<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CAPSTAR HOTEL COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7011 52-1979383
(State of (Primary Standard Industrial (I.R.S. Employer
incorporation) Classification Code Number) Identification No.)
</TABLE>
------------------------------
1010 WISCONSIN AVENUE, N.W.
SUITE 650
WASHINGTON, D.C. 20007
(202) 965-4455
(Address and telephone number of Registrant's principal executive offices)
------------------------------
PAUL W. WHETSELL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CAPSTAR HOTEL COMPANY
1010 WISCONSIN AVENUE, N.W.
SUITE 650
WASHINGTON, D.C. 20007
(202) 965-4455
(Name, address and telephone number of agent for service)
------------------------------
COPIES TO:
RICHARD S. BORISOFF, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
(212) 373-3000
--------------------------
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 in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 $150,000,000 100.25% $150,375,000 $45,568.18
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based on the average of the bid and asked prices on
September 12, 1997 of the Company's outstanding 8 3/4% Senior Subordinated
Notes due 2007.
------------------------
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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. UNDER NO CIRCUMSTANCES SHALL THIS PROSPECTUS 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.
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED SEPTEMBER 16, 1997
[LOGO]
OFFER TO EXCHANGE ITS 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND ALL OF ITS
OUTSTANDING 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 PM, NEW YORK CITY TIME ON ,
1997,
UNLESS EXTENDED.
CapStar Hotel Company ("CapStar" or the "Company") hereby offers to exchange
up to $150,000,000 aggregate principal amount of its 8 3/4% Senior Subordinated
Notes due 2007 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for a like principal
amount of its 8 3/4% Senior Subordinated Notes due 2007 outstanding on the date
hereof (the "Existing Notes") upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer"). The terms of the New Notes are
identical in all material respects to those of the Existing Notes, except for
certain transfer restrictions and registration rights relating to the Existing
Notes. The New Notes will be issued pursuant to, and entitled to the benefits
of, the indenture, dated as of August 19, 1997 (the "Indenture"), between the
Company and IBJ Schroder Bank & Trust Company, as trustee, governing the
Existing Notes. The Existing Notes and New Notes outstanding under the Indenture
at any time are referred to collectively as the "Notes."
Interest on the Notes will be payable semi-annually on February 15 and
August 15 of each year, commencing February 15, 1998. The Notes will be
redeemable at the option of the Company, in whole or in part, at any time on or
after August 15, 2002, at the redemption prices set forth herein, plus accrued
and unpaid interest and Liquidated Damages (as defined herein), if any, to the
date of redemption. At any time prior to August 15, 2000, the Company may, at
its option, redeem up to 35% of the aggregate principal amount of the Notes
originally issued with the net cash proceeds of one or more Public Equity
Offerings (as defined herein) at a redemption price equal to 108.750% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption; provided that at least 65% of the
original principal amount of the Notes remains outstanding immediately after
each such redemption. In addition, prior to August 15, 2002, the Company, at its
option, may redeem the Notes, in whole or in part, at a redemption price equal
to the Make-Whole Price (as defined herein), plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of redemption. See "Description of
Notes--Optional Redemption."
In the event of a Change of Control (as defined herein), each holder of the
Notes will have the right to require the Company to purchase all or any part of
such holder's Notes at a purchase price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase. See "Description of Notes--Repurchase
at the Option of Holders--Change of Control."
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Debt (as
defined herein) of the Company. The Notes are also effectively subordinated to
all obligations of the Company's Subsidiaries (as defined herein), including
without limitation trade payables in the ordinary course. On a pro forma basis,
the Company would have approximately $493.2 million of Indebtedness (as defined
herein) outstanding, including $275.0 million of Senior Debt and $68.2 million
of non-recourse indebtedness of Unrestricted Subsidiaries (as defined herein) of
the Company. See "Description of Notes--Subordination," "--Subsidiary
Guarantees" and "Description of Certain Indebtedness."
---------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE NOTES, SEE "RISK FACTORS," BEGINNING ON PAGE 13.
-------------------
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 New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in two separate Registration Rights
Agreements, each dated as of August 14, 1997 (the "Registration Rights
Agreements"), among (i) the Company and Lehman Brothers Inc., as the initial
purchaser of the Existing Notes (the "Initial Purchaser") and (ii) the Company
and Oak Hill Securities Fund, L.P., as a direct purchaser of the Existing Notes
("OHSF" or the "Direct Purchaser").
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
Existing Notes pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date (as defined herein) for the Exchange Offer. The Company
expressly reserves the right to terminate or amend the Exchange Offer and not to
accept for exchange any Existing Notes not theretofore accepted for exchange
upon the occurrence of any of the events specified under "The Exchange
Offer--Conditions to the Exchange Offer." If any such termination or amendment
occurs, the Company will notify IBJ Schroder Bank & Trust Company (in such
capacity, the "Exchange Agent") and will either issue a press release or give
oral or written notice to the holders of the Existing Notes as promptly as
practicable. The Exchange Offer will expire at 5:00 pm, New York City time, on
, 1997, unless the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Existing
Notes with respect to the Exchange Offer, the Company will promptly return such
Existing Notes to the holders thereof. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal (as
defined herein) states that by so acknowledging and by delivery of a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Existing Notes where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the
Existing Notes. The Company currently does not intend to list the New Notes on
any securities exchange or to seek approval for quotation through any automatic
quotation system and no active public market for the New Notes is currently
anticipated. There can be no assurance that an active public market for the New
Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange pursuant to the Exchange Offer.
---------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE NEW NOTES OR EXISTING NOTES BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH
AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
EXCHANGE PROPOSED TO BE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
THIS EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF EXISTING NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such materials can also be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such materials can also be inspected on the Internet at
http://www.sec.gov. The common stock of the Company (the "Common Stock") is
listed on the New York Stock Exchange ("NYSE") and reports, proxy statements and
other information concerning the Company can be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete.
Pursuant to the Indenture, the Company has agreed to provide the Trustee and
holders of the Notes with annual, quarterly and other reports at the times and
containing in all material respects the information specified in Sections 13 and
15(d) of the Exchange Act and to file such reports with the Commission, whether
or not the Company is subject to such filing requirements.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1996; (ii)
the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997; (iii) the Company's Current Reports on Form 8-K filed
December 31, 1996, as amended, April 4, 1997, July 30, 1997, as amended, August
13, 1997, September 2, 1997, September 8, 1997 and September 9, 1997, as
amended; and (iv) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A (Commission File No. 1-12017) filed
August 2, 1996.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
made hereby, shall be deemed incorporated by reference in this Prospectus and to
be a part of this Prospectus from the date of the filing of such reports.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain, without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents (other than the
exhibits expressly incorporated in such documents by reference). Requests should
be directed to: CapStar Hotel Company, 1010 Wisconsin Avenue, N.W., Suite 650,
Washington, D.C. 20007, (202) 965-4455, Attention: John Emery, Corporate
Secretary.
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES HEREIN TO "CAPSTAR" OR THE
"COMPANY" INCLUDE CAPSTAR HOTEL COMPANY AND ITS SUBSIDIARIES (INCLUDING THE
COMPANY'S SUBSIDIARY OPERATING PARTNERSHIPS, THROUGH WHICH THE COMPANY OPERATES
ALL OF ITS BUSINESSES).
THE COMPANY
CapStar Hotel Company owns and manages hotels throughout the United States
and Canada. CapStar currently owns and/or manages 69 hotels which contain 15,449
rooms (the "Hotels"). Of the Hotels, the Company owns and manages 41 upscale,
full-service hotels which contain 10,521 rooms (the "Owned Hotels") and manages
an additional 28 hotels owned by third parties which contain 4,928 rooms (the
"Managed Hotels"). The Owned Hotels are located in markets that have recently
experienced strong economic growth, including Albuquerque, Atlanta, Charlotte,
Chicago, Cleveland, Dallas, Denver, Houston, Los Angeles, Salt Lake City,
Seattle and Washington, D.C. The Owned Hotels include hotels operated under
nationally recognized brand names such as Hilton-Registered Trademark-,
Sheraton-Registered Trademark-, Westin-Registered Trademark-,
Marriott-Registered Trademark-, Doubletree-Registered Trademark- and Embassy
Suites-Registered Trademark-. The Company's business strategy is to acquire
hotel properties with the potential for cash flow growth and to renovate,
reposition and operate each hotel according to a business plan specifically
tailored to the characteristics of the hotel and its market.
As a fully integrated owner and manager, CapStar intends to capitalize on
its management experience and expertise by continuing to make opportunistic
acquisitions of full-service hotels, securing additional management contracts
and improving the operating performance of the Hotels. The Company's senior
management team, with an average of 19 years of lodging industry experience, has
successfully managed hotels in all segments of the lodging industry, with
particular emphasis on upscale, full-service hotels. Since the inception of the
Company's management business in 1987, the Company has achieved consistent
revenue and portfolio growth, even during periods of relative industry weakness.
The Company attributes its management success to its ability to analyze each
hotel as a unique property and identify those particular cash flow growth
opportunities which each hotel presents. The Company's principal operating
objectives are to generate higher revenue per available room ("RevPAR") and to
increase net operating income while providing its hotel guests with high-quality
service and value.
Key elements of the Company's management programs include the following:
COMPREHENSIVE BUDGETING AND MONITORING. Management and on-site managers set
targets for cost and revenue categories at each of the Hotels based on
historical operating performance, planned renovations, operational efficiencies
and local market conditions. Through effective and timely use of its
comprehensive financial information and reporting systems, the Company can
monitor actual performance and rapidly adjust prices, staffing levels and sales
efforts to improve revenue yield.
TARGETED SALES AND MARKETING. The Company employs a systematic approach
toward identifying and targeting segments of demand for each Hotel in order to
maximize market penetration. The Company employs computerized revenue yield
management systems to manage each Hotel's use of the various distribution
channels in the lodging industry.
STRATEGIC CAPITAL IMPROVEMENTS. The Company plans renovations primarily to
enhance each Hotel's appeal to targeted market segments, thereby attracting new
customers and generating increased revenue and cash flow. Capital spending
decisions are based on both strategic needs and potential rate of return on a
given capital investment.
SELECTIVE USE OF MULTIPLE BRAND NAMES. The Company believes that the
selection of an appropriate franchise brand is essential in positioning a hotel
optimally within its local market. The Company selects
1
<PAGE>
brands based on local market factors such as local presence of the franchisor,
brand recognition, target demographics and efficiencies offered by franchisors.
EMPHASIS ON FOOD AND BEVERAGE. The Company utilizes its food and beverage
operations to create local awareness of its hotel facilities, to improve the
profitability of its hotel operations and to enhance customer satisfaction.
COMMITMENT TO REINVESTMENT. The Company is committed to reinvesting
adequate capital on an ongoing basis to maintain the quality of hotels it owns.
Reinvestment is expected to include room and facilities refurbishment,
renovations and furniture and equipment replacements that are designed to
maintain attractive accommodations, updated restaurants and modern equipment.
COMPUTERIZED REPORTING SYSTEMS. The Company employs computerized reporting
systems at each of the Hotels and at its corporate offices to monitor the
financial and operating performance of the Hotels. By having the latest hotel
operating data available at all times, management is better able to respond to
changes in the market of each Hotel.
COMMITMENT TO SERVICE AND VALUE. The Company is dedicated to providing
exceptional service and value to its customers on a consistent basis. The
Company's practice of tracking customer comments allows investment in services
and amenities where they are most effective.
DISTINCT MANAGEMENT CULTURE. The Company has a distinct management culture
that stresses creativity, loyalty and entrepeneurship and was developed to
emphasize operations from an owner's perspective. Incentive programs and awards
have been established to encourage individual property managers to seek new ways
of increasing revenues and operating cash flow. The culture is reinforced by the
fact that 33 members of management hold, directly or indirectly, an aggregate of
5.1% of the common stock of the Company (the "Common Stock"). See "Principal
Stockholders."
The Company believes that the upscale, full-service segment of the lodging
industry is the most attractive segment in which to own, manage and acquire
hotels and further believes that there are currently many attractive
opportunities to acquire properties in this segment of the industry at prices
below replacement cost. The upscale, full-service segment is attractive for
several reasons. First, the Company expects that there will be no significant
increases in the supply of upscale, full-service hotels in the next several
years because the cost of new construction generally does not justify new hotel
development. Second, upscale, full-service hotels appeal to a wide variety of
customers, thus reducing the risk of decreasing demand from any particular
customer group. Additionally, such hotels have particular appeal to both
business executives and upscale leisure travelers, customers who are generally
less price sensitive than travelers who use limited-service hotels. Finally,
full-service hotels require a greater depth of management expertise than
limited-service hotels, and the Company believes that its superior management
skills provide it with a significant competitive advantage in their operation.
2
<PAGE>
RECENT DEVELOPMENTS
FINANCING ACTIVITIES
The Company completed its initial public offering (the "IPO") in August 1996
at a price of $18.00 per share, generating net proceeds of approximately $110.1
million to the Company. In March 1997, the Company completed a follow-on equity
offering (the "Follow-On Offering" and, together with the IPO, the "Common Stock
Offerings") at a price of $24.75 per share, generating net proceeds of
approximately $134.1 million to the Company.
In July 1997, the Company entered into a $450.0 million senior secured
credit facility (the "1997 Credit Facility") with Lehman Brothers Holdings Inc.
("Lehman Holdings"), an affiliate of Lehman Brothers Inc., BankBoston, N.A.,
Bankers Trust Company and Wells Fargo Bank, N.A., as agents (together, the
"Banks"). The 1997 Credit Facility is structured as a $350.0 million, 5-year
revolving credit facility and a $100.0 million, 7-year term loan facility. The
proceeds of the 1997 Credit Facility have been and will be used to fund new
acquisitions, repay outstanding indebtedness and for general corporate purposes.
See "Description of Certain Indebtedness" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
In August 1997, the Company completed the offering of the Existing Notes
(the "Offering") in the aggregate principal amount of $150.0 million, generating
net proceeds of approximately $145.0 million to the Company. In addition, in
August 1997, the Company entered into a $100.0 million non-recourse credit
facility (the "Non-Recourse Facility") with Lehman Holdings. The Non-Recourse
Facility has an 18-month term and bears interest at a rate of between 175 and
270 basis points over 30-day LIBOR, based upon certain debt service ratios. The
Non-Recourse Facility is expected to be utilized to fund new hotel acquisitions
in a tax-efficient manner.
RECENT ACQUISITIONS AND INVESTMENTS
At the time of the IPO, the Company owned 12 upscale, full-service hotels,
containing 3,516 rooms. Since the IPO, the Company has significantly expanded
its portfolio by completing the purchase of 29 upscale, full-service hotels
containing 7,005 rooms for an aggregate purchase price, including planned
initial renovations (the "Acquisition Cost"), of $564.5 million. The Company has
also entered into contracts to acquire two additional hotels containing 352
rooms for an Acquisition Cost of $43.4 million (the "Additional Acquisitions"),
including: the 151-room Detroit Metro Airport Hilton Suites in Detroit, Michigan
for an Acquisition Cost of $15.9 million and the 201-room Governor Morris Hotel
& Conference Center in Morristown, New Jersey for an Acquisition Cost of $27.5
million. The Company expects to improve the operating performance of the Hotels
by implementing the detailed management plans that have been created for each
property as part of its operating strategy. The Company believes that all of its
acquisitions represent attractive investment opportunities because (i) they are
located in major metropolitan or growing secondary markets and are well-located
within these markets, (ii) they were acquired at an average cost of
approximately $75,000 per room, which represents a significant discount to
replacement cost and (iii) they have attractive current returns and potential
for significant revenue and cash flow growth through implementation of the
Company's operating strategy.
In addition to the acquisition or proposed acquisition of these hotels,
since the IPO the Company has invested in two joint ventures and, including the
management contracts associated with these joint ventures, the Company has
entered into 11 new long-term management agreements. The Company expects to form
additional joint ventures and strategic alliances with institutional and private
hotel owners to invest in future acquisitions and sale and leaseback
transactions, and to secure additional fee management arrangements. See "Special
Note Regarding Forward-Looking Statements."
3
<PAGE>
THE PROPERTIES
The following table sets forth certain information for each of the Owned
Hotels and the Additional Acquisitions for the twelve months ended June 30,
1997:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
JUNE 30, 1997
----------------------------
<S> <C> <C> <C> <C>
GUEST AVERAGE DAILY AVERAGE
HOTEL LOCATION ROOMS RATE ("ADR") OCCUPANCY
- ---------------------------------------------------- ------------------------ ----------- ------------- -------------
OWNED HOTELS
Orange County Airport Hilton........................ Irvine, CA 290 $ 81.53 69.7%
Doubletree Resort(1)................................ Palm Springs, CA 289 76.12 52.2
Sacramento Hilton................................... Sacramento, CA 326 80.46 72.8
San Pedro Hilton.................................... San Pedro, CA 226 65.52 68.1
Santa Barbara Inn................................... Santa Barbara, CA 71 135.14 79.5
Holiday Inn-Registered Trademark-................... Colorado Springs, CO 201 62.06 73.8
Sheraton Hotel...................................... Colorado Springs, CO 502 69.71 73.6
Embassy Suites Denver............................... Englewood, CO 236 106.39 74.0
Embassy Row Hilton.................................. Washington, D.C. 195 116.74 67.4
Georgetown Inn...................................... Washington, D.C. 95 138.10 69.3
The Latham Hotel.................................... Washington, D.C. 143 114.35 73.9
Westin Atlanta Airport.............................. Atlanta, GA 496 81.58 75.5
Jekyll Inn.......................................... Jekyll Island, GA 265 60.00 47.2
Radisson Hotel & Suites............................. Chicago, IL 341 133.03 76.5
Radisson Hotel...................................... Schaumburg, IL 202 78.41 75.0
Doubletree Guest Suites............................. Indianapolis, IN 137 83.67 73.6
Radisson Plaza...................................... Lexington, KY 367 76.18 62.4
Lafayette Hilton & Towers........................... Lafayette, LA 328 72.12 74.4
Holiday Inn Sports Complex.......................... Kansas City, MO 163 66.00 75.3
Sheraton Airport Plaza.............................. Charlotte, NC 226 87.37 67.8
Four Points Hotel................................... Cherry Hill, NJ 213 72.73 61.1
Marriott Hotel...................................... Somerset, NJ 434 109.50 73.4
Holiday Inn......................................... Tinton Falls, NJ 171 75.48 69.6
Doubletree Hotel.................................... Albuquerque, NM 294 77.84 66.7
Holiday Inn......................................... Cleveland, OH 237 72.95 67.7
Great Valley Sheraton............................... Frazer, PA 154 94.88 74.2
Embassy Suites Center City.......................... Philadelphia, PA 288 123.92 76.3
Doubletree Hotel.................................... Austin, TX 350 81.67 75.0
Arlington Hilton.................................... Arlington, TX 310 83.44 72.1
Holiday Inn Select.................................. Dallas, TX 348 61.72 61.6
Radisson Hotel...................................... Dallas, TX 305 61.77 72.7
Houston Southwest Hilton............................ Houston, TX 293 72.54 60.7
Westchase Hilton & Towers........................... Houston, TX 295 92.20 79.1
Salt Lake Airport Hilton............................ Salt Lake City, UT 287 80.78 75.5
Arlington Hilton.................................... Arlington, VA 209 111.76 75.3
National Airport Hilton............................. Arlington, VA 386 104.71 56.7
Bellevue Hilton..................................... Bellevue, WA 180 100.75 80.6
Holiday Inn Calgary Airport......................... Calgary, Alberta 170 51.72 66.7
Sheraton Hotel...................................... Guildford, B.C. 280 70.83 75.2
Holiday Inn-Metrotown............................... Vancouver, B.C. 100 74.04 87.8
Ramada-Registered Trademark- Vancouver Centre....... Vancouver, B.C. 118 71.85 80.5
----------- ------------- ---
Subtotal/Weighted Average--Owned Hotels......... 10,521 $ 85.33 70.3%
ADDITIONAL ACQUISITIONS
Detroit Metro Airport Hilton Suites................. Detroit, MI 151 $ 80.83 84.9
Governor Morris Hotel & Conference Center........... Morristown, NJ 201 123.59 61.5
----------- ------------- ---
Subtotal/Weighted Average--Additional
Acquisitions.................................. 352 $ 101.82 71.5%
----------- ------------- ---
Total/Weighted Average.......................... 10,873 $ 85.88 70.3%
----------- ------------- ---
----------- ------------- ---
</TABLE>
- ------------------------
(1) Operating statistics are presented for the twelve months ended February 28,
1997, the most recent period available.
The Company's principal executive offices are located at 1010 Wisconsin
Avenue, N.W., Suite 650, Washington, D.C. 20007, and its telephone number is
(202) 965-4455.
4
<PAGE>
SUMMARY OF EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered.............. Up to $150,000,000 aggregate principal amount of 8 3/4%
Senior Subordinated Notes due 2007 (the "New Notes"),
which have been registered under the Securities Act. The
terms of the New Notes and those of the Existing Notes are
identical in all material respects, except for certain
transfer restrictions and registration rights relating to
the Existing Notes.
The Exchange Offer.............. The New Notes are being offered in exchange for a like
principal amount of Existing Notes. Existing Notes may be
exchanged only in integral multiples of $1,000. The
issuance of the New Notes is intended to satisfy
obligations of the Company contained in the Registration
Rights Agreements.
Expiration Date;
Withdrawal of Tender.......... The Exchange Offer will expire at 5:00 pm, New York City
time, on , 1997, or such later date and time to
which it is extended by the Company. The tender of
Existing Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date. Any
Existing Notes not accepted for exchange for any reason
will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
Conditions to the Exchange Offer The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Exchange Offer is not conditioned upon any minimum number
of Existing Notes being tendered for exchange. The Company
currently expects that each of the conditions will be
satisfied and that no waivers will be necessary. See "The
Exchange Offer--Conditions to the Exchange Offer."
Procedures for Tendering
Existing Notes................ Unless a tender of Existing Notes is effected pursuant to
the procedures for book-entry transfers as provided
herein, each holder of Existing Notes wishing to accept
the Exchange Offer must complete, sign and date a Letter
of Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such
facsimile, together with such Existing Notes and any other
required documentation, to the Exchange Agent (as defined
herein) at the address set forth herein. Holders of
Existing Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are urged
to contact such person promptly if they wish to tender
Existing Notes pursuant to the Exchange Offer. See "The
Exchange Offer--Procedures for Tendering Existing Notes."
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Letters of Transmittal and certificates representing
Existing Notes should not be sent to the Company. Such
documents should only be sent to the Exchange Agent.
Questions regarding how to tender and requests for
information should be directed to the Exchange Agent. See
"The Exchange Offer--Exchange Agent."
Use of Proceeds................. There will be no proceeds to the Company from the exchange
of Notes pursuant to the Exchange Offer.
Certain Federal Income Tax
Considerations................ The exchange pursuant to the Exchange Offer should not be
a taxable event for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
Exchange Agent.................. IBJ Schroder Bank & Trust Company is serving as the
Exchange Agent (in such capacity, the "Exchange Agent") in
connection with the Exchange Offer.
</TABLE>
6
<PAGE>
CONSEQUENCES OF EXCHANGING EXISTING NOTES
PURSUANT TO THE EXCHANGE OFFER
Based on certain no-action letters issued by the staff of the Commission to
third parties in unrelated transactions, the Company believes that the New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any holder who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or (ii) any broker-dealer that purchases Notes from the Company to resell
pursuant to Rule 144A ("Rule 144A") under the Securities Act or any other
available exemption) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of the holder's business and such holders have
no arrangement or understanding with any person to participate in a distribution
of such New Notes and are not participating in, and do not intend to participate
in, the distribution of such New Notes. The Company has not sought, and does not
intend to seek, its own no-action letter with regard to the Exchange Offer.
Accordingly, there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer. By tendering,
each holder will represent to the Company in the Letter of Transmittal that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being acquired in the ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder, that neither the holder nor
any such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, that neither the holder nor
any such other person is participating in or intends to participate in the
distribution of such New Notes and that neither the holder nor any such other
person is an "affiliate," as defined under Rule 405 of the Securities Act, of
the Company. Each broker-dealer that receives New Notes for its own account in
exchange for Existing Notes must acknowledge that it will deliver a prospectus
in connection with any resale of such New Notes. See "Plan of Distribution." In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and complied with. The Company has
agreed, pursuant to the Registration Rights Agreements and subject to certain
specified limitations therein, to register or qualify the New Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Notes reasonably requests in writing. If a holder of Existing Notes does
not exchange such Existing Notes for New Notes pursuant to the Exchange Offer,
such Existing Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, the Existing Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. See "The Exchange Offer--Consequences of
Failure to Exchange; Resales of New Notes."
The Existing Notes are currently eligible for trading in the PORTAL market.
Following commencement of the Exchange Offer but prior to its consummation, the
Existing Notes may continue to be traded in the PORTAL market. Following
consummation of the Exchange Offer, the New Notes will not be eligible for
PORTAL trading.
7
<PAGE>
THE NOTES
Except as otherwise indicated, the following description relates both to the
Existing Notes and to the New Notes to be issued in exchange for Existing Notes
in connection with the Exchange Offer. The New Notes will be obligations of the
Company evidencing the same indebtedness as the Existing Notes, and will be
entitled to the benefits of the same Indenture. The form and terms of the New
Notes are the same as the form and terms of the Existing Notes, except that the
New Notes have been registered under the Securities Act and therefore will not
bear legends restricting the transfer thereof. For a more complete description
of the Notes, see "Description of the Notes." Throughout this Prospectus,
references to the "Notes" refer to the New Notes and the Existing Notes
collectively.
<TABLE>
<S> <C>
Securities Offered.............. $150,000,000 aggregate principal amount of 8 3/4% Senior
Subordinated Notes due 2007.
Maturity Date................... August 15, 2007.
Interest Payment Dates.......... February 15 and August 15 of each year, commencing
February 15, 1998.
Mandatory Redemption............ None.
Optional Redemption............. The Notes are redeemable at the option of the Company, in
whole or in part, at any time on or after August 15, 2002,
at the redemption prices set forth herein, plus accrued
and unpaid interest and Liquidated Damages (as defined
herein), if any, to the date of redemption. At any time
prior to August 15, 2000, the Company may, at its option,
redeem up to 35% of the aggregate principal amount of the
Notes originally issued with the net cash proceeds of one
or more Public Equity Offerings (as defined herein) at a
redemption price equal to 108.750% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption; provided that
at least 65% of the original principal amount of the Notes
remains outstanding immediately after each such
redemption. In addition, prior to August 15, 2002, the
Company, at its option, may redeem the Notes at a
redemption price equal to the Make-Whole Price (as defined
herein), plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption. See
"Description of Notes--Optional Redemption."
Change of Control............... In the event of a Change of Control (as defined herein),
each holder of the Notes will have the right to require
the Company to purchase all or any part of such holder's
Notes at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, to the
date of purchase. See "Description of Notes--Repurchase at
the Option of Holders--Change of Control."
Ranking......................... The Notes are general unsecured obligations of the Company
and are subordinated in right of payment to all existing
and future Senior Debt (as defined herein) of the Company.
The Notes are also effectively subordinated to all
obligations of the Company's Subsidiaries (as defined
herein), including without limitation trade payables in
the ordinary course. The Notes rank PARI PASSU with any
present and future senior subordinated Indebtedness (as
defined herein) of the Company and senior to all other
subordinated Indebtedness of the Company. None of the
Company's Subsidiaries is presently required to guarantee
the Notes, although under
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
certain future circumstances, the Company may be required
to cause one or more Restricted Subsidiaries (as defined
herein) to guarantee the Notes on a senior subordinated
basis. On a pro forma basis, the Company would have
approximately $493.2 million of Indebtedness outstanding,
including $275.0 million of Senior Debt and $68.2 million
of non-recourse indebtedness of Unrestricted Subsidiaries
(as defined herein) of the Company. See "Description of
Notes--Subordination," "--Subsidiary Guarantees" and
"Description of Certain Indebtedness."
Certain Covenants............... The Indenture contains certain covenants that, subject to
certain exceptions, limit the ability of the Company and
its Restricted Subsidiaries to incur Indebtedness and
issue Disqualified Stock (as defined herein) or, in the
case of Subsidiaries, preferred stock, and limit the
ability of the Company and its Restricted Subsidiaries to
pay dividends or other distributions, repurchase Equity
Interests (as defined herein) and subordinated
Indebtedness, or make certain other restricted payments,
consummate certain asset sales, enter into certain
transactions with affiliates, incur indebtedness that is
subordinate in right of payment to any Senior Debt and
senior in right of payment to the Notes, make investments,
create or incur Liens (as defined herein), merge or
consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. See
"Description of Notes--Certain Covenants" and "--Asset
Sales."
For additional information regarding the Notes, see "Description of Notes."
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
COMPARISON OF NEW NOTES WITH EXISTING NOTES
Freely Transferable............. Generally, the New Notes will be freely transferable under
the Securities Act by holders thereof other than any
holder that is either an affiliate of the Company or a
broker-dealer that purchased the Notes from the Company to
resell pursuant to Rule 144A or any other available
exemption. The New Notes will otherwise be substantially
identical in all material respects (including interest
rate and maturity) to the Existing Notes. See "The
Exchange Offer."
Registration Rights............. The holders of Existing Notes currently are entitled to
certain registration rights pursuant to two separate
Registration Rights Agreements (the "Registration Rights
Agreements"), each dated as of August 14, 1997, among (i)
the Company and the Initial Purchaser and (ii) the Company
and the Direct Purchaser. However, upon consummation of
the Exchange Offer, subject to certain exceptions, holders
of Existing Notes who do not exchange their Existing Notes
for New Notes in the Exchange Offer will no longer be
entitled to registration rights and will not be able to
offer or sell their Existing Notes, unless such Existing
Notes are subsequently registered under the Securities Act
(which, subject to certain limited exceptions, the Company
will have no obligation to do), except pursuant to an
exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. See
"Risk Factors--Adverse Consequences of Failure to Adhere
to Exchange Offer Procedures."
Absence of Public Market for the
New Notes..................... The New Notes are new securities and there is currently no
established market for the New Notes. Accordingly, there
can be no assurance as to the development or liquidity of
any market for the New Notes. The Company does not intend
to apply for listing on a securities exchange of the New
Notes.
</TABLE>
RISK FACTORS
Holders of Existing Notes and prospective purchasers of New Notes should
carefully consider all of the information set forth in this Prospectus and, in
particular, should evaluate the specific factors set forth under "Risk Factors"
in connection with the Exchange Offer.
10
<PAGE>
SUMMARY FINANCIAL AND OTHER INFORMATION
Prior to the IPO, the business of the Company was conducted through EquiStar
Hotel Investors, L.P. ("EquiStar") and CapStar Management Company, L.P.
("CapStar Management"). CapStar Management has been in the hotel management
business since 1987. EquiStar, however, was not formed until January 12, 1995
and the Company did not own any hotels in any prior periods. Therefore, the
Company's financial statements prior to 1995 reflect only the management
business of CapStar Management. In 1994, the Company began to invest in
additional professional staff and incurred related costs in order to position
itself to acquire hotel properties. From January 12, 1995 through June 30, 1997,
the Company acquired 32 hotels on various dates. Thus, the historical financial
statements reflect differing numbers of Owned Hotels throughout the periods
presented. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1997 and the Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the six months ended June 30, 1997 and the year ended December
31, 1996 assume: (i) the Owned Hotels and Additional Acquisitions were owned and
(ii) the Common Stock Offerings, the Offering, the 1997 Credit Facility and the
Non-Recourse Facility were consummated as of the balance sheet date and at the
beginning of the periods presented, respectively.
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------------- -------------------------------
PRO PRO
FORMA FORMA
1992 1993 1994 1995 1996 1996(A) 1996 1997 1997(A)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING RESULTS:
Revenues:
Rooms....................... $ 0 $ 0 $ 0 $ 14,456 $ 68,498 $ 232,509 $ 28,120 $ 79,254 $ 125,553
Food, beverage and other.... 0 0 0 7,471 36,949 112,139 12,989 34,676 59,534
Office rental and other..... 0 0 0 0 0 5,668 3,059 5,664 2,844
Management services and
other..................... 3,479 4,234 4,418 4,436 4,345 2,858 2,088 2,225 2,127
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total revenues.......... 3,479 4,234 4,418 26,363 109,792 353,174 46,256 121,819 190,058
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Departmental expenses:
Rooms....................... 0 0 0 4,190 17,509 57,639 7,365 18,954 31,044
Food, beverage and other.... 0 0 0 5,437 27,102 84,750 10,302 27,338 44,969
Office rental and other..... 0 0 0 0 0 2,683 1,089 3,008 1,184
Undistributed operating
expenses:
Selling, general and
administrative............ 2,836 4,065 4,508 8,078 20,448 54,308 9,457 19,839 27,146
Property operating costs.... 0 0 0 3,934 17,151 68,336 7,497 19,024 35,955
Depreciation and
amortization.............. 12 14 23 2,097 8,248 27,959 3,919 8,220 13,828
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total operating
expenses.............. 2,848 4,079 4,531 23,736 90,458 295,675 39,629 96,383 154,126
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net operating income (loss)... 631 155 (113) 2,627 19,334 57,499 6,627 25,436 35,932
Interest expense, net......... 0 0 0 2,414 12,346 37,317 7,290 8,440 18,617
Minority interest............. 0 0 0 18 39 (1,073) 69 (620) (856)
Income tax provision(B)....... 0 0 0 0 2,674 7,644 0 6,288 6,320
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary item.......... 631 155 (113) 231 4,353 11,465 (594) 10,088 10,139
Extraordinary item(C)......... 0 0 0 (888) (1,956) -- -- -- --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss)....... $ 631 $ 155 $ (113) $ (657) $ 2,397 $ 11,465 $ (594) $ 10,088 $ 10,139
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Earnings per share from
continuing operations....... -- -- -- -- $ 0.31 $ 0.61 -- $ 0.62 $ 0.53
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------------- -------------------------------
PRO PRO
FORMA FORMA
1992 1993 1994 1995 1996 1996(A) 1996 1997 1997(A)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT OPERATING DATA)
OTHER FINANCIAL DATA:
EBITDA(D)..................... $ 643 $ 169 $ (90) $ 4,741 $ 27,621 $ 84,385 $ 10,615 $ 33,036 $ 48,904
Net cash provided by (used in)
operating activities........ 87 (101) 66 4,357 13,373 39,392 3,891 2,745 8,315
Net cash used in investing
activities.................. (65) (24) (41) (116,573) (225,251) (661,085) (95,625) (164,567) (438,683)
Net cash provided by (used in)
financing activities........ (219) 244 0 119,048 226,830 638,118 89,809 151,532 409,721
Ratio of EBITDA to interest
expense..................... -- -- -- -- -- 2.2x -- -- 2.6x
Ratio of earnings to fixed
charges..................... -- -- -- 1.1x 1.5x 1.5x -- 2.7x 1.8x
Restricted Group Data(E):
EBITDA........................ -- -- -- -- -- $ 72,823 -- -- $ 42,044
Interest expense.............. -- -- -- -- 32,305 -- -- 16,344
Ratio of EBITDA to interest
expense..................... -- -- -- -- -- 2.3x -- -- 2.6x
BALANCE SHEET DATA:
Total assets.................. $ 586 $ 1,458 $ 1,232 $ 132,650 $ 379,161 -- $ 231,736 $ 608,073 $ 862,981
Total debt.................... 0 0 0 76,242 200,361 -- 168,112 234,995 493,184(I)
Stockholders' equity.......... -- -- -- -- 160,715 -- -- 315,475 309,028
OPERATING DATA:
Owned Hotels:
Number of hotels............ -- -- -- 6 19 43 11 32 43
Number of guest rooms....... -- -- -- 2,101 5,166 10,873 3,307 8,040 10,873
Total revenues (in
thousands)................ -- -- -- $ 21,927 $ 105,447 $ 344,648 $ 44,168 $ 119,594 $ 185,087
Average occupancy........... -- -- -- 72.3% 71.6% 69.4% 72.7% 74.5% 71.6%
ADR(F)...................... -- -- -- $ 71.58 $ 82.84 $ 83.17 $ 80.56 $ 86.04 $ 87.71
RevPAR...................... -- -- -- $ 51.75 $ 59.31 $ 57.76 $ 58.57 $ 64.08 $ 62.84
All Hotels(G):
Number of hotels(H)......... 34 34 39 46 47 -- -- -- --
Number of guest rooms(H).... 5,918 5,971 5,847 7,895 9,785 -- -- -- --
Total revenues (in
thousands)................ $ 109,837 $ 123,124 $ 128,151 $ 170,888 $ 193,092 -- -- -- --
</TABLE>
- ------------------------------
(A) The pro forma Operating Results, Other Financial Data and Operating Data for
the six months ended June 30, 1997 and the year ended December 31, 1996 have
been prepared as if the Common Stock Offerings, the Offering, the 1997
Credit Facility, the Non-Recourse Facility and the acquisition of the Owned
Hotels and the Additional Acquisitions had been consummated at the beginning
of the periods presented, and the pro forma Balance Sheet Data as of June
30, 1997 have been prepared as if the Offering, the 1997 Credit Facility,
the Non-Recourse Facility and the acquisition of the Owned Hotels and the
Additional Acquisitions had been consummated on such date.
(B) No provision for federal income taxes is included in the historical data
other than for 1996 and 1997 because CapStar Management and EquiStar were
partnerships and all federal income tax liabilities were passed through to
the individual partners.
(C) During 1995 and 1996, certain loan facilities were refinanced and the
write-offs of deferred costs associated with the prior facilities were
recorded as extraordinary losses.
(D) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. Management believes that EBITDA is a useful
measure of operating performance because it is industry practice to evaluate
hotel properties based on operating income before interest, income taxes,
depreciation and amortization, which is generally equivalent to EBITDA, and
EBITDA is unaffected by the debt and equity structure of the property owner.
EBITDA does not represent cash flow from operations as defined by generally
accepted accounting principles ("GAAP"), is not necessarily indicative of
cash available to fund all cash flow needs and should not be considered as
an alternative to net income under GAAP for purposes of evaluating the
Company's results of operations.
(E) Represents data for 39 Owned Hotels and Additional Acquisitions and excludes
data for the Unrestricted Subsidiaries.
(F) Represents total room revenues divided by total number of rooms occupied by
hotel guests on a paid basis.
