action on July 31, 1996, if the Funding Availability Date has
not occurred on or before that date.
Anything contained in this Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Commitments
shall be subject to the limitation that the Total Utilization (after
giving effect to any concurrent payment of the Loans made with the
proceeds of Loans) shall not exceed the lesser of the Borrowing Base
and the Revolving Commitments then in effect.
(ii) Swing Line Commitment. Subject to the terms and
conditions of this Agreement and in reliance upon the representations
and warranties of the Company herein set forth, Swing Line Lender
hereby agrees, subject to the limitations set forth below with respect
to the maximum amount of Swing Line Loans permitted to be outstanding
from time to time, to make a portion of the Revolving Commitments
available to the Company from time to time during the period from the
Funding Availability Date to but excluding the Revolving Commitment
Conversion Date by making Swing Line Loans to the Company in an
aggregate amount not exceeding the amount of the Swing Line Commitment
to be used for the purposes identified in subsection 2.5A,
notwithstanding the fact that such Swing Line Loans, when aggregated
with Swing Line Lender's outstanding Revolving Loans and Swing Line
Lender's Pro Rata Share of the Letter of Credit Usage then in effect,
may exceed Swing Line Lender's Revolving Commitment. The original
amount of the Swing Line Commitment is $10,000,000; provided that any
reduction of the Revolving Commitments made pursuant to subsection
2.4B(ii) which reduces the aggregate Revolving Commitments to an
amount less than the then current amount of the Swing Line Commitment
shall result in an automatic corresponding reduction of the Swing Line
Commitment to the amount of the Revolving Commitments, as so reduced,
without any further action on the part of the Company, the Agent or
Swing Line Lender. The Swing Line Commitment shall expire on the
Revolving Commitment Conversion Date and all Swing Line Loans and all
other amounts owed hereunder with respect to the Swing Line Loans
shall be paid in full no later than that date; provided that the Swing
Line Commitment shall expire immediately and without further action on
July 31, 1996 if the Funding Availability Date has not occurred on or
before that date. Amounts borrowed under this subsection 2.1A(ii) may
be repaid and reborrowed prior to but excluding the Revolving
Commitment Conversion Date.
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Anything contained in this Agreement to the contrary
notwithstanding, the Swing Line Loans and the Swing Line Commitment
shall be subject to the limitation that in no event shall the Total
Utilization (after giving effect to any concurrent payment of the
Loans made with the proceeds of Loans) at any time exceed the
Revolving Loan Commitments then in effect.
With respect to any Swing Line Loans which have not been
voluntarily prepaid by the Company pursuant to subsection 2.4B(i),
Swing Line Lender may, at any time in its sole and absolute
discretion, deliver to the Agent (with a copy to the Company), no
later than 10:00 A.M. (New York City time) on the first Business Day
in advance of the proposed Funding Date, a notice (which shall be
deemed to be a Notice of Borrowing given by Company) requesting the
Lenders to make Revolving Loans that are Base Rate Loans on such
Funding Date in an amount equal to the amount of such Swing Line Loans
(the "REFUNDED SWING LINE LOANS") outstanding on the date such notice
is given which Swing Line Lender requests the Lenders to prepay.
Anything contained in this Agreement to the contrary notwithstanding,
(i) the proceeds of such Revolving Loans made by the Lenders other
than Swing Line Lender shall be immediately delivered by the Agent to
Swing Line Lender (and not to Company) and applied to repay a
corresponding portion of the Refunded Swing Line Loans and (ii) on the
day such Revolving Loans are made, Swing Line Lender's Pro Rata Share
of the Refunded Swing Line Loans shall be deemed to be paid with the
proceeds of a Revolving Loan made by Swing Line Lender, and such
portion of the Swing Line Loans deemed to be so paid shall no longer
be outstanding as Swing Line Loans and shall no longer be due under
the Swing Line Note of Swing Line Lender but shall instead constitute
part of Swing Line Lender's outstanding Revolving Loans and shall be
due under the Revolving Note of Swing Line Lender. The Company hereby
authorizes the Agent and Swing Line Lender to charge the Company's
accounts with the Agent and Swing Line Lender (up to the amount
available in each such account) in order to immediately pay Swing Line
Lender the amount of the Refunded Swing Line Loans to the extent the
proceeds of such Revolving Loans made by the Lenders, including the
Revolving Loan deemed to be made by Swing Line Lender, are not
sufficient to repay in full the Refunded Swing Line Loans. If any
portion of any such amount paid (or deemed to be paid) to Swing Line
Lender should be recovered by or on behalf of the Company from Swing
Line Lender in bankruptcy, by assignment for the benefit of creditors
or otherwise, the loss of the amount so recovered shall be ratably
shared among all Lenders in the manner contemplated by subsection 9.5.
If for any reason (a) Revolving Loans are not made upon the
request of Swing Line Lender as provided in the immediately preceding
paragraph in an amount sufficient to repay any amounts owed to Swing
Line Lender in respect of any outstanding Swing Line Loans or (b) the
Revolving Commitments are terminated at a time when any Swing Line
Loans are outstanding, each Lender shall be deemed to, and hereby
agrees to, have purchased a participation in such outstanding Swing
Line Loans in an amount equal to its Pro Rata Share (calculated, in
the case of the foregoing clause (b), immediately prior to such
termination of the Revolving Commitments) of the unpaid amount of such
Swing Line Loans together with accrued interest thereon.
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Upon one Business Day's notice from Swing Line Lender, each Lender
shall deliver to Swing Line Lender an amount equal to its respective
participation in same day funds at the office of Swing Line Lender
located at 21 Bankers Trust Plaza, New York, New York. In order to
further evidence such participation (and without prejudice to the
effectiveness of the participation provisions set forth above), each
Lender agrees to enter into a separate participation agreement at the
request of Swing Line Lender in form and substance reasonably
satisfactory to Swing Line Lender. In the event any Lender fails to
make available to Swing Line Lender the amount of such Lender's
participation as provided in this paragraph, Swing Line Lender shall
be entitled to recover such amount on demand from such Lender together
with interest thereon at the rate customarily used by Swing Line
Lender for the correction of errors among banks for three Business
Days and thereafter at the Base Rate. In the event Swing Line Lender
receives a payment of any amount in which other Lenders have purchased
participations as provided in this paragraph, Swing Line Lender shall
promptly distribute to each such other Lender its Pro Rata Share of
such payment.
Anything contained herein to the contrary notwithstanding,
each Lender's obligation to make Revolving Loans for the purpose of
repaying any Refunded Swing Line Loans pursuant to the second
preceding paragraph and each Lender's obligation to purchase a
participation in any unpaid Swing Line Loans pursuant to the
immediately preceding paragraph shall be absolute and unconditional
and shall not be affected by any circumstance, including without
limitation (a) any setoff, counterclaim, recoupment, defense or other
right which such Lender may have against Swing Line Lender, the
Company or any other Person for any reason whatsoever; (b) the
occurrence or continuation of an Event of Default or a Potential Event
of Default; (c) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of
the Company or any of its Subsidiaries; (d) any breach of this
Agreement or any other Loan Document by any party thereto; or (e) any
other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided that such obligations of
each Lender are subject to the condition that (y) Swing Line Lender
believed in good faith that all conditions under Section 4 to the
making of the applicable Refunded Swing Line Loans or other unpaid
Swing Line Loans, as the case may be, were satisfied at the time such
Refunded Swing Line Loans or unpaid Swing Line Loans were made or (z)
the satisfaction of any such condition not satisfied had been waived
in accordance with subsection 9.6 prior to or at the time such
Refunded Swing Line Loans or other unpaid Swing Line Loans were made.
B. BORROWING MECHANICS. Loans made on any Funding Date (other
than Revolving Loans made pursuant to subsection 3.3B for the purpose of
reimbursing any Issuing Lender for the amount of a drawing under a Letter of
Credit issued by it or Revolving Loans made pursuant to a request by Swing Line
Lender pursuant to subsection 2.1A(ii) for the purpose of repaying any Refunded
Swing Line Loans) shall be in an aggregate minimum amount of $500,000. The
Company shall be permitted to borrow Revolving Loans pursuant to this
subsection 2.1B only twice during any 30 day period; provided that such
limitation shall not apply to Swing Line Loans. Whenever the Company desires
that the Lenders make Revolving
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Loans, it shall deliver to the Agent a Notice of Borrowing no later than 10:00
A.M. (New York time) at least three Business Days in advance of the proposed
Funding Date (in the case of a Eurodollar Rate Loan) or at least one Business
Day in advance of the proposed Funding Date (in the case of a Base Rate Loan).
Whenever the Company desires that Swing Line Lender make a Swing Line Loan, it
shall deliver to Agent a Notice of Borrowing no later than 12:00 Noon (New York
City time) on the proposed Funding Date.
Each Notice of Borrowing shall contain the information specified in
the form attached hereto as Exhibit III. If any of the proceeds of such Loan
is to be applied to the Renovation or Restoration of any Property, together
with such Notice of Borrowing there shall be delivered the lien waivers and
search report referred to in subsection 4.2A(ii).
If none of the proceeds of the requested Loan is to be applied to the
Renovation or Restoration of any Property, the Company may give the Agent
telephonic notice by the required time of any proposed Loan under this
subsection 2.1B in lieu of delivering the Notice of Borrowing; provided,
however, that such telephonic notice shall be promptly confirmed in writing by
delivery of a Notice of Borrowing to the Agent on or before the applicable
Funding Date. Neither the Agent nor any Lender shall incur any liability to
the Company in acting upon any telephonic notice referred to above that the
Agent believes in good faith to have been given by a duly authorized officer or
other person authorized to borrow on behalf of the Company or for otherwise
acting in good faith under this subsection 2.1B, and upon funding of Loans by
the Lenders in accordance with this Agreement pursuant to any such telephonic
notice the Company shall have effected Loans hereunder.
The Company shall notify the Agent prior to the funding of any Loans
in the event that any of the matters to which the Company is required to
certify in the applicable Notice of Borrowing is no longer true and correct as
of the applicable Funding Date, and the acceptance by the Company of the
proceeds of any Loans shall constitute a re-certification by the Company, as of
the applicable Funding Date, as to the matters to which the Company is required
to certify in the applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B and 2.6C, a Notice of
Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and the Company shall be bound to make a borrowing in accordance therewith.
C. DISBURSEMENT OF FUNDS. All Revolving Loans under this
Agreement shall be made by the Lenders simultaneously and proportionately to
their respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Revolving Loan requested hereunder nor shall the
Commitment of any Lender be increased or decreased as a result of a default by
any other Lender in that other Lender's obligation to make a Revolving Loan
requested hereunder. Promptly after receipt by the Agent of a Notice of
Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof),
the Agent shall notify each Lender or Swing Line Lender, as the case may be, of
the proposed borrowing. Each Lender shall make the amount of its Revolving
Loan available to the Agent, in same day funds, at the office of the Agent
located
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at One Bankers Trust Plaza, New York, New York, not later than 12:00 Noon (New
York time) on the applicable Funding Date and Swing Line Lender shall make the
amount of its Swing Line Loan available to the Agent not later than 2:00 P.M.
(New York City time) on the applicable Funding Date, in each case in same day
funds in Dollars. Except as provided in subsection 2.1A(ii) or subsection 3.3B
with respect to Revolving Loans used to repay Refunded Swing Line Loans or to
reimburse any Issuing Lender for the amount of a drawing under a Letter of
Credit issued by it, upon satisfaction or waiver of the conditions precedent
specified in subsections 4.1 (in the case of Loans made on the Funding
Availability Date) and 4.2 (in the case of all Loans), the Agent shall make the
proceeds of such Loans available to the Company on the applicable Funding Date
by causing an amount of same day funds equal to the proceeds of all such Loans
received by the Agent from the Lenders to be transferred to the Operating
Account.
Unless the Agent shall have been notified by any Lender prior to the
Funding Date for any Loans that such Lender does not intend to make available
to the Agent the amount of such Lender's Loan requested on such Funding Date,
the Agent may assume that such Lender has made such amount available to the
Agent on such Funding Date and the Agent may, in its sole discretion, but shall
not be obligated to, make available to the Company a corresponding amount on
such Funding Date. If such corresponding amount is not in fact made available
to the Agent by such Lender, the Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to the
Agent, at the Federal Funds Effective Rate for three Business Days and
thereafter at the Base Rate. If such Lender does not pay such corresponding
amount forthwith upon the Agent's demand therefor, the Agent shall promptly
notify the Company and the Company shall immediately pay such corresponding
amount to the Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to the Agent, at the rate
payable under this Agreement for Base Rate Loans. Nothing in this subsection
2.1C shall be deemed to relieve any Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights that the Company may have
against any Lender as a result of any default by such Lender hereunder.
D. THE REGISTER.
(i) The Agent shall maintain, at its address referred to
in subsection 9.8, a register for the recordation of the names and
addresses of the Lenders and the Commitment and Loans of each Lender
from time to time (the "REGISTER"). The Company, the Agent and the
Lenders may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Company or any
Lender at any reasonable time and from time to time upon reasonable
prior notice.
(ii) The Agent shall record in the Register the Revolving
Commitment and the Revolving Loans from time to time of each Lender,
the Swing Line Loan Commitment and the Swing Line Loans from time to
time of Swing Line Lender, and each repayment or prepayment in respect
of the principal amount of the Revolving Loans of each Lender or the
Swing Line Loans of Swing Line Lender. Any such
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recordation shall be conclusive and binding on the Company and each
Lender, absent manifest error; provided, however, that failure to make
any such recordation, or any error in such recordation, shall not
affect the Company's Obligations in respect of the applicable Loans.
(iii) Each Lender shall record on its internal records
(including any promissory note described in subsection 2.1D(iv)) the
amount of each Loan made by it and each payment in respect thereof.
Any such recordation shall be conclusive and binding on the Company,
absent manifest error; provided, however, that failure to make any
such recordation, or any error in such recordation, shall not affect
the Company's Obligations in respect of the applicable Loans; provided
further, however, that in the event of any inconsistency between the
Register and any Lender's records, the recordations in the Register
shall govern.
(iv) Any Lender may, by notice to the Agent and the
Company, request that all or part of the principal amount of the
Company's Loans from such Lender hereunder be evidenced by a Note.
Within three Business Days of the Company's receipt of such notice,
the Company shall execute and deliver to the Agent for delivery to the
appropriate Lender a Note in the principal amount(s) of such Loans, in
the form of Exhibit I attached hereto, payable to the notifying Lender
or, if so specified in such notice, any Person who is an assignee of
such Lender pursuant to subsection 9.1 hereof. If the foreclosure or
other enforcement of any Mortgage or any other Security Document
requires the presentation of a Note evidencing the Obligations secured
by such Security Document and the Company fails or refuses to comply
with a request for such Note, then a copy of this Agreement may be
presented in lieu of such a Note.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections
2.2E, 2.6 and 2.7, each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made through the Maturity Date at a rate
determined by reference to the Adjusted Eurodollar Rate or the Base Rate, as
the case may be. The applicable basis for determining the rate of interest
with respect to any Loan shall be selected by the Company initially at the time
a Notice of Borrowing is given with respect to such Loan pursuant to subsection
2.1B. The basis for determining the interest rate with respect to any Loan
shall be changed from time to time in accordance with subsection 2.2D. Subject
to the provisions of subsection 2.7, each Swing Line Loan shall bear interest
on the unpaid principal amount thereof from the date made through maturity
(whether by acceleration or otherwise) at a rate determined by reference to the
Base Rate.
Subject to the provisions of subsections 2.2E, 2.4B(iv) and 2.7, the
Revolving Loans shall bear interest through the Maturity Date as follows:
(i) if a Base Rate Loan, then at a rate equal to the sum
of the Base Rate plus the Applicable Base Rate Margin; and
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(ii) if a Eurodollar Rate Loan, then at the sum of the
Adjusted Eurodollar Rate plus the Applicable Eurodollar Rate Margin.
Subject to the provisions of subsections 2.2E and 2.7, the Swing Line
Loans shall bear interest through maturity at a per annum rate equal to the sum
of the Base Rate plus 1.0%.
B. INTEREST PERIODS. In connection with each Eurodollar Rate
Loan, the Company shall, pursuant to the applicable Notice of Borrowing or
Notice of Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall
be at the Company's option either a one, two, three or six month period;
provided, however, that:
(i) the initial Interest Period for any Eurodollar Rate
Loan shall commence on the Funding Date in respect of such Loan;
(ii) each successive Interest Period shall commence on the
day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided, however, that, if any Interest
Period would otherwise expire on a day that is not a Business Day but
is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(iv) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on
the last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the
Loans shall extend beyond the Maturity Date;
(vi) there shall be no more than five (5) Interest Periods
outstanding at any time;
(vii) in the event the Company shall fail to specify an
Interest Period for a Eurodollar Rate Loan in the applicable Notice of
Borrowing or Notice of Continuation, the Company shall be deemed to
have selected an Interest Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection
2.2E, interest on the Loans shall be payable monthly in arrears on and to each
Payment Date, upon any prepayment of the Loans (to the extent accrued on the
amount being prepaid) and at the Maturity Date.
D. CONVERSION/CONTINUATION. Subject to the provisions of
subsections 2.2E and 2.6, the Company shall have the option (i) to convert at
any time all or any part of its
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outstanding Revolving Loans equal to $500,000 and integral multiples of
$500,000 in excess of that amount from Loans bearing interest at a rate
determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or
any portion of such Loan equal to $500,000 and integral multiples of $500,000
in excess of that amount as a Eurodollar Rate Loan; provided, however, that a
Eurodollar Rate Loan may be converted into a Base Rate Loan only on the
expiration date of an Interest Period applicable thereto; and provided further
that no Loan may be made as or converted into a Base Rate Loan during the
period from December 24 of any year to and including January 7 of the
immediately succeeding year.
The Company shall deliver a Notice of Conversion/Continuation
to Agent no later than 10:00 A.M. (New York City time) at least one Business
Day in advance of the proposed conversion date in the case of a conversion to a
Base Rate Loan and at least three Business Days in advance of the proposed
conversion/continuation date in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan. A Notice of Conversion/Continuation shall contain
the information indicated on the form thereof attached hereto as Exhibit IV.
In lieu of delivering the above-described Notice of Conversion/Continuation,
the Company may give Agent telephonic notice by the required time of any
proposed conversion/continuation under this subsection 2.2D; provided that such
notice shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to the Agent on or before the proposed
conversion/continuation date.
Neither the Agent nor any Lender shall incur any liability to
the Company in acting upon any telephonic notice referred to above that Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to act on behalf of the Company or for otherwise acting in
good faith under this subsection 2.2D, and upon continuation of the applicable
basis for determining the interest rate with respect to any Loans in accordance
with this Agreement pursuant to any such telephonic notice the Company shall
have effected a continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.2E, 2.6B and
2.6C, a Notice of Continuation for continuation of a Eurodollar Rate Loan (or
telephonic notice in lieu thereof) shall be irrevocable on and after the
related Interest Rate Determination Date, and Company shall be bound to effect
a continuation in accordance therewith.
E. DEFAULT RATE INTEREST. During the continuation of any Event
of Default, the outstanding principal amount of all Loans and, to the extent
permitted by applicable law, any interest payments thereon not paid when due
and any fees and other amounts then due and payable hereunder, shall thereafter
bear interest (including post-petition interest in any proceeding under the
Bankruptcy Code or other applicable bankruptcy or insolvency laws) payable upon
demand at a rate that is 3.0% per annum in excess of the interest rate
otherwise payable under this Agreement with respect to the applicable Loans
(or, in the case of any such fees and other amounts, at a rate which is 3.0%
per annum in excess of the interest rate otherwise payable under this Agreement
for Base Rate Loans); provided, however, that, in the case of Eurodollar Rate
Loans, if such Event of Default is continuing, upon the expiration of
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the Interest Period in effect at the time any such increase in interest rate is
effective, such Eurodollar Rate Loans shall thereupon become Base Rate Loans
and shall thereafter bear interest payable upon demand at a rate which is 3.0%
per annum in excess of the interest rate otherwise payable under this Agreement
for Base Rate Loans. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2E is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of the Agent or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Loans shall be
computed (i) in the case of Base Rate Loans, on the basis of a 365-day or
366-day year, as the case may be, and (ii) in the case of Eurodollar Rate
Loans, on the basis of a 360-day year, in each case for the actual number of
days elapsed in the period during which it accrues. In computing interest on
any Loan, the date of the making of such Loan or the first day of an Interest
Period applicable to such Loan shall be included, and the date of payment of
such Loan or the expiration date of an Interest Period applicable to such Loan
shall be excluded; provided, however, that if a Loan is repaid on the same day
on which it is made, one day's interest shall be paid on that Loan.
2.3 FEES.
A. FACILITY FEES. On the Effective Date, the Company shall pay
the Agent (in addition to any facility fees previously paid to the Agent), for
distribution to each Lender in proportion to that Lender's Pro Rata Share, a
non-refundable facility fee equal to 0.625% of the aggregate amount of the
Commitments in effect on the date of such effectiveness, prior to the initial
funding of any Loans.
B. COMMITMENT FEES. The Company agrees to pay to the Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Effective Date to and
excluding the Revolving Commitment Conversion Date, equal to (i) the average of
the daily unused portion of the Commitments (other than the Swing Line
Commitment), taking into consideration any reductions thereof in accordance
with Section 2.4B(ii), multiplied by (ii) 0.375% per annum, such commitment
fees to be calculated on the basis of a 360-day year and the actual number of
days elapsed and to be payable quarterly in arrears on the last day of each
calendar quarter, commencing with the first such date to occur after the
Effective Date, and on the Revolving Commitment Conversion Date. Anything
contained in this Agreement to the contrary notwithstanding, for purposes of
calculating the commitment fees payable by the Company pursuant to this
subsection 2.3B, the "unused portion of the Commitments," as of any date of
determination, shall be an amount equal to the aggregate amount of Revolving
Commitments as of such date minus the sum of (i) the aggregate principal amount
of all outstanding Revolving Loans on such date plus (ii) the aggregate face
amount of outstanding Letters of Credit. The commitment fee shall be payable
as provided in this subsection notwithstanding that the amount available to be
borrowed hereunder may be less than the amount of the Commitments due to the
operation of the Borrowing Base.
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2.4 REPAYMENTS AND PREPAYMENTS; GENERAL PROVISIONS REGARDING PAYMENTS.
A. SCHEDULED PAYMENTS OF THE LOANS; MAXIMUM MATURITY OF REVOLVING
LOANS.
(i) Scheduled Payments. On each of __________, 2000
__________, 2000 and __________, 2000, the Company shall make a
principal payment in the amount equal to 6 2/3% of the amount of the
Total Utilization of Revolving Commitments on the Revolving Commitment
Conversion Date. The amounts of the payments required by the
preceding sentence shall not be increased or decreased by the
occurrence or amounts of prepayments pursuant to subsection 2.4B or
otherwise; provided that voluntary prepayments made after the
Revolving Commitment Conversion Date pursuant to subsection 2.4B(i)
shall be applied against the schedule payments required pursuant to
this subsection 2.4A(i) in order of maturity. The Loans and all other
Obligations shall be paid in full by the Company no later than the
Maturity Date.
(ii) Maximum Maturity of Revolving Loans. Notwithstanding
anything to the contrary contained in this Agreement, each Revolving
Loan and Swing Line Loan shall be repaid no later than the date that
is 35 months after the Funding Date of such Loan; provided that,
subject to the terms and conditions contained in this Agreement
(including, without limitation, subsection 4.2) such Loans may be
repaid with the proceeds of other Revolving Loans and Swing Line
Loans.
B. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS.
(i) Voluntary Prepayments. The Company may, without
prepayment charge or penalty, upon written or telephonic notice to the
Agent on or prior to 12:00 Noon (New York City time) on the date of
prepayment, which notice, if telephonic, shall be promptly confirmed
in writing, at any time and from time to time prepay any Swing Line
Loan on any Business Day in whole or in part in an aggregate minimum
amount of $500,000 and integral multiples of $100,000 in excess of
that amount. The Company may, without prepayment charge or penalty
(except as provided in Section 2.6D), upon not less than one Business
Day's prior written or telephonic notice, in the case of Base Rate
Loans, and upon not less than three Business Days' prior written or
telephonic notice in the case of Eurodollar Rate Loans, in each case
confirmed in writing to the Agent (which notice the Agent will
promptly transmit by telefacsimile or telephone to each Lender), at
any time and from time to time prepay any Loans on any Business Day in
whole or in part in an aggregate minimum amount of $500,000 and
integral multiples of $100,000 in excess of that amount (or, if less,
the total amount of all outstanding Loans); provided, however, that in
the event a Eurodollar Rate Loan is prepaid on a day other than the
last day of the Interest Period applicable thereto, such prepayment
shall be accompanied by the payment of any amounts payable under
subsection 2.6D. Notice of prepayment having been given as aforesaid,
the principal amount of the Loans specified in such notice shall
become due and payable on the prepayment date specified therein;
provided, however, that any such notice given in connection with a
proposed sale or other disposition of a Property pursuant to
subsection 7.15B may be withdrawn by the Company (and the Loans shall
not become
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so due and payable) in the event such proposed sale or other
disposition fails to be consummated on the proposed prepayment date;
provided further, however, that in the case of any such withdrawal,
the Company shall promptly pay all amounts then due to the Lenders
pursuant to subsection 2.6D. Any such voluntary prepayment shall be
applied as specified in subsection 2.4B(vii). Amounts prepaid
pursuant to this subsection 2.4B(i) may be reborrowed pursuant to
subsection 2.1A.
(ii) Voluntary Reductions of Commitments. The Company
may, upon not less than three Business Days' prior written or
telephonic notice confirmed in writing to the Agent (which notice the
Agent will promptly transmit by telegram, telex or telephone to each
Lender), at any time and from time to time terminate in whole or
permanently reduce in part, without premium or penalty, the
Commitments in an amount up to the amount by which the Commitments
exceed the Total Utilization; provided, however, that any such partial
reduction of the Commitments shall be in an aggregate minimum amount
of $500,000 and integral multiples of $100,000 in excess of that
amount. The Company's notice to the Agent shall designate the date
(which shall be a Business Day) of such termination or reduction and
the amount of any partial reduction, and such termination or reduction
of the Commitments shall be effective on the date specified in the
Company's notice and shall reduce the Commitment of each Lender in the
same proportion as its Pro Rata Share.
(iii) Reductions in Borrowing Base Due to Casualty,
Condemnation or Disposition of Pool A Property or Termination of
Management Agreement or Servicing Agreement. If there shall occur (a)
a casualty or Taking with respect to any Pool A Property (or any
portion thereof) or a sale or other permanent disposition of such Pool
A Property, with respect to which occurrence a prepayment is required
to be made pursuant to subsection 6.11E or 7.15B, as the case may be,
then the Borrowing Base shall be reduced by an amount equal to the
Pool A Property Amount with respect to such Pool A Property; or (b)
the expiration (without renewal or extension), cancellation or other
termination of a Management Agreement or a Servicing Agreement, with
respect to which occurrence a prepayment is required to be made
pursuant to subsection 7.16B, then the Borrowing Base shall be reduced
by an amount equal to the Management Amount with respect to such
Management Agreement or Servicing Agreement, as the case may be.
(iv) Prepayments Due to Borrowing Base. If at any time
the Total Utilization exceeds the Borrowing Base then in effect, as
demonstrated by a Borrowing Base Certificate delivered (or required to
be delivered) pursuant to subsection 6.1(iv), the Company shall prepay
the Loans (or, if no Loans are then outstanding, deposit Cash to be
held pursuant to the terms of the Collateral Account Agreement with
respect to Letters of Credit then outstanding, whether or not any
beneficiary under any such Letter of Credit shall have presented, or
shall be entitled at such time to present, the drafts or other
documents or certificates required to draw under such Letter of
Credit) in an amount equal to such excess not later than 5 Business
Days after the date that such Borrowing Base Certificate shall have
been delivered (or, if such Borrowing Base Certificate shall not have
been delivered timely or at all, on the last day that such
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Borrowing Base Certificate is permitted by subsection 6.1(iv) to be
delivered). However, notwithstanding anything in the foregoing to the
contrary, if a prepayment (or such cash collateralization) is required
pursuant to this subsection 2.4(B)(iv) on or before December 31, 1996,
then the Company shall either (a) make such prepayment (or such cash
collateralization) when due or (b) notify the Agent by Officers'
Certificate that it intends to defer such prepayment (or such cash
collateralization) for a three-month period commencing on such due
date, which Officers' Certificate shall confirm that all Voluntary
Removal Periods then in effect are terminated as of such due date. In
the event the Company elects to so defer such prepayment (or such cash
collateralization), then if and so long as the Total Utilization
exceeds the Borrowing Base, (1) the Loans shall bear interest at a
rate that is 0.50% per annum in excess of the interest rate otherwise
applicable to the Loans hereunder pursuant to subsection 2.2A, (2) the
fee payable on outstanding Letters of Credit Pursuant to subsection
3.2(i)(b) shall be 0.50% per annum in excess of the fee otherwise
payable pursuant to such subsection, (3) all Excess Cash Flow
thereafter, as determined within 30 days after the end of each month,
shall be applied to prepay the Loans (or so cash collateralize the
Letters of Credit) until the Total Utilization does not exceed the
Borrowing Base then in effect and (4) the Company shall not be
required to make any prepayments (or such cash collateralization)
pursuant to the first sentence of this subsection 2.4(iv). If on the
last day of such three-month period the Total Utilization exceeds the
Borrowing Base then in effect, then the Company shall prepay the Loans
(or so cash collateralize the Letters of Credit) on such day in an
amount equal to such excess. Any mandatory prepayments pursuant to
this subsection 2.4B(iv) shall be applied as specified in subsection
2.4B(vii).
(v) Prepayment from Sales of Pool C Properties. If there
shall occur any sale or other permanent disposition of any Pool C
Property, the Company shall prepay the Loans (or, if no Loans are then
outstanding, deposit Cash to be held pursuant to the terms of the
Collateral Account Agreement with respect to Letters of Credit then
outstanding, whether or not any beneficiary under any such Letter of
Credit shall have presented, or shall be entitled at such time to
present, the drafts or other documents required to draw under such
Letter of Credit), not later than the first Business Day following the
date of receipt of any Cash Proceeds therefrom, in an amount equal to
the lesser of (a) the Net Sales Price of such Pool C Property and (b)
the aggregate amount of the Investments made by the Loan Parties and
their respective Subsidiaries (including, without limitation, other
Pool C Subsidiaries) in such Pool C Subsidiary.
(vi) Acceleration Due to Reduction of the Facility Amount.
If at any time the aggregate amount of the Revolving Commitments is
less than $10,000,000, whether due to a prepayment or reduction in the
Commitments or otherwise, (a) the Commitments shall be automatically
terminated, (b) the Loans outstanding and all other Obligations of the
Company shall become immediately due and payable and (c) the Company
shall be required to deposit in Cash to be held pursuant to the terms
of the Collateral Account Agreement an amount equal to the maximum
amount that may at any time be drawn under all Letters of Credit then
outstanding (whether or not any beneficiary under any such Letter of
Credit shall have presented, or shall be entitled at such time
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to present, the drafts or other documents or certificates required to
draw under such Letter of Credit).
(vii) Application of Prepayments. Each prepayment of the
Loans shall be applied first to Base Rate Loans to the full extent
thereof before application to Eurodollar Rate Loans, in each case in a
manner which minimizes the amount of any payments required to be made
by the Company pursuant to subsection 2.6D. Each prepayment of the
Loans shall be applied first to Swing Line Loans to the full extent
thereof before application to Revolving Loans.
C. APPLICATION OF PAYMENTS TO PRINCIPAL AND INTEREST. All
payments in respect of the principal amount of the Loans shall include payment
of accrued interest on the principal amount being repaid or prepaid, and all
such payments shall be applied to the payment of unpaid interest before
application to principal.
D. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by the
Company of principal, interest, fees and other Obligations hereunder
and under the Notes and the other Loan Documents owed to Agent or any
Lender shall be made in same day funds and without defense, setoff or
counterclaim, free of any restriction or condition, and delivered to
the Agent not later than 2:00 P.M. (New York time) on the date due at
its office located at One Bankers Trust Plaza, New York, New York, for
the account of the Lenders; funds received by the Agent after that
time on such due date shall be deemed to have been paid by the Company
on the next succeeding Business Day. During the occurrence of an
Event of Default or Potential Event of Default, the Company hereby
authorizes the Agent to instruct the Cash Manager to charge its
accounts with the Cash Manager (including the Concentration Account
and the Operating Account) in order to cause timely payment to be made
to the Agent of all principal, interest, fees and expenses due
hereunder or under the Notes or the other Loan Documents (subject to
sufficient funds being available in its accounts for that purpose).
(ii) Apportionment of Payments. Aggregate principal and
interest payments shall be apportioned among all outstanding Loans to
which such payments relate, in each case proportionately to the
Lenders' respective Pro Rata Shares. The Agent shall promptly
distribute to each Lender, at its primary address set forth below its
name on the appropriate signature page hereof or at such other address
as such Lender may request, its Pro Rata Share of all such payments
received by the Agent and the facility fees and commitment fees of
such Lender when received by the Agent pursuant to subsection 2.3.
Notwithstanding the foregoing provisions of this subsection 2.4D(ii),
if, pursuant to the provisions of subsection 2.6C, any Affected Lender
makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar
Rate Loans, the Agent shall give effect thereto in apportioning
payments received thereafter.
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(iii) Payments on Business Days. Whenever any payment to
be made hereunder shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder.
(iv) Notation of Payment. Each Lender agrees that before
disposing of the Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation
thereon of all Loans evidenced by that Note and all principal payments
previously made thereon and of the date to which interest thereon has
been paid; provided, however, that the failure to make (or any error
in the making of) a notation of any Loan made under such Note shall
not limit or otherwise affect the obligations of the Company hereunder
or under such Note with respect to any Loan or any payments of
principal or interest on such Note.
2.5 USE OF PROCEEDS.
A. LOANS. Subject to the other provisions of this Agreement, the
proceeds of the Loans shall be applied by the Company for the general corporate
purposes of the Company and its Subsidiaries, which may include (i) the
reimbursement of Issuing Lender of any amounts drawn under any Letter of
Credit, (ii) the acquisition, ownership, renovation, restoration, management,
operation and disposition of upscale full service hotels, garden style hotels
and resort hotels located in the United States of America, (iii) the provision
of Investments in Joint Ventures formed to acquire such hotels, (iv) the
acquisition, extension, renewal or modification of Management Agreements,
Servicing Agreements and Other Management Agreements and the provision of
Investments in, and Guaranties of Indebtedness or other obligations of, any
payments to owners of Managed Properties, Additional Managed Properties and
Other Managed Properties and lessors of Pool B Properties, and (v) repayment of
any portion of any other Loan, including Swing Line Loans.
B. LETTERS OF CREDIT. Subject to subsections 2.5C, 7.3 and 7.4,
the Letters of Credit shall be issued for the purposes set forth in the
definitions of Commercial Letter of Credit and such other general corporate
purposes as may, in any instance, be approved in advance, in writing, by the
Agent.
C. RESTRICTIONS ON USE OF PROCEEDS. Notwithstanding anything to
the contrary contained in this Agreement or the other Loan Documents:
(i) if and so long as the sum of (a) Total Utilization of
Revolving Commitments, plus (b) the amount of Guaranties permitted by
subsection 7.4(ii)(a) plus (c) the aggregate amount of the Investments
in the Pool C Subsidiaries permitted by subsection 7.3(ii), in each
case to the extent that such amounts referred to in the preceding
clauses (a) and (b) shall have been used, issued, incurred or made for
or in connection with the Renovation or Restoration of the Properties
which have not been completed on the date of determination, shall
exceed $15,000,000, then, without the prior written approval of the
Agent, which may be granted, withheld, conditioned or delayed in its
sole discretion, the Loan Parties shall not, and shall cause their
respective
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Subsidiaries not to, apply any proceeds of any Loans or procure the
issuance of any Letter of Credit in connection with the Major
Renovation/Restoration of any Property; and
(ii) if and so long as the Total Utilization shall exceed
the Borrowing Base, then, without the prior written approval of the
Agent, which may be granted, withheld, conditioned or delayed in its
sole discretion, and subject to subsection 2.4(iv), the Loan Parties
shall not, and shall cause their respective Subsidiaries not to, apply
the proceeds of any Loan or procure the issuance of any Letter of
Credit for any purpose other than (a) paying or otherwise discharging
any of the Guaranties permitted by subsections 7.3 (v), (vi), (vii)
and (viii) and subsection 7.4(ii)(a), (b) paying or otherwise
discharging any of the Contingent Obligations set forth on Schedule
5.3 annexed hereto or Contingent Obligations otherwise permitted
hereunder or (c) paying or reimbursing costs in respect of the Major
Renovation/Restoration of Properties conducted pursuant to subsection
6.11G, in each case in an aggregate amount not greater than the amount
with respect thereto that shall have been included in such
determination of the Total Utilization.
D. MARGIN REGULATIONS. No portion of the proceeds of any
borrowing under this Agreement shall be used by any Loan Party or any of its
Subsidiaries in any manner that might cause the borrowing to violate Regulation
G, Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to the Eurodollar Rate Loans
as to the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as
practicable after 10:00 A.M. (New York time) on each Interest Rate
Determination Date, the Agent shall determine (which determination shall,
absent manifest error, be final, conclusive and binding upon all parties) the
interest rate that shall apply to the Eurodollar Rate Loans for which an
interest rate is then being determined for the applicable Interest Period and
shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to the Company and each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event
that the Agent shall have determined in good faith (which determination shall
absent manifest error be final and conclusive and binding upon all parties
hereto but shall be made only after consultation with the Company), on any
Interest Rate Determination Date with respect to any Eurodollar Rate Loans,
that by reason of circumstances affecting the interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the interest rate
applicable to such Loans on the basis provided for in the definition of
Adjusted Eurodollar Rate, the Agent shall on such date give notice (by
telefacsimile or by telephone confirmed in writing) to the Company and each
Lender of such determination, whereupon (i) no Loans may be made as, or
converted to
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Eurodollar Rate Loans until such time as the Agent notifies the Company and the
Lenders that the circumstances giving rise to such notice no longer exist and
(ii) any Notice of Borrowing or Notice of Continuation given by the Company
with respect to the Loans in respect of which such determination was made shall
be deemed to contain a request that such Loans be made as or converted to Base
Rate Loans.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In
the event that on any date any Lender shall have determined in good faith
(which determination shall be final and conclusive and binding upon all parties
hereto but shall be made only after consultation with the Company and the
Agent) that the making, maintaining or continuation of its Eurodollar Rate
Loans (i) has become unlawful as a result of compliance by such Lender in good
faith with any law, treaty, governmental rule, regulation, guideline or order
(or would conflict with any such treaty, governmental rule, regulation,
guideline or order not having the force of law even though the failure to
comply therewith would not be unlawful) or (ii) has become impracticable, or
would cause such Lender material hardship, as a result of contingencies
occurring after the date of this Agreement which materially and adversely
affect the interbank Eurodollar market, or the position of such Lender in that
market, then, and in any such event, such Lender shall be an "AFFECTED LENDER"
and it shall on that day give notice (by telefacsimile or by telephone
confirmed in writing) to the Company and the Agent of such determination (which
notice the Agent shall promptly transmit to each other Lender). Thereafter (a)
the obligation of the Affected Lender to make Loans as, or to convert Loans to,
Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn
by the Affected Lender (which withdrawal shall be promptly accomplished by such
Affected Lender by notice to the Agent and the Company as soon as the
circumstances causing such Affected Lender to be so classified no longer
exist), (b) to the extent such determination by the Affected Lender relates to
a Eurodollar Rate Loan then being requested by the Company to be made or
continued hereunder, the Affected Lender shall make such Loan as, or convert
such Loan to, as applicable, a Base Rate Loan, (c) the Affected Lender's
obligation to maintain its outstanding Eurodollar Rate Loans (the "AFFECTED
LOANS") shall be terminated at the earlier to occur of the expiration of the
Interest Period then in effect with respect to the Affected Loans or when
required by law and (d) the Affected Loans shall automatically convert into
Base Rate Loans on the date of such termination. Except as provided in the
immediately preceding sentence, nothing in this subsection 2.6C shall affect
the obligation of any Lender other than an Affected Lender to make or maintain
Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the
terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST
PERIODS. The Company shall compensate each Lender, upon written request by
that Lender (which request shall set forth the basis for requesting such
amounts), for all reasonable losses, expenses and liabilities (including any
interest paid by that Lender to lenders of funds borrowed by it to make or
carry its Eurodollar Rate Loans and any loss, expense or liability sustained by
that Lender in connection with the liquidation or re-employment of such funds)
which that Lender may sustain: (i) if for any reason (other than a default by
that Lender or events described in 2.6C above with respect to such Lender) a
borrowing or continuation of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a Notice of Continuance, as
applicable, or a telephonic request for borrowing, or a
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conversion to or continuation of any Eurodollar Rate Loan does not occur on the
date specified therefor, (ii) if any prepayment or conversion of any of its
Eurodollar Rate Loans occurs on a date that is not the last day of an Interest
Period applicable to that Loan, (iii) if any prepayment (including any
prepayment pursuant to subsection 2.4B(i)) or other principal payment of any of
its Eurodollar Rate Loans is not made by the Company on any date specified in a
notice of prepayment given by the Company or (iv) as a consequence of any other
default by the Company in the repayment of its Eurodollar Rate Loans when
required by the terms of this Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry
or transfer Eurodollar Rate Loans at, to, or for the account of any of its
branch offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS.
Calculation of all amounts payable to a Lender under this subsection 2.6 and
under subsection 2.7A shall be made as though that Lender had actually funded
each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar
deposit bearing interest at the rate obtained pursuant to clause (i) of the
definition of Adjusted Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant Interest
Period and through the transfer of such Eurodollar deposit from an offshore
office of that Lender to a domestic office of that Lender located in the United
States of America; provided, however, that each Lender may fund each of its
Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions
shall be utilized only for the purposes of calculating amounts payable under
this subsection 2.6 and under subsection 2.7A.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the
provisions of subsection 2.7B (which shall be controlling with respect to the
matters covered thereby), in the event that any Lender shall in good faith
determine (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto) that any law, treaty or
governmental rule, regulation or order, or any change therein or in the
interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a Governmental Authority, in each case that becomes
effective after the date hereof, or compliance by such Lender with any
guideline, request or directive issued or made after the date hereof by any
central bank or other Governmental Authority or quasi-governmental authority
(whether or not having the force of law):
(i) subjects such Lender (or its applicable lending
office) to any additional Tax (other than any Tax on the overall net
income of such Lender or any franchise or doing business tax) with
respect to this Agreement or any of its obligations hereunder or any
payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
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(ii) imposes, modifies or holds applicable any reserve
(including any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities
in or for the account of, or advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of such
Lender (other than any such reserve or other requirements with respect
to Eurodollar Rate Loans that are reflected in the definition of
Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect
to a Tax matter) on or affecting such Lender (or its applicable
lending office) or its obligations hereunder or the interbank
Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender
of agreeing to make, making or maintaining Loans hereunder or to reduce any
amount received or receivable by such Lender (or its applicable lending office)
with respect thereto; then, in any such case, the Company shall promptly pay to
such Lender, upon receipt of the statement referred to in the next sentence,
such additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to the Company (with a copy to the Agent)
a written statement within 120 days of such Lender obtaining knowledge of the
occurrence of any event resulting in such Lender's right to receive
compensation hereunder, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Lender under this subsection
2.7A, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by
the Company under this Agreement and the other Loan Documents shall be
paid free and clear of and (except to the extent required by law)
without any deduction or withholding on account of any Tax (excluding
in the case of each Lender and the Agent, Taxes imposed on its income,
and franchise and similar Taxes imposed on it, by a jurisdiction under
the laws of which such Lender is organized or in which its principal
executive office is located or in which its applicable lending office
for funding or booking its Loans hereunder is located) imposed,
levied, collected, withheld or assessed by or within the United States
of America or any political subdivision in or of the United States of
America or any other jurisdiction from or to which a payment is made
by or on behalf of the Company or by any federation or organization of
which the United States of America or any such jurisdiction is a
member at the time of payment.
(ii) Grossing-up of Payments. If the Company or any other
Person is required by law to make any deduction or withholding on
account of any such Tax from any sum paid or payable by the Company to
the Agent or any Lender under any of the Loan Documents:
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(a) the Company shall notify the Agent of any
such requirement or any change in any such requirement as soon
as the Company becomes aware of it;
(b) the Company shall pay any such Tax before the
date on which penalties attach thereto, such payment to be
made (if the liability to pay is imposed on the Company) for
its own account or (if that liability is imposed on the Agent
or such Lender, as the case may be) on behalf of and in the
name of the Agent or such Lender;
(c) the sum payable by the Company in respect of
which the relevant deduction, withholding or payment is
required shall be increased to the extent necessary to ensure
that, after the making of that deduction, withholding or
payment, the Agent or such Lender, as the case may be,
receives on the due date a net sum equal to what it would have
received had no such deduction, withholding or payment been
required or made; and
(d) within 30 days after paying any sum from
which it is required by law to make any deduction or
withholding, and within 30 days after the due date of payment
of any Tax which it is required by clause (b) above to pay,
the Company shall deliver to the Agent evidence satisfactory
to the other affected parties of such deduction, withholding
or payment and of the remittance thereof to the relevant
taxing or other authority;
provided, however, that no such additional amount shall be required to
be paid to any Lender under clause (c) above except to the extent that
any change after the date hereof (in the case of each Lender listed on
the signature pages hereof) or after the date such Lender became a
Lender pursuant to subsection 8.1 (in the case of each other Lender)
in any such requirement for a deduction, withholding or payment as is
mentioned therein shall result in an increase in the rate of such
deduction, withholding or payment from that in effect at the date of
this Agreement (in the case of each Lender listed on the signature
pages hereof) or at the date such Lender became a Lender pursuant to
subsection 8.1 (in the case of each other Lender) as the case may be,
in respect of payments to such Lender.
(iii) U.S. Tax Certificates. Each Lender that is organized
under the laws of any jurisdiction other than the United States of
America or any state or other political subdivision thereof shall
deliver to the Agent for transmission to the Company, on or prior to
the Funding Availability Date (in the case of each Lender listed on
the signature pages hereof) or on the date it becomes a Lender
pursuant to subsection 8.1 (in the case of each other Lender), and at
such other times as may be necessary in the determination of the
Company or the Agent (each in the reasonable exercise of its
discretion), such certificates, documents or other evidence, properly
completed and duly executed by such Lender (including Internal Revenue
Service Form 1001 or Form 4224 or any other certificate or statement
of exemption required by Treasury Regulations Section 1.1441-4(a) or
Section 1.1441-6(c) or any successor thereto) to establish that
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such Lender is not subject to deduction or withholding of United
States federal income tax under Section 1441 or 1442 of the Internal
Revenue Code or otherwise (or under any comparable provisions of any
successor statute) with respect to any payments to such Lender of
principal, interest, fees or other amounts payable under any of the
Loan Documents. The Company shall not be required to pay any
additional amount to any Lender under clause (c) or perform with
respect thereto under clause (d) of subsection 2.7B(ii) if such Lender
shall have failed to satisfy the requirements of the immediately
preceding sentence; provided, however, that if such Lender shall have
satisfied such requirements on the Funding Availability Date (in the
case of each Lender listed on the signature pages hereof) or on the
date it becomes a Lender (in the case of each other Lender), nothing
in this subsection 2.7B(iii) shall relieve Company of its obligation
to pay any additional amounts pursuant to clause (c) or perform with
respect thereto under clause (d) of subsection 2.7B(ii) in the event
that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is
no longer properly entitled to deliver forms, certificates or other
evidence at a subsequent date establishing the fact that such Lender
is not subject to withholding as described in the immediately
preceding sentence.
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have
reasonably determined that the adoption, effectiveness, phase-in or
applicability (after the date of this Agreement) of any law, rule or regulation
(or any provision thereof) regarding capital adequacy, or any change therein or
in the interpretation or administration thereof by any Governmental Authority,
including any central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by any Lender (or its applicable
lending office) with any guideline, request or directive regarding capital
adequacy (whether or not having the force of law (after the date of this
Agreement)) of any such Governmental Authority, has or would have the effect of
reducing the rate of return on the capital of such Lender or any corporation
controlling such Lender as a consequence of, or with reference to, such
Lender's Loans or Commitment or Letters of Credit or participations herein or
other obligations hereunder with respect to the Loans or the Letters of Credit
to a level below that which such Lender or such controlling corporation could
have achieved but for such adoption, effectiveness, phase-in, applicability,
change or compliance (taking into consideration the policies of such Lender or
such controlling corporation with regard to capital adequacy), then from time
to time, within five Business Days after receipt by the Company from such
Lender of the statement referred to in the next sentence, the Company shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or such controlling corporation on an after-tax basis for such reduction. Such
Lender shall deliver to the Company (with a copy to the Agent) a written
statement, setting forth in reasonable detail the basis of the calculation of
such additional amounts, which statement shall be conclusive and binding upon
all parties hereto absent manifest error.
2.8 OBLIGATION OF THE LENDERS TO MITIGATE.
Each Lender agrees that, as promptly as practicable after the officer
of such Lender responsible for administering the Loans becomes aware of the
occurrence of an event or the
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existence of a condition that would cause such Lender to become an Affected
Lender or that would entitle such Lender to receive payments under subsection
2.7, it will, to the extent not inconsistent with the internal policies of such
Lender and any applicable legal or regulatory restrictions, use reasonable
efforts (i) to make, fund or maintain the Commitment of such Lender or the
affected Loans of such Lender through another lending office of such Lender, or
(ii) take such other measures as such Lender may deem reasonable, if as a
result thereof the circumstances which would cause such Lender to be an
Affected Lender would cease to exist or the additional amounts which would
otherwise be required to be paid to such Lender pursuant to subsection 2.7
would be materially reduced and if, as determined by such Lender in its
reasonable judgment, the making, funding or maintaining of such Commitment or
Loans through such other lending office or in accordance with such other
measures, as the case may be, would not otherwise materially adversely affect
such Commitment or Loans or the interests of such Lender; provided, however,
that such Lender will not be obligated to utilize such other lending office
pursuant to this subsection 2.8 unless the Company agrees to pay all
incremental expenses incurred by such Lender as a result of utilizing such
other lending office as described in clause (i) above. A certificate as to the
amount of any such expenses payable by the Company pursuant to this subsection
2.8 (setting forth in reasonable detail the basis for requesting such amount)
submitted by such Lender to the Company (with a copy to the Agent) shall be
conclusive absent manifest error.
2.9 RELEASES OF POOL A PROPERTIES, POOL B PROPERTIES, MANAGEMENT
AGREEMENTS AND SERVICING AGREEMENTS.
A. POOL A PROPERTIES. At any time and from time to time after
the Funding Availability Date, in connection with the sale or other permanent
disposition of any Pool A Property or mandatory prepayments made pursuant to
subsection 2.4B(iv) or otherwise, the Company may obtain a Release of the Lien
of the Security Documents in respect of all, but except as provided below not a
portion of, such Pool A Property, subject to the following terms and conditions
on the applicable Release Date:
(i) the Company shall have delivered written notice to
the Agent (a) not less than 30 days prior to the proposed Release Date
specifying the proposed Release Date and such Pool A Property and (b)
not less than 5 days prior to the actual Release Date specifying such
actual Release Date and such Pool A Property;
(ii) no Event of Default or Potential Event of Default
shall have occurred and be continuing as of the date of the delivery
of the notice pursuant to clause (i) above (other than an Event of
Default or Potential Event of Default that pertains solely to the Pool
A Property or portion thereof which is the subject of such Release or
which is cured by such Release) and no Event of Default or Potential
Event of Default shall be continuing as of the Release Date after
giving effect to such Release;
(iii) concurrently with such Release, the Borrowing Base
shall be reduced by an amount equal to the Pool A Property Amount with
respect to such Pool A Property in effect immediately prior to giving
effect to such Release;
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(iv) the Company shall concurrently prepay the Loans in an
amount equal to the Release Price in respect of such Pool A Property;
(v) the Company shall have delivered to the Agent for
distribution to the Lenders an Officers' Certificate dated the Release
Date, certifying as to the matters referred to in clause (ii) above
and a Borrowing Base Certificate setting forth in reasonable detail
the computation of the Borrowing Base as of the Release Date and
giving effect to such Release;
(vi) the Company, at its sole cost and expense, shall have
(a) with respect to any partial Release of the Lien of the Security
Documents in respect of such Pool A Property (other than the Rose Hall
Property), delivered to the Agent one or more endorsements to the
Title Policy in respect of such Pool A Property delivered to the Agent
on the date hereof and, to the extent generally available in each
state, insuring that, after giving effect to such partial Release and
with respect to the portion of such Pool A Property which is not being
Released, the Liens created by the applicable Mortgage and insured
under the such Title Policy are in full force and effect and
unaffected by such partial Release, (b) prepared any and all documents
and instruments necessary to effect such Release, all of which shall
be satisfactory in form and substance to the Agent, and (c) paid all
reasonable costs and expenses incurred by the Agent and its counsel in
connection with the review, execution and delivery of the release
documents; and
(vii) all other proceedings taken or to be taken in
connection with such Release and all documents incidental thereto
shall be satisfactory in form and substance to the Agent and the
Agent's counsel, the Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as
the Agent may reasonably request and counsel for the Agent shall have
received such documents and evidence that such counsel shall require
in order to establish compliance with the conditions set forth in this
subsection.