(G) Represents operating data for all hotels managed by the Company during all
or a portion of the periods presented.
(H) As of December 31 for the periods presented.
(I) Includes $68,154 of debt of Unrestricted Subsidiaries.
12
<PAGE>
RISK FACTORS
SET FORTH BELOW ARE THE PRINCIPAL RISK FACTORS IN AN EXCHANGE OR INVESTMENT
IN THE NOTES. HOLDERS OF EXISTING NOTES AND PROSPECTIVE PURCHASERS OF THE NEW
NOTES SHOULD CAREFULLY CONSIDER THESE RISK FACTORS AS WELL AS THE OTHER
INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS, WHICH MAY AFFECT A DECISION
TO ACQUIRE THE NEW NOTES. FOR A DISCUSSION OF CERTAIN POTENTIAL TAX CONSEQUENCES
OF SUCH AN INVESTMENT, SEE "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS." THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS
PROSPECTUS. SEE "SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS."
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
On a pro forma basis, the Company's Indebtedness (including current portion)
would have been $493.2 million. The Company expects it will incur additional
Indebtedness, which may include secured Indebtedness, in the future to finance
acquisitions and renovations. See "Description of Notes--Certain
Covenants--Incurrence of Indebtedness and Issuance of Certain Capital Stock."
The degree to which the Company is leveraged could have important
consequences, 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, thereby reducing the funds available to the
Company for its operation; (iii) in addition to the Notes, certain other
agreements governing the Company's Indebtedness, including the 1997 Credit
Facility, 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; (iv) the Company may be hindered
in its ability to adjust rapidly to changing market conditions; and (v) the
Company's substantial degree of leverage could make it more vulnerable in the
event of a downturn in general economic conditions or in its business. The
Company's ability to satisfy its obligations, including the Notes, will be
dependent upon its future performance, which is subject to prevailing economic
conditions and financial, business and other factors, including factors beyond
the Company's control. There can be no assurance that the Company's operating
cash flow will be sufficient to meet its debt service requirements or to repay
the Notes at maturity or that the Company will be able to refinance the Notes or
other indebtedness at maturity. See "Description of Certain Indebtedness" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
SUBORDINATION OF NOTES; ASSET ENCUMBRANCE
On a pro forma basis, the Company would have approximately $493.2 million of
Indebtedness outstanding, including $275.0 million of Senior Debt and $68.2
million of non-recourse indebtedness of Unrestricted Subsidiaries of the
Company. The Notes will be subordinated in right of payment to all existing and
future Senior Debt, including the principal, premium (if any) and interest with
respect to the Senior Debt under the 1997 Credit Facility. The Notes will also
be effectively subordinated to all obligations of Subsidiaries of the Company,
including without limitation trade payables in the ordinary course.
The Company may not pay principal of, premium (if any) on, or interest on,
the Notes, or repurchase or redeem or otherwise retire any Notes, if any default
occurs and is continuing in the payment when due of any Senior Debt (except that
Holders of Notes may receive Permitted Junior Securities (as defined in the
Indenture) and payments made from the trust described under "Description of
Notes--Legal Defeasance and Covenant Defeasance"). In addition, if any other
event of default exists with respect to Designated Senior Debt (as defined in
the Indenture) and certain other conditions are satisfied, the Company may not
make any payments on the Notes for up to 179 days (except that Holders of Notes
may
13
<PAGE>
receive Permitted Junior Securities and payments made from the trust described
under "Description of Notes--Legal Defeasance and Covenant Defeasance"). Upon
any payment or distribution of the assets of the Company in connection with a
total or partial liquidation or dissolution or reorganization of or similar
proceeding relating to the Company, the holders of Senior Debt will be entitled
to receive payment in full before the holders of the Notes are entitled to
receive any payment. See "Description of Notes-- Subordination."
RESTRICTIONS IMPOSED BY THE 1997 CREDIT FACILITY
The Notes are unsecured and thus, in effect, will rank junior to any secured
Indebtedness of the Company. The 1997 Credit Facility includes certain covenants
that, among other things, restrict: (i) the payment of dividends and other
distributions, (ii) acquisitions of additional hotel properties, (iii) the
creation or incurrence of liens, (iv) the incurrence of indebtedness, lease
obligations or contingent liabilities, (v) the acquisition of investments in and
securities issued by joint ventures and other entities, (vi) transactions with
affiliates, (vii) mergers, acquisitions, divestitures or reorganizations, (viii)
the issuance of preferred stock and (ix) sales of its hotel properties. The 1997
Credit Facility also contains covenants that will subject the Company to certain
operating requirements and that require the maintenance of certain financial
levels, such as consolidated net worth, and certain financial ratios, such as
consolidated cash flow to consolidated debt service, consolidated cash flow to
consolidated fixed charges and consolidated total indebtedness to consolidated
cash flow. The ability of the Company to comply with these and other provisions
may be affected by events beyond the Company's control. The breach of any of
these covenants could result in a default under the 1997 Credit Facility, in
which case the lenders, or their successors or assignees, could elect to declare
the entire principal amount under the 1997 Credit Facility, together with
accrued interest, to be due and payable, and the Company could be prohibited
from making payments of interest and principal on the Notes until the default is
cured or all Senior Debt is paid or satisfied in full. If the Indebtedness under
the 1997 Credit Facility were to be accelerated, there can be no assurance that
the assets of the Company would be sufficient to repay in full such Indebtedness
and the other Indebtedness of the Company, including the Notes. See "Description
of Certain Indebtedness" and "Description of Notes--Subordination."
RISKS ASSOCIATED WITH THE LODGING INDUSTRY
OPERATING RISKS. The Company's business is subject to all of the operating
risks inherent in the lodging industry. These risks include the following:
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, motels and recreational properties; changes in
travel patterns; the recurring need for renovations, refurbishment and
improvements of hotel properties; changes in governmental regulations that
influence or determine wages, prices and construction and maintenance costs; and
changes in interest rates and the availability of credit. Demographic,
geographic or other changes in one or more of the Company's markets could impact
the convenience or desirability of the sites of certain hotels, which would in
turn affect the operations of those hotels. In addition, due to the level of
fixed costs required to operate full- service hotels, certain significant
expenditures necessary for the operation of hotels generally cannot be reduced
when circumstances cause a reduction in revenue.
COMPETITION IN THE LODGING INDUSTRY. The lodging industry is highly
competitive. There is no single competitor or small number of competitors of the
Company that are dominant in the industry. The Hotels operate in areas that
contain numerous competitors, many of which have substantially greater resources
than the Company. Competition in the lodging industry is based generally on
location, room rates and range and quality of services and guest amenities
offered. New or existing competitors could significantly lower rates or offer
greater conveniences, services or amenities or significantly expand, improve or
introduce new facilities in markets in which the Hotels compete, thereby
adversely affecting the Company's operations.
14
<PAGE>
SEASONALITY. The lodging industry is seasonal in nature. Generally, hotel
revenues are greater in the second and third quarters than in the first and
fourth quarters. This seasonality can be expected to cause quarterly
fluctuations in the revenues of the Company. Quarterly earnings also may be
adversely affected by events beyond the Company's control, such as extreme
weather conditions, economic factors and other considerations affecting travel.
FRANCHISE AGREEMENTS. All but four of the Owned Hotels and the Additional
Acquisitions are, or will be, operated pursuant to existing franchise or license
agreements (the "Franchise Agreements"). The Franchise Agreements generally
contain specific standards for, and restrictions and limitations on, the
operation and maintenance of a hotel in order to maintain uniformity within the
franchisor system. Those limitations may conflict with the Company's philosophy
of creating specific business plans tailored to each hotel and to each market.
Such standards are often subject to change over time, in some cases at the
discretion of the franchisor, and may restrict a franchisee's ability to make
improvements or modifications to a hotel without the consent of the franchisor.
In addition, compliance with such standards could require a franchisee to incur
significant expenses or capital expenditures. In connection with changing the
franchise affiliation of an Owned Hotel or a subsequently acquired hotel, the
Company may be required to incur significant expenses or capital expenditures.
The Franchise Agreements covering the Owned Hotels expire or terminate, without
specified renewal rights, at various times and have differing remaining terms.
As a condition to renewal, the Franchise Agreements frequently contemplate a
renewal application process, which may require substantial capital improvements
to be made to the hotel.
RISKS ASSOCIATED WITH EXPANSION
COMPETITION FOR EXPANSION OPPORTUNITIES. The Company competes for the
acquisition of hotels with entities that have substantially greater financial
resources than the Company. The Company believes that, as a result of the
downturn experienced by the lodging industry from the late 1980s through the
early 1990s and the significant number of foreclosures and bankruptcies created
thereby, the prices for many hotels have for several years been at historically
low levels and often well below the cost to build new hotels. The recent
economic recovery in the lodging industry and the resulting increase in funds
available for hotel acquisitions may cause additional investors to enter the
hotel acquisition market, which may in turn cause hotel acquisition costs to
increase and the number of attractive hotel acquisition opportunities to
decrease.
FAILURE TO CONSUMMATE ACQUISITIONS. The Company has entered into binding
contracts to acquire the Additional Acquisitions and in the future may enter
into contracts to acquire other hotels as well. There can be no assurance that
the Company will be able to consummate the acquisition of any such hotels.
Failure to consummate such acquisitions could affect the Company's ability to
implement its acquisition strategy.
INTEGRATION RISKS. To successfully implement its acquisition strategy, the
Company must be able to continue to successfully integrate new hotels into its
existing operations. Since August 1996, the Company has acquired 29 hotels. The
Company expects to continue to grow through the acquisition of additional
hotels. The consolidation of functions and integration of departments, systems
and procedures of the new hotels with the Company's existing operations presents
a significant management challenge, and the failure to integrate new hotels into
the Company's management and operating structures could have a material adverse
effect on the results of operations and financial condition of the Company.
There can be no assurance that the Company will be able to achieve operating
results in its new hotels comparable to the historical performance of its
hotels.
RISKS ASSOCIATED WITH OWNING REAL ESTATE
The Company currently owns 41 hotels and has entered into contracts to
acquire the Additional Acquisitions. Accordingly, the Company will be subject to
varying degrees of risk generally incident to the ownership of real estate.
These risks include, among other things, changes in national, regional and local
15
<PAGE>
economic conditions, changes in local real estate market conditions, changes in
interest rates and in the availability, cost and terms of financing, the
potential for uninsured casualty and other losses, the impact of present or
future environmental legislation and adverse changes in zoning laws and other
regulations. Many of these risks are beyond the control of the Company. In
addition, real estate investments are relatively illiquid, resulting in a
limited ability of the Company to vary its portfolio of hotels in response to
changes in economic and other conditions.
HOTEL RENOVATION RISKS
The renovation of hotels involves risks associated with construction and
renovation of real property, including the possibility of construction cost
overruns and delays due to various factors (including the inability to obtain
regulatory approvals, inclement weather, labor or material shortages and the
unavailability of construction and permanent financing) and market or site
deterioration after acquisition or renovation. Any unanticipated delays or
expenses in connection with the renovation of hotels could have an adverse
effect on the results of operations and financial condition of the Company.
SUBSTANTIAL RELIANCE ON KEY PERSONNEL
The Company will place substantial reliance on the lodging industry
knowledge and experience and the continued services of its senior management,
led by Paul W. Whetsell and David E. McCaslin. The Company's future success and
its ability to manage future growth depend in large part upon the efforts of
these persons and on the Company's ability to attract and retain other highly
qualified personnel. Competition for such personnel is intense, and there can be
no assurance that the Company will be successful in attracting and retaining
such personnel. The loss of services of Messrs. Whetsell or McCaslin or the
Company's inability to attract and retain other highly qualified personnel may
adversely affect the results of operations and financial condition of the
Company. The Company currently has employment agreements with Messrs. Whetsell
and McCaslin for terms of three years each expiring in December 1999, which
contain certain non-compete clauses. See "Management--Employment Agreements."
POTENTIAL FOR CONFLICTS OF INTEREST
Mr. Whetsell and Mr. McCaslin and entities owned by them own, directly or
indirectly, (i) a leasehold interest, expiring on December 31, 2001, in two of
the Managed Hotels and (ii) minority equity interests in four of the Managed
Hotels. Mr. Whetsell and Mr. McCaslin exercise management control over the
entities that own two of these Managed Hotels (the "Affiliated Owners") through
their ownership of certain entities which serve as general partners of the
Affiliated Owners. Such interests were acquired prior to the formation of
EquiStar and CapStar Management. For the year ended December 31, 1996 and the
six months ended June 30, 1997, the Company received approximately $287,000 and
$276,000, respectively, in management fees from the four hotels in which Messrs.
Whetsell and McCaslin own an equity interest, including approximately $234,000
and $112,000, respectively, in management fees from the Affiliated Owners.
Conflicts may arise in the future between the Company and the Affiliated
Owners with respect to certain Management Agreements (as defined below) between
the Company and such Affiliated Owners. These conflicts may arise in connection
with the exercise of any rights or the conduct of any negotiations to extend,
renew, terminate or amend such agreements. There can be no assurance that such
conflicts will be resolved in favor of the Company. Transactions involving the
Company and the Affiliated Owners will be passed on for the Company by a
majority of the Independent Directors (as defined herein) of the Board.
Although none of the Managed Hotels owned by Affiliated Owners now competes
with the Owned Hotels, the Company may in the future acquire a hotel in a market
in which a hotel owned by an Affiliated Owner now operates. See "Certain
Relationships and Related Transactions--Ownership Interests in Certain Managed
Hotels."
16
<PAGE>
Under the terms of their employment agreements, Messrs. Whetsell and
McCaslin are prohibited from hereafter acquiring any interests in hotels or
hotel management companies while they serve as officers of the Company. See
"Management--Employment Agreements."
TERMINATION OF MANAGEMENT AGREEMENTS
The Company operates the 28 Managed Hotels pursuant to third party
management agreements (the "Management Agreements") with the owners of such
Managed Hotels. The Management Agreements have remaining terms ranging from one
month to nine years. Substantially all of the Management Agreements permit the
owners of the Managed Hotels to terminate such agreements prior to the stated
expiration dates if the applicable hotel is sold, and several of the Management
Agreements permit the owners of the Managed Hotels to terminate such agreements
prior to the stated expiration date without cause or by reason of the failure of
the applicable hotel to obtain specified levels of performance. For the year
ended December 31, 1996 and the six months ended June 30, 1997, the Company's
pro forma revenue from Management Agreements was $2.9 million and $2.1 million,
respectively, constituting 0.8% and 1.1%, respectively, of the Company's total
pro forma revenue for such periods. No single Management Agreement (or group of
Management Agreements for hotels under common ownership or control) currently
accounts for more than 0.5% of the total revenue of the Company on a pro forma
basis. The early termination of the Management Agreements or the inability of
the Company to negotiate renewals of Management Agreements upon the expiration
of their stated terms would have an adverse impact on the revenues received by
the Company from its management business.
ENVIRONMENTAL RISKS
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. In addition, the presence of contamination from
hazardous or toxic substances, or the failure to properly remediate such
contaminated property, 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 may
also be liable for the costs 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 are also regulated by federal and state laws. In
connection with the ownership and operation of the Hotels, the Company could be
held liable for the costs of remedial action with respect to such regulated
substances and storage tanks and claims related thereto. Activities have been
undertaken to close or remove storage tanks located on the property of two of
the Owned Hotels.
All of the Owned Hotels have undergone Phase I environmental site
assessments ("Phase Is"), which generally provide a physical inspection and
database search but not soil or groundwater analyses, by a qualified independent
environmental engineer within approximately the last 12 months. Phase Is
identify potential sources of contamination for which the Owned Hotels may be
responsible and to assess the status of environmental regulatory compliance. The
Phase Is have not revealed any environmental liability or compliance concerns
that the Company believes would have a material adverse effect on the Company's
results of operation or financial condition, nor is the Company aware of any
such liability or concerns.
In addition, the Owned Hotels have been inspected to determine the presence
of asbestos. Federal, state and local environmental laws, ordinances and
regulations also require abatement or removal of certain asbestos-containing
materials ("ACMs") and govern emissions of and exposure to asbestos fibers in
the air. Limited quantities of ACMs are present in various building materials
such as sprayed-on ceiling treatments, roofing materials or floor tiles at the
Owned Hotels. Operations and maintenance programs for maintaining such ACMs have
been or are in the process of being designed and implemented, or the
17
<PAGE>
ACMs have been scheduled to be or have been abated, at such hotels. Based on
third party environmental assessments and due diligence investigations recently
conducted by the Company and its lenders, the Company believes that the presence
of ACMs in its Owned Hotels will not have a material adverse effect on the
Company's results of operations or financial condition. However, there can be no
assurance that this will be the case. Any liability resulting from
non-compliance or other claims relating to environmental matters could have a
material adverse effect on the Company's results of operations or financial
condition.
GOVERNMENTAL REGULATION
A number of states regulate the licensing of hotels and restaurants,
including liquor license grants, by requiring registration, disclosure
statements and compliance with specific standards of conduct. The Company
believes that it is substantially in compliance with these requirements.
Managers of hotels are also subject to laws governing their relationship with
hotel employees, including minimum wage requirements, overtime, working
conditions and work permit requirements. Compliance with, or changes in, these
laws could reduce the revenue and profitability of the Owned Hotels and could
otherwise adversely affect the Company's results of operations or financial
condition.
Under the Americans with Disabilities Act (the "ADA"), all public
accommodations are required to meet certain requirements related to access and
use by disabled persons. These requirements became effective in 1992. Although
significant amounts have been and continue to be invested in ADA required
upgrades to the Owned Hotels, a determination that the Company is not in
compliance with the ADA could result in a judicial order requiring compliance,
imposition of fines or an award of damages to private litigants. The Company is
likely to incur additional costs of complying with the ADA; however, such costs
are not expected to have a material adverse effect on the Company's results of
operations or financial condition.
FRAUDULENT TRANSFER CONSIDERATIONS
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer and conveyance laws, if the
Company, at the time it issued the Notes, (a) incurred such indebtedness with
the actual intent to hinder, delay or defraud creditors or (b)(i) received less
than reasonably equivalent value or fair consideration therefor and (ii)(A) was
insolvent at the time of such incurrence, (B) was rendered insolvent by reason
of such incurrence (and the application of the proceeds thereof), (C) was
engaged or was about to engage in a business or transaction for which the assets
remaining with the Company constituted unreasonably small capital to carry on
its business or (D) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they mature, then, in each such case, a
court of competent jurisdiction could avoid, in whole or in part, the Notes or,
in the alternative, fashion other equitable relief. The measure of insolvency
for purposes of the foregoing would likely vary depending upon the law applied
in such case. Generally, however, the Company would be considered insolvent if
the sum of its debts, including contingent liabilities, was greater than all of
its assets at a fair valuation, or if the present fair-saleable value of its
assets was less than the amount that would be required to pay the probable
liabilities on its existing debts, including contingent liabilities, as such
debts become absolute and matured. The Company's management believes that, for
purposes of the United States Bankruptcy Code and state fraudulent transfer and
conveyance laws, the Notes are being issued without the intent to hinder, delay
or defraud creditors and for proper purposes and in good faith; that the Company
will receive reasonably equivalent value or fair consideration therefor and
that, after the issuance of the Notes and the application of the net proceeds
thereof, the Company will be solvent, will have sufficient capital for carrying
on its business and will be able to pay its debts as they mature. However, there
can be no assurance that a court passing on such issues would agree with the
determination of the Company's management.
18
<PAGE>
LACK OF PUBLIC MARKET FOR THE NOTES
Prior to the Exchange Offer, there has been no public market for the
Existing Notes. Although the Initial Purchaser has acted as a market maker with
respect to the Existing Notes and has informed the Company that it currently
intends to make a market in the New Notes, it is not obligated to do so and any
such market making may be discontinued at any time without any notice. The
Existing Notes are currently eligible for trading in the PORTAL market.
Following commencement of the Exchange Offer but prior to its consummation, the
Existing Notes may continue to be traded in the PORTAL market. Following
consummation of the Exchange Offer, the New Notes will not be eligible for
PORTAL trading. The Company currently does not intend to list the New Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system and no active public market for the New Notes is currently
anticipated. Accordingly, there can be no assurance as to the development or
liquidity of any market for the New Notes (or any Existing Notes not exchanged).
ADVERSE CONSEQUENCES OF FAILURE TO ADHERE TO EXCHANGE OFFER PROCEDURES
Issuance of the New Notes in exchange for Existing Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Exchange Agent of
such Existing Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of Existing
Notes desiring to tender such Existing Notes in exchange for New Notes should
allow sufficient time to ensure timely delivery. Neither the Company nor the
Exchange Agent is under any duty to give notification of defects or
irregularities with respect to the tenders of Existing Notes for exchange.
Existing Notes that are not tendered or are tendered but not accepted will,
following the consummation of the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain conditions and restrictions. Upon
consummation of the Exchange Offer certain registration rights under the
Registration Rights Agreements will terminate.
RECEIPT OF RESTRICTED SECURITIES UNDER CERTAIN CIRCUMSTANCES
Any holder of Existing Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the New Notes may be deemed to
have received restricted securities and, if so, will be required to comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer--Consequences of
Failure to Exchange; Resales of New Notes."
ADVERSE EFFECT ON MARKET FOR EXISTING NOTES
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the untendered and tendered but unaccepted
Existing Notes could be adversely affected. See "The Exchange Offer."
19
<PAGE>
USE OF PROCEEDS
There will be no proceeds to the Company from the Exchange of New Notes for
Existing Notes pursuant to the Exchange Offer. This Exchange Offer is intended
to satisfy certain of the Company's obligations under the Registration Rights
Agreements. The net proceeds from the issuance and sale of the Existing Notes,
approximately $145.0 million, were used to reduce outstanding indebtedness under
the 1997 Credit Facility; such amounts remain available for reborrowing. The
indebtedness under the 1997 Credit Facility bears interest at variable rates,
with a weighted average annual rate at June 30, 1997 of 7.69%, and matures on
June 30, 2002.
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of June 30, 1997 and pro forma to give effect to the Offering, the 1997 Credit
Facility, the Non-Recourse Facility, the acquisition of nine of the Owned Hotels
since June 30, 1997 and the Additional Acquisitions (for a pro forma total of 43
hotels). The information below should be read in conjunction with the Company's
consolidated financial statements and notes thereto, incorporated herein by
reference, and the Unaudited Pro Forma Condensed Consolidated Financial
Statements and notes thereto contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
------------------------
<S> <C> <C>
HISTORICAL PRO FORMA
---------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
DEBT:
Senior secured credit facility.................................................. $ 168,500 $ --
1997 Credit Facility(A)......................................................... -- 273,939
Non-recourse debt............................................................... 15,404 68,154(C)
8 3/4% Senior Subordinated Notes due 2007....................................... -- 150,000
Other debt...................................................................... 51,091(B) 1,091
---------- ---------
Total debt.................................................................. 234,995 493,184
Minority interest............................................................... 22,270 22,270
STOCKHOLDERS' EQUITY:
Preferred Stock ($.01 par value, 25,000,000 shares authorized, no shares issued
or outstanding)............................................................... -- --
Common Stock ($.01 par value, 49,000,000 shares authorized, 18,905,952 shares
issued and outstanding)....................................................... 189 189
Additional paid-in capital...................................................... 303,564 303,564
Retained earnings............................................................... 12,142 5,695
Cumulative foreign currency translation adjustment.............................. (420) (420)
---------- ---------
Total stockholders' equity.................................................. 315,475 309,028
---------- ---------
Total capitalization........................................................ $ 572,740 $824,482
---------- ---------
---------- ---------
</TABLE>
- ------------------------
(A) In July 1997, the Company obtained the 1997 Credit Facility in the maximum
principal amount of $450.0 million.
(B) Includes $50.0 million of senior subordinated debt refinanced with the
proceeds of the 1997 Credit Facility.
(C) Represents debt of Unrestricted Subsidiaries.
20
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The following table sets forth selected historical and pro forma financial
information for the Company. The Balance Sheet Data of the Company as of
December 31, 1996, 1995 and 1994, and the Operating Results and Other Financial
Data for the years ended December 31, 1996, 1995, 1994 and 1993, have been
derived from the audited financial statements which are incorporated by
reference into this Prospectus. The following information should be read in
conjunction with the historical consolidated financial statements and notes
thereto for the Company, incorporated herein by reference, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Unaudited Pro Forma Condensed Consolidated Financial Statements and notes
thereto included elsewhere in this Prospectus.
The pro forma operating data and other data for the year ended December 31,
1996 and the six months ended June 30, 1997 have been prepared as if the Common
Stock Offerings, the Offering, the 1997 Credit Facility, the Non-Recourse
Facility and the acquisition of the Owned Hotels and the Additional Acquisitions
had been consummated at the beginning of the periods presented, and the pro
forma balance sheet data as of June 30, 1997 have been prepared as if the
Offering, the 1997 Credit Facility, the Non-Recourse Facility and the
acquisition of the Owned Hotels and the Additional Acquisitions had been
consummated on such date. The pro forma financial information is not necessarily
indicative of what the actual financial position and results of operations of
the Company would have been as of and for the periods indicated, nor does it
purport to represent the Company's future financial position and results of
operations.
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------------- --------------------
PRO
FORMA
1992 1993 1994 1995 1996 1996(A) 1996 1997
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING RESULTS:
Revenues:
Rooms............................. $ 0 $ 0 $ 0 $ 14,456 $ 68,498 $ 232,509 $ 28,120 $ 79,254
Food, beverage and other.......... 0 0 0 7,471 36,949 112,139 12,989 34,676
Office rental and other........... 0 0 0 0 0 5,668 3,059 5,664
Management services and other..... 3,479 4,234 4,418 4,436 4,345 2,858 2,088 2,225
--------- --------- --------- --------- --------- --------- --------- ---------
Total revenues................ 3,479 4,234 4,418 26,363 109,792 353,174 46,256 121,819
--------- --------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Departmental expenses:
Rooms............................. 0 0 0 4,190 17,509 57,639 7,365 18,954
Food, beverage and other.......... 0 0 0 5,437 27,102 84,750 10,302 27,338
Office rental and other........... 0 0 0 0 0 2,683 1,089 3,008
Undistributed operating expenses:
Selling, general and
administrative.................. 2,836 4,065 4,508 8,078 20,448 54,308 9,457 19,839
Property operating costs.......... 0 0 0 3,934 17,151 68,336 7,497 19,024
Depreciation and amortization..... 12 14 23 2,097 8,248 27,959 3,919 8,220
--------- --------- --------- --------- --------- --------- --------- ---------
Total operating expenses...... 2,848 4,079 4,531 23,736 90,458 295,675 39,629 96,383
--------- --------- --------- --------- --------- --------- --------- ---------
Net operating income (loss)......... 631 155 (113) 2,627 19,334 57,499 6,627 25,436
Interest expense, net............... 0 0 0 2,414 12,346 37,317 7,290 8,440
Minority interest................... 0 0 0 18 39 (1,073) 69 (620)
Income tax provision(B)............. 0 0 0 0 2,674 7,644 0 6,288
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary
item.............................. 631 155 (113) 231 4,353 11,465 (594) 10,088
Extraordinary item(C)............... 0 0 0 (888) (1,956) -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss)............. $ 631 $ 155 $ (113) $ (657) $ 2,397 $ 11,465 $ (594) $ 10,088
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Earnings per share from continuing
operations........................ -- -- -- -- $ 0.31 $ 0.61 -- $ 0.62
--------- --------- ---------
--------- --------- ---------
<CAPTION>
PRO
FORMA
1997(A)
---------
<S> <C>
OPERATING RESULTS:
Revenues:
Rooms............................. $ 125,553
Food, beverage and other.......... 59,534
Office rental and other........... 2,844
Management services and other..... 2,127
---------
Total revenues................ 190,058
---------
Operating expenses:
Departmental expenses:
Rooms............................. 31,044
Food, beverage and other.......... 44,969
Office rental and other........... 1,184
Undistributed operating expenses:
Selling, general and
administrative.................. 27,146
Property operating costs.......... 35,955
Depreciation and amortization..... 13,828
---------
Total operating expenses...... 154,126
---------
Net operating income (loss)......... 35,932
Interest expense, net............... 18,617
Minority interest................... (856)
Income tax provision(B)............. 6,320
---------
Income (loss) before extraordinary
item.............................. 10,139
Extraordinary item(C)............... --
---------
Net income (loss)............. $ 10,139
---------
---------
Earnings per share from continuing
operations........................ $ 0.53
---------
---------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------------- --------------------
PRO
FORMA
1992 1993 1994 1995 1996 1996(A) 1996 1997
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT OPERATING DATA)
OTHER FINANCIAL DATA:
EBITDA(D)........................... $ 643 $ 169 $ (90) $ 4,741 $ 27,621 $ 84,385 $ 10,615 $ 33,036
Net cash provided by (used in)
operating activities.............. 87 (101) 66 4,357 13,373 39,392 3,891 2,745
Net cash used in investing
activities........................ (65) (24) (41) (116,573) (225,251) (661,085) (95,625) (164,567)
Net cash provided by (used in)
financing activities.............. (219) 244 0 119,048 226,830 638,118 89,809 151,532
Ratio of EBITDA to interest
expense........................... -- -- -- -- -- 2.2x -- --
Ratio of earnings to fixed
charges........................... -- -- -- 1.1x 1.5x 1.5x -- 2.7x
Restricted Group Data(E):
EBITDA.............................. -- -- -- -- -- $ 72,823 -- --
Interest expense.................... -- -- -- -- -- 31,867 -- --
Ratio of EBITDA to interest
expense........................... -- -- -- -- -- 2.3x -- --
BALANCE SHEET DATA:
Total assets........................ $ 586 $ 1,458 $ 1,232 $ 132,650 $ 379,161 -- $ 231,736 $ 608,073
Total debt.......................... 0 0 0 76,242 200,361 -- 168,112 234,995
Stockholders' equity................ -- -- -- -- 160,715 -- -- 315,475
OPERATING DATA:
Owned Hotels:
Number of hotels.................. -- -- -- 6 19 43 11 32
Number of guest rooms............. -- -- -- 2,101 5,166 10,873 3,307 8,040
Total revenues (in thousands)..... -- -- -- $ 21,927 $ 105,447 $ 344,648 $ 44,168 $ 119,594
Average occupancy................. -- -- -- 72.3% 71.6% 69.4% 72.7% 74.5%
ADR(F)............................ -- -- -- $ 71.58 $ 82.84 $ 83.17 $ 80.56 $ 86.04
RevPAR............................ -- -- -- $ 51.75 $ 59.31 $ 57.76 $ 58.57 $ 64.08
All Hotels(G):
Number of hotels(H)............... 34 34 39 46 47 -- -- --
Number of guest rooms(H).......... 5,918 5,971 5,847 7,895 9,785 -- -- --
Total revenues (in thousands)..... $ 109,837 $ 123,124 $ 128,151 $ 170,888 $ 193,092 -- -- --
<CAPTION>
PRO
FORMA
1997(A)
---------
<S> <C>
OTHER FINANCIAL DATA:
EBITDA(D)........................... $ 48,904
Net cash provided by (used in)
operating activities.............. 8,315
Net cash used in investing
activities........................ (438,683)
Net cash provided by (used in)
financing activities.............. 409,721
Ratio of EBITDA to interest
expense........................... 2.6x
Ratio of earnings to fixed
charges........................... 1.8x
Restricted Group Data(E):
EBITDA.............................. $ 42,044
Interest expense.................... 15,844
Ratio of EBITDA to interest
expense........................... 2.7x
BALANCE SHEET DATA:
Total assets........................ $ 862,981
Total debt.......................... 493,184(I)
Stockholders' equity................ 309,028
OPERATING DATA:
Owned Hotels:
Number of hotels.................. 43
Number of guest rooms............. 10,873
Total revenues (in thousands)..... $ 185,087
Average occupancy................. 71.6
ADR(F)............................ $ 87.71%
RevPAR............................ $ 62.84
All Hotels(G):
Number of hotels(H)............... --
Number of guest rooms(H).......... --
Total revenues (in thousands)..... --
</TABLE>
- ------------------------------
(A) The pro forma Operating Results, Other Financial Data and Operating Data for
the six months ended June 30, 1997 and the year ended December 31, 1996 have
been prepared as if the Common Stock Offerings, the Offering, the 1997
Credit Facility, the Non-Recourse Facility and the acquisition of the Owned
Hotels and the Additional Acquisitions had been consummated at the beginning
of the periods presented, and the pro forma Balance Sheet Data as of June
30, 1997 have been prepared as if the Offering, the 1997 Credit Facility,
the Non-Recourse Facility and the acquisition of the Owned Hotels and the
Additional Acquisitions had been consummated on such date.
(B) No provision for federal income taxes is included in the historical data
other than for 1996 and 1997 because CapStar Management and EquiStar were
partnerships and all federal income tax liabilities were passed through to
the individual partners.
(C) During 1995 and 1996, certain loan facilities were refinanced and the
write-offs of deferred costs associated with the prior facilities were
recorded as extraordinary losses.
(D) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. Management believes that EBITDA is a useful
measure of operating performance because it is industry practice to evaluate
hotel properties based on operating income before interest, income taxes,
depreciation and amortization, which is generally equivalent to EBITDA, and
EBITDA is unaffected by the debt and equity structure of the property owner.
EBITDA does not represent cash flow from operations as defined by generally
accepted accounting principles ("GAAP"), is not necessarily indicative of
cash available to fund all cash flow needs and should not be considered as
an alternative to net income under GAAP for purposes of evaluating the
Company's results of operations.
(E) Represents data for 39 Owned Hotels and Additional Acquisitions and excludes
data for the Unrestricted Subsidiaries.
(F) Represents total room revenues divided by total number of rooms occupied by
hotel guests on a paid basis.
(G) Represents operating data for all hotels managed by the Company during all
or a portion of the periods presented.
(H) As of December 31 for the periods presented.
(I) Includes $68,154 of debt of Unrestricted Subsidiaries.
22
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Consolidated Balance Sheet of the Company
as of June 30, 1997 is presented assuming: (i) all of the Owned Hotels and the
Additional Acquisitions were owned at June 30, 1997 and (ii) the Offering, the
1997 Credit Facility, the Non-Recourse Facility and the application of the net
proceeds therefrom were completed at June 30, 1997.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations of
the Company for the six months ended June 30, 1997 and for the year ended
December 31, 1996 are presented assuming: (i) all of the Owned Hotels and the
Additional Acquisitions were owned at the beginning of the periods presented;
and (ii) the Common Stock Offerings, the Offering, the 1997 Credit Facility, the
Non-Recourse Facility and the application of the net proceeds therefrom were
completed at the beginning of the periods presented.
In management's opinion, all material adjustments necessary to reflect the
transactions are presented in the pro forma adjustments columns, which are
further described in the notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements. The Unaudited Pro Forma Condensed Consolidated Financial
Statements are not necessarily indicative of what the Company's financial
position or results of operations actually would have been if all the Owned
Hotels and the Additional Acquisitions were, in fact, owned on such dates
presented and if the Common Stock Offerings, the Offering, the 1997 Credit
Facility and the Non-Recourse Facility occurred on such dates. Additionally, the
pro forma information does not purport to project the Company's financial
position or results of operations at any future date or for any future period.
The Unaudited Pro Forma Condensed Consolidated Financial Statements should be
read in conjunction with the historical consolidated financial statements and
related notes thereto of the Company, which are incorporated herein by
reference.
23
<PAGE>
CAPSTAR HOTEL COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OFFERING AND
OWNED HOTELS AND ADDITIONAL 1997 CREDIT
HISTORICAL(A) NON-RECOURSE FACILITY(B)(E) ACQUISITIONS(D)(E) FACILITY(E) PRO FORMA
------------ --------------------------- ----------------- ------------ -----------
ASSETS
Cash and cash
equivalents............. $ 11,489 $ (5,547) $ -- $ -- $ 5,942
Property and equipment,
net:
Land.................... 81,683 38,445 5,811 -- 125,939
Building and
improvements.......... 404,798 169,298 29,054 -- 603,150
Furniture, fixtures and
equipment............. 44,556 20,045 3,874 -- 68,475
Construction-in-progress.. 5,314 5 -- -- 5,319
------------ -------- -------- ------------ -----------
Total property and
equipment, net.......... 536,351 227,793 38,739 -- 802,883
Deposits and other
assets.................. 60,233 (10,505) -- 4,428(F) 54,156
------------ -------- -------- ------------ -----------
Total assets.............. $ 608,073 $ 211,741 $ 38,739 $ 4,428 $ 862,981
------------ -------- -------- ------------ -----------
------------ -------- -------- ------------ -----------
LIABILITIES, MINORITY
INTEREST AND
STOCKHOLDERS' EQUITY
Other liabilities......... $ 35,333 $ 3,166 $ -- $ -- $ 38,499
Long-term debt:
Senior secured credit
facility................ 168,500 -- -- (168,500) --
1997 Credit Facility.... -- 155,825(C) 38,739(C) 79,375 273,939
Non-Recourse Facility... -- 52,750(C) -- -- 52,750
8 3/4% Senior
Subordinated Notes due
2007.................. -- -- -- 150,000 150,000
Other debt.............. 66,495 -- -- (50,000) 16,495
------------ -------- -------- ------------ -----------
Total liabilities......... 270,328 211,741 38,739 10,875 531,683
Minority interest......... 22,270 -- -- -- 22,270
Stockholders' equity...... 315,475 -- -- (6,447)(F) 309,028
------------ -------- -------- ------------ -----------
Total liabilities,
minority interest and
stockholders' equity.... $ 608,073 $ 211,741 $ 38,739 $ 4,428 $ 862,981
------------ -------- -------- ------------ -----------
------------ -------- -------- ------------ -----------
</TABLE>
- ------------------------------
(A) Reflects the historical unaudited condensed consolidated balance sheet of
the Company as of June 30, 1997.
(B) Reflects the Company's cost basis and financing for the nine Owned Hotels
acquired subsequent to June 30, 1997.
(C) Based upon the timing of the acquisitions, different long-term credit
facilities were used to finance the acquisitions of the Owned Hotels
subsequent to June 30, 1997 and the Additional Acquisitions.
(D) Reflects the Company's cost basis and financing for the Additional
Acquisitions. The estimated total acquisition cost of the Additional
Acquisitions is $44,831, including the purchase price totaling $37,300,
renovation programs of $6,092 and other costs of $1,439.
(E) A schedule of sources and uses of funds related to the Company's various
long-term debt facilities is as follows:
<TABLE>
<S> <C> <C>
SOURCES
Gross proceeds from the Offering................................................... $150,000
Proceeds from the 1997 Credit Facility............................................. 273,939
Proceeds from the Non-Recourse Facility............................................ 52,750
-----------
Total sources...................................................................... $476,689
-----------
-----------
USES
Repayment of senior secured and senior subordinated credit facilities.............. $(218,500)
Purchase of certain Owned Hotels and the Additional Acquisitions................... (247,314)
1997 Credit Facility, the Non-Recourse Facility, the Offering, advisory and other
transaction expenses.............................................................. (10,875)
-----------
Total uses......................................................................... $(476,689)
-----------
-----------
</TABLE>
(F) Reflects the write-off of deferred financing fees of $6,447 at June 30, 1997
related to the senior secured and senior subordinated credit facilities.
Deposits and other assets also reflect the deferral of financing fees of
$10,875 related to the Offering, the 1997 Credit Facility and the
Non-Recourse Facility.
24
<PAGE>
CAPSTAR HOTEL COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OWNED HOTELS AND OFFERING AND
NON-RECOURSE ADDITIONAL 1997 CREDIT
HISTORICAL(A) FACILITY(B) ACQUISITIONS(B) FACILITY PRO FORMA
------------ ----------------------- ------------------- ------------- ----------
Revenue from hotel operations:
Rooms............................. $ 79,254 $ 41,440 $ 4,859 $ -- $ 125,553
Food and beverage................. 34,676 13,502 2,215 -- 50,393
Other............................. 5,664 3,226 251 -- 9,141
Office rental and other............. -- 2,844 -- -- 2,844
Hotel management, accounting and
other............................. 2,225 (98) -- -- 2,127
------------ ------- ------ ------------- ----------
Total revenue..................... 121,819 60,914 7,325 -- 190,058
Hotel operating expense by
department:
Rooms............................. 18,954 10,857 1,233 -- 31,044
Food and beverage................. 27,338 10,984 1,629 -- 39,951
Other operating departments....... 3,008 1,857 153 -- 5,018
Office rental and other expenses.... -- 1,184 -- -- 1,184
Undistributed operating expenses:
Administrative and general........ 19,839 6,524 783 -- 27,146
Property operating costs.......... 13,960 11,817 1,065 -- 26,842
Property taxes, insurance and
other............................. 5,064 3,760 289 -- 9,113
Depreciation and amortization..... 8,220 4,515 640 453(D) 13,828
------------ ------- ------ ------------- ----------
Total operating expenses.......... 96,383 51,498 5,792 453 154,126
Interest expense, net............... 8,440 7,697(C) 1,059(C) 1,421(C) 18,617
Total expenses...................... 104,823 59,195 6,851 1,874 172,743
------------ ------- ------ ------------- ----------
Income (loss) before minority
interest and income taxes......... 16,996 1,719 474 (1,874) 17,315
Minority interest................... (620) (236) -- -- (856)
------------ ------- ------ ------------- ----------
Income (loss) before income taxes... 16,376 1,483 474 (1,874) 16,459
Income tax provision................ 6,288 570 182 (720) 6,320
------------ ------- ------ ------------- ----------
Net income (loss)(E).............. $ 10,088 $ 913 $ 292 $ (1,154) $ 10,139
------------ ------- ------ ------------- ----------
------------ ------- ------ ------------- ----------
Earnings per share(F): $ 0.62 $ 0.53
Weighted average shares outstanding: 16,356,343 19,547,910
</TABLE>
- ------------------------------
(A) Reflects the historical unaudited condensed consolidated statement of
operations of the Company for the six months ended June 30, 1997.
(B) Reflects the pre-acquisition operations of the Owned Hotels and Additional
Acquisitions to provide six months of hotel operations. For each hotel, the
pre-acquisition operations were obtained from the hotel's pre-acquisition
financial statements. Also reflects adjustments to (i) eliminate management
fee revenues for the Owned Hotels for services that were provided by the
Company, (ii) reflect federal and state income taxes (assuming a 38.4%
combined effective rate) and (iii) reflect pro forma depreciation and
amortization expense as if the hotels had been acquired as of the beginning
of the period.
(C) Reflects the adjustments needed to record a full period of interest for the
Owned Hotels and Additional Acquisitions, based upon assumed borrowings on
the 1997 Credit Facility and the Non-Recourse Facility. Adjustments are also
recorded to reflect the net effect of the Offering and repayment of existing
credit facilities.
(D) Adjustments reflect amortization of costs associated with the Offering, the
1997 Credit Facility and the Non-Recourse Facility, net of costs recorded
for the refinanced credit facilities.
(E) After giving effect to the 1997 Credit Facility, the Company incurred
expenses associated with the write-off of deferred financing costs related
to the senior secured and senior subordinated credit facilities. These
extraordinary costs are charged to operations as incurred and have not been
included in the Unaudited Pro Forma Condensed Consolidated Statement of
Operations.
(F) In computing earnings per share, net income has been adjusted for certain
minority interests.
25
<PAGE>
CAPSTAR HOTEL COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
OWNED HOTELS AND OFFERING AND
NON-RECOURSE ADDITIONAL 1997 CREDIT
HISTORICAL(A) FACILITY(B) ACQUISITIONS(B) FACILITY PRO FORMA
------------ ----------------------- -------------- ------------ ----------
Revenue from hotel operations:
Rooms............................... $ 68,498 $ 155,255 $ 8,756 $ -- $ 232,509
Food and beverage................... 30,968 56,584 4,771 -- 92,323
Other............................... 5,981 13,341 494 -- 19,816
Office rental and other............... -- 5,668 -- -- 5,668
Hotel management, accounting and
other............................... 4,345 (1,487) -- -- 2,858
------------ ------------ -------------- ------------ ----------
Total revenue....................... 109,792 229,361 14,021 -- 353,174
Hotel operating expenses by
department:
Rooms............................... 17,509 37,921 2,209 -- 57,639
Food and beverage................... 24,589 45,022 3,801 -- 73,412
Other operating departments......... 2,513 8,497 328 -- 11,338
Office rental and other............... -- 2,683 -- -- 2,683
Undistributed operating expenses:
Administrative and general.......... 20,448 33,202 658 -- 54,308
Property operating costs............ 12,586 35,063 2,232 -- 49,881
Property taxes, insurance and
other............................. 4,565 13,316 574 -- 18,455
Depreciation and amortization....... 8,248 17,524 1,280 907(D) 27,959
------------ ------------ -------------- ------------ ----------
Total operating expenses............ 90,458 193,228 11,082 907 295,675
Interest expense, net................. 12,346 19,831(C) 2,096(C) 3,044(C) 37,317
Total expenses........................ 102,804 213,059 13,178 3,951 332,992
------------ ------------ -------------- ------------ ----------
Income (loss) before minority interest
and income taxes.................... 6,988 16,302 843 (3,951) 20,182
Minority interest..................... 39 (1,112) -- -- (1,073)
------------ ------------ -------------- ------------ ----------
Income (loss) before income taxes..... 7,027 15,190 843 (3,951) 19,109
Income tax provision.................. 2,674 6,213 338 (1,581) 7,644
------------ ------------ -------------- ------------ ----------
Net income (loss)(E)................ $ 4,353 $ 8,977 $ 505 $ (2,370) $ 11,465
------------ ------------ -------------- ------------ ----------
------------ ------------ -------------- ------------ ----------
Earnings per share from continuing
operations(F): $ 0.31 $ 0.61
Weighted average shares outstanding: 12,754,321 19,313,844
</TABLE>
- ------------------------------
(A) Reflects the historical consolidated statement of operations of the Company
for the year ended December 31, 1996.
(B) Reflects the pre-acquisition operations of the Owned Hotels and Additional
Acquisitions to provide a full year of hotel operations. For each hotel, the
pre-acquisition operations were obtained from the hotel's pre-acquisition
financial statements. Also reflects adjustments to (i) eliminate management
fee revenues for the Owned Hotels for services that were provided by the
Company, (ii) reflect federal and state income taxes (assuming a 40%
combined effective rate), (iii) reflect the estimated incremental general
and administrative expenses associated with public ownership (these
additional expenses include insurance, additional executive salaries,
directors' fees and related expenses, legal expenses, expenses associated
with preparing quarterly and annual reports, and other miscellaneous
expenses) and (iv) reflect pro forma depreciation and amortization expense
as if the hotels had been acquired as of the beginning of the period.
(C) Reflects the adjustments needed to record a full year of interest for the
Owned Hotels and Additional Acquisitions, based upon assumed borrowings on
the 1997 Credit Facility and the Non-Recourse Facility. Adjustments are also
recorded to reflect the net effect of the Offering and repayment of existing
credit facilities.
(D) Adjustments reflect amortization of costs associated with the Offering, the
1997 Credit Facility and the Non-Recourse Facility, net of costs recorded
for the refinanced credit facilities.
(E) After giving effect to the 1997 Credit Facility, the Company incurred
expenses associated with the write-off of deferred financing costs related
to the senior secured and senior subordinated credit facilities. These
extraordinary costs are charged to operations as incurred and have not been
included in the Unaudited Pro Forma Condensed Consolidated Statement of
Operations.
(F) Historical earnings per share has been calculated using actual income for
the period from the IPO through December 31, 1996. In computing pro forma
earnings per share, net income has been adjusted for certain minority
interests.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CERTAIN STATEMENTS CONTAINED HEREIN AND ELSEWHERE IN THIS PROSPECTUS WHICH
ARE NOT HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES REFERENCED ELSEWHERE IN THIS PROSPECTUS. SEE "RISK FACTORS" AND
"SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS."
GENERAL
Prior to the IPO, the business of the Company was conducted through
EquiStar, which owned 12 of the Owned Hotels, and CapStar Management, which
managed these and certain other hotels. CapStar Management has been in the hotel
management business since 1987. EquiStar, however, was not formed until January
12, 1995 and the Company did not own any hotels in any prior periods. Therefore,
the Company's financial statements prior to 1995 reflect only the management
business of CapStar Management. The economics of the management business are
based on fees paid to the Company for management services and the costs related
to the performance of these services. The fee management business is labor
intensive and requires relatively little capital.
Beginning in 1994, the Company began to invest in additional professional
staff and incurred related costs in order to position itself to acquire hotel
properties. From January 12, 1995 through June 30, 1997, the Company acquired 32
hotels. Thus, the historical financial statements for the six months ended June
30, 1996 and 1997, and the years ended December 31, 1996 and 1995 reflect
differing numbers of Owned Hotels throughout the periods. The economics
associated with the acquisition and ownership of hotels is significantly
different from the fee management business in that capital is required to both
acquire and maintain hotels. Due to the timing and magnitude of the
acquisitions, it is difficult to compare results of these periods either to each
other or to prior years.
At December 31, 1995, the Company owned and operated five hotels and
acquired or assumed operations of five additional hotels during the first six
months of 1996 on the following dates: February 2, February 16, February 22,
February 29 and March 8, bringing the total of hotels owned at June 30, 1996 to
ten. At December 31, 1996, the Company owned 19 hotels and acquired 13
additional hotels during the first six months of 1997 on the following dates:
January 27, January 31 (two hotels), March 17, March 28, April 1 (six hotels)
and April 30 (two hotels), bringing the total of hotels owned at June 30, 1997
to 32. Therefore, the financial statements for the six months ended June 30,
1997 and 1996, reflect differing numbers of hotels owned throughout the periods.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1996
Revenues increased to $121.8 million for the six months ended June 30, 1997
from $46.3 million for the six months ended June 30, 1996. Operating expenses
also increased significantly. These increases are a result of the increase in
the number of hotels owned during the respective periods.
Interest expense increased to $8.4 million for the six months ended June 30,
1997 from $7.3 million for the same period in 1996, resulting from the increase
in debt incurred relating to the acquisition of the hotels since June 30, 1996.
This increase in debt and the related interest expense was partially offset by
proceeds from two equity offerings and the lower interest rate charged on the
Credit Facility.
Net income rose to $10.1 million for the six months ended June 30, 1997
compared to a net loss of $0.6 million for the same period of 1996.
EBITDA increased to $33.0 million for the six months ended June 30, 1997
from $10.6 million for the same period of 1996.
27
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1995
Total revenues increased to $109.8 million in 1996 from $26.4 million in
1995. The Company purchased its first hotel in March 1995 and owned and managed
five hotels as of the end of 1995. During 1996, the Company purchased an
additional 14 hotels. The growth in revenues between 1995 and 1996 reflects this
significant growth in the number of hotels owned.
Operating costs and expenses increased to $90.5 million in 1996 from $23.7
million in 1995. Departmental expenses, property operating costs, selling,
general and administrative costs and depreciation and amortization increased in
1996 over 1995. All of these increases reflect the growth in the number of owned
hotels from five to nineteen. The costs related to management of the Managed
Hotels remained stable between the periods.
Operating income increased to $19.3 million in 1996 from $2.6 million in
1995. The increase from 1995 is due to the operating income generated by
additional hotels and to increased efficiencies in the management of the Managed
Hotels.
Net interest expense of $12.3 million for 1996 increased from $2.4 million
in 1995 due to the additional debt incurred related to the hotels acquired in
1996.
The extraordinary loss of $2.0 million in 1996 reflects the write-off of
deferred financing fees of $3.3 million, net of a deferred tax benefit of $1.3
million. The financing fees written-off were unamortized fees associated with a
credit facility which was refinanced prior to maturity. The Company also
incurred an extraordinary loss on extinguishment of debt during 1995 from the
write-off of deferred financing fees in connection with a refinancing
transaction.
Net income increased to $2.4 million for 1996 from a net loss of $0.7
million for 1995. The primary reason for the increase is due to increased
operating income generated by hotels acquired during 1996 and improvements in
operating income from hotels acquired in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994
Total revenues increased to $26.4 million in 1995 from $4.4 million in 1994.
Room revenues and food, beverage and other hotel department revenues for 1995
reflect the operating revenues of five Owned Hotels acquired during the period.
There were no Owned Hotels acquired during 1994.
Operating costs and expenses increased to $23.7 million in 1995 from $4.5
million in 1994. Departmental expenses and property operating costs for 1995
reflect the operations of five Owned Hotels acquired during the period. Selling,
general and administrative costs and depreciation expense reflect increases due
to the acquisition of five Owned Hotels and the interest in the Westin Atlanta
Airport during 1995. The costs related to management of the Managed Hotels
remained relatively constant between the periods.
Operating income increased to $2.6 million in 1995 from a loss of $0.1
million in 1994. The increase from 1994 is due to the operating income of the
Owned Hotels and to increased efficiencies in the management of the Managed
Hotels.
Net interest expense of $2.4 million for 1995 results from the debt incurred
related to the acquisition of the Owned Hotels.
The Company incurred an extraordinary loss on extinguishment of debt during
1995 from the write-off of deferred financing fees in connection with a
refinancing transaction.
The net loss increased to $0.7 million for 1995 from $0.1 million for 1994.
The primary reason for the loss was the early extinguishment of debt.
28
<PAGE>
FINANCIAL CONDITION
JUNE 30, 1997 COMPARED WITH DECEMBER 31, 1996
Total assets increased by $228.9 million to $608.1 million at June 30, 1997
from $379.2 million at December 31, 1996. This growth was due to the acquisition
of 13 hotels during the first six months of 1997 and deposits related to certain
hotels acquired during July 1997.
Long-term debt increased to $235.0 million at June 30, 1997. This reflects
borrowings to finance the purchase of the hotels acquired, net of repayments
with proceeds from the Follow-On Offering.
The increase in minority interest reflects the OP Units (as defined herein)
issued in conjunction with the acquisition of a portfolio of six hotels from
Highgate Hotels, Inc. and certain affiliated entities. The increase in equity
resulted from the net proceeds from the Follow-On Offering and the partial
conversion of the OP Units in May 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash on hand, cash
generated from operations, borrowings under credit facilities and equity
offerings, as well as the proceeds from the Follow-On Offering. The Company's
continuing operations are funded through cash generated from hotel operations.
Hotel acquisitions and joint venture investments are financed through a
combination of internally generated cash, external borrowings and the issuance
of OP Units and/or Common Stock.
The Company completed its IPO in August 1996 at a price of $18.00 per share,
generating net proceeds of approximately $110.1 million to the Company. The net
proceeds from the IPO were used to repay borrowings incurred in connection with
the acquisition and renovation of certain of the Owned Hotels. In March 1997,
CapStar completed the Follow-On Offering at a price of $24.75 per share,
generating net proceeds of approximately $134.1 million to the Company. Proceeds
of the Follow-On Offering were used to fund certain acquisitions with the
remainder used to repay indebtedness and for general corporate purposes.
In July 1997, the Company obtained the 1997 Credit Facility (as more fully
described below), with initial borrowings used to repay existing indebtedness.
In August 1997, the Company completed the Offering in the aggregate principal
amount of $150.0 million, generating net proceeds of approximately $145.0
million to the company. In addition, in August 1997, the Company entered into
the $100.0 million Non-Recourse Facility with Lehman Holdings. The Non-Recourse
Facility has an 18-month term and bears interest at a rate of between 175 and
270 basis points over 30-day LIBOR, based on certain debt service ratios. The
Non-Recourse Facility is expected to be utilized to fund new hotel acquisitions
in a tax-efficient manner.
During the fiscal year ended December 31, 1996, the Company paid $226.1
million in aggregate Acquisition Cost to purchase certain of the Owned Hotels.
Initial renovation and ongoing capital expenditure programs during the same
period totaled $21.6 million. During the six months ended June 30, 1997, CapStar
invested $198.7 million in aggregate Acquisition Cost to purchase certain of the
Owned Hotels and $12.9 million on initial renovation and ongoing capital
expenditure programs. The Company expects to spend an additional $16.4 million
to complete the initial renovation of these Owned Hotels. Initial renovation
programs related to the nine Owned Hotels acquired subsequent to June 30, 1997
and the Additional Acquisitions are projected to total $25.1 million and $6.1
million, respectively. Substantially all renovation programs are expected to be
completed within the next 12 months.
Capital for renovation work has been and will be provided by a combination
of internally generated cash and external borrowings. The Company is committed
to reinvesting adequate capital on an ongoing basis to maintain the quality of
the hotels it owns. Once initial renovation programs are complete, the Company
expects to spend approximately 4% of revenues on an annual basis for ongoing
capital
29
<PAGE>
expenditures, including room and facilities refurbishments, renovations and
furniture and equipment replacements. The Company believes that these
investments will enhance the Company's competitive position.
At June 30, 1997, the Company had $11.5 million in cash and cash
equivalents, a decrease of $10.3 million from the balance of $21.8 million on
December 31, 1996.
The Company has obtained the 1997 Credit Facility in the maximum principal
amount of $450.0 million. Initial borrowings under the 1997 Credit Facility were
used by the Company to repay existing indebtedness. Subsequent borrowings under
the 1997 Credit Facility will be used to acquire and renovate upscale,
full-service hotels and for other general corporate purposes. The 1997 Credit
Facility is composed of a $350.0 million revolving loan facility maturing on
June 30, 2002, and a $100.0 million term loan facility maturing on June 30,
2004. The term loan facility calls for mandatory payments of principal beginning
on March 31, 1998. The revolving loan facility commitment will be reduced in
increments of $12.5 million on a quarterly basis beginning on October 1, 2000
and ending on July 1, 2001. In addition, the 1997 Credit Facility provides that
net sales and financing proceeds and 50% of excess cash flow, in each case to
the extent not reinvested and subject to certain exceptions set forth in the
1997 Credit Facility, must be used to prepay the term loan facility and reduce
the revolving credit facility. The Company will be required to pay customary
fees in connection with the structuring of the 1997 Credit Facility, a
commitment fee on the unused portion of the 1997 Credit Facility and a fee on
outstanding letters of credit under the 1997 Credit Facility. The 1997 Credit
Facility is a direct obligation of the Company and is fully and unconditionally
guaranteed by the Company and certain subsidiaries of the Company, including the
Operating Partnerships and the subsidiaries owning hotel properties. The 1997
Credit Facility is secured by substantially all the real and personal property
of the Company and its subsidiaries. The 1997 Credit Facility contains covenants
that impose certain limitations on the Company in respect of, among other
things, (i) the payment of dividends and other distributions, (ii) acquisitions
of additional hotel properties, (iii) the creation or incurrence of liens, (iv)
the incurrence of indebtedness, lease obligations or contingent liabilities, (v)
the acquisition of investments in and securities issued by joint ventures and
other entities, (vi) transactions with affiliates, (vii) mergers, acquisitions,
divestitures or reorganizations, (viii) the issuance of preferred stock and (ix)
sales of its hotel properties. The 1997 Credit Facility also contains covenants
that will subject the Company to certain operating requirements and that require
the maintenance of certain financial levels, such as consolidated net worth, and
certain financial ratios, such as consolidated cash flow to consolidated debt
service, consolidated cash flow to consolidated fixed charges and consolidated
total indebtedness to consolidated cash flow. The 1997 Credit Facility prohibits
certain changes in control of the Company, including certain dispositions of
stock owned by Paul Whetsell, and requires that Paul Whetsell remain an active
senior officer of the Company.
Management believes that the Company will have access to sufficient capital
resources to fund its operating and administrative expenses, to continue to
service its debt obligations and to acquire additional hotel properties.
SEASONALITY
Demand in the lodging industry is affected by recurring seasonal patterns.
Demand is lower in the winter months due to decreased travel and higher in the
spring and summer months during peak travel season. Accordingly, the Company's
operations are seasonal in nature, with lower revenue, operating profit and cash
flow in the first and fourth quarters and higher revenue, operating profit and
cash flow in the second and third quarters.
INFLATION
The rate of inflation has not had a material effect on the revenues or
operating results of the Company during the three most recent fiscal years.
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THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying "Letter of Transmittal" (which
together constitute the "Exchange Offer"), to exchange up to $150.0 million
aggregate principal amount of New Notes for a like aggregate principal amount of
Existing Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The Exchange
Offer is being made with respect to all of the Existing Notes. The total
aggregate principal amount of Existing Notes and New Notes will in no event
exceed $150.0 million.
The Existing Notes were issued on August 19, 1997. An aggregate of $100.0
million aggregate principal amount of the Existing Notes were sold to the
Initial Purchaser and then re-offered at a price of 99.866%. The remaining $50.0
million aggregate principal amount of Existing Notes were sold directly to the
Direct Purchaser at a price of 97.866%. The Direct Purchaser agreed with the
Initial Purchaser that it will not sell, transfer or otherwise dispose of or
transfer any of the Existing Notes (except for the Exchange Offer) purchased by
it for a period of 90 days from the Offering without the consent of the Initial
Purchaser. The Direct Purchaser, Oak Hill Securities Fund, L.P., is a Delaware
limited partnership that acquires and actively manages a diverse portfolio of
investments, principally in leveraged companies. Certain principals of Oak Hill
Advisors, Inc., the advisor of the Direct Purchaser, have business relationships
with Acadia Partners, L.P. See "Principal Stockholders." The Company paid a
$375,000 fee to Oak Hill Advisors, Inc. for financial advisory services rendered
in connection with the Offering.
As of the date of this Prospectus, $150.0 million aggregate principal amount
of the Existing Notes was outstanding. This Prospectus, together with the Letter
of Transmittal, is first being sent on or about , 1997, to all holders of
Existing Notes known to the Company. The Company's obligation to accept Existing
Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "--Conditions to the Exchange Offer" below.
PURPOSE OF THE EXCHANGE OFFER
The Existing Notes were issued by the Company on August 19, 1997 in a
transaction exempt from the registration requirements of the Securities Act.
Accordingly, the Existing Notes may not be reoffered, resold or otherwise
transferred in the United States unless so registered or unless an applicable
exemption from the registration and prospectus delivery requirements of the
Securities Act is available.
In connection with the issuance and sale of the Existing Notes, the Company
entered into two separate Registration Rights Agreements, each dated as of
August 14, 1997, which require the Company to (i) file on or before September
18, 1997 (30 days after the date of issuance of the Existing Notes) a
registration statement relating to the Exchange Offer (the "Exchange Offer
Registration Statement"), (ii) use its best efforts to cause the Exchange Offer
Registration Statement to become effective on or before November 17, 1997 (90
days after the date of issuance of the Existing Notes), (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
commence the Exchange Offer and use its best efforts to issue on or prior to 30
business days after the date on which the Exchange Offer Registration Statement
was declared effective by the Commission, New Notes in exchange for all Existing
Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file
the Shelf Registration Statement (as defined herein), use its best efforts to
file the Shelf Registration Statement with the Commission on or prior to 30 days
after such filing obligation arises and to cause the Shelf Registration
Statement to be declared effective by the Commission on or prior to 90 days
after such obligation arises. If (A) the Company fails to file any of the
Registration Statements required by the Registration Rights Agreements on or
before the date specified above for such filing, (B) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (C) the
Company fails to consummate the Exchange Offer within 30
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business days of the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement, or (D) the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Transfer
Restricted Securities (as defined herein) during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (A)
through (D) above a "Registration Default"), then the Company will pay
Liquidated Damages ("Liquidated Damages") to each Holder of Notes, with respect
to the first 90-day period immediately following the occurrence of the first
Registration Default in an amount equal to $0.05 per week per $1,000 principal
amount of Notes held by such Holder. The amount of the Liquidated Damages will
increase by an additional $0.05 per week per $1,000 principal amount of Notes
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of Liquidated Damages of $0.50 per week
per $1,000 principal amount of Notes. All accrued Liquidated Damages will be
paid by the Company to the Global Notes Holder by wire transfer of immediately
available funds or by federal funds check and to Holders of certificated Notes
by wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Existing Notes will be required to make certain representations
to the Company (as described in the Registration Rights Agreements) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreements in order to have their Existing Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
Based on no-action letters issued by the staff of the Commission to third
parties in unrelated transactions, the Company believes that the New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases New Notes from the
Company to resell pursuant to Rule 144A or any other available exemption)
without compliance with the registration and prospectus delivery requirements of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and such holders have no arrangement or
understanding with any person to participate in the distribution of such New
Notes and are not participating in, and do not intend to participate in, the
distribution of such New Notes. The Company has not sought, and does not intend
to seek, its own no-action letter with regard to the Exchange Offer.
Accordingly, there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer. Any holder of
Existing Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes may be deemed to have received
restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Thus, any New Notes acquired by
such holders will not be freely transferable except in compliance with the
Securities Act. See "--Consequences of Failure to Exchange; Resale of New
Notes."
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 pm, New York City time, on
, 1997, unless the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open (such date, as it may be
extended, is referred to herein as the "Expiration Date"). The Expiration Date
will be at least 20 business days after the commencement of the Exchange Offer
in accordance with Rule 14e-1(a) under the Exchange Act. The Company expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open, and thereby delay acceptance for
exchange of any Existing Notes, by giving oral notice (promptly confirmed in
writing) or written notice to the Exchange Agent and by giving written notice of
such extension to the holders thereof or by timely
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public announcement communicated, unless otherwise required by applicable law or
regulation, by making a release through the Dow Jones News Service, in each
case, no later than 9:00 am New York City time, on the next business day after
the previously scheduled Expiration Date. During any such extension, all
Existing Notes previously tendered will remain subject to the Exchange Offer
unless properly withdrawn.
In addition, the Company expressly reserves the right to terminate or amend
the Exchange Offer and not to accept for exchange any Existing Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "--Conditions to the Exchange Offer." If any such
termination or amendment occurs, the Company will notify the Exchange Agent and
will either issue a press release or give oral or written notice to the holders
of the Existing Notes as promptly as practicable.
For purposes of the Exchange Offer, the term "business day" has the meaning
set forth in Rule 14d-1(c)(6) under the Exchange Act.
PROCEDURES FOR TENDERING EXISTING NOTES
The tender to the Company of Existing Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Existing Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Existing Notes being tendered and any required
signature guarantees, to the Exchange Agent at its address set forth below on or
prior to the Expiration Date (or complying with the procedure for book-entry
transfer described below) or (ii) complying with the guaranteed delivery
procedures described below.
THE METHOD OF DELIVERY OF EXISTING NOTES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO INSURE TIMELY DELIVERY. NO EXISTING NOTES OR LETTERS OF TRANSMITTAL
SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Existing Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Existing Notes
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
amount of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a clearing agency, an insured
credit union, a savings association or a commercial bank or trust company having
an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Existing Notes are registered in the name of a person other
than a signer of the Letter of Transmittal, the Existing Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
Any financial institution that is a participant in The Depository Trust
Company's (the "Depositary") Book-Entry Transfer Facility (the "Book-Entry
Transfer Facility") system may make book-entry delivery of the Existing Notes by
causing the Depositary to transfer such Existing Notes into the Exchange Agent's
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account in accordance with the Depository's procedures for such transfer. In
connection with a book-entry transfer, a Letter of Transmittal need not be
transmitted to the Exchange Agent, provided that the book-entry transfer
procedures must be complied with prior to 5:00 pm, New York City time, on the
Expiration Date.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Existing Note to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date a letter,
telegram or facsimile transmission from an Eligible Institution setting forth
the name and address of the tendering holder, the names in which the Existing
Notes are registered and, if possible, the certificate numbers of the Existing
Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date the
Existing Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Existing Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Existing Notes being tendered by the
above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery (a "Notice
of Guaranteed Delivery") which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Existing Notes (or a confirmation of book-entry transfer of
such Existing Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) from an Eligible Institution is received by the Exchange Agent.
Issuances of New Notes in exchange for Existing Notes tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made only
against deposit of the Letter of Transmittal (and any other required documents)
and the tendered Existing Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Existing Notes not properly tendered or to not accept
any particular Existing Notes which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular Existing Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Existing Notes in the Exchange Offer). The interpretation of the terms
and conditions of the Exchange Offer as to any particular Existing Notes either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Existing Notes for exchange must be cured within such reasonable period of time
as the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Existing Notes for exchange, nor
shall any of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Existing Notes, such Existing Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear on the
Existing Notes.
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If the Letter of Transmittal or any Existing Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted.
By tendering, each holder will represent to the Company in the Letter of
Transmittal that, among other things, the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder, that
neither the holder nor any such other person has an arrangement or understanding
with any person to participate in the distribution of such New Notes, that
neither the holder nor any such other person is participating in or intends to
participate in the distribution of such New Notes and that neither the holder
nor any such other person is an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company.
Each broker-dealer that receives New Notes for its own account in exchange
for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
WITHDRAWAL RIGHTS
Tenders of Existing Notes may be withdrawn at any time prior to the close of
business, New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent prior to the Expiration Date at its address
set forth below. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Existing Notes to be withdrawn (the "Depositor"),
(ii) identify the Existing Notes to be withdrawn (including the certificate
number or numbers and principal amount of such Existing Notes), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Existing Notes were tendered or as otherwise described
above (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee under the Indenture
register the transfer of such Existing Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Existing
Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company in its sole discretion, which
determination will be final and binding on all parties. Any Existing Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Existing Notes which have been tendered for
exchange and which are properly withdrawn will be returned to the holder thereof
without cost to such holder as soon as practicable after such withdrawal.
Properly withdrawn Existing Notes may be retendered by following one of the
procedures described under "--Procedures for Tendering Existing Notes" above at
any time on or prior to the Expiration Date.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Existing Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Existing Notes. See "--Conditions to the Exchange Offer" below. For purposes of
the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Existing Notes for exchange when, as and if the Company has given oral
or written notice thereof to the Exchange Agent.
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive a New Note having a principal amount equal to that of the
surrendered Existing Note.
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In all cases, issuance of New Notes for Existing Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Existing Notes or a timely
Book-Entry Confirmation of such Existing Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal and all other required documents. If any tendered Existing
Notes are not accepted for any reason set forth in the terms and conditions of
the Exchange Offer or if Existing Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Existing Notes will be returned without expense to the tendering holder thereof
(or, in the case of Existing Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such non-exchanged Existing
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration of the Exchange Offer.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Existing Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Existing Notes for exchange or the exchange of the
New Notes for such Existing Notes any of the following events shall occur:
(i) any injunction, order or decree shall have been issued by any court
or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer, or
(ii) the Exchange Offer shall violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company, in whole or in part, at any time from
time to time, if it determines in its reasonable discretion that any of the
foregoing events or conditions has occurred or exists or has not been satisfied,
subject to applicable law. The failure by the Company at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
In addition, the Company will not accept for exchange any Existing Notes
tendered, and no New Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act"). In any such event, the Company is required to use
its best efforts to obtain the withdrawal or lifting of any stop order at the
earliest possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this
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Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C> <C>
BY REGISTERED OR CERTIFIED BY HAND: BY OVERNIGHT DELIVERY:
MAIL:
IBJ Schroder Bank & Trust IBJ Schroder Bank & Trust IBJ Schroder Bank & Trust
Company Company Company
P.O. Box 84 One State Street One State Street
Bowling Green Station 11th Floor 11th Floor
New York, NY 10274-0084 New York, NY 10004 New York, NY 10004
Attention: Reorganization Attention: Securities Attention: Securities
Operations Department Processing Window, Subcellar Processing Window, Subcellar
One (SC-1) One (SC-1)
For information, call:
Information and Facsimile
Confirmation: (212) 858-2103
Facsimile: (212) 858-2611
(Eligible Institutions Only)
</TABLE>
DELIVERY OF THE EXISTING NOTES, LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The cash
expenses to be incurred by the Company in connection with the Exchange Offer
will be paid by the Company.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company.
Neither the delivery of this Prospectus nor any exchange made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the respective dates as of which
information is given herein. The Exchange Offer is not being made to (nor will
tenders be accepted from or on behalf of) holders of Existing Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Existing Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Existing Notes not tendered or accepted for exchange
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Existing Notes tendered, or if
tendered Existing Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Existing Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or
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exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the carrying value of the Existing Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of New Notes for Existing Notes. Expenses incurred in
connection with the issuance of the New Notes will be amortized over the term of
the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Existing Notes who do not exchange their Existing Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
Existing Notes not exchanged pursuant to the Exchange Offer will continue to
remain outstanding in accordance with their terms. In general, the Existing
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Existing Notes under the
Securities Act. However, if (i) the Company is not required to file the
Registration Statement or permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy or (ii)
any Holder of Transfer Restricted Securities notifies the Company prior to the
20th day following consummation of the Exchange Offer that (A) it is prohibited
by law or Commission policy from participating in the Exchange Offer or (B) that
it may not resell the New Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and this Prospectus is not appropriate or
available for such resales or (C) that it is a broker-dealer and owns Existing
Notes acquired directly from the Company or an affiliate of the Company, the
Company will file with the Commission a Shelf Registration Statement (the "Shelf
Registration Statement") to cover resales of the Existing Notes by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. The Company will use its
best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Existing Note until (i)
the date on which such Note has been exchanged by a person other than a
broker-dealer for a New Note in the Exchange Offer, (ii) following the exchange
by a broker-dealer in the Exchange Offer of an Existing Note for a New Note, the
date on which such New Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of this Prospectus,
(iii) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Securities Act. The Company will, in the event
that a Shelf Registration Statement is filed, provide to each holder of Existing
Notes copies of the prospectus that is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement for the
Notes has become effective and take certain other actions as are required to
permit unrestricted sales of the Notes.
Based on certain no-action letters issued by the staff of the Commission to
third parties in unrelated transactions, the Company believes that the New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases Notes from the Company
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
38
<PAGE>
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business and such holders have no arrangement or understanding
with any person to participate in the distribution of such New Notes and are not
participating in, and do not intend to participate in, the distribution of such
New Notes. The Company has not sought, and does not intend to seek, its own
no-action letter with regard to the Exchange Offer. Accordingly, there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer. If any holder has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such holder (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. A broker-dealer who holds
Existing Notes that were acquired for its own account as a result of market
making or other trading activities may be deemed to be an "underwriter" within
the meaning of the Securities Act and must, therefore, deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
New Notes. Each such broker-dealer that receives New Notes for its own account
in exchange for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such New Notes. See "Plan of
Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreements and subject to certain
specified limitations therein, to register or qualify the New Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Existing Notes reasonably requests in writing.
Participation in the Exchange Offer is voluntary, and holders of Existing
Notes should carefully consider whether to participate. Holders of the Existing
Notes are urged to consult their financial and tax advisors in making their own
decision on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Existing Notes pursuant to the terms of, this Exchange Offer,
the Company will have fulfilled a covenant contained in the Registration Rights
Agreements. Holders of Existing Notes who do not tender their Existing Notes in
the Exchange Offer will continue to hold such Existing Notes and will be
entitled to all the rights, and limitations applicable thereto, under the
Indenture, except for any such rights under the Registration Rights Agreements
that by their terms terminate or cease to have further effectiveness as a result
of the making of this Exchange Offer. See "--Purpose of the Exchange Offer." All
untendered Existing Notes will continue to be subject to the restrictions on
transfer set forth in the Indenture. To the extent that Existing Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
Existing Notes could be adversely affected.
The Company may in the future seek to acquire untendered Existing Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The terms of any such purchases or offers may differ from
the terms of the Exchange Offer.
39
<PAGE>
THE COMPANY
CapStar Hotel Company owns and manages hotels throughout the United States
and Canada. CapStar currently owns and/or manages 69 Hotels which contain 15,449
rooms. Of the Hotels, the Company owns and manages 41 upscale, full-service
Owned Hotels which contain 10,521 rooms and manages an additional 28 Managed
Hotels owned by third parties which contain 4,928 rooms. The Owned Hotels are
located in markets that have recently experienced strong economic growth,
including Albuquerque, Atlanta, Charlotte, Chicago, Cleveland, Dallas, Denver,
Houston, Los Angeles, Salt Lake City, Seattle and Washington, D.C. The Owned
Hotels include hotels operated under nationally recognized brand names such as
Hilton, Sheraton, Westin, Marriott, Doubletree and Embassy Suites. The Company's
business strategy is to acquire hotel properties with the potential for cash
flow growth and to renovate, reposition and operate each hotel according to a
business plan specifically tailored to the characteristics of the hotel and its
market.
The Company completed its IPO in August 1996. Since the IPO, the Company has
significantly expanded its portfolio by completing the purchase of 29 upscale,
full-service hotels containing 7,005 rooms for an aggregate Acquisition Cost of
$564.5 million. The Company has also entered into contracts to acquire two
additional hotels containing 352 rooms for an Acquisition Cost of $43.4 million.
In addition to the acquisition or proposed acquisition of these hotels, since
the IPO the Company has invested in two joint ventures and, including the
management contracts associated with these joint ventures, the Company has
entered into 11 new long-term management agreements.