The Company may obtain a Release of the Lien of the Security Documents in
respect of a portion of any Pool A Property, if title to such portion has been
permanently Taken, by complying with the foregoing terms and conditions on the
applicable Release Date.
B. POOL B PROPERTIES. At any time and from time to time after
the Funding Availability Date, in connection with the sale or other permanent
disposition of any Pool B Property or mandatory prepayments made pursuant to
subsection 2.4B(iv) or otherwise, the Company may obtain a Release of the Lien
of the Security Documents in respect of all, but except as provided below not a
portion of, such Pool B Property subject to the following terms and conditions
on the applicable Release Date:
(i) the Company shall have delivered written notice to
the Agent (a) not less than 30 days prior to the proposed Release Date
specifying the proposed Release Date and such Pool B Property and (b)
not less than 5 days prior to the actual Release Date specifying such
actual Release Date and such Pool B Property;
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(ii) no Event of Default or Potential Event of Default
shall have occurred and be continuing as of the date of the delivery
of the notice pursuant to clause (i) above (other than an Event of
Default or Potential Event of Default that pertains solely to the Pool
B Property or portion thereof which is the subject of such Release or
which is cured by such Release) and no Event of Default or Potential
Event of Default shall be continuing as of the Release Date after
giving effect to such Release;
(iii) the Company shall have prepaid the Loans in an amount
equal to the Release Price in respect of such Pool B Property;
(iv) the Company shall have delivered to the Agent an
Officers' Certificate dated the Release Date, certifying as to the
matters referred to in clause (ii) above;
(v) the Company, at its sole cost and expense, shall have
(a) prepared any and all documents and instruments necessary to effect
such Release, all of which shall be satisfactory in form and substance
to the Agent, and (b) paid all reasonable costs and expenses incurred
by the Agent and its counsel in connection with the review, execution
and delivery of the release documents; and
(vi) all other proceedings taken or to be taken in
connection with such Release and all documents incidental thereto
shall be satisfactory in form and substance to the Agent and the
Agent's counsel, the Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as
the Agent may reasonably request and counsel for the Agent shall have
received such documents and evidence that such counsel shall require
in order to establish compliance with the conditions set forth in this
subsection.
The Company may obtain a Release of the Lien of the Security Documents in
respect of a portion of any Pool B Property, if title to such portion has been
permanently Taken, by complying with the foregoing terms and conditions on the
applicable Release Date.
C. MANAGEMENT AGREEMENTS, SERVICING AGREEMENTS, OTHER MANAGEMENT
AGREEMENTS, FRANCHISE AGREEMENTS AND OTHER COLLATERAL. At any time and from
time to time after the Funding Availability Date, in connection with the sale
or other permanent disposition of any Management Agreement, Servicing
Agreement, Other Management Agreement, Franchise Agreement or other item of
Collateral that is not subject to subsection 2.9A or 2.9B (including, without
limitation, the final payment of any obligation included in the Collateral) or
mandatory prepayments made pursuant to subsection 2.4B(iv) or otherwise, the
Company may obtain a Release of the Lien of the Security Documents in respect
of such Management Agreement, Servicing Agreement, Other Management Agreements,
Franchise Agreement or other item of Collateral that is not subject to
subsection 2.9A or 2.9B, as the case may be, subject to the following terms and
conditions on the applicable Release Date:
(i) the Company shall have delivered written notice to
the Agent (a) not less than 30 days prior to the proposed Release Date
specifying the proposed Release Date and such Management Agreement,
Servicing Agreement, Other Management
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Agreement, Franchise Agreement or other item of Collateral to the
extent practical and (b) not less than 5 days prior to the actual
Release Date specifying such actual Release Date and such Management
Agreement, Other Management Agreement, Servicing Agreement, Other
Management Agreement, Franchise Agreement or other item of Collateral
as the case may be;
(ii) no Event of Default or Potential Event of Default
shall have occurred and be continuing as of the date of the delivery
of the notice pursuant to clause (i) above (other than an Event of
Default or Potential Event of Default that pertains solely to the
Management Agreement, Servicing Agreement, Other Management Agreement,
Franchise Agreement or other item of Collateral which is the subject
of such Release or which is cured by such Release) and no Event of
Default or Potential Event of Default shall be continuing as of the
Release Date after giving effect to such Release;
(iii) in the case of a Management Agreement or Servicing
Agreement, the Company shall have prepaid the Loans in an amount equal
to the Release Price in respect of such Management Agreement, Other
Management Agreement, Franchise Agreement or other item of Collateral
as the case may be;
(iv) the Company shall have delivered to the Agent (a) an
Officers' Certificate dated the Release Date, certifying as to the
matters referred to in clause (ii) above, and (b) if the amount of the
Release Price payable by the Company pursuant to clause (iii) above
shall have been reduced pursuant to the proviso to clause (iii) or the
proviso to clause (iv) in the definition of Release Price by reason of
the Company's compliance with this subsection 2.9C(iv), a Borrowing
Base Certificate, in reasonable detail satisfactory to the Agent and
together with the financial statements and other information utilized
by the Company to calculate the Borrowing Base, and certified by the
Chief Executive Officer or Chief Financial Officer of the Company,
calculated as of the Release Date, and demonstrating that Total
Utilization does not exceed the Borrowing Base and that, without
giving effect to the limitations in subsection 2.1 with respect to the
frequency and minimum amounts of borrowings, the Company would then be
entitled to make a borrowing in an amount not less than $1.00;
(v) the Company, at its sole cost and expense, shall have
(a) prepared any and all documents and instruments necessary to effect
such Release, all of which shall be satisfactory in form and substance
to the Agent, and (b) paid all reasonable costs and expenses incurred
by the Agent and its counsel in connection with the review, execution
and delivery of the release documents; and
(vi) all other proceedings taken or to be taken in
connection with such Release and all documents incidental thereto
shall be satisfactory in form and substance to the Agent and the
Agent's counsel, the Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as
the Agent may reasonably request and counsel for the Agent shall have
received such documents and evidence that such counsel shall require
in order to establish compliance with the conditions set forth in this
subsection.
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D. EFFECT OF RELEASE. Upon any Release of any Pool A Property,
Pool B Property, Management Agreement, Servicing Agreement, Other Management
Agreement, Franchise Agreement or other item of Collateral in accordance with
this subsection 2.9, such Property shall cease to be a Mortgaged Property or
other item of Collateral for the purposes of this Agreement (other than for
purposes of any indemnity contained herein or in any of the other Loan
Documents to the extent such indemnification applies to such Property,
Management Agreement, Servicing Agreement, Other Management Agreement,
Franchise Agreement or other item of Collateral prior to giving effect to such
Release, including subsections 5.2G and 6.8 (to the extent such subsections
apply to such Property, Management Agreement, Servicing Agreement, Other
Management Agreement, Franchise Agreement or other item of Collateral and
incorporate the Environmental Indemnity) and subsection 9.3).
E. REVISED SCHEDULES. (i) Upon the Release of any Pool A
Property or Pool B Property, (ii) within five days of the last day of each
month and (iii) concurrently with the delivery of each Notice of Borrowing, the
Company shall deliver to the Agent revised Schedules to this Agreement, the
Environmental Indemnity, the Security Agreement and the Omnibus Management and
Liquor License Agreement, as applicable, reflecting the Release of such
Property, Management Agreement, Other Management Agreement or Servicing
Agreement, which Schedules shall be satisfactory to the Agent and shall become
effective upon the date of such Release.
SECTION 3
LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS
THEREIN.
A. LETTERS OF CREDIT. In addition to the Company requesting that
the Lenders make Revolving Loans pursuant to subsection 2.1A(i) and that Swing
Line Lender make Swing Line Loans pursuant to subsection 2.1A(ii), the Company
may request, in accordance with the provisions of this subsection 3.1, from
time to time during the period from the Funding Availability Date to but
excluding the Revolving Commitment Conversion Date that one or more Lenders
issue Letters of Credit for the account of the Company for the purposes
specified in the definitions of Commercial Letters of Credit and Standby
Letters of Credit and such other general corporate purposes as may, in any
instance, be approved in advance, in writing, by the Agent. Subject to the
terms and conditions of this Agreement and in reliance upon the representations
and warranties of the Company herein set forth, any one or more Lenders may,
but (except as provided in subsection 3.1B(ii)) shall not be obligated to,
issue such Letters of Credit in accordance with the provisions of this
subsection 3.1; provided that the Company shall not request that any Lender
issue (and no Lender shall issue):
(i) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of Revolving Commitments would exceed
the lesser of Revolving Commitments then in effect and the Borrowing
Base;
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(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $15,000,000;
(iii) any Standby Letter of Credit having an expiration
date later than the earlier of (a) the Maturity Date and (b) the date
which is one year from the date of issuance of such Standby Letter of
Credit; provided that the immediately preceding clause (b) shall not
prevent any Issuing Lender from agreeing that a Standby Letter of
Credit will automatically be extended for one or more successive
periods not to exceed one year each unless such Issuing Lender elects
not to extend for any such additional period; and provided further,
that such Issuing Lender shall elect not to extend such Standby Letter
of Credit if it has knowledge that an Event of Default has occurred
and is continuing (and has not been waived in accordance with
subsection 9.6) at the time such Issuing Lender must elect whether or
not to allow such extension;
(iv) any Commercial Letter of Credit having an expiration
date (a) later than the earlier of (x) the date which is 30 days prior
to the Maturity Date and (y) the date which is 180 days from the date
of issuance of such Commercial Letter of Credit or (b) that is
otherwise unacceptable to the applicable Issuing Lender in its
reasonable discretion; or
(v) any Letter of Credit denominated in a currency other
than Dollars.
B. MECHANICS OF ISSUANCE.
(i) Notice of Issuance. Whenever the Company desires the
issuance of a Letter of Credit, it shall deliver to Agent a Notice of
Issuance of Letter of Credit substantially in the form of Exhibit V
annexed hereto no later than 12:00 Noon (New York City time) at least
three Business Days (in the case of Standby Letters of Credit) or five
Business Days (in the case of Commercial Letters of Credit), or in
each case such shorter period as may be agreed to by the Issuing
Lender in any particular instance, in advance of the proposed date of
issuance. Each Notice of Issuance of Letter of Credit shall contain
the information indicated on the form thereof attached hereto as
Exhibit V; provided that the Issuing Lender, in its reasonable
discretion, may require changes in the text of the proposed Letter of
Credit or any such documents; and provided further, that no Letter of
Credit shall require payment against a conforming draft to be made
thereunder on the same business day (under the laws of the
jurisdiction in which the office of the Issuing Lender to which such
draft is required to be presented is located) that such draft is
presented if such presentation is made after 10:00 A.M. (in the time
zone of such office of the Issuing Lender) on such business day.
The Company shall notify the applicable Issuing Lender
(and Agent, if Agent is not such Issuing Lender) prior to the issuance
of any Letter of Credit in the event that any of the matters to which
Company is required to certify in the applicable Notice of Issuance of
Letter of Credit is no longer true and correct as of the proposed date
of issuance of such Letter of Credit, and upon the issuance of any
Letter of Credit Company shall be deemed to have re-certified, as of
the date of such issuance, as to the
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matters to which the Company is required to certify in the applicable
Notice of Issuance of Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by
Agent of a Notice of Issuance of Letter of Credit pursuant to
subsection 3.1B(i) requesting the issuance of a Letter of Credit, in
the event the Agent elects to issue such Letter of Credit, the Agent
shall promptly so notify the Company, and the Agent shall be the
Issuing Lender with respect thereto. In the event that the Agent, in
its sole discretion, elects not to issue such Letter of Credit, the
Agent shall promptly so notify the Company, whereupon the Company may
request any other Lender to issue such Letter of Credit by delivering
to such Lender a copy of the applicable Notice of Issuance of Letter
of Credit. Any Lender so requested to issue such Letter of Credit
shall promptly notify the Company and the Agent whether or not, in its
sole discretion, it has elected to issue such Letter of Credit, and
any such Lender which so elects to issue such Letter of Credit shall
be the Issuing Lender with respect thereto. In the event that at
least two other Lenders shall have declined to issue such Letter of
Credit, notwithstanding the prior election of the Agent not to issue
such Letter of Credit, the Agent shall be obligated to issue such
Letter of Credit and shall be the Issuing Lender with respect thereto,
notwithstanding the fact that the Letter of Credit Usage with respect
to such Letter of Credit and with respect to all other Letters of
Credit issued by the Agent, when aggregated with Agent's outstanding
Revolving Loans and Swing Line Loans, may exceed the Agent's Revolving
Commitment then in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction or
waiver (in accordance with subsection 9.6) of the conditions set forth
in subsection 4.3, the Issuing Lender shall issue the requested Letter
of Credit in accordance with the Issuing Lender's standard operating
procedures.
(iv) Notification to Lenders. Upon the issuance or
amendment of any Standby Letter of Credit, the applicable Issuing
Lender shall promptly notify the Agent and each other Lender of such
issuance or amendment, which notice shall be accompanied by a copy of
such Standby Letter of Credit or amendment. Promptly after receipt of
such notice (or, if the Agent is the Issuing Lender, together with
such notice), the Agent shall notify each Lender of the amount of such
Lender's respective participation in such Standby Letter of Credit,
determined in accordance with subsection 3.1C.
(v) Reports to Lenders. Within 15 days after the end of
each month ending after the Funding Availability Date, so long as any
Commercial Letter of Credit shall have been outstanding during such
month, each Issuing Lender shall deliver to each other Lender a report
setting forth for such month the daily aggregate amount available to
be drawn under the Commercial Letters of Credit issued by such Issuing
Lender that were outstanding during such month.
C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT.
Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby agrees to,
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have irrevocably purchased from the Issuing Lender a participation in such
Letter of Credit and any drawings honored thereunder in an amount equal to such
Lender's Pro Rata Share of the maximum amount which is or at any time may
become available to be drawn thereunder.
3.2 LETTER OF CREDIT FEES.
The Company agrees to pay the following amounts with respect
to Letters of Credit issued hereunder:
(i) with respect to each Standby Letter of Credit, (a) a
fronting fee, if any, payable directly to the applicable Issuing
Lender (other than Bankers) for its own account, equal to the amount
specified by written agreement between the Company and such Issuing
Lender, and (b) a letter of credit fee, payable to Agent for the
account of Lenders, equal to 2.00% per annum of the daily amount
available to be drawn under such Standby Letter of Credit, each such
fronting fee or letter of credit fee to be payable in arrears on and
to (but excluding) each March 15, June 15, September 15 and December
15 of each year and computed on the basis of a 360-day year for the
actual number of days elapsed;
(ii) with respect to each Commercial Letter of Credit, (a)
a fronting fee, payable directly to the applicable Issuing Lender
(other than Bankers) for its own account, equal to the amount
specified by written agreement between the Borrower and such Issuing
Lender and (b) a letter of credit fee, payable to the Agent for the
account of Lenders, equal to 1.75% per annum of the daily amount
available to be drawn under such Commercial Letter of Credit, each
such fronting fee or letter of credit fee to be payable in arrears on
and to (but excluding) each March 15, June 15, September 15 and
December 15 of each year and computed on the basis of a 360-day year
for the actual number of days elapsed; and
(iii) with respect to the issuance, amendment or transfer
of each Letter of Credit and each payment of a drawing made thereunder
(without duplication of the fees payable under clauses (i) and (ii)
above), documentary and processing charges payable directly to the
applicable Issuing Lender for its own account in accordance with such
Issuing Lender's standard schedule for such charges in effect at the
time of such issuance, amendment, transfer or payment, as the case may
be.
For purposes of calculating any fees payable under clauses (i) and (ii) of this
subsection 3.2, the daily amount available to be drawn under any Letter of
Credit shall be determined as of the close of business on any date of
determination. Promptly upon receipt by the Agent of any amount described in
clause (i)(b) or (ii)(b) of this subsection 3.2, the Agent shall distribute to
each Lender its Pro Rata Share of such amount.
3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT.
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing
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Lender shall be responsible only to examine the documents delivered under such
Letter of Credit with reasonable care so as to ascertain whether they appear on
their face to be in accordance with the terms and conditions of such Letter of
Credit.
B. REIMBURSEMENT BY THE COMPANY OF AMOUNTS PAID UNDER LETTERS OF
CREDIT. In the event an Issuing Lender has determined to honor a drawing under
a Letter of Credit issued by it, such Issuing Lender shall immediately notify
the Company and the Agent, and the Company shall reimburse such Issuing Lender
on or before the Business Day immediately following the date on which such
drawing is honored (the "REIMBURSEMENT DATE") in an amount in Dollars and in
same day funds equal to the amount of such honored drawing; provided that,
anything contained in this Agreement to the contrary notwithstanding, (i)
unless the Company shall have notified the Agent and such Issuing Lender prior
to 10:00 A.M. (New York City time) on the date such drawing is honored that
Company intends to reimburse such Issuing Lender for the amount of such honored
drawing with funds other than the proceeds of Revolving Loans, the Company
shall be deemed to have given a timely Notice of Borrowing to the Agent
requesting Lenders to make Revolving Loans that are Base Rate Loans on the
Reimbursement Date in an amount in Dollars equal to the amount of such honored
drawing and (ii) subject to satisfaction or waiver of the conditions specified
in subsection 4.2B, the Lenders shall, on the Reimbursement Date, make
Revolving Loans that are Base Rate Loans in the amount of such honored drawing,
the proceeds of which shall be applied directly by the Agent to reimburse such
Issuing Lender for the amount of such honored drawing; and provided further
that if for any reason proceeds of Revolving Loans are not received by such
Issuing Lender on the Reimbursement Date in an amount equal to the amount of
such honored drawing, the Company shall reimburse such Issuing Lender, on
demand, in an amount in same day funds equal to the excess of the amount of
such honored drawing over the aggregate amount of such Revolving Loans, if any,
which are so received. Nothing in this subsection 3.3B shall be deemed to
relieve any Lender from its obligation to make Revolving Loans on the terms and
conditions set forth in this Agreement, and the Company shall retain any and
all rights it may have against any Lender resulting from the failure of such
Lender to make such Revolving Loans under this subsection 3.3B.
C. PAYMENT BY THE LENDERS OF UNREIMBURSED AMOUNTS PAID UNDER
LETTERS OF CREDIT.
(i) Payment by the Lenders. In the event that the
Company shall fail for any reason to reimburse any Issuing Lender as
provided in subsection 3.3B in an amount equal to the amount of any
drawing honored by such Issuing Lender under a Letter of Credit issued
by it, such Issuing Lender shall promptly notify each other Lender of
the unreimbursed amount of such honored drawing and of such other
Lender's respective participation therein based on such Lender's Pro
Rata Share. Each Lender shall make available to such Issuing Lender
an amount equal to its respective participation, in Dollars and in
same day funds, at the office of such Issuing Lender specified in such
notice, not later than 12:00 Noon (New York City time) on the first
business day (under the laws of the jurisdiction in which such office
of such Issuing Lender is located) after the date notified by such
Issuing Lender. In the event that any Lender fails to make available
to such Issuing Lender on such business day the amount of such
Lender's
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participation in such Letter of Credit as provided in this subsection
3.3C, such Issuing Lender shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the rate
customarily used by such Issuing Lender for the correction of errors
among banks for three Business Days and thereafter at the Base Rate.
Nothing in this subsection 3.3C shall be deemed to prejudice the right
of any Lender to recover from any Issuing Lender any amounts made
available by such Lender to such Issuing Lender pursuant to this
subsection 3.3C in the event that it is determined by the final
judgment of a court of competent jurisdiction that the payment with
respect to a Letter of Credit by such Issuing Lender in respect of
which payment was made by such Lender constituted gross negligence or
willful misconduct on the part of such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received
From the Company. In the event any Issuing Lender shall have been
reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or
any portion of any drawing honored by such Issuing Lender under a
Letter of Credit issued by it, such Issuing Lender shall distribute to
each other Lender which has paid all amounts payable by it under
subsection 3.3C(i) with respect to such honored drawing such other
Lender's Pro Rata Share of all payments subsequently received by such
Issuing Lender from the Company in reimbursement of such honored
drawing when such payments are received. Any such distribution shall
be made to a Lender at its primary address set forth below its name on
the appropriate signature page hereof or at such other address as such
Lender may request.
D. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Company. The Company agrees
to pay to each Issuing Lender, with respect to drawings honored under
any Letters of Credit issued by it, interest on the amount paid by
such Issuing Lender in respect of each such honored drawing from the
date such drawing is honored to but excluding the date such amount is
reimbursed by the Company (including any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate
equal to (a) for the period from the date such drawing is honored to
but excluding the Reimbursement Date, the rate then in effect under
this Agreement with respect to Revolving Loans that are Base Rate
Loans and (b) thereafter, a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Agreement with
respect to Revolving Loans that are Base Rate Loans. Interest payable
pursuant to this subsection 3.3D(i) shall be computed on the basis of
a 360-day year for the actual number of days elapsed in the period
during which it accrues and shall be payable on demand or, if no
demand is made, on the date on which the related drawing under a
Letter of Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender.
Promptly upon receipt by any Issuing Lender of any payment of interest
pursuant to subsection 3.3D(i) with respect to a drawing honored under
a Letter of Credit issued by it, (a) such Issuing Lender shall
distribute to each other Lender, out of the interest received by such
Issuing Lender in respect of the period from the date such drawing is
honored to but excluding
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the date on which such Issuing Lender is reimbursed for the amount of
such drawing (including any such reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B), the amount that such
other Lender would have been entitled to receive in respect of the
letter of credit fee that would have been payable in respect of such
Letter of Credit for such period pursuant to subsection 3.2 if no
drawing had been honored under such Letter of Credit, and (b) in the
event such Issuing Lender shall have been reimbursed by other Lenders
pursuant to subsection 3.3C(i) for all or any portion of such honored
drawing, such Issuing Lender shall distribute to each other Lender
which has paid all amounts payable by it under subsection 3.3C(i) with
respect to such honored drawing such other Lender's Pro Rata Share of
any interest received by such Issuing Lender in respect of that
portion of such honored drawing so reimbursed by other Lenders for the
period from the date on which such Issuing Lender was so reimbursed by
other Lenders to but excluding the date on which such portion of such
honored drawing is reimbursed by the Company. Any such distribution
shall be made to a Lender at its primary address set forth below its
name on the appropriate signature page hereof or at such other address
as such Lender may request.
3.4 OBLIGATIONS ABSOLUTE.
The obligation of the Company to reimburse each Issuing Lender
for drawings honored under the Letters of Credit issued by it and to repay any
Revolving Loans made by the Lenders pursuant to subsection 3.3B and the
obligations of Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of any Letter
of Credit;
(ii) the existence of any claim, set-off, defense or other
right which the Company or any Lender may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons
for whom any such transferee may be acting), any Issuing Lender or
other Lender or any other Person or, in the case of a Lender, against
the Company, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction
(including any underlying transaction between the Company or one of
its Subsidiaries and the beneficiary for which any Letter of Credit
was procured);
(iii) any draft or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any
Letter of Credit against presentation of a draft or other document
which does not substantially comply with the terms of such Letter of
Credit;
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(v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of
the Company or any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan
Document by any party thereto;
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential
Event of Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES.
A. INDEMNIFICATION. In addition to amounts payable as provided
in subsection 3.6, the Company hereby agrees to protect, indemnify, pay and
save harmless each Issuing Lender from and against any and all losses, claims,
damages, liabilities, costs or expenses (including the reasonable fees, charges
and disbursements of counsel and the allocated costs and expenses of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the bad faith or recklessness of such
Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"GOVERNMENTAL ACTS").
B. NATURE OF ISSUING LENDERS' DUTIES. As between the Company and
any Issuing Lender, the Company assumes all risks of the acts and omissions of,
or misuse of the Letters of Credit issued by such Issuing Lender by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, such Issuing Lender shall not be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness or legal effect of
any document submitted by any party in connection with the application for and
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (iii) failure of the beneficiary
of any such Letter of Credit to comply fully with any conditions required in
order to draw upon such Letter of Credit;
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(iv) errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, telefacsimile, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (v) errors in interpretation of technical
terms; (vi) any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit or of the
proceeds thereof; (vii) the misapplication by the beneficiary of any such
Letter of Credit of the proceeds of any drawing under such Letter of Credit; or
(viii) any consequences arising from causes beyond the control of such Issuing
Lender, including without limitation any Governmental Acts, and none of the
above shall affect or impair, or prevent the vesting of, any of such Issuing
Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions set forth in the first paragraph of this subsection 3.5B,
any action taken or omitted by any Issuing Lender under or in connection with
the Letters of Credit issued by it or any documents and certificates delivered
thereunder, if taken or omitted in good faith, shall not put such Issuing
Lender under any resulting liability to the Company.
Notwithstanding anything to the contrary contained in this
subsection 3.5, the Company shall retain any and all rights it may have against
any Issuing Lender for any liability arising solely out of the gross negligence
or willful misconduct of such Issuing Lender, as determined by a final judgment
of a court of competent jurisdiction.
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
Subject to the provisions of subsection 2.7B (which shall be
controlling with respect to the matters covered thereby), in the event that any
Issuing Lender or Lender shall in good faith determine (which determination
shall, absent manifest error, be final and conclusive and binding upon all
parties hereto) that any law, treaty or governmental rule, regulation or order,
or any change therein or in the interpretation, administration or application
thereof (including the introduction of any new law, treaty or governmental
rule, regulation or order), or any determination of a court or governmental
authority, in each case that becomes effective after the date hereof, or
compliance by any Issuing Lender or Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasi-governmental authority (whether or not having the force
of law):
(i) subjects such Issuing Lender or Lender (or its
applicable lending or letter of credit office) to any additional Tax
(other than any Tax on the overall net income of such Issuing Lender
or Lender) with respect to the issuing or maintaining of any Letters
of Credit or the purchasing or maintaining of any participations
therein or any other obligations under this Section 3, whether
directly or by such being imposed on or suffered by any particular
Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement in respect of any Letters of Credit
issued by any Issuing Lender or participations therein purchased by
any Lender; or
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(iii) imposes any other condition (other than with respect
to a Tax matter) on or affecting such Issuing Lender or Lender (or its
applicable lending or letter of credit office) regarding this Section
3 or any Letter of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender
or Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, the Company shall promptly pay to such Issuing
Lender or Lender, upon receipt of the statement referred to in the next
sentence, such additional amount or amounts as may be necessary to compensate
such Issuing Lender or Lender for any such increased cost or reduction in
amounts received or receivable hereunder. Such Issuing Lender or Lender shall
deliver to the Company a written statement within 120 days of such Lender
obtaining knowledge of the occurrence of any event resulting in such Lender's
right to receive compensation hereunder, setting forth in reasonable detail the
basis for calculating the additional amounts owed to such Issuing Lender or
Lender under this subsection 3.6, which statement shall be conclusive and
binding upon all parties hereto absent manifest error.
SECTION 4
CONDITIONS PRECEDENT
4.1 CONDITIONS TO EFFECTIVENESS OF COMMITMENTS.
The effectiveness of the Commitments of the Lenders is conditioned
upon the prior or concurrent satisfaction, at the expense of the Company, of
the conditions specified in subsection 4.2 and in this subsection 4.1, in each
case as determined by the Agent:
A. CORPORATE DOCUMENTS. Each Loan Party (other than any
Partnership Subsidiary) shall deliver or cause to be delivered to the Agent
(with sufficient originally executed copies for each Lender and the Agent's
counsel) the following, each unless otherwise noted dated the Funding
Availability Date:
(i) executed originals of this Agreement, the Subsidiary
Guaranty, the Security Agreement, a Revolving Note in favor of each
Lender, the Swing Line Note in favor of Swing Line Lender and each
other Loan Document to which it is a party;
(ii) except with respect to the Payroll Subsidiaries,
certified copies of its Certificate of Incorporation, together with
(a) a good standing certificate (including verification, where
generally available, of tax good standing) from the Secretary of State
(or similar official) of its jurisdiction of incorporation and each
other state in which a Property owned or leased by such Loan Party is
located), each dated a recent date prior to the Funding Availability
Date and (b) a telegram from each such Secretary of State (or similar
official) or on-line verification from the official database
certifying as to the foregoing matters and dated the Funding
Availability Date;
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(iii) except with respect to the Payroll Subsidiaries,
copies of its Bylaws, certified as of the Funding Availability Date by
its corporate secretary or an assistant secretary;
(iv) resolutions of its Board of Directors approving and
authorizing (a) the execution, delivery and performance of each Loan
Document and Related Document to which it is a party, (b) the
consummation of the Formation and (c) in the case of the Company, the
issuance of the Common Stock pursuant to the Equity Offering Documents
and the issuance of the Senior Notes pursuant to the Debt Offering
Documents, in each case certified as of the Funding Availability Date
by its corporate secretary or an assistant secretary as being in full
force and effect without modification or amendment; and
(v) signature and incumbency certificates of its officers
executing this Agreement and the other Loan Documents to which it is a
party.
B. PARTNERSHIP DOCUMENTS. Each Partnership Subsidiary shall
deliver to the Agent (with sufficient originally executed copies for each
Lender and the Agent's counsel) the following, each unless otherwise noted
dated the Funding Availability Date:
(i) executed originals of the Subsidiary Guaranty, the
Security Agreement and each other Loan Document to which it is a
party;
(ii) a conformed copy of the partnership agreement,
certified by each general partner of such partnership as of the
Funding Availability Date as being in full force and effect without
modification or amendment;
(iii) (a) its Certificate of Limited Partnership and
Statements of Partnership, certified by the Secretary of State (or
similar official) of its jurisdiction of formation and a certificate
of existence or good standing, as the case may be, from the Secretary
of State (or similar official) of such jurisdiction, each dated as of
a recent date prior to the Funding Availability Date, and (b) a good
standing certificate or certificate of existence, as the case may be,
from the Secretary of State (or similar official) of each state or
other jurisdiction in which a Property owned or leased by such entity
is located);
(iv) all documents of such Partnership Subsidiary and its
partners approving or authorizing (a) the execution, delivery and
performance of the Subsidiary Guaranty and any other Loan Documents to
which it is a party, and (b) the consummation of the Formation, each
certified as of the Funding Availability Date by the general partner
of such Partnership Subsidiary or other Loan Party; and
(v) signature and incumbency certificate of the Person(s)
executing, on behalf of such partnership, any Loan Documents to which
such Partnership Subsidiary is a party.
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C. FINANCIAL STATEMENTS; CERTIFICATES. The Company shall have
delivered to the Agent an Officers' Certificate of the Chief Executive Officer
and the Chief Financial Officer of the Company certifying as to the following:
(i) the delivery to the Agent of the financial statements
referred to in subsection 5.3 on or before the Funding Availability
Date;
(ii) as of the Funding Availability Date and for the year
ending December 31, 1995:
(a) the sum of the Property EBITDA in respect of
the Pool A Properties (other than the Rose Hall Property)
minus an amount equal to 3.50% of Property Gross Revenues from
such Pool A Properties for such period, was equal to or
greater than $__________;
(b) Property EBITDA for the Rose Hall Property
minus 3.50% of Property Gross Revenues from the Rose Hall
Property for such period, was equal to or greater than
$__________;
(c) the sum of Property EBITDA in respect of the
HPT Properties minus a reserve for FF&E for the HPT Properties
equal to the greater of (1) an amount equal to 3.50% of
Property Gross Revenues from the HPT Properties for such
period and (2) the aggregate amount that would have been
required to be reserved by GHALP Corp. pursuant to Section
5.1.2(b) of the HPT Leases (without regard to the amounts
required to be reserved by GHALP Corp. pursuant to Section
5.1.2(a) of the HPT Leases) for such period, was equal to or
greater than $__________;
(d) the Property EBITDA in respect of the Harbour
Island Property minus a reserve for FF&E for such Property
equal to the greater of (1) an amount equal to 3.50% of
Property Gross Revenues for such period and (2) the aggregate
amount reserved by the predecessor of WHI pursuant to the
Harbour Island Lease for such period, was equal to or greater
than $__________; and
(e) the sum of Management EBITDA in respect of
the Managed Properties for such period was equal to or
greater than $__________;
(iii) after giving effect to the Public Offerings:
(a) the Company has a minimum Market Equity
Capitalization of not less than $250,000,000; and
(b) each of the ratios of (1) Consolidated Total
Indebtedness to (2) the sum of Market Equity Capitalization
and Consolidated Total Indebtedness and (3) the sum of
Consolidated Total Indebtedness and Adjusted Stockholders'
Equity, respectively, expressed as a percentage, is not
greater than 50%.
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(iv) since December 31, 1995, no Material Adverse Effect
has occurred; and
(v) the delivery to the Agent of a Borrowing Base
Certificate and a Compliance Certificate, each as of the Funding
Availability Date and which shall be attached thereto.
D. NO MATERIAL ADVERSE EFFECT. Since December 31, 1995, in the
sole opinion of the Agent, no condition or event has occurred that has had or
could reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect.
E. SECURITY INTERESTS. The Company shall have taken or caused to
be taken all such actions as may be necessary or reasonably requested by the
Agent to give the Agent a valid, enforceable and perfected first priority Lien
on or first priority security interest in the Collateral as of the Funding
Availability Date, subject only to Permitted Encumbrances and Liens permitted
pursuant to subsection 7.2A(ii), (iii) and (iv), it being understood by each
Lender that perfection against Persons other than the Company of such Lien on
the Rents may in certain jurisdictions require the Agent to have possession of
the Rents. Such actions shall include the following:
(i) the delivery to the Agent of fully executed and
acknowledged counterparts of the Mortgage, the Assignment of Rents and
Leases, the Omnibus Management and Liquor License Agreement, the
Security Agreement, the Trademark Agreement and all other Security
Documents with respect to the Pool A Properties, the Pool B
Properties, the Management Agreements and the other Collateral as of
the Funding Availability Date, and the delivery of evidence
satisfactory to the Agent that counterparts of the Mortgage, the
Assignment of Rents and Leases and all other of such documents the
Agent desires to have recorded have been or will be recorded in all
places necessary or desirable to create and maintain (a) valid and
enforceable first priority Liens on the fee simple or leasehold
interests of the Company, as applicable, in the Pool A Properties and
Pool B Properties in favor of the Agent, as mortgagee (or as
beneficiary in those jurisdictions where the Lien is granted to a
trustee for the benefit of the Agent), (b) valid and enforceable first
priority Liens on the Rents and Leases in favor of the Agent, (c)
valid and enforceable first priority Liens in all fixtures at the Pool
A Properties and Pool B Properties, in favor of the Agent, as secured
party and (d) valid and enforceable first priority Liens in all other
items of Collateral as of the Funding Availability Date in favor of
the Agent;
(ii) (a) the delivery to the Agent for filing pursuant to
the Security Documents of properly executed financing statements under
the Uniform Commercial Code (or any equivalent or similar
legislation), or any other documents required to be filed by other
Applicable Laws, satisfactory in form and substance to the Agent in
each jurisdiction as may be necessary (in the Agent's reasonable
judgment) effectively to perfect and maintain the security interests
in the Collateral created by such Security Documents and (b) the
delivery of evidence that such financing statements or other documents
will have been or will be recorded in all places necessary or
desirable, in the reasonable judgment of the Agent, to create and
maintain valid and enforceable first
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priority Liens on the Collateral in favor of the Agent, subject only
to Permitted Encumbrances and Liens permitted pursuant to subsection
7.2A(ii), (iii) and (iv);
(iii) the delivery to the Agent of a title report or
commitment (together with copies of all documents listed therein as
exceptions to title) dated not more than 90 days prior to the Funding
Availability Date with respect to each Pool A Property (other than the
Rose Hall Property) and pro forma Title Policies dated not more than
30 days prior to the Funding Availability Date with respect to each
such Pool A Property, each satisfactory in form and substance to the
Agent;
(iv) the delivery to the Agent of an opinion of counsel in
each state or other jurisdiction in which each Pool A Property or Pool
B Property is located, dated the Funding Availability Date, addressed
to the Agent and the Lenders and in form and substance reasonably
satisfactory to the Agent;
(v) the delivery to the Agent of the Title Policies or
marked title commitments insuring fee simple title to each of the Pool
A Properties (other than the Rose Hall Property) vested in the Company
(or, as to those Pool A Properties, if any, in which the Company holds
a leasehold estate, insuring fee simple title to such Property vested
in the landlord and such leasehold estate vested in the Company) and
insuring the first priority of the Liens created under the Mortgages
in an aggregate amount not less than $88,854,000 with respect to the
Pool A Properties, in each case subject only to Permitted
Encumbrances, and such other title exceptions as are satisfactory to
the Agent. Such Title Policies shall be reinsured with title
insurance companies acceptable to the Agent in amounts as required by
the Agent subject to facultative reinsurance agreements in form
satisfactory to the Agent. Such Title Policies shall also contain
such endorsements and affirmative insurance provisions as the Agent
may reasonably require and to the extent the same are available in the
applicable jurisdiction, including "comprehensive" endorsements,
revolving credit endorsements, affirmative insurance against
mechanic's liens, survey exceptions, violations of covenants,
conditions and restrictions, encroachments, gap insurance, contiguity
endorsements, tie-in endorsements, access endorsements, "Last-dollar"
endorsements, survey endorsements, contingent loss/first loss
endorsements, variable rate mortgage endorsements, leasehold
endorsement for Pool A Properties that are leaseholds, and any other
endorsements required by the Agent to address issues raised by the
Agent's due diligence or as a matter of Applicable Law. In addition,
the Company shall have paid to the Title Company or to the appropriate
Governmental Authority all expenses and premiums of the Title Company
in connection with the issuance of such Title Policies or in
connection with any Loan hereunder and an amount equal to the
recording and stamp taxes (including mortgage recording, intangible
and similar taxes) payable in connection with recording each Mortgage
and the Assignment of Rents and Leases in the appropriate county land
offices or in connection with any Loans hereunder;
(vi) the delivery to the Title Company of such
certificates and affidavits as the Title Company may reasonably
require in connection with the issuance of the Title Policies;
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(vii) the delivery to the Agent of a Survey with respect to
each of the Pool A Properties and the Pool B Properties, dated or
re-dated to within 120 days prior to the Funding Availability Date,
which Surveys shall be reasonably satisfactory in form and substance
to the Agent;
(viii) the delivery to the Agent of a letter from the
applicable zoning authority with respect to each of the Pool A
Properties and the Pool B Properties and reasonably satisfactory to
the Agent stating that all Improvements on each such Property have
been constructed and are being used and operated in full compliance
with (a) all applicable zoning, subdivision, environmental and other
Applicable Laws of all Governmental Authorities or quasi-governmental
authorities having jurisdiction with respect to each such Property,
and (b) all building permits issued in respect of each such Property
and the certificate of occupancy (if available) for each such
Property;
(ix) the delivery to the Agent pursuant to the Security
Agreement of the stock certificates (which certificates shall be
accompanied by irrevocable undated stock powers duly endorsed in blank
and irrevocable proxies, all satisfactory in form and substance to the
Agent) and promissory notes or other instruments, including the DAB
Notes, the shares of Common Stock pledged to the Company by the
obligors as security for the payment thereof and the Affiliate Notes
(in each case duly endorsed to the order of the Agent, as secured
party), representing the capital stock, promissory notes and other
instruments to be pledged on the Funding Availability Date pursuant to
the Security Agreement;
(x) the delivery to the Agent (i) of the Trademark
Agreement, in a form suitable for filing with the United States
Trademark and Patent Office, (ii) of the Trademark Security Agreement
in a form suitable for filing with the Canadian Trademark Office,
(iii) Trademark Agreement in a form suitable for filing with the Trade
Marks Department of the Registrar of Companies in Jamaica for
registration in relation to the Jamaican trademarks and the Registrar
of Companies in Jamaica for registration as a charge in the charges
register of IP Corp.;
(xi) the delivery to the Agent of Cash Management Letters
for each financial institution at which a Deposit Account is located
pursuant to the Cash Management System, which Cash Management Letters
and the Cash Management System shall be in form and substance
reasonably satisfactory to the Agent; and
(xii) the delivery to the Agent of evidence satisfactory to
the Agent that all other filings, recordings and other actions the
Agent deems necessary or advisable to establish, perfect and preserve
the Liens granted to the Agent in the Collateral as of the Funding
Availability Date shall have been made.
F. CASUALTY, FLOOD INSURANCE AND WORKERS' COMPENSATION. The
Company shall have delivered to the Agent (i) duplicate originals or true and
complete copies of each policy or other evidence of insurance required by this
Agreement evidencing (a) the issuance of such policies, (b) the payment of all
premiums payable for the period ending not earlier than the first
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anniversary of the Funding Availability Date or as otherwise approved in
writing by Agent and (c) coverage which meets all of the requirements set forth
in this Agreement; (ii) an Officers' Certificate dated the Funding Availability
Date to the effect that the insurance coverage required by this Agreement is in
full force and effect, that all monthly premiums therefor have been paid and
that the amount of each limit of property insurance provided for in the
policies of insurance delivered to the Agent which evidence such coverage are
sufficient to cover all cost of replacing the property and Improvements covered
thereby; and (iii) evidence satisfactory to the Agent that the Company is
insured for workers' compensation liability with a maximum deductible of
$500,000.
To the extent permitted by law, the Company hereby irrevocably waives,
releases and discharges any and all rights of action, demands and other claims
of any kind or nature against the Agent and the Lenders arising from any
failure of the Agent or the Lenders to comply with the National Flood Insurance
Act of 1968 (42 U.S.C. Sections 4001, et seq.), the Flood Disaster Protection
Act of 1973 or the National Flood Insurance Reform Act of 1994, including any
failure of the Agent or the Lenders to provide the Company with written
notification within ten days prior to the Funding Availability Date whether any
Pool A Property or Pool B Property is in a special flood hazard area or whether
federal disaster relief assistance will be available in the event of flood
damage to any Pool A Property or Pool B Property.
G. POOL A GROUND LEASES; LANDLORD ESTOPPEL CERTIFICATES. The
Company shall have delivered to the Agent (i) executed or conformed, certified
copies of each of the Pool A Ground Leases and all amendments thereto entered
into on or prior to the Funding Availability Date, as listed on Schedule 4.1G
annexed hereto, which Pool A Ground Leases shall be satisfactory in form and
substance to the Agent, in its sole discretion; the Pool A Ground Leases, as so
amended, shall be in full force and effect and no term or condition thereof
shall have been further amended or modified, or waived after the execution
thereof; and no Person shall have failed in any material respect to perform any
material obligation or covenant or satisfy any material condition required by
the Pool A Ground Leases to be performed or complied with on or before the
Funding Availability Date; and (ii) original counterparts of estoppel
certificates and agreements with respect to each of the Pool A Ground Leases,
satisfactory in form and substance to the Agent, and duly executed and
acknowledged by each lessor under such Pool A Ground Lease.
H. POOL B DOCUMENTS; LANDLORD AND LENDER ESTOPPEL CERTIFICATES.
The Company shall have delivered to the Agent (i) executed or conformed,
certified copies of each of the Pool B Documents (including, without
limitation, the Pool B Ground Leases) and all amendments thereto entered into
on or prior to the Funding Availability Date, as listed on Schedule 4.1H
annexed hereto, which documents shall be satisfactory in form and substance to
the Agent, in its sole discretion; such documents, as so amended, shall be in
full force and effect and no term or condition thereof shall have been further
amended or modified, or waived after the execution thereof; and no Person shall
have failed in any material respect to perform any material obligation or
covenant or satisfy any material condition required thereunder to be performed
or complied with on or before the Funding Availability Date; and (ii) original
counterparts of estoppel certificates and consent agreements with respect to
each of the Pool B Obligations specified on Schedule 4.1H, satisfactory in form
and substance to the Agent, and
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duly executed by the lessor under the Ground Lease with respect to the related
Pool B Property or by each lender with respect to the Pool B Properties
specified on such schedule, as the case may be.
I. MANAGEMENT AGREEMENTS; OWNER AND LENDER ESTOPPEL CERTIFICATES.
The Company shall have delivered to the Agent (i) executed or conformed,
certified copies of each of the Management Agreements and all amendments
thereto entered into on or before the Funding Availability Date, as listed on
Schedule 4.1I annexed hereto, which Management Agreements shall be satisfactory
in form and substance to the Agent; the Management Agreements, as so amended,
shall be in full force and effect and no term or condition thereof shall have
been further amended or modified, or waived after the execution thereof; and no
Person shall have failed in any material respect to perform any material
obligation or covenant or satisfy any material condition required by the
Management Agreements to be performed or complied with on or before the Funding
Availability Date; (ii) original counterparts of estoppel certificates and
consent agreements with respect to each Management Agreement specified on
Schedule 4.1I having ranking 1, 2 or 3, satisfactory in form and substance to
the Agent, and duly executed by each owner of the related Managed Property or
by each lender with respect to the Managed Properties specified on such
schedule, as the case may be; and (iii) a Management Agreement Report for each
Management Agreement.
J. SERVICING AGREEMENTS. On or before the Funding Availability
Date, the Company shall have delivered to the Agent executed or conformed,
certified copies of the Property Servicing Agreement with respect to each
Property and, if a Liquor License exists with respect to such Property, the
Liquor Operation Service Agreement with respect to such Property, in each case
with all amendments thereto entered into on or before the Funding Availability
Date, as listed on Schedule 4.1J annexed hereto, which Servicing Agreements
shall be satisfactory in form and substance to the Agent, in its sole
discretion; the Servicing Agreements, as so amended, shall be in full force and
effect and no term or condition thereof shall have been further amended or
modified, or waived after the execution thereof; and no Person shall have
failed in any material respect to perform any material obligation or covenant
or satisfy any material condition required by the Servicing Agreements to be
performed or complied with on or before the Funding Availability Date.
K. FRANCHISE AGREEMENTS; FRANCHISE ESTOPPEL CERTIFICATES. The
Company shall have delivered to the Agent (i) executed or conformed, certified
copies of each of the Franchise Agreements and all amendments thereto entered
into on or before the Funding Availability Date, as listed on Schedule 4.1K
annexed hereto, which Franchise Agreements shall be satisfactory in form and
substance to the Agent; the Franchise Agreements, as so amended, shall be in
full force and effect and no term or condition thereof shall have been further
amended or modified, or waived after the execution thereof; and no Person shall
have failed in any material respect to perform any material obligation or
covenant or satisfy any material condition required by the Franchise Agreements
to be performed or complied with on or before the Funding Availability Date;
and (ii) original counterparts of estoppel certificates and consent agreements
with respect to each Franchise Agreement specified on Schedule 4.1K,
satisfactory in form and substance to the Agent, and duly executed by the
franchisee with respect to each Franchise Agreement.
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L. MATERIAL LEASES; TENANT ESTOPPEL CERTIFICATES; TENANT
SUBORDINATION AGREEMENTS. The Company shall have delivered to the Agent (i)
executed or conformed, certified copies of each Material Lease with respect to
each Property and all amendments thereto entered into on or before the Funding
Availability Date, as listed on Schedule 4.1L annexed hereto, which Material
Leases shall be satisfactory in form and substance to the Agent; the Material
Leases, as so amended, shall be in full force and effect and no term or
condition thereof shall have been further amended or modified, or waived after
the execution thereof; and no Person shall have failed in any material respect
to perform any material obligation or covenant or satisfy any material
condition required by the Material Leases to be performed or complied with on
or before the Funding Availability Date; and (ii) original counterparts of
estoppel certificates with respect to each of the Material Leases specified on
Schedule 4.1L, satisfactory in form and substance to the Agent, duly executed
and delivered by each Tenant party to such Material Lease; and (iii) a Tenant
Subordination Agreement with respect to such Material Leases.
M. ENVIRONMENTAL AUDITS. The Company shall have delivered to the
Agent evidence satisfactory to the Agent, in its sole discretion, that (i)
there are no material pending or threatened claims, suits, actions or
proceedings arising out of or relating to the existence of any Hazardous
Materials at, in, on, from, around or under any of the Pool A Properties and
Pool B Properties; (ii) each such Property is in compliance in all material
respects with all applicable Environmental Laws with respect to such Property;
and (iii) no Hazardous Materials exist at, in, on, from, around or under any
such Property, except in compliance in all material respects with applicable
Environmental Laws and all other Hazardous Materials have been removed from
each Property to the extent required by Applicable Law. Such evidence shall
include (a) a comprehensive environmental audit (which shall include a Phase I
environmental audit and, if necessary or desirable in the Agent's opinion, a
Phase II environmental audit), satisfactory in form and substance to the Agent,
conducted and certified by an Approved Environmental Consultant (the Company
shall certify as of the Funding Availability Date that, as to any environmental
audit delivered by the Company prior to the Funding Availability Date, to the
Company's knowledge, the information contained in such audit remains true,
correct and complete), (b) a reliance letter from such Approved Environmental
Consultant with respect to each such environmental audit addressed to the Agent
and Lenders, which reliance letter shall be satisfactory in form and substance
to the Agent, (c) certification that all required approvals from all
Governmental Authorities having jurisdiction with respect to the environmental
condition of the Pool A Properties and the Pool B Properties, if any, have been
obtained, and (d) such other environmental reports, inspections and
investigations as the Agent shall in its sole discretion require, prepared, in
each instance, by an Approved Environmental Consultant, which approvals,
reports, inspections and investigations shall be satisfactory in form and
substance to the Agent, in its sole discretion. On or before the Funding
Availability Date, the Company shall have delivered to the Agent evidence
satisfactory to the Agent, in its sole discretion, that the Company has
complied (or has made arrangements to comply) with the recommendations and
suggestions of all environmental consultant(s) referred to above.
N. ENGINEERING REPORTS. The Company shall have delivered to the
Agent (i) a written Engineering Report with respect to each Property dated not
more than 45 days prior to the Funding Availability Date and prepared by an
Engineer acceptable to the Agent, which
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Engineering Report shall contain repair recommendations for the first five
years, and shall in all other respects be satisfactory in form and substance to
the Agent; and (ii) a reliance letter from such Engineer with respect to each
such Engineering Report addressed to the Agent and Lenders, which letter shall
be in form and substance reasonably satisfactory to the Agent.
O. APPRAISALS. The Agent shall have received (i) an Appraisal of
each Pool A Property dated not more than 60 days prior to the Funding
Availability Date and prepared by an Appraiser designated by the Agent, which
Appraisal shall be satisfactory in form and substance to the Agent; and (ii)
copies of all appraisals, market studies, and similar information with respect
to each of the Pool A Properties and Pool B Properties in the possession or
under the control of the Company or any of its Subsidiaries.
P. OPINIONS OF THE COMPANY'S COUNSEL; AUDITOR'S LETTER. On the
Funding Availability Date the Company shall have delivered to the Agent, its
counsel and the Lenders (i) executed copies of each of the favorable written
opinions of Locke Purnell Rain Harrell (A Professional Corporation), counsel
for the Company, substantially in the form of Exhibit XV annexed hereto, with
such changes as the Agent may approve and dated the Funding Availability Date;
(ii) executed copies of a letter prepared by Coopers & Lybrand, independent
accountants for the Company, as to such matters as the Agent and its counsel
may reasonably request, addressed to the Agent and Lenders and satisfactory in
form and substance to the Agent; (iii) executed copies of a reliance letter
from Locke Purnell Rain Harrell (A Professional Corporation), counsel to
Company, and each other counsel to the Company delivering an opinion in
connection with the issuance of the Common Stock in the Equity Offering, in
each case addressed to the Agent and Lenders and satisfactory in form and
substance to the Agent and stating that the Agent and Lenders may rely on such
opinions as if they were original addressees thereof, and in each case
attaching an executed original thereof; (iv) executed copies of a reliance
letter from Locke Purnell Rain Harrell (A Professional Corporation), counsel to
the Company, and each other counsel to the Company delivering an opinion in
connection with the Debt Offering, in each case addressed to the Agent and
Lenders and satisfactory in form and substance to the Agent stating that the
Agent and Lenders may rely on such opinions as if they were original addressees
thereof, and in each case attaching an executed original thereof; and (v)
evidence satisfactory to the Agent that the Company has requested such counsel
and auditor to deliver such opinions and letter to the Agent and its counsel
and the Lenders.