As a fully integrated owner and manager, CapStar intends to capitalize on
its management experience and expertise by continuing to make opportunistic
acquisitions of full-service hotels, securing additional management contracts
and improving the operating performance of the Hotels. The Company's senior
management team, with an average of 19 years of experience, has successfully
managed hotels in all segments of the lodging industry, with particular emphasis
on upscale, full-service hotels. Since the inception of the Company's management
business in 1987, the Company has achieved consistent revenue and portfolio
growth, even during periods of relative industry weakness. The Company
attributes its management success to its ability to (i) analyze each hotel as a
unique property and identify those particular cash flow growth opportunities
which each hotel presents, (ii) create and implement marketing plans that
properly position each hotel within its local market and (iii) develop
management programs that emphasize guest service, labor productivity, revenue
yield and cost control. The Company has a distinct management culture that
stresses creativity, loyalty and entrepreneurship and was developed to emphasize
operations from an owner's perspective. This culture is reinforced by the fact
that 33 members of management hold, directly or indirectly, an aggregate of 5.1%
of the Common Stock. See "Principal Stockholders."
The Company believes that the upscale, full-service segment of the lodging
industry is the most attractive segment in which to own, manage and acquire
hotels and further believes that there are currently many attractive
opportunities to acquire properties in this segment of the industry at prices
below replacement cost. The upscale, full-service segment is attractive for
several reasons. First, the Company expects that there will be no significant
increases in the supply of upscale, full-service hotels in the next several
years because the cost of new construction generally does not justify new hotel
development. Second, upscale, full-service hotels appeal to a wide variety of
customers, thus reducing the risk of decreasing demand from any particular
customer group. Additionally, such hotels have particular appeal to business
executives and upscale leisure travelers, customers who are generally less price
sensitive than travelers who use limited-service hotels. Finally, full-service
hotels require a greater depth of management expertise than limited-service
hotels, and the Company believes that its superior management skills provide it
with a significant competitive advantage in their operation.
40
<PAGE>
RECENT DEVELOPMENTS
FINANCING ACTIVITIES
The Company completed its IPO in August 1996 at a price of $18.00 per share,
generating net proceeds of approximately $110.1 million to the Company. In March
1997, the Company completed the Follow-On Offering at a price of $24.75 per
share, generating net proceeds of approximately $134.1 million to the Company.
In July 1997, the Company entered into the $450.0 million 1997 Credit
Facility with Lehman Holdings, an affiliate of Lehman Brothers Inc., and the
other Banks. The 1997 Credit Facility is structured as a $350.0 million, 5-year
revolving credit facility and a $100.0 million, 7-year term loan facility. The
proceeds of the 1997 Credit Facility have been and will be used to fund new
acquisitions, repay outstanding indebtedness and for general corporate purposes.
See "Description of Certain Indebtedness" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
In August 1997, the Company completed the Offering in the aggregate
principal amount of $150.0 million, generating net proceeds of approximately
$145.0 million to the Company. In addition, in August 1997, the Company entered
into the $100.0 million Non-Recourse Facility with Lehman Holdings. The
Non-Recourse Facility has an 18-month term and bears interest at a rate of
between 175 and 270 basis points over 30-day LIBOR, based on certain debt
service ratios. The Non-Recourse Facility is expected to be utilized to fund new
hotel acquisitions in a tax-efficient manner.
RECENT ACQUISITIONS AND INVESTMENTS
At the time of the IPO, the Company owned 12 upscale, full-service hotels,
containing 3,516 rooms. The Company completed its IPO in August 1996. Since the
IPO, the Company has significantly expanded its portfolio by completing the
purchase of 29 upscale, full-service hotels containing 7,005 rooms for an
Acquisition Cost of $564.5 million. The Company has also entered into contracts
to acquire the Additional Acquisitions, including: the 151-room Detroit Metro
Airport Hilton Suites in Detroit, Michigan for an Acquisition Cost of $15.9
million and the 201-room Governor Morris Hotel & Conference Center in
Morristown, New Jersey for an Acquisition Cost of $27.5 million. The Company
expects to improve the operating performance of these newly acquired hotels by
implementing the detailed management plans that have been created for each
property as part of its operating strategy. The Company believes that all of its
acquisitions represent attractive investment opportunities because (i) they are
located in major metropolitan or growing secondary markets and are well-located
within these markets, (ii) they were acquired at an average cost of
approximately $75,000 per room, which represents a significant discount to
replacement cost and (iii) they have attractive current returns and potential
for significant revenue and cash flow growth through implementation of the
Company's operating strategy.
In addition to the acquisition or proposed acquisition of these hotels,
since the IPO the Company has invested in two joint ventures and, including the
management contracts associated with these joint ventures, the Company has
entered into 11 new long-term management agreements. The Company expects to form
additional joint ventures and strategic alliances with institutional and private
hotel owners to invest in future acquisitions and sale and leaseback
transactions, and to secure additional fee management arrangements. See "Special
Note Regarding Forward-Looking Statements."
41
<PAGE>
BUSINESS AND PROPERTIES
The Company seeks to increase shareholder value by (i) implementing its
operating strategy to improve hotel operations and increase cash flow, (ii)
expanding its management business and (iii) continuing to acquire upscale,
full-service hotels at prices below replacement cost in selected markets
throughout the United States and Canada.
OPERATING STRATEGY
The Company's principal operating objectives are to generate higher RevPAR
and to increase net operating income while providing its hotel guests with
high-quality service and value. The Company seeks to achieve these objectives by
creating and executing management plans that are specifically tailored for each
individual Hotel rather than by implementing an operating strategy that is
designed to maintain a uniform corporate image or brand. Management believes
that its custom-tailored business plans are the most effective means of
addressing the needs of a given hotel or market. The Company believes that
skilled management of hotel operations is the most critical element in
maximizing revenue and cash flow in full-service hotels.
The Company's corporate headquarters carries out financing and acquisition
activities and provides services to support as well as monitor the Company's
on-site hotel operating executives. Each of the Company's executive departments,
including Sales and Marketing, Human Resources and Training, Food and Beverage,
Technical Services, Development, and Corporate Finance, is headed by an
executive with significant experience in that area. These departments support
decentralized decision-making by the hotel operating executives by providing
accounting and budgeting services, property management software and other
resources which cannot be economically maintained at the individual Hotels.
Key elements of the Company's management programs include the following:
COMPREHENSIVE BUDGETING AND MONITORING. The Company's operating strategy
begins with an integrated budget planning process that is implemented by
individual on-site managers and monitored by the Company's corporate staff.
Management sets targets for cost and revenue categories at each of the Hotels
based on historical operating performance, planned renovations, operational
efficiencies and local market conditions. On-site managers coordinate with the
central office staff to ensure that such targets are realistic. Through
effective and timely use of its comprehensive financial information and
reporting systems, the Company can monitor actual performance and rapidly adjust
prices, staffing levels and sales efforts to take advantage of changes in the
market and to improve yield.
TARGETED SALES AND MARKETING. The Company employs a systematic approach
toward identifying and targeting segments of demand for each Hotel in order to
maximize market penetration. Executives at the Company's corporate headquarters
and property-based managers divide such segments into smaller subsegments,
typically ten or more for each Hotel, and develop narrowly tailored marketing
plans to suit each such segment. The Company supports each Hotel's local sales
efforts with corporate sales executives who develop new marketing concepts and
monitor and respond to specific market needs and preferences. These executives
are active in implementing on-site marketing programs developed in the central
management office. The Company employs computerized revenue yield management
systems to manage each Hotel's use of the various distribution channels in the
lodging industry. Management control over those channels, which include
franchisor reservation systems and toll-free numbers, travel agent and airline
global distribution systems, corporate travel offices and office managers, and
convention and visitor bureaus, enables the Company to maximize revenue yields
on a day-to-day basis. Sales teams are recruited locally and receive
incentive-based compensation bonuses. All of the Company's sales managers
complete a highly developed sales training program.
42
<PAGE>
STRATEGIC CAPITAL IMPROVEMENTS. The Company plans renovations primarily to
enhance a Hotel's appeal to targeted market segments, thereby attracting new
customers and generating increased revenue and cash flow. For example, at all of
the Owned Hotels, the Company has renovated banquet and meeting spaces and
upgraded guest rooms with computer ports and comfortable work spaces to better
accommodate the needs of business travelers and to increase ADRs. Capital
spending decisions are based on both strategic needs and potential rate of
return on a given capital investment.
SELECTIVE USE OF MULTIPLE BRAND NAMES. The Company believes that the
selection of an appropriate franchise brand is essential in positioning a hotel
optimally within its local market. The Company selects brands based on local
market factors such as local presence of the franchisor, brand recognition,
target demographics and efficiencies offered by franchisors. The Company
believes that its relationships with many major hotel franchisors, established
both as a manager and an owner of hotels operated under their respective
franchises, places the Company in a favorable position when dealing with those
franchisors and allows it to negotiate favorable franchise agreements with
franchisors. The Company believes that its growth through acquisition of
additional hotels will further strengthen its relationship with franchisors.
The following chart summarizes certain information with respect to the
national franchise affiliations of the Hotels and the Additional Acquisitions:
<TABLE>
<CAPTION>
OWNED HOTELS
AND ADDITIONAL ACQUISITIONS MANAGED HOTELS
----------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
NUMBER OF NUMBER NUMBER OF NUMBER
GUEST OF % OF TOTAL GUEST OF
FRANCHISE ROOMS HOTELS ROOMS ROOMS HOTELS
- ---------------------------------------------------- ----------- --------------- ----------- ----------- -------------
Hilton.............................................. 3,476 13 32.0% -- --
Radisson............................................ 1,215 4 11.1 126 1
Sheraton............................................ 1,162 4 10.7 -- --
Holiday Inn......................................... 1,042 6 9.6 744 3
Doubletree.......................................... 933 3 8.6 208 1
Independent......................................... 775 5 7.1 468 5
Embassy Suites...................................... 524 2 4.7 -- --
Westin.............................................. 496 1 4.6 -- --
Marriott............................................ 434 1 4.0 288 1
Holiday Select...................................... 348 1 3.2 -- --
Four Points......................................... 213 1 2.0 596 2
Doubletree Guest Suites............................. 137 1 1.3 -- --
Ramada.............................................. 118 1 1.1 309 2
Crowne Plaza........................................ -- -- -- 730 2
Best Western........................................ -- -- -- 287 2
Comfort Suites...................................... -- -- -- 244 2
Clarion............................................. -- -- -- 226 1
Quality Suites...................................... -- -- -- 177 1
Budget Inn.......................................... -- -- -- 147 1
Residence Inn....................................... -- -- -- 104 1
Quality Inn......................................... -- -- -- 100 1
Days Inn............................................ -- -- -- 96 1
Holiday Inn Express................................. -- -- -- 78 1
-- --
----------- ----- -----
10,873 43 100.0% 4,928 28
-- --
-- --
----------- ----- -----
----------- ----- -----
<CAPTION>
<S> <C>
% OF TOTAL
FRANCHISE ROOMS
- ---------------------------------------------------- -----------
Hilton.............................................. 0.0%
Radisson............................................ 2.6
Sheraton............................................ 0.0
Holiday Inn......................................... 15.1
Doubletree.......................................... 4.2
Independent......................................... 9.5
Embassy Suites...................................... 0.0
Westin.............................................. 0.0
Marriott............................................ 5.8
Holiday Select...................................... 0.0
Four Points......................................... 12.1
Doubletree Guest Suites............................. 0.0
Ramada.............................................. 6.3
Crowne Plaza........................................ 14.8
Best Western........................................ 5.8
Comfort Suites...................................... 5.0
Clarion............................................. 4.6
Quality Suites...................................... 3.6
Budget Inn.......................................... 3.0
Residence Inn....................................... 2.1
Quality Inn......................................... 2.0
Days Inn............................................ 1.9
Holiday Inn Express................................. 1.6
-----
100.0%
-----
-----
</TABLE>
EMPHASIS ON FOOD AND BEVERAGE. Management believes popular food and
beverage ideas are a critical component in the overall success of a hotel. The
Company utilizes its food and beverage operations to create local awareness of
its hotel facilities, to improve the profitability of its hotel operations and
to
43
<PAGE>
enhance customer satisfaction. The Company is committed to competing for patrons
with restaurants and catering establishments by offering high-quality
restaurants that garner positive reviews and strong local and/or national
reputations. The Company has engaged food and beverage experts to develop
several proprietary restaurant concepts. The Owned Hotels contain restaurants
ranging from Michel Richard's highly acclaimed CITRONELLE-Registered Trademark-,
to Morgan's, a Company-designed concept which offers popular, moderately-priced
American cuisine. The Company has also successfully placed national food
franchises such as Starbuck's Coffee-Registered Trademark- and
"TCBY"-Registered Trademark- Yogurt in casual, delicatessen-style restaurants in
several of the Owned Hotels. Popular food concepts have strengthened the
Company's ability to attract business travelers and group meetings and improved
the name recognition of the Owned Hotels.
COMMITMENT TO REINVESTMENT. The Company is committed to reinvesting
adequate capital on an ongoing basis to maintain the quality of the hotels it
owns. Reinvestment is expected to include room and facilities refurbishments,
renovations and furniture and equipment replacements that are designed to
maintain attractive accommodations, updated restaurants and modern equipment.
The Company believes that these investments will enhance the Company's
competitive position.
COMPUTERIZED REPORTING SYSTEMS. The Company employs computerized reporting
systems at each of the Hotels and at its corporate offices to monitor the
financial and operating performance of the Hotels. Management information
services have been fully integrated through the installation of Novell and Unix
networks. Management also utilizes programs like Data Plus-Registered Trademark-
and cc:Mail-Registered Trademark- to facilitate daily communication. Such
programs have enabled the Company to create and implement detailed reporting
systems at each of the Hotels and its corporate headquarters. Corporate
executives utilize information systems that track each Hotel's daily occupancy,
ADR, and revenue from rooms, food and beverage. By having the latest hotel
operating information available at all times, management is better able to
respond to changes in the market of each Hotel.
COMMITMENT TO SERVICE AND VALUE. The Company is dedicated to providing
exceptional service and value to its customers on a consistent basis. The
Company conducts extensive employee training programs to ensure personalized
service at the highest levels. Programs such as "Be A Star" have been created
and implemented by the Company to ensure the efficacy and uniformity of its
employee training. The Company's practice of tracking customer comments, through
the recording of guest comment cards and the direct solicitation (during
check-in and check-out) of guest opinions regarding specific items, allows
investment in services and amenities where they are most effective. The
Company's focus on these areas has enabled it to attract lucrative group
business.
DISTINCT MANAGEMENT CULTURE. The Company has a distinct management culture
that stresses creativity, loyalty and entrepreneurship and was developed to
emphasize operations from an owner's perspective. Management believes in
realistic solutions to problems, and innovation is always encouraged. Incentive
programs and awards have been established to encourage individual property
managers to seek new ways of increasing revenues and operating cash flow. This
creative, entrepreneurial spirit is prevalent from the corporate staff and the
general managers down to the operations staff. Individual general managers work
closely with the corporate staff and they and their employees are rewarded for
achieving target operating and financial goals.
ACQUISITION STRATEGY
The Company intends to continue acquiring upscale, full-service hotels. In
addition to the direct acquisition of hotels, the Company anticipates that it
may make investments in hotels through joint ventures with strategic partners or
through equity contributions, sale and leasebacks or secured loans. The Company
identifies acquisition candidates located in markets with economic, demographic
and supply dynamics favorable to hotel owners and operators. Through its
extensive due diligence process, the Company chooses those acquisition targets
where it believes selective capital improvements and intensive management will
increase the hotel's ability to attract key demand segments, enhance hotel
operations and
44
<PAGE>
increase long-term value. In order to evaluate the relative merits of each
investment opportunity, senior management and individual operations teams create
detailed plans covering all areas of renovation and operation. These plans serve
as the basis for the Company's acquisition decisions and guide subsequent
renovation and operating plans. At the Owned Hotels, the Company has been able
to implement these plans and apply its system of management to create
improvements in revenue and profitability.
The Company will seek to acquire and invest in hotels that meet the
following criteria:
MARKET CRITERIA
ECONOMIC GROWTH. The Company focuses on metropolitan areas that are
approaching, or have already entered, periods of economic growth. Such areas
generally show above average growth in the business community as measured by (i)
job formation rates, (ii) population growth rates, (iii) tourism and convention
activity, (iv) airport traffic volume, (v) local commercial real estate
occupancy, and (vi) retail sales volume. Markets that exhibit these
characteristics typically have strong demand for hotel facilities and services.
SUPPLY CONSTRAINTS. The Company seeks lodging markets with favorable supply
dynamics for hotel owners and operators, including an absence of current new
hotel development and barriers to future development such as zoning constraints,
the need to undergo lengthy local development approval processes and a limited
number of suitable sites. Other factors limiting the supply of new hotels are
the current lack of financing available for new development and the inability to
generate adequate returns on investment to justify new development.
GEOGRAPHIC DIVERSIFICATION. The Company seeks to maintain a geographically
diverse portfolio of hotels to offset the effects of regional economic cycles.
The Hotels are located in 28 states across the nation, the District of Columbia
and Canada, with nine hotels located in California, six in Texas, five in
Washington, D.C., four in Colorado, four in New Jersey, four in Virginia, three
in British Columbia, three in Georgia, three in Maryland, three in New York,
three in Pennsylvania, two in Illinois, two in Louisiana, two in Michigan, two
in Missouri and one hotel each in 15 additional states and one additional
Canadian province.
HOTEL CRITERIA
LOCATION AND MARKET APPEAL. The Company seeks to acquire upscale,
full-service hotels that are situated near both business and leisure centers
which generate a broad base of demand for hotel accommodations and facilities.
These demand generators include (i) business parks, (ii) airports, (iii)
shopping centers and other retail areas, (iv) convention centers, (v) sports
arenas and stadiums, (vi) major highways, (vii) tourist destinations, (viii)
major universities, and (ix) cultural and entertainment centers with nightlife
and restaurants. The confluence of nearby business and leisure centers enables
the Company to attract both weekday business travelers and weekend leisure
guests. Attracting a balanced mix of business, group and leisure guests to the
Hotels helps to maintain stable occupancy rates and high ADRs.
SIZE AND FACILITIES. The Company seeks to acquire well-constructed hotels
that are less than 20 years old, contain 200 to 500 guest rooms and include
accommodations and facilities that are, or are capable of being made, attractive
to key demand segments such as business, group and leisure travelers. These
facilities typically include large, upscale guest rooms, food and beverage
facilities, extensive meeting and banquet space, and amenities such as health
clubs, swimming pools and adequate parking.
POTENTIAL PERFORMANCE IMPROVEMENTS. The Company seeks to acquire hotels
where intensive management and selective capital improvements can increase
revenue and cash flow. These hotels represent opportunities where a systematic
management approach and targeted renovations should result in improvements in
revenue and cash flow.
45
<PAGE>
The Company expects that its relationships throughout the industry and its
acquisition staff located on both coasts of the United States will continue to
provide it with a competitive advantage in identifying, evaluating and
purchasing hotels which meet its acquisition criteria. The Company has a record
of successfully renovating and repositioning hotels, both at the Owned Hotels
and at the Managed Hotels (varying in levels of service, room rates and market
types). As a public company, the Company believes it has improved access to
various debt and equity financing sources to fund acquisitions. In addition, in
consummating acquisitions the Company expects that it will benefit from its
ability to utilize OP Units or Common Stock as an alternative to cash. The
Company currently expects to retain earnings for future acquisitions and the
renovation and maintenance of the hotels it owns.
THE PROPERTIES
The Owned Hotels and the Additional Acquisitions feature, or after the
Company's renovation programs have been completed will feature, comfortable,
modern guest rooms, extensive meeting and convention facilities and full-service
restaurant and catering facilities that attract meeting and convention functions
from groups and associations, upscale business and vacation travelers as well as
banquets and receptions from the local community.
46
<PAGE>
The following table sets forth certain information with respect to the Owned
Hotels and the Additional Acquisitions for the twelve months ended June 30,
1997:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
NUMBER JUNE 30, 1997
OF ------------------------
GUEST YEAR MONTH AVERAGE
HOTEL LOCATION ROOMS BUILT ACQUIRED OCCUPANCY ADR
- ----------------------------------------- -------------------- ----------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
OWNED HOTELS
Orange County Airport Hilton............. Irvine, CA 290 1976 2/96 69.7% $ 81.53
Doubletree Resort(1)..................... Palm Springs, CA 289 1985 7/97 52.2 76.12
Sacramento Hilton........................ Sacramento, CA 326 1983 12/96 72.8 80.46
San Pedro Hilton......................... San Pedro, CA 226 1989 1/97 68.1 65.52
Santa Barbara Inn........................ Santa Barbara, CA 71 1959 12/96 79.5 135.14
Holiday Inn.............................. Colorado Springs, CO 201 1974 12/96 73.8 62.06
Sheraton Hotel........................... Colorado Springs, CO 502 1974 6/95 73.6 69.71
Embassy Suites Denver.................... Englewood, CO 236 1986 12/96 74.0 106.39
Embassy Row Hilton....................... Washington, D.C. 195 1969 12/96 67.4 116.74
Georgetown Inn........................... Washington, D.C. 95 1962 7/97 69.3 138.10
The Latham Hotel......................... Washington, D.C. 143 1981 3/96 73.9 114.35
Westin Atlanta Airport................... Atlanta, GA 496 1982 11/95 75.5 81.58
Jekyll Inn............................... Jekyll Island, GA 265 1971 8/97 47.2 60.00
Radisson Hotel & Suites.................. Chicago, IL 341 1971 7/97 76.5 133.03
Radisson Hotel........................... Schaumburg, IL 202 1979 6/95 75.0 78.41
Doubletree Guest Suites.................. Indianapolis, IN 137 1987 4/97 73.6 83.67
Radisson Plaza........................... Lexington, KY 367 1982 8/97 62.4 76.18
Lafayette Hilton & Towers................ Lafayette, LA 328 1981 12/96 74.4 72.12
Holiday Inn Sports Complex............... Kansas City, MO 163 1975 4/97 75.3 66.00
Sheraton Airport Plaza................... Charlotte, NC 226 1985 2/96 67.8 87.37
Four Points Hotel........................ Cherry Hill, NJ 213 1971 3/97 61.1 72.73
Marriott Hotel........................... Somerset, NJ 434 1978 10/95 73.4 109.50
Holiday Inn.............................. Tinton Falls, NJ 171 1976 4/97 69.6 75.48
Doubletree Hotel......................... Albuquerque, NM 294 1975 1/97 66.7 77.84
Holiday Inn.............................. Cleveland, OH 237 1978 2/96 67.7 72.95
Great Valley Sheraton.................... Frazer, PA 154 1971 3/97 74.2 94.88
Embassy Suites Center City............... Philadelphia, PA 288 1963 8/97 76.3 123.92
Doubletree Hotel......................... Austin, TX 350 1984 8/97 75.0 81.67
Arlington Hilton......................... Arlington, TX 310 1983 4/96 72.1 83.44
Holiday Inn Select....................... Dallas, TX 348 1974 4/97 61.6 61.72
Radisson Hotel........................... Dallas, TX 305 1972 4/97 72.7 61.77
Houston Southwest Hilton................. Houston, TX 293 1979 10/96 60.7 72.54
Westchase Hilton & Towers................ Houston, TX 295 1980 1/97 79.1 92.20
Salt Lake Airport Hilton................. Salt Lake City, UT 287 1980 3/95 75.5 80.78
Arlington Hilton......................... Arlington, VA 209 1990 8/96 75.3 111.76
National Airport Hilton.................. Arlington, VA 386 1974 7/97 56.7 104.71
Bellevue Hilton.......................... Bellevue, WA 180 1979 8/95 80.6 100.75
Holiday Inn Calgary Airport.............. Calgary, Alberta 170 1981 4/97 66.7 51.72
Sheraton Hotel........................... Guildford, B.C. 280 1992 4/97 75.2 70.83
Holiday Inn-Metrotown.................... Vancouver, B.C. 100 1989 8/97 87.8 74.04
Ramada Vancouver Centre.................. Vancouver, B.C. 118 1968 4/97 80.5 71.85
----------- ----- ---------
Subtotal/Weighted Average--Owned Hotels 10,521 70.3% $ 85.33
ADDITIONAL ACQUISITIONS
Detroit Metro Airport Hilton Suites...... Detroit, MI 151 1989 9/97 84.9% $ 80.83
Governor Morris Hotel & Conference Morristown, NJ 201 1962 9/97 61.5 123.59
Center.................................
----------- ----- ---------
Subtotal/Weighted Average--Additional Acquisitions 352 71.5% $ 101.82
----------- ----- ---------
Total/Weighted Average 10,873 70.3% $ 85.88
----------- ----- ---------
----------- ----- ---------
<CAPTION>
HOTEL REVPAR
- ----------------------------------------- -----------
<S> <C>
OWNED HOTELS
Orange County Airport Hilton............. $ 56.83
Doubletree Resort(1)..................... 39.73
Sacramento Hilton........................ 58.57
San Pedro Hilton......................... 44.62
Santa Barbara Inn........................ 107.44
Holiday Inn.............................. 45.80
Sheraton Hotel........................... 51.31
Embassy Suites Denver.................... 78.73
Embassy Row Hilton....................... 78.68
Georgetown Inn........................... 95.70
The Latham Hotel......................... 84.50
Westin Atlanta Airport................... 61.59
Jekyll Inn............................... 28.32
Radisson Hotel & Suites.................. 101.77
Radisson Hotel........................... 58.81
Doubletree Guest Suites.................. 61.58
Radisson Plaza........................... 47.54
Lafayette Hilton & Towers................ 53.66
Holiday Inn Sports Complex............... 49.70
Sheraton Airport Plaza................... 59.24
Four Points Hotel........................ 44.44
Marriott Hotel........................... 80.37
Holiday Inn.............................. 52.53
Doubletree Hotel......................... 51.92
Holiday Inn.............................. 49.39
Great Valley Sheraton.................... 70.40
Embassy Suites Center City............... 94.55
Doubletree Hotel......................... 61.25
Arlington Hilton......................... 60.16
Holiday Inn Select....................... 38.02
Radisson Hotel........................... 44.91
Houston Southwest Hilton................. 44.03
Westchase Hilton & Towers................ 72.93
Salt Lake Airport Hilton................. 60.99
Arlington Hilton......................... 84.16
National Airport Hilton.................. 59.37
Bellevue Hilton.......................... 81.20
Holiday Inn Calgary Airport.............. 34.50
Sheraton Hotel........................... 53.26
Holiday Inn-Metrotown.................... 65.01
Ramada Vancouver Centre.................. 57.84
-----------
Subtotal/Weighted Average--Owned Hote $ 59.99
ADDITIONAL ACQUISITIONS
Detroit Metro Airport Hilton Suites...... $ 68.62
Governor Morris Hotel & Conference 76.01
Center.................................
-----------
Subtotal/Weighted Average--Additional $ 72.80
-----------
Total/Weighted Average $ 60.37
-----------
-----------
</TABLE>
- ------------------------
(1) Operating statistics are presented for the twelve months ended February 28,
1997, the most recent period available.
47
<PAGE>
RECENT ACQUISITIONS
The following is a brief description of the Owned Hotels acquired subsequent
to June 30, 1997:
DOUBLETREE RESORT, PALM SPRINGS, CA. Built in 1985, the 289-room resort at
Desert Princess Country Club is located in Cathedral City, five minutes from the
Palm Springs Airport and one mile from the Date Palm Drive exit off Interstate
10. The hotel offers a wide array of recreational facilities, including a nine-
hole golf course, 10 tennis courts, two swimming pools, a health club, a
racquetball court and workout room, and access to the adjacent 18-hole David
Rainville-designed golf course. The property has 15,000 square feet of meeting
space, including two large ballrooms, two restaurants, the Promenade Cafe and
Princess Restaurant and two entertainment facilities, the Oasis Nightclub and
Vista Lounge. The Company has also obtained management contracts for 45
condominiums, which are contiguous to the hotel, increasing the property's
potential room capacity to 334.
GEORGETOWN INN, WASHINGTON, D.C. Built in 1962, the six story, 95-room
hotel is located in Georgetown, an historic district in central Washington D.C..
The hotel combines a high level of quality found in luxury hotels with a more
personalized level of service not usually found at larger hotels.
JEKYLL INN, JEKYLL ISLAND, GA. Built in 1971, the Jekyll Inn is a 265-room
oceanfront resort hotel on Jekyll Island off the coast of Georgia. The hotel has
an advantageous location near a 27-hole public golf course and is in close
proximity to the recently renovated and expanded convention center. The hotel
has more guest rooms and more extensive meeting space than any other hotel on
Jekyll Island or the nearby Sea Island and St. Simons.
RADISSON HOTEL & SUITES, CHICAGO, IL. Built in 1971, the 341-room hotel is
located in downtown Chicago, a half-block off North Michigan Avenue and the
city's renowned "Magnificent Mile" shopping area. The hotel is a 40-story,
mixed-use hotel and office tower, comprising its guest quarters, 93,000 square
feet of office space and a 170-space parking facility. The hotel's rooftop pool
and its oversized guest rooms and suites offer spectacular views of the city and
Lake Michigan. The hotel's meeting and banquet facilities total in excess of
18,000 square feet, including the recently completed RadiCenter 7, a 5,500
square foot conference facility that is ideal for small to mid-size groups and
one of the most advanced conference sites in the Midwest.
RADISSON PLAZA, LEXINGTON, KY. Built in 1982, the Radisson Plaza is a major
mixed-use development located in downtown Lexington directly across from and
connected by skywalk to Rupp Arena, the Lexington Convention Center and Festival
Market Place. The development consists of the 22-story, 367-room Radisson Hotel
and the Vine Center, which consists of a 17-story office tower containing
242,528 square feet and 38 privately owned condominium units on floors 18
through 22.
EMBASSY SUITES CENTER CITY, PHILADELPHIA, PA. Built in 1963, the 288-unit
Embassy Suites Center City has a premier location in Center City Philadelphia at
1776 Ben Franklin Parkway in the heart of the Market Street West corridor,
adjacent to Logan Circle. The property has prominent visibility along the
Parkway and is located in the city's top Class A office corridor, adjacent to
the Bell Atlantic Tower, one of the preeminent office towers in the Philadelphia
skyline. The hotel is conveniently located within a nine block radius of several
attractions including the recently built 622,000 square foot Philadelphia
Convention Center, the Philadelphia Museum of Art, City Hall, the Franklin
Institute and the Rodin Museum and Academy of Natural Sciences.
DOUBLETREE HOTEL, AUSTIN, TX. Built in 1984, the Doubletree Hotel is a
350-room, full-service hotel located in the city's high tech growth corridor
along Interstate 35. Austin, the capital of the State of Texas and home to the
nation's third largest university, has added to its economy more than 400 high
tech manufacturing and software companies over the past ten years. The
Doubletree is the premier commercial
48
<PAGE>
hotel adjacent to Austin's "golden triangle" high tech area. The property enjoys
excellent visibility and access via I-35, which connects Austin to Dallas to the
north and San Antonio to the south.
NATIONAL AIRPORT HILTON, ARLINGTON, VA. Built in 1974, the 386-room hotel
is located one-half mile from National Airport in Crystal City, one of the
largest and most successful mixed-use developments in the United States. The
hotel has excellent accessibility by car, taxi and Metro, and generates demand
from many parts of the metropolitan D.C. area.
HOLIDAY INN-METROTOWN, VANCOUVER, B.C. Built in 1989, the 100-room hotel is
located adjacent to the skytrain station and physically integrated into the
Metrotown Mall, the largest shopping mall in British Columbia. The hotel
features a jogging track, outdoor pool and tennis courts as well as 3,805 square
feet of meeting space and two restaurants.
THE ADDITIONAL ACQUISITIONS
DETROIT METRO AIRPORT HILTON SUITES, DETROIT, MI. Built in 1989, the hotel
contains 151 suites and is located one-quarter mile north of Detroit Metro
Airport. The hotel has 3,281 square feet of meeting space, an indoor and outdoor
swimming pool, exercise facilities and a gameroom, business center and gift
shop.
GOVERNOR MORRIS HOTEL & CONFERENCE CENTER, MORRISTOWN, NJ. Built in 1962,
the 201-room hotel is located 25 minutes from Newark International Airport and
45 minutes from Manhattan. The hotel has 18,503 square feet of meeting and
banquet space, four food and beverage outlets, a fitness center, a business
center, an outdoor swimming pool and a paddle tennis court.
THE MANAGED HOTELS
The Company operates 28 Managed Hotels owned by third parties containing
4,928 rooms. Of the Managed Hotels, 21 are full-service properties, and seven
are limited-service properties. Of the Managed Hotels, 23 are operated under
nationally-recognized brand names and five are independent properties. The brand
names of the Managed Hotels include Crowne Plaza Four Points, Clarion, Holiday
Inn and Best Western. See "Certain Relationships and Related Transactions" and
"Risk Factors--Potential Conflicts of Interest."
The Management Agreements have remaining terms ranging from one month to
nine years. Substantially all of the Management Agreements permit the owners of
the Managed Hotels to terminate such agreements prior to the stated expiration
dates if the applicable hotel is sold and several of the Management Agreements
permit the owners of the Managed Hotels to terminate such agreements prior to
the stated expiration date without cause or by reason of the failure of the
applicable hotel to obtain specified levels of performance. For the twelve
months ended December 31, 1996 and the six months ended June 30, 1997, the
Company's pro forma revenue from Management Agreements was $2.9 million and $2.1
million, respectively, constituting 0.8% and 1.1%, respectively, of the
Company's total pro forma revenue for such periods. No single Management
Agreement (or group of Management Agreements for hotels under common ownership
or control) currently accounts for more than 0.5% of the total revenue of the
Company on a pro forma basis. See "Risk Factors--Termination of Management
Agreements."
The Company intends to continue its efforts to add to its portfolio of
Managed Hotels by aggressively pursuing new management agreements. The Company
believes that, in addition to adding to the Company's revenues and profits, the
business of operating hotels for third parties benefits the Company by (i)
increasing the Company's operating experience in, and knowledge of, hotel
markets throughout the United States, (ii) broadening the Company's
relationships with hotel owners and thus enhancing the Company's opportunities
to identify, evaluate and negotiate hotel acquisitions prior to the active
marketing of a hotel for sale, and (iii) improving the Company's ability to
attract, train and retain highly-qualified operating employees by offering them
the opportunity to work in a broader variety of hotels and markets.
49
<PAGE>
COMPETITION
The Company competes primarily in the upscale and mid-priced sectors of the
full-service segment of the lodging industry. In each geographic market in which
the Hotels are located, there are other full- and limited-service hotels that
compete with the Hotels. In addition, the Company's food and beverage operations
compete with local free-standing restaurants and bars. Competition in the U.S.
lodging industry is based generally on convenience of location, brand
affiliation, price, range of services and guest amenities offered and quality of
customer service and overall product.
EMPLOYEES
As of June 30, 1997, the Company employed approximately 7,700 persons, of
whom approximately 6,500 were compensated on an hourly basis. Approximately 70
employees work at the corporate headquarters.
Employees at ten of the Hotels are represented by labor unions. Management
believes that labor relations with its employees are good.
TRADEMARKS
The Company employs a flexible branding strategy based on a particular
Hotel's market environment and the Hotel's unique characteristics. Accordingly,
the Company uses various national trade names pursuant to licensing arrangements
with national franchisors.
DOUBLETREE-Registered Trademark-, EMBASSY SUITES-Registered Trademark-,
HILTON-Registered Trademark- HOLIDAY INN-Registered Trademark-,
MARRIOTT-Registered Trademark-, RADISSON-Registered Trademark-,
RAMADA-Registered Trademark-, SHERATON-Registered Trademark- AND
WESTIN-Registered Trademark- ARE REGISTERED TRADEMARKS OF THIRD PARTIES, NONE OF
WHICH SHALL BE DEEMED AN ISSUER OR UNDERWRITER OF THE NOTES OFFERED HEREBY NOR
HAVE ANY OF SUCH FRANCHISORS ENDORSED OR APPROVED THE OFFERING. SUCH FRANCHISORS
HAVE NOT ASSUMED AND SHALL NOT HAVE ANY LIABILITY OR RESPONSIBILITY FOR ANY
FINANCIAL STATEMENTS OR OTHER FINANCIAL INFORMATION CONTAINED HEREIN OR ANY
PROSPECTUS OR ANY WRITTEN OR ORAL COMMUNICATIONS REGARDING THE SUBJECT MATTER
HEREOF. A GRANT OF ANY SUCH FRANCHISE LICENSE FOR CERTAIN OF THE COMPANY'S
HOTELS IS NOT INTENDED AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR
IMPLIED APPROVAL OR ENDORSEMENT BY ANY OF SUCH FRANCHISORS (OR ANY OF THEIR
AFFILIATES, SUBSIDIARIES OR DIVISIONS) OF THE COMPANY OR THE NOTES OFFERED
HEREBY.
LEGAL PROCEEDINGS
The Company is involved in various lawsuits arising in the normal course of
business. The Company believes that the ultimate outcome of these lawsuits will
not have a material adverse effect on the Company.
GOVERNMENTAL REGULATION
A number of states regulate the licensing of hotels and restaurants,
including liquor license grants, by requiring registration, disclosure
statements and compliance with specific standards of conduct. The Company
believes that it is substantially in compliance with these requirements.
Managers of hotels are also subject to laws governing their relationship with
hotel employees, including minimum wage requirements, overtime, working
conditions and work permit requirements. Compliance with, or changes in, these
laws could reduce the revenue and profitability of the Owned Hotels and could
otherwise adversely affect the Company's operations.
50
<PAGE>
Under the ADA, all public accommodations are required to meet certain
requirements related to access and use by disabled persons. These requirements
became effective in 1992. Although significant amounts have been and continue to
be invested in ADA required upgrades to the Owned Hotels, a determination that
the Company is not in compliance with the ADA could result in a judicial order
requiring compliance, imposition of fines or an award of damages to private
litigants. The Company is likely to incur additional costs of complying with the
ADA; however, such costs are not expected to have a material adverse effect on
the Company's results of operations or financial condition. See "Risk Factors--
Governmental Regulation."
For a description of certain environmental regulations to which the Company
is subject, see "Risk Factors--Environmental Risks."
51
<PAGE>
THE OPERATING PARTNERSHIPS
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE
PROVISIONS OF THE LIMITED PARTNERSHIP AGREEMENTS OF CAPSTAR MANAGEMENT AND
CAPSTAR MANAGEMENT COMPANY II, L.P. ("CAPSTAR MANAGEMENT II"), COPIES OF WHICH
MAY BE OBTAINED FROM THE COMPANY.
Substantially all of the Company's assets are currently held indirectly by
and operated through CapStar Management and CapStar Management II, the Company's
subsidiary operating partnerships. The Company is the sole general partner of
CapStar Management, and the Company, CapStar LP Corporation, a wholly owned
subsidiary of the Company ("CapStar LP"), and an affiliate of Highgate Hotels
Inc. are the sole limited partners of CapStar Management. CapStar General Corp.,
a wholly-owned subsidiary of the Company, is the general partner of CapStar
Management II, and CapStar Limited Corp., another wholly-owned subsidiary of the
Company, and affiliates of the Highgate Hotels Inc. are the sole limited
partners of CapStar Management II. The partnership agreements of CapStar
Management and CapStar Management II (in each case, an "Operating Partnership")
give the general partner full control over the business and affairs of the
Operating Partnerships. The general partner is also given the right, in
connection with the contribution of property to such Operating Partnerships or
otherwise, to issue additional partnership interests in such Operating
Partnerships in one or more classes or series, with such designations,
preferences and participating or other special rights and powers (including
rights and powers senior to those of the existing partners) as the general
partner may determine.
The partnership agreements of the Operating Partnerships provide for two
classes of partnership interests ("OP Units"), common OP Units and preferred OP
Units, and the partners of the Operating Partnerships own the following
aggregate numbers of such OP Units: (i) the Company and its wholly owned
subsidiaries--a number of common OP Units equal to the number of issued and
outstanding shares of Common Stock; and (ii) affiliates of Highgate Hotels
Inc.--350,899 common OP Units and 392,157 preferred OP Units. The preferred OP
Units pay a 6.5% cumulative annual preferred return, compounded quarterly to the
extent not paid on a current basis, and are entitled to a liquidation preference
of $25.50 per preferred OP Unit. All net income and capital proceeds earned by
the Operating Partnerships, after payment of the annual preferred return and, if
applicable, the liquidation preference, will be shared by the holders of the
common OP Units in proportion to the number of common OP Units in the relevant
operating partnership owned by each such holder.
Each OP Unit held by an affiliate of Highgate Hotels Inc. is convertible by
the holder thereof for one share of Common Stock (or, at the Company's option,
for cash in an amount equal to the market value of a share of Common Stock). In
addition, the preferred OP Units will be redeemable by CapStar Management at a
price of $25.50 per preferred OP Unit (or, at the Company's option, for a number
of shares of Common Stock having a value equal to such redemption price) at any
time after April 1, 2000 or by the holders of the OP Units at a price of $25.50
per preferred OP Unit (in cash or, at the holder's option, for a number of
shares of Common Stock having a value equal to the redemption price) at any time
after April 1, 2004.
52
<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to the
Company's directors and executive officers as of the date of this Prospectus.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Paul W. Whetsell..................................... 47 President, Chief Executive Officer and Chairman of
the Board
David E. McCaslin.................................... 40 Chief Operating Officer and Director
John Emery........................................... 33 Chief Financial Officer
John E. Plunket...................................... 41 Executive Vice President, Finance and Development
Michael T. George.................................... 38 Senior Vice President, Operations
D. Scott Livchak..................................... 43 Senior Vice President, Operations
Robert Gauthier...................................... 43 Senior Vice President, Operations
Daniel L. Doctoroff.................................. 39 Director
Bradford E. Bernstein................................ 30 Director
William S. Janes..................................... 43 Director
Joseph McCarthy...................................... 65 Director
Edward L. Cohen...................................... 51 Director
Edwin T. Burton, III................................. 54 Director
Edward P. Dowd....................................... 54 Director
Mahmood Khimji....................................... 37 Director
</TABLE>
PAUL W. WHETSELL has served as President and Chief Executive Officer of the
Company since its founding in 1987. From 1981 to 1986, Mr. Whetsell served as
Vice President of Development for Lincoln Hotels in Dallas, Texas. Prior to
that, from 1973 to 1981, Mr. Whetsell worked for Quality Inns in various
capacities in its franchise division, culminating in Vice President of
Franchise.
DAVID E. MCCASLIN has served as Chief Operating Officer of the Company since
1994. Mr. McCaslin joined the Company in 1987 as a General Manager and was named
Vice President of Operations in 1988. From 1985 to 1987, Mr. McCaslin served as
General Manager for Lincoln Hotels. Prior to that, from 1979 to 1985, he worked
for Westin Hotels in various capacities, including Assistant General Manager,
Rooms Division Manager and Food & Beverage Manager.
JOHN EMERY has served as Chief Financial Officer of the Company since June
1997. From March 1996 to June 1997, he served as Treasurer and Secretary of the
Company and from September 1995 to March 1996 he served as Director of Finance
of the Company. Prior to that, from January 1987 to September 1995, he worked
for Deloitte & Touche LLP in various capacities, culminating with Senior Manager
for the hotel and real estate industries.
JOHN E. PLUNKET has served as Executive Vice President, Finance and
Development since November 1993. From September 1991 to October 1993, Mr.
Plunket served as Vice President and Principal Broker for CIG International, an
investment and hotel asset management company. From February 1988 to August
1991, Mr. Plunket served as Managing Director of Cassidy & Pinkard Inc., a
commercial real estate services company. From 1985 to 1987, Mr. Plunket served
as Senior Vice President for Oxford Development Corporation. Prior to that, from
December 1979 to April 1985, Mr. Plunket worked for Marriott Corporation in
various capacities, culminating in Director of Project Finance.
MICHAEL T. GEORGE has served as Senior Vice President, Operations since
1995. From 1990 to 1995, Mr. George served as Vice President of Operations and
ultimately as Chief Operating Officer for Devon Hotels Ltd. in Montreal. From
1989 to 1990, Mr. George served as a General Manager and Vice President for
Radisson Hotels International, Inc. Prior to that, from 1986 to 1989, Mr. George
served in various capacities with Radisson Hotels, Hilton Hotels and Sheraton
Hotels.
53
<PAGE>
D. SCOTT LIVCHAK has served as Senior Vice President, Operations since 1990.
From 1985 to 1989 Mr. Livchak served as General Manager for The Adams Mark Hotel
in Philadelphia, owned by HBE Corporation. From 1977 to 1985, Mr. Livchak served
in various capacities with Sheraton Corporation in New York, Atlanta, Ohio and
Florida.
ROBERT GAUTHIER has served as Senior Vice President, Operations since 1996.
From 1993 to 1996, he served as Vice President, Operations and General Manager
of various CapStar hotels. Prior to that, from 1987 to 1993, Mr. Gauthier served
as Area Operations Manager and General Manager for Drexel Burnham Lambert
Realty, Inc. Mr. Gauthier also serves as a Director of the ITT Sheraton
Marketing Board.
DANIEL L. DOCTOROFF has been Managing Director of Oak Hill Partners, Inc.
(Acadia Partners' investment advisor) and its predecessor since August 1987;
Vice President and Director of Acadia Partners MGP, Inc. since March 1992; and a
Managing Partner of Insurance Partners Advisors, L.P. since February 1994. All
of such entities are affiliates of Acadia Partners. Mr. Doctoroff is also a
Director of Bell & Howell Holdings Company, Kemper Corporation, Specialty Foods
Corporation and since March 1992 a Vice President of Keystone, Inc.
BRADFORD E. BERNSTEIN has served as a Principal and Vice President of Oak
Hill Partners, Inc. (Acadia Partners' investment advisor) since 1992. From 1991
until 1992, Mr. Bernstein worked at Patricof & Co. Ventures. Prior to that, from
1989 to 1991, he worked at Merrill, Lynch & Co. Mr. Bernstein serves as a
director of Pinnacle Brands, Inc., Payroll Transfers, Inc. and Caliber Collision
Centers, Inc.
WILLIAM S. JANES has served as a Principal and Director of RMB Realty, Inc.
since 1990. Prior to that, from 1984 to 1989, Mr. Janes served as Regional
General Partner of Lincoln Property Company. Mr. Janes serves as a Director of
Paragon Group, Inc., a publicly-traded real estate investment trust, as well as
Brazos Asset Management, Brazos Fund, Paragon Property Services, Inc. and Carr
Real Estate Services. Mr. Janes maintains professional affiliations as a member
of the National Association of Real Estate Investment Trusts, the Society of
Industrial and Office Realtors and the Urban Land Institute.
JOSEPH MCCARTHY has been retired since 1994. From 1993 to 1994 he has served
as Chairman of the Board for Motel 6. From 1985 to 1993, he served as President
and Chief Executive Officer for Motel 6. From 1980 to 1985, he served as
President and Chief Executive Officer of Lincoln Hotels. From 1976 to 1980, he
served as President and Chief Executive Officer of Quality Inns International.
Prior to that, from 1971 to 1976, he served as Senior Vice President of the
Sheraton Corporation.
EDWARD L. COHEN has served as an Executive Officer of Lerner Corporation, a
real estate management and leasing company located in Bethesda, Maryland, since
1985. Mr. Cohen is also a Principal of Lerner Enterprises, a real estate
development and investment company. Prior to his participation with the Lerner
organization, he was a lawyer in private practice in Washington, D.C.
EDWIN T. BURTON, III has served as President of Windermere Consulting
Company since April 1995 and Trustee of the Commonwealth of Virginia Retirement
System since March 1994. From 1994 to April 1995, he served as Managing Director
and a member of the Board of Interstate Johnson Lane, Inc. Prior to that, from
1987 to 1993, he was President of Rothschild Financial Services, Inc. Mr. Burton
is a Visiting Professor of Economics at the University of Virginia in
Charlotesville, Virginia.
EDWARD P. DOWD has served as Senior Vice President of John Hancock Real
Estate Investment Group of John Hancock Financial Services since 1992. Prior to
that, from 1970 to 1992, Mr. Dowd served in various capacities at John Hancock
Realty. Mr. Dowd serves as Director of John Hancock Realty Investors, Inc., John
Hancock Realty Services Inc. and Maritime Life Assurance Co.
MAHMOOD KHIMJI has served as Senior Vice President of Highgate Hotels, Inc.,
an owner and operator of hotel and commercial properties throughout North
America, since 1988. Prior to that, from 1986 to
54
<PAGE>
1988, Mr. Khimji was an associate at the law firm of Paul, Weiss, Rifkind,
Wharton & Garrison. Mr. Khimji serves as a Director of the Texas Hotel/Motel
Association.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company during
1996 with respect to the Chief Executive Officer and the four most highly
compensated executive officers (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ---------------------------------------------- ---------- --------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Paul W. Whetsell.............................. $ 215,081 $ -- $ 2,312 150,000 --
President, Chief Executive Officer and
Chairman of the Board
David E. McCaslin............................. 179,748 30,000 2,312 87,500 --
Chief Operating Officer and Director
John E. Plunket............................... 185,691 10,000 -- 73,129 --
Executive Vice President, Finance and
Development
William M. Karnes............................. 154,549 30,000 -- 50,000 --
Senior Executive Vice President
Michael T. George............................. 132,000 13,000 20,500 18,282 --
Senior Vice President, Operations
</TABLE>
STOCK OPTION GRANTS
The following table sets forth certain information with respect to the
options granted to the Named Executive Officers during 1996.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
POTENTIAL
<S> <C> <C> <C> <C> <C> <C>
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM(2)
OPTIONS 1996 FISCAL OR EXPIRATION --------------------------
NAME GRANTED(1) YEAR BASE PRICE DATE 5% 10%
- --------------------------------- ------------ --------------- ------------- ------------------ ------------ ------------
Paul W. Whetsell................. 150,000 20.1% $ 18 August 20, 2006 $ 1,698,015 $ 4,303,105
David E. McCaslin................ 87,500 11.7 18 August 20, 2006 990,509 2,510,144
John E. Plunket.................. 73,129 9.8 18 August 20, 2006 827,828 2,097,878
William M. Karnes................ 50,000 6.7 18 August 20, 2006 566,005 1,434,368
Michael T. George................ 18,282 2.5 18 August 20, 2006 206,954 524,462
</TABLE>
- ------------------------
(1) All of these options vest in equal installments over three years except
10,000 of the options granted to Mr. Plunket which vested immediately upon
their grant.
(2) In accordance with rules of the Commission, these amounts are the
hypothetical gains or "option spreads" that would exist for the respective
options based on assumed rates of annual compound stock price appreciation
of 5% and 10% from the date the options were granted over the full option
term.
55
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company ("Independent Directors") are
paid an annual fee of $12,000. In addition, each Independent Director is paid
$750 for attendance at each meeting of the Board and $500 for attendance at each
meeting of a committee of the Board of which such director is a member.
Directors who are employees of the Company do not receive any fees for their
service on the Board or a committee thereof. The Company reimburses directors
for their out-of-pocket expenses in connection with their service on the Board.
In connection with the IPO, each Independent Director was granted options to
purchase 5,000 shares of Common Stock at the IPO price of $18.00 per share. On
the date of the annual meeting of the Company's shareholders beginning with the
annual meeting held in 1997, each Independent Director will be granted options
to purchase 5,000 shares of Common Stock at the then current market price. All
options granted to directors will vest in equal installments over a period of
three years from the date of grant. Any Independent Director who ceases to be a
director will forfeit the right to receive any options not previously vested or
granted.
COMMITTEES
The Board currently has an Audit Committee, a Compensation Committee and an
Investment Committee. The Audit Committee consists of three Independent
Directors. The Audit Committee makes recommendations concerning the engagement
of independent public accountants, reviews with the independent public
accountants the plans and results of the audit engagement, approves professional
services provided by the independent public accountants, review the independence
of the independent public accountants, considers the range of audit and
non-audit fees and reviews the adequacy of the Company's internal accounting
controls. The Compensation Committee consists of three Independent Directors and
determines compensation of the Company's executive officers and administers the
Company's Equity Incentive Plan (as defined below). The Investment Committee
consists of the Chairman of the Board and three Independent Directors, and
reviews and approves investments proposed to be made by the Company.
COMPENSATION PLANS
MANAGEMENT BONUS PLAN. The Company has established a management bonus plan
(the "Management Bonus Plan") under which certain officers and employees of the
Company, including the Named Executive Officers, are eligible to receive cash
bonuses based upon the achievement of predetermined corporate and individual
goals. Bonuses awarded under the Management Bonus Plan may not exceed 66% of the
officer or employee's annual base salary. The Management Bonus Plan is
administered by the Compensation Committee.
STOCK PURCHASE PLAN. Each employee of the Company who has completed 90 days
employment and is customarily employed at least 20 hours or more per week by the
Company or an affiliate (as defined in the Stock Purchase Plan), other than an
employee who owns beneficially 5% or more of the outstanding Common Stock, is
eligible to participate in the Company's stock purchase plan (the "Stock
Purchase Plan"). Under the Stock Purchase Plan, participating employees may
elect to authorize the Company to withhold a minimum of $200 per quarter and a
maximum of 8% or $25,000 (whichever is less) of the participating employee's
base pay, which amounts will be used to purchase Common Stock from the Company
on a monthly basis. The purchase price of Common Stock will equal a designated
percentage from 85% to 100% of the closing sales price for Common Stock as
reported on the Composite Transactions Tape of the NYSE (except as described
below) on the first trading day of the month or on the last trading day of the
month, whichever is less. The designated percentage will be established annually
by the Compensation Committee which is responsible for the administration of the
Stock Purchase Plan.
Common Stock purchased under the Stock Purchase Plan is held in custodial
accounts until sold or distributed at the participant's request. The custodian
may charge a fee for the execution of any such sale
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or for the delivery of share certificates. The participant may not elect to
purchase stock under the Stock Purchase Plan for three months after a withdrawal
or sale of Common Stock under the Stock Purchase Plan. Shares purchased under
the Stock Purchase Plan may not be sold for six months after their purchase. Any
cash dividends paid on Common Stock held in a participant's account will be
reinvested in additional Common Stock (at 100% of fair market value). Non-cash
distributions on Common Stock held in a participant's account will be
distributed to the participant.
The Company has reserved 500,000 shares of Common Stock for issuance under
the Stock Purchase Plan. Such shares may be from authorized and unissued shares,
treasury shares or a combination thereof. The Stock Purchase Plan will remain in
effect until terminated by the Board, or until all shares authorized for
issuance thereunder have been issued. The Stock Purchase Plan may be amended
from time to time by the Board. No amendment will increase the aggregate number
of shares of Common Stock that may be issued and sold under the Stock Purchase
Plan (except for authorizations pursuant to the anti-dilution provisions of the
Stock Purchase Plan) without further approval by the Company's shareholders.
EQUITY INCENTIVE PLAN. The Company's Equity Incentive Plan (the "Equity
Incentive Plan") is designed to attract and retain qualified directors, officers
and other key employees of the Company and its affiliates (as defined in the
Equity Incentive Plan). The Equity Incentive Plan authorizes the grant of
options to purchase shares of Common Stock ("Options"), stock appreciation
rights ("Appreciation Rights") and restricted shares ("Restricted Shares"). The
Compensation Committee administers the Equity Incentive Plan and determines to
whom Options, Appreciation Rights and Restricted Shares are to be granted and
the terms and conditions thereof, including the number of shares relating to
each award and the period of exercisability or restricted period, as the case
may be. Notwithstanding the foregoing, the Board may resolve to administer the
Equity Incentive Plan itself, in which case the term Compensation Committee
shall be deemed to mean the Board.
Subject to adjustment as provided in the Equity Incentive Plan, the number
of shares of Common Stock that may be issued or transferred and covered by
outstanding awards granted under the Equity Incentive Plan may not in the
aggregate exceed 1,740,000 shares. To the extent that an award is canceled,
terminates, expires or lapses for any reason without the payment of
consideration, any shares of Common Stock subject to the award will again be
available for the grant of awards. Common Stock subject to Appreciation Rights
that are settled in cash will thereafter be available for the grant of awards.
Common Stock issued under the Equity Incentive Plan may be from authorized and
unissued shares, treasury shares or a combination thereof. Awards may be granted
to directors, officers or other key employees of the Company or an affiliate, as
determined by the Compensation Committee.
In connection with the IPO, the Company granted certain executive officers
and other members of management options to purchase up to 745,254 shares of
Common Stock at the IPO price of $18.00 per share. Certain of these options were
exercisable immediately upon their grant, while the remaining options become
exercisable in three annual installments.
The Compensation Committee may grant Options at a per share price equal to,
greater than or less than fair market value of the Common Stock on the date of
grant. The exercisability of Options may be conditioned on continued service
and/or the achievement of specified performance objectives ("Management
Objectives"). Subject to adjustment as provided in the Equity Incentive Plan, no
participant shall be granted awards relating to more than 200,000 shares during
any calendar year. The Compensation Committee shall determine the method of
exercising options and the form of payment, which may include, without
limitation, cash, shares of Common Stock that are already owned by the optionee,
other property or "cashless exercise" arrangements. Any grant may provide for
automatic "reload option rights", except that the term of any reload options
shall not extend beyond the term of the Options originally exercised. The
Compensation Committee may specify at the time Options are granted that shares
of Common Stock will not be accepted in payment of the option price until they
have been owned by the optionee for a specified period; however, the Equity
Incentive Plan does not require any such holding period. Options
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granted under the Equity Incentive Plan may be intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Code, or Options that
are not intended to so qualify. No incentive stock option may be exercised more
than ten years from the date of grant. Each grant must specify the period, if
any, of continuous service with the Company or any affiliate that is necessary
before the Options will become exercisable and may provide for the earlier
exercise of the Options in the event of a change of control of the Company or
other event. More than one grant may be made to the same optionee.
Appreciation Rights granted under the Equity Incentive Plan may be either
free-standing Appreciation Rights or Appreciation Rights that are granted in
tandem with Options. An Appreciation Right represents the right to receive from
the Company the difference (the "Spread"), or a percentage thereof not in excess
of 100%, between the base price per share of Common Stock in the case of a
free-standing Appreciation Right, or the option price of the related Option
Right in the case of a tandem Appreciation Right, and the market value of the
Common Stock on the date of exercise of the Appreciation Right. Tandem
Appreciation Rights may only be exercised at a time when the related Option
Right is exercisable and the Spread is positive, and the exercise of a tandem
Appreciation Right requires the surrender of the related Option Right for
cancellation. A free-standing Appreciation Right must specify a base price,
which may be equal to, greater than or less than the fair market value of a
share of Common Stock on the date of grant, must specify the period of
continuous service that is necessary before the Appreciation Right becomes
exercisable (except that it may provide for its earlier exercise in the event of
a change in control of the Company or other event) and, in the case of an
Appreciation Right awarded in tandem with an incentive stock option, may not be
exercised more than ten years from the date of grant. Any grant of Appreciation
Rights may specify that the amount payable by the Company upon exercise may be
paid in cash, Common Stock or a combination thereof. In addition, any grant may
specify that an Appreciation Right may be exercised only in the event of a
change in control of the Company. The Compensation Committee may condition the
award of Appreciation Rights on continued service and/or the achievement of one
or more Management Objectives.
The Compensation Committee may award Restricted Shares to participants in
such amounts and subject to such terms and conditions as may be determined by
the Compensation Committee. The participant may be entitled to voting, dividend
and other ownership rights prior to the vesting of the shares. The Compensation
Committee may condition the vesting of an award on the achievement of specified
Management Objectives.
No Options, Appreciation Rights or other awards are transferable by a
participant except by will or the laws of descent and distribution. Options and
Appreciation Rights may not be exercised during a participant's lifetime except
by the participant or, in the event of the participant's incapacity, by the
participant's guardian or legal representative acting in a fiduciary capacity on
behalf of the participant under state law and court supervision.
In the event of certain stock dividends, stock splits, combinations of
shares, recapitalizations, mergers, consolidations, spin-offs, reorganizations,
liquidations, issuances of rights or warrants, and similar transactions or
events, the Compensation Committee, in its sole discretion, may adjust (i) the
maximum number of shares that may be issued or transferred under the Equity
Incentive Plan, (ii) the number of shares covered by outstanding awards, (iii)
the exercise price of outstanding options and (iv) base prices of outstanding
SARs. The Compensation Committee may also, as it determines to be appropriate in
order to reflect any such transaction or event, make or provide for such
adjustments in the number of shares that may be issued or transferred and
covered by outstanding awards granted under the Equity Incentive Plan and the
number of shares permitted to be covered by Options and Appreciation Rights
granted to any one participant during any calendar year.
In connection with its administration of the Equity Incentive Plan, the
Compensation Committee is authorized to interpret the Equity Incentive Plan,
related agreements and other documents. With the approval of the Board, the
Equity Incentive Plan may be amended from time to time by the Compensation
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Committee but, without further approval by the shareholders of the Company, no
such amendment may (i) increase the total number of shares of Common Stock that
may be issued under the Equity Incentive Plan (except as otherwise provided in
the plan), (ii) modify the Equity Incentive Plan's eligibility requirements or
(iii) materially increase the benefits accruing to participants under the Equity
Incentive Plan.
EMPLOYMENT AGREEMENTS
Each of Paul Whetsell, David McCaslin, John Emery and John Plunket are
parties to employment agreements with the Company which will expire on December
31, 1999. Mr. Whetsell's and Mr. McCaslin's agreements provide for automatic one
year extensions thereafter unless either the executive or the Company gives
notice to the other at least 120 days prior to the end of any such period that
he or it, as the case may be, does not wish to extend the agreement for an
additional period. The employment agreements provide for annual base salaries of
$225,000, in the case of Mr. Whetsell, $215,000, in the case of Mr. McCaslin,
$200,000, in the case of Mr. Emery, and $150,000, in the case of Mr. Plunket,
subject, in each such case, to periodic increases. Each executive will be
eligible to receive annual bonuses and will be entitled to participate in all
existing or future plans for the benefit of the Company's employees and
management, on the same basis as other senior executive officers of the Company.
Under the employment agreements of Messrs. Whetsell and McCaslin, each is
entitled to receive (i) a lump sum payment equal to the product of (a) his total
cash compensation for the previous fiscal year and (b) the greater of (1) the
number of full and fractional years remaining in the agreement and (2) the
number two, in addition to any other remedies available if his employment is
terminated by the Company without Cause (as defined below) or is terminated by
the executive for Good Reason (as defined below), or (ii) a lump sum payment
equal to two times his total cash compensation for the previous fiscal year if
the Company elects not to extend his contract for an additional year at the end
of its initial term (which ends December 31, 1999) or any subsequent term. The
events constituting "Good Reason" include the assignment to the executive of
duties materially inconsistent with his position and a material breach of the
employment agreement by the Company. As used in the employment agreements of
Messrs. Whetsell and McCaslin, the term "Cause" includes (i) the executive's
willful and intentional failure or refusal to perform or observe any of his
material duties set forth in his employment agreement, if such breach is not
cured within 30 days of notice from the Company; (ii) any willful and
intentional act of the executive involving theft, fraud, embezzlement or
dishonesty affecting the Company; and (iii) the executive's conviction of an
offense which is a felony in the jurisdiction involved. Messrs. Whetsell's and
McCaslin's employment agreements also provide that if (i) the executive elects
to terminate his employment within six months of a Change in Control (as defined
below) of the Company or (ii) within one year of any such change in control, the
executive is terminated without Cause or the executive terminates his employment
for Good Reason, the executive is entitled to receive a lump sum payment equal
to the product of (a) his total cash compensation for the previous fiscal year
and (b) the greater of (1) the number of full and fractional years remaining in
the agreement and (2) the number three. As used in the employment agreements of
Messrs. Whetsell and McCaslin, the term "Change in Control" means the occurrence
of one of the following events: (i) any person or entity other than Acadia
Partners becoming beneficial owner of greater than 35% of the Common Stock; (ii)
the Company adopts a plan of liquidation; (iii) the Company merges or combines
with another company and, immediately thereafter, the stockholders of the
Company prior to the merger or combination hold 50% or less of the Common Stock;
(iv) the Company sells all or substantially all of its assets; or (v) the
Company ceases to act as general partner of CapStar Management. Amounts received
by the executive upon termination of employment will increase to compensate the
executive for any excise tax imposed by Section 4999 of the Code payable by him
under the Code. These employment agreements prohibit the executives from using
or disclosing any confidential information about the Company and its operations
for a period of three years after the term of employment and from engaging in
any competitive hotel business for a period of one year after the term of
employment.
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Under the employment agreements of Messrs. Emery and Plunket, each is
entitled to receive a lump some payment equal to his annual base salary for the
greater of one year or the remaining unexpired term of employment, if his
employment is terminated by the Company without Cause (as defined below). Each
will be entitled to receive his annual base salary for a period of two years if
his employment is terminated by the executive as a result of the occurrence of a
Material Adverse Change (as defined below) or a Change in Control occurs and the
executive reasonably believes that a Material Adverse Change will occur
following such Change in Control (as defined below). The events constituting
"Cause" under the employment agreements of Messrs. Emery and Plunket include:
(i) the executive's inability to perform his duties under the agreement for more
than a 120-day period, whether or not continuous, during any 365-day period;
(ii) acts of willful misfeasance or gross negligence in connection with the
executive's employment; (iii) the executive's conviction of (or plea of no
contest to) an offense which is a felony in the jurisdiction involved; (iv)
repeated failure, after written notice thereof, by the executive to perform any
material duties under the employment agreement; and (v) a breach of a specific
provision of the employment agreement and, if such breach is curable, failure to
cure same within 30 days of written notice thereof. As used in the employment
agreement of Messrs. Emery and Plunket, the term "Change in Control" means: any
person or entity, other than Acadia Partners, L.P. and its affiliates, becoming
beneficial owner of greater than 35% of the Common Stock, so long as no Change
in Control will be deemed to have occurred if the executive continues to report
to Paul W. Whetsell. As used in the employment agreement of Messrs. Emery and
Plunket, the term "Material Adverse Change" means a material reduction or
material adverse change in the executive's working conditions if, after such
reduction or change, the executive's authority or working conditions are not
commensurate with those of executives holding chief financial officer positions
at companies comparable to the Company in the lodging industry.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of June 30, 1997 by (i) all persons known by the
Company to own beneficially more than 5% of the Common Stock, (ii) each director
who is a stockholder, (iii) each of the Named Executive Officers, and (iv) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
--------------------------
<S> <C> <C>
NAME & ADDRESS OF BENEFICIAL OWNER NUMBER PERCENTAGE
- ---------------------------------------------------------------------- --------- ---------------
Acadia Partners, L.P.(1).............................................. 1,426,102 7.5%
RCM Capital Management, L.L.C.(2)..................................... 1,424,500 7.4
LaSalle Advisors Limited Partnership and ABKB/LaSalle Securities
Limited Partnership(3).............................................. 1,154,700 6.1
Franklin Resources, Inc.(4)........................................... 987,500 5.1
Paul W. Whetsell(5)................................................... 970,503 5.1
David E. McCaslin(5).................................................. 472,236 2.5
John E. Plunket(5).................................................... 462,729 2.4
Mahmood Khimji(5)..................................................... 400,000 2.1
John Emery(6)......................................................... 0 --
Michael T. George(6).................................................. 0 --
D. Scott Livchak(6)................................................... 0 --
Robert Gauthier(6).................................................... 0 --
Daniel L. Doctoroff(6)................................................ 0 --
Bradford E. Bernstein(6).............................................. 0 --
William S. Janes(6)................................................... 0 --
Joseph McCarthy(6).................................................... 0 --
Edward L. Cohen....................................................... 0 --
Edwin T. Burton, III.................................................. 0 --
Edward P. Dowd........................................................ 0 --
All directors and executive officers as a group (15 persons).......... 980,010 5.1%
</TABLE>
- ------------------------
(1) The business address of Acadia Partners, L.P. is 201 Main Street, Suite
2600, Fort Worth, TX 76102. Includes 1,373,034 shares owned by Acadia
Partners, L.P. and 53,068 shares owned by Cherwell Investors, Inc.
("Cherwell"), a wholly owned subsidiary of Acadia Partners, L.P. The general
partner of Acadia Partners, L.P. is Acadia FW Partners, L.P., the managing
general partner of which is Acadia MGP, Inc. ("Acadia MGP"). J. Taylor
Crandall is the sole stockholder of Acadia MGP and may be deemed to
beneficially own the shares owned by Acadia Partners, L.P. and Cherwell. In
addition, Mr. Crandall is the sole stockholder of each of PTJ, Inc. ("PTJ")
and Group 31, Inc. ("Group 31"). PTJ is the managing general partner of PTJ
Merchant Banking Partners, L.P., which is the general partner of Penobscot
Partners, L.P. ("Penobscot"), which together with MC Investment Corporation
("MC Investment"), Penobscot's wholly owned subsidiary, owns 275,299 shares.
Group 31 is the general partner of FWHY Coinvestments VIII Partners, L.P.
("FWHY"), which owns 406,702 shares. As a result of his ownership of PTJ and
Group 31, Mr. Crandall may also be deemed to beneficially own the 732,951
shares owned by Penobscot, MC Investment and FWHY, which shares are not
included in the number of shares set forth as being owned by Acadia
Partners, L.P. in the Principal Stockholders chart, above. The number of
shares set forth as being owned by Acadia Partners, L.P. in the Principal
Stockholders chart above also excludes 406,701 shares held by OHP EquiStar
Partners, L.P. ("OHP") and OHP EquiStar Partners II, L.P. ("OHP II"). Oak
Hill Partners, Inc., which is the investment advisor to Acadia Partners,
L.P., is the general partner of each of OHP and OHP II.
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(2) The business address of RCM Capital Management, L.L.C. ("RCM Capital") is
Four Embarcadero Center, Suite 2900, San Francisco, CA 94111. The Managing
Agent of RCM Capital is RCM Limited L.P. ("RCM Limited"). The General
Partner of RCM Limited is RCM General Corporation ("RCM General"). As such,
RCM Limited and RCM General may be deemed to beneficially own such shares
within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934,
as amended ("Rule 13d-3"). In addition, RCM Capital is a wholly-owned
subsidiary of Dresdner Bank AG ("Dresdner"). As such, Dresdner also may be
deemed to beneficially own the shares held by RCM Limited.
(3) The business address of LaSalle Advisors Limited Partnership and
ABKB/LaSalle Securities Limited Partnership (collectively, the "LaSalle
Partnerships") is 11 South LaSalle Street, Chicago, IL 60603. The LaSalle
Partnerships are registered investment advisors and may be deemed to
beneficially own such shares within the meaning of Rule 13d-3. William K.
Morrill, Jr. and Keith R. Pauley are employees of the LaSalle Partnerships
and, in such capacity, also may be deemed to beneficially own such shares
within the meaning of Rule 13d-3.
(4) The business address of Franklin Resources, Inc. ("FRI") is 777 Mariners
Island Blvd., San Mateo, CA 94404. Such shares are owned by one or more open
or closed-ended investment companies or other managed accounts which are
advised by direct or indirect advisory subsidiaries of FRI. Such advisory
subsidiaries may be deemed to beneficially own such shares within the
meaning of Rule 13d-3. Charles B. Johnson and Rupert H. Johnson, Jr. each
own in excess of 10% of FRI and, as such, also may be deemed to own such
shares held, directly or indirectly, by FRI within the meaning of Rule
13d-3.
(5) Includes shares held by entities over which such person has beneficial
ownership within the meaning of Rule 13d-3.
(6) Such individuals own interests in entities which own shares of Common Stock,
but these individuals do not have beneficial ownership of such shares of
Common Stock within the meaning of Rule 13d-3.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITIONS
In March 1996, the Company acquired The Latham Hotel in Washington, D.C. for
a purchase price of $12,000,000 from LCP Hotel Ventures, L.P. ("LCP"). At the
time of the acquisition, the general partner of LCP was Latham Hotels, Inc.
("LHI"), a corporation owned 80% by Paul W. Whetsell, President and Chief
Executive Officer of the Company, and 10% by David E. McCaslin, Chief Operating
Officer of the Company. Including their interests in LHI, Mr. Whetsell and Mr.
McCaslin owned, directly or indirectly, 9.18% and 0.52%, respectively, of the
beneficial interest in LCP and received $763,000 and $42,000, respectively, of
the net proceeds of the purchase price paid to LCP. The purchase price for The
Latham Hotel was determined through arm's-length negotiations between the
Company, on the one hand, and representatives of the holders of the majority of
the beneficial interests in LCP, on the other hand; such representatives are not
affiliated with the Company.
In April 1997, the Company acquired the Holiday Inn in Tinton Falls, New
Jersey and the Holiday Inn Sports Complex in Kansas City, Missouri for an
aggregate purchase price of $10,128,000 from two partnerships in which Mr.
Whetsell owned, directly or indirectly, 12.0% and 11.0%, respectively, and Mr.
McCaslin owned, directly or indirectly, 1.5% and 1.4%, respectively, of the
beneficial interest. The purchase price for these hotels was determined through
arm's-length negotiations between the Company, on the one hand, and
representatives of the holders of the majority of the beneficial interests in
the sellers, on the other hand; such representatives are not affiliated with the
Company.
In April 1997, the Company acquired a portfolio of six hotels from Highgate
Hotels, Inc. and certain affiliated entities, for consideration consisting of
$68 million cash and $32 million of OP Units. Mahmood
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Khimji, a director of the Company, is a principal of Highgate Hotels, Inc. At
the time of the acquisition, Mr. Khimji was not a director of the Company.
In August 1997, the Company acquired the Holiday Inn-Metrotown in Vancouver,
British Columbia for an aggregate purchase price of $6,951,000 from Highgate
Hotels, Inc. and certain affiliated entities. The purchase price for the hotel
was determined through arm's-length negotiations between the Company on the one
hand, and representatives of the sellers, on the other hand, and is believed to
have been at fair market value.
Since November 1995, the Company has acquired 86.4% of the limited
partnership interests in the partnership ("Atlanta Partners") that owns the
Westin Atlanta Airport. In November 1995, the Company acquired, for a purchase
price of $56,000, the 1% general partnership interest in Atlanta Partners
previously held by a corporation in which E. Robert Roskind owned an equity
interest ("LHP"). At the time of such acquisition Mr. Roskind was a principal of
both CapStar Management and EquiStar. LHP was also paid a fee of $893,000 in
connection with the acquisition of the partnership interests in Atlanta
Partners, and is entitled to an additional $161,000 upon the ultimate
disposition of Atlanta Partners. The LCP Group, L.P., in which Mr. Roskind owns
an equity interest is entitled to an annual fee of $30,000 for providing certain
administrative services relating to the outside limited partners of the Westin
Atlanta Airport. All of the compensation paid or payable to affiliates of Mr.
Roskind in connection with the Westin Atlanta Airport transaction was negotiated
between Mr. Roskind, on the one hand, and other principals of EquiStar, on the
other hand, who believed the compensation to have been at fair market value. Mr.
Roskind is no longer associated with the Company.
OWNERSHIP INTERESTS IN CERTAIN MANAGED HOTELS
Mr. Whetsell and Mr. McCaslin and entities owned by them own, directly or
indirectly, (i) a leasehold interest, expiring on December 31, 2001, in two of
the Managed Hotels and (ii) minority equity interests in four of the Managed
Hotels. Mr. Whetsell and Mr. McCaslin exercise management control over the
Affiliated Owners of two of these Managed Hotels through their ownership of
certain entities which serve as general partners of the Affiliated Owners. Such
interests were acquired prior to the formation of EquiStar and CapStar
Management. For the year ended December 31, 1996 and for the six months ended
June 30, 1997, the Company received approximately $287,000 and $276,000 in
management fees, respectively, from those Managed Hotels in which Messrs.
Whetsell and McCaslin own an equity interest, including approximately $234,000
and $112,000, respectively, in management fees from the Affiliated Owners. Under
the terms of their employment agreements, Messrs. Whetsell and McCaslin are
prohibited from hereafter acquiring any interests in hotels or hotel management
companies while they serve as officers of the Company. See
"Management--Employment Agreements."
INDEBTEDNESS OF CERTAIN MEMBERS OF MANAGEMENT
In connection with the initial formation and capitalization of EquiStar,
CapStar Management made loans to certain directors and executive officers of the
Company, which loans were used to make capital contributions to EquiStar. Such
loans were made from August 1995 through April 1996 and bore interest at the
prime rate through December 31, 1995 and at a rate of 1.5% above the prime rate
thereafter. The largest aggregate amounts of the loans to such directors and
executive officers outstanding at any time (where such aggregate amount exceeded
$60,000) were $300,000 to Mr. Whetsell and $147,500 to Mr. McCaslin. All such
loans were repaid in September 1996.