Q. OPINION OF AGENT'S COUNSEL. The Lenders shall have received
executed copies of the favorable written opinion of O'Melveny & Myers, counsel
to the Agent, dated as of the Funding Availability Date.
R. APPROVED CAPITAL POLICY. The Company shall have delivered to
the Agent a copy of the Company's stated policy for the capitalization of
expenditures on the financial statements of the Company and its Subsidiaries,
which stated policy shall be reasonably acceptable to the Agent.
S. FORMATION DOCUMENTS; FORMATION; PAYMENT OF CERTAIN
INDEBTEDNESS. The Company shall have delivered to the Agent (i) an executed or
conformed, certified copy of
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each of the Formation Documents entered into on or prior to the Formation Date,
which documents shall be satisfactory in form and substance to the Agent; such
documents, as so amended, shall be in full force and effect and no term or
condition thereof shall have been further amended or modified, or waived after
the execution thereof; and no Person shall have failed in any material respect
to perform any material obligation or covenant or satisfy any material
obligation or covenant or satisfy any material condition required thereunder to
be performed or complied with on or before the Funding Availability Date; (ii)
a copy of each agreement, legal opinion, accountant's letter, certificate and
each other document or instrument delivered in connection with the formation of
the Company and the Formation; (iii) an Officers' Certificate of the Company
certifying that, as of the Funding Availability Date, each transaction
constituting the Formation has been duly authorized by all necessary action of
the Loan Parties, the applicable current and former Subsidiaries of the Loan
Parties and all other Persons and has been consummated in accordance with, and
is enforceable pursuant to, all Applicable Laws; (iv) evidence satisfactory to
the Agent that the proceeds of the Public Offerings have been applied to
refinance all outstanding Indebtedness secured by the Pool A Properties or
ownership interests therein as set forth on Schedule 4.1S annexed hereto and,
upon such refinancing, any commitments to lend in connection with such
Indebtedness shall terminate or shall have terminated; and (v) the Company
shall have caused the holders of such Indebtedness to deliver properly executed
termination statements under the Uniform Commercial Code and any and all
releases of mortgages and subordination agreements benefitting such Persons.
On or before the Funding Availability Date, each of the transactions
constituting the Formation shall have been consummated in accordance with all
Applicable Laws.
T. ISIS 2000 AGREEMENTS; CWS AGREEMENTS; WYNRIGHT AGREEMENTS;
GREYSTAR AGREEMENTS. The Company shall have delivered to the Agent such drafts
as are available of the CWS Agreements and Greystar Agreements and executed or
conformed, certified copies of each of the ISIS 2000 Agreements and the
Wynright Agreements, in each case with all amendments thereto entered into on
or before the Funding Availability Date, which drafts, agreements and
amendments shall be satisfactory in form and substance to the Agent, in its
sole discretion; the ISIS 2000 Agreements and Wynright Agreements, as so
amended, shall be in full force and effect and no term or condition thereof
shall have been further amended or modified, or waived after the execution
thereof; and no Person shall have failed in any material respect to perform any
material obligation or covenant or satisfy any material condition required by
such agreements to be performed or complied with on or before the Funding
Availability Date.
U. EQUITY OFFERING; GE OPTION. The Company shall have delivered
to the Agent (i) evidence satisfactory to the Agent that the Equity Offering
shall have been consummated pursuant to the Equity Offering Documents; (ii)
executed or conformed, certified copies of each of the Equity Offering
Documents and all satisfactory in form and substance to the Agent, which
documents shall be in full force and effect; (iii) evidence satisfactory to the
Agent that the exercise of the GE Option, and the issuance of shares of Common
Stock pursuant thereto, shall have been consummated pursuant to the GE Option;
(iv) evidence satisfactory to the Agent that, after giving effect to the
Formation, the Public Offerings and the issuance, sale and delivery of shares
of Common Stock pursuant to the GE Option, the Market Equity
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Capitalization of the Company is not less than $250,000,000; and (v) evidence
satisfactory to the Agent that, after giving effect to the Formation, the
Equity Offering and the issuance, sale and delivery of shares of Common Stock
pursuant to the GE Option, Bedrock, the Crow Interests and the Senior
Executives beneficially and of record own not less than the numbers of shares
of Common Stock set forth on Schedule 4.1U annexed hereto, which shall not be
less than 11.5%, 47.0% and 14.5%, respectively, of the equity Securities of the
Company then outstanding and shall not include any equity Securities of the
Company beneficially or of record owned by WEL; provided, however, that shares
of Common Stock may be pledged by the Senior Executives to the Company to
secure the payment of the DAB Notes, as more particularly indicated on Schedule
4.1U annexed hereto. All other matters with respect to the Equity Offering and
the exercise of the GE Option shall be satisfactory to the Agent.
V. DEBT OFFERING. The Company shall have delivered to the Agent
(i) evidence satisfactory to the Agent that the Debt Offering shall have been
consummated pursuant to the Debt Offering Documents; (ii) the Agent and Lenders
shall have received executed or conformed, certified copies of each of the Debt
Offering Documents, all satisfactory in form and substance to the Agent, which
documents shall be in full force and effect; and (iii) evidence satisfactory to
the Agent that the Company shall have issued not less than $100,000,000 in
aggregate principal amount of Senior Notes pursuant to the Indenture. No
Person shall have failed in any material respect to perform any material
obligation or covenant or satisfy any material condition required by the Debt
Offering Documents to be performed or complied with on or before the Funding
Availability Date. All other matters with respect to the Debt Offering shall
be satisfactory to the Agent.
W. NO ADVERSE LITIGATION. There shall not be pending or, to the
knowledge of the Company, threatened, any action, suit, proceeding,
governmental investigation or arbitration against or affecting the Company or
any of its Subsidiaries or any property of the Company or any of its
Subsidiaries that has not been disclosed by the Company in writing pursuant to
subsection 4.5 prior to the execution of this Agreement and that is reasonably
likely to have a Material Adverse Effect, and there shall have occurred no
development not so disclosed in any such action, suit, proceeding, governmental
investigation or arbitration so disclosed, that, in either event, in the
opinion of the Agent, is reasonably likely to have a Material Adverse Effect;
and no injunction or other restraining order shall have been issued and no
hearing to cause an injunction or other restraining order to be issued shall be
pending or noticed with respect to any action, suit or proceeding seeking to
enjoin or otherwise prevent the consummation of, or to recover any damages or
obtain relief as a result of, the transactions contemplated by this Agreement
or the making of the Loans hereunder.
X. ORIGINAL ACQUISITION DOCUMENTS. The Company shall have
delivered to the Agent executed certified copies of each of the Original
Acquisition Agreements and all amendments thereto entered into on or prior to
the Funding Availability Date.
Y. PAYMENT OF FEES AND EXPENSES. The Company shall have paid to
the Agent, for distribution (as appropriate) to the Lenders and the Agent, the
fees payable pursuant to subsection 2.3 and the expenses payable pursuant to
subsection 9.2.
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Z. DEFERRED MAINTENANCE ACCOUNT. The Company shall have
deposited into the Deferred Maintenance Account an amount not less than
$__________ in the aggregate, and shall have delivered to the Agent an
Officers' Certificate with respect to the allocation of such amount among the
Properties, which allocation shall be satisfactory to the Agent.
AA. COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto and the Formation not
previously found acceptable by the Agent and its counsel shall be reasonably
satisfactory in form and substance to the Agent and such counsel, and the Agent
and such counsel shall have received all such counterpart originals or
certified copies of such documents as the Agent may reasonably request.
AB. OTHER DOCUMENTS. Each Loan Party shall have delivered to the
Agent such other information and documents as the Agent may reasonably request.
4.2 CONDITIONS TO ALL LOANS.
The obligations of the Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. NOTICE OF BORROWING. The Agent shall have received before
that Funding Date, in accordance with the provisions of subsection 2.1B, (i) an
originally executed Notice of Borrowing, in each case signed by the chief
executive officer, the chief financial officer or the treasurer of the Company
or by any executive officer of the Company designated by any of the
above-described officers on behalf of the Company in a writing delivered to the
Agent and (ii) if any of the proceeds of such Loan are to be applied to the
Restoration or Renovation of any Property, waivers of lien satisfactory to the
Agent covering that part of the Renovation or Restoration for which payment or
reimbursement is being requested and by a search prepared by the Title Company
satisfactory to the Agent establishing that there has not been filed with
respect to such Property any mechanics' or other lien or instrument for the
retention of title in respect of any part of the Renovation or Restoration not
discharged of record or bonded to the reasonable satisfaction of the Agent and
evidencing the continued priority of the Mortgage and Assignment of Rents and
Leases on such Property.
B. OTHER CONDITIONS PRECEDENT. As of that Funding Date:
(i) the representations and warranties of the Loan
Parties as contained herein and in the other Loan Documents shall be
true and correct in all material respects on and as of that Funding
Date to the same extent as though made on and as of that date, except
to the extent such representations and warranties specifically relate
to an earlier date, in which case such representations and warranties
shall have been true and correct in all material respects on and as of
such earlier date;
(ii) no event shall have occurred and be continuing or
would result from the consummation of the borrowing contemplated by
such Notice of Borrowing that would constitute an Event of Default or
a Potential Event of Default, including a breach or
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violation of Section 4.3 of the Indenture with respect to the
consummation of such borrowing;
(iii) each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by it on or before
that Funding Date;
(iv) no order, judgment or decree of any arbitrator or
Governmental Authority shall purport to enjoin or restrain any Lender
from making the Loans to be made by it on that Funding Date;
(v) the making of the Loans requested on such Funding
Date shall not violate any law including, without limitation,
Regulation G, Regulation T, Regulation U or Regulation X of the Board
of Governors of the Federal Reserve System;
(vi) there shall not be pending or, to the knowledge of
the Company, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting the Company of its
Subsidiaries that has not been disclosed by the Company in writing
pursuant to subsection 5.5 or 6.1(xv) prior to the making of such
Loans and that would be reasonably likely to have a Material Adverse
Effect, and there shall have occurred no development not so disclosed
in any such action, suit, proceeding, governmental investigation or
arbitration so disclosed, that, in either event, in the opinion of the
Agent, would be reasonably likely to have a Material Adverse Effect;
and no injunction or other restraining order shall have been issued
and no hearing to cause an injunction or other restraining order to be
issued shall be pending or noticed with respect to any action, suit or
proceeding seeking to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated by this Agreement or the making of Loans
hereunder;
(vii) after giving effect to the proposed borrowing, the
Borrowing Base shall not be less than the Total Utilization of
Revolving Commitments and the Company shall have delivered to the
Agent the Borrowing Base Certificate for the most recent calendar
month as required pursuant to subsection 6.1(ii); and
(viii) since December 31, 1995, no condition or event shall
have occurred that has had or could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.
4.3 CONDITIONS TO LETTERS OF CREDIT.
The issuance of any Letter of Credit hereunder (whether or not
the applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
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A. INITIAL LOANS. On or before the date of issuance of the
initial Letter of Credit pursuant to this Agreement, the conditions set forth
in subsection 4.1 for the making of the initial Loans shall have been
satisfied.
B. NOTICE OF ISSUANCE OF LETTER OF CREDIT. On or before the date
of issuance of such Letter of Credit, Agent shall have received, in accordance
with the provisions of subsection 3.1B(i), an originally executed Notice of
Issuance of Letter of Credit, in each case signed by the chief executive
officer, the chief financial officer or the treasurer of Company or by any
executive officer of Company designated by any of the above-described officers
on behalf of Company in a writing delivered to Agent, together with all other
information specified in subsection 3.1B(i) and such other documents or
information as the applicable Issuing Lender may reasonably require in
connection with the issuance of such Letter of Credit.
C. OTHER CONDITIONS PRECEDENT. On the date of issuance of such
Letter of Credit, all conditions precedent described in subsection 3.2B shall
be satisfied to the same extent as if the issuance of such Letter of Credit
were the making of a Loan and the date of issuance of such Letter of Credit
were a Funding Date.
SECTION 5
COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this
Agreement and to make the Loans, to induce Issuing Lenders to issue Letters of
Credit and to induce other Lenders to purchase participations therein, the
Company represents and warrants to the Agent and the Lenders that the following
statements in this Section 5 are true, correct and complete on the Effective
Date, on the Funding Availability Date, on each Funding Date and on the date of
issuance of each Letter of Credit.
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Loan Party and each of its
Subsidiaries (other than any Partnership Subsidiary) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation (which jurisdiction is set forth on Schedule 5.1A
annexed hereto). Each such Loan Party and each such Subsidiary has the
requisite corporate power and authority to own and operate its properties
(including the Properties identified as being owned or leased by such Loan
Party or such Subsidiary on Schedule 5.4A1, Schedule 5.4A2 and Schedule 5.4A3
annexed hereto), to carry on its business as now conducted and as proposed to
be conducted, to enter into the Loan Documents and the Related Documents to
which it is a party, to carry out the transactions contemplated thereby and, in
the case of the Company, to issue and pay the Notes and the Senior Notes
pursuant to the Senior Note Documents. Each Partnership Subsidiary is a
limited partnership duly formed and validly existing under the laws of its
jurisdiction of organization (which jurisdiction is set forth on Schedule 5.1A)
and each Partnership Subsidiary has all requisite partnership power and
authority to own and operate its properties (including the Properties
identified on Schedule 5.4A1, Schedule 5.4A2 and Schedule 5.4A3 as being owned
or leased by such Partnership
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Subsidiary), to carry on its business as now conducted and proposed to be
conducted, to enter into each Loan Document and Related Document to which it is
a party and to carry out the transactions contemplated thereby. The books and
records of each Loan Party and each of its Subsidiaries reflect the properties
and assets purported to be owned by such Loan Party or Subsidiary, as
applicable.
B. QUALIFICATION AND GOOD STANDING. Each Loan Party and each of
its Subsidiaries is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, except in jurisdictions where the failure to be so
qualified or in good standing has not had and could not reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect.
The jurisdictions in which each Loan Party and each of its Subsidiaries owns
property or otherwise conducts business as of the Funding Availability Date are
set forth on Schedule 5.1B annexed hereto.
C. CONDUCT OF BUSINESS. The Company and each of its Subsidiaries
are engaged only in the businesses permitted to be engaged in by them pursuant
to subsection 7.14.
D. SUBSIDIARIES. The capital stock of each of the Subsidiaries
(other than any Partnership Subsidiary) is duly authorized, validly issued and
fully paid and nonassessable. All of the Subsidiaries of each Loan Party are
identified on Schedule 5.1A annexed hereto, as Schedule 5.1A may be
supplemented from time to time pursuant to subsection 7.7(iii). The capital
stock of each Person identified on Schedule 5.1A (as so supplemented) is not
Margin Stock. Schedule 5.1A correctly sets forth the ownership interests in
each Loan Party (other than the Company) and each of its Subsidiaries, as
Schedule 5.1A may be supplemented from time to time pursuant to the provisions
of subsection 7.7(iii). Each Subsidiary of the Company is a Wholly Owned
Subsidiary.
E. ACQUISITIONS. Each Pool B Subsidiary or Pool C Subsidiary, as
the case may be, shall have the corporate power to consummate each Acquisition
to be consummated by it upon the consummation thereof, on the terms set forth
in any applicable Acquisition Agreement or other operative agreement. Upon the
consummation of any Acquisition, such Acquisition shall have been duly
authorized by all necessary action of such Pool B Subsidiary or Pool C
Subsidiary, as the case may be.
F. FORMATION. Schedule 5.1F annexed hereto specifies (i) each of
the transactions constituting the Formation, (ii) each of the parties to each
such transaction, (iii) each registration or filing with, consent or approval
of, or notice to, or other action to, with or by, any Governmental Authority or
any other Person that is required or proposed to be made, taken or obtained, as
the case may be, in connection therewith the absence of which could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect and (iv) the respective dates on which such transactions are proposed to
be effected and such filings, registrations, consents, approvals, notices and
other actions are proposed to be made, taken or obtained, as the case may be,
in connection therewith. Each of the transactions constituting the Formation
has been duly authorized by all necessary corporate or partnership action of
the Company and the applicable current and former Subsidiaries of the Loan
Parties and other
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Persons. As of the Funding Availability Date, each of the transactions
constituting the Formation shall have been consummated in accordance with, and
shall be effective under, all Applicable Laws.
G. PUBLIC OFFERINGS; GE OPTION. Each of the transactions
constituting the issuance, sale and delivery of up to 3,852,500 shares of
Common Stock in the Equity Offering pursuant to the Equity Offering Documents,
the issuance, sale and delivery of the Senior Notes in the Debt Offering
pursuant to the Debt Offering Documents and the payment thereof pursuant to the
terms thereof and of the Indenture and the issuance, sale and delivery of
approximately 537,634 shares of Common Stock pursuant to the GE Option has been
duly authorized by all necessary action of the Company. As of the Funding
Availability Date, each of such transactions shall have been consummated in
accordance with, and shall be effective under, all Applicable Laws.
5.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and
performance of this Agreement and the other Loan Documents and the Related
Documents to which each Loan Party is a party and the issuance, delivery and
payment of the Notes have been duly authorized by all necessary corporate or
partnership action on the part of each Loan Party, as the case may be.
B. NO CONFLICT. The execution, delivery and performance by each
Loan Party of each Loan Document and each Related Document to which it is a
party and the consummation of the transactions contemplated hereby and thereby,
the consummation of the transactions constituting the Formation, the issuance,
sale and delivery by the Company of __________ shares of Common Stock in the
Formation pursuant to the Formation Documents, the issuance, sale and delivery
by the Company of up to 3,852,500 shares of Common Stock in the Equity Offering
pursuant to the Equity Offering Documents, the issuance, sale and delivery by
the Company of the Senior Notes in the Debt Offering pursuant to the Debt
Offering Documents and the payment thereof pursuant to the terms thereof and of
the Indenture, the issuance, sale and delivery of __________ shares of Common
Stock pursuant to the GE Option and the consummation of each Acquisition and
the other transactions contemplated by this Agreement, the other Loan Documents
and the Related Documents do not and will not (i) violate any provision of law
applicable to any Loan Party or any of its Subsidiaries, the Certificate of
Incorporation or Bylaws or partnership agreement of any Loan Party or any of
its Subsidiaries or any order, judgment or decree of any court or other agency
of government binding on any Loan Party or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any material Contractual Obligation of any Loan
Party, which default, individually or in the aggregate, could have a Material
Adverse Effect, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of any Loan Party or any of its
Subsidiaries (other than Liens securing the Obligations), or (iv) require any
approval of stockholders or any approval or consent of any Person under any
material Contractual Obligation of any Loan Party the absence of which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, other than approvals or consents which will be or have been
obtained on or before the
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Funding Availability Date (or, in the case of an Acquisition, on or before the
date such Acquisition is consummated) and disclosed in writing to the Agent and
the Lenders.
C. GOVERNMENTAL CONSENTS. Except as set forth on Schedules 5.1F
and 5.2 annexed hereto, the execution, delivery and performance by each Loan
Party of each Loan Document and each Related Document to which it is a party,
the consummation of each of the transactions constituting the Formation, the
issuance, sale and delivery by the Company of __________ shares of Common Stock
in the Formation pursuant to the Formation Documents, the issuance, sale and
delivery by the Company of up to 3,852,500 shares of Common Stock in the Equity
Offering pursuant to the Equity Offering Documents, the issuance, sale and
delivery by the Company of the Senior Notes in the Debt Offering pursuant to
the Debt Offering Documents and the payment thereof in accordance with the
terms thereof and of the Indenture, the issuance, sale and delivery by the
Company of __________ shares of Common Stock pursuant to the GE Option and the
consummation of each Acquisition and the other transactions contemplated by
this Agreement, the other Loan Documents and the Related Documents do not and
will not require any registration with, consent or approval of, or notice to,
or other action to, with or by, any Governmental Authority, except for (i) such
of the foregoing which will have been made or obtained on or before the Funding
Availability Date (or, in the case of any Related Document relating to an
Acquisition, on or before the date of the closing of such Acquisition), (ii)
such of the foregoing which, if not made or obtained, could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect and (iii) the recordings and filings required to perfect the Liens
granted pursuant to the Security Documents. As of the Funding Availability
Date, all consents or approvals from or notices to or filings with any federal,
state, or other (domestic or foreign) regulatory authorities required to be
obtained on or before such date in connection with the documents or
transactions described or referred to in the preceding sentence will have been
accomplished in all material respects in compliance in all material respects
with all Applicable Laws except for those referred to in clause (ii) above.
None of the transactions constituting the Formation, the issuance, sale and
delivery of such shares of Common Stock in the Formation pursuant to the
Formation Documents, the issuance, sale and delivery of such shares of Common
Stock in the Equity Offering pursuant to the Equity Offering Documents, the
issuance, sale and delivery of the Senior Notes in the Debt Offering pursuant
to the Debt Offering Documents, the issuance, sale and delivery of such shares
of Common Stock pursuant to the GE Option or the consummation of the other
transactions contemplated by this Agreement, the other Loan Documents and the
Related Documents violates any Applicable Law or regulation in any respect,
which could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
D. BINDING OBLIGATION. This Agreement is, and the other Loan
Documents when executed and delivered hereunder will be, the legally valid and
binding obligations of the applicable Loan Parties, enforceable against the
applicable Loan Parties in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally, and by general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or law) and subject to other qualifications,
exceptions and assumptions such as are
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set forth in the various legal opinions delivered to the Agent in connection
with such documents or other documents.
E. VALID ISSUANCE OF COMMON STOCK. All the issued and
outstanding Common Stock is duly and validly issued, fully paid and
nonassessable. No other Securities of the Company are issued and outstanding,
and no Person has any rights to acquire Securities of the Company other than
shares of Common Stock pursuant to the Formation, the Equity Offering, the GE
Option, the 1996 Long-Term Incentive Plan and the Non-Employee Directors
Retainer Stock Plan, as the case may be, and the Senior Notes pursuant to the
Debt Offering. The issuance and sale of such shares of Common Stock or Senior
Notes, as the case may be, upon issuance and sale, will either (i) have been
registered under applicable federal and qualified under state securities laws
or (ii) be exempt therefrom.
F. NEW YORK STOCK EXCHANGE LISTING; NASDAQ/NMS. All outstanding
shares of each class of Capital Stock of the Company shall at all times be duly
listed on the New York Stock Exchange, Inc. or on NASDAQ/NMS. The Company
shall timely file all reports required to be filed by it with the New York
Stock Exchange, Inc. or by the National Association of Securities Dealers,
Inc., as the case may be, and the Securities and Exchange Commission.
G. RELATED DOCUMENTS; REPRESENTATIONS AND WARRANTIES IN OTHER
LOAN DOCUMENTS. Each Related Document to which any Loan Party or any of its
Subsidiaries is a party is in full force and effect and no term or condition
thereof has been amended or modified in any material respect except as in
accordance with this Agreement. Each Related Document is the legally valid and
binding obligation of such parties, enforceable against such parties in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally, and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or law) and subject
to other qualifications, exceptions and assumptions such as are set forth in
the various legal opinions delivered to Agent in connection with such documents
or other documents. Each Loan Party has delivered to the Agent complete and
correct copies of all Related Documents to which such Loan Party or any of its
Subsidiaries is a party (including in each case all exhibits and schedules
thereto), as amended, modified or waived to date, and of all material notices
or other material writings delivered to or by such Loan Party or such
Subsidiary in connection therewith.
5.3 FINANCIAL CONDITION; NO MATERIAL ADVERSE EFFECT; CONTINGENT
OBLIGATIONS.
A. FINANCIAL CONDITION. The Company has heretofore delivered to
the Agent, at the Agent's request, the following financial statements and
information: (i) the audited consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1995 and the related consolidated statements of
income, stockholders' equity and cash flows of the Company and its Subsidiaries
for such calendar year, (ii) the unaudited statements of Property Gross
Revenues and Operating Expenses for each of the Pool A Properties and the Pool
B Properties for the calendar year ended December 31, 1993, December 31, 1994
and December 31, 1995, respectively, and (iii) the financial statements of the
Company and its Subsidiaries
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required to be delivered to the Agent pursuant to subsections 6.1(i), (ii),
(iii), (v), (vi) and (vii). The statements referred to in clause (i) of the
preceding sentence were prepared in conformity with GAAP and fairly present, in
all material respects, the financial position of the Company and its
Subsidiaries as at the date thereof and the results of operations of the
Company and its Subsidiaries for the period then ended, subject to changes
resulting from audit and normal year end adjustments. The Company and its
Subsidiaries do not (and will not following the initial extension of credit
hereunder) have any Contingent Obligation, contingent liability or liability
for taxes, long-term lease or unusual forward or long-term commitment that is
not reflected in the foregoing financial statements, the notes thereto or
Schedule 5.3C annexed hereto or permitted pursuant to subsection 7.4 and which
in any such case is material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries.
B. CONTINGENT OBLIGATIONS. After giving effect to the Formation,
the Loan Parties and their respective Subsidiaries will not be directly or
indirectly liable with respect to any Contingent Obligations other than as set
forth on Schedule 5.3C annexed hereto or, with respect to such Contingent
Obligations, in amounts greater than the respective maximum estimated amounts
specified thereon. Schedule 5.3C sets forth all Investments made by the Loan
Parties and their respective Subsidiaries and all Guaranties with respect to
which the Loan Parties and their respective Subsidiaries are liable as of the
Funding Availability Date, including all such Investments and Guaranties that
would be subject to subsections 7.3 and 7.4 if the same were made or incurred
on or after the Effective Date.
5.4 PROPERTIES; DAB NOTES AND AFFILIATE NOTES; AGREEMENTS; LICENSES.
A. TITLE TO PROPERTIES; LIENS. Each of Schedule 5.4A1, Schedule
5.4A2 and Schedule 5.4A3 correctly sets forth the interest of each Loan Party
and each of its Subsidiaries in each of the Pool A Properties, Pool B
Properties and Pool C Properties, respectively, in each case after giving
effect to the Formation. There are no outstanding options, rights of first
refusal, rights of first offer or similar rights to purchase or otherwise
acquire such fee interest or leasehold interest, as the case may be, in any
such Property, other than options and rights owned by Loan Party or Subsidiary
thereof, as applicable. After giving effect to the Formation, such Loan Party
or Subsidiary thereof, as applicable, will have good and marketable fee simple
title to, or a valid leasehold interest in, the Properties and good title to
the remainder of the Collateral purported to be owned by it, free and clear of
all Liens, in each case except Permitted Encumbrances and Liens permitted
pursuant to subsection 7.2A (ii) and (iii). All material fixtures,
furnishings, attachments and equipment necessary for the operation, use and
occupancy of each such Property have been installed or incorporated into such
Property and, after giving effect to the Formation, each Loan Party or
Subsidiary thereof, as applicable, will be the sole owner of all of the same,
free and clear of all chattel mortgages, conditional vendor's liens and other
liens, and security interests other than (i) Permitted Encumbrances and Liens
Permitted pursuant to subsections 7.2A(ii), (iii) and (iv), and (ii) in respect
of each Pool C Property, Liens securing any related Pool C Indebtedness.
Except as heretofore disclosed in writing by the Company to the Agent, no tax
liens have been filed against the Company or any of its Subsidiaries and/or any
of their respective properties, including any Property, other than Liens for
non-delinquent real property taxes.
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B. DAB NOTES AND AFFILIATE NOTES. After giving effect to the
Formation, the Company will be a purchaser of each of the DAB Notes and the
Affiliate Notes for value and good faith and without notice of any adverse
claim, and the Company will be the sole owner of all the DAB Notes and the
Affiliate Notes free of any adverse claim or restriction on transfer imposed by
any obligor with respect to any of the DAB Notes and the Affiliate Notes.
Schedule 5.4B sets forth a true and complete list of each of the DAB Notes that
will be outstanding on the Funding Availability Date.
C. POOL A GROUND LEASES. Each of the Pool A Ground Leases and
all amendments thereto that have been or will be entered into on or prior to
the Funding Availability Date are listed on Schedule 4.1G annexed hereto.
After giving effect to the Formation, the Pool A Ground Leases, as so amended,
will be in full force and effect and no term or condition thereof will have
been further amended or modified, or waived after the execution thereof except
in accordance with this Agreement; and no Person will have failed in any
respect to perform any obligation or covenant or satisfy any condition required
by the Pool A Ground Leases to be performed or complied with on or before the
Funding Availability Date except where failure to so comply will not then have
had and could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
D. POOL B DOCUMENTS. Each of the Pool B Documents and all
amendments thereto that have been or will be entered into on or prior to the
Funding Availability Date are listed on Schedule 4.1H annexed hereto. After
giving effect to the Formation, such documents, as so amended, will be in full
force and effect and no term or condition thereof will have been further
amended or modified, or waived after the execution thereof except in accordance
with this Agreement, and no Person will have failed in any respect to perform
any obligation or covenant or satisfy any condition required thereunder to be
performed or complied with on or before the Funding Availability Date except
where failure to so comply will not then have had and could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.
E. MANAGEMENT AGREEMENTS. Each of the Management Agreements and
all amendments thereto that have been or will be entered into on or before the
Funding Availability Date are listed on Schedule 4.1I annexed hereto. After
giving effect to the Formation, the Management Agreements, as so amended, will
be in full force and effect and no term or condition thereof will have been
further amended or modified, or waived after the execution thereof except in
accordance with this Agreement; and no Person will have failed in any respect
to perform any obligation or covenant or satisfy any condition required by the
Management Agreements to be performed or complied with on or before the Funding
Availability Date except where failure to so comply will not then have had and
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. No party to a Management Agreement is in
default on the Funding Availability Date in its obligations to pay Management
Fees in accordance with the provisions of such Management Agreement.
F. SERVICING AGREEMENTS. The Property Servicing Agreement with
respect to each Property and, if a Liquor License exists with respect to such
Property, the Liquor Operation
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Service Agreement with respect to such Property, in each case with all
amendments thereto that have been or will be entered into on or before the
Funding Availability Date, are listed on Schedule 4.1J annexed hereto. After
giving effect to the Formation, the Servicing Agreements, as so amended, will
be in full force and effect and no term or condition thereof will have been
further amended or modified, or waived after the execution thereof except in
accordance with this Agreement; and no Person will have failed in any respect
to perform any obligation or covenant or satisfy any condition required by the
Servicing Agreements to be performed or complied with on or before the Funding
Availability Date except where failure to so comply will not then have had and
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
G. FRANCHISE AGREEMENTS. Each of the Franchise Agreements and
all amendments thereto entered into on or before the Funding Availability Date
are listed on Schedule 4.1K annexed hereto. After giving effect to the
Formation, the Franchise Agreements, as so amended, will be in full force and
effect and no term or condition thereof will have been further amended or
modified, or waived after the execution thereof except in accordance with this
Agreement; and no Person will have failed in any respect to perform any
obligation or covenant or satisfy any condition required by the Franchise
Agreements to be performed or complied with on or before the Funding
Availability Date except where failure to so comply will not then have had and
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
H. MATERIAL LEASES. Each Material Lease with respect to each
Property and all amendments thereto that have been or shall be entered into on
or before the Funding Availability Date are listed on Schedule 4.1L annexed
hereto. After giving effect to the Formation, the Material Leases, as so
amended, shall be in full force and effect and no term or condition thereof
will have been further amended or modified, or waived after the execution
thereof except in accordance with this Agreement; and no Person will have
failed in any respect to perform any obligation or covenant or satisfy any
condition required by the Material Leases to be performed or complied with on
or before the Funding Availability Date except where failure to so comply will
not then have had and could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
I. LIQUOR LICENSES. Each Liquor License issued in connection
with each Property is set forth on Schedule 5.4I annexed hereto, each such
Liquor License is validly issued and in full force and effect and the holder of
each such Liquor License is a party to the Omnibus Management and Liquor
License Agreement. The holder of each Liquor License has the legal right to
utilize each such Liquor License in connection with the operation of any
restaurant, bar or other alcoholic beverage service located at the applicable
Property. All cash and other revenues and receipts from the operation of any
owner of a Liquor License of an alcoholic beverage service at any Property are
collected either by the licensee thereof or Management Corp. and are then
deposited directly into Deposit Accounts subject to the Cash Management System.
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5.5 LITIGATION; ADVERSE FACTS.
Except as set forth in Schedule 5.5 annexed hereto, as amended or
supplemented from time to time with the consent of the Agent, there is no
action, suit, proceeding, arbitration or governmental investigation (whether or
not purportedly on behalf of the Company or any of its Subsidiaries) at law or
in equity or before or by any Governmental Authority, or changes to Applicable
Law, pending or, to the knowledge of the Company, threatened against or
affecting any Loan Party or any of its Subsidiaries, any Property or any other
property of the Company or any of its Subsidiaries that has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. No Loan Party nor any of its Subsidiaries is (i) in
violation of any Applicable Law that has had, or could reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect or
(ii) subject to or in default with respect to any Applicable Law that has had,
or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. To the knowledge of the Company, there
are no pending or threatened actions, suits or proceedings to revoke, attack,
invalidate, rescind or modify the zoning affecting any Property or any
Authorizations heretofore issued with respect to any Property or asserting that
such Authorizations or the zoning affecting any Property or any other property
of any Loan Party or any of its Subsidiaries do not permit the continued use of
such Property or property as contemplated by the Loan Documents. Except as set
forth on Schedule 5.5, to the knowledge of the Company, no Person has asserted
any claimed violation of Applicable Laws arising from the operation, use or
occupancy of the Properties which has not been cured which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
5.6 TAXES.
A. PAYMENT OF TAXES. Except to the extent permitted by
subsection 6.4 and as set forth on the financial statements delivered pursuant
to subsections 4.1C and 5.3, all federal, state and material local Tax returns
and reports relating to any Loan Party or any of its Subsidiaries or the
Properties required to be filed have been timely filed, and all Taxes,
Impositions, assessments, fees and other governmental charges upon any Loan
Party or any of its Subsidiaries or upon the Properties which are due and
payable have been paid prior to delinquency. The Company does not know of any
proposed Tax assessment against any Loan Party or any of its Subsidiaries or
the Properties that could reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect. Neither any Loan Party nor any
of its Subsidiaries (i) has executed or filed with the Internal Revenue Service
or any other Governmental Authority any agreement or other document extending,
or having the effect of extending, the period for assessment or collection of
any Taxes, assessments, fees or other governmental charges or (ii) has any
obligation under any written Tax sharing agreement or agreement regarding
payments in lieu of Taxes.
B. CHARACTERIZATION OF FORMATION FOR FEDERAL INCOME TAX PURPOSES.
The transactions contemplated by the Formation Agreement, the Hampstead
Exchange Agreement and the Rose Hall Transfer Agreement collectively qualify as
a contribution of property for shares under Section 351 of the Internal Revenue
Code. Each Loan Party and each of its
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Subsidiaries shall report the transactions contemplated by the Formation
Agreement, the Hampstead Exchange Agreement and the Rose Hall Transfer
Agreement consistently with the provisions of such section and the Treasury
Regulations promulgated thereunder. There is no plan or intention of the
Company to issue additional shares of Common Stock or shares of a stock of a
different class of Capital Stock of the Company, such that the parties
receiving shares of Common Stock pursuant to the Formation Agreement or the
Hampstead Exchange Agreement or the Equity Offering would no longer satisfy the
control requirement of Sections 351(a) and 368(c) of the Internal Revenue Code.
C. TAX CLASSIFICATION OF PREDECESSOR ENTITIES. With respect to
each Existing Entity (as defined in the Formation Agreement) that is a
partnership, for the period of its existence, such entity was properly
classified as a partnership for federal income tax purposes. With respect to
each Existing Entity that has elected to be treated as an S corporation for
federal income tax purposes, such corporation made a valid S corporation
election under Section 1362 of the Internal Revenue Code and at all times
during the period of its existence satisfied the eligibility criteria under the
Internal Revenue Code for such treatment. Each of the Existing Entities paid
all income taxes to which it was subject, except where the failure to so pay
would not have a Material Adverse Effect.
5.7 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS.
No Loan Party nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any Contractual Obligation, and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a default, except where the consequences, direct or
indirect, of such default or defaults, if any, could not reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect.
Except as disclosed on Schedule 5.7, no Loan Party nor any of its Subsidiaries
is a party to or otherwise subject to any agreement or instrument (other than
the Loan Documents and the HPT Agreements), any charge or other internal
restriction or any Contractual Obligation which by its terms or effect (i)
prohibits or restricts such Loan Party or Subsidiary from acquiring, loaning or
disposing of any Property or other asset, or any interest therein, or acquiring
or entering into, or providing any services under any Management Agreement or
other management agreement or (ii) otherwise restricts the conduct by such Loan
Party or any of its Subsidiaries of any business, except in each case where the
consequences, direct or indirect, of any violation thereof could not reasonably
be expected to have, either individually or in the aggregate, a Material
Adverse Effect. No Loan Party nor any of its Subsidiaries is a party to or is
otherwise subject to any agreement or instrument, any charter or other internal
restriction or any Contractual Obligation which has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.
5.8 GOVERNMENTAL REGULATION; SECURITIES ACTIVITIES.
No Loan Party nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
the Interstate Commerce Act or the Investment Company Act of 1940 or under any
other federal or state statute or
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regulation which could limit its ability to incur Indebtedness or which could
otherwise render all or any portion of the Obligations unenforceable. No Loan
Party nor any of its Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any Margin Stock.
5.9 EMPLOYEE BENEFIT PLANS.
A. ERISA. Each Loan Party, each of its Subsidiaries and each of
their respective ERISA Affiliates are in compliance in all material respects
with all applicable provisions and requirements of ERISA and the regulations
and published interpretations thereunder with respect to each Employee Benefit
Plan, and have performed in all material respects their respective obligations
under each Employee Benefit Plan. The sponsor of each Employee Benefit Plan
which is intended to qualify under Section 401(a) of the Internal Revenue Code
has received a determination letter from the Internal Revenue Service
concluding that such Employee Benefit Plan is so qualified, or has timely filed
an application for a determination letter with the IRS for such employee
benefit plan and has not received an unfavorable determination, and to the
knowledge of each Loan Party, each of its Subsidiaries and each of their
respective ERISA Affiliates, no event has occurred, amendment been adopted or
action been taken that would cause such Employee Benefit Plan to lose its
qualified status.
B. ERISA EVENT. No ERISA Event has had or which could reasonably
be expected to result in liability in excess of $100,000 has occurred or is
reasonably expected to occur.
C. HEALTH AND WELFARE BENEFITS. Except to the extent required
under Section 4980B of the Internal Revenue Code, no Employee Benefit Plan
provides health or welfare benefits (through the purchase of insurance or
otherwise) for any retired or former employee of any Loan Party, any of its
Subsidiaries or any of their respective ERISA Affiliates.
D. UNFUNDED BENEFIT LIABILITIES. As of the most recent valuation
date for any Pension Plan, the amount of unfunded benefit liabilities (as
defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for
all Pension Plans (excluding for purposes of such computation any Pension Plans
with respect to which assets exceed benefit liabilities), does not exceed
$1,000,000.
E. POTENTIAL WITHDRAWAL LIABILITY. As of the most recent
valuation date for each Multiemployer Plan for which the actuarial report is
available, the potential liability of the Loan Parties, their Subsidiaries and
their respective ERISA Affiliates for a complete withdrawal from such
Multiemployer Plan (within the meaning of Section 4203 of ERISA), when
aggregated with such potential liability for a complete withdrawal from all
Multiemployer Plans, based on information available pursuant to Section 4221(e)
of ERISA, does not exceed $1,000,000.
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5.10 CERTAIN FEES.
No broker's or finder's fee or commission will be payable by any Loan
Party or any of its Subsidiaries with respect to this Agreement or the offer,
issue and sale of the Common Stock and the Senior Notes pursuant to the Public
Offerings or any of the transactions contemplated hereby or thereby (other than
the fees payable pursuant to this Agreement and the underwriters' discounts
with respect to the Public Offerings), and the Company hereby indemnifies the
Agent and the Lenders against, and agrees that it will hold the Agent and the
Lenders harmless from, any claim, demand or liability for any such broker's or
finder's fees or commissions payable by the Company alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.
5.11 SOLVENCY.
As of the date of this Agreement, and after giving effect to the
Formation and the consummation of the other transactions contemplated by this
Agreement, the other Loan Documents and the Related Documents, as of the
Funding Availability Date, with respect to each Loan Party and each of its
Subsidiaries, (i) (a) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to such person; (b)
such Person's capital is (or will be, as the case may be), not unreasonably
small in relation to its business or any contemplated or undertaken
transaction; and (c) such Person does not intend to incur, or believe (nor
should it reasonably believe) that it will incur, debts beyond its ability to
pay such debts as they become due; and (ii) such Person is (or will be, as the
case may be), "solvent" within the meaning given that term and similar terms
under Applicable Laws relating to fraudulent transfers and conveyances. For
purposes of clause (i) of the preceding sentence, the amount of any contingent
liability at any time shall be computed as the amount that, in light of all of
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
5.12 DISCLOSURE.
No representation or warranty of any Loan Party contained in this
Agreement, the other Loan Documents and the Related Documents to which it is a
party or in any other document, certificate or written statement furnished to
the Agent or the Lenders by or on behalf of any Loan Party for use in
connection with the transactions contemplated by the Loan Documents and the
Related Documents (as from time to time superseded by subsequent materials
furnished to the Agent) contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact (known to such
Loan Party, in the case of any document not furnished by it) necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances in which the same were made or will be made, as the case may
be. The projections and pro forma financial information contained in such
materials (as from time to time superseded by subsequent materials furnished to
the Agent) are based
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or will be based upon good faith estimates and assumptions believed to be
reasonable at the time made, it being recognized by the Agent and the Lenders
that such projections as to future events are not to be viewed as facts and
that actual results during the period or periods covered by any such
projections may differ materially from the projected results. There is no fact
known to the Company (other than matters of a general economic nature) that has
had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect and that has not been disclosed in any of
the Loan Documents and the Related Documents to which any Loan Party is a party
as of the date hereof or in such other documents, certificates and statements
furnished to the Lenders for use in connection with the transactions
contemplated hereby.
5.13 LIENS ON THE COLLATERAL.
A. GENERAL. The provisions of this Agreement and the Security
Documents are effective to create and maintain, upon proper filing or recording
or taking of possession, as applicable, in favor of the Agent on behalf of the
Lenders valid and legally enforceable Liens on in all of the Pool A Properties,
all of the Pool B Properties and all of the remainder of the Collateral and,
when all necessary and appropriate recordings and filings have been effected in
all necessary and appropriate public offices, and payment is made of any
applicable mortgage recording, intangible and/or similar taxes, this Agreement
and the Security Documents will constitute perfected Liens on all of such
Properties and all of the remainder of the Collateral prior and superior to all
other Liens except Permitted Encumbrances; provided, however, that the
perfection against Persons other than the Company of such a Lien on the Rents
in respect of such Properties may in certain jurisdictions require the Agent to
have possession of such Rents and/or control of such Properties.
B. MORTGAGES. Each Mortgage upon execution and delivery of such
Mortgage by the applicable Loan Party will be a valid and enforceable first
priority Lien on the Pool A Property or Pool B Property that such Mortgage
purports to encumber, and such Mortgage, when such Mortgage is recorded in the
real property records of the county in which such Property encumbered by such
Mortgage is located and upon payment of any applicable mortgage recording,
intangible and/or similar taxes, will be a perfected, valid and enforceable
first priority Lien on such Property in favor of the Agent, which Property will
then be free and clear of all Liens having priority over the first Lien of such
Mortgage, except for Permitted Encumbrances (which shall include, in the case
of each Pool B Property other than the Harbour Island Property, certain first
priority Liens in favor of HPTWN more particularly described in Section 8.25 of
the Mortgages affecting such Pool B Properties).
C. ASSIGNMENTS OF RENTS AND LEASES. Each Assignment of Rents
and Leases, upon execution and recordation of such Assignment of Rents and
Leases in the real property records of the county in which the Pool A Property
or Pool B Property affected by such Assignment of Rents and Leases is located
and upon payment of any applicable recording or intangible taxes, will be, (i)
as to each Pool A Property and the Harbour Island Property, a perfected, valid
and enforceable first priority present assignment of or Lien on the Leases
affecting such Property and of the Rents of and from such Property, and (ii) as
to each Pool B Property (other than the Harbour Island Property), a perfected,
valid and enforceable second
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priority present assignment of the Leases affecting such Property and of the
Rents of and from such Property (subject and subordinate only to the first Lien
of a certain Collateral Assignment of Leases, Contracts and Agreements dated as
of __________, 1996 in favor of HPTWN); which Properties will then otherwise be
free and clear of all Liens having priority over the Assignment of Rents and
Leases, except for Permitted Encumbrances. As of the Funding Availability
Date, the Company represents that upon recordation of each Assignment of Rents
and Leases the Agent has taken all actions necessary to obtain, and as of the
Funding Availability Date the Agent has, a valid and perfected first priority
(or, to the extent described in the immediately preceding sentence, second
priority) assignment of or Lien on the Rents from the Pool A Properties and the
Pool B Properties and of all security for the Leases affecting such Properties,
including cash or securities deposited as security under such Leases subject to
the prior right of the Tenants making such deposits; provided, however, that
the perfection against Persons other than the Company of such a Lien on the
Rents in respect of such Properties may in certain jurisdictions require the
Agent to have possession of such Rents and/or control of such Properties.
D. MECHANICS' LIENS. Except as being contested in accordance
with the provisions of subsection 6.9, no rights of mechanics, contractors,
subcontractors, materialmen or suppliers are outstanding that under law could
give rise to any mechanics' liens affecting any Property. Except as being
contested in accordance with the provisions of subsection 6.9, the cost of all
completed work that has been performed at or about any Property has been paid
in full, no work is currently being performed at or about any Property for
which the Company or any of its Subsidiaries or such Property is or could under
any circumstance become liable.
E. FILINGS AND RECORDINGS. All filings (including all financing
statements and all assignments of financing statements under the Uniform
Commercial Code) have been delivered to the Agent for filing in each public
office in which such filings and recordings are required or advisable to
perfect the Liens on each of the Pool A Properties, the Pool B Properties and
the other Collateral granted by the Loan Parties pursuant to the Security
Documents and, except for the filing of continuation statements with respect to
such financing statements as may be required or advisable to be filed at
periodic intervals, no periodic refiling or periodic recording is presently
required to protect and preserve such Liens and security interests.
5.14 ZONING; AUTHORIZATIONS.
A. ZONING. Except as set forth on Schedule 5.14A annexed hereto,
the use and operation by each Loan Party or any of its Subsidiaries, as
applicable, of each Property as a commercial hotel with related uses, separate
and apart from any other properties, constitutes a legal use under applicable
zoning regulations (as the same may be modified by special use permits or the
granting of variances) and complies in all material respects with all
Applicable Laws and all applicable Insurance Requirements, and does not violate
any Authorizations or other material approvals, material restrictions of record
or any material agreement affecting any Property (or any portion thereof) to
which such Loan Party or such Subsidiary is a party or by which such Loan
Party, such Subsidiary or such Property (or portion thereof) is bound, except
where the consequences, direct or indirect, of any violation thereof has not
had and could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse
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Effect. Except as set forth on Schedule 5.14A, neither the zoning nor any
right of access to or use of any Property is to any extent dependent upon or
related to any real property other than such Property.
B. AUTHORIZATIONS. Except as set forth with respect to the
temporary liquor licenses on Schedule I-A to the Omnibus Management and Liquor
License Agreement, there have been issued in respect of each Property all
Authorizations necessary to own, operate, use and occupy such Property in the
manner operated by the Loan Parties and their respective Subsidiaries, and
their respective predecessors in interest, as of the Effective Date and
contemplated by the Loan Parties and their respective Subsidiaries to be
operated on and after the Formation Date (including any required permits
relating to Hazardous Materials), other than any such Authorizations which, if
not obtained, could not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect. To the knowledge of the Company,
there have been issued in respect of each Property all Authorizations necessary
or required to own, operate, use and occupy such Property in the manner
currently operated by the Tenants under any Material Lease and contemplated to
be operated by the Tenants on and after the Funding Availability Date
(including any required permits relating to Hazardous Materials), other than
any such Authorizations which, if not obtained, could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. Each such Authorization is in full force and effect, and no Loan Party
nor any of its Subsidiaries nor, to the knowledge of the Company, any prior
owner thereof, has received any notice of violation or revocation thereof.
5.15 PHYSICAL CONDITION; ENCROACHMENT; CAPITAL EXPENDITURES.
A. PHYSICAL CONDITION; ENCROACHMENT. Except as disclosed on the
Engineering Reports delivered pursuant to subsection 4.1L, or 7.15A(i), (ii) or
(iii), each Property is free of structural defects and is in good repair
(normal wear and tear excepted) and all building systems contained therein and
all other material items of Collateral are in good working order subject to
ordinary wear and tear, except as disclosed in the Engineering Reports, and is
free and clear of any damage that would affect materially and adversely the
value of such Property or the use of such Property for its intended purposes.
To the knowledge of the Company, other than as described in the Title Policy
and in any Survey, no Improvement at any Property encroaches upon any building
line, setback line, side yard line or any recorded or visible easement.
B. CAPITAL EXPENDITURES. Schedule 5.15B annexed hereto, as
supplemented from time to time by a written notice delivered to the Agent, sets
forth a complete and accurate list of the capital expenditure or similar
reserves required in respect of any Property pursuant to a Ground Lease, any
agreement pursuant to which any of the Loan Parties and their respective
Subsidiaries shall have incurred or may incur any Indebtedness or any other
agreement, instrument or other document.
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5.16 INSURANCE.
All insurance required to be maintained by the Loan Parties and their
respective Subsidiaries pursuant to this Agreement or any other Loan Document
is in full force and effect in accordance with the terms thereof. As to each
Property located in an area identified by the Federal Emergency Management
Agency as having special flood hazards, if flood insurance is available, a
flood insurance policy is in effect. All premiums have been paid with respect
to each insurance policy required to be maintained by the Company and its
Subsidiaries pursuant to this Agreement or any other Loan Document. Schedule
5.16 annexed hereto contains a complete and accurate description of all
policies of insurance that will be in effect as of the Formation Date.
5.17 LEASES.
There is no default or event which with notice or lapse of time or
both would constitute a default under any of the provisions of any Material
Lease affecting any Property that has had, or could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect. No
litigation is currently pending or has been threatened by any Tenant in
connection with any Material Lease affecting any Property that has had, or
could reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect. All Material Leases and other Leases material to
the operation of the Properties as hotels are in full force and effect, except
to the extent such failure could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
5.18 ENVIRONMENTAL REPORTS; ENGINEERING REPORTS; APPRAISALS; MARKET
STUDIES.
To the knowledge of the Company, the Company has delivered to the
Agent and the Lenders correct and complete copies of all environmental audits,
engineering reports, appraisals and market studies with respect to each
Property that any Loan Party or any of its Subsidiaries has in its possession.
5.19 NO CONDEMNATION OR CASUALTY.
No condemnation or other like proceedings (including relocation of any
roadways abutting any Property or change in grade of such roadways or denial of
access to any Property) that has had, or could reasonably be expected to result
in, a Material Adverse Effect, are pending and served nor, to the knowledge of
the Company, threatened against any Property in any manner whatsoever. No
casualty has occurred to any Property that has had or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.
5.20 UTILITIES AND ACCESS.
To the extent necessary for the full utilization of each Property in
accordance with its current use, telephone services, gas, steam, electric
power, storm sewers, sanitary sewers and water facilities and all other utility
services are available to each Property, are adequate to
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serve each such Property, exist at the boundaries of the Land and are not
subject to any conditions, other than normal charges to the utility supplier,
which would limit the use of such utilities. All streets and easements
necessary for the occupancy and operation of each Property are available to the
boundaries of the Land. All necessary rights-of-way for all roads, which are
sufficient to permit each Property to be utilized fully for its current use,
have been completed and are serviceable, and, to the knowledge of the Company,
all public rights-of-way through or adjacent to the Properties have been
acquired and dedicated and accepted for maintenance and public use by the
applicable Governmental Authorities.