SUBORDINATED DEBT
In December 1996, the Company incurred $50 million of subordinated
indebtedness under a credit facility which was refinanced in July 1997 with the
proceeds of the 1997 Credit Facility. One member of the syndicate of lenders of
the $50 million subordinated indebtedness was OHSF. The investment advisor to
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OHSF is Oak Hill Advisors, Inc., one of the principal stockholders of which is
Daniel L. Doctoroff, a director of the Company. Mr. Doctoroff is also a
principal stockholder the Company. See "Principal Stockholders".
DESCRIPTION OF CERTAIN INDEBTEDNESS
THE 1997 CREDIT FACILITY
The Company has obtained the 1997 Credit Facility in the maximum principal
amount of $450 million. Initial borrowings under the 1997 Credit Facility were
used by the Company to repay existing indebtedness. Subsequent borrowings under
the 1997 Credit Facility will be used to acquire and renovate upscale, full-
service hotels and for other general corporate purposes.
The 1997 Credit Facility is composed of a $350 million revolving loan
facility maturing on June 30, 2002, and a $100 million term loan facility
maturing on June 30, 2004. The term loan facility calls for mandatory payments
of principal beginning on March 31, 1998. The revolving loan facility commitment
will be reduced in increments of $12.5 million on a quarterly basis beginning on
October 1, 2000 and ending on July 1, 2001. In addition, the 1997 Credit
Facility provides that net sales and financing proceeds and 50% of excess cash
flow, in each case to the extent not reinvested and subject to certain
exceptions set forth in the 1997 Credit Facility, must be used to prepay the
term loan facility and reduce the revolving credit facility.
Borrowings under the 1997 Credit Facility will bear interest, at the
Company's option, at a rate equal to (a) the "Base Rate" or (b) the "Eurodollar
Rate" plus, in either case, the "Applicable Margin." The Base Rate is equal to
the highest of (i) the publicly announced prime rate of BankBoston, N.A.; (ii)
the secondary market rate for three-month certificates of deposit plus 1% and
(iii) the federal funds rate plus 1/2 of 1%. The Eurodollar Rate is the rate at
which eurodollar deposits for one, two, three or six months (as selected by the
Company) are offered in the interbank eurodollar market. The Applicable Margin
will be determined on a quarterly basis by reference to the ratio of the
Company's debt to the Company's EBITDA for the trailing twelve-month period and
will range from (A) 1.5% to 2.0% in the case of Eurodollar Rate loans under the
revolving loan facility; (B) 0.5% to 1.0% in the case of Base Rate loans under
the revolving loan facility; (C) 1.75% to 2.125% in the case of Eurodollar Rate
loans under the term loan facility; and (D) 0.75% to 1.125% in the case of Base
Rate loans under the term loan facility.
The Company will be required to pay customary fees in connection with the
structuring of the 1997 Credit Facility, a commitment fee on the unused portion
of the 1997 Credit Facility and a fee on outstanding letters of credit under the
1997 Credit Facility.
The 1997 Credit Facility is a direct obligation of the Company and is fully
and unconditionally guaranteed by the Company and certain subsidiaries of the
Company, including the Operating Partnerships and the subsidiaries owning hotel
properties. The 1997 Credit Facility is secured by substantially all the real
and personal property of the Company and its Restricted Subsidiaries. The 1997
Credit Facility contains covenants that impose certain limitations on the
Company in respect of, among other things, (i) the payment of dividends and
other distributions, (ii) acquisitions of additional hotel properties and
Management Agreements, (iii) the creation or incurrence of liens, (iv) the
incurrence of indebtedness, lease obligations or contingent liabilities, (v) the
acquisition of investments in and securities issued by joint ventures and other
entities, (vi) transactions with affiliates, (vii) mergers, acquisitions,
divestitures or reorganizations, (viii) the issuance of preferred stock and (ix)
sales of its hotel properties. The 1997 Credit Facility also contains covenants
that will subject the Company to certain operating requirements and that require
the maintenance of certain financial levels, such as consolidated net worth, and
certain financial ratios, such as consolidated cash flow to consolidated debt
service, consolidated cash flow to consolidated fixed charges and consolidated
total indebtedness to consolidated cash flow. The 1997 Credit Facility
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prohibits certain changes in control of the Company, including certain
dispositions of stock owned by Paul Whetsell, and requires that Paul Whetsell
remain an active senior officer of the Company.
THE NON-RECOURSE FACILITY
In August 1997, the Company entered into the $100.0 million Non-Recourse
Facility with Lehman Holdings. The Non-Recourse Facility has an 18-month term
and bears interest at a rate of between 175 and 270 basis points over 30-day
LIBOR, based upon certain debt service ratios. The Non-Recourse Facility is
expected to be utilized to fund new hotel acquisitions in a tax-efficient
manner.
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DESCRIPTION OF NOTES
Except as otherwise indicated, the following description relates both to the
Existing Notes issued in the Offering and the New Notes to be issued in exchange
for Existing Notes and in connection with the Exchange Offer. The form and terms
of the New Notes are the same as the form and terms of the Existing Notes,
except that the New Notes have been registered under the Securities Act and
therefore will not bear legends restricting the transfer thereof.
GENERAL
The Existing Notes were, and the New Notes will be, issued pursuant to an
Indenture (the "INDENTURE") dated as of August 19, 1997, between the Company and
IBJ Schroder Bank & Trust Company, as trustee (the "TRUSTEE"). The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act. The Notes are subject to all such
terms, and Holders of the Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below and those terms made a part of the Indenture by
reference to the Trust Indenture Act as in effect on the date of the Indenture.
A copy of the Indenture has been filed with the Commission as an exhibit to the
Registration Statement of which this Prospectus is a part and is incorporated
herein by reference. See "--ADDITIONAL INFORMATION." The definitions of certain
terms used in the following summary are set forth below under "--CERTAIN
DEFINITIONS." For purposes of this section, references to the "COMPANY" refer
only to CapStar Hotel Company without including any of its Subsidiaries.
The Notes are unsecured obligations of the Company, ranking subordinate in
right of payment to all Senior Debt of the Company. See "--SUBORDINATION." In
addition, the Notes are effectively subordinate to all obligations of the
Company's Subsidiaries, including without limitation trade payables in the
ordinary course. On a pro forma basis, the Company would have approximately
$493.2 million of Indebtedness outstanding, including $275.0 million of Senior
Debt and $68.2 million of Non-Recourse Indebtedness of Unrestricted Subsidiaries
of the Company. The Indenture permits the incurrence of additional Senior Debt
in the future.
For purposes of the Indenture, the Company's Subsidiaries are divided into
two categories-- Restricted Subsidiaries, which generally are subject to the
restrictive covenants set forth in the Indenture, and Unrestricted Subsidiaries,
which generally are not. As of the date of this Prospectus, certain of the
Company's Subsidiaries, which hold or will hold the Company's interests in the
Radisson Plaza, Lexington, Kentucky, the Embassy Suites Center City,
Philadelphia, the Doubletree Hotel, Austin, and the Westchase Hilton & Towers,
Houston, were designated as Unrestricted Subsidiaries. None of the Company's
Restricted Subsidiaries is presently required to guarantee the Notes, although
under certain future circumstances the Company may be required to cause one or
more Restricted Subsidiaries to guarantee the Notes on a senior subordinated
basis. See "--SUBSIDIARY GUARANTEES." Subsidiaries that are properly designated
and maintained as Unrestricted Subsidiaries by the Company will not be required
to guarantee the Notes under any circumstances.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount of $200,000,000, of
which $150,000,000 aggregate principal amount was issued in the Offering.
Additional amounts may be issued in one or more series from time to time,
subject to the limitations set forth under "--INCURRENCE OF INDEBTEDNESS AND
ISSUANCE OF CERTAIN CAPITAL STOCK" and the restrictions contained in the Credit
Agreement. The Company has agreed not to offer or sell any additional amounts
under the Indenture for a period of 180 days from the date of the Indenture
without the prior written consent of the Initial Purchaser. The Notes will
mature on August 15, 2007. Interest on the Notes will accrue from the Issuance
Date and will be payable semi-annually in
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arrears in cash on February 15 and August 15 of each year, commencing on
February 15, 1998, at the rate of 8 3/4% per annum to holders of Notes (each, a
"Holder") of record on the immediately preceding February 1 and August 1.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the Issuance Date. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. Principal of and premium, interest and Liquidated Damages, if any, on
the Notes will be payable at the office or agency of the Company maintained for
such purpose or, at the option of the Company, payment of interest and
Liquidated Damages may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes,
provided that all payments with respect to Notes the Holders of which have given
wire transfer instructions to the Company will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. Until otherwise designated by the Company, the Company's office or
agency will be the office of the Trustee maintained for such purpose. The Notes
will be issued in denominations of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
At any time on or after August 15, 2002, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 15 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------ -----------
<S> <C>
2002...................................... 104.375%
2003...................................... 102.917
2004...................................... 101.458
2005 and thereafter....................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to August 15, 2000, the Company may
redeem, on any one or more occasions, with the net cash proceeds of one or more
public offerings of its common equity (a "PUBLIC EQUITY OFFERING") (within 60
days of the consummation of any such Public Equity Offering), up to 35% of the
aggregate principal amount of the Notes at a redemption price equal to 108.750%
of the principal amount of such Notes plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date; PROVIDED, HOWEVER,
that at least 65% of the aggregate principal amount of Notes originally issued
remains outstanding immediately after each such redemption. The Credit Agreement
prohibits the purchase of the Notes with the net cash proceeds of a Public
Equity Offering, unless and until the Indebtedness under the Credit Agreement is
repaid in full.
In addition, the Company, at its option, at any time prior to August 15,
2002, may redeem the Notes, in whole or in part (if in part, by lot or by such
other method as the Trustee shall deem fair or appropriate) at the Make-Whole
Price, plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the applicable redemption date.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full in cash or
Cash Equivalents of all Obligations on Senior Debt, whether outstanding on the
Issuance Date or thereafter incurred. Upon any payment or distribution of
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assets of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors or marshalling of assets
of the Company or in a bankruptcy, reorganization, insolvency, receivership or
other similar proceeding relating to the Company or its property, whether
voluntary or involuntary, all Obligations due upon all Senior Debt shall first
be paid in full in cash or Cash Equivalents, or such payment shall be duly
provided for to the satisfaction of the holders of Senior Debt, before any
payment or distribution of any kind or character is made on account of any
Obligations on the Notes, or for the acquisition by the Company or any of its
Subsidiaries of any of the Notes for cash or property or otherwise, and, until
all Obligations with respect to Senior Debt are paid in full in cash or Cash
Equivalents, any distribution to which the Holders would be entitled shall be
made to the holders of Senior Debt (except that Holders of Notes may receive
Permitted Junior Securities and payments made from the trust described under "--
LEGAL DEFEASANCE AND COVENANT DEFEASANCE").
If any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any Designated Senior Debt, no payment
of any kind or character shall be made by or on behalf of the Company or any
other Person on its behalf with respect to any Obligations on the Notes or to
acquire any of the Notes for cash or property or otherwise (except that Holders
of Notes may receive Permitted Junior Securities and payments made from the
trust described under "--LEGAL DEFEASANCE AND COVENANT DEFEASANCE"). In
addition, if any other event of default occurs and is continuing with respect to
any Designated Senior Debt, as such event of default is defined in the
instrument creating or evidencing such Designated Senior Debt, permitting the
holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
trustee (a "DEFAULT NOTICE"), then, unless and until all events of default have
been cured or waived or have ceased to exist or the Trustee receives notice from
the Representative for the respective issue of Designated Senior Debt
terminating the Blockage Period (as defined below), during the 179 days after
the delivery of such Default Notice (the "BLOCKAGE PERIOD"), neither the Company
nor any of its Subsidiaries shall (x) make any payment of any kind or character
with respect to any Obligations on the Notes (except the Holders of Notes may
receive Permitted Junior Securities and payments made from the trust described
under "--LEGAL DEFEASANCE AND COVENANT DEFEASANCE") or (y) acquire any of the
Notes for cash or property or otherwise. Notwithstanding anything herein to the
contrary, in no event will a Blockage Period extend beyond 179 days from the
date the payment on the Notes was due and only one such Blockage Period may be
commenced within any 365 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Blockage Period with
respect to the Designated Senior Debt shall be, or be made, the basis for
commencement of a second Blockage Period by the Representative of such
Designated Senior Debt whether or not within a period of 365 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 180 consecutive days (it being acknowledged that any subsequent
action, or any breach of any financial covenants for a period commencing after
the date of commencement of such Blockage Period that, in either case, would
give rise to an event of default pursuant to any provisions under which an event
of default previously existed or was continuing shall constitute a new event of
default for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the Holders of the Notes, may recover less ratably than holders of Senior Debt.
On a pro forma basis, the Company would have had approximately $493.2 million of
Indebtedness outstanding, including $275.0 million of Senior Debt and $68.2
million of Non-Recourse Indebtedness of Unrestricted Subsidiaries of the
Company.
None of the Company's Subsidiaries is presently required to guarantee the
Notes, although under certain future circumstances the Company may be required
to cause one or more Restricted Subsidiaries to guarantee the Notes on a senior
subordinated basis. The Indebtedness represented by any such
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Guarantee (i.e., the payment of Obligations on the Notes) will be subordinated
on the same basis to Senior Debt of the Guarantor as the Notes are subordinated
to Senior Debt of the Company.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL. The Indenture provides that upon the occurrence of a
Change of Control, each Holder will have the right to require that the Company
purchase all or a portion of such Holder's Notes pursuant to the offer described
below (the "CHANGE OF CONTROL OFFER"), at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase.
Within 10 days following the date upon which the Change of Control occurs,
the Company must send, by first class mail, a notice to each Holder, with a copy
to the Trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice shall state, among other things, the purchase date, which
must be no earlier than 30 days nor later than 60 days from the date such notice
is mailed, other than as may be required by law (the "CHANGE OF CONTROL PAYMENT
DATE"). Holders electing to have a Note purchased pursuant to a Change of
Control Offer will be required to surrender the Note, with the form entitled
"OPTION OF HOLDER TO ELECT PURCHASE" on the reverse of the Note completed, to
the Trustee or Paying Agent, if any, at the address specified in the notice
prior to the close of business on the third business day prior to the Change of
Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept that Change of Control Offer. The Credit Agreement prohibits the purchase
of Notes by the Company in the event of a Change of Control, unless and until
such time as the Indebtedness under the Credit Agreement is repaid in full. Any
future credit agreements or other agreements relating to Senior Debt to which
the Company becomes a party may contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when the Company is prohibited
from purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute as default under
the Credit Agreement. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "ALL OR SUBSTANTIALLY ALL"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "SUBSTANTIALLY ALL," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of the Company to another person may be uncertain.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "CHANGE
OF CONTROL" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be
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deemed to have breached its obligations under the "CHANGE OF CONTROL" provisions
of the Indenture by virtue thereof.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
ASSET SALES The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, conduct an Asset Sale, unless (x)
the Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (evidenced by a resolution of
the Board of Directors set forth in an officer's certificate delivered to the
Trustee) and (y) at least 75% of the consideration therefor received by the
Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents; PROVIDED, HOWEVER, that the principal amount of the following shall
be deemed to be cash for purposes of this provision: (A) any liabilities (as
shown on the Company's or such Restricted Subsidiary's most recent balance sheet
or in the notes thereto), of the Company or any Restricted Subsidiary (other
than liabilities that are by their terms subordinated to the Notes or any
Guarantee thereof) that are assumed by the transferee of any such assets and (B)
any notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are converted by the Company or such
Restricted Subsidiary into cash within 90 days of the closing of such Asset Sale
(to the extent of the cash received). Notwithstanding the foregoing, the
restriction in clause (y) above will not apply with respect to mortgages, other
notes receivable or other securities received by the Company or any Restricted
Subsidiary from a transferee of any assets to the extent such mortgages, other
notes receivable or other securities are Investments permitted to be made by the
Company or such Restricted Subsidiary under the covenant entitled "RESTRICTED
PAYMENTS."
Within 365 days of any Asset Sale, the Company or such Restricted Subsidiary
may (a) apply the Net Proceeds from such Asset Sale to prepay any Indebtedness
that ranks by its terms senior to the Notes (or any Guarantee thereof) and, in
the case of any Indebtedness under the Credit Agreement, to effect a permanent
reduction in the amount of Indebtedness that may be incurred pursuant to clause
(ii) of the second paragraph of the covenant entitled "INCURRENCE OF
INDEBTEDNESS AND ISSUANCE OF CERTAIN CAPITAL STOCK," or (b) invest the Net
Proceeds from such Asset Sale in property or assets used in a Hospitality-
Related Business, PROVIDED that the Company or such Restricted Subsidiary will
have complied with this clause (b) if, within 365 days of such Asset Sale, the
Company or such Restricted Subsidiary shall have commenced and not completed or
abandoned an investment in compliance with this clause (b) and shall have
segregated such Net Proceeds from the general funds of the Company and its
Subsidiaries for that purpose and such Investment is substantially completed
within 180 days after the first anniversary of such Asset Sale. Any Net Proceeds
from an Asset Sale that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "EXCESS PROCEEDS." When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall
make an offer, to all Holders of Notes and other Indebtedness that ranks by its
terms PARI PASSU in right of payment with the Notes and the terms of which
contain substantially similar requirements with respect to the application of
net proceeds from asset sales as are contained in the Indenture (an "ASSET SALE
OFFER") to purchase on a PRO RATA basis the maximum principal amount of Notes,
that is an integral multiple of $1,000, that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase, in accordance with the procedures set forth in
the Indenture. To the extent that the aggregate amount of Notes and other such
Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess
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Proceeds available for purchase thereof, the Trustee shall select the Notes to
be purchased in the manner described under the caption "--SELECTION AND NOTICE"
below. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero. Pending the final application of any Net Proceeds from
an Asset Sale pursuant to this paragraph, the Company or any Restricted
Subsidiary may temporarily reduce Indebtedness of the Company or a Restricted
Subsidiary that ranks by its terms senior to the Notes or otherwise invest such
Net Proceeds in Cash Equivalents. The Credit Agreement generally prohibits the
purchase of Notes by the Company in the circumstances described above unless and
until such time as the indebtedness under the Credit Agreement is repaid in
full.
The Company will comply, to the extent applicable, with the requirements of
Rule 14e-1 under the Exchange Act and other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with any offer to purchase and the purchase of Notes as described above. To the
extent that the provisions of any securities laws or regulations conflict with
the "ASSET SALE" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "ASSET SALE" provisions of the Indenture by
virtue thereof.
SELECTION AND NOTICE
In the event that less than all of the Notes are to be purchased in an Asset
Sale Offer or redeemed at any time, selection of Notes for purchase or
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed, or, if the notes are not so listed, on a PRO RATA basis, by lot or by
such method as the Trustee shall deem fair and appropriate, PROVIDED that no
Notes of a principal amount of $1,000 or less shall be redeemed in part,
PROVIDED, FURTHER, that if a partial redemption is made with the proceeds of a
public offering by the Company of common equity securities, selection of the
Notes or portions thereof for redemption shall be made by the Trustee only on a
PRO RATA basis or on as nearly a PRO RATA basis as is practicable (subject to
procedures of the Depositary), unless such method is otherwise prohibited.
Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the purchase or redemption date to each Holder of
Notes to be purchased or redeemed at its registered address. If any Note is to
be purchased or redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
purchased or redeemed.
A new Note in principal amount equal to the unpurchased or unredeemed
portion of any Note purchased or redeemed in part will be issued in the name of
the Holder thereof upon cancellation of the original Note. On and after the
purchase or redemption date, interest ceases to accrue on Notes or portions
thereof called for purchase or redemption as long as the Company has deposited
with the Trustee funds in satisfaction of the applicable redemption price
pursuant to the Indenture.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
RESTRICTED PAYMENTS. The Indenture provides that the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (other than:
(1) dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company; (2) dividends or distributions by a
Restricted Subsidiary of the Company, provided that to the extent that a portion
of such dividend or distribution is paid to a holder of Equity Interests of a
Restricted Subsidiary other than the Company or a Restricted Subsidiary, such
portion of such dividend or distribution is not greater than such holder's PRO
RATA aggregate common equity interest in such Restricted Subsidiary; and (3)
dividends or distributions payable on Existing Preferred OP Units and Preferred
OP Units issued in compliance with the covenant described under the caption
"--INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF CERTAIN CAPITAL
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STOCK"); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary or other Affiliate
of the Company (other than (A) any Equity Interests owned by the Company or any
Restricted Subsidiary of the Company, (B) any Existing Preferred OP Units and
(C) any Preferred OP Units issued in compliance with the covenant described
under the caption "-- INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF CERTAIN CAPITAL
STOCK"); (iii) purchase, redeem or otherwise acquire or retire for value any
Indebtedness of the Company or any Restricted Subsidiary that is subordinated or
junior in right of payment, by its terms, to the Notes or any Guarantee thereof
prior to the scheduled final maturity or sinking fund payment dates for payment
of principal and interest in accordance with the original documentation for such
subordinated or junior Indebtedness; or (iv) make any Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the covenant described under the
caption "--INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF CERTAIN CAPITAL
STOCK"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (v) and (vi)(X) of the next succeeding
paragraph), is less than the sum, without duplication, of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from June 30, 1997 to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), PLUS
(ii) 100% of the aggregate net proceeds (including the fair market value of
non-cash proceeds as determined in good faith by the Board of Directors)
received by the Company from the issue or sale, in either case, since the
date of the Indenture of either (A) Equity Interests of the Company or of
(B) debt securities of the Company that have been converted or exchanged
into such Equity Interests (other than Equity Interests (or convertible or
exchangeable debt securities) sold to a Restricted Subsidiary of the Company
and other than Disqualified Stock or debt securities that have been
converted or exchanged into Disqualified Stock), PLUS (iii) in case any
Unrestricted Subsidiary has been redesignated a Restricted Subsidiary
pursuant to the terms of the Indenture or has been merged, consolidated or
amalgamated with or into, or transfers or conveys assets to, or is
liquidated into, the Company or a Restricted Subsidiary and PROVIDED that no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof, the lesser of (A) the book value (determined
in accordance with GAAP) at the date of such redesignation, combination or
transfer of the aggregate Investments made by the Company and its Restricted
Subsidiaries in such Unrestricted Subsidiary (or of the assets transferred
or conveyed, as applicable) and (B) the fair market value of such Investment
in such Unrestricted Subsidiary at the time of such redesignation,
combination or transfer (or of the assets transferred or conveyed, as
applicable), in each case as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive and
evidenced by a resolution of such Board and, in each case, after deducting
any Indebtedness associated with the Unrestricted Subsidiary so designated
or combined or with the assets so transferred or conveyed, PLUS (iv) 100% of
any dividends, distributions or interest actually received in cash by the
Company or a Restricted Subsidiary after the date of the Indenture from (A)
a Restricted Subsidiary the Net Income of which has been excluded from the
computation of Consolidated Net Income, (B) an Unrestricted Subsidiary, (C)
a person that is not a Subsidiary or (D) a Person that is accounted for on
the equity method plus (v) $15.0 million.
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The foregoing provisions will not prohibit the following Restricted
Payments: (i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture; (ii) (X) the redemption,
purchase, retirement or other acquisition of any OP Unit in exchange for Equity
Interests of the Company (other than Disqualified Stock) and (Y) the redemption,
purchase, retirement or other acquisition of any Equity Interests of the Company
or a Restricted Subsidiary (other than OP Units or Preferred OP Units) in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Restricted Subsidiary of the Company) of other Equity Interests
of the Company (other than any Disqualified Stock), PROVIDED that in the case of
(X) and (Y) the amount of any proceeds that is utilized for such redemption,
repurchase, retirement or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (iii) the defeasance, redemption, repayment or
purchase of Indebtedness of the Company or any Restricted Subsidiary that is
subordinated or junior in right of payment, by its terms, to the Notes and any
Guarantee thereof in a Permitted Refinancing; (iv) the defeasance, redemption,
repayment or purchase of Indebtedness of the Company or any Restricted
Subsidiary that is subordinated or junior in right of payment, by its terms, to
the Notes and any Guarantee thereof with the proceeds of a substantially
concurrent sale (other than to a Subsidiary of the Company) of Equity Interests
(other than Disqualified Stock) of the Company, PROVIDED that the amount of any
proceeds that is utilized for such defeasance, redemption, repayment or purchase
shall be excluded from clause (c)(ii) of the preceding paragraph; (v) the
purchase, redemption or other acquisition or retirement for value of any Equity
Interests of the Company pursuant to any management equity subscription
agreement or stock option agreement; PROVIDED, HOWEVER, that the aggregate price
paid for all such purchased, redeemed, acquired or retired Equity Interests
shall not exceed $1,000,000 in any 12 month period; and (vi) (X) the making of
any Permitted Investment described in clauses (a), (b), (c), (d) or (f) of the
definition thereof and (Y) the making of any Permitted Investment described in
clause (e) thereof, PROVIDED that, in the case of clauses (ii)(Y), (iii), (iv),
(v) and (vi)(Y), no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof.
In determining whether any Restricted Payment is permitted by the foregoing
covenant, the Company may allocate or reallocate all or any portion of such
Restricted Payment among the clauses (i) through (vi) of the preceding paragraph
or among such clauses and the first paragraph of this covenant including clauses
(a), (b) and (c), PROVIDED that at the time of such allocation or reallocation,
all such Restricted Payments, or allocated portions thereof, would be permitted
under the various provisions of the foregoing covenant.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors of the Company
set forth in an officer's certificate delivered to the Trustee) on the date of
the Restricted Payment of the asset(s) proposed to be transferred by the Company
or such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than (i) the end of any calendar quarter in which any
Restricted Payment is made or (ii) the making of a Restricted Payment which,
when added to the sum of all previous Restricted Payments made in a calendar
quarter, would cause the aggregate of all Restricted Payments made in such
quarter to exceed $5.0 million, the Company shall deliver to the Trustee an
officer's certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this covenant
were computed, which calculations may be based upon the Company's latest
available financial statements.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default or Event
of Default. For purposes of making the determination as to whether such
designation would cause a Default or Event of Default, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of (x) the net
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book value of such Investments at the time of such designation, (y) the fair
market value of such Investments at the time of such designation and (z) the
original fair market value of such Investments at the time they were made. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
officer's certificate certifying that such designation complied with the
foregoing conditions.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF CERTAIN CAPITAL STOCK. The
Indenture provides that the Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to (collectively, "INCUR" and correlatively, an "INCURRENCE" of) any
Indebtedness (including Acquired Debt), that the Company will not issue, and
will not permit any of its Restricted Subsidiaries to issue, any shares of
Disqualified Stock and that the Company will not permit any of its Restricted
Subsidiaries to issue any Preferred Stock; PROVIDED, HOWEVER, that the Company
or any Guarantor may incur Indebtedness or issue shares of Disqualified Stock
and the Restricted Subsidiaries may incur Indebtedness under the Credit
Agreement if the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock is issued would have been at least 2.0 to
1, determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Indebtedness; PROVIDED, HOWEVER, that if any such indebtedness
ceases to be Non-Recourse Indebtedness of an Unrestricted Subsidiary, such
event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Company;
(ii) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness pursuant to the Credit Agreement in an aggregate principal
amount not to exceed $300.0 million at any one time outstanding MINUS any
Net Proceeds that have been applied to permanently reduce the outstanding
amount of such Indebtedness pursuant to clause (a) of the second paragraph
of the covenant described under the caption "--REPURCHASE AT THE OPTION OF
HOLDERS--ASSET SALES;"
(iii) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(iv) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness under Hedging Obligations that do not increase the Indebtedness
of the Company or the Restricted Subsidiary, as the case may be, other than
as a result of fluctuations in interest or foreign currency exchange rates
provided that such Hedging Obligations are incurred for the purpose of
providing interest rate protection with respect to Indebtedness permitted
under the Indenture or to provide currency exchange protection in connection
with revenues generated in currencies other than U.S. dollars;
(v) the incurrence or the issuance by the Company of Refinancing
Indebtedness or Refinancing Disqualified Stock or the incurrence or issuance
by a Restricted Subsidiary of Refinancing Indebtedness or Refinancing
Disqualified Stock; PROVIDED, HOWEVER, that such Refinancing Indebtedness or
Refinancing Disqualified Stock is a Permitted Refinancing;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; PROVIDED,
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HOWEVER, that (a) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than a
Restricted Subsidiary and (b) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Restricted
Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Restricted Subsidiary, as the case
may be;
(vii) the incurrence of Indebtedness represented by the Notes and any
Guarantee thereof;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries, in the ordinary course of business and consistent with past
practice, of surety, performance or appeal bonds;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness (in addition to Indebtedness permitted by any other clause
of this paragraph) in an aggregate principal amount at any time outstanding
not to exceed $50.0 million;
(x) the incurrence by the Company or any of its Restricted Subsidiaries
of Assumed Indebtedness PROVIDED that, after giving effect to the incurrence
thereof, the Company could incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test described in the preceding
paragraph; and
(xi) the issuance of Preferred OP Units by the Company or any of its
Restricted Subsidiaries as full or partial consideration for the acquisition
of lodging facilities and related assets, PROVIDED that, after giving effect
to the issuance thereof, the Company could incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
described in the preceding paragraph.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) (i) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest
or participation in, or measured by, its profits, or (ii) pay any Indebtedness
owed to the Company or any of its Restricted Subsidiaries, (b) make loans or
advances or capital contributions to the Company or any of its Restricted
Subsidiaries, or (c) sell, lease or transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reasons of (i) Existing Indebtedness as in
effect on the Issuance Date, (ii) the Credit Agreement, PROVIDED that the
encumbrances or restrictions contained in such agreement as amended, modified,
supplemented, restructured, renewed, restated, refunded, replaced or refinanced
or extended from time to time on one or more occasions are no more restrictive
than those contained in the Credit Agreement as in effect on the Issuance Date,
(iii) the Indenture and the Notes, (iv) applicable law, (v) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries or of any Person that becomes a Restricted
Subsidiary as in effect at the time of such acquisition or such Person becoming
a Restricted Subsidiary (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition or such Person becoming
a Restricted Subsidiary), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person, so acquired, PROVIDED that the
Consolidated Cash Flow of such Person is not taken into account (to the extent
of such restriction) in determining whether such acquisition was permitted by
the terms of the Indenture, (vi) restrictions of the nature described in clause
(c) above by reason of customary non-assignment provisions in leases entered
into in the ordinary course of business and consistent with past practices,
(vii) purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (c) above on
the property so acquired, (viii) Permitted Refinancings, PROVIDED that the
encumbrance or restrictions contained in the agreements governing such Permitted
Refinancings are no more restrictive than those contained in the agreements
governing the Indebtedness or Disqualified Stock being refinanced, or (ix)
customary restrictions in security agreements or mortgages securing Indebtedness
of a
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Restricted Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements and mortgages.
PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT. The Indenture
provides that (i) the Company will not incur, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is senior in right of payment
to the Notes and subordinate or junior in right of payment to any other
Indebtedness of the Company and (ii) no Guarantor will incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is senior
in right of payment to the Guarantee by such Guarantor of the Notes and
subordinate or junior in right of payment to any other Indebtedness of the
Guarantor.
LIENS. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly create,
incur, assume or suffer to exist any Lien that secures obligations under any
Indebtedness which is PARI PASSU with or subordinated to the Notes, unless the
Notes are equally and ratably secured with the obligations so secured or until
such time as such obligations are no longer secured by a Lien.
MERGER, CONSOLIDATION OR SALE OF ASSETS. The Indenture provides that the
Company may not consolidate or merge with or into (whether or not the Company is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another corporation, Person or entity unless
(i) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have ben made assumes all the obligations
of the Company pursuant to a supplemental indenture under the Notes and the
Indenture; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) the Company or any Person formed by or surviving any
such consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (A) will have
Consolidated Net Worth (immediately after the transaction) equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the covenant described under the caption "--INCURRENCE OF INDEBTEDNESS
AND ISSUANCE OF CERTAIN CAPITAL STOCK."
Upon any such consolidation, merger, lease, conveyance or transfer in
accordance with the foregoing, the successor Person formed by such consolidation
or into which the Company is merged or to which such lease, conveyance or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor had been named as the Company therein and thereafter
(except in the case of a lease) the predecessor corporation will be relieved of
all further obligations and covenants under the Indenture and the Notes.
TRANSACTIONS WITH AFFILIATES. The Indenture provides that the Company will
not, and will not permit any of its Restricted Subsidiaries to, sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or Guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "AFFILIATE TRANSACTION"), unless (a) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary on an arm's
length basis with an unrelated Person, (b) the Company delivers to the Trustee
(i) with respect to any Affiliate Transaction involving aggregate payments in
excess of $5.0 million, an officer's certificate certifying that such Affiliate
Transaction complies with clause (a) above and such Affiliate Transaction is
approved by a majority of the
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disinterested members of the Board of Directors and (ii) with respect to any
Affiliate Transaction involving aggregate payments in excess of $10.0 million
(other than an Affiliate Transaction involving the acquisition or disposition of
a lodging facility by the Company or a Restricted Subsidiary of the Company), an
opinion as to the fairness to the Company or such Restricted Subsidiary from a
financial point of view issued, at the option of the Company, by an investment
banking firm of national standing or a Qualified Appraiser and (c) the Company
delivers to the Trustee in the case of an Affiliate Transaction involving the
acquisition or disposition of a lodging facility by the Company or a Restricted
Subsidiary of the Company and (x) involving aggregate payments of more than $5.0
million and less than $25.0 million, an appraisal by a Qualified Appraiser to
the effect that the transaction is being undertaking at fair market value or (y)
involving aggregate payments of $25.0 million or more, an opinion as to the
fairness of the transaction to the Company or such Restricted Subsidiary from a
financial point of view issued by an investment banking firm of national
standing; PROVIDED, HOWEVER, that the following shall not be deemed Affiliate
Transactions: (A) any employment, deferred compensation, stock option,
noncompetition, consulting or similar agreement entered into by the Company or
any of its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted Subsidiary,
(B) transactions between or among the Company and/or its Restricted
Subsidiaries, (C) the incurrence of fees in connection with the provision of
hotel management services, provided that such fees are paid in the ordinary
course of business and are consistent with past practice and (D) Restricted
Payments permitted by the provisions of the Indenture described above under the
covenant described under the caption "--RESTRICTED PAYMENTS."
LINE OF BUSINESS. The Indenture provides that for so long as any Notes are
outstanding, the Company will not, and will not permit any of its Restricted
Subsidiaries to, engage in any business or activity other than a
Hospitality-Related Business.
PAYMENTS FOR CONSENT. The Indenture provides that neither the Company nor
any of its Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of any Notes for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or agreed to be paid to all Holders of the
Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
SUBSIDIARY GUARANTEES
As of the Issuance Date, no Subsidiary of the Company is required to act as
a Guarantor in respect of the Notes. However, the Indenture provides that, prior
to guaranteeing any other Indebtedness of the Company (other than the Credit
Agreement), a Restricted Subsidiary that is also a Significant Subsidiary must
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Restricted Subsidiary shall Guarantee, on an unsecured senior subordinated
basis, all of the Obligations of the Company with respect to the Notes together
with an opinion of counsel (which counsel may be an employee of the Company) to
the effect that the supplemental indenture has been duly executed and delivered
by such Restricted Subsidiary and is in compliance in all material respects with
the terms of the Indenture. The Indebtedness represented by any such Guarantee
(i.e., the payment of Obligations on the Notes) will be subordinated on the same
basis to Senior Debt of the Guarantor as the Notes are subordinated to Senior
Debt of the Company. The Credit Agreement generally prohibits the incurrence of
any such Guarantee unless and until such time as the indebtedness under the
Credit Agreement is repaid in full.
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity, whether or not affiliated with such Guarantor
(other than the Company or another Guarantor), unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental
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indenture in form and substance reasonably satisfactory to the Trustee under the
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists and (iii) such Guarantor, or any Person formed by or
surviving any such consolidation or merger, (A) would have Consolidated Net
Worth (immediately after giving effect to such transaction), equal to or greater
than the Consolidated Net Worth of such Guarantor immediately preceding the
transaction and (B) would be permitted by virtue of the Company's Fixed Charge
Coverage Ratio to incur, immediately after giving effect to such transaction, at
last $1.00 of additional Indebtedness pursuant to the Fixed Charged Coverage
Ratio set forth in the covenant described above under the caption "--CERTAIN
COVENANTS --INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF CERTAIN CAPITAL STOCK."
The Indenture provides that in the event of a sale or other disposition of
all or substantially all of the assets of any Guarantor, which sale or other
disposition is otherwise in compliance with the terms of the Indenture, by way
of merger, consolidation or otherwise, or a sale or other disposition of all of
the capital stock of any Guarantor, then such Guarantor (in the event of a sale
or other disposition, by way of such a merger, consolidation or otherwise, of
all of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) will be automatically and unconditionally
released and relieved of any obligations under its Subsidiary Guarantee.
For purposes of a Guarantee with respect to the Notes, each Guarantor's
liability will be that amount from time to time equal to the aggregate liability
of such Guarantor thereunder, but shall be limited to the lesser of (i) the
aggregate amount of the obligations of the Company under the Notes and the
Indenture or (ii) the amount, if any, which would not have (A) rendered such
Guarantor "INSOLVENT" (as such term is defined in the Federal Bankruptcy Code
and in the Debtor and Creditor Law of the State of New York) or (B) left it with
unreasonably small capital at the time its Guarantee with respect to the Notes
was entered into, after giving effect to the incurrence of existing Indebtedness
immediately prior to such time, PROVIDED that, it shall be a presumption in any
lawsuit or other proceeding in which a Guarantor is a party that the amount
guaranteed pursuant to the Guarantee with respect to the Notes is the amount set
forth in clause (i) above unless any creditor, or representative of creditors of
such Guarantor, or debtor in possession or trustee in bankruptcy of the
Guarantor, otherwise proves in such a lawsuit that the aggregate liability of
the Guarantor is limited to the amount set forth in clause (ii). The Indenture
provides that, in making any determination as to the solvency or sufficiency of
capital of a Guarantor in accordance with the previous sentence, the right of
such Guarantor to contribution from other Guarantors and any other rights such
Guarantor may have, contractual or otherwise, shall be taken into account.