5.21 INTELLECTUAL PROPERTY.
A. OWNERSHIP; IP LICENSE AGREEMENTS. The Loan Parties and their
respective Subsidiaries own, or are licensed to use or otherwise have the
lawful right to use, the Intellectual Property and except as set forth on
Schedule 5.21A annexed hereto, all such Intellectual Property is fully
protected and duly and properly registered, filed or issued in the appropriate
office and jurisdictions for such registrations, filing or issuances. All
registered Intellectual Property and all pending applications and the
jurisdictions in which such Intellectual Property is registered or will be
registered on or before the Funding Availability Date, and in each case the
Loan Party holding rights therein, are identified in Schedule 5.21A annexed
hereto. Each of the license agreements (together with any such agreements
entered into after the Funding Availability Date, the "IP LICENSE AGREEMENTS")
pursuant to which any Loan Party or any of its Subsidiaries has rights or will
have rights on or before the Funding Availability Date to use any material
Intellectual Property as of the Funding Availability Date is identified in
Schedule 5.21A. Each Loan Party and each of its Subsidiaries is in compliance
with the material terms of each IP License Agreement to which it is a party and
each such IP License Agreement is in full force and effect, except where the
failure to be in compliance or the failure to be in full force and effect (i)
has not had and could not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect or (ii) result in an Event of
Default hereunder.
B. NO ADVERSE CLAIMS. Except as disclosed in the Registration
Statements, (i) no claim has been asserted by any Person with respect to the
use of any such Intellectual Property, or challenging or questioning the
validity or effectiveness of any such Intellectual Property and the Company
does not know of any valid basis for any such claim which, in either case, has
had or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect; and (ii) the use of such Intellectual
Property by each Loan Party and each of its Subsidiaries does not infringe on
the rights of any Person, subject to such claims and infringements as do not,
in the aggregate, give rise to any liability on the part of any Loan Party or
any of its Subsidiaries that has had or could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. The
consummation of the transactions contemplated by this Agreement will not in any
manner or to any extent impair the ownership of (or the license to use, as the
case may be) any of such Intellectual Property by any Loan Party or any of its
Subsidiaries.
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5.22 WETLANDS.
To the knowledge of the Company and except as disclosed on Schedule
5.22 annexed hereto, none of the Improvements on any Property are constructed
on land designated by any Governmental Authority having land use jurisdiction
as wetlands.
5.23 CASH MANAGEMENT SYSTEM.
The summary of the Cash Management System attached hereto as Schedule
5.23 is accurate and complete in all material respects, after giving effect to
the Formation, and does not omit to state any material fact necessary to make
the statements set forth therein not misleading. No Loan Party nor any of its
Subsidiaries owns any Deposit Account which is not described in Schedule 5.23
or otherwise permitted pursuant to subsection 6.15. After the Funding
Availability Date, there will be no change to the Cash Management System (other
than as permitted by subsection 6.15) except such changes as have been
disclosed to the Agent in writing and approved by the Agent in writing. A Cash
Management Letter covering each Deposit Account included in the Cash Management
System has been delivered to the Agent.
5.24 LABOR MATTERS.
There are no strikes or other labor disputes against any Loan Party or
any of its Subsidiaries, pending or, to the knowledge of the Company,
threatened that have had or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. Hours worked by
and payments made by any Loan Party or any of its Subsidiaries to their
respective employees are not in violation of the Fair Labor Standards Act or
any other applicable law dealing with such matters, except to the extent such
violation could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
5.25 EMPLOYMENT AND LABOR AGREEMENTS.
Except as disclosed on Schedule 5.25 annexed hereto, there are no
employment agreements covering management employees of any Loan Party or any of
its Subsidiaries and there are no collective labor agreements covering any
employees of any Loan Party or any of its Subsidiaries. Each Loan Party and
each of its Subsidiaries is in compliance with the terms and conditions of all
such collective bargaining agreements except where failure to so comply has not
had and could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
5.26 AFFILIATES.
A. AGREEMENTS WITH AFFILIATES. As of the Funding Availability
Date, each of the ISIS 2000 Agreements and the Wynright Agreements will be in
full force and effect and no Person shall have failed in any material respect
to perform any material obligation or covenant or satisfy any material
condition required by such agreements to be performed or complied with on or
before the Funding Availability Date.
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B. AFFILIATE INTERESTS. Set forth on Schedule 5.26B annexed
hereto are the equity and debt interests of Bedrock, the Crow Interests and the
Senior Executives, respectively, in (i) each of the Managed Properties or the
respective owners thereof as of the Effective Date and (ii) Persons that
provided goods or services with respect to any of the Properties or to the
respective owners thereof having a purchase price or value of more than $60,000
during the 12 most recently completed calendar months ending before the
Effective Date.
SECTION 6
COMPANY'S AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from and after the Effective
Date and so long thereafter as the Commitments hereunder shall remain in effect
and until payment in full of the Loans and the other Obligations and the
cancellation or expiration of all Letters of Credit, the Company shall perform
and shall cause each of its Subsidiaries to perform all covenants in this
Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
The Company shall maintain and cause each of its Subsidiaries to
maintain a system of accounting established and administered in accordance with
sound business practices to permit preparation of consolidated and
consolidating financial statements in conformity with GAAP. The Company shall
deliver to the Agent:
(i) Monthly Property Operating Statements: as soon as
available and in any event within 30 days after the end of each
calendar month of each calendar year, commencing with respect to the
calendar month ending April 30, 1996, a statement of Property Gross
Revenues and Operating Expenses and any other expenses with respect to
each Property separately and all Properties collectively (without
duplication), in each case for the 12 month period ending on the last
day of such calendar month, in reasonable detail satisfactory to the
Agent and certified by the Chief Executive Officer, Chief Financial
Officer or Chief Accounting Officer of the Company stating that (x)
such statements of Property Gross Revenues and Operating Expenses and
other expenses fairly present, in all material respects, the results
of operations of the Properties indicated for the periods indicated
and (y) all Operating Expenses and any other expenses with respect to
each Property which have become due and payable as of the last day of
the calendar month next preceding the delivery of such income
statement have been fully paid or otherwise provided for by the
Company or any of its Subsidiaries;
(ii) Monthly Management Statements: as soon as available
and in any event within 30 days after the end of each calendar month
of each calendar year, commencing with respect to the calendar month
ending April 30, 1996, a statement of Approved Management Fees and
other Management Fees, in each case for the 12 month period ending on
the last day of such calendar month, in reasonable detail satisfactory
to the Agent and certified by the Chief Executive Officer, the Chief
Financial Officer or Chief
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Accounting Officer of the Company stating that such statements of
Approved Management Fees and other Management Fees fairly present, in
all material respects, such information for the periods indicated;
(iii) Management Agreement Reports: as soon as available
and in any event (a) within 30 days after the end of each calendar
month of each calendar year, commencing with respect to the calendar
month ending April 30, 1996, a Management Agreement Report certified
by the Chief Executive Officer, the Chief Financial Officer or Chief
Accounting Officer of the Company as of the last day of such calendar
month, together with the information utilized by the Company to
prepare such Management Agreement Report, (b) within 5 days after the
delivery of a written notice pursuant to subsection 7.16B(i) (but in
no event later than the occurrence of effectiveness of the event or
condition required to be specified in such written notice), a
Management Agreement Report certified by the Chief Executive Officer,
Chief Financial Officer or the Chief Accounting Officer of the Company
as of the date of the occurrence or effectiveness of the event or
condition specified therein, together with the information used by the
Company to prepare such Management Agreement Report, (c) within 5 days
after the delivery of a Notice of Renovation/Restoration pursuant to
subsection 7.16B(ii) (but in no event later than the commencement of
any Major Renovation/Restoration), a Management Agreement Report
certified by the Chief Executive Officer, Chief Financial Officer or
the Chief Accounting Officer of the Company with respect to the
Management Agreements as of the date of commencement of any related
Major Renovation/Restoration, together with the information utilized
by the Company to prepare such Management Agreement Report, (d) within
5 days after the expiration (without renewal or extension),
cancellation or termination of a Management Agreement, a Management
Agreement Report certified by the Chief Executive Officer, Chief
Financial Officer or Chief Accounting Officer of the Company with
respect to the Management Agreements as of such date of expiration,
cancellation or termination, and (e) upon written request from the
Agent or at the option of the Company, a Management Agreement Report
certified by the Chief Executive Officer, Chief Financial Officer or
the Chief Accounting Officer of the Company with respect to the
Management Agreements as of the date requested by the Agent in such
request or selected by the Company, as the case may be, together with
the information utilized by the Company to prepare such Management
Agreement Report;
(iv) Borrowing Base Certificates: from and after the
Funding Availability Date, as soon as available and in any event (a)
within 30 days after the end of each calendar month of each calendar
year, a Borrowing Base Certificate, in the form attached hereto as
Exhibit VII and together with the financial statements and other
information utilized by the Company to calculate the Borrowing Base,
and certified by the Chief Executive Officer or Chief Financial
Officer of the Company, calculated as of the last day of such calendar
month, (b) within 5 days after the delivery of a written notice
pursuant to subsection 2.9A(v), 7.15B or 7.16B (but in no event later
than the occurrence or effectiveness of the event or condition
required to be specified in such written notice), a Borrowing Base
Certificate calculated as of the date of the occurrence or
effectiveness of the event or condition specified therein, and
together with the
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financial statements and other information used by the Company to
calculate the Borrowing Base, (c) within 5 days after the delivery of
a Notice of Renovation/Restoration pursuant to subsection 6.11A,
6.11C, 6.12A, 7.15C or 7.16C (but in no event later than the
commencement of a Major Renovation/Restoration), a Borrowing Base
Certificate calculated as of the date of commencement of any related
Major Renovation/Restoration, and together with the financial
statements and other information used by the Company to calculate the
Borrowing Base, (d) within 5 days after a casualty or Taking with
respect to, or the Release of, any Pool A Property (or any portion
thereof) or after the expiration (without renewal or extension),
cancellation or other termination of a Management Agreement, a
Borrowing Base Certificate calculated as of the date of such casualty,
Taking, Release, expiration, cancellation or other termination, as the
case may be, and together with the financial statements and other
information used by the Company to calculate the Borrowing Base, and
(e) at the option of the Company, a Borrowing Base Certificate
calculated as of the date requested by the Agent in such request or
selected by the Company, as the case may be, in reasonable detail
satisfactory to the Agent and together with the financial statements
and other information used by the Company to calculate the Borrowing
Base;
(v) Quarterly Management Statements: as soon as
available and in any event within 30 days after the end of each
calendar quarter of each year, commencing with respect to the calendar
quarter ending March 31, 1996, (a) a statement of Approved Management
Fees and other Management Fees, and (b) summaries of Approved
Management Fees and other Management Fees, in each case for such
calendar quarter, for the 12 month period ending on the last day of
such calendar quarter, and for the then current calendar year to the
end of such calendar quarter, all of the foregoing in reasonable
detail satisfactory to the Agent and certified by the Chief Executive
Officer, the Chief Financial Officer or Chief Accounting Officer of
the Company stating that (x) such statements of Approved Management
Fees and other Management Fees fairly present, in all material
respects, such information for the periods indicated;
(vi) Monthly Financial Statements: as soon as available
and in any event within 30 days after the end of each calendar month
of each calendar year, commencing with respect to the calendar month
ending April 30, 1996, (a) the consolidated balance sheet of the
Company and its Subsidiaries as at the end of such calendar month and
the related consolidated statements of income, stockholders' equity
and cash flows of the Company and its Subsidiaries for such calendar
month for the 12 months ending on the last day of such calendar month
and certified by the Chief Executive Officer, the Chief Financial
Officer or Chief Accounting Officer of the Company stating that they
fairly present, in all material respects, the financial condition of
the Company and its Subsidiaries as at the date indicated and the
results of their operations and their cash flows for the period
indicated, subject to changes resulting from audit and normal year-end
adjustments; provided that financial statements shall not be required
to be delivered pursuant to this subdivision (vi) unless the
Management Margin shall be determined in accordance with clause (ii)
of the definition of Management EBITDA;
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(vii) Quarterly Financial Statements: as soon as available
and in any event within 45 days after the end of each calendar quarter
of each calendar year, commencing with respect to the calendar quarter
ending March 31, 1996, (a) the consolidated balance sheet of the
Company and its Subsidiaries as at the end of such calendar quarter
and the related consolidated statements of income, stockholders'
equity and cash flows of the Company and its Subsidiaries for such
calendar quarter and for the period from the beginning of the then
current calendar year to the end of such calendar quarter, setting
forth in each case in comparative form the corresponding figures for
the corresponding periods of the previous year and the corresponding
figures from the plan and financial forecast for the current year
delivered pursuant to this subsection, and (b) the consolidating
financial statements of the Company and its Subsidiaries (including
balance sheets and income statements segmenting any Subsidiaries of
the Company or groups of Subsidiaries of the Company, as requested by
the Agent in its reasonable discretion) together with any adjustments
and/or eliminations needed to reconcile such Subsidiary financial
statements to the consolidated financial statements of the Company,
all in reasonable detail (it being understood and agreed that, to the
extent the Company's quarterly report filed on Form 10-Q with the
Securities and Exchange Commission for such period contains the
foregoing information, such quarterly report shall be deemed to comply
with the foregoing requirements) and certified by the Chief Executive
Officer, the Chief Financial Officer or Chief Accounting Officer of
the Company stating that they fairly present, in all material
respects, the financial condition of the Company and its Subsidiaries
as at the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments;
(viii) Year-End Financial Statements: as soon as available
and in any event within 90 days after the end of each calendar year,
commencing with respect to the calendar year ending December 31, 1996,
(a) the consolidated balance sheet of the Company and its Subsidiaries
as at the end of such calendar year and the related consolidated
statements of income, stockholders' equity and cash flows of the
Company and its Subsidiaries for such calendar year, setting forth in
each case in comparative form the corresponding figures for the
previous calendar year and the corresponding figures from the plan and
financial forecast delivered pursuant to this subsection for the
calendar year covered by such consolidated financial statements, (b)
the consolidated balance sheets of each Property, (c) the
consolidating financial statements of the Company and its Subsidiaries
(including balance sheets and income statements segmenting any
Subsidiaries of the Company or groups of Subsidiaries of the Company,
as requested by the Agent in its reasonable discretion) together with
any adjustments and/or eliminations needed to reconcile such
Subsidiary financial statements to the consolidated financial
statements of the Company, all of the foregoing in reasonable detail
(it being understood and agreed that, to the extent the Company's
annual report filed on Form 10-K with the Securities and Exchange
Commission for such period contains the foregoing information, such
annual report shall be deemed to comply with the foregoing
requirements) and certified by the Chief Executive Officer or Chief
Financial Officer of the Company stating that they present fairly, in
all material respects, the financial condition of the Company and its
Subsidiaries as at the dates
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indicated and the results of their operations and their cash flows for
the periods indicated, and (d) in the case of the consolidated
financial statements referred to in clause (a), a report thereon of
Coopers & Lybrand or other independent accountants of recognized
national standing selected by the Company and reasonably satisfactory
to the Agent, which report shall be unqualified, shall express no
doubts about the ability of the Company and its Subsidiaries to
continue as a going concern and shall state that such consolidated and
consolidating financial statements fairly present, in all material
respects, the financial position of the Company and its Subsidiaries
as at the dates indicated and the results of their operations and
their cash flows for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the examination by
such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted
auditing standards;
(ix) Officers' and Compliance Certificates: together with
each delivery of financial statements of the Company and its
Subsidiaries pursuant to subdivisions (i), (ii), (v), (vi), (viii)
above, (a) an Officers' Certificate of the Company stating that the
signers have reviewed the terms of this Agreement and have made, or
caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of the Company and its
Subsidiaries and the Collateral during the accounting period covered
by such financial statements and state that such review has not
disclosed the existence during or at the end of such accounting
period, and that the signers do not have knowledge of the existence as
at the date of such Officers' Certificate, of any condition or event
that constitutes an Event of Default or Potential Event of Default,
or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the Company has
taken, is taking and proposes to take with respect thereto; and (b) a
Compliance Certificate demonstrating in reasonable detail compliance
during and at the end of the applicable accounting periods with the
covenants set forth in Section 6;
(x) Accountants' Certification: together with each
delivery of financial statements of the Company pursuant to
subdivision (ix) above, a written statement by Coopers & Lybrand or
other independent accountants of recognized national standing selected
by the Company and reasonably satisfactory to the Agent giving the
report thereon (a) stating in substance that their audit examination
has included a review of the terms of this Agreement and the other
Loan Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or
event that constitutes an Event of Default or Potential Event of
Default has come to their attention and, if such a condition or event
has come to their attention, specifying the nature and period of
existence thereof; provided, however, that such accountants shall not
be liable by reason of any failure to obtain knowledge of any such
Event of Default or Potential Event of Default that would not be
disclosed in the course of their audit examination, and (c) stating in
substance that based on their audit examination nothing has come to
their attention that causes them to believe either or both that the
information contained in the certificates delivered therewith pursuant
to subdivision (viii) above with respect to the annual financial
statements delivered pursuant to
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subdivision (viii) above is not correct or that the matters set forth
in the Compliance Certificates delivered therewith pursuant to
subdivision (viii) above for the applicable calendar year are not
stated in accordance with the terms of this Agreement;
(xi) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of
all reports submitted to the Company by Coopers & Lybrand or any other
independent accountants in connection with each annual, interim or
special audit of the consolidated financial statements of the Company
and its Subsidiaries made by such accountants, including any comment
letter submitted by such accountants to management in connection with
their annual audit;
(xii) Reconciliation Statements: if, as a result of any
change in accounting principles and policies from those used in the
preparation of the audited financial statements referred to in
subsection 5.3, the consolidated financial statements of the Company
and its Subsidiaries delivered pursuant to subdivisions (vi), (vii) or
(viii) of this subsection 6.1 differ in any material respect from the
consolidated financial statements that would have been delivered
pursuant to such subdivisions had no such change in accounting
principles and policies been made, then (a) together with the first
delivery of financial statements pursuant to subdivision (vi), (vii)
or (viii) of this subsection 6.1 following such change, consolidated
financial statements of the Company and its Subsidiaries for (1) the
current calendar year to the effective date of such change and (2) the
two full calendar years immediately preceding the calendar year in
which such change is made, in each case prepared on a pro forma basis
as if such change had been in effect during such periods, and (b)
together with each delivery of financial statements pursuant to
subdivision (vi), (vii) or (viii) of this subsection 6.1 following
such change, a written statement of the Chief Accounting Officer or
Chief Executive Officer of the Company setting forth the differences
which would have resulted in the calculation of the covenants set
forth in Section 6 if such financial statements had been prepared
without giving effect to such change;
(xiii) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by the
Company to its security holders, (b) all regular and periodic reports
and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by the Company with the New York
Stock Exchange, Inc., NASDAQ/NMS, any other securities exchange or
with the Securities and Exchange Commission or any Governmental
Authority or private regulatory authority, and (c) all press releases
and other statements made available generally by the Company or any of
its Subsidiaries to the public or to the securityholders of the
Company;
(xiv) Events of Default, etc.: promptly upon the Company
obtaining knowledge (a) of any condition or event that constitutes an
Event of Default or Potential Event of Default, or becoming aware that
the Agent or any Lender has given any notice or taken any other action
with respect to a claimed Event of Default or Potential Event of
Default, (b) that any Person has given any notice to the Company or
taken any other action with respect to a claimed default or event or
condition of the
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type referred to in subsection 8.1B, 8.1C, 8.1D, 8.1E, 8.1F, 8.1H or
8.1I (c) of any condition or event that constitutes or may (upon the
giving or receiving of notice or the lapse of time, later, or
otherwise) a default, a potential event of default, an event of
default (in each case, as defined in the agreement or instrument
creating, evidencing or governing any such Indebtedness) under or with
respect to any Indebtedness (other than the Indebtedness hereunder),
any Pool B Obligation or any Related Document, or becoming aware that
any agent, trustee, lender or security holder with respect thereto has
given any notice or taken any other action with respect to such
condition or event, (d) of any condition or event that would be
required to be disclosed in a current report filed by the Company with
the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, and
6 of such Form as in effect on the date hereof) if the Company were
required to file such reports under the Exchange Act, (e) that there
has commenced, or is intended to be commenced, a Major
Renovation/Restoration of any Property, Managed Property or Other
Managed Property with respect to which a Notice of
Renovation/Restoration shall not previously have been delivered to the
Agent or (f) of the occurrence of any event or change that has had, or
could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, an Officers' Certificate
specifying the nature and period of existence of such condition, event
or change, or specifying the notice given or action taken by any such
Person and the nature of such claimed Event of Default, Potential
Event of Default, default, event or condition, and what action the
Company has taken, is taking and proposes to take with respect
thereto;
(xv) Indenture: concurrently with their delivery to or
receipt from the Trustee or any holder of the Senior Notes, copies of
all notices, certificates and other documents delivered by the Company
or any of its Subsidiaries to, or received by the Company or any of
its Subsidiaries from, the Trustee or such Holder, as the case may be,
pursuant to the Indenture or the Senior Notes, including, without
limitation, notices, certificates and other documents delivered to the
Trustee pursuant to Sections 3.2, 3.4, 4.9, 4.12, 4.16, 4.17, 8.2,
8.3, 9.1, 9.2, 10.2 and 10.3 of the Indenture and notices received
from the Trustee pursuant to Sections 6.2 and 7.5 of the Indenture;
(xvi) Litigation or Other Proceedings: (a) promptly upon
the Company obtaining knowledge of (x) the institution of any action,
suit, proceeding (whether administrative, judicial or otherwise),
governmental investigation or arbitration against or affecting the
Company or any of its Subsidiaries, or any property of the Company or
such Subsidiary (collectively, "PROCEEDINGS") not previously disclosed
in writing by the Company to the Lenders or (y) any material
development in any Proceeding that, in any case:
(1) if adversely determined, could reasonably be
expected to have, either individually or in the aggregate, a
Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as
a result of, the transactions contemplated hereby;
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written notice thereof together with such other information as may be
reasonably available to the Company to enable the Agent and its
counsel to evaluate such matters; and (b) within 20 days after the end
of each calendar quarter of the Company, a schedule of all Proceedings
involving an alleged liability of, or claims against or affecting, the
Company and its Subsidiaries equal to or greater than $1,000,000
individually or $5,000,000 in the aggregate, and promptly after
request by the Agent, such other information as may be reasonably
requested by the Agent to enable the Agent and its counsel to evaluate
any of such Proceedings;
(xvii) ERISA Events and Notices: (a) promptly upon becoming
aware of the occurrence of or forthcoming occurrence of any ERISA
Event, a written notice specifying the nature thereof, what action the
Company or any of its Subsidiaries or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the PBGC with
respect thereto; and (b) with reasonable promptness, copies of (x)
each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) filed by the Company or any of its ERISA Affiliates with
the Internal Revenue Service with respect to each Pension Plan; (y)
all notices received by the Company or any of its ERISA Affiliates
from a Multiemployer Plan sponsor concerning an ERISA Event; and (z)
copies of such other documents or governmental reports or filings
relating to any Employee Benefit Plan as the Agent shall reasonably
request;
(xviii) Financial Plans: as soon as practicable and in any
event no later than November 30 of each year, projected financial
statements for each Property for the three next succeeding calendar
years setting forth in detail each line item appearing in the form of
financial statement set forth in Schedule 6.1 annexed hereto, together
with an explanation of the assumptions on which such forecasts are
based, and such other information and projections as the Agent may
reasonably request for any Property, all the Properties or the Company
or any of its Subsidiaries;
(xix) Insurance: as soon as practicable and in any event
by the last day of each calendar year, a report in form and substance
reasonably satisfactory to the Agent outlining all material insurance
coverage maintained as of the date of such report by the Company and
its Subsidiaries or, in lieu thereof, copies of such policies, and a
report as to all material insurance coverage planned to be maintained
by the Company and its Subsidiaries in the next succeeding calendar
year to the extent varying from the description of that delivered or
described;
(xx) Environmental Audits and Reports: as soon as
practicable following receipt thereof, copies of all environmental
audits and reports, whether prepared by personnel of the Company or
any of its Subsidiaries or by independent consultants, with respect to
material environmental matters at any Property or which relate to an
Environmental Claim which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect;
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(xxi) Board of Directors: with reasonable promptness,
written notice of any change in the Board of Directors of the Company;
(xxii) Ownership by Bedrock, the Crow Interests and the
Senior Executives: with reasonable promptness, written notice of any
change in the ownership of equity Securities of the Company by
Bedrock, the Crow Interests or the Senior Executives;
(xxiii) Change in Name or Chief Place of Business: (a)
notification of any change in any Loan Party's name, identity or
corporate structure within 30 days of such change and (b) 30 days'
prior written notice of any change in any Loan Party's executive
office or chief place of business;
(xxiv) UCC Search Report: as soon as practicable after the
date of delivery to the Agent of any UCC financing statement executed
by any Loan Party pursuant to subsection 4.1D(ii) or 6.9A, copies of
completed UCC searches evidencing the proper filing, recording and
indexing of all such UCC financing statements and listing all other
effective financing statements that name such Loan Party as debtor,
together with copies of all such other financing statements not
previously delivered to the Agent by or on behalf of the Company or
such Loan Party;
(xxv) Approved Capital Policy: promptly upon any change in
the Approved Capital Policy, written notice of such change; and
(xxvi) Other Information: with reasonable promptness, (a)
information and other data revised to correct any erroneous
information and other data previously delivered by the Company to the
Agent pursuant to this subsection 6.1 or included in any statement,
report or certificate previously delivered by the Company to the Agent
pursuant to this subsection 6.1, together with such statement, report
or certificate that shall have been revised to reflect such revised
information and data and (b) such other information and data with
respect to the Loan Parties and their respective Subsidiaries, the
Properties (separately and for all Properties), the Ground Leases and
Leases, the Management Agreements, the other Collateral and the other
assets and liabilities of the Loan Parties and their respective
Subsidiaries, all in form satisfactory to the Agent, as from time to
time may be reasonably requested by the Agent.
6.2 COMMON STOCK.
The Company shall (i) cause the Common Stock, and each class of
preferred stock of the Company permitted by subsection 7.19B, to be duly listed
on the New York Stock Exchange, Inc. or NASDAQ/NMS and (ii) file timely all
reports required to be filed by the Company with the New York Stock Exchange,
Inc. or the National Association of Securities Dealers, Inc., as the case may
be, and the Securities and Exchange Commission.
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6.3 CORPORATE EXISTENCE; CORPORATE SEPARATENESS ETC.
A. CORPORATE EXISTENCE. Except as permitted pursuant to
subsection 7.7, each Loan Party shall, and shall cause each of its Subsidiaries
to, at all times preserve and keep in full force and effect its corporate or
partnership existence and all Authorizations, rights and franchises material to
its business.
B. FINANCIAL MATTERS. The Company shall cause each of its
Subsidiaries to (i) maintain financial statements, payroll records, accounting
records and other corporate records and other documents separate from each
other and any other Person; (ii) maintain its own bank accounts in its own name
(or, in the case of the Company, in the names of its Subsidiaries), separate
from each other and any other Person; (iii) pay its own expenses and other
liabilities from its own assets and incur (or endeavor to incur) obligations to
other Persons based solely upon its own assets and creditworthiness and not
upon the creditworthiness of each other or any other Person; and (iv) file its
own tax returns or, if part of a consolidated group, join in the consolidated
tax return of such group as a separate member thereof.
C. CORPORATE FORMALITIES. The Company shall take all actions
reasonably necessary to keep the Company and its Subsidiaries separate from
Bedrock and the Crow Interests and their respective Affiliates, including,
without limitation, (i) the taking of action under the direction of the Board
of Directors of the Company and, if so required by the Certificate of
Incorporation or the Bylaws of the Company or by law, the approval or consent
of the stockholders of the Company; (ii) the preparation of corporate minutes
for or other appropriate evidence of each significant transaction engaged in by
the Company; and (iii) the observance of separate approval procedures for the
adoption of resolutions by the Board of Directors of the Company, on the one
part, and of Bedrock and the Crow Interests and their respective Affiliates, on
the other part.
D. INDEPENDENT BUSINESS. The Company shall manage the business
of the Company and its Subsidiaries independently from the business of Bedrock
and the Crow Interests and their respective Affiliates and any other Person and
in accordance with the best interest of the Company; provided that Management
Corp. may manage hotels owned by Bedrock and the Crow Interests, respectively,
and by their respective Affiliates pursuant to Management Agreements or Other
Management Agreements. The Company shall conduct the administrative activities
of the Company and its Subsidiaries separately from the administrative
activities of Bedrock and the Crow Interests and their respective Affiliates
and any other Person; provided the Company may enter into asset management
services agreements with either Bedrock or Crow Interests pursuant to which it
may provide certain administrative services. Any moneys earned by the Company
or its Subsidiaries on their assets or proceeds of the sale of any of their
assets shall be deposited in bank accounts separate from any of the assets of
any other Person, and no assets of the Company and its Subsidiaries shall
become commingled with assets of such Persons. The Company shall use
reasonable efforts to correct any known misunderstanding or misrepresentation
regarding the independence of the Company and its Subsidiaries from Bedrock and
the Crow Interests and their respective Affiliates.
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E. BUSINESS DEALINGS. The Company shall hold itself out, and
shall continue to hold itself out, to the public and to its creditors as a
legal entity, separate and distinct from all other entities, and shall continue
to take all steps reasonably necessary to avoid (i) misleading any other Person
as to the identity of the entity with which such Person is transacting business
or (ii) implying that the Company is, directly or indirectly, absolutely or
contingently, responsible for the Indebtedness or other obligations of Bedrock
or the Crow Interests and their respective Affiliates or any other Person.
6.4 TAXES AND CLAIMS; TAX CONSOLIDATION.
A. TAXES AND CLAIMS. Each Loan Party shall, and shall cause each
of its Subsidiaries to, pay or discharge or cause to be paid or discharged all
Taxes and Impositions imposed upon any Loan Party or any of its Subsidiaries,
or payable by any Loan Party or any of its Subsidiaries with respect to any
Property or other assets or in respect of any of the franchises, business,
income or other property of any Loan Party or any of its Subsidiaries before
the same shall become delinquent and before any penalty accrues thereon, and
will pay, discharge or otherwise satisfy or cause to be paid, discharged or
otherwise satisfied at or before maturity or before they become delinquent, all
Indebtedness, obligations and other claims (including claims for labor,
supplies, materials and services that, if unpaid, might become a Lien on the
property of any Loan Party or any of its Subsidiaries) of any Loan Party and
its Subsidiaries; provided, however, that if, by law, any such Imposition is
payable, or may at the option of the taxpayer be paid, in installments, the
Company or such other party may pay the same or cause it to be paid, together
with any accrued interest on the unpaid balance of such Imposition, in
installments as the same become due and before any fine, penalty, interest or
cost may be added thereto for the nonpayment of any such installment and
interest; provided further, however, that no such charge or claim needs to be
paid if (i) such charge or claim is being diligently contested in good faith by
appropriate proceedings, (ii) reserves consistent with GAAP or otherwise
consented to by the Agent shall have been made therefor by such Loan Party or
such Subsidiary, (iii) none of the Collateral is in jeopardy of being sold,
forfeited or lost during or as a result of such contest, (iv) none of any Loan
Party, or any of its Subsidiaries, the Agent or any Lender could become subject
to any civil fine or penalty not adequately reserved against (in the case of
any Loan Party or Subsidiary thereof) or criminal fine or penalty, in each case
as a result of non-payment of such charge or claim and (v) such contest has not
had and could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. Upon written request by the Agent, each
Loan Party shall, and shall cause each of its Subsidiaries to, deliver to the
Agent all receipts evidencing the payment of all such Taxes, Impositions,
assessments, levies, permits, fees, rents and other public charges imposed upon
or in respect of or assessed against any Loan Party, any of its Subsidiaries or
any of their respective properties or assets except for those being paid or
contested as described in the provisos above.
B. TAX CONSOLIDATION. Each Loan Party will not, and will not
permit any of its Subsidiaries to, file or consent to the filing of any
consolidated income tax return with any Person other than the Company and its
Subsidiaries.
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6.5 MAINTENANCE OF PROPERTIES; REPAIR; ALTERATION.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
(i) maintain or cause to be maintained each Property and all other items of
Collateral in a manner consistent for hotel properties and related property,
and other property and assets constituting the Collateral, in each case of the
same quality and character, and shall keep or cause to be kept every part
thereof in good condition and repair, reasonable wear and tear excepted, and
make all reasonably necessary repairs, renewals or replacements thereto as may
be reasonably necessary to conduct the business of such Loan Party and its
Subsidiaries; (ii) not remove, demolish or structurally alter, or permit or
suffer the removal, demolition or structural alteration of, any of the
Improvements except as expressly permitted hereunder or in connection with a
Renovation or Restoration with the prior written consent of the Agent; (iii)
complete promptly and in a good and workmanlike manner any Improvements which
may be now or hereafter constructed on any Property and, subject to subsection
6.11, promptly restore in like manner any portion of the Improvements which may
be damaged or destroyed thereon from any cause whatsoever, and pay when due all
claims for labor performed and materials furnished therefor (subject to the
right to contest the amount of validity thereof in good faith); (iv) comply in
all material respects with all Applicable Laws, applicable Insurance
Requirements and all covenants, conditions and restrictions now or hereafter
affecting any Property or other item of Collateral or any part thereof or
requiring any alterations or improvements; and (v) not commit, or permit, any
waste of the Collateral (provided that demolition or other work in connection
with renovation, expansion or repair shall not be considered waste); (vi) not
remove any item of the Collateral (other than in accordance with subsection 2.9
or otherwise in the ordinary course of business) without replacing it with a
comparable item of equal or greater quality, value and usefulness, except that
such Loan Party or Subsidiary thereof, as applicable, may sell or dispose of in
the ordinary course of business any property which is obsolete or no longer
useful in its business; provided, however, that the determination of
obsolescence or uselessness of any material property shall be determined by the
senior management of such Loan Party or such Subsidiary.
6.6 INSPECTION; LENDERS' MEETING; APPRAISALS.
A. INSPECTION AND LENDER MEETING. Each Loan Party shall, and
shall cause each of its Subsidiaries to, permit any authorized representatives
designated by the Agent to visit and inspect any Property, including its and
their financial and accounting records, tenant leasing files and other
management books and records, and to make copies and take extracts therefrom,
and to discuss its and their affairs, operations, finances and accounts with
its and their officers, property managers and independent accountants (provided
that any Loan Party or any such Subsidiary may, if it so chooses, be present at
or participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours, with as little disruption of
such party's business and operations as is reasonably practical, and as often
as may be reasonably requested. Without in any way limiting the foregoing, the
Company will, upon the request of the Agent, participate in a meeting with the
Agent and the Lenders once during each calendar year to be held at the
Company's corporate offices (or such other location as may be agreed to by the
Company and the Agent) at such time as may be agreed to by the Company and the
Agent.
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B. APPRAISALS. If the Agent shall advise the Company by written
notice that the Agent believes that the value of one or more Pool A Properties
has been adversely affected, for any reason, since the date of the most recent
Appraisal thereof, promptly thereafter the Loan Parties shall, or shall cause
each of their respective Subsidiaries to, at their expense, cause the
preparation and delivery to the Agent of an Appraisal of each such Pool A
Property dated not more than 30 days prior to the date of such delivery, which
Appraisal shall be prepared by an Appraiser designated by the Agent and shall
be satisfactory in form and substance to the Agent; provided that the Company
shall not be required to pay the expense of more than one such Appraisal of any
such Pool A Property during any period of 12 consecutive months commencing
after the Funding Availability Date. If any Loan Party or any of its
Subsidiaries obtains an appraisal of one or more of the Pool A Properties other
than pursuant to this subsection, the Company shall deliver a copy of such
appraisal to the Agent promptly upon the completion thereof and the Agent may
elect, in its sole discretion and subject to Applicable Laws, to treat such
appraisal as an "Appraisal." In the event that the Agent obtains an Appraisal
of one or more of the Pool A Properties, the Agent shall deliver a copy of such
Appraisal to the Company upon the completion thereof.
6.7 COMPLIANCE WITH LAWS, AUTHORIZATIONS, ETC.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
comply with the requirements of all Applicable Laws, noncompliance with which
could reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect. Each Loan Party shall, and shall cause each of its
Subsidiaries to, keep all Authorizations which are from time to time required
for the use and operation of each Property in full force and effect except
where the failure to keep such Authorizations in effect would not individually
or in the aggregate materially and adversely affect any Property, individually,
or all Properties, collectively.
6.8 PERFORMANCE OF LOAN DOCUMENTS AND RELATED DOCUMENTS.
A. LOAN DOCUMENTS. Each Loan Party shall, and shall cause each
of its Subsidiaries to, observe and perform, or cause to be observed and
performed, all its covenants, agreements, conditions and requirements contained
in each of the Loan Documents to which it is or will be a party in accordance
with the terms thereof and will maintain the validity and effectiveness of such
Loan Documents.
B. RELATED DOCUMENTS. Each Loan Party shall, and shall cause
each of its Subsidiaries to, observe and perform, or cause to be observed and
performed, all its material covenants, agreements, conditions and requirements
contained in each of the Related Documents to which it is a party in accordance
with the terms thereof and will maintain the validity and effectiveness of such
Related Documents, the violation or invalidity of which could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. Each Loan Party shall take no action, nor permit any action to be
taken, which will release any party to the Related Documents from any of such
party's obligations or liabilities thereunder, or will result in the
termination, modification or amendment, or will materially impair the validity
or effectiveness, of any Related Document except as expressly
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provided for herein and therein, which release, invalidity or ineffectiveness
could reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect. The Company shall give the Agent written notice of
any default by any party to any Related Document promptly after such default
becomes known to the Company if such default could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect.
C. ENFORCEMENT. At the request of the Agent and also following
the occurrence of a breach or default under any Related Document to which any
Loan Party or any of its Subsidiaries is a party, such Loan Party or such
Subsidiary, as applicable, will, at its expense but subject to the direction
and control of the Agent, take such action, or at the Agent's request furnish
funds sufficient to enable the Agent to take such action, as the Agent may
reasonably request in connection with enforcing such Related Document.
6.9 PAYMENT OF LIENS.
A. REMOVAL BY LOAN PARTIES. In the event that, notwithstanding
the covenants contained in subsection 7.2, a Lien not otherwise permitted under
subsection 7.2 may encumber any Property or other item of Collateral or any
portion thereof, the Company shall promptly discharge or cause to be discharged
by payment to the lienor or lien claimant or promptly secure removal by bonding
or deposit with the county clerk or otherwise or, at the Agent's option,
promptly obtain insurance against, any such Lien or mechanics' or materialmen's
claims of lien filed or otherwise asserted against any Property or any other
item of Collateral or any portion thereof within 30 days after the date of
notice thereof. The Company shall exhibit to the Agent upon request all
receipts or other satisfactory evidence of payment, bonding, deposit of taxes,
assessments, Liens or any other item which may cause any such Lien to be filed
against any Property or other item of Collateral of any Loan Party or any of
its Subsidiaries. Each Loan Party and each of its Subsidiaries shall fully
preserve the Lien and the priority of each of the Mortgages and the other
Security Documents without cost or expense to the Agent or the Lenders.
B. REMOVAL BY THE AGENT. If any Loan Party or any of its
Subsidiaries fails to promptly discharge, remove or bond off any such Lien or
mechanics' or materialmen's claim of lien as described above within 30 days
after the receipt of notice thereof, then the Agent may, but shall not be
required to, procure the release and discharge of such Lien, mechanics' or
materialmen's claim of lien and any judgment or decree thereon, and in
furtherance thereof may, in its sole discretion, effect any settlement or
compromise with the lienor or lien claimant or post any bond or furnish any
security or indemnity as the Agent, in its sole discretion, may elect. In
settling, compromising or arranging for the discharge of any Liens under this
subsection, the Agent shall not be required to establish or confirm the
validity or amount of the Lien. The Company agrees that all costs and expenses
expended or otherwise incurred pursuant to this subsection 6.9 (including
reasonable attorneys' fees and disbursements) by the Agent shall be paid by the
Company in accordance with the terms hereof.
C. TITLE SEARCHES. In the event that the Agent reasonably
believes that a Lien not otherwise permitted under subsection 7.2 may encumber
any Property or Collateral or any
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portion thereof, the Agent may, at the expense of the applicable Loan Party or
Subsidiary thereof, obtain an updated title and/or lien search regarding such
Property or Collateral.
6.10 INSURANCE.
A. RISKS TO BE INSURED. With respect to each Property, each Loan
Party shall procure or cause to be procured, and each Loan Party shall maintain
or cause to be maintained continuously in effect, insurance coverage issued by
an insurer (i) authorized to issue such insurance in all applicable
jurisdictions, (ii) rated "A" (or its equivalent) or better by Alfred M. Best
Company, Inc., (iii) with a financial size rating of [**VIII**] (or its
equivalent) or better, by Alfred M. Best Company, Inc., and (iv) otherwise
satisfactory to the Agent; provided, however, that the requirements set forth
in clauses (ii) and (iii) above with respect to any Property shall be subject
to any requirements of any related Ground Lease or any requirements of any
mortgage or deed of trust securing any related Pool C Indebtedness; provided
further, however, that (1) __________, the insurer of the Company's umbrella
indemnity insurance policy as of the Funding Availability Date (and any renewal
thereof by such insurer), may be rated "A-" (or its equivalent) by Alfred M.
Best Company, Inc.; it being understood and agreed that, in the event the
Company procures first loss indemnity insurance from a carrier other than
__________, such carrier shall comply with the requirement set forth in clause
(ii) above, and (2) as of the Funding Availability Date, the insurers of the
Company's earthquake, flood and wind insurance policies (and any renewals
thereof by such insurers, respectively) may be rated "A-" (or its equivalent)
by Alfred M. Best Company, Inc. and have a financial size rating of "VII" (or
its equivalent) by Alfred M. Best Company, Inc.; it being understood and
agreed that, in the event the Company procures any earthquake, flood or wind
insurance from a carrier other than the carrier providing such insurance on the
Funding Availability Date, such carrier shall comply with the requirements set
forth in clauses (ii) and (iii) above unless otherwise approved by the Agent.
Each Loan Party shall pay, and shall cause each of its Subsidiaries to pay, in
a timely manner all premiums due in connection therewith. All insurance
policies shall be issued by insurers doing business as admitted licensed
carriers in the state where such Property is located, and shall be authorized
and licensed to issue insurance in such state unless otherwise approved by the
Agent in its sole discretion. The insurance to be procured and maintained by
the Company is the following:
(i) Casualty. The Company shall keep, or shall cause its
Subsidiaries to keep, each Property insured for the benefit of the
Agent, in each case, as follows:
(a) All Risk of Physical Loss. Insurance with
respect to the Improvements now or hereafter located on the
Properties and any alterations or additions thereto and the
furniture, fixtures and equipment against any peril included
within the classification "All Risks of Physical Loss" with
extended coverage (including fire, lightning, windstorm,
sprinkler, hail, explosion, riot, riot attending a strike,
civil commotion, vandalism, malicious mischief, terrorist
acts, aircraft, vehicle and smoke) in an amount equal to the
full insurable value of such Improvements and such furniture,
fixtures and equipment. The term "FULL INSURABLE VALUE" shall
mean the actual replacement cost of such Improvements and such
furniture, fixtures and equipment (without taking into
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account any depreciation, and exclusive of excavations,
footings and foundations, landscaping and paving) determined
by an insurer upon the request of the Agent, a recognized
independent insurance broker or an appraiser selected (and
approved by the Agent) and paid by the applicable Loan Party
or its Subsidiary; provided, however, that such amount shall
be sufficient to prevent such Loan Party or such Subsidiary
from becoming a co-insurer, and the policy shall contain a
stated value endorsement to that effect.
(b) Builder's Risk. During any period of
construction of Improvements and any repair, restoration,
Renovation or replacement thereof, a standard builder's all
risk policy (completed value non-reporting form) for an amount
at least equal to the full insurable value of the work to be
performed and equipment, supplies and materials to be
furnished, as shall be reasonably approved by the Agent for
such purpose, the coverage of which shall include the hazards
described in subsection 6.10A(i)(a) and building collapse;
provided, however, that such policy may be obtained by a
contractor if it names the Agent and the Company as additional
named insureds and if it otherwise complies with this
Agreement. Such policy shall contain a stated value
endorsement so that no co-insurance provision shall be
applicable to any loss thereunder. Such policy shall contain
the provision that "permission is hereby granted to complete
and/or occupy" upon the earlier to occur of substantial
completion of any discrete increment of the work or a Tenant
taking occupancy of any Property (or portion thereof) as to
which work was being performed.
(c) Flood. Insurance against damage or loss by
flood as to any Property that is located in an area now or
subsequently designated as an area having special flood
hazards and in which flood insurance has been made available
under the National Flood Insurance Act of 1968 or the Flood
Disaster Protection Act of 1973,or the National Flood
Insurance Reform Act of 1994, as such Acts may be amended,
modified, supplemented or replaced from time to time, on such
basis and not less than such amounts as shall be reasonably
approved by the Agent, but not less than the amount required
by law. If any Loan Party or any of its Subsidiaries fails to
obtain flood insurance as required, the Agent may purchase
such flood insurance, and the Company shall pay all premiums
and other costs and expenses incurred by the Agent.
(d) Boilers. Broad form boiler and machinery
insurance (without exclusion for explosion) covering all
boilers, boiler tanks, heating and air conditioning equipment,
pressure vessels, auxiliary piping and similar apparatus,
machinery and equipment located in, on or about each Property
insuring against damage or loss from boilers, boiler tanks,
heating and air conditioning equipment, pressure vessels,
auxiliary piping and similar apparatus, machinery and
equipment and insurance against loss of occupancy or use
arising from any such breakdown in such amounts as are
generally available at reasonable premiums and are generally
required by institutional lenders for properties comparable to
the Properties.
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(e) Business Interruption or Rental Income
Insurance. Business interruption and/or loss of rental value
or use and occupancy insurance insuring against business
interruption at and against loss of rental income from each
Property due to any of the hazards listed in subsection
6.10A(i)(a) above in an amount sufficient to avoid any
co-insurance penalty and to provide proceeds for a period not
less than one year of loss.
(f) Earthquake Insurance. With respect to any
Property located in California or other area at high risk for
earthquakes, as reasonably determined by the Agent, and at the
reasonable discretion of the Agent, earthquake insurance on
such basis and in such amounts as shall be reasonably required
by the Agent.
(ii) Worker's Compensation. Each Loan Party shall
maintain, and shall cause each of its Subsidiaries to maintain, for
itself and for each Property at which such Loan Party or such
Subsidiary maintains employees, statutory workers' compensation
insurance (to the extent the risks to be covered thereby are not
already covered by other policies of insurance maintained by such Loan
Party or such Subsidiary), in statutory amounts as required by law.
(iii) Liability. The Company shall procure and maintain:
(a) Comprehensive General Liability Insurance.
Comprehensive general liability insurance, on an occurrence
basis in the amount of $1,000,000 per occurrence per Property
and $3,000,000 in the aggregate per Property covering each
Loan Party, each of its Subsidiaries and the Agent against
claims for bodily injury, death and property damage (including
claims and legal liability to the extent insurable imposed
upon the Agent and all court costs and attorneys' fees and
expenses), arising out of or connected with the possession,
use, leasing, operation, maintenance or condition of each
Property or occurring in, upon or about or resulting from each
Property, or any drive, sidewalk, curb or passageway adjacent
thereto (to the extent insurable), which insurance shall
include blanket contractual liability coverage which insures
contractual liability (to the extent insurable) under the
indemnification set forth in subsection 9.3 of this Agreement
(but such coverage or the amount thereof shall in no way limit
such indemnification), garage liability (if applicable),
products liability (if applicable) and elevator liability (if
applicable) coverage and during any period of construction of
any Improvements, owner's and contractor's protective
liability coverage, including completed operations liability
coverage.
(b) Employer's Liability. Employer's liability
insurance on such basis and in such amounts as shall be
reasonably required by the Agent.
(c) General Liability and Property Damage. Broad
form public liability and property damage insurance on an
occurrence basis in connection with any Renovation being
performed at any Property, to be carried by any
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contractor or construction manager or by any Person, including
any Loan Party or any of its Subsidiaries, performing a
similar function, including "Builders Risk" coverage in the
amount of $1,000,000 per occurrence and $3,000,000 in the
aggregate.
(d) Liquor Liability and Dram Shop Insurance.
Liquor liability and dram shop insurance on such basis and in
such amounts as shall be required by the Agent.
(iv) Additional Insurance. Each Loan Party shall procure
and maintain, and shall cause each of its Subsidiaries to procure and
maintain, such other insurance with respect to the Properties against
loss or damage of the kinds from time to time customarily insured
against and in such amounts as are generally available at reasonable
premiums and are generally required by institutional lenders for
properties comparable to the Properties.
B. POLICY PROVISIONS. Each policy of insurance maintained in
respect of any Loan Party, any of its Subsidiaries and/or any Property pursuant
to this subsection 6.10 shall (a) in the case of each category of public
liability insurance, name such Loan Party or such Subsidiary, as the case may
be, as insured and name the Agent (for the benefit of the Lenders) as an
additional insured, and in the case of all other insurance required under this
Agreement (other than any such policy maintained solely in respect of one or
more Pool B Properties and Pool C Properties), name the Agent (for the benefit
of the Lenders) as an additional insured or as a loss payee, as Agent shall
require; (b) except in the case of public liability insurance and workers'
compensation insurance, provide that all proceeds thereunder shall be payable
to the Agent pursuant to a standard first mortgagee endorsement, without
contribution, that all losses with respect to each Property shall be paid
directly to the Agent, without contribution by any similar insurance carried by
the Agent and that adjustment and settlement of any material loss shall be
subject to the reasonable approval of the Agent; (c) include effective waivers
by the insurer of all rights of subrogation against any loss payee, additional
insured or named insured; (d) permit the Agent to pay the premiums and continue
any insurance upon failure of such Loan Party or such Subsidiary, as the case
may be, to pay premiums when due, upon the insolvency of such Loan Party or
such Subsidiary, as the case may be, or through foreclosure; (e) to the extent
such provisions are reasonably obtainable, provide that such insurance shall
not be impaired or invalidated by virtue of (1) any act, failure to act,
negligence of, or violation of declarations, warranties or conditions contained
in such policy by such Loan Party or such Subsidiary, as applicable, the
Company, the Agent, the Lenders or any other named insured, additional insured
or loss payee, except for the willful misconduct of the Agent or the Lenders
knowingly in violation of the conditions of such policy, (2) the occupation or
use of such Property for purposes more hazardous than permitted by the terms of
the policy, (3) any foreclosure or other proceeding or notice of sale relating
to such Property or (4) any change in the possession of such Property without a
change in the identity of the holder of actual title to such Property (provided
that with respect to items (3) and (4) any notice requirements of the
applicable policies are satisfied); (f) be subject to a deductible, if any, not
greater than $100,000 (or, with respect to coverage for wind damage or
earthquake damage, such greater amount as shall not exceed 2% or 5%,
respectively, of the affected Property's
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agreed value); (g) contain an endorsement providing that none of the Agent, the
Lenders or such Loan Party or such Subsidiary, as applicable, shall be, or
shall be deemed to be, a co-insurer with respect to any risk insured by such
policy; and (h) provide that if all or any part of such policy shall be
canceled or terminated, or shall expire, the insurer will forthwith give notice
thereof to each named insured, additional insured and loss payee and that no
cancellation, termination, expiration, reduction in amount of, or material
change (other than an increase) in, coverage thereof shall be effective until
at least 30 days (or 10 days in the case of non-payment for premiums) after
receipt by each named insured, additional insured and loss payee of written
notice thereof; provided, however, that the requirements set forth in this
subsection 6.10B with respect to any Property shall be subject to any
requirements of any Ground Lease affecting such Property or any requirements of
any mortgage or deed of trust securing any related Pool C Indebtedness.
C. INCREASES IN COVERAGE. The policy limits of any policy of
insurance required hereunder shall be increased from time to time to reflect
what a reasonable prudent owner of land and improvements similar in type and
locality to each Property would carry.
D. PAYMENT OF PROCEEDS. If any such insurance proceeds required
to be paid to the Agent are instead made payable to the Company or any Loan
Party or Subsidiary thereof, the Company hereby appoints the Agent as its
attorney-in-fact, irrevocably and coupled with an interest, to endorse and/or
transfer any such payment to the Agent.