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes all quarterly and annual financial information that would be required to
be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants. In addition, whether or not required by the rules and
regulations of the Commission, the Company will submit a copy of all such
information with the Commission for public availability (unless the Commission
will not accept such a submission) and file such information with the Trustee
and make such information available to investors and securities analysts who
request it in writing. In addition, for so long as the Notes are outstanding,
the Company will continue to provide to Holders and to prospective purchasers of
Notes the information required by Rule 144A(d)(4).
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EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not such payment shall be
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due of the principal of or premium, if any, on the Notes at
maturity, upon redemption or otherwise (including the failure to make a payment
to purchase Notes tendered pursuant to a Change of Control Offer or an Asset
Sale Offer) (whether or not such payment shall be prohibited by the
subordination provisions of the Indenture); (iii) failure by the Company or any
Restricted Subsidiary to comply with the covenant described under the caption
"--CERTAIN COVENANTS--MERGER, CONSOLIDATION OR SALES OF ASSETS"; (iv) failure by
the Company or any Restricted Subsidiary for 30 days in the performance of any
other covenant, warranty or agreement in the Indenture or the Notes after
written notice shall have been given to the Company by the Trustee or to the
Company and the Trustee from Holders of at least 25% in principal amount of the
Notes then outstanding, (v) the failure to pay at final stated maturity (giving
effect to any applicable grace periods and any extensions thereof) the principal
amount of Non-Recourse Indebtedness of the Company or any of its Restricted
Subsidiaries with an aggregate principal amount in excess of the lesser of (A)
10% of the total assets of the Company and its Restricted Subsidiaries measured
as of the end of the Company's most recent fiscal quarter for which internal
financial statements are available immediately prior to the date on which such
default occurred, determined on a PRO FORMA basis, and (B) $50 million, and such
failure continues for a period of 10 days or more, or the acceleration of the
final stated maturity of any such Non-Recourse Indebtedness (which acceleration
is not rescinded, annulled or otherwise cured within 10 days of receipt by the
Company or such Restricted Subsidiary of notice of any such acceleration); (vi)
the failure to pay at final stated maturity (giving effect to any applicable
grace periods and any extensions thereof) the principal amount of any
Indebtedness (other than Non-Recourse Indebtedness) of the Company or any
Restricted Subsidiary of the Company, or the acceleration of the final stated
maturity of any such Indebtedness if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
in default for failure to pay principal at final maturity or which has been
accelerated, in each case with respect to which the 10-day period described
above has passed, aggregates $10.0 million or more at any time; (vii) failure by
the Company or any of its Restricted Subsidiaries to pay final judgments
rendered against them (other than judgment liens without recourse to any assets
or property of the Company or any of its Restricted Subsidiaries other than
assets or property securing Non-Recourse Indebtedness) aggregating in excess of
$10.0 million, which judgments are not paid, discharged or stayed for a period
of 60 days (other than any judgments as to which a reputable insurance company
has accepted full liability); (viii) except as permitted by the Indenture, any
Guarantee with respect to the Notes shall be held in a judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor (or its successors or assigns), or any Person acting on
behalf of such Guarantor (or its successors or assigns), shall deny or disaffirm
its obligations or shall fail to comply with any obligations under its
Guarantee; and (ix) certain events of bankruptcy or insolvency with respect to
the Company, any Guarantor or any of the Company's Subsidiaries that would
constitute a Significant Subsidiary or any group of the Company's Subsidiaries
that, taken together, would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any of its Subsidiaries that would
constitute a Significant Subsidiary or any group of its Subsidiaries that, taken
together, would constitute a Significant Subsidiary or any Guarantor, all
outstanding Notes will become due and payable without further action or notice.
Under certain circumstances, the Holders of a majority in principal amount of
the outstanding Notes may rescind any acceleration with respect to the Notes and
its consequences. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee
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in its exercise of any trust or power. The Trustee may withhold from Holders of
the Notes notice of any continuing Default or Event of Default (except a Default
or Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The Indenture provides that no Holder of a Note may pursue a remedy under
the Indenture unless (i) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default or the Trustee receives such notice from
the Company; (ii) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue a remedy;
(iii) such Holder of a Note or Holders of Notes offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense; (iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and (v) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request; PROVIDED, HOWEVER, that such provision
does not affect the right of a Holder of a Note to sue for enforcement of any
overdue payment thereon.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, including with respect to any
Restricted Payments made during such year, the basis upon which the calculations
required by the covenants described under the caption "--CERTAIN
COVENANTS--RESTRICTED PAYMENTS" were computed (which calculations may be based
on the Company's latest available financial statements) and the Company is
required upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder, past, present
or future of the Company, any successor Person or any Guarantor, as such, shall
have any liability for any obligations of the Company under the Notes, any
Guarantee thereof or the Indenture or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver and release
may not be effective to waive or release liabilities under the federal
securities laws and it is the view of the Commission that such a waiver or
release is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations and the obligations of any Guarantor discharged with respect to the
outstanding Notes ("LEGAL DEFEASANCE") except for (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due, (ii) the
Company's and the Guarantors obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and money
for security payments held in trust, (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and the Company's and the Guarantors obligations
in connection therewith and (iv) the Legal Defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect to
have the obligations of the Company and any Guarantor released with respect to
certain covenants that are described in the Indenture ("COVENANT DEFEASANCE")
and thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "EVENTS OF
DEFAULT" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be
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sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Notes on the stated maturity or on the applicable redemption date,
as the case may be, of such principal or installment of principal of, premium,
if any, or interest on the outstanding Notes; (ii) in the case of Legal
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel (which counsel may be an employee of the Company or any Subsidiary of
the Company) reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the Issuance Date, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel (which counsel may be an employee of the Company or any
Subsidiary of the Company) reasonably acceptable to the Trustee confirming that
the Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds applied to such deposit) or insofar as
Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 123rd day after the date of deposit (or greater
period of time in which any such deposit of trust funds may remain subject to
bankruptcy or insolvency laws insofar as those apply to the deposit by the
Company); (v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that, as of the date of such opinion, (A) the trust funds
will not be subject to any rights of holders of Indebtedness other than the
Notes and (B) assuming no intervening bankruptcy of the Company between the date
of deposit and the 123rd day following the deposit and assuming no Holder of
Notes is an insider of the Company, after the 123rd day following the deposit,
the trust funds will not be subject to the effects of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors rights generally
under any applicable United States or state law; (vii) the Company shall have
delivered to the Trustee an officer's certificate stating that the deposit was
not made by the Company with the intent of preferring the Holders of Notes over
the other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; and (viii) the
Company shall have delivered to the Trustee an officer's certificate and an
opinion of counsel (which counsel may be an employee of the Company), each
stating, that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of Notes)
as to all outstanding Notes when either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes that have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been delivered to the
Trustee for cancellation or (b)(i) all such Notes not theretofore delivered to
the Trustee for cancellation have become due and payable by their terms or shall
have been called for redemption and the Company has irrevocably deposited or
caused to be deposited with the Trustee as trust funds in trust for such purpose
an amount of money sufficient to pay and discharge the entire Indebtedness on
the Notes
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not theretofore delivered to the Trustee for cancellation or redemption, for the
principal amount, premium and Liquidated Damages, if any, and accrued interest
to the date of such deposit; (ii) the Company has paid all other sums payable by
it under the Indenture; and (iii) the Company has delivered irrevocable
instructions to the Trustee to apply the deposited money toward the payment of
the Notes at maturity or on the redemption date, as the case may be. In
addition, the Company must deliver an officer's certificate and an opinion of
counsel stating that all conditions precedent to satisfaction and discharge have
been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar (who will initially be the Trustee) and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Note selected for redemption. Also, the Company is not
required to transfer or exchange any Note for a period of 15 days before a
selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs of this
subsection, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for Notes), and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes
(including consent obtained in connection with a tender offer or exchange offer
for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder of Notes): (i) reduce
the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal of or change the fixed maturity
of any Notes or alter the provisions with respect to the redemption of the
Notes; (iii) reduce the rate of or change the time for payment of interest on
any Note; (iv) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration); (v) make any Note payable in money other than that
stated in the Notes; (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the Notes;
(vii) waive a redemption payment with respect to any Note; (viii) make any
change in the foregoing amendment and waiver provisions; (ix) modify or change
any provision of the Indenture or the related definitions affecting the
subordination or ranking of the Notes or any Guarantee thereof in a manner which
adversely affects the Holders in any material respect; or (x) make any change to
the covenants described under the caption "REPURCHASE AT THE OPTION OF HOLDERS."
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of the Notes in the case of a
merger, consolidation or sale of assets, to release a Guarantor in accordance
with the Indenture, to make any change that would provide any additional rights
or benefits to the Holders of the Notes (including providing for Guarantees with
respect to the Notes pursuant to the covenant described under the caption
"--SUBSIDIARY GUARANTEES") or that does not adversely affect the legal rights
under the Indenture of any such Holder, or to comply with
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requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company to obtain payment of claims in
certain cases or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its powers, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who received this Prospectus may obtain a copy of the Indenture and
the Registration Rights Agreements without charge by writing to CapStar Hotel
Company, 1010 Wisconsin Avenue, N.W., Suite 650, Washington, D.C. 20007.
Attention: John Emery, Corporate Secretary.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full description of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person and (ii)
Indebtedness encumbering any asset acquired by such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "CONTROL"
(including, with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"ASSET SALE" means (i) the sale, lease (other than operating leases in
respect of facilities which are ancillary to the operation of the Company's or a
Restricted Subsidiary's Hospitality Related Business properties or assets),
conveyance or other disposition of any property or assets of the Company or any
Restricted Subsidiary (including by way of a sale and leaseback transaction),
(ii) the issuance or sale of Equity Interests of any of the Company's Restricted
Subsidiaries or (iii) any Event of Loss, other than, with respect to clauses
(i), (ii) and (iii) above, the following: (1) the sale or disposition of
personal property held for sale in the ordinary course of business, (2) the sale
or disposal of damaged, worn out or other obsolete property in the ordinary
course of business as long as such property is no longer necessary for the
proper
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conduct of the business of the Company or such Restricted Subsidiary, as
applicable, (3) the transfer of assets by the Company to a Restricted Subsidiary
of the Company or by a Restricted Subsidiary of the Company to the Company or to
another Restricted Subsidiary of the Company, (4) (A) the exchange of one or
more lodging facilities and related assets held by the Company or a Restricted
Subsidiary of the Company for one or more lodging facilities and related assets
of any person or entity, PROVIDED, that if any other assets are received by the
Company or such Restricted Subsidiary in such exchange, such other consideration
is in cash or Cash Equivalents; PROVIDED, FURTHER, that such cash or Cash
Equivalent consideration shall be deemed to be cash proceeds of an Asset Sale
for the purposes of calculating "Net Proceeds" and applying Net Proceeds, if
any, as described in the covenant "Asset Sales," or (B) the issuance of OP Units
or Preferred OP Units as full or partial consideration for the acquisition of
lodging facilities and related assets, PROVIDED, that the Board of Directors of
the Company has determined that the terms of any exchange or acquisition are
fair and reasonable and that the fair market value of the assets received by the
Company, as set forth in an opinion of a Qualified Appraiser, are equal to or
greater than the fair market value of the assets exchanged, sold or issued by
the Company or a Restricted Subsidiary of the Company, (5) any Restricted
Payment, permitted under the covenant described under the caption "-- CERTAIN
COVENANTS--RESTRICTED PAYMENTS," (6) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
compliance with the provisions of the Indenture described above under the
captions "--REPURCHASE AT THE OPTION OF HOLDERS--CHANGE OF CONTROL" and
"--CERTAIN COVENANTS--MERGER, CONSOLIDATION OR SALE OF ASSETS," (7) the
conversion of or foreclosure or any mortgage or note, provided that the Company
or a Restricted Subsidiary receives the real property underlying any such
mortgage or note or (8) any transaction or series of related transactions that
would otherwise be an Asset Sale where the fair market value of the assets,
sold, leased, conveyed or otherwise disposed of was less than $5.0 million or an
Event of Loss or related series of Events of Loss pursuant to which the
aggregate value of property or assets involved in such Event of Loss or Events
of Loss is less than $5.0 million.
"ASSUMED INDEBTEDNESS" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person and (ii)
Indebtedness encumbering any asset acquired by such specified Person, in each
case excluding Indebtedness incurred in connection with, or in contemplation of
such other Person merging with or into or becoming a Subsidiary of such
specified Person.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including, without
limitation, with respect to partnerships, partnership interests (whether general
or limited) and any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, such partnership.
"CASH EQUIVALENTS" means (i) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (ii) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers
acceptances with maturities not exceeding six months from the date of
acquisition and overnight bank deposits, in each case with any domestic
commercial bank having capital and surplus in excess of $500 million, (iii)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i) and (ii) entered into with any
financial institution meeting the qualifications specified in clause (ii) above,
(iv) commercial paper or commercial paper master notes having a rating of at
least P-2 or the equivalent thereof by Moody's Investors Service, Inc. or at
least A-2 or the equivalent thereof by Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition, (v) money market
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mutual funds that provide daily purchase and redemption features, and (vi)
corporate debt with maturities of not greater than six months and with a rating
of at least A or the equivalent thereof by Standard & Poor's Corporation and a
rating of at least A2 or the equivalent thereof by Moody's Investors Service,
Inc.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of the Company's assets to any person or group (as such term
is used in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company, (iii) the acquisition
by any person or group (as such term is used in Section 13(d)(3) of the Exchange
Act) of a direct or indirect interest in more than 50% of the ownership of the
Company or the voting power of the voting stock of the Company by way of
purchase, merger or consolidation or otherwise (other than a creation of a
holding company that does not involve a change in the beneficial ownership of
the Company as a result of such transaction), (iv) the merger or consolidation
of the Company with or into another corporation or the merger of another
corporation into the Company with the effect that immediately after such
transaction the stockholders of the Company immediately prior to such
transaction hold less than 50% of the total voting power of all securities
generally entitled to vote in the election of directors, managers, or trustees
of the Person surviving such merger or consolidation or (v) the first day on
which a majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus: (a) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale, to the extent such losses were deducted in computing Consolidated
Net Income, plus (b) provisions for taxes based on income or profits of such
Person for such period, to the extent such provision for taxes was included in
computing Consolidated Net Income, plus (c) Consolidated Interest Expense of
such Person for such period to the extent such expense was deducted in computing
Consolidated Net Income, plus (d) Consolidated Depreciation and Amortization
Expense of such Person for such period, to the extent deducted in computing
Consolidated Net Income less (e) noncash items increasing such Consolidated Net
Income for such period in each case, on a consolidated basis for such Person and
its Restricted Subsidiaries and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, the depreciation and amortization of and the interest expense of, a
Restricted Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Restricted Subsidiary was included in
calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to such Person by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders. Any
calculation of the Consolidated Cash Flow of an individual hotel property shall
be calculated in a manner consistent with the foregoing.
"CONSOLIDATED CURRENT LIABILITIES" as of the date of determination means the
aggregate amount of liabilities of the Company and its consolidated Subsidiaries
which may properly be classified as current liabilities (including taxes payable
as accrued), on a consolidated basis, after eliminating (i) all intercompany
items between the Company and any Subsidiary and (ii) all current maturities of
long-term Indebtedness, all as determined in accordance with GAAP consistently
applied.
"CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means, with respect to
any Person for any period, the total amount of depreciation and amortization
expense (including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and the
total amount of non-cash charges (other than non-cash charges that represent an
accrual or reserve for cash charges in future periods or which involved a cash
expenditure in a prior period) of such Person and its Restricted Subsidiaries
for such period on a consolidated basis as determined in accordance with GAAP.
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"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, without duplication, the sum of (a) interest expense, whether paid or
accrued, to the extent such expense was deducted in computing Consolidated Net
Income (including amortization of original issue discount, non-cash interest
payments, the interest component of Capital Lease Obligations, and net payments
(if any) pursuant to Hedging Obligations, but excluding amortization of deferred
financing fees), (b) commissions, discounts and other fees and charges paid or
accrued with respect to letters of credit and bankers acceptance financing and
(c) interest for which such Person or its Restricted Subsidiaries is liable,
whether or not actually paid, pursuant to Indebtedness or under a Guarantee of
Indebtedness of any other Person, in each case, calculated for such Person and
its Restricted Subsidiaries for such period on a consolidated basis as
determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP,
PROVIDED, that the following shall be excluded: (i) the Net Income of any Person
that is not a Restricted Subsidiary or that is accounted for by the equity
method of accounting shall be excluded, whether or not distributed to the
Company or one of its Restricted Subsidiaries, (ii) the Net Income of any Person
that is a Restricted Subsidiary and that is restricted from declaring or paying
dividends or other distributions, directly or indirectly, by operation of the
terms of its charter, any applicable agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation or otherwise shall be included
only to the extent of the amount of dividends or distributions paid to the
referent Person or a Restricted Subsidiary, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded and (iv) the cumulative effect of changes
in accounting principles shall be excluded.
"CONSOLIDATED NET TANGIBLE ASSETS" as of any date of determination, means
the total amount of assets (less accumulated depreciation and amortization,
allowances for doubtful receivables, other applicable reserves and other similar
items properly deducted in determining net assets) which would appear on a
consolidated balance sheet of the Company and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, and after giving
effect to purchase accounting and after deducting therefrom Consolidated Current
Liabilities and, to the extent otherwise included, the amounts of: (i) minority
interests in consolidated Subsidiaries held by Persons other than the Company or
a Subsidiary; (ii) excess of cost over fair value of assets of businesses
acquired, as determined in good faith by the Board of Directors; (iii) any
revaluation or other write-up in book value of assets subsequent to the Issuance
Date as a result of a change in the method of valuation in accordance with GAAP
consistently applied; (iv) unamortized debt discount and expenses and other
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, licenses, organization or developmental expenses and
other intangible items; (v) treasury stock; and (vi) cash set apart and held in
a sinking or other analogous fund established for the purpose of redemption or
other retirement of Capital Stock to the extent such obligation is not reflected
in Consolidated Current Liabilities.
"CONSOLIDATED NET WORTH" means, with respect to any Person, as of any date
of determination, the sum of (i) the consolidated equity of the common
stockholders of such Person and its consolidated Subsidiaries as of such date
plus (ii) the respective amount reported on such Person's balance sheet as of
such date with respect to any series of Preferred Stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such Preferred Stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Issuance Date in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all Investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, Permitted
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Investments) and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issuance Date or (ii) was nominated for election or elected to
such Board of Directors with the affirmative vote of at least a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"CREDIT AGREEMENT" means the senior credit facility dated June 30, 1997,
entered into between and among the Company and the lenders party thereto,
providing for borrowings and letters of credit, including any related notes,
security documentation, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case as amended, modified,
supplemented, restructured, renewed, restated, refunded, replaced or refinanced
or extended, in each case on a senior basis, from time to time on one or more
occasions.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event if Default.
"DESIGNATED SENIOR DEBT" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$25.0 million and is specifically designated in the instrument evidencing such
Senior Debt as "DESIGNATED SENIOR DEBT" by the Company.
"DISQUALIFIED STOCK" means any Capital Stock (other than OP Units and
Preferred OP Units) which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the first anniversary of the date on which the
Notes mature.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for Capital Stock).
"EVENT OF LOSS" means, with respect to any property or asset (tangible or
intangible, real or personal), any of the following: (A) any loss, destruction
or damage of such property or asset or (B) any actual condemnation, seizure or
taking by the power of eminent domain or otherwise of such property or asset, or
confiscation of such property or asset or the requisition of the use of such
property or asset.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted
Subsidiaries in existence on the Issuance Date (after giving effect to the use
of proceeds of the Offering), excluding, for this purpose, amounts outstanding
under the Credit Agreement as in effect on the Issuance Date.
"EXISTING PREFERRED OP UNITS" means Preferred OP Units issued and
outstanding on the date of the Indenture.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings that provide
working capital in the ordinary course of business) or issues or redeems
Preferred Stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"CALCULATION DATE"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness, or such issuance or redemption of Preferred Stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. For purposes of making the computation referred to above, acquisitions,
dispositions and discontinued operations (as determined in accordance with GAAP)
that have been made by the Company or any of its Restricted
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Subsidiaries, including all mergers, consolidations and dispositions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be calculated on a pro forma basis assuming
that all such acquisitions, dispositions, discontinued operations, mergers,
consolidations (and the reduction of any associated fixed charge obligations
resulting therefrom) had occurred on the first day of the four-quarter reference
period.
"FIXED CHARGES" means, with respect to any Person for any period, the sum of
(a) Consolidated Interest Expense of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued, to the extent such expense was
deducted in computing Consolidated Net Income and (b) the product of (i) all
cash dividend or distribution payments on any series of Preferred Stock of such
Person or its Restricted Subsidiaries (other than Preferred Stock owned by such
Person or its Restricted Subsidiaries), times (ii) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP;
PROVIDED, HOWEVER, that if the cash dividend or distribution on such Preferred
Stock is deductible for federal tax purposes, then the fraction shall be equal
to one.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States of America is
pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) or otherwise
incurring, assuming or becoming liable for the payment of any principal, premium
or interest, direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness or other obligation (including agreements to
keep-well and to purchase assets, goods, securities or services).
"GUARANTOR" means a Restricted Subsidiary that becomes a guarantor of the
Notes pursuant to the terms of the Indenture, and its successor, if any.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"HOSPITALITY-RELATED BUSINESS" means the lodging business and other
businesses necessary for, incident to, in support of, connected with,
complementary to or arising out of the lodging business, including, without
limitation, (i) developing, managing, operating, improving or acquiring lodging
facilities, restaurants and other food-service facilities and convention or
meeting facilities, and marketing services related thereto, (ii) acquiring,
developing, operating, managing or improving any real estate taken in
foreclosure (or similar settlement) by the Company or any of its Restricted
Subsidiaries, or any real estate ancillary or connected to any lodging owned,
managed or operated by the Company or any of its Restricted Subsidiaries, (iii)
owning and managing mortgages in, or other Indebtedness secured by Liens on
lodging and real estate related or ancillary to lodging or (iv) other related
activities thereto.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing any
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Hedging Obligations, except any such balance that constitutes an accrued expense
or trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, and also
includes, to the extent not otherwise included, the Guarantee of any
Indebtedness of such Person or any other Person.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
the Company no longer owns, directly or indirectly, greater than 50% of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.
"ISSUANCE DATE" means the date of the Indenture.
"LIEN" means, with respect to any asset, or income or profits therefrom, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"MAKE-WHOLE AMOUNT" with respect to a Note means an amount equal to the
excess, if any, of (i) the present value of the remaining interest, premium and
principal payments due on such Note as if such Note were redeemed on August 15,
2002, computed using a discount rate equal to the Treasury Rate plus 62.5 basis
points, over (ii) the outstanding principal amount of such Note. "TREASURY RATE"
is defined as the yield to maturity at the time of the computation of United
States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15(519),
which has become publicly available at least two business days prior to the date
of the redemption notice or, if such Statistical Release is no longer published,
any publicly available source of similar market date) most nearly equal to the
then remaining maturity of the Notes assuming redemption of the Notes on August
15, 2002; PROVIDED, HOWEVER, that if the Make-Whole Average Life of such Note is
not equal to the constant maturity of a United States Treasury security for
which such yields are given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the Make-Whole Average Life of such Notes is less than one
year, the weekly average yield on actually traded United State Treasury
securities adjusted to a constant maturity of one year shall be used.
"MAKE-WHOLE AVERAGE LIFE" means the number of years (calculated to the nearest
one-twelfth) between the date of redemption and August 15, 2002.
"MAKE-WHOLE PRICE" with respect to a Note means the greater of (1) the sum
of the outstanding principal amount and the Make-Whole Amount of such Note, and
(ii) the redemption price of such Note on August 15, 2002, determined pursuant
to the Indenture (104.375% of the principal amount).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any Asset Sale, and excluding any
extraordinary gain (but not loss), together with any related provision for taxes
on such extraordinary gain (but not loss).
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"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale, net of the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions), and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness (a) as to which neither the
Company nor any of its Restricted Subsidiaries (i) provides credit support
(other than in the form of a Lien on an asset serving as security for
Non-Recourse Indebtedness) pursuant to any undertaking, agreement or instrument
that would constitute Indebtedness, (ii) is directly or indirectly liable (other
than in the form of a Lien on an asset serving as security for Non-Recourse
Indebtedness) or (iii) constitutes the lender and (b) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OP UNITS" means limited partnership interests in CapStar Management
Company, L.P., CapStar Management Company II, L.P. or any successor operating
partnership that require the issuer thereof to pay dividends or distributions
which are tied to dividends paid on the Company's common stock and which by
their terms may be converted into, or exercised or redeemed for, cash or the
Company's common stock.
"PERMITTED INVESTMENTS" means any (a) Investments in the Company, (b)
Investments in any Restricted Subsidiary, (c) Investments in Cash Equivalents,
(d) Investments by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company, (e) Investments in Unrestricted Subsidiaries or Permitted Joint
Ventures, provided that such Investments are in entities solely or principally
engaged in Hospitality-- Related Businesses and that the aggregate of such
Investments does not exceed the greater of (i) $25.0 million or (ii) 5% of
Consolidated Net Tangible Assets and (f) Investments in Unrestricted
Subsidiaries formed to acquire the Radisson Plaza, Lexington, Kentucky, the
Embassy Suites Center City, Philadelphia and the Doubletree Hotel, Austin, in an
aggregate amount not to exceed $50.0 million.
"PERMITTED JOINT VENTURE" means any corporation, partnership, limited
liability company or partnership or other similar entity formed to hold lodging
properties for which the Company holds a management contract related thereto in
which the Company owns less than a 50.1% interest.
"PERMITTED JUNIOR SECURITIES" means Equity Interest in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to a
greater extent than, the Notes are subordinated to Senior Debt pursuant to the
Indenture.
"PERMITTED REFINANCING" means Refinancing Indebtedness or Refinancing
Disqualified Stock, as the case may be, to the extent (a) the principal amount
of Refinancing Indebtedness or the liquidation preference amount of Refinancing
Disqualified Stock, as the case may be, does not exceed the principal amount of
Indebtedness or the liquidation preference amount of Disqualified Stock, as the
case may be, so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of premiums and reasonable expenses incurred in connection
therewith); (b) such Refinancing Indebtedness or Refinancing Disqualified Stock,
as the case may be, is scheduled to mature or is redeemable at the option of the
holder,
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as the case may be, no earlier than the Indebtedness or Disqualified Stock, as
the case may be, being refinanced; (c) in the case of Refinancing Indebtedness,
the Refinancing Indebtedness has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (d) in the case
of Refinancing Disqualified Stock, the Disqualified Stock has a Weighted Average
Life to Mandatory Redemption equal to or greater than the Weighted Average Life
to Mandatory Redemption of the Disqualified Stock being extended, refinanced,
renewed, replaced, defeased or refunded; (e) if the Indebtedness or the
Disqualified Stock, as the case may be, being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated or junior in right of payment to
the Notes, the Refinancing Indebtedness or Refinancing Disqualified Stock, as
the case may be, is subordinated or junior in right of payment to the Notes on
terms at least as favorable to the holders of Notes as those contained in the
documentation governing the Indebtedness or the Disqualified Stock, as the case
may be, being extended, refinanced, renewed, replaced, defeased or refunded and
(f) such Refinancing Indebtedness or Refinancing Disqualified Stock is incurred
or issued either by the Company or by a Restricted Subsidiary who is the obligor
on the Indebtedness or Disqualified Stock being extended, refinanced, renewed,
replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PREFERRED OP UNITS" means limited partnership interests in CapStar
Management Company, L.P., CapStar Management Company II, L.P. or any successor
operating partnership that require the issuer thereof to pay regularly scheduled
fixed distributions thereon, which are not related to dividends on the Company's
common stock, and which by their terms may be converted into, or exercised or
redeemed for, cash or the Company's common stock.
"PREFERRED STOCK" means (i) any Equity Interest with preferential right in
the payment of dividends or distributions or upon liquidation, and (ii) any
Disqualified Stock.
"REFINANCING DISQUALIFIED STOCK" means Disqualified Stock issued in exchange
for, or the proceeds of which are used, to extend, refinance, renew, replace,
defease or refund Disqualified Stock or Indebtedness permitted to be issued
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described under the caption "--CERTAIN
COVENANTS--INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF CERTAIN CAPITAL STOCK" or
Indebtedness referred to in clauses (iii), (v), (vii), (ix) and (x) of the
second paragraph of such covenant.
"REFINANCING INDEBTEDNESS" means Indebtedness issued in exchange for, or the
proceeds of which are used to extend, refinance renew, replace, defease or
refund Indebtedness permitted to be incurred pursuant to the Fixed Charge
Coverage Ratio test set forth in the covenant described under the caption
"--CERTAIN COVENANTS--INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF CERTAIN CAPITAL
STOCK" or Indebtedness referred to in clauses (iii), (v), (vii), (ix) and (x) of
the second paragraph of the covenant described under the caption "--CERTAIN
COVENANTS--INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF CERTAIN CAPITAL STOCK."
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative in respect of Designated Senior Debt, PROVIDED, that if, and for
so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"RESTRICTED INVESTMENTS" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
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"SENIOR DEBT" means, in the case of the Company or any Guarantor, the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of the Company, whether
outstanding on the Issuance Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Notes. Without limiting the generality of the foregoing, "SENIOR DEBT" shall
also include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all Obligations of every nature of the Company under
the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, whether outstanding on the Issuance Date or thereafter
incurred, and (y) all Hedging Obligations (including Guarantees thereof),
whether outstanding on the Issuance Date or thereafter incurred. Notwithstanding
the foregoing, "SENIOR DEBT" shall not include (i) any Indebtedness of the
Company or any Guarantor to a Subsidiary of the Company or any Affiliate of the
Company or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or
guaranteed on behalf of, any shareholder, director, officer or employee of the
Company or any Subsidiary of the Company or any Subsidiary of the Company or any
Guarantor (including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) any liability for federal, state,
local or other taxes owed or owing by the Company or any Guarantor, (v) that
portion of Indebtedness incurred in violation of the Indenture provisions set
forth under "--CERTAIN COVENANTS--INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
CERTAIN CAPITAL STOCK"; PROVIDED, HOWEVER, that in the case of this clause (v),
(A) any Indebtedness issued to any person who had no actual knowledge that the
incurrence of such Indebtedness was not permitted under the Indenture and who
received on the date of issuance thereof a certificate from the Chief Financial
Officer of the Company to the effect that the issuance of such Indebtedness
would not violate the Indenture shall constitute Senior Debt and (B) any
Indebtedness arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument inadvertantly (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of
business shall constitute Senior Debt provided that such Indebtedness is
extinguished within three business days of occurrence, and (vi) any Indebtedness
which is, by its express terms, subordinated in right of payment to any other
Indebtedness of the Company or any Guarantor.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"SUBSIDIARY" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a board resolution,
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Indebtedness; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the same time from Persons who are not
affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity
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Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results (other
than pursuant to agreements relating to the management of hotels entered into
between Restricted Subsidiaries and Unrestricted Subsidiaries in the ordinary
course of such Subsidiaries' business, consistent with past practice); and (d)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the board resolution giving effect
to such designation and an officer's certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "--CERTAIN COVENANTS--RESTRICTED
PAYMENTS." If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "--CERTAIN COVENANTS--INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF CERTAIN
CAPITAL STOCK," the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary, PROVIDED that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary, and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "-- CERTAIN COVENANTS--INCURRENCE OF
INDEBTEDNESS AND ISSUANCE OF CERTAIN CAPITAL STOCK," and (ii) no Default or
Event of Default would be in existence following such designation.
"WEIGHTED AVERAGE LIFE TO MANDATORY REDEMPTION" means, when applied to any
Disqualified Stock at any date, the number of years obtained by dividing (a) the
sum of the products obtained by multiplying (x) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof, by (y)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
liquidation preference amount of such Disqualified Stock.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the New Notes will be represented by one or more
global notes in registered, global form without interest coupons (each, a
"Global Note"). Each Global Note initially will be deposited upon issuance with
the Trustee as custodian for the Depositary, in New York, New York, and
registered in the name of the Depositary or its nominee, in each case for credit
to an account of a direct or indirect participant as described below.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of the Depositary or to a successor of the
Depositary or its nominee. Beneficial interests in the Global Notes may not be
exchanged for New Notes in certificated form except in the limited circumstances
described below. See "--Exchange of Book-Entry Notes for Certificated Notes." In
addition, transfer of beneficial interests in the Global Notes will be subject
to the applicable rules and procedures of the Depositary and its direct or
indirect participants, which may change from time to time.
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DEPOSITARY PROCEDURES
The Depositary has advised the Company that the Depositary is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of Participants. The Participants
include securities brokers and dealers (including the Initial Purchaser), banks,
trust companies, clearing corporations and certain other organizations. Access
to the Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
"Indirect Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of the Depositary only through the Participants
or Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of the
Depositary are recorded on the records of the Participants and Indirect
Participants.
The Depositary has also advised the Company that pursuant to procedures
established by it, (i) upon deposit of the Global Notes, the Depositary will
credit the accounts of Participants designated by the Initial Purchaser with
portions of the principal amount of Global Notes and (ii) ownership of the New
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by the Depositary (with respect to
Participants) or by Participants and the Indirect Participants (with respect to
other owners of beneficial interests in the Global Notes). The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interest in a New Note to such persons may be limited to that extent. Because
the Depositary can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in a New Note to pledge such interest to persons or
entities that do not participate in the Depositary system, or otherwise take
actions in respect of such interests, may be affected by the lack of physical
certificate evidencing such interests. For certain other restrictions on the
transferability of the Notes see, "--Exchange of Book-Entry Notes for
Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal and premium and Liquidated Damages, if
any, and interest on any New Note represented by a Global Note registered in the
name of the Depositary or its nominee will be payable by the Trustee to the
Depositary or its nominee in its capacity as the registered Holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee will
treat the persons in whose names the New Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Company,
the Trustee nor any agent of the Company or the Trustee has or will have any
responsibility or liability for (i) any aspect of the Depositary's records or
any Participant's or Indirect Participant's records relating to or payments made
on account of beneficial ownership interests in the New Notes, or for
maintaining, supervising or reviewing any of the Depositary's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the New Notes or (ii) any other matter relating to the
actions and practices of the Depositary or any of its Participants or Indirect
Participants.
The Depositary has advised the Company that its current practices, upon
receipt of any payment in respect of securities such as the Notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in principal amount of beneficial interests in the relevant
security such as the Global Notes as shown on the records of the Depositary.
Payments by Participants and the Indirect Participants to the
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beneficial owners of Notes will be governed by standing instructions and
customary practices and will not be the responsibility of the Depositary, the
Trustee or the Company. Neither the Company nor the Trustee will be liable for
any delay by the Depositary or its Participants in identifying the beneficial
owners of the Notes, and the Company and the Trustee may conclusively rely on
and will be protected in relying on instructions from the Depositary or its
nominee as the registered owner of the Notes for all purposes.
Interests in the Global Notes will trade in the Depositary's Same-Day Funds
Settlement System and secondary market trading activity in such interests will,
therefore, settle in immediately available funds, subject in all cases to the
rules and procedures of the Depositary and its participants. In addition,
transfers between Participants in the Depositary will be effected in accordance
with the Depositary's procedures, and will be settled in same-day funds.
Each Person owning a beneficial interest in a Global Note must rely on the
procedures of the Depositary and, if such Person is not a Participant or an
Indirect Participant, on the procedures of the Participant through which such
Person owns its interest, to exercise any rights of a Holder under the Indenture
or such Global Note. The Company understands that under existing industry
practice, in the event the Company requests any action of Holders or a Person
that is an owner of a beneficial interest in a Global Note desires to take any
action that the Depositary, as the Holder of such Global Note (in such capacity,
the "Global Notes Holder"), is entitled to take, the Depositary would authorize
the Participants to take such action and the Participant would authorize Persons
owning through such Participants to take such action or would otherwise act upon
the instruction of such Persons.
The information in this section concerning the Depositary and its book-entry
systems has been obtained from sources that the Company believes to be reliable,
but the Company takes no responsibility for the accuracy thereof.
Although the Depositary has agreed to the foregoing procedures to facilitate
transfers of interests in the Global Notes among participants in the Depositary,
it is under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. None of the Company, the
Initial Purchaser or the Trustee will have any responsibility for the
performance by the Depositary or its respective participants or indirect
participants of its respective obligations under the rules and procedures
governing its operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive New Notes in registered
certificated form if (i) the Depositary (A) notifies the Company that it is
unwilling or unable to continue as depositary for the Global Note and the
Company thereupon fails to appoint a successor depositary or (B) has ceased to
be a clearing agency registered under the Exchange Act or (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause issuance of
the New Notes in certificated form. In addition, beneficial interests in a
Global Note may be exchanged for certificated Notes upon request but only upon
at least 20 days prior written notice given to the Trustee by or on behalf of
the Depositary in accordance with customary procedures. In all cases,
certificated New Notes delivered in exchange for any Global Note or beneficial
interest therein will be registered in names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures).
CERTIFICATED NOTES
Subject to certain conditions, any person having a beneficial interest in
any Global Note may, upon request to the Trustee, exchange such beneficial
interest for New Notes in the form of certificated Notes. Upon any such
issuance, the Trustee is required to register such certificated Notes in the
name of, and cause the same to be delivered to, such person or persons (or the
nominee of any thereof). In addition, if (i) the Company notifies the Trustee in
writing that the Depositary is no longer willing or able to act as a depositary
and the Company is unable to locate a qualified successor within 90 days or (ii)
the Company, at
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its option, notifies the Trustee in writing that it elects to cause the issuance
of New Notes in the form of certificated Notes under the Indenture, then, upon
surrender by the Global Notes Holder of its Global Note, New Notes in such form
will be issued to each person that the Global Notes Holder and the Depositary
identify as being the beneficial owner of the related New Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Notes Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Notes Holder or the
Depositary for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the New Notes represented
by the Global Note (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Notes Holder. With respect to
certificated New Notes, the Company will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. The Company expects that secondary trading in the
certificated New Notes will also be settled in immediately available funds.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain of the anticipated federal income tax
consequences of an exchange of Existing Notes for New Notes and of the purchase,
ownership and disposition of the New Notes is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the final, temporary and
proposed regulations promulgated thereunder, and administrative rulings and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or different interpretations. This summary does not
purport to deal with all aspects of federal income taxation that may be relevant
to a particular investor, nor any tax consequences arising under the laws of any
state, locality, or foreign jurisdiction, and it is not intended to be
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations, foreign
persons, persons that hold New Notes as part of a straddle or conversion
transaction or holders subject to the alternative minimum tax, may be subject to
special rules. In addition, the summary is limited to persons that will hold the
New Notes as "capital assets" (generally, property held for investment) within
the meaning of Section 1221 of the Code. ALL INVESTORS ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE EXCHANGE AND THE OWNERSHIP AND DISPOSITION OF NEW NOTES.