E. DELIVERY OF COUNTERPART POLICIES; EVIDENCE. Each Loan Party
shall deliver, and shall cause each of its Subsidiaries to deliver, to the
Agent on or before the Funding Availability Date valid evidence acceptable to
the Agent for the policies of insurance required by this Agreement or any other
Loan Document to be carried evidencing (i) the issuance of such policies, (ii)
the payment of all premiums payable for the period ending not earlier than the
first anniversary of the Funding Availability Date and (iii) coverage which
meets all of the requirements set forth in this Agreement. At each time after
the Funding Availability Date that any Loan Party or any of its Subsidiaries is
required by this Agreement or by any Security Document or any other Loan
Document to deliver evidence of insurance, such Loan Party shall deliver, or
shall cause such Subsidiary to deliver, such evidence of valid policies of
insurance acceptable to the Agent evidencing (a) the issuance of the policies
of insurance required by this Agreement or other Loan Document to be carried,
(b) the payment of all premiums then due to the applicable insurer, (c)
coverage which meets all of the requirements set forth in this Agreement or
other Loan Document, and (d) that the required policies are in full force and
effect.
F. REPLACEMENT OR RENEWAL POLICIES. Not less than 20 days prior
to the expiration, termination or cancellation of any insurance policy which
any Loan Party or any of its Subsidiaries is required to maintain hereunder,
such Loan Party shall obtain, or shall cause such Subsidiary to obtain, a
replacement or renewal policy or policies (or a binding commitment for such
replacement or renewal policy or policies), which shall be effective no later
than the date of the expiration, termination or cancellation of the previous
policy, and shall deliver to the Agent a valid binder in respect of such policy
or policies in the same form and containing the same information as the
expiring policy or policies required to be delivered
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by each Loan Party and its Subsidiaries pursuant to subsection 6.10E or a copy
of the binding commitment for such policy complying with all the requirements
of this subsection, followed by a certified true copy of the policy or policies
when issued.
G. MATERIAL CHANGE IN POLICY. Each Loan Party shall deliver, and
shall cause each of its Subsidiaries to deliver, to the Agent concurrently with
each material change in any insurance policy covering any part of the
Properties required to be maintained by each Loan Party and its Subsidiaries
hereunder, a valid binder or policy endorsement with respect to such changed
insurance policy certified by the insurance company issuing such policy, in the
same form and containing the same information as the original evidence of
insurance required to be delivered by each Loan Party and its Subsidiaries
pursuant to subsection 6.10E.
H. SEPARATE INSURANCE. Each Loan Party will not take out, nor
will it permit any of its Subsidiaries to take out, separate insurance
concurrent in form or contributing in the event of loss with that required to
be maintained pursuant to this subsection unless such insurance complies with
all of the requirements of this subsection.
6.11 CASUALTY AND CONDEMNATION; RESTORATION.
A. NOTICE OF CASUALTY. Upon the occurrence of any damage to or
loss or destruction of all or any portion of any Property, whether or not
covered by insurance, which will cost (or may reasonably be expected to cost)
more than $100,000 to Restore, as determined by the Company and so certified in
an Officers' Certificate delivered to the Agent, (i) the Company shall promptly
deliver to the Agent written notice of the same which shall, among other
things, describe such casualty, and (ii) as soon as practicable but in any
event prior to the commencement of Restoration of such Property, the Company
shall deliver to the Agent a Notice of Renovation/Restoration in the form
attached hereto as Exhibit XVII.
B. INSURANCE PROCEEDS. All Insurance Proceeds in respect of a
Pool A Property or a Pool B Property (other than Insurance Proceeds
attributable to insurance required pursuant to subsection 6.10A(ii) and (iii))
and the right thereto are hereby irrevocably assigned and pledged by each Loan
Party to the Agent for the benefit of the Lenders, and the Agent on behalf of
the Lenders is authorized, at its option, to collect and receive all of the
same and to give proper receipts and acquittances therefor; provided, however,
that such assignment and pledge with respect to any such Property is subject to
any requirements of any Ground Lease affecting such Property; provided further,
however, that such Loan Party shall have the right to cause the Agent to apply
Insurance Proceeds in accordance with subsections 6.11E and 6.11F. Each Loan
Party agrees to execute and to cause each of its Subsidiaries to execute such
further assignments and pledges of any Insurance Proceeds in respect of Pool A
Properties and Pool B Properties as the Agent may reasonably require and shall
otherwise cooperate with the Agent in obtaining for the Agent and the Lenders
the benefit of any Insurance Proceeds lawfully or equitably payable in respect
of any such Property, subject to the provisos above. If, prior to the receipt
by the Agent of such Insurance Proceeds, any Pool A Property or Pool B Property
shall have been transferred upon foreclosure of the applicable Mortgage (or by
deed in lieu thereof), the Agent shall have the right to receive such Insurance
Proceeds to the extent (x) such Insurance Proceeds are attributable to a
casualty occurring prior to foreclosure or
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delivery of any deed in lieu thereof and (y) of any deficiency found to be due
upon such sale, with legal interest thereon, and reasonable counsel fees, costs
and disbursements incurred by the Agent in connection with the collection of
such Insurance Proceeds. The Agent may, but shall not be obligated to, make
proof of loss if not made promptly by the applicable Loan Party or Subsidiary
thereof. During the continuance of an Event of Default (but not otherwise),
the Agent is hereby authorized and empowered by the Company to settle, adjust
or compromise any claims for damage, destruction or loss thereunder, with or
without the consent of any Loan Party or any of its Subsidiaries (and the
Company hereby irrevocably appoints and constitutes the Agent as the Company's
lawful attorney-in-fact, coupled with an interest and with full power of
substitution, for such purpose). In no event shall any Loan Party or any of
its Subsidiaries settle, adjust or compromise any claim for Insurance Proceeds
in respect of any Pool A Property or Pool B Property in excess of $100,000
without the prior written consent of the Agent, which shall not be unreasonably
withheld, conditioned or delayed; provided, however, that this provision shall
not restrict the right of the lessor under any applicable Ground Lease (1) to
settle, adjust or compromise any claim for Insurance Proceeds to the extent
such lessor is granted the power to do so under such Ground Lease or (2) to
approve any settlement, adjustment or compromise of any claim for Insurance
Proceeds to the extent the approval of such lessor is required under such
Ground Lease. Subject to the requirements of any Ground Lease affecting any
Pool A Property or Pool B Property, each insurance company concerned is hereby
authorized and directed to make payment of all Insurance Proceeds in respect of
each of the Pool A Properties and Pool B Properties payable by it directly to
the Agent. If any Loan Party or any of its Subsidiaries receives any Insurance
Proceeds resulting from such casualty in respect of any Pool A Property or Pool
B Property, such Loan Party shall (subject to the requirements of any Ground
Lease affecting such Property) promptly endorse and transfer, or cause such
Subsidiary to endorse and transfer, such Insurance Proceeds to the Agent and
each Loan Party covenants that until so paid over to the Agent, such Loan Party
or such Subsidiary, as applicable, shall hold such Insurance Proceeds in trust
for the benefit of the Agent and shall not commingle such Insurance Proceeds
with any other funds or assets of such Loan Party or Subsidiary or any other
Person.
C. NOTICE OF CONDEMNATION; NEGOTIATION AND SETTLEMENT OF CLAIMS.
The Loan Parties shall, and shall cause their respective Subsidiaries to,
promptly deliver written notice to the Agent upon obtaining knowledge of the
institution, or the proposed institution, of any bona fide action or proceeding
for the Taking of all or any portion of any Property. The Agent shall have the
right to participate in any negotiation, action or proceeding relating to any
such action or proceeding affecting any Pool A Property or Pool B Property, and
no settlement or compromise of any claim in connection with any such action or
proceeding shall be made without the consent of the Agent, which consent shall
not be unreasonably withheld, conditioned or delayed; provided, however, that
this provision shall not restrict the right of the lessor under any applicable
Ground Lease (1) to settle or compromise any such claim to the extent such
lessor is granted the power to do so under such Ground Lease or (2) to approve
any settlement or compromise of any such claim to the extent the approval of
such lessor is required under such Ground Lease. Upon the occurrence of any
Taking with respect to a Property which will cost (or may reasonably be
expected to cost) more than $100,000 to Restore, as determined by the Company
and so certified in an Officers' Certificate delivered to the Agent, as soon as
practicable thereafter but in any event prior to the commencement of
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any Restoration of such Property, the Company shall deliver to the Agent a
Notice of Renovation/Restoration in the form attached hereto as Exhibit XVII.
D. CONDEMNATION PROCEEDS. All Condemnation Proceeds in respect
of each of the Pool A Properties and Pool B Properties and the right thereto
are hereby irrevocably assigned and pledged by each Loan Party to the Agent for
the benefit of the Lenders, and the Agent on behalf of the Lenders is
authorized, at its option, to collect and receive all such Condemnation
Proceeds and to give proper receipts and acquittances therefor; provided,
however, that such assignment and pledge with respect to any such Property is
subject to any requirements of any Ground Lease affecting such Property;
provided further, however, that such Loan Party shall have the right to cause
the Agent to apply Condemnation Proceeds in accordance with subsections 6.11E
and 6.11F. Each Loan Party agrees to execute, and to cause each of its
Subsidiaries to execute, such further assignments of any Condemnation Proceeds
in respect of any Pool A Property or Pool B Property as the Agent may
reasonably require and shall otherwise cooperate with the Agent in obtaining
for the Agent and the Lenders the benefit of any Condemnation Proceeds lawfully
or equitably payable in respect of such Property, subject to the provisos
above. If, prior to the receipt by the Agent of such Condemnation Proceeds,
the portion of the Pool A Property or Pool B Property, as the case may be,
subject to such action or proceeding shall have been sold on foreclosure of the
applicable Mortgage (or by deed in lieu thereof), the Agent shall have the
right to receive such Condemnation Proceeds to the extent (x) such Condemnation
Proceeds are attributable to a Taking occurring prior to foreclosure or
delivery of any deed in lieu thereof and (y) of any deficiency found to be due
upon such sale, with legal interest thereon, and reasonable counsel fees, costs
and disbursements incurred by the Agent in connection with the collection of
such Condemnation Proceeds. The Agent may, but shall not be obligated to, make
proof of loss if not made promptly by the applicable Loan Party or Subsidiary
thereof. Upon the occurrence and during the continuance of an Event of Default
(but not otherwise), the Agent is hereby authorized and empowered by each Loan
Party to settle, adjust or compromise any claims for Condemnation Proceeds with
or without the consent of such Loan Party or any of its Subsidiaries (and the
Company hereby irrevocably appoints and constitutes the Agent as the Company's
lawful attorney-in-fact, coupled with an interest and with full power of
substitution, for such purpose). In no event shall any Loan Party or any of
its Subsidiaries settle, adjust or compromise any claim for Condemnation
Proceeds in respect of any Pool A Property or Pool B Property without the prior
written consent of the Agent, which shall not be unreasonably withheld,
conditioned or delayed; provided, however, that this provision shall not
restrict the right of the lessor under any applicable Ground Lease (1) to
settle or compromise any claim for Condemnation Proceeds to the extent such
lessor is granted the power to do so under such Ground Lease or (2) to approve
any settlement or compromise of any claim for Condemnation Proceeds to the
extent the approval of such lessor is required under such Ground Lease.
Subject to the requirements of any Ground Lease affecting any Pool A Property
or Pool B Property, each condemnor concerned is hereby authorized and directed
to make payment of all Condemnation Proceeds in respect of each of the Pool A
Properties and Pool B Properties payable by it directly to the Agent. If any
Loan Party or any of its Subsidiaries receives any Condemnation Proceeds
resulting from such condemnation in respect of any Pool A Property or Pool B
Property, such Loan Party or such Subsidiary shall (subject to the requirements
of any Ground Lease affecting such Property) promptly endorse and transfer such
Condemnation
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Proceeds to the Agent and each Loan Party covenants that until so paid over to
the Agent, such Loan Party or Subsidiary, as the case may be, shall hold such
Condemnation Proceeds in trust for the benefit of the Agent and shall not
commingle such Condemnation Proceeds with any other funds or assets of such
Loan Party or Subsidiary or any other Person.
E. REDUCTION OF BORROWING BASE; PAYMENT OF RELEASE PRICE. In the
event of any casualty or Taking with respect to a Pool A Property, a Pool B
Property or a Pool C Property, which will cost (or may reasonably be expected
to cost) more than $100,000 to Restore, as determined by the Company and so
certified in an Officers' Certificate delivered to the Agent, the Company shall
elect by written notice delivered to the Agent as soon as practicable
thereafter, but in any event before the earlier of (x) 10 days after the
occurrence of such casualty or Taking and (y) the commencement of the
Restoration of such Property, either:
(i) to reduce the Borrowing Base as provided in
subsection 2.4B(iii), if applicable, prepay the Loans in an amount
equal to the Release Price with respect to such Property and Restore
such Property pursuant to subsection 6.11G; or
(ii) if all the following conditions shall be satisfied,
to Restore such Property pursuant to subsection 6.11F:
(a) the Maturity Date shall then not have
occurred;
(b) no Potential Event of Default (other than any
Potential Event of Default caused solely by an event or
condition with respect to another Property) or Event of
Default shall have occurred and be continuing or would be
caused by such Restoration;
(c) the Company is in compliance in all respects
with the provisions of subsection 6.11F;
(d) the Agent shall have determined, in its
reasonable discretion, that Restoration of such Property is,
under the circumstances then existing, physically and
economically feasible and can be completed in accordance with
subsection 6.11F on or before a date not less than six months
prior to the Maturity Date;
(e) the Loan Parties and their respective
Subsidiaries shall have business interruption insurance
complying with subsection 6.10 in an amount at least equal to
the reduction in Property EBITDA with respect to such
Property, if any, which the Company reasonably expects to
suffer during the period of Restoration;
(f) the Loan Parties and their respective
Subsidiaries shall have complied with all notice and other
requirements under any Ground Lease affecting such Property
that must be satisfied in respect of such Restoration, the
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Restoration is permitted under the terms of such Ground Lease,
the Ground Lease remains in full force and effect; and
(g) either (1) the Net Insurance/Condemnation
Proceeds shall be sufficient to complete the costs of such
Restoration, as determined by the Agent in its reasonable
discretion, or (2) the Loan Parties and their respective
Subsidiaries shall have provided, at the Company's option, a
cash deposit or a letter of credit satisfactory to the Agent
(other than a Letter of Credit), in its reasonable discretion
(or other collateral reasonably satisfactory to the Agent),
for the amount of any shortfall in the amount of Net
Insurance/Condemnation Proceeds necessary to cover the costs
to complete such Restoration.
If the Loan Parties and their respective Subsidiaries shall fail to satisfy the
conditions set forth in clause (ii) of the preceding sentence or in subsection
6.11F with respect to the related Property, or shall fail to diligently and
continuously prosecute the Work to completion (other than as a result of
Excusable Delay), as determined by the Agent, in its reasonable discretion,
then, subject to the requirements of any Ground Lease affecting such Property,
the Borrowing Base shall be reduced as provided in subsection 2.4B(iii), the
Company shall prepay the Loans in an amount equal to the Release Price with
respect to such Property and the Agent shall apply any or all remaining
Insurance Proceeds or Condemnation Proceeds, as applicable, towards such
prepayment, and execute and deliver a Release with respect to such Property.
F. RESTORATION WITH NET INSURANCE/CONDEMNATION PROCEEDS. In the
event of any casualty or Taking with respect to a Pool A Property, a Pool B
Property or a Pool C Property, which will cost (or may reasonably be expected
to cost) more than $100,000 to Restore, as determined by the Company and so
certified in an Officers' Certificate delivered to the Agent, if any of the
Loan Parties and their respective Subsidiaries elects to Restore a Pool A
Property, a Pool B Property or a Pool C Property pursuant to this subsection
6.11F and the conditions set forth in clause (ii) of the first sentence of
subsection 6.11E are satisfied, all Net Insurance/Condemnation Proceeds shall
be held by the Agent (subject to the requirements of any Ground Lease affecting
such Property) in an interest-bearing account at the Agent, with all interest
to be held therein until completion and final inspection of the Work, and shall
be applied by the Agent to the payment of the cost of Restoring such Property
so damaged or destroyed or of the portion or portions of such Property not so
Taken (the "WORK") and shall be paid out from time to time to the Company as
the Work progresses, subject to retainage as determined by the Agent and
otherwise in accordance with any conditions reasonably imposed by the Agent but
subject to each of the following conditions:
(i) Subject to Excusable Delays, the Company shall
promptly (and in any event within 90 days after the applicable
casualty or Taking) commence, or cause the commencement of,
Restoration of such Property.
(ii) If the Work is structural or if the cost of the Work,
as estimated by the Company, shall exceed (a) with respect to a Pool A
Property, the lesser of 10% of the Pool A Property Amount with respect
to such Property and $500,000 and (b) with respect to a Pool B
Property or a Pool C Subsidiary, $500,000, the Work shall be in the
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charge of an architect or Engineer (who may be an employee or
Affiliate of the Company only if the cost of the Work does not exceed
the amount specified with respect to such Property pursuant to the
preceding clause (a) or (b), as the case may be), and before any Loan
Party or any of its Subsidiaries commences any Work, other than
temporary work to protect property or prevent interference with
business, the Agent shall have approved the plans and specifications
and the general contract for the Work to be submitted by such Loan
Party or such Subsidiary. Such plans and specifications shall provide
for such Work that, upon completion thereof, the Improvements shall
(x) be in compliance in all material respects with all legal
requirements such that all representations or warranties of the Loan
Parties relating to the compliance of such Property with Applicable
Laws in this Agreement or any of the other Loan Documents would then
be true and correct, and (y) be at least equal in value and general
utility to the Improvements which were on such Property prior to the
damage, destruction or Taking. Such plans and specifications shall be
accompanied by (1) a signed estimate of the Company, or, if an
architect or Engineer is required to supervise the Work, such
architect or Engineer, stating the estimated cost of completing the
Work, which estimate shall bear the architect's or Engineer's seal if
not made by the Company and (2) to the extent necessary at such stage
of the Work, certified copies of all Authorizations required in
connection with the commencement and performance of the Work.
(iii) Each request for payment shall be made on seven days'
prior notice to the Agent and shall be accompanied by paid invoices
and by a certificate to be made by such architect or Engineer, if one
be required under clause (ii) above, otherwise by an Officers'
Certificate of the Company, stating (a) that all of the Work completed
has been done in substantial compliance with the approved plans and
specifications, if any be required under said clause (ii) above, (b)
that the sum requested is justly required to reimburse any of the Loan
Parties and their respective Subsidiaries for payments made by the
applicable Loan Party or Subsidiary thereof to, or is justly due to,
the contractor, subcontractors, materialmen, laborers, engineers,
architects or other Persons rendering services or materials for the
Work (giving a brief description of such services and materials), and
that when added to all sums previously paid out by the Agent does not
exceed the cost of the Work done to the date of such certificate, and
(c) that either (x) the amount of such proceeds remaining in the
hands of the Agent, or (y) the amount of such funds, plus funds in the
hands of the applicable Loan Party or Subsidiary thereof from other
sources irrevocably committed to the completion of the Work in a
manner satisfactory to the Agent (including delivery of such funds to
the Agent for application to pay the costs of the Restoration), will
be sufficient on completion of the Work to pay for the same in full
(giving in such reasonable detail as the Agent may require an estimate
of the cost of such completion). The Agent may require that any such
statements be independently verified by an inspector approved by the
Agent.
(iv) Each request shall be accompanied by waivers of lien
satisfactory to the Agent covering that part of the Work for which
payment or reimbursement has been made and by a search prepared by the
Title Company satisfactory to the Agent establishing that there has
not been filed with respect to such Property any mechanics'
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or other lien or instrument for the retention of title in respect of
any part of the Work not discharged of record or bonded to the
reasonable satisfaction of the Agent and evidencing the continued
priority of the Mortgage and Assignment of Rents and Leases on such
Property.
(v) The available Insurance Proceeds or Condemnation
Proceeds which are paid or will be payable by the insurance company
(together with any cash, irrevocable letter of credit, payment or
performance bond or United States government obligation assigned to
the Agent as collateral, in each case acceptable to the Agent as to
amount, obligor and maturity) are, in the judgment of the Agent,
sufficient to pay in full the costs of the Restoration.
(vi) There shall be no Event of Default or Potential Event
of Default (other than any Potential Event of Default caused solely by
an event or condition with respect to another Property).
(vii) The request for any payment after the Work has been
completed shall be accompanied by (a) a copy of any certificate or
certificates required by law to render occupancy of the improvements
being rebuilt, repaired or restored legal; and (b) final lien waivers
for all labor, materials and supplies from all contractors,
subcontractors and materialmen.
(viii) After commencing the Work, the Company shall, subject
to Excusable Delays, perform, or shall cause the applicable Loan Party
or Subsidiary thereof to perform, the Work diligently and in good
faith in a good and workmanlike manner to completion in accordance
with the approved plans and specifications, if any.
(ix) The Agent shall have received "agreements to
complete" of the general contractor, any independent architects or
Engineers, and such subcontractors as the Agent reasonably deems
necessary or desirable, which agreements to complete shall be in form
and substance reasonably satisfactory to the Agent.
(x) The Company shall have obtained and maintained, or
shall have caused the applicable Loan Party or Subsidiary thereof to
obtain and maintain, completed value builders' risk (all risk)
insurance with an insurer reasonably satisfactory to the Agent, and
with loss payable to the Agent.
All costs and expenses of any Restoration, including, without
limitation, any Work, Engineer's fees, architect's fees or contractors fees and
the cost and expenses of complying with this subsection 6.11F, shall be for the
account of the Company. Upon completion of the Work and payment in full
therefor, the Agent will return to the Company the amount of any unspent
Insurance Proceeds or Condemnation Proceeds then or thereafter in the hands of
the Agent on account of the casualty or Taking that necessitated such Work,
together with all undisbursed accrued interest thereon. Nothing in this
subsection shall prevent the Agent from applying at any time all or any part of
the Insurance Proceeds or Condemnation Proceeds to the curing of any Event of
Default under this Agreement or any other Loan Document.
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G. OTHER RESTORATIONS. In the event of any casualty or Taking
with respect to a Property, which will cost (or may reasonably be expected to
cost) more than $100,000 to Restore, as determined by the Company and so
certified in an Officers' Certificate delivered to the Agent, and either (x)
the Company or any of its Subsidiaries elects to Restore a Property pursuant to
subsection 6.11F but the conditions set forth in clause (ii) of the first
sentence of subsection 6.11E are not satisfied or (y) the Company or any of its
Subsidiaries elects to Restore any Property pursuant to this subsection 6.11G,
the Company shall:
(i) prepay the Loans in the amount of the sum of (a) the
aggregate Insurance Proceeds or Condemnation Proceeds, as the case may
be, plus (b) if such Restoration constitutes a Major Renovation/
Restoration, the additional amount that may be required to be paid
pursuant to subsection 2.3B(iv) after taking into account any required
recalculation of the Borrowing Base; and
(ii) together with the delivery of the Notice of
Renovation/Restoration pursuant to subsection 6.11A or 6.11C, deliver
to the Agent the following: (a) a project budget (as revised and
supplemented from time to time in accordance with this subsection
6.11G, the "RESTORATION BUDGET") satisfactory in form to the Agent and
setting forth, among other things, the aggregate costs for such
Restoration, and the aggregate cost for each line item in such budget;
(b) an estimated time schedule for such Restoration, satisfactory in
form to the Agent and setting forth, among other things, the projected
completion date; (c) the final plans and specifications for the
Restoration (as revised and supplemented from time to time in
accordance with this subsection 6.11G, the "RESTORATION PLANS") which,
with respect to any Pool A Property or Pool B Property, shall provide
for the restoration of the related Improvements such that, upon
completion thereof, the Improvements shall (x) be in compliance in all
material respects with all legal requirements such that all
representations or warranties of the Loan Parties relating to the
compliance of such Property with Applicable Laws in this Agreement or
any of the other Loan Documents would then be true and correct, and
(y) be at least equal in value and general utility to the Improvements
which were on such Property prior to the related damage, destruction
or Taking, as the case may be; and (d) all such other information or
materials with respect to the Restoration that the Agent may
reasonably request.
If the Company or any applicable Subsidiary materially changes the scope of the
intended Restoration, materially revises the Restoration Budget (including the
estimated amounts contained therein), or materially revises or modifies the
Restoration Plans, the Company shall promptly deliver to the Agent a supplement
to the Restoration Budget or Restoration Plans or a revised Restoration Budget
or revised Restoration Plans, as applicable, which, with respect to any Pool A
Property or Pool B Property, shall be satisfactory in form and substance to the
Agent. Subject to Excusable Delays, the Company shall, and shall cause each
applicable Subsidiary to, commence such Restoration as soon as practicable, and
in any event within 90 days of the applicable casualty or Taking, and complete
the Restoration promptly, in a good and workmanlike manner and in accordance
with the Restoration Plans. Upon completion of the Restoration, the Company
shall promptly deliver to the Agent a Completion Certificate with respect
thereto. All costs and expenses of any Restoration, including, without
limitation, the
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cost and expenses of complying with this subsection 6.11G, shall be for the
account of the Company. If the Agent determines at any time that the Company
is not in compliance with the provisions of this subsection 6.11G or that the
Property cannot be Restored as contemplated by this subsection 6.11G, the Agent
shall provide the Company written notice of such determination and, within 10
Business Days after delivery of such notice, the Company shall prepay the Loans
(net of any prior prepayments made by the Company in respect of such casualty
or Taking pursuant to this subsection) and the Borrowing Base shall be reduced
as provided in subsection 6.11E.
6.12 RENOVATIONS.
A. NOTICE OF RENOVATION; RENOVATION PLANS. If the Company or any
of its Subsidiaries intends to Renovate any Property, the cost of which will
exceed (or may reasonably be expected to exceed) $100,000, as determined by the
Company and as so certified in an Officers' Certificate delivered to the Agent,
the Company shall, prior to the commencement of any such Renovation, deliver to
the Agent the following: (i) a Notice of Renovation/Restoration with respect
thereto, in the form of Exhibit XVII attached hereto; (ii) a project budget (as
revised and supplemented from time to time in accordance with this subsection
6.12A, the "RENOVATION BUDGET") satisfactory in form to the Agent and setting
forth, among other things, the aggregate costs for such Renovation, and the
aggregate cost for each line item in such budget; (iii) an estimated time
schedule for such Renovation, satisfactory in form to the Agent and setting
forth, among other things, the projected completion date, the number of rooms
that will be unavailable for business as a result of such Renovation and the
duration of such unavailability; (iv) the final plans and specifications for
the Renovation (as revised and supplemented from time to time in accordance
with this subsection 6.12A, the "RENOVATION PLANS") which, with respect to any
Pool A Property or Pool B Property, shall be satisfactory in form and substance
to the Agent; and (v) all such other information or materials with respect to
the Renovation that the Agent may reasonably request. In the event the
Company, or any applicable Subsidiary changes the scope of the intended
Renovation, materially revises the Renovation Budget (including the estimated
amounts contained therein), or materially revises or modifies the Renovation
Plans, the Company shall promptly deliver to the Agent a supplement to the
Renovation Budget or Renovation Plans or a revised Renovation Budget or revised
Renovation Plans, as applicable, which with respect to any Pool A Property or
Pool B Property, shall be satisfactory in form and substance to the Agent.
B. CONDUCT OF RENOVATION; COSTS. Subject to Excusable Delays,
the Company shall, or shall cause its Subsidiaries to, complete the Renovation
promptly, in a good and workmanlike manner and in accordance with the
Renovation Plans. All costs and expenses of any Renovation, including, without
limitation, the cost and expenses of complying with this subsection 6.12, shall
be for the account of the Company.
C. COMPLETION CERTIFICATE. Upon completion of the Renovation,
the Company shall promptly deliver to the Agent a Completion Certificate with
respect thereto.
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6.13 BRUNDAGE CLAUSE.
In the event of the enactment of or change in (including a change in
interpretation of) any Applicable Law (i) deducting or allowing any Loan Party
or any of its Subsidiaries to deduct from the value of any Property for the
purpose of taxation any Lien thereon, (ii) subjecting any Lender to any tax in
respect of, or changing the basis of taxation in respect of, the Mortgages, or
the manner of collection of such taxes (other than Taxes on net income,
franchise taxes and doing business taxes), or (iii) for the taxation of
mortgages or debts secured by mortgages or in the means of collection of any
such tax, in each such case, so as to affect any Lender or the Notes or the
Mortgages or any other Loan Document, and the result is to increase the taxes
imposed upon or the cost to any Lender of maintaining the Loans, or to reduce
the amount of any payments receivable under the Notes, the Mortgages or any
other Loan Document, or to invalidate the Lien created by any Security
Document, then, in any such event, the Company shall, within ten Business Days
of receipt of a request therefor, accompanied by documentation verifying the
nature, amount and due date, pay to such Lender additional amounts to
compensate for such increased costs or reduced amounts; provided, however, that
if any Lender makes such a request, or if the Lien created by any Security
Document may be invalidated, then the Company shall have the right, and, in the
case of such invalidation, shall have the obligation, to reduce the Commitments
and prepay the Loans, in accordance with the provisions of this Agreement and
the Notes; provided further, however, that if any such payment or reimbursement
shall be unlawful or would constitute usury or render the Loans wholly or
partially usurious under Applicable Law, then the Agent may, in its sole
discretion, declare the Loans so affected immediately due and payable (without
premium or penalty) and/or require the Company to pay or reimburse the Lenders
for payment of the lawful and non-usurious portion thereof not less than 180
days after notice of such declaration.
6.14 INTEREST RATE PROTECTION.
If at any time the aggregate principal amount of the Indebtedness of
the Loan Parties and their respective Subsidiaries bearing interest or
requiring other payments (other than principal payments) to be made based on a
rate that is not fixed through maturity exceeds the sum of (i) an amount equal
to 50% of all Indebtedness of the Loan Parties and their respective
Subsidiaries plus (ii) the aggregate notional amount of interest rate
protection then maintained by the Loan Parties and their respective
Subsidiaries provided under an interest rate protection agreement obtained
pursuant to this subsection 6.14 or otherwise on terms and with counterparties
approved by the Agent, which approval shall not be unreasonably withheld,
conditioned or delayed (the amount of such excess being referred to as "EXCESS
FLOATING RATE DEBT"), then, within five Business Days from the day such excess
occurs, the Loan Parties and their respective Subsidiaries shall obtain and
thereafter shall maintain (until such time as no such Excess Floating Rate Debt
is outstanding) interest rate protection through the Maturity Date in a
notional amount at least equal to the Excess Floating Rate Debt as in effect
from time to time and on terms and with counterparties approved by the Agent,
which approval shall not be unreasonably withheld, conditioned or delayed.
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6.15 CASH MANAGEMENT SYSTEM; AGENT RIGHTS; APPLICATION OF CASH FLOW;
DEPOSITORY ACCOUNT NAMES.
A. CASH MANAGEMENT SYSTEM. Each Loan Party shall, and shall
cause each of its Subsidiaries to, maintain the Cash Management System as
described in Schedule 5.23; provided, however, that each Loan Party may open
and close Local Accounts and make other changes to the Cash Management System
in the ordinary course of business upon prior written notice to the Agent and
as long as (i) no Event of Default or monetary default has occurred and is
continuing or would result therefrom, (ii) such changes, either individually or
in the aggregate are not adverse to either the Agent or any Lender (in its
capacity as a Lender) or impair any rights, priority or perfection of the Agent
under the Security Documents, (iii) in the case of any closing of any Local
Account, a replacement Local Account satisfactory to the Agent is opened by
such Loan Party or such Subsidiary, as the case may be, and a Cash Management
Letter is entered into with respect to such replacement Deposit Account prior
to the closing of such Local Account and (iv) all Receipts of each Loan Party
continue to be collected and distributed pursuant to procedures subject to Cash
Management Letters at all times, except as described on Schedule 5.23.
B. AGENT RIGHTS. All funds on deposit in the Local Accounts of
each Loan Party and each of its Subsidiaries shall be transferred on a daily
basis to the Concentration Account, and each Loan Party agrees to perform and
comply and to cause each of their respective Subsidiaries to perform and comply
with the following covenants and agreements:
(i) Receipts shall be received and held by the Company
and such Subsidiary and any of their respective officers, employees,
agents, managers or other Persons acting for or in concert with the
Company or such Subsidiary to make collections for or on behalf of the
Company or such Subsidiary (collectively, "COLLECTING AGENTS"), in
trust for the Agent as Collateral. Notwithstanding any other
provision of this Agreement or any other Loan Document, except as
described on Schedule 5.23, all Receipts shall be deposited daily into
the Deposit Accounts subject to the Cash Management System. On a
daily basis, except as described on Schedule 5.23, each Loan Party, or
any Collecting Agent, shall deposit or shall cause to be deposited,
all Receipts into the Concentration Account or other Deposit Accounts
included in the Cash Management System and subject to Cash Management
Letters on or before the first Business Day following receipt thereof
in the accounting office of the Company or such Subsidiary, as
applicable, and as soon as practical in the case of Receipts received
in any other manner.
(ii) As long as no Event of Default or monetary default
shall have occurred and be continuing, the Company may request that
the Agent instruct the Cash Manager to either apply Receipts on
deposit in the Concentration Account to prepay Loans or transfer such
Receipts to the Operating Accounts in such amounts as the Company may
require, in each case by delivering such a request to the Agent. As
long as no Event of Default or monetary default shall have occurred
and be continuing, upon receipt by the Agent of such a request, the
Agent shall instruct the Cash Manager to apply the Receipts on deposit
in accordance with such request; provided that the Agent may
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instruct the Cash Manager to automatically apply Receipts on deposit
in the Concentration Account in accordance with the Company's
instructions unless the Agent notifies the Cash Manager that an Event
of Default or monetary default has occurred and is continuing subject
to the availability of funds on deposit in the Concentration Account.
(iii) During the continuance of an Event of Default without
the need of any further action by Loan Parties, each Loan Party
irrevocably makes, constitutes and appoints the Agent, and all Persons
designated by Agent for that purpose (including the Cash Manager), at
any time, as such Loan Party's true and lawful attorney-in-fact to
endorse such Loan Party's name on any checks, notes, drafts or any
other form of payment relating to Collateral or Receipts or proceeds
of Collateral or Receipts that come into the Agent's or the Cash
Manager's possession or under the Cash Manager's or the Agent's
control; provided, however, that such appointment by such Loan Party
of the Agent as such Loan Party's attorney-in-fact shall in no case
impose upon the Agent or any such Person any obligation or duty to
take any actions on behalf of such Loan Party or any fiduciary
obligations with respect to such Loan Party.
C. APPLICATION OF CASH FLOW. Notwithstanding anything herein to
the contrary, each Loan Party shall, and shall cause each of its Subsidiaries
to, pay the following from funds provided in the Operating Accounts or
otherwise:
(i) all Operating Expenses for the Properties;
(ii) all scheduled payments of rent, principal or interest
with respect to the Pool B Obligations, the Pool C Indebtedness and
the FF&E Financing Indebtedness;
(iii) federal, state and local taxes; and
(iv) so long as no Event of Default or Potential Event of
Default has occurred and is continuing, Permitted Junior Payments;
it being understood and agreed that, during the continuance of an Event of
Default or Potential Event of Default the Agent may, in its sole discretion in
accordance with subsection 6.15B(iii), apply funds on deposit in the Deposit
Accounts and other Receipts received by the Agent, (i) to the payment of the
foregoing expenses and/or (ii) to the payment of the Obligations. In the event
that the Agent determines, during the continuance of an Event of Default or
Potential Event of Default, to apply funds or Receipts to the payment of the
foregoing expenses, promptly after being notified of such determination by the
Agent, the Company shall deliver to the Agent (x) within five Business Days of
the first day of each calendar month during the continuance of an Event of
Default or Potential Event of Default, a budget setting forth the estimated
Operating Expenses and other amounts set forth above for such calendar month
(y) within three Business Days of the date on which the Company desires a
disbursement to be made, but not more frequently than once in any calendar
week, a written request for disbursements with respect to Operating Expenses
and amounts set forth above for such calendar week and (z) such other budgets
and related information as the Agent may reasonably
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request. Upon receipt of any such request for disbursements, the Agent may, in
its sole discretion, instruct the Cash Manager to transfer funds on deposit in
the Concentration Account to the Operating Accounts to be applied to the
payment of amounts set forth in such request for disbursements and approved by
the Agent.
D. NAMES ON DEPOSIT ACCOUNTS. The Company shall cause each Local
Account listed on Schedule 5.23 annexed hereto in respect of a Pool A Property
or Pool B Property to be changed to the extent necessary so that such Deposit
Account is, at all times on and after the Formation Date, maintained by and in
the name of the Company or any of its Wholly Owned Subsidiaries.
E. CASH MANAGEMENT LETTER. Notwithstanding anything in this
Agreement or in any of the other Loan Documents to the contrary, including any
Cash Management Letter, except during the continuation of an Event of Default
or monetary default, the Agent shall not withdraw any funds from, close or take
any other actions in connection with any Deposit Account (other than cause such
funds to be transferred to the Concentration Account) pursuant to any Cash
Management Letter without the Company's prior written consent or written
joinder. During the continuation of an Event of Default or monetary default,
the Agent shall have the same rights with respect to any Deposit Account as are
expressly provided in this Agreement with respect to the Concentration Account
during the continuance of an Event of Default or monetary default.
6.16 CAPITAL EXPENDITURES.
A. CAPITAL RESERVE ACCOUNT. On the thirtieth day of each
calendar month, commencing on the first such day to occur after the Funding
Availability Date, the Company shall do the following:
(i) deposit or cause to be deposited into the Capital
Reserve Account an amount equal to the remainder, which shall not be
less than zero, of (a) 3.50% of Property Gross Revenues for each of
the Properties for the immediately preceding calendar month minus (b)
if such Property is a Pool B Property or a Pool C Property, the
aggregate amount, if any, that shall then have been deposited with
respect to such Property in Other Capital Reserve Accounts pursuant to
the requirements of the related Pool B Obligation or Pool C Obligation
for such calendar quarter; and
(ii) deliver to the Agent an Officers' Certificate with
respect to (a) the allocation of such amount among the Properties,
which allocation shall reflect the amounts determined with respect to
the Properties pursuant to the preceding clause (i), (b) the
allocation of the resulting balance in the Capital Reserve Account
among the Properties, which allocation shall reflect the allocation of
all deposits in the Capital Reserve Account pursuant to this
subsection 6.16A and all transfers therefrom pursuant to this
subsection 6.16A and (c) the deposits in and withdrawals from each of
the Other Capital Reserve Accounts during the preceding calendar month
and the respective closing balances thereof.
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So long as no Event of Default or Potential Event of Default has occurred and
is continuing, upon the Company's written request and not more frequently than
once each month, the Agent shall transfer funds to the Company then on deposit
in the Capital Reserve Account for the payment of costs of Capital Items or for
the deposit of funds into Other Capital Reserve Accounts, in each case in
amounts not greater than the amount of funds then required by the terms of the
related Pool B Obligation or Pool C Obligation, as the case may be, to be so
deposited; provided, however, that the aggregate amount of such funds applied
towards Capital Items from the Capital Reserve Accounts in respect of any
Property shall not exceed the aggregate amount of funds deposited in the
Capital Reserve Account in respect of such Property. Together with each such
request, the Company shall deliver to the Agent copies of bills and other
documentation as may be reasonably required by the Agent to establish that such
Capital Items or such deposits in such Other Capital Reserve Accounts, as the
case may be, are then due.
B. RENOVATION AND REMEDIATION OF ROSE HALL PROPERTY. Rose Hall
Partnership shall undertake and complete, in accordance with the budget and
time schedule set forth on Schedule 6.16B annexed hereto, and in a manner
satisfactory to the Agent, (i) the Renovation of the Rose Hall Property and
(ii) the remediation of the Rose Hall Property and implementation of monitoring
programs in accordance with the recommendations and suggestions specified in
the Report of Environmental Site Assessment dated April 1996 for the Rose Hall
Property that shall have been approved in writing by the Agent, which approval
may be granted, withheld, conditioned or delayed in its sole discretion. Each
of the Company and Rose Hall Partnership shall promptly provide the Agent with
copies of all monitoring data and reports that it receives from time to time in
connection with the monitoring programs implemented in accordance with clause
(ii) of the preceding sentence.
6.17 DEFERRED MAINTENANCE.
A. DEFERRED MAINTENANCE ACCOUNT. So long as no Event of Default
or Potential Event of Default has occurred and is continuing upon the Company's
written request and not more frequently than once each month, the Agent shall
transfer funds to the Company then on deposit in the Deferred Maintenance
Account for the payment of costs and expenses paid or incurred by any of the
Loan Parties and their respective Subsidiaries in connection with the
completion of Deferred Maintenance; provided, however, that the aggregate
amount of funds applied towards Deferred Maintenance in respect of any Property
shall not exceed the aggregate amount of funds deposited in the Deferred
Maintenance Account in respect of such Property. Together with such request,
the Company shall deliver to the Agent (i) an Officers' Certificate of the
Company, satisfactory to the Agent, certifying as to (a) the completion of the
Deferred Maintenance described therein, (b) the amount budgeted therefor on
Schedule 6.17A annexed hereto and (c) the actual amount of the costs and
expenses therefor incurred or paid by the Loan Parties and their respective
Subsidiaries, and (ii) copies of bills and other documentation as may be
reasonably requested by the Agent to establish that payments in respect of the
related Deferred Maintenance have been made or are then due, as the case may
be.
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B. COMPLETION. Subject to Excusable Delay, the Loan Parties
shall, or shall cause their respective Subsidiaries to, undertake and complete
the Deferred Maintenance in a good and workmanlike manner and in accordance
with the budgets and time schedules set forth on Schedule 6.17A annexed hereto
and, in any event, within 6 months after the Effective Date.
6.18 MANAGEMENT OF PROPERTIES; SERVICING AGREEMENTS.
The Company shall, or shall cause Management Corp. or any of the
Wholly Owned Subsidiaries of Management Corp. to, (i) manage and operate each
of the Properties pursuant to Servicing Agreements in a commercially reasonable
and prudent manner and (ii) maintain worker's compensation insurance as
required by Governmental Authorities. No Person other than the Company,
Management Corp. or such Wholly Owned Subsidiary shall have substantial
authority over the management and operation of any Property.
6.19 INTELLECTUAL PROPERTY.
The Company shall cause each Subsidiary (other than any Pool C
Subsidiary) owning, licensed to use or otherwise having the lawful right to use
any Intellectual Property to execute and deliver the Trademark Agreement for
the purposes of becoming bound thereby, and the Company shall deliver
supplements to the Schedules to this Agreement, the Security Agreement and the
Trademark Agreement, which Schedules shall be acceptable to the Agent.
6.20 FURTHER ASSURANCES.
A. ASSURANCES. Without expense or cost to the Agent or the
Lenders, each Loan Party shall, and shall cause each of its Subsidiaries to,
from time to time hereafter execute, acknowledge, file, record, do and deliver
all and any further acts, deeds, conveyances, mortgages, deeds of trust, deeds
to secure debt, security agreements, hypothecations, pledges, charges,
assignments, financing statements and continuations thereof, notices of
assignment, transfers, certificates, assurances and other instruments as the
Agent may from time to time reasonably require and which do not involve a
material expansion of the Company's obligations or liabilities hereunder in
order to carry out more effectively the purposes of this Agreement or the other
Loan Documents, including to subject any Pool A Property, Pool B Property or
other items of Collateral, intended to now or hereafter be covered, to the
Liens created by the Security Documents, to perfect and maintain such Liens,
and to assure, convey, assign, transfer and confirm unto the Agent the property
and rights hereby conveyed and assigned or intended to now or hereafter be
conveyed or assigned or which any Loan Party or any such Subsidiary may be or
may hereafter become bound to convey or to assign to the Agent or for carrying
out the intention of or facilitating the performance of the terms of this
Agreement, or any other Loan Documents or for filing, registering or recording
this Agreement or any other Loan Documents. Without limiting the foregoing,
the Company shall, and shall cause each other Loan Party to, deliver to Agent,
promptly upon receipt thereof, all instruments received by the Company or any
such Loan Party after the Effective Date and take all actions and execute all
documents necessary or reasonably requested by the Agent to perfect the Agent's
security interest in any such instrument or any other Investment acquired by
the Company or any other Loan Party. Promptly upon request or, in an
emergency, upon demand,
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each Loan Party shall execute and deliver, and hereby authorizes the Agent to
execute and file in the name of such Loan Party, to the extent the Agent may
lawfully do so, one or more financing statements, chattel mortgages or
comparable security instruments to evidence more effectively the Lien hereof
upon the Collateral.
B. FILING AND RECORDING OBLIGATIONS. Each Loan Party shall pay
all filing, registration and recording fees and all expenses incident to the
execution and acknowledgement of any Mortgage or other Loan Document, including
any instrument of further assurance described in subsection 6.21A, and shall
pay all mortgage recording taxes, transfer taxes, general intangibles taxes and
governmental stamp and other taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution, delivery, filing, recording
or registration of any Mortgage or other Loan Document, including any
instrument of further assurance described in subsection 6.21A, or by reason of
its interest in, or measured by amounts payable under, the Notes, the Mortgages
or any other Loan Document, including any instrument of further assurance
described in subsection 6.21A (including all Georgia Intangible Tax, but
excluding income, franchise and doing business taxes), and shall pay all stamp
taxes and other taxes required to be paid on the Notes or any other Loan
Document; provided, however, that such Loan Party may contest in good faith and
through appropriate proceedings, any such taxes, duties, imposts, assessments
and charges; provided further, however, that such Loan Party shall pay all such
taxes, duties, imposts and charges when due to the appropriate taxing authority
during the pendency of any such proceedings if required to do so to stay
enforcement thereof. If any Loan Party fails to make any of the payments
described in the preceding sentence within 10 days after notice thereof from
the Agent (or such shorter period as is necessary to protect the loss of or
diminution in value of any Collateral by reason of tax foreclosure or
otherwise, as determined by the Agent, in its sole discretion) accompanied by
documentation verifying the nature and amount of such payments, the Agent may
(but shall not be obligated to) pay the amount due and such Loan Party shall
reimburse all amounts in accordance with the terms hereof. If Applicable Law
prohibits any Loan Party from paying such taxes, charges, filing, registration
and recording fees, excises, levies, stamp taxes or other taxes, then the Agent
may declare the Pool A Property Amount with respect to the applicable Pool A
Property in accordance with the terms of this Agreement to be immediately due
and payable without premium or penalty not less than 30 days after such
declaration.
C. COSTS OF DEFENDING AND UPHOLDING THE LIEN. The Agent may,
upon at least five days' prior notice to the Company, (i) appear in and defend
any action or proceeding, in the name and on behalf of the Agent, the Lenders,
any Loan Party or any of its Subsidiaries, in which the Agent or any Lender is
named or which the Agent in its sole discretion determines is reasonably likely
to materially adversely affect any Pool A Property, any Pool B Property, any
Management Agreement or other Collateral, any Mortgage, the Lien thereof or any
other Loan Document and (ii) institute any action or proceeding which the Agent
reasonably determines should be instituted to protect the interest or rights of
the Agent and the Lenders in any Pool A Property, any Pool B Property, any
Management Amount or other Collateral or under this Agreement or any other Loan
Document. The Company agrees that all reasonable costs and expenses expended
or otherwise incurred pursuant to this subsection (including reasonable
attorneys' fees and disbursements) by the Agent shall be paid by the Company or
reimbursed to the Agent, as the case may be, promptly after demand.
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D. COSTS OF ENFORCEMENT. The Company agrees to bear and shall
pay or reimburse the Agent and the Lenders in accordance with the terms of
subsection 8.2 for all reasonable sums, costs and expenses incurred by the
Agent and the Lenders (including reasonable attorneys' fees and the expenses
and fees of any receiver or similar official) of or incidental to the
collection of any of the Obligations, any foreclosure (or Transfer in lieu of
foreclosure) of this Agreement, any Mortgage or any other Loan Document or any
sale of all or any portion of any Pool A Property, any Pool B Property, all or
any interests under the Management Agreements or all or any portion of the
other Collateral.
E. FURNISHING OF DOCUMENTS. The Company shall, at its sole cost
and expense, furnish to the Agent all instruments, documents, boundary surveys,
footing or foundation surveys, certificates, plans and specifications,
Appraisals (but only to the extent required to be paid by the Company pursuant
to subsection 6.6B), title and other insurance reports and agreements, and each
and every other document, certificate, agreement and instrument required to be
furnished pursuant to the terms of the Loan Documents.
SECTION 7
COMPANY'S NEGATIVE COVENANTS
The Company covenants and agrees that, so long as the Commitments
hereunder shall remain in effect and until payment in full of the Loans and the
other Obligations and the cancellation or expiration of all Letters of Credit,
the Company shall perform and shall cause each of its Subsidiaries to perform
all covenants in this Section 7.
7.1 INDEBTEDNESS.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, create, incur, assume,
Guarantee, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except:
(i) the Loan Parties and their respective Subsidiaries
may become and remain liable with respect to the Obligations;
(ii) the Loan Parties and their respective Subsidiaries
may become and remain liable with respect to (a) the Senior Notes
pursuant to the Indenture and (b) with the prior written approval of
the Agent, which approval may be granted, withheld, conditioned or
delayed in its sole discretion, any refinancing, exchange or refunding
of the Senior Notes; provided, however, that in no event shall the
Indebtedness for which the Loan Parties and their respective
Subsidiaries may become and remain liable pursuant to the preceding
clause (b) shall (x) have an aggregate principal amount greater than
the principal amount of the Senior Notes so refinanced, exchanged or
refunded or (y) have terms that are more burdensome either to the Loan
Parties and their respective Subsidiaries or to the rights and
obligations of the Agent and Lenders hereunder and under the other
Loan Documents in any material respect, as determined by the Agent in
its sole discretion.
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(iii) the Loan Parties and their respective Subsidiaries
may become and remain liable with respect to FF&E Financing
Indebtedness in aggregate principal amounts at any time outstanding
not to exceed (a) $5,000,000 in the aggregate, (b) $600,000 with
respect to each Property that is an upscale full service hotel or a
resort hotel and (c) $300,000 for each Property that is a garden style
hotel, or in each case such lesser amount as shall be permitted under
the Pool B Documents or the Pool C Documents with respect to each of
the Pool B Properties and the Pool C Properties, as the case may be;
provided that all FF&E Financing Indebtedness shall be secured solely
by the FF&E financed with such FF&E Indebtedness;
(iv) the Loan Parties and their respective Subsidiaries
may become and remain liable with respect to Indebtedness in respect
of the Pool B Obligations indicated on Schedule 7.1(iv) annexed hereto
as being owed thereby;
(v) the Loan Parties and their respective Subsidiaries
may become and remain liable with respect to Indebtedness in respect
of the Letters of Credit;
(vi) the Loan Parties and their respective Subsidiaries
may become and remain liable with respect to Interest Rate Agreements
required pursuant to subsection 6.14 or otherwise approved by the
Agent, which approval shall not be unreasonably withheld, conditioned
or delayed;
(vii) so long as at the time of incurrence thereof no Event
of Default or Potential Event of Default has occurred and is
continuing or would be caused thereby, each Pool C Subsidiary may
incur and remain liable with respect to Indebtedness to Persons in
connection with the Acquisition or ownership of a Pool C Property, and
may refinance, exchange or refund the same (as so incurred,
refinanced, exchanged or refunded, "POOL C INDEBTEDNESS"), in each
case as incurred, refinanced, exchanged or refunded on terms and
conditions approved in writing by the Agent, which approval shall not
be unreasonably withheld, conditioned or delayed; provided, however,
that (r) the aggregate outstanding principal amount of any such Pool C
Indebtedness shall not at any time exceed 50% of the sum of the
aggregate cash purchase price of such Pool C Property plus the
aggregate amount of expenditures actually made by such Pool C
Subsidiary in connection with the Renovation of such Pool C Property,
(s) such Pool C Indebtedness of any Pool C Subsidiary shall not
require the scheduled payment of principal, interest and other amounts
during any period that in the aggregate exceeds an amount equal to 50%
of the Property EBITDA for such period with respect to such Pool C
Property, provided that this clause (s) shall not be given effect with
respect to any Pool C Property during the period from the commencement
of a Renovation with respect thereto to the last day of 12 complete
calendar months after the completion of such Renovation if and so long
as the Pool C Subsidiary either, at the written election made by the
Company or such Pool C Subsidiary and delivered to the Agent before
the date of such commencement, (1) shall have deposited and maintained
funds in a segregated account in an amount not less than the aggregate
amount of interest that shall be required to be paid during the
remainder of the period with respect to which this clause (s) shall
not be given effect, (2) in the absence of a default under such
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Pool C Indebtedness, have the unrestricted right to add to the
principal amount thereof the aggregate amount of such interest or to
make one or more additional borrowings thereunder to pay the aggregate
amount of such interest, or (3) shall have directed the Agent by
Officers' Certificate to include an amount equal to such aggregate
amount of interest in clause (iv) of the definition of Total
Utilization during the remainder of the period with respect to which
this clause (s) will not be given effect, (t) such Pool C Indebtedness
shall be non-recourse to any Loan Party or any of its Subsidiaries
(other than for any Guaranties provided with respect to customary
carve-outs for environmental and "bad deed" indemnities), provided
that such Pool C Indebtedness may be recourse to any Pool C Subsidiary
so long as such Pool C Indebtedness is secured by first priority Liens
on all material assets (including all the capital stock of its
Subsidiaries and all such Subsidiaries' assets) owned by each such
Pool C Subsidiary (which Pool C Subsidiary shall have no other
material assets or Indebtedness), (u) such Pool C Indebtedness shall
not be secured by (1) the assets of any Loan Party or any of its
Subsidiaries (other than the Pool C Subsidiary that is the obligor
with respect thereto, in accordance with the preceding clause (v)) or
(2) the Transfer of or Lien on any Intellectual Property, (v) so long
as (1) such Pool C Indebtedness has not been accelerated, (2) a
receiver has not been appointed with respect to the related Pool C
Property or (3) no other remedy is being exercised with respect to any
collateral securing, or other property subject to, such Pool C
Indebtedness, such financing does not preclude or limit the
distribution of Excess Cash Flow (after reserves for Capital Items) to
the Company for the purposes set forth herein, (w) a Potential Event
of Default or an Event of Default or a default or event of default
under the Senior Notes shall not constitute a default or event of
default thereunder, (x) after giving affect to such transaction, the
Company is in compliance with all of the provisions set forth herein
and the other Loan Documents, (y) the Company shall have delivered to
the Agent any Officers' Certificate demonstrating compliance with the
provisions of this subsection 7.1(vii) by any Pool C Subsidiary in
connection with such Acquisition, and (z) the Company shall provide
Bankers with a request for proposal regarding the provision of such
Pool C Indebtedness and will consider Bankers' proposal, if any, in
accordance with the Company's usual practice;
(viii) so long as at the time of assumption or incurrence
thereof no Event of Default has occurred and is continuing or would be
caused thereby, the Vinings Subsidiary may assume or incur and remain
liable with respect to Indebtedness to Persons other than the Company
and its Wholly Owned Subsidiaries in connection with the Acquisition
or ownership of the Vinings Property, and may refinance, exchange or
refund the same (as so assumed, incurred, refinanced, exchanged or
refunded, "VININGS INDEBTEDNESS"), in each case assumed, incurred,
refinanced, exchanged or refunded on terms and conditions approved in
writing by the Agent, which approval shall not be unreasonably
withheld, conditioned or delayed; provided that (x) without the
approval of the Agent, the Vinings Subsidiary may assume the
Indebtedness of the seller of the Vinings Property under or with
respect to the Vinings Bond Documents in a principal amount not
greater than $9,675,000, (y) the Vinings Subsidiary shall not
refinance, exchange or refund any amount of such Indebtedness so
assumed, or amend or otherwise modify any of the terms thereof,
without the prior written approval of the
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Agent, which approval may be withheld, conditioned or delayed in its
sole discretion, provided, however, that (1) without the approval of
the Agent, the Vinings Subsidiary may refinance, exchange or refund
such Indebtedness, or amend or otherwise modify any of the terms
thereof, if, after giving effect to such refinancing, exchange,
refund, amendment or other modifications, the principal amount of such
Indebtedness and all other Indebtedness of the Vinings Subsidiary
shall not exceed 50% of the value of the Vinings Property specified in
an Appraisal of the Vinings Property dated as of a date not more than
60 days before the effectiveness of such refinancing, exchange,
refunding, amendment or other modification and approved by the Agent
in its sole discretion and (2) all Indebtedness assumed or incurred by
the Vinings Subsidiary at any time shall be non-recourse to the
Company or any of its other Subsidiaries (other than for any
Guaranties provided with respect to customary carve-outs for
environmental and "bad deed" indemnities) and shall not be secured by
(1) the assets of any Loan Party or any of its Subsidiaries (other
than the Vinings Subsidiary) or (2) the Transfer of or Lien on any
Intellectual Property;
(ix) the Loan Parties and their respective Subsidiaries may
become and remain liable with respect to the Indebtedness that
consists of Contingent Obligations otherwise permitted by subsection
7.4, subject to the terms and conditions thereof; and
(x) other Indebtedness in an aggregate principal amount not
to exceed $250,000 at any time.
7.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. The Loan Parties shall not, and shall
not permit any of their respective Subsidiaries to, directly or indirectly,
create, incur, assume or permit to exist any Lien on or with respect to any
property or asset of any kind (including any document or instrument in respect
of goods, furniture, fixtures, equipment or accounts receivable) of the Company
or any of its Subsidiaries, whether now owned or hereafter acquired, or any
income or profits therefrom, or file or permit the filing of, or permit to
remain in effect, any financing statement or other similar notice of any Lien
with respect to any such property, asset, income or profits under the Uniform
Commercial Code of any State or under any similar recording or notice statute,
except:
(i) Permitted Encumbrances;
(ii) Liens granted to secure FF&E Financing Indebtedness
as permitted by subsections 7.1(iii); provided, however, that such
Liens encumber only the assets purchased, financed or refinanced with
such FF&E Financing Indebtedness;
(iii) Liens granted or assumed by a Pool B Subsidiary to
secure the Pool B Obligations owed by the Pool B Subsidiary; provided,
however, that such Liens encumber only the assets purchased, financed
or refinanced with, or leased or otherwise used pursuant to the terms
of, such Pool B Obligations; and
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(iv) Liens granted by a Pool C Subsidiary to secure Pool C
Indebtedness owed by the Pool C Subsidiary, as permitted by subsection
7.1(vii); provided, however, that, other than with respect to Liens
specifically permitted by subsection 7.1(vii), such Liens encumber
only the Property purchased, financed or refinanced with such Pool C
Indebtedness;
(v) a Lien granted to Bank One, Texas, N.A., against a
deposit account balance in the amount of $2,637,045 to collateralize a
letter of credit issued in connection with the refurbishment of the
Wyndham Hotel at Los Angeles Airport, as such deposit account balance
may from time to time be reduced in connection with reductions in the
face amount of such letter of credit;
(vi) Liens granted by the Company to HPTWN to secure the
obligations of GHALP Corp. under the HPT Leases pursuant to the HPT
Stock Pledge covering all issued and outstanding stock of GHALP Corp.,
which Liens shall at all times remain junior, subject and subordinate
to the Liens against such stock granted to the Agent and the Lenders,
as more particularly set forth in the HPT Estoppel; and
(vii) Liens against certain Tenant's Personal Property, the
FF&E Reserve, the Retained Funds and related Records (as such
capitalized terms are defined in the HPT Leases) and Liens against the
Assigned Leases, the Contracts and the Agreements (as such capitalized
terms are defined in the HPT Collateral Documents) granted to HPTWN
pursuant to the HPT Collateral Documents to secure the obligations of
GHALP Corp. under the HPT Leases; which Liens shall at all times be
subject to the Lien priority provisions contained in the HPT Estoppel.
; provided, however, that this covenant shall not be breached by any
involuntary Lien, claimed or assumed, so long as the provisions of subsection
6.9 are being complied with.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If any Loan Party or any
of its Subsidiaries shall create or assume any Lien upon any of its properties
or assets, whether now owned or hereafter acquired, other than Liens excepted
by the provisions of subsection 7.2A or which are the subject of subsection 6.9
so long as the Company is in compliance with the provisions thereof, the
Company shall make or cause to be made effective provision whereby the
Obligations will be secured by such Lien equally and ratably with any and all
other Indebtedness secured thereby as long as any such Indebtedness shall be so
secured; provided, however, that, notwithstanding the foregoing, this covenant
shall not be construed as a consent by the Agent or any Lender to the creation
or assumption of any such Lien not permitted by the provisions of subsection
7.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to (i)
specific property encumbered to secure payment of particular Indebtedness or to
be sold pursuant to an executed agreement with respect to a sale or other
disposition of assets permitted hereunder, (ii) specific property subject to a
Ground Lease and (iii) Other Management Agreements (to the extent that the
terms thereof prohibit the assignment of rights thereunder, consistent with
industry practices) and (iv) for the Senior Note Documents and any agreement
which by its terms
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restricts the assignment of such agreement (but not any other Property) as
security for the Obligations or otherwise, the Loan Parties shall not and shall
not permit any of their respective Subsidiaries to, directly or indirectly,
enter into any agreement prohibiting the creation or assumption of any Lien
upon any of its properties or assets (including, without limitation, any
interest in, or right to receive payments under, any of the Other Management
Agreements), whether now owned or hereafter acquired except to the extent that
Liens to secure the Obligations are excluded therefrom.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO THE COMPANY OR
OTHER SUBSIDIARIES. Except as provided in this Agreement, the Pool B Documents
(with respect to the related Pool B Subsidiaries) and the Pool C Documents
(with respect to the related Pool C Subsidiaries), the Loan Parties shall not,
and shall not permit any of their respective Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
such Subsidiary to (i) pay dividends or make any other distributions on any of
such Subsidiary's capital stock owned by the Company or any other Subsidiary of
the Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to
the Company or any other Subsidiary of the Company, (iii) make loans or
advances to the Company or any other Subsidiary of the Company, or (iv)
transfer any of its property or assets to the Company or any other Subsidiary
of the Company, except for specific property encumbered to secure the payment
of particular Indebtedness permitted hereunder.
7.3 INVESTMENTS, GUARANTIES AND CERTAIN PAYMENTS.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, make any Investment in any
Person, including any Affiliate or Joint Venture, or, in each case for the
purpose of or otherwise in connection with securing, extending, renewing or
modifying any Management Agreement or Other Management Agreement, become liable
for, any Guaranty for the benefit of any Person, including any Affiliate or
Joint Venture, or make any payment to such Person, except as follows:
(i) each Loan Party and its Subsidiaries may make
Investments in Cash Equivalents;
(ii) each Loan Party and its Subsidiaries may make equity
or debt Investments in the Company or any of its Wholly Owned
Subsidiaries for the purposes set forth in subsection 7.14; provided
that, as of any date of determination, (a) except to the extent
provided to the contrary in subsection 7.3(viii), the aggregate amount
of such Investments by the Company and its Subsidiaries in any Pool B
Subsidiary (other than an Investment not to exceed $1,150,000 in GHALP
Sub made on or before the Effective Date for reserves for Capital
Items) shall not exceed the aggregate amount of dividends and other
distributions made by such Pool B Subsidiary to the Company and its
other Wholly Owned Subsidiaries (other than other Pool B Subsidiaries
and Pool C Subsidiaries) plus, with respect to GHALP Sub and WHI, an
aggregate amount not greater than $250,000 in the aggregate during the
period from the Effective Date to December 31, 1996 and (b) the
aggregate amount of Investments in the Pool C
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Subsidiaries for the Major Renovation/Restoration of Pool C Properties
shall not exceed the amount by which $15,000,000 is greater than the
sum of (1) the Total Utilization of Revolving Commitments as of such
date of determination plus (2) the amount of the Guaranties permitted
by subsection 7.4(ii)(a) as of such date of determination, in each
case to the extent that such amounts referred to in the preceding
clauses (1) and (2) shall have been used, issued or incurred for or in
connection with the Major Renovation/Restoration of the Properties
which have not been completed on or before such date of determination;
(iii) the Company may acquire the DAB Notes and the
Affiliate Notes and may acquire the collateral securing any Affiliate
Notes and/or DAB Notes upon a foreclosure;
(iv) GHALP Corp. may acquire the rights to the Retained
Funds under and as defined in the HPT Sale Agreement;
(v) [**WYNDHAM TO PROVIDE INFORMATION:**] [**subject to
subsection 7.10B(viii), until December 31, 1996, so long as no Event
of Default or Potential Event of Default has occurred and is
continuing, the Company may (a) make equity or debt Investments in
ISIS 2000 in an aggregate amount not to exceed $750,000 at any time
and (b) become liable with respect to Guaranties of Indebtedness or
other obligations of ISIS 2000 in an aggregate principal amount not to
exceed $3,500,000 at any time;**]
(vi) so long as No Event of Default or Potential Event of
Default is continuing, each Loan Party and its Subsidiaries may,
subject to subsection 7.10, (a) make equity or debt Investments in one
or more Joint Ventures (other than ISIS 2000, CWS and Wynright) and
(b) become liable with respect to Guaranties of Indebtedness or other
obligations of such Joint Ventures; provided that (1) the sole purpose
of each such Joint Venture is to acquire, renovate, restore, manage,
operate and dispose of Managed Properties that are upscale full
service hotels, garden style hotels and resort hotels located in the
United States of America; (2) Management Corp. or any of its Wholly
Owned Subsidiaries shall have entered into an Additional Management
Agreement with such Joint Venture or a Wholly Owned Subsidiary thereof
that owns or leases such Managed Property pursuant to subsection
7.16A(i); (3) the aggregate amount of such Investments in and
Guaranties for the benefit of such Joint Venture and its Wholly Owned
Subsidiaries shall not at any time exceed the lesser of (x)
$20,000,000 and (y) the amount by which the aggregate amount of
outstanding Investments, outstanding Guaranties and payments made by
the Loan Parties and their respective Subsidiaries permitted by
subsections 7.3(vii)(3) and 7.3(viii) is less than $50,000,000, (4)
the aggregate amount of such Guaranties for the benefit of such Joint
Venture and its Wholly Owned Subsidiaries shall not at any time exceed
the amount by which the aggregate amount of outstanding Guaranties of
the Loan Parties and their respective Subsidiaries permitted by
subsections 7.3(vi), (vii) and (ix) and subsection 7.4(ii) is less
than $25,000,000; (5) as of the date of each such Investment in each
such Joint Venture after the Effective Date and at all times
thereafter, the Company's Adjusted Equity Interest therein shall be
equal to or greater than 20% and less than or
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equal to 49% of the Total Adjusted Equity Interests of such Joint
Venture, provided that (X) the Company's Adjusted Equity Interest in
such Joint Venture may be less than 20% of the Total Adjusted Equity
Interests of such Joint Venture as of any date of determination to the
extent that such deficiency has resulted from an increase in the
outstanding amount of equity Securities of such Joint Venture owned by
Persons other than the Loan Parties and their respective Subsidiaries
and Affiliates and such increase was not reasonably foreseen by the
Company on the date of the most recent investment in such Joint
Venture by the Loan Parties and their respective Subsidiaries and (Y)
the Company's Adjusted Equity Interest in such Joint Venture may be
greater than 49% of the Total Adjusted Equity Interests of such Joint
Venture as of any date of determination to the extent that such excess
has resulted from the breach by any Person (other than the Loan
Parties and their respective Subsidiaries and Affiliates) of an
obligation to make an additional equity Investment in such Joint
Venture after the date of the most recent Investment therein by the
Loan Parties and their respective Subsidiaries; (6) the greater of (1)
the undepreciated book value of properties and other assets owned or
leased by such Joint Ventures or their respective Wholly Owned
Subsidiaries and (2) the fair market value of such properties and
other assets, in each case determined as of the respective dates of
acquisition thereof, shall not exceed $145,000,000 at any time, as
reasonably determined by the Company and certified to the Agent in an
Officers' Certificate of the Chief Executive Officer or the Chief
Financial Officer of the Company to such effect, together with the
information utilized by the Company to make such determination; and
(7) assuming for the purpose of this clause (7) that the principal
amount of any obligation so Guaranteed is Indebtedness of such Joint
Venture and its Subsidiaries, the sum of (A) the aggregate principal
amount of the Indebtedness of such Joint Venture and its Subsidiaries
plus (B) the purchase price of any equity Securities issued by such
Joint Venture and its Subsidiaries that are preferred in right or
priority of payment (including any mandatory redemption or redemption
at the option of the holder) to any such equity or debt Investment
(other than a priority right to receive a preferred return on
investment of up to 25% per annum) shall not exceed 60% of the amount
determined in accordance with the preceding clause (6) from time to
time, as determined by the Company and certified to the Agent in an
Officers' Certificate of the Chief Executive Officer or the Chief
Financial Officer of the Company to such effect, together with the
information utilized by the Company to make such determination,
provided that this clause (7) shall not be given effect with respect
to Investments made by the Loan Parties and their respective
Subsidiaries to, or Guaranties made by the Loan Parties and their
respective Subsidiaries for the benefit of, Joint Ventures formed
pursuant to the Bedrock Investment Program Agreements to acquire,
renovate, restore, manage, operate and dispose of Managed Properties
that are upscale full service hotels, garden style hotels and resort
hotels located in the United States of America;
(vii) so long as no Event of Default or Potential Event of
Default is continuing, if the Company shall have determined that
making such Investment, becoming liable with respect to such Guaranty
or making such payment, in each case pursuant to this subsection
7.3(vii), is necessary to secure one or more Additional Management
Agreements pursuant to subsection 7.16A(i) or Other Management
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Agreements pursuant to subsection 7.16A(ii), or to secure an
extension, renewal or modification thereof, the Company and its
Subsidiaries may, subject to subsection 7.10, (a) make equity or debt
Investments in one or more Persons (other than ISIS 2000, CWS and
Wynright) owning or leasing the related Managed Properties or Other
Managed Properties, as the case may be, (b) become liable with respect
to Guaranties of Indebtedness or other obligations of such Persons and
(c) make payments to such Persons or their respective Affiliates;
provided that (1) the sole purpose of each such Person shall be to
acquire, own, renovate, operate and dispose of a Managed Property or
Other Managed Properties, as the case may be, that is an upscale full
service hotel, a garden style hotel or a resort hotel; (2) Management
Corp. or one of its Wholly Owned Subsidiaries shall have entered into
an Additional Management Agreement with such Person with respect to
such Managed Property pursuant to subsection 7.16(i) or an Other
Management Agreement with such Person with respect to such Other
Managed Property pursuant to subsection 7.16(ii), as the case may be
(or an extension, renewal or modification thereof, as the case may
be); (3) if the aggregate amount of outstanding Investments,
outstanding Guaranties and payments made by the Loan Parties and their
respective Subsidiaries, in each case as permitted by subsections
7.3(vi), (vii) and (viii), does not (and after giving effect to any
proposed additional Investment, Guaranty or payment pursuant to this
subsection 7.3(vii) would not) exceed $50,000,000, then (A) the Person
in which or for whose benefit each such additional Investment,
Guaranty or payment shall be made, shall not be an Affiliate of more
than 4 other Affiliated Owners, and the aggregate amount of such
Investments in, Guaranties for the benefit of and payments to such 5
or fewer Affiliated Owners shall not exceed $7,500,000 at any time,
(B) if the Managed Property or Other Managed Property, as the case may
be, is an upscale full service hotel or a resort hotel, the aggregate
amount of such Investments in, Guaranties for the benefit of and
payments to the Person in which or for whose benefit such additional
Investment, Guaranty or payment shall be made, shall not exceed
$5,000,000 at any time and (C) if the Managed Property or Other
Managed Property, as the case may be, is a garden style hotel, the
aggregate amount of such outstanding Investments in, outstanding
Guaranties for the benefit of and payments to the Person in which or
for whose benefit such additional Investment, Guaranty or payment
shall be made, shall not exceed $2,000,000 at any time; (4) if the
aggregate amount of outstanding Investments, outstanding Guaranties
and payments made by the Loan Parties and their respective
Subsidiaries, in each case as permitted by subsections 7.3(vi), (vii)
and (viii), then exceeds (or after giving effect to any proposed
additional Investment, Guaranty or payment pursuant to this subsection
7.3(vi) would exceed) $50,000,000, then (A) the Person in which or for
whose benefit such additional Investment, Guaranty or payment shall be
made, shall not be an Affiliate of more than two other Affiliated
Owners, and the aggregate amount of such Investments in, Guaranties
for the benefit of and payments to such 3 or fewer Affiliated Owners
shall not exceed $2,500,000 at any time, (B) if the Managed Property
or Other Managed Property, as the case may be, is an upscale full
service hotel or a resort hotel, the aggregate amount of such
outstanding Investments in, outstanding Guaranties for the benefit of
and payments to the Person in which or for whose benefit such
additional Investment, Guaranty or payment shall be made, shall not
exceed $2,000,000 at any time and (C) if the Managed Property or Other
Managed Property, as the case may be,
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is a garden style hotel, the aggregate amount of such outstanding
Investments in, outstanding Guaranties for the benefit of and payments
to the Person in which or for whose benefit such additional
Investment, Guaranty or payment shall be made, shall not exceed
$500,000 at any time; (5) the aggregate amount of outstanding
Guaranties made by the Loan Parties and their respective Subsidiaries
pursuant to subsections 7.3(vi), (vii) and (ix) and subsection 7.4(ii)
shall not exceed $25,000,000 at any time; and (6) as of the date of
each such Investment and at all times thereafter, the Company's
Adjusted Equity Interest in the Person in which or for whose benefit
such additional Investment, Guaranty or payment shall be made shall be
less than 20% of the Total Adjusted Equity Interests of such Person,
provided that the Company's Adjusted Equity Interest in such Person
may be greater than 20% of the Total Adjusted Equity Interests of such
Person as of any date of determination to the extent that such excess
has resulted from the breach by any Person (other than the Loan
Parties and their respective Subsidiaries and Affiliates) of an
obligation to make an additional equity investment of such entity
after the date of the most recent investment therein by the Loan
Parties and their respective subsidiaries; and certified to the Agent
in a certificate of the Chief Executive Officer or the Chief Financial
Officer of the Company to such effect, together with the information
utilized by the Company to make such determination;
(viii) so long as no Event of Default or Potential Event of
Default is continuing, if the Company shall have determined that
making such Investment or payment permitted by this subsection
7.3(viii) is necessary to secure an Additional Management Agreement
with respect to an Additional Pool B Property that is an upscale full
service hotel, garden style hotel or resort hotel located in the
United States of America, or to secure an extension, renewal or
modification of such Additional Management Agreement, the Loan Parties
and their respective Subsidiaries may, subject to subsection 7.10, (a)
make equity or debt Investments in the Pool B Subsidiary that shall
lease such Additional Pool B Property and (b) make payments to the
lessor of such Additional Pool B Property or its Affiliates on behalf
of, or for the benefit of, such Pool B Subsidiary, provided that (1)
the Loan Parties and their respective Subsidiaries shall comply with
subsection 7.15A(ii); (2) the aggregate amount of the outstanding
Investments, outstanding Guaranties and payments made by the Loan
Parties and their respective Subsidiaries, in each case as permitted
by subsections 7.3(vi), (vii) and (viii), does not (and after giving
effect to such additional investment pursuant to this subsection
7.3(viii) would not) exceed $50,000,000; (3) the sum of (A) the
aggregate amount of outstanding Investments, outstanding Guaranties
and payments made by the Loan Parties and their respective
Subsidiaries in, to or for the benefit of the lessor of such
Additional Pool B Property and its Affiliates (which lessor and its
Affiliates together shall not number more than 5 Affiliated Owners)
pursuant to subsections 7.3(vi) and (vii) and (vii) plus (B) the
aggregate amount of outstanding Investments in Pool B Subsidiaries
that shall have leased Pool B Properties directly or indirectly from
such lessor and its Affiliates (which lessor and its Affiliates
together shall not number more than 5 Affiliated Owners), shall not
exceed $7,500,000 at any time; (4) if such Additional Pool B Property
is an upscale full service hotel or a resort hotel, such investment
shall not exceed $5,000,000; (5) if such Additional Pool B Property is
a garden style hotel, such investment shall not exceed $2,500,000; (6)
the aggregate
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<PAGE> 193
amount of payments to all lessors with respect to Additional Pool B
Properties and their respective Affiliates pursuant to this subsection
7.3(viii) shall not exceed $5,000,000 in the aggregate;
(ix) Investments, Guaranties and payments made by the Loan
Parties and their respective Subsidiaries pursuant to, and in amounts
not greater than the maximum estimated amounts of, the respective
contingent liabilities and obligations specified on Schedule 5.3
annexed hereto; and
(x) the Company and its Subsidiaries may become liable
with respect to such Guaranties as the Agent shall have approved in
writing, which approval may be granted, withheld, conditioned or
delayed in its sole discretion;
provided that (x) for purposes of clauses (vi), (vii) and (viii) above, (1) the
amount of the Investment in and payments to HPTWN pursuant to the HPT Sale
Agreements shall be deemed to be zero, (2) HPTWN shall be deemed to be an
Affiliate Owner with respect to any Affiliate thereof that is an Affiliate
Owner and (3) at least 30 days before the proposed closing date of the
acquisition by any Affiliate Owner of a fee or leasehold interest in any real
property, the Company, at its expense, shall deliver to the Agent copies of the
documents set forth in subsection 4.1M, mutatis mutandis, with respect to such
real property, in each case subject to the satisfaction of the Agent specified
in subsection 4.1M, (y) except as provided to the contrary in subsection
7.4(v)(b), Investments, Guaranties and payments made by the Loan Parties and
their respective Subsidiaries pursuant to, and in amounts not greater than the
maximum estimated amounts of, the respective contingent liabilities and
obligations specified on Schedule 5.3 annexed hereto, shall not be subject to
subsections 7.3(vi), (vii) and (viii) above and (z) the Company and its
Subsidiaries shall not enter into, make or become liable with respect to any
Investment, Guaranty or payment referred to in this subsection 7.3 if the
Company or any of its Subsidiaries shall become (or may reasonably be expected
to become), by law, contract, ownership of Securities or otherwise, directly or
indirectly, obligated or liable to pay to any Person any amount in addition to
the maximum amount thereof specified in an Officers' Certificate delivered to
the Agent not later than the date of such Investment, Guaranty or payment, as
the case may be, or have any other liability for the assets, liabilities or
operations of any other Person.
For the purpose of this subsection 7.3 and without limiting any other
method of making an Investment, the Company and its Subsidiaries shall be
deemed to make an Investment in each Investment owned by a Person at the time
such Person becomes a Subsidiary of the Company or any of its Subsidiaries.
7.4 CONTINGENT OBLIGATIONS.
The Loan Parties shall not and shall not permit any of their
respective Subsidiaries to, directly or indirectly, create or become liable
with respect to any Contingent Obligation, except that, so long as no Event of
Default or Potential Event of Default has occurred and is continuing:
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<PAGE> 194
(i) the Company and its Subsidiaries may become liable
with respect to Contingent Obligations in respect of Letters of
Credit;
(ii) the Company and its Subsidiaries may become liable
with respect to indemnification agreements and Guaranties with
respect to (a) performance, surety and similar bonds or guaranties of
completion provided in the ordinary course of business consistent with
past practices in respect of the Restoration or Renovation of any
Property, but excluding any such bonds with respect to any hotel
property that is not then a Property, in an aggregate amount not at
any time exceeding the amount by which $15,000,000 is greater than the
sum of (1) the aggregate principal amount of Loans, plus (2) the
amount of all Letters of Credit plus (3) the aggregate amount of
Investments in Pool C Subsidiaries, in each case to the extent that
such amounts referred to in the preceding clauses (1), (2) and (3)
shall have been used, issued or made for or in connection with the
Renovation or Restoration of the Properties, (b) other performance,
surety and appeal bonds provided in the ordinary course of business
consistent with past practices or contemplated by subsection 6.9, (c)
with respect to indemnification or contribution obligations in respect
of agreements providing for indemnification, adjustment of purchase
price or similar obligations or for Guaranties or letters of credit,
surety bonds and performance bonds securing any obligations of the
Company or any of its Subsidiaries pursuant to such agreements, in any
case incurred in connection with the Transfer of a business, asset or
Subsidiary (other than Guaranties of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or
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 Subsidiary in connection with such Transfer, (d)
environmental and "bad-deed" indemnification obligations, (e)
indemnification and contribution obligations pursuant to the Formation
Documents and the Public Offering Documents and (f) other ordinary
course indemnification obligations in connection with Indebtedness,
Management Agreements, Servicing Agreements, Other Management
Agreements, service contracts, Leases and partnership agreements, in
each case on customary terms and to the extent that such Indebtedness
or agreements are permitted by this Agreement;
(iii) the Company and its Subsidiaries may become liable
with respect to the Guaranties permitted by subsections 7.3(v), (vi),
(vii), (viii), (ix) and (x);
(iv) the Company and its Subsidiaries may become liable to
make Investments and payments, in each case with respect to Guaranties
permitted by, and in accordance with the terms of, subsection 7.3(v),
(vi), (vii), (viii), (ix) and (x);
(v) such of the Company and its Subsidiaries as are
specified on Schedule 5.3 annexed hereto may be liable (a) with
respect to the Contingent Obligations set forth on such Schedule, in
each case in the aggregate amount not greater than the maximum
estimated amount specified thereon with respect to such Contingent
Liability and (b) with respect to modifications to any such Guaranty
either (1) that do not increase either the maximum possible amount, or
the maximum estimated amount
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thereof, or both, in each case as specified on each list, add any
obligors with respect thereto or increase, decrease or otherwise vary
the liabilities of the existing obligors with respect thereto or (2)
that increase either the maximum possible amount or the maximum
estimated amount thereof, or both, in each case as specified on such
list, add any obligors with respect thereto or increase, decrease or
otherwise vary the liabilities of the existing obligors, provided
that, with respect to the modification of a Guaranty subject to the
preceding clause (2), (A) if such Guaranty shall have been made, or
such modification thereof is being made, to secure a Management
Agreement or Other Management Agreement or an extension, renewal or
modification thereof, or otherwise shall have been made in connection
therewith, then for all purposes of subsections 7.3 (vi), (vii) and
(viii), (x) the modification shall be deemed to be a Guaranty subject
to the restrictions of such clauses, (y) an amount equal to the
greater increase referred to in the preceding clause (2) shall be
included in the calculation of amounts referred to in subsections 7.3
(vi), (vii) and (viii) (including, without limitation, in clause (4)
to the proviso to subsection 7.3(vi) and in clause (5) to the proviso
to subsection 7.3(vi)) and (z) the Person for whose benefit such
Guaranty or modification shall have been made shall be deemed to be an
Affiliated Owner and (B) if such Guaranty shall not have been made,
and such modification thereof is not proposed to be made, to secure a
Management Agreement, Additional Management Agreement or Other
Management Agreement or an extension, renewal or modification thereof,
or otherwise shall not have been made and is not being proposed to be
made in connection therewith, then (x) the Company and its
Subsidiaries shall not effect such modification without the prior
written approval of the Agent, which approval shall not be
unreasonably withheld, conditioned or delayed, and (y) for purposes of
subsections 7.3 (vi) and (vii), an amount equal to the amount of the
greater increase referred to in the preceding clause (2) shall be
included in the calculation of amounts referred to in clause (4) in
the proviso to subsection 7.3(vi) and in clause (5) to the proviso to
subsection 7.3(vii); and
(vi) the Subsidiaries of the Company may become liable
with respect to a Guaranty of the Senior Notes pursuant to the Senior
Note Subsidiary Guaranty.
7.5 RESTRICTED JUNIOR PAYMENTS.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, declare, order, pay, make,
give or publish notice or fix a date in respect of or set apart any sum for any
Restricted Junior Payment, enter into an agreement or make any commitment to
effect any of the foregoing or take any other similar action in furtherance of
or otherwise in connection with the foregoing; provided, however, that the Loan
Parties may make any of the following payments (the "PERMITTED JUNIOR
PAYMENTS"): (i) the Company may acquire shares of Common Stock pledged to
secure payment of one or more of the DAB Notes in connection with the
foreclosure of such pledge or the exercise of other remedies with respect
thereto and (ii) so long as no Event of Default or Potential Event of Default
has occurred and is continuing or would result therefrom, (a) the Company may
make scheduled payments of interest on account of the Senior Notes pursuant to
the terms thereof as in effect on the date of the initial closing of the Debt
Offering and (b) unless and until the aggregate consideration paid therefor by
the Loan Parties and their respective Subsidiaries after the
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<PAGE> 196
Effective Date shall exceed $200,000 in any period of 12 consecutive calendar
months commencing on the Effective Date or on any anniversary thereof, as the
case may be, with amounts unused in any such 12-month period being available
for such purpose in any subsequent 12-month period, the Loan Parties and their
respective Subsidiaries may purchase, redeem, acquire, cancel or otherwise
retire for value shares of Capital Stock of the Company, options on any such
shares or related stock appreciation rights or similar Securities held by
officers and employees of the Loan Parties and their respective Subsidiaries or
former officers and employees thereof (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
Capital Stock, options or related rights were issued, (iii) during the
continuance of a Potential Event of Default or Event of Default, the Agent may
permit the Company to make payments on account of the Senior Notes pursuant to
subsection 6.15, which permission may be granted, withheld, conditioned or
delayed in the Agent's sole discretion.
7.6 FINANCIAL COVENANTS.
A. MINIMUM NET WORTH. The Company shall not permit at any time
the Net Worth of the Company and its Subsidiaries to be less than $48,500,000.
B. MINIMUM MARKET EQUITY CAPITALIZATION. The Company shall not
permit at any time its Market Equity Capitalization to be less than the lesser
of (i) 50% of the Market Equity Capitalization of the Company as of the date of
the initial closing under the Public Offerings and (i) an amount equal to the
Market Equity Capitalization of the Company as of such date of determination
that bears the same percentage relationship to the Market Equity Capitalization
of the Company as of the Funding Availability Date as the percentage
relationship that the aggregate Market Capitalization of the Comparable
Companies as of such date of determination bears to the aggregate Market Equity
Capitalization of such Comparable Companies as of the Funding Availability
Date. For the purposes of this subsection 7.6B, the term "Comparable
Companies" means Persons that own or operate hotels as one of their primary
business activities and have common stock listed on a national securities
exchange or admitted for trading on NASDAQ/NMS, as such Persons shall be
selected from time to time by the Agent and approved by the Company, which
approval shall not be unreasonably withheld, conditioned or delayed.
C. MAXIMUM CONSOLIDATED TOTAL INDEBTEDNESS. The Company shall
not permit at any time Consolidated Total Indebtedness to exceed the lesser of
(i) 50% of the sum of (a) Consolidated Total Indebtedness plus (b) the Market
Equity Capitalization of the Company and (ii) 50% of the sum of Consolidated
Total Indebtedness and Adjusted Stockholders' Equity provided that, as of any
date of determination, the preceding clause (a) shall not be given effect if
the aggregate Market Equity Capitalization of the Comparable Companies as of
such date is less than 50% of the Market Equity Capitalization of such
Comparable Companies as of the date of the initial closing under the Public
Offerings.
D. MINIMUM FIXED CHARGE RATIO. As of the last day of any
calendar quarter (or, if and so long as the Total Utilization of Revolving
Commitments shall then be equal to or
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<PAGE> 197
greater than $50,000,000 and if the Agent shall then so elect, on the last day
of the calendar month) ending during any of the periods set forth below, the
Company shall not permit the ratio of (i) the sum of (a) Consolidated EBITDA
plus (b) the amount calculated pursuant to clause (viii) of the definition of
Consolidated Fixed Charges for such period plus (c) one-third of the rental
expense attributable to Operating Leases with respect to real property and
one-third of the rental expense attributable to Operating Leases with respect
to personal property with an initial term, including any renewals at the option
of either party, in excess of one year to (ii) the sum of Consolidated Fixed
Charges, to be less than the correlative ratio indicated for the periods set
forth below (such amounts to be determined with reference to the preceding
12-month period ending on such last day and to be adjusted to the extent
required by the respective provisos to the definitions of Property EBITDA and
Management EBITDA):
<TABLE>
<CAPTION>
MINIMUM
FIXED CHARGE
PERIOD COVERAGE RATIO
----------------------- --------------
<S> <C>
F.A. Date-06/30/96 1.75 to 1.00
07/01/96-12/31/96 1.85 to 1.00
01/01/97-12/31/97 2.25 to 1.00
01/01/98-12/31/98 2.50 to 1.00
01/01/99-12/31/99 2.75 to 1.00
01/01/00-Maturity Date 3.00 to 1.00
</TABLE>
E. MINIMUM FIXED CHARGE RATIO (EXCLUDING CAPITAL EXPENDITURES).
As of the last day of the calendar quarter or, as so provided in subsection
7.7D, on the last day of the calendar month) ending during any of the periods
set forth below, the Company shall not permit the ratio of (i) the sum (a) of
Consolidated EBITDA-Cap Ex plus (b) the amount calculated pursuant to clause
(viii) of the definition of Consolidated Fixed Charges for such period plus (c)
one-third of the rental expense attributable to Operating Leases with respect
to real property and one-third of the rental expense attributable to Operating
Leases with respect to personal property with an initial term, including any
renewals at the option of either party, in excess of one year to (ii)
Consolidated Fixed Charges, to be less than the correlative ratio indicated for
the periods set forth below (such amounts to be determined with reference to
the preceding 12-month period ending on such last day and to be adjusted to the
extent required by the respective provisos to the definitions of Property
EBITDA and Management EBITDA):
<TABLE>
<CAPTION>
MINIMUM
FIXED CHARGE
PERIOD COVERAGE RATIO
---------------------------- --------------
<S> <C>
F.A. Date-06/30/96 1.50 to 1.00
07/01/96-12/31/96 1.60 to 1.00
01/01/97-12/31/97 2.00 to 1.00
01/01/98-12/31/98 2.25 to 1.00
01/01/99-12/31/99 2.50 to 1.00
01/01/00-Maturity Date 2.75 to 1.00
</TABLE>
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F. MAXIMUM TOTAL DEBT LEVERAGE RATIO. As of the last day of the
calendar quarter or, as so provided in subsection 7.7D, on the last day of the
calendar month) ending during any of the periods set forth below, the Company
shall not permit the ratio of (i) Consolidated Total Indebtedness to (ii) the
sum of Consolidated EBITDA plus the amount calculated pursuant to clause (viii)
of the definition of Consolidated Fixed Charges for such period to exceed the
correlative ratio indicated for the periods set forth below (Consolidated Total
Indebtedness to be determined as of such last day, Consolidated EBITDA to be
determined with reference to the preceding 12-month period ending on such day
and each to be adjusted to the extent required by the respective provisos to
the definitions of Property EBITDA and Management EBITDA):
<TABLE>
<CAPTION>
MAXIMUM
LEVERAGE
PERIOD RATIO
---------------------------- ------------
<S> <C>
F.A. Date-06/30/96 5.50 to 1.00
07/01/96-12/31/96 5.50 to 1.00
01/01/97-12/31/97 5.00 to 1.00
01/01/98-12/31/98 4.50 to 1.00
01/01/99-12/31/99 4.00 to 1.00
01/01/00-Maturity Date 3.50 to 1.00
</TABLE>
G. MAXIMUM TOTAL DEBT LEVERAGE RATIO (EXCLUDING CAPITAL
EXPENDITURES). As of the last day of the calendar quarter or, as so provided
in subsection 7.7D, on the last day of the calendar month) ending during any of
the periods set forth below, the Company shall not permit the ratio of (i)
Consolidated Total Indebtedness to (ii) the sum of Consolidated EBITDA-Cap Ex
plus the amount calculated pursuant to clause (viii) of the definition of
Consolidated Fixed Charges for such period to exceed the correlative ratio
indicated for the periods set forth below (Consolidated Total Indebtedness to
be determined as of such last day, Consolidated EBITDA-Cap Ex to be determined
with reference to the preceding 12-month period ending on such day and each to
be adjusted to the extent required by the respective provisos to the
definitions of Property EBITDA and Management EBITDA):
<TABLE>
<CAPTION>
MAXIMUM
LEVERAGE
PERIOD RATIO
---------------------------- ------------
<S> <C>
F.A. Date-06/30/96 6.55 to 1.00
07/01/96-12/31/96 6.45 to 1.00
01/01/97-12/31/97 5.75 to 1.00
01/01/98-12/31/98 5.25 to 1.00
01/01/99-12/31/99 4.75 to 1.00
01/01/00-Maturity Date 4.25 to 1.00
</TABLE>
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<PAGE> 199
7.7 FUNDAMENTAL CHANGES.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, alter the corporate, capital or legal structure of
any Loan Party or any of its Subsidiaries, to incorporate or otherwise organize
any Subsidiaries, or enter into any transaction of merger or consolidation, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or make or permit any Transfer or acquire by purchase or
otherwise, directly or indirectly, all or substantially all the business,
property or fixed assets of, or stock or other evidence of beneficial ownership
of, any Person, make any Acquisition, acquire or enter into any management
agreement or other agreement with respect to the management or operation of a
hotel property or Transfer any Property or Management Agreement, except that,
from time to time after the Funding Availability Date:
(i) the Loan Parties and their Subsidiaries may lease
space in Improvements and may sell or otherwise dispose of in the
ordinary course of business any property which is obsolete or no
longer useful in accordance with subsection 6.5(vi);
(ii) so long as no Event of Default or Potential Event of
Default has occurred and is continuing or would be caused thereby,
with the prior approval of the Agent, which approval may be granted,
withheld, conditioned or delayed in the Agent's sole discretion, any
Wholly Owned Subsidiary of the Company may be merged with or into the
Company or any Wholly Owned Subsidiary Guarantor, or be liquidated,
wound up or dissolved, or all or any part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise
disposed of, in one transaction or a series of transactions, to the
Company or any Wholly Owned Subsidiary Guarantor; provided however,
that, in the case of such a merger, the Company or such Wholly Owned
Subsidiary Guarantor shall be the continuing or surviving corporation;
(iii) the Company and any Subsidiary (other than a Pool A
Subsidiary or a Pool B Subsidiary) may create one or more Subsidiaries
(including, without limitation, Pool B Subsidiaries and Pool C
Subsidiaries); provided that (a) each such Subsidiary shall be Wholly
Owned Subsidiary of the Company and (b) the legal and tax structure of
each such Subsidiary shall be approved by the Agent, which approval
shall not be unreasonably withheld, conditioned or delayed, provided
that, with respect to the restrictions on the tax and legal structure
of a Pool B Subsidiary or a Pool C Subsidiary, such structure may
include features intended by the Company to make one or more of the
Pool B Subsidiaries and the Pool C Subsidiaries "bankruptcy-remote";
(iv) the Loan Parties and their respective Subsidiaries
may make Acquisitions to the extent permitted by, and in accordance
with, subsection 7.15A;
(v) the Loan Parties and their respective Subsidiaries
may Transfer Properties to the extent permitted by, and in accordance
with, subsection 7.15B;
(vi) the Loan Parties and their respective Subsidiaries
may acquire or enter
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into Management Agreements, Servicing Agreements and Other Management
Agreements with respect to hotel properties to the extent permitted
by, and in accordance with, subsection 6.18 or 7.16A;
(vii) the Loan Parties and their respective Subsidiaries
may Transfer Management Agreements, Servicing Agreements and Other
Management Agreements to the extent permitted by, and in accordance
with, subsection 7.16B; and
(viii) the Loan Parties and their respective Subsidiaries
may dissolve one or more Pool C Subsidiaries, Pool B Subsidiaries,
Subsidiaries of Management Corp. and "payroll" Subsidiaries upon the
Transfer of the assets to which they relate.
7.8 ZONING AND CONTRACT CHANGES AND COMPLIANCE.
The Loan Parties shall not and shall not permit any of their
respective Subsidiaries to initiate or consent to any zoning reclassification
of any property or seek any variance under any existing zoning ordinance or use
or permit the use of any Property in any manner that could result in such use
becoming a non-conforming use under any zoning ordinance or any other
applicable land use law, rule or regulation. The Loan Parties shall not and
shall not permit any of their respective Subsidiaries to initiate or consent to
any change in any laws, requirements of Governmental Authorities or obligations
created by private contracts and Material Leases which now or hereafter could
reasonably be likely to materially and adversely affect the ownership,
occupancy, use or operation of any Property without the prior written consent
of the Agent; provided, however, that this covenant shall not apply to
emergency situations in which any Loan Party or such Subsidiary exercises its
prudent judgment and notifies the Agent promptly thereafter of such emergency
and the actions taken in response thereto.
7.9 NO JOINT ASSESSMENT; SEPARATE LOTS.
The Loan Parties shall not suffer, permit or initiate, and shall not
permit any of their respective Subsidiaries to suffer, permit or initiate, the
joint assessment of any Property (i) with any other real property constituting
a separate tax lot (other than another Property) and (ii) with any portion of
any Property which may be deemed to constitute personal property, or any other
procedure whereby the lien of any Taxes which may be levied against any such
personal property shall be assessed or levied or charged to any Property as a
single lien. Each Property is comprised of one or more parcels, each of which,
to the knowledge of the Company, constitutes a separate tax lot (except with
respect to any lot constituting another Property) and none of which constitutes
a portion of any other tax lot.
7.10 TRANSACTIONS WITH AFFILIATED PERSONS.
A. RESTRICTIONS GENERALLY. The Loan Parties shall not, and shall
not permit any of their respective Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property, the rendering of any
service or the making of any Investment or Guaranty, or the amendment,
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<PAGE> 201
restatement, supplement or other change of, or waiver or failure to enforce any
obligations under any agreement) with Bedrock, the Crow Interests, any holder
of 5% or more of any class of equity Securities of the Company or any Affiliate
of any of the foregoing or of the Company unless (1) the terms thereof are not
less favorable to such Loan Party or Subsidiary, as the case may be, than those
that might be obtained in a comparable transaction at the time on an arms-
length basis from Persons who are not such a holder or Affiliate and (2) if the
value of such transaction or series of related transactions has an aggregate
value of $500,000 or more, a majority of the members of the Board of Directors
of the Company who are not officers, employees, partners, beneficiaries,
principals or holders of 5% or more of any class of equity Securities of the
Company, Bedrock or the Crow Interests or any of their respective Affiliates
shall have made a determination to the effect referred to in the preceding
clause (1); provided, however, that this subsection 7.10A shall not apply to
(i) any transaction between the Company and any of its Wholly Owned
Subsidiaries or between any of its Wholly Owned Subsidiaries, (ii) reasonable
and customary fees paid to members of the Boards of Directors of the Company
and its Subsidiaries, (iii) reasonable compensation payable or paid to senior
management personnel of the Company, (iv) so long as no Event of Default or
Potential Event of Default has occurred and is continuing, any transaction
between Management Corp. and any of its Wholly Owned Subsidiaries, on the one
part, and any Affiliate of Bedrock or the Crow Interests, on the other part,
pursuant to an asset management agreement with respect to a Managed Property
that requires the other party to pay to Management Corp. or such Wholly Owned
Subsidiary a reimbursement (or make similar payments measured by or
attributable to the cost (direct or allocated) of providing a good or service),
in lieu of the payment of a fee, as consideration for providing a good or
service to such other party pursuant to such asset management agreement and (v)
so long as no Event of Default or Potential Event of Default has occurred and
is continuing, any transaction described in Schedule 7.10A annexed hereto.
B. SPECIFIC RESTRICTIONS. Without limiting the generality of
subsection 7.10A, except as provided to the contrary below, without the prior
written approval of the Agent, which approval may not be unreasonably withheld,
conditioned or delayed, the Loan Parties shall not, and shall not permit any of
their respective Subsidiaries to, do any of the following, directly or
indirectly:
(i) become or remain liable with respect to any FF&E
Financing Indebtedness or Pool C Indebtedness owed to Bedrock, the
Crow Interests, holders of 5% or more of any class of equity
Securities of the Company or any of Affiliate of any of the foregoing;
or
(ii) acquire, directly or indirectly, any fee or leasehold
or other interest in any Additional Pool A Property, Additional Pool B
Property or Pool C Property from Bedrock, the Crow Interests, holders
of 5% or more of any class of equity Securities of the Company or any
Affiliate of any of the foregoing;
(iii) Transfer, directly or indirectly, any Property,
Management Agreement or Servicing Agreement to Bedrock, the Crow
Interests, holders of 5% or more of any class of equity Securities of
the Company or any of their respective Affiliates;
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(iv) make Investments in or Guaranties for the benefit of
Bedrock, the Crow Interests, holders of 5% or more of any class of
equity Securities of the Company or any Affiliate of any of the
foregoing, whether pursuant to subsection 7.3 or otherwise;
[**provided that, without the prior approval of the Agent, the Loan
Parties and their respective Subsidiaries may make the Investments and
Guaranties referred to in subsection 7.3(v)**];
(v) enter into any agreement or other arrangement with,
or acquire goods or services from or provide goods or services to,
ISIS 2000; provided that (x) the Company may (A) enter into the ISIS
2000 Agreements in the respective forms approved by the Agent, which
approval may be granted, withheld, conditioned or delayed in its sole
discretion, and (B) enter into such amendments, restatements,
supplements or other modifications thereof as the Agent shall have
approved in writing, which approval shall not be unreasonably
withheld, conditioned or delayed, (y) the Company shall exercise its
rights thereunder and enforce the obligations of ISIS 2000 thereunder
in the manner and to the extent that the Company would exercise such
rights and enforce such obligations under the ISIS 2000 Agreements if
the other parties thereto were not Affiliates of Bedrock, the Crow
Interests or any holder of 5% or more of any class of equity
Securities of the Company and (z) the Company shall advise the Agent
in writing, reasonably in advance of the action contemplated by the
Company to be taken, with respect to any determination by the Company
to waive, surrender or fail to exercise any material right of the
Company under any ISIS 2000 Agreement or to waive, surrender or fail
to enforce any material obligation of ISIS 2000 thereunder;
(vi) enter into any agreement or other arrangement with,
or acquire goods or services from or provide goods or services to,
CWS; provided that (x) the Company may (A) enter into the CWS
Agreements in the respective forms approved by the Agent, which
approval may be granted, withheld, conditioned or delayed in its sole
discretion, and (B) enter into such amendments, restatements,
supplements or other modifications thereof as the Agent shall have
approved in writing, which approval shall not be unreasonably
withheld, conditioned or delayed, (y) the Company shall exercise its
rights thereunder and enforce the obligations of CWS thereunder in the
manner and to the extent that the Company would exercise such rights
and enforce such obligations under the CWS Agreements if the other
parties thereto were not Affiliates of Bedrock, the Crow Interests or
any holder of 5% or more of any class of equity Securities of the
Company and (z) the Company shall advise the Agent in writing,
reasonably in advance of the action contemplated by the Company to be
taken, with respect to any determination by the Company to waive,
surrender or fail to exercise any material right of the Company under
any CWS Agreement or to waive, surrender or fail to enforce any
material obligation of CWS thereunder;
(vii) enter into any agreement or other arrangement with,
or acquire goods or services from or provide goods or services to,
Wynright; provided that (x) the Company may (A) enter into the
Wynright Agreements in the respective forms approved by the Agent,
which approval may be granted, withheld, conditioned or delayed in its
sole discretion, and (B) enter into such amendments, restatements,
supplements or other
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modifications thereof as the Agent shall have approved in writing,
which approval shall not be unreasonably withheld, conditioned or
delayed, (y) the Company shall exercise its rights thereunder and
enforce the obligations of Wynright thereunder in the manner and to
the extent that the Company would exercise such rights and enforce
such obligations under the Wynright Agreements if the other parties
thereto were not Affiliates of Bedrock, the Crow Interests or any
holder of 5% or more of any class of equity Securities of the Company
and (z) the Company shall advise the Agent in writing, reasonably in
advance of the action contemplated by the Company to be taken, with
respect to any determination by the Company to waive, surrender or
fail to exercise any material right of the Company under any Wynright
Agreement or to waive, surrender or fail to enforce any material
obligation of Wynright thereunder;
(viii) enter into any agreement or other arrangement with,
or acquire goods or services from or provide goods or services to,
Greystar Partnership or its Affiliates; provided that (x) the Company
may (A) enter into the Greystar Agreements that certain terms
consistent with the description thereof in the Debt Prospectus in the
second paragraph in the section entitled "Growth Strategy -- II.
Additional Growth Opportunities -- New Lodging Products" and enter
into Other Management Agreements with Greystar Partnership or its
Affiliates and (B) enter into such amendments, restatements,
supplements or other modifications thereof as shall be consistent with
such description, (y) the Company shall exercise its rights thereunder
and enforce the obligations of Greystar Partnership thereunder in the
manner and to the extent that the Company would exercise such rights
and enforce such obligations under the Greystar Agreements if the
other parties thereto were not Affiliates of Bedrock, the Crow
Interests or any holder of 5% or more of any class of equity
Securities of the Company and (z) the Company shall advise the Agent
in writing, reasonably in advance of the action contemplated by the
Company to be taken, with respect to any determination by the Company
to amend, modify, waive, surrender or fail to exercise any material
right of the Company under any Greystar Agreement or to amend, modify,
waive, surrender or fail to enforce any material obligation of
Greystar Partnership thereunder.
7.11 SALES AND LEASE-BACKS.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, enter into any arrangement
with any Person providing for the leasing by any Loan Party or any of its
Subsidiaries of any real or tangible personal property, which property has been
or is to be sold or transferred by any Loan Party or any of its Subsidiaries to
such Person in contemplation of such leasing, unless (i) the Loan Parties and
their respective Subsidiaries shall comply with the conditions set forth in
subsection 7.15A(ii) with respect thereto, (ii) the Company would not be in
default, as of the date of such leasing, of any of paragraphs C, D, E, F and G
of subsection 7.6 if Consolidated Total Indebtedness were to increase by an
amount equal to the Attributable Indebtedness with respect to such sale and
lease-back arrangement, (iii) the gross proceeds of any such sale are at least
equal to the fair market value of such property (including the fair market
value of the related leasehold interest), (iv) the Company or such Subsidiary
shall apply the cash proceeds of such sale as required by subsections 2.4B and
2.9 and (v) the aggregate amount of Attributable Indebtedness with
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respect to all sale and lease-back transactions permitted by this subsection
7.11 does not exceed $75,000,000 at any time. A sale and lease-back
transaction with respect to a Property permitted by this subsection 7.11 shall
be deemed to be a sale or other permanent disposition of such Property for all
purposes of this Agreement.
7.12 SALE OR DISCOUNT OF RECEIVABLES.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, sell with recourse, or
discount or otherwise sell for less than the face value thereof, any of its
notes or accounts receivable. Nothing in this subsection 7.12 shall be
construed to permit anything not permitted by any other provision of any Loan
Document.
7.13 TRANSFER OF SUBSIDIARY STOCK.
Except as expressly permitted pursuant to subsection 7.7(ii), the HPT
Agreements and the Loan Documents , the Loan Parties shall not, and shall not
permit any of their respective Subsidiaries to directly or indirectly Transfer
any shares of capital stock or other equity Securities of any of its
Subsidiaries, except to qualify directors if required by Applicable Laws or
permit Investments by foreign nationals mandated by Applicable Law.
7.14 CONDUCT OF BUSINESS.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, do the following:
(i) engage in any business other than (a) the
acquisition, ownership, renovation, restoration, management, operation
and disposition of Properties, Managed Properties and Other Managed
Properties that are upscale full service hotels, garden style hotels
and resort hotels located in the United States of America and
Properties and Managed Properties that are upscale full service
hotels, garden style hotels and resort hotels in other jurisdictions
on the Effective Date; (b) the management of Other Managed Properties
that are upscale full service hotels, garden style hotels and resort
hotels in Canada and the Caribbean; (c) the management of Other
Managed Properties that are (1) extended stay hotels located in the
United States of America, (2) not operated under the service marks
"Wyndham" or "Wyndham Garden" or any similar brand, (3) owned or
leased by Greystar Partnership and managed by Management Corp. or its
Wholly Owned Subsidiaries pursuant to the Greystar Agreements and (4)
managed pursuant to Other Management Agreements that have terms
substantially the same as these in the form of Other Management
Agreement to which hotels referred to in the preceding clause (b) are
subject; and (d) any business that is ancillary, in purpose and
extent, to any business referred to in the preceding clauses (a), (b)
and (c);
(ii) enter into any Material Lease or other agreement, or
take any other action, that would materially change the business
conducted at any Property, including any such Material Lease,
agreement or other action, that would convert or reposition
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any Property into any hotel other than an upscale full service hotel,
garden style hotel or resort hotel; or
(iii) make any Investment in, Guaranty for the benefit of
or make any payment to the Person owning or leasing any Other Managed
Property referred to in clause (i)(b) or (i)(c) above (other than
payments of revenues generated by the Other Managed Property).
7.15 PROPERTIES.
A. ACQUISITION OF PROPERTIES. The Loan Parties shall not, and
shall not permit any of their respective Subsidiaries to, make an Acquisition
of a fee or leasehold interest in any hotel property after the Formation Date,
except that, from time to time:
(i) so long as no Event of Default or Potential Event of
Default has occurred and is continuing or would be caused thereby,
without the approval of the Agent (except as provided to the contrary
in subsection 7.10 and this subsection 7.15A(i)), the Company or a
Wholly-Owned Subsidiary thereof may make Acquisitions of the fee
interests or leasehold interests in additional Pool A Properties;
provided that, in any event, (a) each additional Pool A Property (an
"ADDITIONAL POOL A PROPERTY") subject to such Acquisition shall
include the entire fee interest or leasehold interest, as the case may
be, in an upscale full service hotel, garden style hotel or resort
hotel, as the case may be, located in the United States of America and
otherwise be of a type, quality and character consistent with the
Company's business plan and strategy, as described in the Debt
Prospectus in the section entitled "Business -- Growth Strategy -- I.
Primary Growth Opportunities" or, if not consistent, as approved by
the Agent, which approval may be granted, withheld, conditioned or
delayed in its sole discretion; (b) the fair market value of such
Additional Pool A Property (as reasonably determined by the Company,
which determination shall be evidenced by an Officers' Certificate
delivered to the Agent) shall be equal to or greater than the purchase
price for such Property; (c) all Investments and Guaranties to be made
by the Company and its Subsidiaries in connection with the proposed
Acquisition shall be permitted pursuant to subsections 7.3 and 7.4;
(d) on or before such closing date, Management Corp. or any of its
Wholly Owned Subsidiaries shall have entered into a Property Servicing
Agreement with the Company and, if a Liquor License exists with
respect to such Additional Pool A Property or is required thereafter,
the holders thereof shall have entered into a Liquor Operation
Servicing Agreement, in each case substantially in the form delivered
on or before the Funding Availability Date pursuant to subsection 4.1J
or in such other form as may be reasonably acceptable to the Agent,
which shall provide for Management Fees in amounts and on other terms
substantially similar to those obtained in the initial Servicing
Agreements or, if different, on terms satisfactory to the Agent; (e)
on or before such closing date, the Company, at its expense, shall
deliver to the Agent (1) an Officers' Certificate of the Company
setting forth a schedule of insurance with respect to each of the
insurance policies required pursuant to subsection 6.10, and the Agent
shall be satisfied that such insurance policies comply with the
requirements of Section 6.10, and each such insurance policy shall
name the Agent on behalf of the Lenders,
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as loss payee, (2) supplements to the Schedules to this Agreement, the
Environmental Indemnity, the Security Agreement, the Omnibus
Management and Liquor License Agreement and, if so required by the
Agent, the Trademark Agreement reflecting the acquisition of such
Additional Pool A Property, which Schedules shall be acceptable to the
Agent, (3) if such Pool A Property is being acquired by a Wholly-Owned
Subsidiary of the Company, originally executed counterparts to the
Environmental Indemnity, the Security Agreement, the Omnibus
Management and Liquor License Agreement and the Subsidiary Guaranty,
together with such other Security Documents as the Agent may require
which do not enlarge the scope of any party's obligations as compared
to similar Security Documents previously executed, (4) each of the
other documents and satisfy each of the other conditions set forth in
paragraphs E, F, G, J(i), M and N(i) (provided that Agent shall not be
required to approve such Engineering Report) of subsection 4.1,
mutatis mutandis, with respect to such Additional Pool A Property, in
each case subject to the satisfaction of the Agent specified in such
subsections, (5) executed or certified, conformed copies of the
related Acquisition Agreements, Pool A Ground Lease, if any, and such
other documents, certificates and opinions executed and delivered by
or on behalf of the Company and any of its Subsidiaries as the Agent
may reasonably request, and (7) payment pursuant to subsection 9.2 of
the reasonable expenses incurred by the Agent in connection with the
matters subject to this subsection 7.15A(i); (f) at least 30 days
before the proposed Addition Date with respect to such Additional Pool
A Property, the Company, at its expense, shall deliver to the Agent
the Property Information with respect to such Additional Pool A
Property, which Property Information shall be satisfactory in form and
substance to the Agent, in its sole discretion; (g) on or before the
proposed Addition Date with respect to such Additional Pool A
Property, the Company, at its expense, shall deliver to the Agent (1)
a statement of Property Gross Revenues and Operating Expenses and any
other expenses with respect to such Additional Pool A Property for the
12 most recently completed calendar months before such Addition Date,
in reasonable detail satisfactory to the Agent and certified by the
Chief Executive Officer or the Chief Financial Officer of the Company
to the effect provided in subsection 6.1(i), mutatis mutandis, (2) an
Addition Certificate in reasonable detail satisfactory to the Agent
and together with the financial statements and other information used
by the Company to calculate the Borrowing Base and certified by the
Chief Executive Officer or Chief Financial Officer of the Company, (3)
payment pursuant to subsection 9.2 of the reasonable expenses incurred
by the Agent in connection with the matters subject to this subsection
7.15A(iii) and not previously paid pursuant to clause (e)(7) above,
(4) an Appraisal with respect to such Additional Pool A Property,
which Appraisal shall be satisfactory in form and substance to the
Agent and shall indicate that the fair market value of such additional
Pool A Property is equal to or greater than the purchase price for
such Property, and (5) each of the other documents set forth in
paragraphs K, L, and N (provided that, without limiting any other
consent or approval rights, the Engineering Report and relative
Reliance letter shall be satisfactory in form and substance to the
Agent and (6) projections of property Gross Revenues for 5 years for
such Additional Pool A Property; (h) the Addition Date with respect to
such Additional Pool A Property shall not occur without the prior
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written approval of the Agent, which approval may be granted,
withheld, conditioned or delayed in the Agent's sole discretion;
(ii) so long as no Event of Default or Potential Event of
Default has occurred and is continuing or would be caused thereby,
without the approval of the Agent (except as provided to the contrary
in subsection 7.10 and this subsection 7.15A(ii)), any of the Pool B
Subsidiaries may make Acquisitions of leasehold interests in
additional Pool B Properties (each, an "ADDITIONAL POOL B PROPERTY");
provided that, in any event, (a) each additional Pool B Property
subject to such Acquisition shall include the entire leasehold
interest in an upscale full service hotel, garden style hotel or
resort hotel, as the case may be, located in the United States of
America and otherwise be of a type, quality and character consistent
with the Company's business plan and strategy, as described in the
Debt Prospectus in the section entitled "Business -- Growth Strategy
-- I. Primary Growth Opportunities" or, if not consistent, as
approved by the Agent, which approval may be granted, withheld,
conditioned or delayed in its sole discretion; (b) either (1) the
Acquisition of such leasehold interest shall be made in a sale and
lease-back transaction permitted by subsection 7.11 and the aggregate
amount of Attributable Indebtedness with respect to all leasehold
interests so acquired in such sale and lease- back transactions shall
not exceed $75,000,000 or (2) the Company or Management Corp. shall
have determined that such Acquisition is necessary to secure an
Additional Management Agreement with respect to such Additional Pool B
Property and the aggregate fair market value of the Additional Pool B
Properties leased by Pool B Subsidiaries pursuant to this subsection
7.15A(ii), in each case determined as of the respective dates of
acquisition thereof, shall not exceed $75,000,000, as reasonably
determined by the Company and certified to the Agent in an Officers'
Certificate of the Chief Executive Officer or the Chief Financial
Officer of the Company to such effect, together with the information
utilized by the Company to make such determination; (c) at least 30
days before the proposed closing date of each such Acquisition, the
Company, at its expense, shall deliver to the Agent the Property
Information with respect to such Additional Pool B Property; (d) the
terms and conditions of the Pool B Obligations of the Loan Parties and
their respective Subsidiaries, including such Pool B Subsidiary, under
the related Pool B Ground Lease and the other related Pool B Documents
(including, without limitation, provisions with respect to cure rights
and obligations with respect to Capital Items) shall be approved by
the Agent, which approval shall not be unreasonably withheld,
conditioned or delayed; (e) all Indebtedness and other obligations
incurred by such Pool B Subsidiary at any time, whether under such
Pool B Documents or otherwise (including, without limitation, lease
payments), shall not be recourse to any of the Loan Parties or any of
their respective Subsidiaries (other than such Pool B Subsidiary) and
shall otherwise be approved by the Agent, which approval shall not be
unreasonably withheld, delayed or conditioned; (f) the lessor of such
Additional Pool B Property shall not be affiliated with more than 4
Affiliated Owners, and all Investments by the Loan Parties and their
respective Subsidiaries in such Pool B Subsidiary shall be permitted
by subsection 7.3(ii) or (viii); (g) the Loan Parties and their
respective Subsidiaries shall not make any Guaranties for the benefit
of any such Pool B Subsidiary; (h) on or before such closing date,
Management Corp. or any of its Wholly Owned Subsidiaries shall have
entered
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into a Property Servicing Agreement with such Subsidiary and in the
event a Liquor License exists with respect to such Additional Pool B
Property or is acquired thereafter, the holders thereof shall have
entered into a Liquor Operation Servicing Agreement, in each case
substantially in the form delivered on the Funding Availability Date
pursuant to subsection 4.1J or in such other form as may be reasonably
acceptable to the Agent, which shall provide for Management Fees in
amounts and on other terms substantially similar to those obtained in
the Servicing Agreements which relate to the initial Pool B Properties
or, if different, on terms satisfactory to the Agent; (i) on or before
such closing date, the Company, at its expense, shall deliver to the
Agent (1) an Officers' Certificate of the Company setting forth a
schedule of insurance with respect to each of the insurance policies
required pursuant to any Pool B Document with respect to such
Additional Pool B Property or subsection 6.10, and to the extent not
conforming to the provisions governing such insurance as specified in
subsection 6.10, the Agent shall be satisfied with the nature and
scope of such insurance policies and each such insurance policy shall
name the holder of any applicable beneficiary of any related Pool B
Obligation (if and so long as any shall be outstanding) or the Agent
on behalf of the Lenders, as loss payee, (2) a statement of Property
Gross Revenues and Operating Expenses and any other expenses with
respect to such Additional Pool B Property for the 12 most recently
completed calendar months ending not less than 30 days before such
closing date, in reasonable detail satisfactory to the Agent and
certified by the Chief Executive Officer or the Chief Financial
Officer of the Company to the effect provided in subsection 6.1(i),
mutatis mutandis, (3) an Addition Certificate, in reasonable detail
satisfactory to the Agent and together with the financial statements
and other information used by the Company to calculate the Borrowing
Base and certified by the Chief Executive Officer or Chief Financial
Officer of the Company, (4) supplements to the Schedules to this
Agreement, the Environmental Indemnity, the Security Agreement, the
Omnibus Management and Liquor License Agreement and, if so required by
the Agent, the Trademark Agreement reflecting the acquisition of such
Additional Pool B Property, which Schedules shall be acceptable to the
Agent, (5) originally executed counterparts to the Environmental
Indemnity, the Security Agreement, the Omnibus Management and Liquor
License Agreement and the Subsidiary Guaranty, together with such
other Security Documents as the Agent may require which do not enlarge
the scope of any party's obligations as compared to similar Security
Documents previously executed, (6) executed or certified, conformed
copies of the related Acquisition Agreements and such other documents,
certificates and opinions executed and delivered by or on behalf of
the Company and any of its Subsidiaries as the Agent may reasonably
request, (6) copies of each of the documents set forth in paragraphs
E, F, H, J, K, L and M of subsection 4.1, mutatis mutandis, with
respect to such Additional Pool B Property, in each case subject to
the satisfaction of the Agent specified in such subsections, and (8)
payment pursuant to subsection 9.2 of the expenses incurred by the
Agent in connection with the matters subject to this subsection
7.15A(ii); and (j) within 45 days after the applicable Addition Date,
the Company, at its expense, shall deliver to the Agent an Appraisal
with respect to such Additional Pool B Property;
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(iii) so long as no Event of Default or Potential Event of
Default has occurred and is continuing or would be caused thereby,
without the approval of the Agent (except as provided to the contrary
in subsection 7.10 and this subsection 7.15(A)(iii)), any of the Pool
C Subsidiaries may make Acquisitions of Pool C Properties; provided,
however, that (a) each Pool C Property subject to such Acquisition
shall include the entire fee interest in an upscale full service
hotel, garden style hotel or resort hotel, as the case may be, located
in the United States of America and otherwise be of a type, quality
and character consistent with the Company's business plan and
strategy, as described in the Debt Prospectus in the section entitled
"Business -- Growth Strategy -- I. Primary Growth Opportunities" or,
if not consistent, as approved by the Agent, which approval may be
granted, withheld, conditioned or delayed in its sole discretion; (b)
after giving effect to such Acquisition, the greater of (x) the
aggregate undepreciated book value of the Pool C Properties and all
other properties and other assets (including, without limitation,
additions and improvements thereto and FF&E provided that the
aggregate cost of FF&E installed at any Pool C Property in a period of
12 complete calendar months that is less than 5.0% of the Gross
Property Revenues from such Pool C Property shall be excluded from the
calculation of any amount referred to in this clause (b)) then owned
or leased by the Company and the Pool C Subsidiaries in connection
therewith and (y) the aggregate fair market value of such Pool C
Properties and such other properties and assets (including, without
limitation, such additions, improvements and FF&E), in each case of
the respective dates of acquisition thereof, shall not exceed
$75,000,000, as reasonably determined by the Company and certified to
the Agent in an Officers' Certificate of the Chief Executive Officer
or the Chief Financial Officer of the Company to such effect, together
with the information utilized by the Company to make such
determination; (c) at least 30 days before the proposed closing date
of each such Acquisition, the Company, at its expense, shall deliver
to the Agent the Property Information with respect to such Pool C
Property; (d) the Loan Parties and their respective Subsidiaries,
including each such Pool C Subsidiary, shall not assume or otherwise
become liable for any liabilities or other obligations secured by or
otherwise relating to any such Pool C Property except those incurred
in the ordinary course of business (which liabilities and obligations
shall not include Indebtedness); (e) all Indebtedness assumed or
incurred by such Pool C Subsidiary at any time shall be Pool C
Indebtedness permitted by subsection 7.1(vii); (f) all Investments and
Guaranties to be made by the Company and its other Subsidiaries in
each such Pool C Subsidiary shall be permitted by subsections 7.3(ii)
and 7.4; (g) on or before such closing date, Management Corp. shall
have entered into a Property Servicing Agreement with the Company or
such Pool C Subsidiary, as the case may be, and in the event a Liquor
License exists with respect to such Pool C Property or is acquired
thereafter, the holders thereof shall have entered into a Liquor
Operation Servicing Agreement, in each case substantially in the form
delivered on the Funding Availability Date pursuant to subsection 4.1J
or in such other form as may be reasonably acceptable to the Agent,
which shall provide for Management Fees in amounts and on other terms
substantially similar to those obtained in the Servicing Agreements
that related to the initial Pool A Properties or, if different, on
terms satisfactory to the Agent; and (h) on or before such closing
date, the Company, at its expense, shall deliver to the Agent (1) an
Officers' Certificate of the Company setting
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forth a schedule of insurance with respect to each of the insurance
policies required pursuant to any applicable Pool C Document or
subsection 6.10, and to the extent not conforming to the provisions
governing such insurance as specified in subsection 6.10, the Agent
shall be satisfied with the nature and scope of such insurance
policies and each such insurance policy shall name the holder of any
applicable beneficiary of any related Pool C Obligation (if and so
long as any shall be outstanding) or the Agent on behalf of the
Lenders, as loss payee, (2) a statement of Property Gross Revenues and
Operating Expenses and any other expenses with respect to such Pool C
Property for the 12 most recently completed calendar months ending not
less than 30 days before such closing date, in reasonable detail
satisfactory to the Agent and certified by the Chief Executive Officer
or the Chief Financial Officer of the Company to the effect provided
in subsection 6.1(i), mutatis mutandis, (3) an Addition Certificate,
in reasonable detail satisfactory to the Agent and together with the
financial statements and other information used by the Company to
calculate the Borrowing Base and certified by the Chief Executive
Officer or Chief Financial Officer of the Company, (4) supplements to
the Schedules to this Agreement and,if the Company shall be required
pursuant to the following clause(s) to execute and deliver
counterparts to the Environmental Indemnity and the Subsidiary
Guaranty, Schedules thereto, reflecting the acquisition of such Pool C
Property, which Schedules shall be acceptable to the Agent, (5)
originally executed counterparts to the Environmental Indemnity and
the Subsidiary Guaranty, if permitted by the provider of the Pool C
Indebtedness, together with such other Security Documents as the Agent
may require, (6) executed or certified, conformed copies of the
related Acquisition Agreements and such other documents, certificates
and opinions executed and delivered by or on behalf of the Company and
any of its Subsidiaries as the Agent may reasonably request and (7)
copies of each of the documents set forth in paragraphs F, J, L
(excluding clause (iii) and M of subsection 4.1, mutatis mutandis,
with respect to such Pool C Property, in each case subject to the
satisfaction of the Agent specified in such subsections, and (8)
payment pursuant to subsection 9.2 of the expenses incurred by the
Agent in connection with the matters subject to this subsection
7.15A(iii); and
(iv) so long as no Event of Default or Potential Event of
Default has occurred and is continuing or would be caused thereby,
without the approval of the Agent (except as provided to the contrary
in subsection 7.10 and this subsection 7.15(A)(iii)), a Wholly Owned
Subsidiary of the Company (the "VININGS SUBSIDIARY") may make an
Acquisition of the Vinings Property; provided, however, that (a) the
Vinings Property shall include the entire fee interest in an upscale
full service hotel, garden style hotel or resort hotel, as the case
may be, located in the United States of America and otherwise be of a
type, quality and character consistent with the Company's business
plan and strategy, as described in the Debt Prospectus in the section
entitled "Business -- Growth Strategy -- I. Primary Growth
Opportunities" or, if not consistent, as approved by the Agent, which
approval may be granted, withheld, conditioned or delayed in its sole
discretion; (b) after giving effect to such Acquisition, the greater
of (x) the aggregate undepreciated book value of the Pool C
Properties, the Vinings Property and all other properties and other
assets (including, without limitation, additions and improvements
thereto and FF&E, provided that the aggregate cost of
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FF&E installed at any Pool C Property or the Vinings Property in a
period of 12 complete calendar months ending not less than 30 days
before the date of determination that is less than 5.0% of the Gross
Property Revenues from such Pool C Property or the Vinings Property
for such period shall be excluded from the calculation of any amount
referred to in this clause (b) then owned or leased by the Company,
the Pool C Subsidiaries and the Vinings Subsidiary in connection
therewith and (y) the aggregate fair market value of such Pool C
Properties, the Vinings Property and such other properties and assets
(including, without limitation, such additions, improvements and
FF&E), in each case as of the respective dates of acquisition thereof,
shall not exceed $75,000,000, as reasonably determined by the Company
and certified to the Agent in an Officers' Certificate of the Chief
Executive Officer or the Chief Financial Officer of the Company to
such effect, together with the information utilized by the Company to
make such determination; (c) at least 30 days prior to the proposed
closing date of such Acquisition, the Company, at its expense, shall
deliver to the Agent the Property Information with respect to the
Vinings Property; (d) the Indebtedness assumed by the Vinings
Subsidiary in connection with the Acquisition of the Vinings Property
shall be permitted by subsection 7.1(viii); (e) all Investments and
Guaranties to be made by the Company and its other Subsidiaries in the
Vinings Subsidiary shall be permitted by subsections 7.3(ii) and 7.4;
(f) on or before such closing date, Management Corp. shall have
entered into a Property Servicing Agreement with the Vinings
Subsidiary, and in the event a Liquor License exists with respect to
the Vinings Property or is acquired thereafter, the holders thereof
shall have entered into a Liquor Operation Servicing Agreement, in
each case substantially in the form delivered on the Funding
Availability Date pursuant to subsection 4.1J or in such other form as
may be reasonably acceptable to the Agent, which shall provide for
Management Fees in amounts and on other terms substantially similar to
those obtained in the Servicing Agreements that related to the initial
Pool A Properties or, if different, on terms satisfactory to the
Agent; and (g) on or before such closing date, the Company, at its
expense, shall deliver to the Agent (1) an Officers' Certificate of
the Company setting forth a schedule of insurance with respect to each
of the insurance policies required pursuant to any applicable Vinings
Bond Document or subsection 6.10, and to the extent not conforming to
the provisions governing such insurance as specified in subsection
6.10, the Agent shall be satisfied with the nature and scope of such
insurance policies and each such insurance policy shall name the
holder of any applicable beneficiary of any related obligation under
the Vinings Bond Documents (if and so long as any shall be
outstanding) or the Agent on behalf of the Lenders, as loss payee, (2)
a statement of Property Gross Revenues and Operating Expenses and any
other expenses with respect to the Vinings Property for the 12 most
recently completed calendar months ending not less than 30 days before
such closing date, in reasonable detail satisfactory to the Agent and
certified by the Chief Executive Officer or the Chief Financial
Officer of the Company to the effect provided in subsection 6.1(i),
mutatis mutandis, (3) an Addition Certificate, in reasonable detail
satisfactory to the Agent and together with the financial statements
and other information used by the Company to calculate the Borrowing
Base and certified by the Chief Executive Officer or Chief Financial
Officer of the Company, (4) supplements to the Schedules to this
Agreement and, if the Company shall be required pursuant to the
following clause(s) to execute and deliver counterparts to the
Environmental
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Indemnity and the Subsidiary Guaranty, Schedules thereto, reflecting
the acquisition of the Vinings Property, which Schedules shall be
acceptable to the Agent, (5) originally executed counterparts to the
Environmental Indemnity and the Subsidiary Guaranty to the extent
permitted by the Vinings Bond Documents, (6) executed or certified,
conformed copies of the related Acquisition Agreements and such other
documents, certificates and opinions executed and delivered by or on
behalf of the Company and any of its Subsidiaries as the Agent may
reasonably request, (7) copies of each of the documents set forth in
paragraphs E, F, J, L (excluding clause (iii)) and M of subsection
4.1, mutatis mutandis, with respect to the Vinings Property, in each
case subject to the satisfaction of the Agent specified in such
subsections, and (8) payment pursuant to subsection 9.2 of the
expenses incurred by the Agent in connection with the matters subject
to this subsection 7.15A(iv). The Vinings Subsidiary shall be deemed
to be a Pool C Subsidiary and the Vinings Property shall be deemed to
be a Pool C Property for all purposes of this Agreement, including,
without limitation, for purposes of the application to the Vinings
Subsidiary and the other Pool C Subsidiaries of the restrictions set
forth in clause (b) in the proviso to subsection 7.15A(iii), but
excluding the application to the Vinings Subsidiary of the
restrictions set forth in subsection 7.1(vii) and in clause (e) in the
proviso to subsection 7.15A(iii); provided that, the Vinings
Subsidiary shall be deemed to be a Pool B Subsidiary and the Vinings
Property shall be deemed to be a Pool B Property if and so long as (w)
the Lenders shall elect, in their sole discretion, to provide a Letter
of Credit as the sole credit enhancement for the payment of the
Vinings Bonds, (x) the Vinings Subsidiary shall execute and record a
Mortgage on the Vinings Property that is junior or subordinate in
priority only to the lien of the mortgage securing the payment of the
Vinings Bonds pursuant to the Vinings Indenture and to such other
liens and encumbrances as shall be approved by the Agent in its sole
discretion, such Mortgage shall secure a portion of the Facility that
shall be acceptable to the Agent in its sole discretion and such
Mortgage shall be cross-defaulted with the Mortgages on the Pool A
Properties and the Pool B Properties, (y) the Trustee under the
Vinings Indenture, as the first lienholder, and the Agent shall have
entered into an intercreditor agreement in form and substance
acceptable to the Agent in its sole discretion, and (z) the other
agreements, instruments and other documents evidencing or effecting
such amendment or refinancing, and all other matters in connection
therewith, shall be acceptable to the Agent in its sole discretion.
B. TRANSFER OF PROPERTIES. The Loan Parties shall not, and shall
not permit any of their respective Subsidiaries to, Transfer any Property;
provided that, subject to subsection 7.10B, (i) the Loan Parties and their
respective Subsidiaries may create, incur, assume or permit to exist Liens in
accordance with subsection 7.2 and subsection 6.9, and (ii) each Loan Party and
each of its Subsidiaries may sell or otherwise permanently dispose of any
Property if (a) each such sale or other permanent disposition of such Property
is made on an arms-length basis for the fair market value of such Property, (b)
not less than 100% of the consideration received by such Loan Party or
Subsidiary in any such transaction (net of any Pool B Obligations or Pool C
Indebtedness forgiven or paid in connection therewith) shall be Cash and shall
be received on the date of such sale or other permanent disposition, (c) with
respect to any Pool A Property, the Borrowing Base shall be reduced as provided
in subsection 2.4B(iii) and (d) with respect to any Pool A Property or Pool B
Property, the Company complies with
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the provisions set forth in subsection 2.9 with respect to such Property,
including the payment of any Release Price required thereby.
C. NOTICES WITH RESPECT TO PROPERTIES. The Company shall
deliver, or shall cause to be delivered, the following written notices to the
Agent:
(i) promptly after the Company's acquiring actual
knowledge of the same, an Officers' Certificate with respect to the
occurrence or effectiveness of any event or condition that could
reasonably be expected to cause the Property Amount or Property EBITDA
with respect to any Property, as of any date of determination
thereafter, to be reduced as of such later date of determination or
for any period pursuant to the provisos contained in the definitions
of Property Amount and Property EBITDA, respectively; and
(ii) at least 20 days prior to the commencement of any
Material Restoration/Renovation of any Property, a Notice of
Renovation/Restoration with respect thereto and upon the completion of
such Major Renovation/Restoration, a Completion Certificate with
respect thereto.
7.16 MANAGEMENT AGREEMENTS, SERVICING AGREEMENTS AND OTHER MANAGEMENT
AGREEMENTS.
A. EXECUTION OF MANAGEMENT AGREEMENTS, SERVICING AGREEMENTS AND
OTHER MANAGEMENT AGREEMENTS. The Loan Parties shall not, and shall not permit
any of their respective Subsidiaries to, enter into or otherwise become
obligated with respect to, any agreement regarding the management or operation
of any hotel property after the Funding Availability Date, except that, from
time to time:
(i) with the prior written approval of the Agent, which
approval may be granted, withheld, conditioned or delayed in the
Agent's sole discretion, Management Corp. or any of its Wholly Owned
Subsidiaries may acquire or enter into proposed Management Agreements
with respect to the management and operation of hotel properties, the
related land and the improvements thereof (each an "ADDITIONAL
MANAGEMENT AGREEMENT"); provided that, in any event, (a) each proposed
Managed Property shall be an upscale full service hotel, garden style
hotel or resort hotel, as the case may be, located in the United
States of America and otherwise be of a type, quality and character
consistent with the Company's business plan and strategy, as described
in the Debt Prospectus in the section entitled "Business -- Growth
Strategy -- I. Primary Growth Opportunities" or, if not as so
described, as approved by the Agent, which approval may be granted,
withheld, conditioned or delayed in its sole discretion; (b) at least
30 days before the proposed date of each such closing or the proposed
effective date of such Additional Management Agreement, the Company,
at its expense, shall deliver to the Agent a copy of such Additional
Management Agreement with respect to the proposed Managed Property;
(c) each Investment in, Guaranty for the benefit of or payment to any
Person that may be required to be made by the Loan Parties and their
respective Subsidiaries pursuant to the terms of or in
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connection with the Additional Management Agreement shall be permitted
under subsection 7.3(vi), (vii) or (viii); and (d) on or before such
closing date or effective date, the Company, at its expense, shall
deliver to the Agent (1) execution or conformed copies of the
Additional Management Agreement, including any amendments,
modifications and supplements thereto and all other documents
delivered therewith as of such closing date or effective date, as the
case may be, which documents shall be satisfactory in form and
substance to the Agent, in its sole discretion, (2) a statement of
Approved Management Fees and other Management Fees with respect to
such Additional Management Agreement, for the 12 month period ending
on the last day of the most recently completed calendar month ending
not less than 30 days before such closing date or effective date, as
the case may be, in reasonable detail satisfactory to the Agent and
certified by the Chief Executive Officer or the Chief Financial
Officer of the Company to the effect provided in subsection 6.1(ii),
mutatis mutandis, (3) an Addition Certificate, (4) supplements to the
Schedules to this Agreement, the Security Agreement and the Omnibus
Management and Liquor License Agreement, which schedules shall be
acceptable to the Agent, (5) payment pursuant to subsection 9.2 of the
expenses incurred by the Agent in connection with the matters subject
to this subsection 7.16A(i), provided, however, that the Loan Parties
and their respective Subsidiaries shall not at any time make any
Investment in, become liable with respect to any Guaranty for the
benefit of or make any payment to any Person owning or leasing the
Other Managed Property or otherwise in connection with such Other
Management Agreement, pursuant to subsections 7.3(vii) and (viii) or
otherwise, unless and until the Company, at its expense, shall have
delivered to the Agent copies of each of the documents set forth in
subsection 4.1M, mutatis mutandis, with respect to such Additional
Management Agreement, in each case subject to the satisfaction of the
Agent specified in subsection 4.1M;
(ii) so long as no Event of Default or Potential Event of
Default has occurred and is continuing or would be caused thereby,
without the approval of the Agent (except as provided to the contrary
in subsections 7.10 and 7.16D and this subsection 7.16A(ii)),
Management Corp. or any of its Wholly Owned Subsidiaries may enter
into management agreements (other than Management Agreements and
Servicing Agreements) with respect to the management and operation of
hotel properties, the related land and the improvements thereof (each
an "OTHER MANAGEMENT AGREEMENT"); provided, however, that (a) each
hotel property subject to such Other Management Agreement shall be
either (1) an upscale full service hotel, garden style hotel or resort
hotel located in the United States of America, Canada or the Caribbean
or (2) an extended stay hotel in the United States of America that is
owned or leased by the Greystar Partnership and managed, under a
service mark other than "Wyndham" or "Wyndham Garden" (or any other
brand under which any of the Properties or Managed Properties are
operated from time to time) pursuant to the Greystar Agreements and an
Other Management Agreement that has terms substantially the same as
those in the form of Other Management Agreement to which hotels
referred to in the preceding clause (1) are subject, and in either
case the related Other Managed Property shall be of a type, quality
and character consistent with the Company's business plan and
strategy, as described in the Debt Prospectus in the section entitled
"Business --
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Growth Strategy -- I. Primary Growth Opportunities" or, if not
consistent, as approved by the Agent, which approval may be granted,
withheld, conditioned or delayed in its sole discretion; (b) at least
30 days before the proposed date of each such closing or the proposed
effective date of such Other Management Agreement, the Company, at its
expense, shall deliver to the Agent a copy of such Other Management
Agreement with respect to the proposed Other Managed Property; (c)
each Investment in, Guaranty for the benefit of or payment to any
Person owning or leasing the related Other Managed Property that may
be required to be made by the Loan Parties and their respective
Subsidiaries for the purpose of or otherwise in connection with
securing, extending, renewing or modifying such Other Management
Agreement shall be permitted under subsection 7.3(vii), provided,
however, that the Loan Parties and their respective Subsidiaries shall
not at any time make any Investment in, become liable with respect to
any Guaranty for the benefit of or make any payment to any Person
owning or leasing the Other Managed Property or otherwise in
connection with such Other Management Agreement, pursuant to
subsections 7.3(vii) and (viii) or otherwise, (1) if such Other
Managed Hotel is not an upscale full service hotel, garden style hotel
or resort hotel located in the United States of America and (2) unless
and until the Company, at its expense, shall have delivered to the
Agent copies of each of the documents set forth in subsection 4.1M,
mutatis mutandis, with respect to such Other Management Agreement, in
each case subject to the satisfaction of the Agent specified in
subsection 4.1M; (d) such Other Management Agreement shall not
constitute, have the form of or contain provisions creating a
leasehold interest in any Other Managed Property or other real or
personal property; and (e) on or before such effective date, the
Company, at its expense, shall deliver to the Agent (1) execution or
conformed copies of the Other Management Agreement, including any
amendments, modifications and supplements thereto and all other
documents delivered therewith as of such closing date or effective
date, as the case may be, which documents shall be satisfactory in
form and substance to the Agent, in its sole discretion, (2) a
statement of Approved Management Fees and other Management Fees, with
respect to such Other Management Agreement, for the 12 month period
ending on the last day of the most recently completed calendar month
ending not less than 30 days before such closing date or effective
date, as the case may be, in reasonable detail satisfactory to the
Agent and certified by the Chief Executive Officer or the Chief
Financial Officer of the Company to the effect provided in subsection
6.1(ii), mutatis mutandis, (3) an Addition Certificate and (4)
supplements to the Schedules to this Agreement and the Security
Agreement, which schedules shall be acceptable to the Agent, and (5)
payment pursuant to subsection 9.2 of the reasonable expenses incurred
by the Agent in connection with the matters subject to this subsection
7.16A(ii) and (f) by the end of the calendar month following the month
in which such closing date or effective date occurs, and from time to
time thereafter as the same becomes available,the Company at its
expense, shall deliver to the Agent, such portion of the Management
Information as shall not previously have been delivered by the Company
to the Agent; and
(iii) Management Corp. and any of its Wholly Owned
Subsidiaries shall enter into Servicing Agreements with respect to the
management and operation of the Properties as contemplated by
subsection 4.1J or pursuant to subsection 7.15A.
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B. TRANSFER OR TERMINATION OF MANAGEMENT AGREEMENTS, SERVICING
AGREEMENTS AND OTHER MANAGEMENT AGREEMENTS. The Loan Parties shall not, and
shall not permit any of their respective Subsidiaries to, Transfer any
Management Agreement, Servicing Agreement or Other Management Agreement;
provided that, subject to subsection 7.10, (i) the Loan Parties and their
respective Subsidiaries may create, incur, assume or permit to exist Liens in
accordance with subsection 7.2 and subsection 6.9; (ii) Management Corp. and
each of its Wholly Owned Subsidiaries may sell or otherwise permanently dispose
of any Management Agreement or Servicing Agreement if (a) each such sale or
other permanent disposition of such Management Agreement or Servicing
Agreement, as the case may be, is made on an arms-length basis for the fair
market value of such Management Agreement or Servicing Agreement, as the case
may be, (b) not less than 100% of the consideration received by such Loan Party
or Subsidiary in any such transaction shall be Cash and shall be received on
the date of such sale or permanent disposition, (c) the Borrowing Base shall be
reduced as provided in subsection 2.4B(iii) and (d) the Company complies with
the provisions set forth in subsection 2.9 with respect to such Management
Agreement or Servicing Agreement, as the case may be, including the payment of
any Release Price required thereby; and (iii) Management Corp. and each of its
Wholly Owned Subsidiaries may sell or otherwise permanently dispose of an Other
Management Agreement. Upon the expiration (without renewal or extension),
cancellation or other termination of any Management Agreement, Servicing
Agreement or Other Management Agreement, as the case may be, the Borrowing Base
shall be reduced in accordance with the provisions of subsection 2.4B(iii), and
the Company shall pay the amounts, if any, that may be required to be paid
pursuant to subsection 2.4B(iii) or 2.4B(iv) after taking into account any
required reduction or recalculation of the Borrowing Base.
C. NOTICES WITH RESPECT TO MANAGEMENT AGREEMENTS, SERVICING
AGREEMENTS AND OTHER MANAGEMENT AGREEMENTS. The Company shall deliver, or
shall cause to be delivered, the following written notices to the Agent:
(i) promptly after the Company's acquiring actual
knowledge of the same, a written notice with respect to the occurrence
or effectiveness of any event or condition that could reasonably be
expected to cause the Management Amount or Management EBITDA with
respect to any Management Agreement, Servicing Agreement or Other
Management Agreement, as of any date of determination thereafter, to
be reduced as of such date of determination or for any period pursuant
to the provisos contained in the definition of Management Amount or
Management EBITDA, as the case may be; and
(ii) at least 20 days prior to the commencement of any
Material Restoration/Renovation of any Managed Property or Other
Managed Property, a Notice of Renovation/Restoration with respect
thereto and upon the completion of such Major Renovation/Restoration,
a Completion Certificate with respect thereto.
D. CERTAIN INVESTMENTS, GUARANTIES AND PAYMENTS. Except as
permitted by subsections 7.3(vi), (vii) and (viii), the Loan Parties shall not,
and shall not permit any of their respective Subsidiaries to, make any
Investments in, become liable with respect to any Guaranties for the benefit of
or make any other payment to any Person, including any Affiliate
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or any Joint Venture, for the purpose of or otherwise in connection with
securing, extending, renewing or modifying any Management Agreement, Servicing
Agreement or Other Management Agreement.
7.17 INTELLECTUAL PROPERTY; FRANCHISE AGREEMENTS; OTHER JURISDICTIONS.
A. INTELLECTUAL PROPERTY. Except as provided to the contrary in
subsection 7.17B, the Loan Parties shall not, and shall not permit any of their
respective Subsidiaries, to Transfer any Intellectual Property unless the
Company shall have determined that the Intellectual Property so Transferred is
no longer material to the business, operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries.
B. FRANCHISE AGREEMENTS. The Loan Parties shall not, and shall
not permit any of their respective Subsidiaries to, enter into or otherwise
become obligated with respect to, any franchise agreement, license agreement or
similar agreement with respect to the operation of any hotel property as a
"Wyndham" or "Wyndham Garden" hotel (each an "ADDITIONAL FRANCHISE AGREEMENT"),
except that, from time to time after the Funding Availability Date, without the
prior approval of the Agent, but subject to subsection 7.10A, IP Corp. may
enter into Franchise Agreements and Management Corp. may enter into Management
Agreements, Servicing Agreements, Other Management Agreements and sublicenses
of licenses from IP Corp. pursuant to which they grant rights in Intellectual
Property; provided, however, that (i) each hotel property subject to each such
Additional Franchise Agreement shall be of a type, quality and character
consistent with the Company's business plan and strategy as described in the
Debt Prospectus in the section entitled "Business -- Growth Strategy -- II.
Additional Growth Opportunities" or, if not consistent, as approved by the
Agent in its sole discretion, (ii) the Loan Parties and their respective
Subsidiaries may not make any Investment in, or become liable with respect to
any Guaranty for the benefit of, or make any payment to any Person owning or
leasing the hotel property subject to such Additional Franchise Agreement or
otherwise in connection with such Additional Franchise Agreement, and (iii)
such Additional Franchise Agreement shall not constitute, have the form of or
contain provisions creating a leasehold interest in any real or personal
property.
C. OTHER JURISDICTIONS. The Loan Parties shall not, and shall
not permit any of their respective Subsidiaries to acquire any Property, as
permitted by subsection 7.15A, secure any Additional Management Agreement or
Other Management Agreement with respect to any Managed Property or Other
Managed Property, as permitted by subsection 7.16A, or enter into any
Additional Franchise Agreement with respect to any Property, Managed Property,
Other Managed Property or other hotel property, as permitted by subsection
7.17B, if such Property, Managed Property, Other Managed Property or other
hotel property is located in any jurisdiction other than the United States of
America, unless the Company, at its expense, shall have (i) prepared and
delivered to the Agent for filing in the appropriate offices such instruments
as may be necessary or appropriate, in the determination of the Agent, to
perfect under the laws of such other jurisdiction a first priority security
interest in favor of the Agent or the Lenders, as the Agent shall determine, in
the Intellectual Property of the Loan Parties and their respective Subsidiaries
that may be used or useful in the ownership, management or operation of such
Property, Managed Property, Other Managed Property or other hotel or
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hospitality property and (ii) caused to be prepared and delivered to the Agent
an opinion of counsel with respect to the perfection of such security interest,
which counsel and opinion shall be reasonably satisfactory to the Agent.
7.18 MATERIAL LEASES.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, (i) enter into any Lease other than Leases
incidental to the operation of the Properties as hotels or (ii) enter into any
Material Lease or any advanced booking of more than 51% of the rooms at any
Property for a period in excess of 30 days without the prior written approval
of the Agent, which approval shall not be unreasonably withheld, conditioned or
delayed; it being understood and agreed that if after the Effective Date any
Loan Party or any of its Subsidiaries enters into a Material Lease or any such
advanced booking, the Agent may require that the Tenant thereunder enter into a
Tenant Subordination Agreement satisfactory in form and substance to the Agent.
In the event any Lease necessary to the operation of any Property as a hotel is
terminated, the applicable Loan Party or Subsidiary thereof shall replace such
Lease with a suitable comparable Lease within a reasonable period of time
following such termination.
7.19 AMENDMENTS OF CREDIT AGREEMENT, OTHER INDEBTEDNESS, OBLIGATIONS,
CERTAIN DOCUMENTS.
A. CREDIT AGREEMENT. Without the prior written approval of the
Agent, which approval may granted, withheld, conditioned or delayed in its sole
discretion, the Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, enter into any agreement prohibiting or restricting
the ability of any of the Loan Parties and any of their respective Subsidiaries
to amend or otherwise modify this Agreement or any other Loan Document.
B. COMPANY PREFERRED STOCK AND OTHER STOCK. Without the prior
written approval of the Agent, which approval may be granted, withheld,
conditioned or delayed in its sole discretion, the Company shall not amend,
restate, supplement or otherwise change its articles of incorporation if the
effect of such amendment, restatement, supplement or change is to provide for
the issuance of any preferred stock of the Company or the filing of any
certificate of designation with respect thereto, except that the Company may
amend, restate, supplement or change its certificate of incorporation to
provide for the issuance of non-cumulative preferred stock; provided, however,
that (i) the certificate of incorporation of the Company, as so amended,
restated, supplemented or changed, and any prospectus, certificate of
designation or other document delivered in connection with such issuance shall
be in form and substance reasonably satisfactory to the Agent, (ii) such
preferred stock shall be Qualified Capital Stock and (iii) such preferred stock
shall be subordinate in right and time of payment to the Obligations.
C. ORGANIZATION DOCUMENTS. Without the prior written approval of
the Agent, which approval may be granted, withheld, conditioned or delayed in
its sole discretion, except as expressly permitted hereunder, the Loan Parties
shall not, and shall not permit any of their respective Subsidiaries to, amend
or otherwise modify their respective charters or partnership
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agreements in any material respect except in connection with an activity
permitted by subsection 7.7(viii).
D. OTHER INDEBTEDNESS. Without the prior written approval of the
Agent, which approval be granted, withheld, conditioned or delayed in its sole
discretion, the Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, (i) amend, restate, supplement or otherwise change
the terms of, or waive or fail to enforce any provision of, any Senior Note
Document or any Pool C Indebtedness in any material respect, (ii) except as
provided to the contrary in subclause (x) of and proviso (1) to subsection
7.1(viii), amend, restate, supplement or otherwise change the terms of, or
waive any provision of, any of the Vinings Bond Documents in any material
respect, or (iii) pay or prepay any principal amount of the Senior Notes or
defease, or make any payments the effect of which is to defease the Senior
Notes in whole or in part (whether pursuant to the defeasance provisions of the
Indenture or otherwise).
E. POOL A GROUND LEASES; POOL B GROUND LEASES; OTHER POOL B
DOCUMENTS. Without the prior written approval of the Agent, which approval may
be granted, withheld, conditioned or delayed in its sole discretion, the Loan
Parties shall not, and shall not permit any of their respective Subsidiaries
to, (i) amend, restate, supplement or otherwise change, or waive or fail to
enforce any provision of, any of the Pool A Ground Leases, the Pool B Ground
Leases and the other Pool B Documents in any material respect or (ii) exercise
any option or other right under or with respect to any Pool B Obligation or
Pool C Obligation (other than to request advances and elect interest rate
options under the Pool C Indebtedness to the extent permitted by subsection
7.17) if the result of such exercise is, or may reasonably be expected to be,
an increase in the amount of rent, principal, interest or any other payment
required to be made by such Loan Party or Subsidiary to the holder of such Pool
B Obligation or Pool C Obligation, as the case may be.
F. MANAGEMENT AGREEMENTS. Without the prior written approval of
the Agent, which approval may be not be unreasonably withheld, conditioned or
delayed, the Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, amend, restate, supplement or otherwise change, or
waive or fail to enforce any provision of, any of the Management Agreements and
the Additional Management Agreements (but not Other Management Agreements) in
any material respect.
G. OMNIBUS MANAGEMENT AND LIQUOR LICENSE AGREEMENT; SERVICING
AGREEMENTS. Without the prior written approval of the Agent, which approval
may be granted, withheld, conditioned or delayed in its sole discretion, the
Loan Parties shall not, and shall not permit any of their respective
Subsidiaries to, amend, restate, supplement or otherwise change, or waive or
fail to enforce any provision of, the Omnibus Management and Liquor License
Agreement or any Servicing Agreement in any material respect.
H. AFFILIATE AGREEMENTS. Without the prior written approval of
the Agent, which approval may be granted, withheld, conditioned or delayed in
its sole discretion, and subject to subsection 7.10B, the Loan Parties shall
not, and shall not permit any of their respective Subsidiaries to, amend,
restate, supplement or otherwise change, or waive or fail to enforce any
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provision of, any of the ISIS 2000 Agreements, the CWS Agreements and the
Wynright Agreements in any material respect.
7.20 FISCAL YEAR.
The Company shall not change its fiscal year-end from December 31.
SECTION 8
EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT.
If any of the following conditions or events ("EVENTS OF DEFAULT")
shall occur:
A. FAILURE TO MAKE PAYMENTS WHEN DUE. Failure to pay any
installment of principal of any Loan, any reimbursement obligation in respect
of a Letter of Credit or any Release Price when due, whether at stated
maturity, by acceleration in accordance with the provisions of the applicable
Loan Document, by notice of voluntary prepayment, by mandatory prepayment or
otherwise; or failure to pay interest or any other amount due under this
Agreement (including any other amounts owed in respect of the Letters of
Credit) within five days after the date due; or
B. DEFAULT ON SENIOR NOTES. Failure of the Company to pay when
due any principal of or interest on or any other amount payable in respect of
the Senior Notes, in each case beyond the end of any grace period provided
therefor; or
C. DEFAULT IN OTHER AGREEMENTS. (i) Failure of any Loan Party or
any of its Subsidiaries to pay when due any principal of or interest on any
Indebtedness (other than Indebtedness referred to in subsection 8.1A or 8.1B,
but including, without limitation, any Indebtedness included in the Pool B
Obligations and any Pool C Indebtedness), in each case beyond the end of any
grace period provided therefor (which shall not exceed 5 days); or (ii)
occurrence of any other event or condition (other than an event or condition
expressly described in another subsection of this 8.1) which, with the giving
of notice or the lapse of time or both, with respect to (a) any Indebtedness
(including, without limitation, the Senior Notes, any Indebtedness included in
the Pool B Obligations and any Pool C Indebtedness) or any Contingent
Obligation or (b) any loan agreement, mortgage, indenture or other agreement
relating to such Indebtedness or Contingent Obligation(s), would cause, or
would permit the holder or holders of that Indebtedness or Contingent
Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that
Indebtedness or Contingent Obligation(s) to become or be declared due and
payable (upon the giving or receiving of notice, lapse of time, both, or
otherwise) prior to its stated maturity or the stated maturity of any
underlying obligation, as the case may be, in each case beyond the end of any
cure period therefor (which shall not exceed 5 days); provided that, with
respect to Pool C Indebtedness, either (x) such Indebtedness shall consist of
two or more independent obligations secured by two or more Pool C Properties
that shall not be cross-defaulted or cross-collateralized or (y) the principal
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amount of such Indebtedness, together with the aggregate principal amount of
other Indebtedness of the Loan Parties and their respective Subsidiaries that
is cross-defaulted or cross-collateralized or both with such Indebtedness,
shall be greater in the aggregate than the lesser of (1) $7,500,000 and (2) an
amount equal to 50% of the minimum aggregate principal amount of any
Non-Recourse Indebtedness (as defined in the Indenture) of the Loan Parties and
their respective Subsidiaries, the default in the payment of which, or the
acceleration of the maturity of which, accelerates, or permits the holders of
the Notes to cause the acceleration of, the maturity of all or any portion of
the Notes; provided further, that, for purposes of calculating any amount
pursuant to this clause (y), the principal amount of the Vinings Indebtedness
shall be zero if and so long as no Person shall have the right, by law,
contract, ownership of Securities or otherwise, and whether upon or without
regard to the giving of notice or the lapse of time or both (it being agreed
that, for purposes of this further proviso, the election by the parties to the
Vinings Forbearance Agreement to effect one or more forbearance periods in the
Vinings Forbearance Agreement shall not be deemed to be the "giving of notice"
or the "lapse of time"), (A) to exercise any default remedy under the Vinings
Bond Documents, (B) to take any other action to enforce against any other
Person the obligation to pay any principal amount of, interest on or other
amount in respect of the Vinings Bond Documents or any other Indebtedness or
other obligations created or evidenced thereby or (C) to exercise any right to
foreclose, draw or otherwise realize on any letter of credit, Guaranty, other
credit enhancement, mortgage, pledge or other security for the Vinings Bond
Documents or any such other Indebtedness or other obligations; or
D. BREACH OF CERTAIN COVENANTS. Failure of the Company to
perform or comply with any term or condition contained in subsection 2.5, 6.14,
6.15, 6.16A, 7.1, 7.3, 7.5, 7.6, 7.10, 7.11, 7.14 and 7.19F; or
E. DEFAULT UNDER SUBSECTION 7.2. Any Loan Party or any of its
Subsidiaries shall default in the performance of or compliance with the terms
and conditions of subsection 7.2 (other than any such default which is caused
by the imposition of a Lien created or evidenced by an agreement, instrument or
other document signed by or filed at the direction of any Loan Party or any of
its Subsidiaries), and such default shall not have been remedied or waived on
or before the 30th day after the earlier of (i) such Loan Party's or such
Subsidiary's obtaining knowledge of such default or (ii) receipt by such Loan
Party or such Subsidiary of notice from the Agent of such default; provided,
however, that if such default cannot be cured solely by the payment of money
and the cure of such default requires a period in excess of 30 days, and if
such Loan Party or such Subsidiary, as applicable, is diligently and
continuously prosecuting such cure, then such default shall not be an Event of
Default unless such Loan Party or such Subsidiary fails to cure such default
before the later of (x) the 90th day after such Loan Party or such Subsidiary
obtains knowledge or notice thereof, as the case may be, and (y) the last day
of a Voluntary Removal Period relating to a Property if (1) such default shall
have occurred only with respect to such Property (and not also with respect to
any other Property) and (2) such Voluntary Removal Period shall have commenced
on or before the 90th day after such Loan Party or such Subsidiary obtains
knowledge or notice thereof, as the case may be; and provided further that so
long as any Lien is the subject of a bond, deposit or insurance so that the
subject Property or portion thereof cannot be foreclosed on or otherwise
forfeited, no Event of Default shall exist with respect to such Lien; or
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F. BREACH OF WARRANTY. Any representation, warranty,
certification or other statement of any Loan Party or any of its Subsidiaries
made in this Agreement or in any other Loan Document or in any Related Document
to which such Loan Party or such Subsidiary is a party or in any statement or
certificate at any time given in writing pursuant hereto or thereto or in
connection herewith or therewith shall be false in any material respect on the
date as of which made and such default shall not have been remedied or waived
within 30 days after the earlier of (i) such Loan Party's or such Subsidiary's
obtaining knowledge of such default and (ii) receipt by such Loan Party or such
Subsidiary of notice from the Agent of such default; provided, however, that
if such default cannot be cured solely by the payment of money and the cure of
such default requires a period in excess of 30 days, and if such Loan Party or
such Subsidiary, as applicable, is diligently and continuously prosecuting such
cure, then such default shall not be an Event of Default unless such Loan Party
or such Subsidiary fails to cure such default within 90 days, after such Loan
Party or such Subsidiary obtain knowledge or notice thereof, as the case may
be; or
G. INVALIDITY OF LOAN DOCUMENT; FAILURE OF SECURITY; REPUDIATION
OF OBLIGATIONS. At any time after the execution and delivery thereof, (i) any
Loan Document (other than a Security Document) or any material provision
thereof shall cease to be in full force and effect (other than in accordance
with its terms) or shall be declared null and void; (ii) any Security Document
or any material provision thereof shall cease to be in full force and effect
(other than by reason of a release of Collateral thereunder in accordance with
the terms hereof or thereof or any other termination of such Security Document
in accordance with the terms hereof or thereof) or shall be declared null and
void, or the Agent shall not have or shall cease to have a valid and perfected
first priority Lien or security interest in any Collateral purported to be
covered, in each case for any reason other than the failure of the Agent to
take any action within its control; (iii) any Loan Party shall contest in
writing the validity or enforceability of any Loan Document in writing or deny
in writing that it has any further liability, including with respect to future
advances by the Lenders, under any Loan Document to which it is a party; or
(iv) the Trustee or any holder of the Senior Notes or representative or agent
thereof shall contest the validity or enforceability of Article Ten or Section
11.2 of the Indenture; or
H. POOL A GROUND LEASES. (i) Failure by any Loan Party or any of
its Subsidiaries to pay when due any monetary obligation contained in any Pool
A Ground Lease, in each case beyond the end of any grace period provided
therefor; (ii) occurrence of any other event or condition which, with the
giving of notice or lapse of time or both, would cause, or would permit the
landlord under any Pool A Ground Lease to cause, a cancellation or termination,
as against any Loan Party or any of its Subsidiaries party thereto, of such
Pool A Ground Lease; (iii) election by any Loan Party or any of its
Subsidiaries party to a Pool A Ground Lease to terminate such Pool A Ground
Lease in accordance with the terms thereof or to reject such Pool A Ground
Lease in any bankruptcy proceeding; or (iv) failure by any Loan Party or any of
its Subsidiaries to permit the Agent and/or its representatives at all
reasonable times upon reasonable prior written notice to make investigation or
examination concerning such Loan Party's or such Subsidiary's performance and
observance of the terms, covenants and conditions of a Pool A Ground Lease; or
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I. POOL B OBLIGATIONS. (i) Failure by any Loan Party or any of
its Subsidiaries to pay when due any monetary obligation contained in any Pool
B Document (other than the principal of or interest on any Indebtedness
included in the Pool B Obligations, as the case may be), in each case beyond
the end of any grace period provided therefor; (ii) the occurrence of any event
or condition which, with the giving of notice or lapse of time or both, would
cause, or would permit the holder or holders of the related Pool B Obligation,
as the case may be (including, without limitation, a landlord under any related
Pool B Ground Lease), to cause, (a) such Pool B Obligation to become or be
declared due and payable (upon the giving or receiving of notice, lapse of
time, both, or otherwise) prior to its stated maturity or the stated maturity
of any underlying obligation, as the case may be, or (b) a cancellation or
termination, as against any Loan Party or any of its Subsidiaries party
thereto, of such Pool B Ground Lease; (iii) election by any Loan Party or any
of its Subsidiaries party to a Pool B Ground Lease to terminate such Pool B
Ground Lease in accordance with the terms thereof or reject such Ground Lease
in any bankruptcy proceeding; or (iv) failure by any Loan Party or any of its
Subsidiaries to permit the Agent and/or its representatives at all reasonable
times upon reasonable prior written notice to make investigation or examination
concerning such Loan Party's or such Subsidiary's performance and observance of
the terms, covenants and conditions of the Pool B Documents; or
J. PROHIBITED TRANSFERS. If any Loan Party attempts to assign
its rights under this Agreement or any other Loan Document or any interest
herein or therein; or
K. OTHER DEFAULTS UNDER LOAN DOCUMENTS OR RELATED DOCUMENTS. Any
Loan Party or any of its Subsidiaries shall default in the performance of or
compliance with any term contained in this Agreement or any other Loan Document
or any material term of any Related Document to which such Loan Party or such
Subsidiary is a party (other than Related Documents pertaining to Pool C
Obligations) if the default thereunder could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, other than any
such term in this Agreement, other Loan Document or Related Document that is
referred to in any other clause of this subsection 8.1, and such default shall
not have been remedied or waived within 30 days after the earlier of (i) such
Loan Party's or such Subsidiary's obtaining knowledge of such default or (ii)
receipt by such Loan Party or such Subsidiary of notice from the Agent of such
default; provided, however, that if such default cannot be cured solely by the
payment of money and the cure of such default requires a period in excess of 30
days, and if such Loan Party or such Subsidiary is diligently and continuously
prosecuting such cure, then such default shall not be an Event of Default
unless such Loan Party or such Subsidiary fails to cure such default before the
later of (x) the 90th day after any Loan Party or any of its Subsidiaries
obtains knowledge or notice thereof, as the case may be, or (y) the last day of
a Voluntary Removal Period relating to a Property if (1) such default shall
have arisen under subsections [**WYNDHAM TO PROPOSE:**] _____, _____, _____ and
_____ of __________ (but no other provision of any other Loan Document) with
respect to such Property (and not also with respect to any other Property) and
(2) such Voluntary Removal Period shall have commenced on or before the 90th
day after such Loan Party or such Subsidiary obtains knowledge or notice
thereof, as the case may be; or
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L. INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A
court having jurisdiction in the premises shall enter a decree or order for
relief in respect of any Loan Party or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against any Loan Party or any of its Subsidiaries under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over any Loan Party or any of
its Subsidiaries, or over all or a substantial part of its property, shall have
been entered; or there shall have occurred the involuntary appointment of an
interim receiver, trustee or other custodian of any Loan Party or any of its
Subsidiaries for all or a substantial part of its property; or a warrant of
attachment, execution or similar process shall have been issued against any
substantial part of the property of any Loan Party or any of its Subsidiaries,
and any such event described in this clause (ii) shall continue for 60 days
unless dismissed, bonded or discharged; or
M. VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) Any
Loan Party or any of its Subsidiaries shall have an order for relief entered
with respect to it or commence a voluntary case under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or any Loan Party or any of its Subsidiaries shall make
any assignment for the benefit of creditors; or (ii) any Loan Party or any of
its Subsidiaries shall be unable, or shall fail generally, or shall admit in
writing its inability, to pay its debts as such debts become due; or the Board
of Directors of any Loan Party or any of its Subsidiaries (or any committee
thereof) shall adopt any resolution or otherwise authorize any action to
approve any of the actions referred to in clause (i) above or this clause (ii);
or
N. JUDGMENTS AND ATTACHMENTS. Any money judgment, writ or
warrant of attachment or similar process involving individually or in the
aggregate at any time an amount in excess of $1,000,000 (in either case not
adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed against
the Company or any of its Subsidiaries or any of their respective assets and
shall remain undischarged, unvacated, unbonded or unstayed for a period of 60
days (or in any event later than five days prior to the date of any proposed
sale thereunder); or
O. DISSOLUTION. Any order, judgment or decree shall be entered
against any Loan Party or any of its Subsidiaries decreeing the dissolution or
split up of such Loan Party or that Subsidiary and such order shall remain
undischarged or unstayed for a period in excess of 30 days; or
P. EMPLOYEE BENEFIT PLANS. There shall occur one or more ERISA
Events which individually or in the aggregate results in or could reasonably be
expected to result in liability
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of the Company, any of its Subsidiaries or any of their respective ERISA
Affiliates in excess of $1,000,000 during the term of this Agreement; or there
shall exist an amount of unfunded benefit liabilities (as defined in Section
4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans,
which exceeds $1,000,000; or
Q. MATERIAL ADVERSE EFFECT. Any event or change shall occur that
has caused or evidences, either in any case or in the aggregate, (i) a material
adverse effect upon the business, operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, and (ii) the
impairment of the ability of the Company and its Subsidiaries, taken as a
whole, to perform, or of the Agent or the Lenders to enforce, monetary
Obligations or the material impairment of the ability of any Loan Party to
perform, or of the Agent or the Lenders to enforce, non- monetary Obligations,
including the obligations of any Loan Party to perform, or of the Agent or the
Lenders to enforce, any Security Document; or
R. CONTINGENT OBLIGATIONS. Payments by the Loan Parties or any
of their Subsidiaries with respect to any of the Contingent Obligations set
forth on Schedule 5.3 annexed hereto in an aggregate amount greater than the
maximum estimated amount specified on Schedule 5.3 with respect thereto; or
S. CHANGE IN CONTROL. (i) Either Bedrock, the Crow Interests or
the Senior Executives, collectively (the "LARGER GROUP"), or the Senior
Executives, collectively (the "SMALLER GROUP"), shall Transfer, or otherwise
cease for any reason to maintain, beneficial or record ownership of 50% or more
of the numbers of shares of Common Stock owned by them, respectively, after
giving effect to the Formation as of the Formation Date (excluding equity
Securities of the Company beneficially or of record owned by WEL), as each such
number may be adjusted by reason of stock splits, reverse stock splits,
reclassifications and similar transactions or events affecting all shares of
Common Stock or all shares of any other class of Capital Stock of the Company;
provided, however, that (a) the pledge of shares of Common Stock (prior to the
foreclosure thereof) by Bedrock, the Crow Interests or the Senior Executives to
secure the payment of indebtedness owed by the members of the Larger Group or
the Smaller Group, as the case may be, shall not be deemed to be a Transfer or
other cessation of beneficial ownership of such shares by the respective
pledgors thereof if, as of the date of determination, the aggregate principal
amount of the indebtedness owned by members of the Larger Group or the Smaller
Group, as the case may be, and so secured by pledges of such shares shall not
be greater than an amount equal to 50% of the product obtained by multiplying
the number of shares of Common Stock owned beneficially and of record by the
members of the Larger Group or the Smaller Group, as the case may be, by the
average of the closing bid prices of the Common Stock on the principal national
securities exchange on which the Common Stock is listed or, if the Common Stock
is not so listed, on NASDAQ/NMS, as the case may be, for each of the 30
consecutive trading days next preceding such date of determination (or such
shorter period during which the Common Stock shall have been publicly traded
until such time as it has been so traded for 30 consecutive trading days); and
(b) if Donald J. McNamara, Robert A. Whitman and Daniel A. Decker, or any of
them, shall cease at any time to control the business and affairs of Bedrock,
including the voting and disposition of the equity Securities of the Company
owned beneficially or of record by Bedrock then for purposes of this clause (i)
Bedrock shall be deemed to have ceased owning any shares of
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Common Stock; (ii) any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable),
other than Bedrock, the Crow Interests and the Senior Executives and the
Affiliates of each of the foregoing), is or becomes the "beneficial owner" (as
such term is used in Rule 14d-3 promulgated pursuant to the Exchange Act),
directly or indirectly, of more then 35% 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; (iii) a majority of the
board of directors of the Company shall not consist of nominees of Bedrock or
the Crow Interests; or (iii) there shall occur a Change of Control (within the
meaning of the Indenture); or
T. EMPLOYMENT OF JAMES A. CARREKER, LESLIE V. BENTLEY AND ERIC A.
DANZIGER. The lapse of 30 days after any two or more of James A. Carreker,
Leslie V. Bentley and Eric A. Danziger cease to be employed by the Company by
reason of death or disability; or
U. OWNERSHIP OF SUBSIDIARIES. The Company shall cease to own,
directly or indirectly, all the equity Securities of Management Corp. and its
other Subsidiaries, subject to the provisions of subsection 7.7(ii);
THEN (i) upon the occurrence of any Event of Default described in subsection
8.1L or 8.1M, each of (a) the unpaid principal amount of and accrued interest
on the Loans, (b) an amount equal to the maximum amount that may at any time be
drawn under all Letters of Credit then outstanding (whether or not any
beneficiary under any such Letter of Credit shall have presented, or shall be
entitled at such time to present, the drafts or other documents or certificates
required to draw under such Letter of Credit), and (c) all other Obligations
shall automatically become immediately due and payable, without notice,
presentment, demand, protest or other requirements of any kind, all of which
are hereby expressly waived by the Company and the obligations of each Lender
to make any Loan, the obligation of Agent to issue any Letter of Credit and the
right of any Lender to issue any Letter of Credit hereunder shall thereupon
terminate, and (ii) during the continuance of any other Event of Default, the
Agent may, in its sole discretion, by written notice to the Company, declare
all or any portion of the amounts described in clauses (a) through (c) above to
be, and the same shall forthwith become, immediately due and payable and the
obligation of each Lender to make any Loan, the obligation of Agent to issue
any Letter of Credit and the right of any Lender to issue any Letter of Credit
hereunder shall thereupon terminate; provided that the foregoing shall not
affect in any way the obligations of Lenders under subsection 3.3C(i) or the
obligations of Lenders to purchase participations in any unpaid Swing Line
Loans as provided in subsection 2.1A(ii).
Any amounts described in clause (b) above, when received by
Agent, shall be held by Agent pursuant to the terms of the Collateral Account
Agreement and shall be applied as therein provided.
The occurrence of any condition or event may constitute an
Event of Default (or a Potential Event of Default) under more than one
provision of this subsection 8.1.
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8.2 CERTAIN REMEDIES.
A. During the continuance of an Event of Default, all or any one
or more of the rights, powers, privileges and other remedies available to the
Agent or the Lenders against the Company under this Agreement, the Notes, the
Mortgages, the Security Documents or any of the other Loan Documents, or at law
or in equity, may be exercised by the Agent, acting in its own sole discretion
at any time and from time to time, whether or not all or any portion of the
Obligations shall be declared due and payable, and whether or not the Agent
shall have commenced any foreclosure proceeding or other action for the
enforcement of its rights and remedies under any of the Loan Documents with
respect to any Property or all or any portion of the Mortgaged Property. Any
such actions taken by the Agent shall be cumulative and concurrent and may be
pursued independently, singly, successively, together or otherwise, at such
time and in such order as the Agent in its sole discretion may determine, to
the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of the Agent or the Lenders permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.
B. In the event of the foreclosure or other action by the Agent
to enforce its remedies in connection with one or more of the Pool A
Properties, the Ground Leases, the Pool B Properties, the Management Agreements
or any other Collateral or all or any portion of the Mortgaged Property,
whether such foreclosure (or other remedy) yields net proceeds in an amount
less than, equal to or more than the Pool A Property Amount with respect to
such Property or Mortgaged Property, the Agent shall apply all net proceeds
received to repay the Obligations, the Obligations shall be reduced to the
extent of such net proceeds and the remaining portion of the Obligations shall
remain outstanding and secured by the Mortgages and the other Loan Documents,
it being understood and agreed by the Company that the Company is liable for
the repayment of the Obligations and that any "excess" foreclosure proceeds are
part of the cross- collateralized and cross-defaulted security granted to the
Agent on behalf of the Lenders pursuant to the Mortgages; provided, however,
that, if the Agent so elects, the Loans and the Notes shall be deemed to have
been accelerated only to the extent of the net proceeds actually received by
the Lenders with respect to any individual Property (or, in the event that the
Agent on behalf of the Lenders is the purchaser of such Property by Credit Bid
at a foreclosure sale, the Loans and the Notes shall be deemed to have been
accelerated only at such time as the Agent subsequently disposes of such
Property and then only to the extent of the amount of such Credit Bid) and
applied in reduction of the Obligations in accordance with the provisions of
this Agreement and the Notes, after payment by the Company of all transaction
costs and expenses and costs of enforcement.
C. It is intended that the Liens of the Mortgages shall each be
construed and treated as a separate, distinct Lien for the purpose of securing
the entire Obligations secured thereby in the same manner as though each
Property was mortgaged and transferred to the Agent on behalf of the Lenders by
a separate and distinct mortgage and security agreement, so that if it should
at any time appear or be held that any Mortgage fails to mortgage, and transfer
to the Agent on behalf of the Lenders a Lien upon and the title to any
Property, or any part thereof, as against creditors of the Company other than
the Lenders or otherwise, such failure shall not operate to affect in any way
the transfer of the other Properties or Mortgaged Property or any
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part thereof to the Agent on behalf of the Lenders; but nothing contained
herein or in the Mortgages shall be construed as requiring the Agent on behalf
of the Lenders to resort to any Property for the satisfaction of the
Obligations secured thereby in preference or priority to any other Mortgaged
Property thereby conveyed, but the Agent, acting in its sole discretion may
seek satisfaction out of all of the Mortgaged Property or any part thereof.
D. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default the Agent is
hereby authorized by the Company at any time or from time to time, without
notice to the Company or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including Indebtedness evidenced by certificates
of deposit, whether matured or unmatured, but not including trust accounts) and
any other Indebtedness at any time held or owing by the Agent to or for the
credit or the account of the Company against and on account of the obligations
and liabilities of the Company to the Agent under this Agreement and the Notes,
including all claims of any nature or description arising out of or connected
with this Agreement or any other Loan Document, irrespective of whether or not
(i) the Agent shall have made any demand hereunder or (ii) the principal of or
the interest on the Loan or any other amounts due hereunder shall have become
due and payable pursuant to subsection 8.1 and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
E. During the continuance of an Event of Default, the Agent, in
its sole discretion, shall have the right, to the extent permitted by law, to
impound and take possession of books, records, notes, and other documents
evidencing the Company's Deposit Accounts, accounts receivable and other claims
for payment of money (including Rents) arising in connection with the
Properties, to give notice to the obligors thereunder of the Agent's interest
therein, and to make direct collections on such Deposit Accounts, accounts
receivable and claims.
F. During the occurrence of an Event of Default and upon the
occurrence and during the continuance of a default in the payment of any
principal or interest of any Indebtedness owed or alleged to be owed by the
Company or any Subsidiary, and following the initiation of any proceeding or
the taking of any other action to collect the payment thereof by the Person
entitled to such payment, the Agent may, in its sole discretion, advance either
to such Person or to the Company, for payment to such Person, all or any
portion of the amount of such payment, whether or not the existence of such
obligation or amount thereof shall be disputed by the Company or such
Subsidiary. Each such advance, to the extent not paid out of Excess Cash Flow,
shall deemed a Loan hereunder and shall be subject to the provisions of this
Agreement.
G. The rights, powers and remedies of the Agent and the Lenders
under this Agreement shall be cumulative and not exclusive of any other right,
power or remedy which the Agent or the Lenders may have against the Company
pursuant to this Agreement or the other Loan Documents executed by or with
respect to the Company, or existing at law or in equity or otherwise. The
rights, powers and remedies of the Agent and the Lenders may be pursued singly,
concurrently or otherwise, at such time and in such order as the Agent, acting
in its own sole discretion, may determine. No delay or omission to exercise
any remedy, right
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or power accruing upon an Event of Default shall impair any such remedy, right
or power or shall be construed as a waiver thereof, but any such remedy, right
or power may be exercised from time to time and as often as may be deemed
expedient. A waiver of any Event of Default or Potential Event of Default with
respect to the Company shall not be construed to be a waiver of any subsequent
Event of Default or Potential Event of Default by the Company or to impair any
remedy, right or power consequent thereon.
SECTION 9
MISCELLANEOUS
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.
A. GENERAL. Each Lender shall have the right at any time to (i)
sell, assign, transfer or negotiate to any Eligible Assignee (provided that
such Eligible Assignee complies with the requirements of subsection 2.7B(iii)
as of the date it becomes a Lender hereunder, to the extent applicable), or
(ii) sell to any Eligible Participant participations to any Person in, all or
any part of its Commitment or any Loan or Loans made by it or its Letters of
Credit or participations therein or any other interest herein or in any other
Obligations owed to it; provided, however, that (w) no such sale, assignment,
transfer or participation shall, without the consent of the Company, require
the Company to file a registration statement with the Securities and Exchange
Commission or apply to qualify such sale, assignment, transfer or participation
under the securities laws of any state, (x) no such sale, assignment, transfer
or participation of any Letter of Credit or any participation therein may be
made separately from a sale, assignment, transfer or participation of a
corresponding interest in the Revolving Loan Commitment and the Revolving Loans
of the Lender effecting such sale, assignment, transfer or participation, (y)
no such sale, assignment or transfer of an interest in the Revolving Loan
Commitment of such Lender shall be made in an amount less than $5,000,000 (or,
if less, the aggregate amount of the Revolving Loan Commitment of such Lender)
and (z) unless Bankers shall be removed as Agent, Bankers shall not make any
such sale, assignment or transfer if, after giving effect thereto, the
Revolving Loan Commitment of Bankers would be less than $15,000,000. In the
case of any assignment authorized under this subsection 9.1, (i) the Agent
shall notify the Company of the effective date of such assignment, (ii) as of
such effective date, the assignee shall be a party hereto and, to the extent
that an interest hereunder have been assigned to it, shall have the rights and
obligations of a Lender hereunder and (iii) the assigning Lender shall, to the
extent that its rights and obligations hereunder have been assigned by it,
relinquish its rights and be released from its obligations under this
Agreement. In the event of an assignment hereunder, the Commitments shall be
modified to reflect the Commitments of such assignee. Except with respect to
the portion of the Loans and Commitments assigned pursuant to this subsection
9.1, no Lender shall, as between the Company and such Lender, be relieved of
any of its obligations hereunder as a result of any sale, assignment, transfer
or negotiation of, or any granting of participations in, all or any part of its
Commitment or the Loans, the Letters of Credit or participations therein, or
other Obligations owed to such Lender.
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B. PARTICIPATIONS. The Company and each Lender hereby
acknowledge and agree that, solely for purposes of subsections 2.6, 2.7, and
9.5, (i) any participation will give rise to a direct obligation of the Company
to the participant and (ii) the participant shall be considered to be a
"Lender".
C. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the
assignments and participations permitted under the foregoing provisions of this
subsection 9.1, any Lender may assign and pledge all or any portion of its
Loans and the other Obligations owed to such Lender to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of
the Federal Reserve System and any operating circular issued by such Federal
Reserve Bank. No Lender shall, as between the Company and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge.
D. INFORMATION. Each Lender may furnish any information
concerning the Company and its Subsidiaries in the possession of that Lender
from time to time to assignees and participants (including prospective
assignees and participants who have executed a confidentiality agreement
substantially in the form attached as Exhibit XXI hereto and otherwise meeting
the criteria of an Eligible Assignee or Eligible Participant, as the case may
be).
9.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, the Company agrees to pay promptly, and, with respect to the
expenses referred to in clauses (iv) and (v) below, on or before the date of
the initial closing of the Public Offerings, (i) all the costs of furnishing
all opinions of counsel for the Company and the other Loan Parties (including
any opinions reasonably requested by the Agent) as to any legal matters arising
hereunder and of each Loan Party's performance of and compliance with all
agreements and conditions on its part to be performed or complied with under
this Agreement and the other Loan Documents including with respect to
confirming compliance with environmental, insurance and solvency requirements
and with respect to the Security Documents and the Liens created pursuant
thereto; (ii) actual costs and expenses of creating, perfecting and maintaining
Liens in favor of the Agent for the benefit of the Lenders pursuant to any Loan
Document, including filing and recording fees and expenses, mortgage recording
taxes, intangible taxes and transfer and stamp taxes, title searches, title
insurance premiums, UCC searches and UCC filing charges; (iii) all the
reasonable out-of-pocket expenses incurred by the Agent and payable to
auditors, accountants, architects, engineers or appraisers and any
environmental or other consultants, advisors and agents employed or retained by
the Agent or its counsel (but excluding the fees of counsel for the Agent) in
connection with performing due diligence, including obtaining and reviewing any
Appraisals, any environmental audits or reports, market surveys, title reports,
surveys and similar information; (iv) up to $20,000 in the aggregate of
out-of-pocket expenses incurred by the Agent and its Affiliates for travel in
connection with the negotiation, preparation and execution of the Loan
Documents, the syndication of the Loans and due diligence; (v) all the
reasonable fees, expenses and disbursements of counsel for the Agent and its
Affiliates in connection with the negotiation, preparation and execution of the
Loan Documents, the closing and syndication of the Loans and due diligence;
provided that
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(x) if the Funding Availability Date hereof occurs on or before the fifth
Business Day after the date of the initial closing of the Public Offerings (the
"TARGET DATE") the fees of O'Melveny & Myers for such purposes shall not exceed
[**$515,000**] (plus additional fees for legal services after April 26, 1996
that are attributable to the proposed Acquisition and refinancing of the
Vinings Property) and (y) if the Funding Availability Date hereof occurs after
the Target Date the fees of O'Melveny & Myers for such purposes will be the
amount referred to in clause (x) plus all reasonable fees incurred after the
Target Date; (vi) all reasonable expenses incurred by the Agent, including,
without limitation, the reasonable fees, expenses and disbursements of counsel
for the Agent (including allocated costs of internal counsel) in connection
with (a) the administration of the Loan Documents and any consents, amendments,
waivers or other modifications thereto, (b) any Acquisition, any acquisition or
addition of a Management Agreement or Other Management Agreement, and any
Transfer or release of any Property, Management Agreement, Servicing Agreement
or Other Management Agreement or any proposal with respect to any of the
foregoing and (c) the preparation or review of other documents or matters
requested by any Loan Party; and (vii) after the occurrence of an Event of
Default, all costs and expenses, including reasonable attorneys' fees and costs
of settlement, incurred by the Agent and the Lenders in enforcing any
Obligations of or in collecting any payments due from the Company hereunder or
under the other Loan Documents by reason of such Event of Default or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or pursuant to any
insolvency or bankruptcy proceedings. Anything in this Agreement to the
contrary notwithstanding, the Company shall not be liable for the payment of
expenses incurred or payable by the Agent and its Affiliates in the performance
of the activities referred to in clauses (iv) and (v) of the preceding sentence
in excess of the amounts specified therein with respect to the periods, if any,
specified therein. Provisions contained in this Agreement or in any of the
other Loan Documents requiring the Company to pay or reimburse any costs or
expenses, which are modified by the term "reasonable", shall require the
Company to pay the costs or expenses that are "reasonably" incurred and that
are in a "reasonable" amount. Except as expressly provided to the contrary in
this Agreement or any other Loan Document, such costs or expenses that are
payable after the Effective Date shall be payable by the Company within five
Business Days after the Company's receipt of written demand from the Agent to
pay same, accompanied by documentation in reasonable detail sufficient to
verify the nature and amount.
9.3 INDEMNITY.
A. INDEMNITY. In addition to the payment of expenses as required
by subsection 9.2, whether or not the transactions contemplated hereby shall be
consummated, the Company agrees to defend, indemnify and hold harmless the
Agent, Lenders and Bankers and their respective Affiliates and Persons deemed
to be "controlling persons" thereof within the meaning of the Securities Act or
the Exchange Act and the respective directors, officers, employees, agents,
attorneys and representatives of the foregoing (collectively, "INDEMNIFIED
PERSONS" and individually, an "INDEMNIFIED PERSON"), to the full extent
lawful, from and against any and all losses, claims, damages, liabilities,
costs and expenses or other obligations of any kind or nature whatsoever
incurred by each such Indemnified Person (including fees, charges and
disbursements of counsel and the allocated costs and expenses of internal
counsel
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for such Indemnified Person) which are related to, arise out of or result from
(a) any untrue statements or alleged untrue statements or omissions or alleged
omissions to state therein a material fact necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
in each case made or, to the extent contemplated by the Loan Documents, to be
made, by or on behalf of any Loan Party or any of its Affiliates, (x) in the
representations and warranties of the Loan Parties contained in the Loan
Documents, (y) in or pursuant to the Original Financing Letter, the Loan
Documents or the Related Documents or (z) otherwise in connection with the
Original Financing Letter, the Loan Documents or the Related Documents, (b)
information provided by or on behalf of any Loan Party or any of their
Affiliates for use in connection with any syndication, assignment or
participation of any portion of the Commitments, the Loans, the Notes, the
other Loan Documents or the Obligations, or in connection with the Original
Financing Letter, any Loan Document or any Related Document or any transactions
contemplated hereby or thereby, (c) the transactions contemplated by the Loan
Documents (including the Lenders' agreements to make the Loans or the use or
intended use of the proceeds thereof) or any enforcement of any of the Loan
Documents (including any sale of, collection from, or other realization upon
any of the Collateral or the enforcement of the Subsidiary Guaranty), (d) any
actions taken or omitted to be taken by an Indemnified Person with the consent
of the Company or in conformity with the instructions of the Company, or (e)
any other transactions contemplated by the Original Financing Letter, the Loan
Documents or the Related Documents, and the Company will reimburse each
Indemnified Person for all reasonable costs and expenses, including fees and
disbursements of both outside and internal counsel for such Indemnified Person,
as they are incurred, in connection with investigating, preparing for, or
defending any formal or informal claim, action, suit, investigation, inquiry or
other proceeding, whether or not in connection with pending or threatening
litigation, caused by or arising out of or in connection with the foregoing,
whether or not such Indemnified Person is named as a party thereto and whether
or not any liability results therefrom. The Company shall not, however, be
responsible for any losses, claims, damages, liabilities, costs or expenses
pursuant to clauses (c), (d) or (e) of the preceding sentence which have
resulted primarily from the bad faith or recklessness of such Indemnified
Person as determined by a final judgment of a court of competent jurisdiction.
Neither the Agent nor any other Indemnified Person shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to any of the
Loan Parties and their respective Affiliates or any director, officer,
employee, agent or representative of any of the foregoing, or any other person,
for or in connection with the foregoing, or otherwise arising out of or in any
way relating to the matters contemplated by the Original Financing Letter, the
Loan Documents, the Related Documents or any commitment to lend except for such
liability for losses, claims, damages, liabilities, costs or expenses of any
Indemnified Person pursuant to clauses (c), (d) or (e) of the preceding
sentence to the extent they are determined to have resulted primarily from the
bad faith or recklessness of such Indemnified Person as determined by a final
judgment of a court of competent jurisdiction and in no event shall the Agent
or any other Indemnified Person be responsible for or liable to any of the Loan
Parties or any of their respective Affiliates or any other Person for
consequential, punitive or exemplary damages. The Company further agrees that
the Loan Parties shall not, nor shall they permit their respective Subsidiaries
to, without the prior written consent of the Agent and Bankers, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit, investigation, inquiry or other proceeding in respect of
which indemnification is
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actually sought hereunder unless such settlement, compromise or consent
includes an unconditional release of the Agent and each other Indemnified
Person hereunder from all liability arising out of such claim, action, suit,
investigation, inquiry or other proceeding.
B. PROCEDURE. If any action, suit, investigation, inquiry or
other proceeding is commenced, as to which an Indemnified Person proposes to
demand indemnification hereunder, such Indemnified Person shall notify the
Company with reasonable promptness; provided, however, that any failure by such
Indemnified Person to notify the Company shall not relieve the Company or any
of its Affiliates from its obligations hereunder (except to the extent that the
Company or such Affiliate is prejudiced by such failure to so promptly notify).
The Company shall be entitled to assume the defense of any such action, suit,
investigation, inquiry or other proceeding, including the employment of counsel
reasonably satisfactory to the Indemnified Person and the payment of all
reasonable fees and expenses incurred in connection therewith. The Indemnified
Person shall have the right to employ separate counsel in any such action,
suit, investigation, inquiry or other proceeding, or to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Indemnified Person unless (i) the Company has agreed to pay such
fees and expenses, (ii) the Company shall have failed promptly upon written
demand therefor to assume the defense of such action, suit, investigation,
inquiry or other proceeding, and employ counsel reasonably satisfactory to the
Indemnified Person in connection therewith or (iii) such Indemnified Person
shall have been advised by counsel that there exists actual or potential
conflicting interests between the Company and such Indemnified Person,
including situations in which one or more legal defenses may be available to
such Indemnified Person that are different from or additional to those
available to the Company, in which case, if such Indemnified Person notifies
the Company in writing that it elects to employ separate counsel at the expense
of the Company, the Company shall not have the right to assume the defense of
such action or proceeding on behalf of such Indemnified Person; provided,
however, that the Company shall not, in connection with any one such action,
suit, investigation, inquiry or other proceeding or separate but substantially
similar or related actions, suits, investigations, inquiries or other
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys at any time for all such Indemnified Persons (in
addition to local counsel), which firm shall be designated in writing by the
Agent.
C. CONTRIBUTION. In order to provide for just and equitable
contribution with respect to matters subject to subsection 9.3A, if a claim for
indemnification is made pursuant to these provisions but is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal)
that such indemnification is not available for any reason (except, with respect
to indemnification sought solely pursuant to subsection 9.3A, for the reasons
specified in the second sentence of subsection 9.3A), even though the express
provisions hereof provide for indemnification in such case, or is insufficient
to hold an Indemnified Party harmless, then the Company, on the one hand, and
the Agent, the Lenders or Bankers, on the other hand, shall contribute to such
loss, claim, damage, liability, cost or expense for which such indemnification
or reimbursement is held unavailable or is insufficient in such proportion as
is appropriate to reflect the relative benefits to the Loan Parties and their
respective Affiliates, on the one hand, and the Agent, Lenders or Bankers, on
the other hand, in connection with the transactions
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described in the Original Financing Letter, the Loan Documents and the Related
Documents, as well as any other equitable considerations. The parties agree
that for the purpose of this subsection 9.3C, the relative benefits to the Loan
Parties and their respective Affiliates, on the one hand, and the Agent,
Lenders and Bankers, on the other hand shall be deemed to be in the same
proportion as the proceeds received or to be received by the Loan Parties from
the Loan Documents bears to the fees paid or to be paid to the Agent, Lenders
and Bankers under the Loan Documents. Notwithstanding the foregoing, the
Agent, Lenders and Bankers shall not be required to contribute under this
subsection 9.3C any amount in excess of the amount of fees actually received by
the Agent, Lenders and Bankers, respectively, in respect of the Loan Documents.
The Company, Agent, Bankers and the Lenders agree that it would not be just and
equitable if contribution pursuant to this subsection 9.3C were determined by
pro rata allocation or by any other method which does not take into account the
equitable considerations referred to in this subsection 9.3C.
D. NO LIMITATION. The foregoing rights to indemnity and
contribution shall be in addition to any rights that any Indemnified Person and
Loan Parties may have at common law or otherwise and shall remain in full force
and effect following the completion or any termination of the transactions
contemplated by the Original Financing Letter, the Loan Documents and the
Related Documents. In no event shall the Agent, the Lenders, or Bankers be
responsible or liable to any person for consequential damages which may be
alleged as a result of the Original Financing Letter, the Loan Documents and
the Related Documents or any transaction contemplated thereby.
E. INDEPENDENCE OF INDEMNITY. The Company acknowledges and
agrees that the provisions of this subsection 9.3 are separate from and in
addition to the provisions contained in the Original Financing Letter and
contained in the Environmental Indemnity.
9.4 NO JOINT VENTURE OR PARTNERSHIP.
The Lenders and the Company acknowledge and agree that the
relationship created hereunder or under the other Loan Documents is that of
creditor/debtor. The Company acknowledges and agrees that (a) the Company
through its directors, officers and employees, is a knowledgeable and
sophisticated business practitioner with particular expertise and broad
experience in the area of real estate acquisition and finance; (b) the Lenders
individually and collectively, do not owe, and have expressly disclaimed, any
fiduciary or special obligation to the Company and/or any of the Company's
partners, agents, or representatives; and (c) nothing contained in this
Agreement or any other Loan Document shall affect the relationship between the
Lenders and the Company as that of creditor/debtor hereunder and under the
other Loan Documents. Nothing herein or therein is intended to create a joint
venture, partnership, tenancy-in-common, or joint tenancy relationship between
the Company, any other Loan Party or Subsidiary thereof and the Lenders nor to
grant the Agent or the Lenders any interest in the Mortgaged Property other
than that of mortgagee or lender.
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9.5 RATABLE SHARING.
The Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with this Agreement), by realization upon security,
through the exercise of any right of set-off or banker's lien, by counterclaim
or cross action or by the enforcement of any right under the Loan Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, amounts payable in respect of Letters
of Credit, fees and other amounts then due and owing to that Lender hereunder
or under the other Loan Documents (collectively, the "AGGREGATE AMOUNTS DUE" to
such Lender) which is greater than the proportion received by any other Lender
in respect of the Aggregate Amounts Due to such other Lender, then the Lender
receiving such proportionately greater payment shall (i) notify the Agent and
each other Lender of the receipt of such payment and (ii) apply a portion of
such payment to purchase participations (which it shall be deemed to have
purchased from each seller of a participation simultaneously upon the receipt
by such seller of its portion of such payment) in the Aggregate Amounts Due to
the other Lenders so that all such recoveries of Aggregate Amounts Due shall be
shared by all Lenders in proportion to the Aggregate Amounts Due to them;
provided, however, that if all or part of such proportionately greater payment
received by such purchasing Lender is thereafter recovered from such Lender
upon the bankruptcy or reorganization of the Company or otherwise, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender ratably to the
extent of such recovery, but without interest. The Company expressly consents
to the foregoing arrangement and agrees that any holder of a participation so
purchased may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by the Company to that
holder with respect thereto as fully as if that holder were owed the amount of
the participation held by that holder.
9.6 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision of
this Agreement or any other Loan Document or consent to any departure by any
Loan Party therefrom, shall in any event be effective without the written
concurrence of the Agent. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. No
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 9.6 shall be binding upon each Lender at the time
outstanding, each future Lender and, if signed by the Company, on the Company.
9.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be
within the limitations of, another covenant shall not
228
<PAGE> 236
avoid the occurrence of an Event of Default or Potential Event of Default if
such action is taken or condition exists.
9.8 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed, or sent by telefacsimile or courier service
and shall be deemed to have been given when delivered in person or by courier
service, upon receipt of telefacsimile or telex; provided, however, that
notices to the Agent and the Company shall not be effective until received.
For the purposes hereof, the address of each party hereto shall be as set forth
under such party's name on the signature pages hereof or (i) as to the Company
and the Agent, such other address as shall be designated by such Person in a
written notice delivered to the other parties hereto and (ii) as to each other
party, such other address as shall be designated by such party in a written
notice delivered to the Agent.
9.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. Except as provided in subsection 9.9B below, all
representations, warranties and agreements made herein shall survive the
execution and delivery of this Agreement and the making of the Loans and the
issuance of the Letters of Credit hereunder and shall terminate upon
indefeasible payment in full of the Obligations and the expiration or
termination of all Commitments and Letters of Credit, notwithstanding anything
in this Agreement or implied by law to the contrary.
B. Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of the Company set forth in subsections 2.6,
2.7, 3.5A, 3.6, 5.2G (to the extent it incorporates the Environmental
Indemnity), 6.8 (to the extent it incorporates the Environmental Indemnity),
9.2, 9.3 and 9.5 shall survive the payment in full of the Obligations, the
cancellation or expiration of the Letters of Credit and the reimbursement of
any amounts drawn thereunder, and the termination of this Agreement.
9.10 AGENT'S DISCRETION.
Whenever pursuant to this Agreement or any other Loan Document the
Agent exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to the Agent, the decision of the
Agent to approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of the Agent. The Company
acknowledges and agrees that, notwithstanding anything in this Agreement to the
contrary, certain decisions to be made by the Agent under this Agreement may be
subject to or determined by the further decision by the Lenders or a percentage
of the Lenders.
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<PAGE> 237
9.11 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF THE LENDERS' RIGHTS.
The obligations of the Lenders hereunder are several and no Lender
shall be responsible for the obligations or Commitment of any other Lender
hereunder. Nothing contained herein or in any other Loan Document, and no
action taken by the Lenders pursuant hereto or thereto, shall be deemed to
constitute the Lenders as a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall not
be necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.
9.12 REMEDIES OF THE COMPANY.
In the event that a claim or adjudication is made that the Agent or
any Lender or their respective agents has acted unreasonably or unreasonably
delayed acting in any case where by law or under this Agreement, the Notes, the
Mortgages or the other Loan Documents, the Agent, such Lender or such agent, as
the case may be, has an obligation to act reasonably or promptly, the Company
agrees that none of the Agent, such Lender or such agents, shall be liable for
any monetary damages, and the Company's sole remedies shall be limited to
commencing an action seeking injunctive relief or declaratory judgement. The
parties hereto agree that any action or proceeding to determine whether the
Agent or any Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.
9.13 MARSHALLING; PAYMENTS SET ASIDE.
Neither the Agent nor any Lenders shall be under any obligation to
marshal any assets in favor of the Company, any other Loan Party or any other
party or against or in payment of any or all of the Obligations. To the extent
that the Company or any other Loan Party makes a payment or payments to the
Lenders or the Agent (or to the Agent for the benefit of the Lenders), or the
Agent or the Lenders enforce any security interests or the Agent exercises its
rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, any
other state or federal law, common law or any equitable cause of action, then,
to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied, and all Liens, rights and remedies therefor or
related thereto, shall be revived and continued in full force and effect as if
such payment or payments had not been made or such enforcement or setoff had
not occurred.
9.14 MAXIMUM AMOUNT.
A. It is the intention of the Company and the Lenders to conform
strictly to the usury and similar laws relating to interest from time to time
in force, and all agreements between the Loan Parties and their respective
Subsidiaries and the Lenders, whether now existing or hereafter arising and
whether oral or written, are hereby expressly limited so that in no contingency
or event whatsoever, whether by acceleration of maturity hereof or
230
<PAGE> 238
otherwise, shall the amount paid or agreed to be paid in the aggregate to the
Lenders as interest hereunder or under the other Loan Documents or in any other
security agreement given to secure the indebtedness of the Company to the
Lenders, or in any other document evidencing, securing or pertaining to the
indebtedness evidenced hereby, exceed the maximum amount permissible under
applicable usury or such other laws (the "MAXIMUM AMOUNT"). If under any
circumstances whatsoever fulfillment of any provision hereof, or any of the
other Loan Documents, at the time performance of such provision shall be due,
shall involve exceeding the Maximum Amount, then, ipso facto, the obligation to
be fulfilled shall be reduced to the Maximum Amount. For the purposes of
calculating the actual amount of interest paid and/or payable hereunder in
respect of laws pertaining to usury or such other laws, all sums paid or agreed
to be paid to the holder hereof for the use, forbearance or detention of the
indebtedness of the Company evidenced hereby, outstanding from time to time
shall, to the extent permitted by Applicable Law, be amortized, pro-rated,
allocated and spread from the date of disbursement of the proceeds of the Notes
until payment in full of all of such indebtedness, so that the actual rate of
interest on account of such indebtedness is uniform through the term hereof.
The terms and provisions of this subsection shall control and supersede every
other provision of all agreements between the Company or any endorser of the
Notes and the Lenders.
B. If under any circumstances any Lender shall ever receive an
amount which would exceed the Maximum Amount, such amount shall be deemed a
payment in reduction of the principal amount of the Loans and shall be treated
as a voluntary prepayment under subsection 2.4B(i) and shall be so applied in
accordance with subsection 2.4 hereof or if such excessive interest exceeds the
unpaid balance of the Loans and any other indebtedness of the Company in favor
of such Lender, the excess shall be deemed to have been a payment made by
mistake and shall be refunded to the Company.
9.15 SEVERABILITY.
In case any provision in or obligation under this Agreement or any
Note or any other Loan Document shall be invalid, illegal or unenforceable in
any jurisdiction or under any set of circumstances, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction or under any other set of
circumstances, shall not in any way be affected or impaired thereby.
9.16 HEADINGS.
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
9.17 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE
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<PAGE> 239
STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
9.18 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of the Agent and the Lenders (it being
understood that the Lenders' rights of assignment are subject to subsection
9.1). Neither the Company's rights or obligations hereunder nor any interest
therein may be assigned or delegated by the Company.
9.19 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE COMPANY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, THE COMPANY, FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SUBSECTION 9.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE
IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT THE AGENT RETAIN THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 9.19
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND
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<PAGE> 240
ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL
OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
9.20 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED HEREBY AND THEREBY. The
scope of this waiver is intended to be all-encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of this
transaction, including contract claims, tort claims, breach of duty claims and
all other common law and statutory claims. Each party hereto acknowledges that
this waiver is a material inducement to enter into a business relationship,
that each has already relied on this waiver in entering into this Agreement and
the other Loan Documents, and that each will continue to rely on this waiver in
their related future dealings. Each party hereto further warrants and
represents that it has reviewed this waiver with its legal counsel and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER
SPECIFICALLY REFERRING TO THIS SUBSECTION 9.20 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
9.21 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by the Company and
the Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
9.22 MATERIAL INDUCEMENT.
The Company acknowledges that its representations, warranties,
covenants and agreements contained in this Agreement and the other Loan
Documents, including its covenants
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<PAGE> 241
and agreements to pay Release Prices, are material inducements to the Lenders
to enter into this Agreement and to make the Loans and issue the Letters of
Credit, that the Lenders have already relied on such representations,
warranties, covenants and agreements in entering into this Agreement and
agreeing to make the Loans (notwithstanding any investigation heretofore or
hereafter made by or on behalf of the Lenders), and that the Lenders will
continue to rely on such representations, warranties, covenants and agreements
in their future dealings with the Company. The Company understands that the
Release Prices are designed to afford to the Lenders a predictable return on
their investment in the Loans, that the Release Prices will be required to be
paid by the Company in connection with all voluntary and involuntary
prepayments of the principal amount of the Loans and reductions in the
Commitments (except as specifically set forth to the contrary in subsection
2.4B), and that the payment of the Release Prices in connection with
involuntary prepayments beyond the Company's control (such as upon the
occurrence of a casualty or a Taking) will be required. The Company agrees
that its representations, warranties, covenants and agreements contained in
this Agreement and the other Loan Documents, including its covenants and
agreements to pay Release Prices, are reasonable in purpose and scope. The
Company represents and warrants that it has reviewed this Agreement and the
other Loan Documents with its legal counsel and that it knowingly and
voluntarily is entering into this Agreement and the other Loan Documents
following consultation with legal counsel.
9.23 ENTIRE AGREEMENT.
This Agreement is evidence of the indebtedness incurred pursuant
hereto and, taken together with all of the other Loan Documents and all
certificates and other documents delivered to the Agent and the Lenders
hereunder and thereunder, embodies the entire agreement and supersede all prior
agreements, written and oral, relating to the subject matter hereof.
9.24 CONFIDENTIALITY.
Each Lender and the Agent, severally and not jointly, agrees to
exercise commercially reasonable efforts to keep any non-public information
delivered or made available to such Lender or the Agent pursuant to the Loan
Documents, which any Loan Party or its authorized representative has identified
as confidential information, confidential from any Person other than Persons
employed by or retained by such Lender or the Agent who are or are expected to
become engaged in evaluating, approving, structuring or administering the
Revolving Loans, Letters of Credit and other extensions of credit or
Obligations hereunder; provided that nothing herein shall prevent any Lender or
the Agent from disclosing such information to any bona fide Eligible Assignee,
transferee or Eligible Participant that has agreed to comply with this
subsection 9.24 by execution of an agreement in the form attached hereto as
Exhibit XXI in connection with the contemplated assignment or transfer of any
Commitments, Revolving Loans, Letters of Credit or other extensions of credit
or Obligations hereunder or participation therein or as required or requested
by any Governmental Authority or representative thereof or pursuant to legal
process or in connection with the exercise of any remedy under the Loan
Documents.
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<PAGE> 242
9.25 RELIANCE BY THE COMPANY.
The Company shall be entitled to rely on all written approvals and
consents received from the Agent as being that also of the Lenders, without
obtaining separate acknowledgement of same, and shall be required to deal only
with the Agent, all except as otherwise expressly provided in this Agreement or
in such approval or consent.
[Remainder of page intentionally left blank.]
235
<PAGE> 243
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
WYNDHAM HOTEL CORPORATION
By:
-----------------------------------
Name:
Title:
Notice Address:
Wyndham Hotel Corporation
2001 Bryan Street, Suite 2300
Dallas, Texas 75201
Attention: __________
S-1
<PAGE> 244
AGENT:
BANKERS TRUST COMPANY,
as Agent
By:
-----------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
280 Park Avenue
New York, New York 10017
Attention: __________
LENDERS:
BANKERS TRUST COMPANY,
as a Lender
By:
-----------------------------------
Name:
Title:
Notice Address:
Bankers Trust Company
280 Park Avenue
New York, New York 10017
Attention: __________
S-2
<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
Wyndham 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.
Xerxes Limited Jamaica Xerxes 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 20, 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 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 7,212,537 9,017,341
<SECURITIES> 0 0
<RECEIVABLES> 11,105,061 13,991,182
<ALLOWANCES> 267,000 368,000
<INVENTORY> 1,020,185 1,062,044
<CURRENT-ASSETS> 23,424,126 26,670,821
<PP&E> 115,367,214 115,929,353
<DEPRECIATION> 27,763,364 29,082,676
<TOTAL-ASSETS> 133,403,073 143,083,313
<CURRENT-LIABILITIES> 30,680,048 29,683,638
<BONDS> 0 0
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 17,557,243 22,464,031
<TOTAL-LIABILITY-AND-EQUITY> 133,403,073 143,083,313
<SALES> 0 0
<TOTAL-REVENUES> 87,889,708 26,610,046
<CGS> 0 0
<TOTAL-COSTS> 62,813,899 18,062,958
<OTHER-EXPENSES> 10,450,457 1,805,194
<LOSS-PROVISION> 265,004 118,976
<INTEREST-EXPENSE> 8,465,239 2,114,357
<INCOME-PRETAX> 8,673,897 5,760,479
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 7,949,482 5,167,192
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,949,482 5,167,192
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>