TAXATION OF HOLDERS ON EXCHANGE
Although the matter is not free from doubt, an exchange of Existing Notes
for New Notes should not be a taxable event to Holders of Existing Notes and
Holders should not recognize any taxable gain or loss as a result of such an
exchange. Accordingly, a Holder would have the same adjusted basis and holding
period in the New Notes as it had in the Existing Notes immediately before the
exchange. Further, the tax consequences of ownership and disposition of any New
Notes should be the same as the tax consequences of ownership and disposition of
Existing Notes.
MARKET DISCOUNT
If a Holder purchases a Note for an amount that is less than its principal
amount, the amount of the difference will be treated as "market discount" for
federal income tax purposes, unless such difference is less than a specified de
minimis amount. Under the market discount rules, a Holder will be required to
treat any principal payment on, or any gain on the sale, exchange, retirement or
other disposition of, a Note as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on such a Note at the time of such payment or disposition. In
addition, the Holder may be required to defer, until the maturity of the Note or
its earlier disposition in a taxable transaction, the deduction of all or a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the Holder
elects to accrue on a constant interest method. A Holder of a Note may elect to
include market discount in income currently as it accrues (on either a ratable
or constant interest method), in which case the rule described above regarding
deferral of interest deductions will not apply. This election to include market
discount in income currently, once made, applies to all market discount
obligations acquired on or after the first taxable year to which the election
applies and may not be revoked without the consent of the Internal Revenue
Service (the "IRS").
AMORTIZABLE BOND PREMIUM
A Holder that purchases a Note for an amount in excess of the sum of its
principal amount will be considered to have purchased the Note at a "premium." A
Holder generally may elect to amortize the premium over the remaining term of
the Note on a constant yield method. The amount amortized in any year will be
treated as a reduction of the Holder's interest income from the Note. Bond
premium on a
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Note held by a Holder that does not make such an election will decrease the gain
or increase the loss otherwise recognized on disposition of the Note. The
election to amortize premium on a constant yield method once made applies to all
debt obligations held or subsequently acquired by the electing Holder on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the IRS.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A Holder's tax basis in a Note will, in general, be the Holder's cost
therefor, increased by market discount previously included in income by the
Holder and reduced by any amortized premium. Upon the sale, exchange or
retirement of a Note, a Holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange or retirement
(less any accrued interest, which will be taxable as such) and the adjusted tax
basis of the Note. Except as described above with respect to market discount,
such gain or loss will be capital gain or loss and will be long-term capital
gain or loss if at the time of sale, exchange or retirement the Note has been
held for more than one year. Under current law, long-term capital gains of
individuals are, under certain circumstances, taxed at lower rates than items of
ordinary income. The deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Notes and to the proceeds of
sale of a Note made to Holders other than certain exempt recipients (such as
corporations). A 31% backup withholding tax will apply to such payments if the
Holder fails to provide a taxpayer identification number or certification of
foreign or other exempt status or fails to report in full dividend and interest
income.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such Holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
THE FOREGOING SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES TO
HOLDERS DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO A PARTICULAR HOLDER OF NOTES IN LIGHT OF HIS PARTICULAR
CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF NOTES SHOULD CONSULT SUCH
HOLDER'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE
OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OR SUBSEQUENT VERSIONS THEREOF.
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ERISA CONSIDERATIONS
Sections 406 and 407 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and Section 4975 of the Code prohibit certain employee
benefit plans, individual retirement accounts, individual retirement annuities
and employee annuity plans ("Plans") from engaging in certain transactions with
persons who, with respect to such Plan, are "parties in interest" under ERISA or
"disqualified persons" under the Code. A violation of these "prohibited
transaction" rules may generate excise taxes under the Code and other
liabilities under ERISA for such persons. Possible violations of the prohibited
transaction rules could occur if the Notes are purchased with the assets of any
Plan if the Company or any of its affiliates is a party in interest or
disqualified person with respect to such Plan, unless such acquisition is
subject to a statutory or administrative exemption.
The foregoing discussion is general in nature and is not intended to be
all-inclusive. Any fiduciary of a Plan considering the purchase of the Notes
should consult its legal advisors regarding the consequences of such purchases
under ERISA and the Code. If the Plan is not subject to ERISA, the fiduciary
should consult its legal advisors regarding the consequences of any state law or
Code considerations.
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PLAN OF DISTRIBUTION
Based on certain no-action letters issued by the staff of the Commission to
third parties in unrelated transactions, the Company believes that the New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any holder who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or (ii) any broker-dealer that purchases Notes from the Company to resell
pursuant to Rule 144A or any other available exemption) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of the holder's
business and such holders have no arrangement or understanding with any person
to participate in a distribution of such New Notes and are not participating in,
and do not intend to participate in, the distribution of such New Notes. The
Company has not sought, and does not intend to seek, its own no-action letter
with regard to the Exchange Offer. Accordingly, there can be no assurance that
the staff of the Commission would make a similar determination with respect to
the Exchange Offer. By tendering, each holder will represent to the Company in
the Letter of Transmittal that, among other things, the New Notes acquired
pursuant to the Exchange Offer are being acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the holder, that neither the holder nor any such other person has an arrangement
or understanding with any person to participate in the distribution of such New
Notes, that neither the holder nor any such other person is participating in or
intends to participate in the distribution of such New Notes and that neither
the holder nor any such other person is an "affiliate," as defined under Rule
405 of the Securities Act, of the Company. In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification is
available and complied with. The Company has agreed, pursuant to the
Registration Rights Agreements and subject to certain specified limitations
therein, to register to qualify the New Notes for offer or sale under the
securities or blue sky laws of such jurisdictions as any holder of the Notes
reasonably request in writing.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Existing Notes
where such Existing Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that, for a period of 180
days after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any commission
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the close of the Exchange Offer the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Existing Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
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LEGAL MATTERS
The validity of the New Notes will be passed upon for the Company by Paul,
Weiss, Rifkind, Wharton & Garrison, New York, New York.
EXPERTS
The Company's financial statements as of December 31, 1996 and 1995, and for
the years then ended, and the supplemental schedule and the financial statements
of CapStar Management as of December 31, 1994, and for the years ended December
31, 1994 and 1993, incorporated by reference herein and in the Registration
Statement, have been incorporated by reference in reliance on the reports of
KPMG Peat Marwick LLP, independent accountants, and on the authority of said
firm as experts in accounting and auditing. The financial statements of certain
other entities, incorporated by reference herein and in the Registration
Statement, have been incorporated by reference in reliance on the reports of
KPMG Peat Marwick LLP, Wertheim & Company, King Griffin & Adamson P.C., Coopers
& Lybrand L.L.P. and Mann Frankfort Stein & Lipp, P.C., as the case may be,
independent accountants, given on the authority of said firms as experts in
accounting and auditing.
Any financial statments and schedules hereafter incorporated by reference in
the Registration Statement of which this Prospectus is a part that have been
audited and are the subject of a report by independent accountants will be so
incorporated by reference in reliance upon such reports and upon the authority
of such firms as experts in accounting and auditing to the extent covered by
consents filed with the Commission.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the headings "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "The Company," "Recent Developments," "Business and Properties" and
elsewhere in this Prospectus constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performances or achievements of the
Company to be materially different from any future results, performances or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the following: the ability of the Company
to successfully implement its acquisition strategy and operating strategy; the
Company's ability to manage rapid expansion; changes in economic cycles;
competition from other hospitality companies; and changes in the laws and
government regulations applicable to the Company.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL.
---------------------
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Available Information........................... ii
Incorporation of Certain Documents by
Reference..................................... ii
Prospectus Summary.............................. 1
Risk Factors.................................... 13
Use of Proceeds................................. 20
Capitalization.................................. 20
Selected Financial and Other Data............... 21
Unaudited Pro Forma Condensed Consolidated
Financial Statements.......................... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 27
The Exchange Offer.............................. 31
The Company..................................... 40
Recent Developments............................. 41
Business and Properties......................... 42
The Operating Partnerships...................... 52
Management...................................... 53
Principal Stockholders.......................... 61
Certain Relationships and Related
Transactions.................................. 62
Description of Certain Indebtedness............. 64
Description of Notes............................ 66
Certain Federal Income Tax Considerations....... 97
ERISA Considerations............................ 99
Plan of Distribution............................ 100
Legal Matters................................... 101
Experts......................................... 101
Special Note Regarding Forward-Looking
Statements.................................... 101
</TABLE>
PROSPECTUS
$150,000,000
[LOGO]
OFFER TO EXCHANGE $150,000,000 OF ITS 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR $150,000,000 OF ITS
OUTSTANDING 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
, 1997
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware Law permits a provision in the certificate
of incorporation of each corporation organized thereunder, eliminating or
limiting, with certain exceptions, the personal liability of a director to the
corporation or its stockholders for monetary damages for certain breaches of
fiduciary duty as a director. The Certificate of Incorporation of the Company
eliminates the personal liability of directors to the fullest extent permitted
by the Delaware Law.
Section 145 of the Delaware Law ("Section 145"), in summary, empowers a
Delaware corporation, within certain limitations, to indemnify its officers,
directors, employees and agents against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by them in connection with any suit or proceeding other than by or on
behalf of the corporation, if they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to a criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful.
With respect to actions by or on behalf of the corporation, Section 145
permits a corporation to indemnify its officers, directors, employees and agents
against expenses (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such action or suit, provided such
person meets the standard of conduct described in the preceding paragraph,
except that no indemnification is permitted in respect of any claim where such
person has been found liable to the corporation, unless the Court of Chancery or
the court in which such action or suit was brought approves such indemnification
and determines that such person is fairly and reasonably entitled to be
indemnified.
Article Eight of the Certificate of Incorporation of the Company provides
for the indemnification of officers and directors and certain other parties (the
"Indemnitees") of the Company to the fullest extent permitted under the Delaware
Law; provided, that except in the case of proceedings to enforce rights to
indemnification, the Company shall indemnify such Indemnitee in connection with
a proceeding initiated by such Indemnitee only if such proceeding was authorized
by the Board.
Each of the employment agreements of Messrs. Whetsell, McCaslin and Emery
contains provisions entitling the executive to indemnification for losses
incurred in the course of services to the Company or its subsidiaries, under
certain circumstances.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
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3.1.1 -- Amended and Restated Certificate of Incorporation of the Company (previously
filed with the Company's Registration Statement on Form S-1 (File No. 333-6583)
on June 21, 1996, as amended, and incorporated by reference herein)
3.1.2 -- Amendment to Amended and Restated Certificate of Incorporation (previously filed
with the Company's Registration Statement on Form S-1 (File No. 333-6583) on
June 21, 1996, as amended, and incorporated by reference herein)
3.1.3 -- Second Amendment to Amended and Restated Certificate of Incorporation
(previously filed with the Company's Registration Statement on Form S-1 (File
No. 333-6583) on June 21, 1996, as amended, and incorporated by reference
herein)
3.2 -- By-laws of the Company (previously filed with the Company's Registration
Statement on Form S-1 (File No. 333-6583) on June 21, 1996, as amended, and
incorporated by reference herein)
4.1 -- Indenture between the Company and IBJ Schroder Bank & Trust Company, as Trustee,
dated as of August 19, 1997
4.2 -- Specimen certificate of Existing Note (included in Exhibit 4.1 as Exhibit A)
4.3* -- Specimen certificate of New Note
5* -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
</TABLE>
II-1
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10.1 -- Purchase Agreement between the Company and Lehman Brothers Inc., dated as of
August 14, 1997
10.2 -- Purchase Agreement between the Company and Oak Hill Securities Fund, L.P., dated
as of August 14, 1997
10.3 -- Registration Rights Agreement between the Company and Lehman Brothers Inc.,
dated as of August 14, 1997
10.4 -- Registration Rights Agreement between the Company and Oak Hill Securities Fund,
L.P., dated as of August 14, 1997
10.5 -- Registration Rights Agreement between the Company and certain affiliates of
Highgate Hotels, dated as of April 1, 1997 (previously filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997)
10.6 -- Form of Registration Rights Agreement (previously filed with the Company's
Registration Statement on Form S-1 (File No. 333-6583) on June 21, 1996, as
amended, and incorporated by reference herein)
10.7 -- Form of Employment Agreement between the Company and Paul W. Whetsell
(previously filed with the Company's Registration Statement on Form S-1 (File
No. 333-6583) on June 21, 1996, as amended, and incorporated by reference
herein)
10.8 -- Form of Employment Agreement between the Company and David E. McCaslin
(previously filed with the Company's Registration Statement on Form S-1 (File
No. 333-6583) on June 21, 1996, as amended, and incorporated by reference
herein)
10.9 -- Form of Employment Agreement between the Company and John Emery
10.10 -- Form of Employment Agreement between the Company and John E. Plunket (previously
filed with the Company's Registration Statement on Form S-1 (File No. 333-6583)
on June 21, 1996, as amended, and incorporated by reference herein)
10.11 -- Form of Amended and Restated Agreement of Limited Partnership of CapStar
Management (previously filed with the Company's Registration Statement on Form
S-1 (File No. 333-6583) on June 21, 1996, as amended, and incorporated by
reference herein)
10.12 -- Form of First Amendment to Amended and Restated Agreement of Limited Partnership
of CapStar Management (previously filed with the Company's Registration
Statement on Form S-1 (File No. 333-22073) on February 20, 1997, as amended, and
incorporated by reference herein)
10.13 -- Second Amendment to Amended and Restated Agreement of Limited Partnership of
CapStar Management, dated as of April 15, 1997 (previously filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997)
10.14 -- Agreement of Limited Partnership of Capstar Management II, dated as of April 1,
1997 (previously filed with the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997)
10.15 -- First Amendment to Agreement of Limited Partnership of CapStar Management II,
dated as of April 1, 1997 (previously filed with the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997)
10.16 -- Second Amendment to Agreement of Limited Partnership of CapStar Management II,
dated as of April 15, 1997 (previously filed with the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997)
10.17 -- Form of Equity Incentive Plan of the Company (previously filed with the
Company's Registration Statement on Form S-1 (File No. 333-6583) on June 21,
1996, as amended, and incorporated by reference herein)
10.18 -- Form of Employee Stock Purchase Plan of the Company (previously filed with the
Company's Registration Statement on Form S-1 (File No. 333-6583) on June 21,
1996, as amended, and incorporated by reference herein)
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C> <C>
10.19 -- Credit Agreement among the Company, Lehman Holdings, Bankers Trust Company,
BankBoston, N.A. and Wells Fargo Bank, dated as of June 30, 1997 (previously
filed with the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997)
10.20 -- Loan Agreement between BA Parkway Associates II, L.P. and Lehman Holdings, dated
as of August 12, 1997
10.21 -- First Amendment to Loan Agreement among BA Parkway Associates II, L.P., MCV
Venture, LLC, CapStar AP Partners, L.P. and Lehman Holdings, dated as of August
18, 1997.
12 -- Statement Regarding Computation of Ratios (previously filed with the Company's
Registration Statement on Form S-3 (File No. 333-34253) on August 22, 1997, as
amended, and incorporated by reference herein)
21 -- List of Subsidiaries of the Company (previously filed with the Company's
Registration Statement on Form S-3 (File No. 333-34253) on August 22, 1997, as
amended, and incorporated by reference herein)
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Wertheim & Company
23.3 -- Consent of King Griffin & Adamson P.C.
23.4 -- Consent of Coopers & Lybrand L.L.P.
23.5 -- Consent of Mann Frankfort Stein & Lipp, P.C.
23.6 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5)
24 -- Power of Attorney (see signature page)
25.1* -- Statement of Eligibility of Trustee
99.1* -- Form of Letter of Transmittal
99.2* -- Form of Notice of Guaranteed Delivery
99.3* -- Form of Exchange Agency Agreement
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant the provisions described under Item 20, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
II-3
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 12 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(5) To supply by means of a post-effective amendment all information
concerning the Exchange Offer that was not the subject of and included in
the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Washington, District of
Columbia, on the 16th day of September, 1997.
CAPSTAR HOTEL COMPANY
By: /s/ PAUL W. WHETSELL
-----------------------------------
Name: Paul W. Whetsell
Title: President and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below hereby constitutes and appoints Paul W. Whetsell, David E. McCaslin and
John Emery, and each of them, his true and lawful agent, proxy and
attorney-in-fact, each acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to (i) act on, sign and file with the Securities and Exchange
Commission any and all amendments (including post-effective amendments) to this
registration statement together with all schedules and exhibits thereto and any
subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, together with all schedules and exhibits thereto, (ii)
act on, sign and file such certificates, instruments, agreements and other
documents as may be necessary or appropriate in connection therewith, (iii) act
on and file any supplement to any prospectus included in this registration
statement or any such amendment or any subsequent registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and (iv) take any and
all actions which may be necessary or appropriate in connection therewith,
granting unto such agents, proxies and attorneys-in-fact, and each of them, full
power and authority to do and perform each and every act and thing necessary or
appropriate to be done, as fully for all intents and purposes as he might or
could do in person, hereby approving, ratifying and confirming all that such
agents, proxies and attorneys-in-fact, any of them or any of his or their
substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------------- ------------------------------------------------------------
<S> <C>
/s/ PAUL W. WHETSELL President, Chief Executive Officer and Chairman of the Board
- ---------------------------------------- (Principal Executive Officer)
Paul W. Whetsell
/s/ DAVID E. MCCASLIN Chief Operating Officer and Director
- ----------------------------------------
David E. McCaslin
/s/ JOHN EMERY Chief Financial Officer (Principal Financial and Accounting
- ---------------------------------------- Officer)
John Emery
/s/ DANIEL L. DOCTOROFF Director
- ----------------------------------------
Daniel L. Doctoroff
/s/ BRADFORD E. BERNSTEIN Director
- ----------------------------------------
Bradford E. Bernstein
/s/ JOSEPH MCCARTHY Director
- ----------------------------------------
Joseph McCarthy
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------------- ------------------------------------------------------------
<S> <C>
/s/ WILLIAM S. JANES Director
- ----------------------------------------
William S. Janes
/s/ EDWARD L. COHEN Director
- ----------------------------------------
Edward L. Cohen
/s/ EDWIN T. BURTON, III Director
- ----------------------------------------
Edwin T. Burton, III
/s/ EDWARD P. DOWD Director
- ----------------------------------------
Edward P. Dowd
/s/ MAHMOOD KHIMJI Director
- ----------------------------------------
Mahmood Khimji
</TABLE>
Dated: September 16, 1997
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENTS
- ---------- --------------------------------------------------------------------------------
<S> <C> <C>
3.1.1 -- Amended and Restated Certificate of Incorporation of the Company (previously
filed with the Company's Registration Statement on Form S-1 (File No. 333-6583)
on June 21, 1996, as amended, and incorporated by reference herein)
3.1.2 -- Amendment to Amended and Restated Certificate of Incorporation (previously filed
with the Company's Registration Statement on Form S-1 (File No. 333-6583) on
June 21, 1996, as amended, and incorporated by reference herein)
3.1.3 -- Second Amendment to Amended and Restated Certificate of Incorporation
(previously filed with the Company's Registration Statement on Form S-1 (File
No. 333-6583) on June 21, 1996, as amended, and incorporated by reference
herein)
3.2 -- By-laws of the Company (previously filed with the Company's Registration
Statement on Form S-1 (File No. 333-6583) on June 21, 1996, as amended, and
incorporated by reference herein)
4.1 -- Indenture between the Company and IBJ Schroder Bank & Trust Company, as Trustee,
dated as of August 19, 1997
4.2 -- Specimen certificate of Existing Note (included in Exhibit 4.1 as Exhibit A)
4.3* -- Specimen certificate of New Note
5* -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
10.1 -- Purchase Agreement between the Company and Lehman Brothers Inc., dated as of
August 14, 1997
10.2 -- Purchase Agreement between the Company and Oak Hill Securities Fund, L.P., dated
as of August 14, 1997
10.3 -- Registration Rights Agreement between the Company and Lehman Brothers Inc.,
dated as of August 14, 1997
10.4 -- Registration Rights Agreement between the Company and Oak Hill Securities Fund,
L.P., dated as of August 14, 1997
10.5 -- Registration Rights Agreement between the Company and certain affiliates of
Highgate Hotels, dated as of April 1, 1997 (previously filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997)
10.6 -- Form of Registration Rights Agreement (previously filed with the Company's
Registration Statement on Form S-1 (File No. 333-6583) on June 21, 1996, as
amended, and incorporated by reference herein)
10.7 -- Form of Employment Agreement between the Company and Paul W. Whetsell
(previously filed with the Company's Registration Statement on Form S-1 (File
No. 333-6583) on June 21, 1996, as amended, and incorporated by reference
herein)
10.8 -- Form of Employment Agreement between the Company and David E. McCaslin
(previously filed with the Company's Registration Statement on Form S-1 (File
No. 333-6583) on June 21, 1996, as amended, and incorporated by reference
herein)
10.9 -- Form of Employment Agreement between the Company and John Emery
10.10 -- Form of Employment Agreement between the Company and John E. Plunket (previously
filed with the Company's Registration Statement on Form S-1 (File No. 333-6583)
on June 21, 1996, as amended, and incorporated by reference herein)
10.11 -- Form of Amended and Restated Agreement of Limited Partnership of CapStar
Management (previously filed with the Company's Registration Statement on Form
S-1 (File No. 333-6583) on June 21, 1996, as amended, and incorporated by
reference herein)
10.12 -- Form of First Amendment to Amended and Restated Agreement of Limited Partnership
of CapStar Management (previously filed with the Company's Registration
Statement on Form S-1 (File No. 333-22073) on February 20, 1997, as amended, and
incorporated by reference herein)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.13 -- Second Amendment to Amended and Restated Agreement of Limited Partnership of
CapStar Management, dated as of April 15, 1997 (previously filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997)
10.14 -- Agreement of Limited Partnership of Capstar Management II, dated as of April 1,
1997 (previously filed with the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997)
10.15 -- First Amendment to Agreement of Limited Partnership of CapStar Management II,
dated as of April 1, 1997 (previously filed with the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997)
10.16 -- Second Amendment to Agreement of Limited Partnership of CapStar Management II,
dated as of April 15, 1997 (previously filed with the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997)
10.17 -- Form of Equity Incentive Plan of the Company (previously filed with the
Company's Registration Statement on Form S-1 (File No. 333-6583) on June 21,
1996, as amended, and incorporated by reference herein)
10.18 -- Form of Employee Stock Purchase Plan of the Company (previously filed with the
Company's Registration Statement on Form S-1 (File No. 333-6583) on June 21,
1996, as amended, and incorporated by reference herein)
10.19 -- Credit Agreement among the Company, Lehman Holdings, Bankers Trust Company,
BankBoston, N.A. and Wells Fargo Bank, dated as of June 30, 1997 (previously
filed with the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997)
10.20 -- Loan Agreement between BA Parkway Associates II, L.P. and Lehman Holdings, dated
as of August 12, 1997
10.21 -- First Amendment to Loan Agreement among BA Parkway Associates II, L.P., MCV
Venture, LLC, CapStar AP Partners, L.P. and Lehman Holdings, dated as of August
18, 1997
12 -- Statement Regarding Computation of Ratios (previously filed with the Company's
Registration Statement on Form S-3 (File No. 333-34253) on August 22, 1997, as
amended, and incorporated by reference herein)
21 -- List of Subsidiaries of the Company (previously filed with the Company's
Registration Statement on Form S-3 (File No. 333-34253) on August 22, 1997, as
amended, and incorporated by reference herein)
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Wertheim & Company
23.3 -- Consent of King Griffin & Adamson P.C.
23.4 -- Consent of Coopers & Lybrand L.L.P.
23.5 -- Consent of Mann Frankfort Stein & Lipp, P.C.
23.6 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5)
24 -- Power of Attorney (see signature page)
25.1* -- Statement of Eligibility of Trustee
99.1* -- Form of Letter of Transmittal
99.2* -- Form of Notice of Guaranteed Delivery
99.3* -- Form of Exchange Agency Agreement
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
EXHIBIT 4.1
================================================================================
CAPSTAR HOTEL COMPANY
$200,000,000
SERIES A AND SERIES B
83/4% SENIOR SUBORDINATED NOTES DUE 2007
INDENTURE
DATED AS OF AUGUST 19, 1997
IBJ SCHRODER BANK & TRUST COMPANY
TRUSTEE
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE................................................................ 1
SECTION 1.1 DEFINITIONS.............................................. 1
SECTION 1.2 OTHER DEFINITIONS........................................ 14
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT........ 14
SECTION 1.4 RULES OF CONSTRUCTION.................................... 15
ARTICLE 2
THE NOTES................................................................... 15
SECTION 2.1 FORM AND DATING.......................................... 15
SECTION 2.2 EXECUTION AND AUTHENTICATION............................. 16
SECTION 2.3 REGISTRAR AND PAYING AGENT............................... 16
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST...................... 17
SECTION 2.5 HOLDERS LISTS............................................ 17
SECTION 2.6 TRANSFER AND EXCHANGE.................................... 17
SECTION 2.7 REPLACEMENT NOTES........................................ 18
SECTION 2.8 OUTSTANDING NOTES........................................ 18
SECTION 2.9 TREASURY NOTES........................................... 19
SECTION 2.10 TEMPORARY NOTES.......................................... 19
SECTION 2.11 CANCELLATION............................................. 19
SECTION 2.12 DEFAULTED INTEREST....................................... 19
SECTION 2.13 RECORD DATE.............................................. 20
SECTION 2.14 CUSIP NUMBER............................................. 20
SECTION 2.15 RESTRICTIVE LEGENDS...................................... 20
SECTION 2.16 BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY................ 21
SECTION 2.17 SPECIAL TRANSFER PROVISIONS.............................. 22
ARTICLE 3
REDEMPTIONS AND OFFERS TO PURCHASE.......................................... 24
SECTION 3.1 NOTICES TO TRUSTEE....................................... 24
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED OR PURCHASED........... 24
SECTION 3.3 NOTICE OF REDEMPTION..................................... 25
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION........................... 25
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.............................. 26
SECTION 3.6 NOTES REDEEMED IN PART................................... 26
SECTION 3.7 OPTIONAL REDEMPTION...................................... 26
SECTION 3.8 MANDATORY REDEMPTION..................................... 27
-i-
<PAGE>
PAGE
----
SECTION 3.9 OFFER TO PURCHASE BY APPLICATION OF EXCESS
PROCEEDS...... 27
ARTICLE 4
COVENANTS................................................................... 29
SECTION 4.1 PAYMENT OF NOTES......................................... 29
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY.......................... 29
SECTION 4.3 SEC REPORTS.............................................. 30
SECTION 4.4 COMPLIANCE CERTIFICATE................................... 30
SECTION 4.5 TAXES.................................................... 31
SECTION 4.6 STAY, EXTENSION AND USURY LAWS........................... 31
SECTION 4.7 LIMITATION ON RESTRICTED PAYMENTS........................ 31
SECTION 4.8 LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES........................ 34
SECTION 4.9 LIMITATION ON ADDITIONAL INDEBTEDNESS AND ISSUANCE OF
CERTAIN CAPITAL STOCK.................................... 34
SECTION 4.10 LIMITATION ON SALE OF ASSETS............................. 36
SECTION 4.11 LIMITATION ON TRANSACTIONS WITH AFFILIATES............... 37
SECTION 4.12 LIMITATION ON LIENS...................................... 38
SECTION 4.13 CORPORATE EXISTENCE...................................... 38
SECTION 4.14 CHANGE OF CONTROL........................................ 38
SECTION 4.15 SUBSIDIARY GUARANTEES.................................... 39
SECTION 4.16 LINE OF BUSINESS......................................... 40
SECTION 4.17 PAYMENTS FOR CONSENT..................................... 40
SECTION 4.18 NO SENIOR SUBORDINATED DEBT.............................. 40
ARTICLE 5
SUCCESSORS.................................................................. 40
SECTION 5.1 WHEN THE COMPANY MAY MERGE, ETC.......................... 40
SECTION 5.2 SUCCESSOR SUBSTITUTED.................................... 41
ARTICLE 6
DEFAULTS AND REMEDIES....................................................... 41
SECTION 6.1 EVENTS OF DEFAULT........................................ 41
SECTION 6.2 ACCELERATION............................................. 43
SECTION 6.3 OTHER REMEDIES........................................... 44
SECTION 6.4 WAIVER OF PAST DEFAULTS.................................. 44
SECTION 6.5 CONTROL BY MAJORITY...................................... 44
SECTION 6.6 LIMITATION ON SUITS...................................... 44
SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT..................... 45
SECTION 6.8 COLLECTION SUIT BY TRUSTEE............................... 45
-ii-
<PAGE>
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM......................... 45
SECTION 6.10 PRIORITIES............................................... 46
SECTION 6.11 UNDERTAKING FOR COSTS.................................... 46
ARTICLE 7
TRUSTEE..................................................................... 46
SECTION 7.1 DUTIES OF TRUSTEE........................................ 46
SECTION 7.2 RIGHTS OF TRUSTEE........................................ 47
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE............................. 48
SECTION 7.4 TRUSTEE'S DISCLAIMER..................................... 48
SECTION 7.5 NOTICE OF DEFAULTS....................................... 48
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS............................ 49
SECTION 7.7 COMPENSATION AND INDEMNITY............................... 49
SECTION 7.8 REPLACEMENT OF TRUSTEE................................... 50
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC......................... 51
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION............................ 51
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY............................................. 51
ARTICLE 8
DISCHARGE OF INDENTURE...................................................... 51
SECTION 8.1 DEFEASANCE AND DISCHARGE OF THIS INDENTURE AND THE
NOTES.................................................... 51
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE........................... 52
SECTION 8.3 COVENANT DEFEASANCE...................................... 53
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE............... 53
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.................... 55
SECTION 8.6 REPAYMENT TO THE COMPANY................................. 55
SECTION 8.7 REINSTATEMENT............................................ 56
ARTICLE 9
AMENDMENTS.................................................................. 56
SECTION 9.1 WITHOUT CONSENT OF HOLDERS............................... 56
SECTION 9.2 WITH CONSENT OF HOLDERS.................................. 57
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT...................... 58
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS........................ 58
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES......................... 58
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.......................... 58
-iii-
<PAGE>
PAGE
----
ARTICLE 10
SUBORDINATION................................................................ 59
SECTION 10.1 AGREEMENT TO SUBORDINATE................................. 59
SECTION 10.2 LIQUIDATION; DISSOLUTION; BANKRUPTCY..................... 59
SECTION 10.3 NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES............. 60
SECTION 10.4 [THIS SECTION INTENTIONALLY OMITTED]..................... 60
SECTION 10.5 ACCELERATION OF NOTES.................................... 61
SECTION 10.6 WHEN DISTRIBUTION MUST BE PAID OVER...................... 61
SECTION 10.7 NOTICE BY THE COMPANY.................................... 61
SECTION 10.8 SUBROGATION.............................................. 61
SECTION 10.9 RELATIVE RIGHTS.......................................... 61
SECTION 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY............. 62
SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE................. 62
SECTION 10.12 RIGHTS OF TRUSTEE AND PAYING AGENT....................... 62
SECTION 10.13 AUTHORIZATION TO EFFECT SUBORDINATION.................... 63
SECTION 10.14 AMENDMENTS............................................... 63
ARTICLE 11
SUBSIDIARY GUARANTEES....................................................... 63
SECTION 11.1 SUBSIDIARY GUARANTEES.................................... 63
SECTION 11.2 WHEN A GUARANTOR MAY MERGE, ETC.......................... 64
SECTION 11.3 LIMITATION OF GUARANTOR'S LIABILITY...................... 65
SECTION 11.4 RELEASE OF A GUARANTOR................................... 65
ARTICLE 12
MISCELLANEOUS............................................................... 66
SECTION 12.1 TRUST INDENTURE ACT CONTROLS............................. 66
SECTION 12.2 NOTICES.................................................. 66
SECTION 12.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.............. 67
SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT....... 67
SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION............ 67
SECTION 12.6 RULES BY TRUSTEE AND AGENTS.............................. 68
SECTION 12.7 LEGAL HOLIDAYS........................................... 68
SECTION 12.8 RECOURSE AGAINST OTHERS.................................. 68
SECTION 12.9 DUPLICATE ORIGINALS...................................... 68
SECTION 12.10 GOVERNING LAW............................................ 68
SECTION 12.11 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS............ 69
SECTION 12.12 SUCCESSORS............................................... 69
SECTION 12.13 SEVERABILITY............................................. 69
SECTION 12.14 COUNTERPART ORIGINALS.................................... 69
SECTION 12.15 TABLE OF CONTENTS, HEADINGS, ETC......................... 69
-iv-
<PAGE>
PAGE
----
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Supplemental Indenture
Exhibit C Form of Certificate to be Delivered in Connection with Transfers
to Non- QIB accredited Investors
Exhibit D From of Certificate to be Delivered in Connection with Transfers
Pursuant to Regulation S
-v-
<PAGE>
INDENTURE dated as of August 19, 1997 between CapStar Hotel Company, a
Delaware corporation (the "COMPANY"), and IBJ Schroder Bank & Trust Company, as
trustee (the "TRUSTEE").
Each of the Company and the Trustee agrees as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 83/4%
Series A Senior Subordinated Notes due 2007 of the Company (the "SERIES A
NOTES") and the 83/4% Series B Senior Subordinated Notes due 2007 of the Company
(the "SERIES B NOTES," and, together with the Series A Notes, the "NOTES").
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1 DEFINITIONS.
"ACQUIRED DEBT" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person and (ii)
Indebtedness encumbering any asset acquired by such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "CONTROL"
(including, with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"AGENT" means any Registrar, Paying Agent or co-Registrar or agent for
service of notices and demands.
"ASSET SALE" means (i) the sale, lease (other than operating leases in
respect of facilities which are ancillary to the operation of the Company's or a
Restricted Subsidiary's Hospitality Related Business properties or assets),
conveyance or other disposition of any property or assets of the Company or any
Restricted Subsidiary (including by way of a sale and leaseback transaction),
(ii) the issuance or sale of Equity Interests of any of the Company's Restricted
Subsidiaries or (iii) any Event of Loss, other than, with respect to clauses
(i), (ii) and (iii) above, the following: (1) the sale or disposition of
personal property held for sale in the ordinary course of business, (2) the sale
or disposal of damaged, worn out or other obsolete property in the ordinary
course of business as long as such property is no longer necessary for the
proper conduct of the business of the Company or such Restricted Subsidiary, as
applicable, (3) the transfer of assets by the Company to a Restricted Subsidiary
of the Company or by a Restricted Subsidiary of the Company to the Company or to
another Restricted Subsidiary of the Company, (4) (A) the exchange of one or
more lodging facilities and related assets held by the Company or a Restricted
Subsidiary of the Company for one or more lodging facilities and related assets
of any person or entity, PROVIDED, that if any other assets are received by the
Company or such Restricted Subsidiary in such exchange, such other consideration
is in cash or Cash Equivalents; PROVIDED, FURTHER, that such cash or Cash
Equivalent consideration shall be deemed to be cash proceeds of an Asset Sale
for the purposes of calculating "Net Proceeds" and applying Net Proceeds, if
any, as described in Section 4.10 hereof, or (B) the issuance of OP Units or
<PAGE>
2
Preferred OP Units as full or partial consideration for the acquisition of
lodging facilities and related assets, PROVIDED, that the Board of Directors of
the Company has determined that the terms of any exchange or acquisition are
fair and reasonable and that the fair market value of the assets received by the
Company, as set forth in an opinion of a Qualified Appraiser, are equal to or
greater than the fair market value of the assets exchanged, sold or issued by
the Company or a Restricted Subsidiary of the Company, (5) any Restricted
Payment, permitted under Section 4.7 hereof, (6) the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
compliance with the provisions of Section 4.14 and Article V hereof, (7) the
conversion of or foreclosure or any mortgage or note, PROVIDED that the Company
or a Restricted Subsidiary receives the real property underlying any such
mortgage or note or (8) any transaction or series of related transactions that
would otherwise be an Asset Sale where the fair market value of the assets,
sold, leased, conveyed or otherwise disposed of was less than $5.0 million or an
Event of Loss or related series of Events of Loss pursuant to which the
aggregate value of property or assets involved in such Event of Loss or Events
of Loss is less than $5.0 million.
"ASSUMED INDEBTEDNESS" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other Person
merged with or into or became a Subsidiary of such specified Person and (ii)
Indebtedness encumbering any asset acquired by such specified Person, in each
case excluding Indebtedness incurred in connection with, or in contemplation of
such other Person merging with or into or becoming a Subsidiary of such
specified Person.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any authorized committee of the Board of Directors.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or a day
on which banking institutions in New York, New York or the city in which the
Corporate Trust Office is located are authorized or obliged by law or executive
order to close.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participation,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, with respect to partnerships, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"CASH EQUIVALENTS" means (i) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (ii) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers
acceptances with maturities not exceeding six months from the date of
acquisition and overnight bank deposits, in each case with any domestic
commercial bank having capital and surplus in excess of $500 million, (iii)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i) and (ii) entered into with any
financial institution meeting the qualifications specified in clause (ii) above,
(iv) commercial paper or commercial paper master notes having a rating of at
least P-2 or the equivalent thereof by Moody's Investors Service, Inc. or at
least A-2 or the equivalent thereof by Standard & Poor's Corporation and in each
case maturing within six months
<PAGE>
3
after the date of acquisition, (v) money market mutual funds that provide daily
purchase and redemption features, and (vi) corporate debt with maturities of not
greater than six months and with a rating of at least A or the equivalent
thereof by Standard & Poor's Corporation and a rating of at least A2 or the
equivalent thereof by Moody's Investors Service, Inc.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i)
the sale, lease or transfer, in one or a series of related transactions, of all
or substantially all of the Company's assets to any person or group (as such
term is used in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company, (iii) the
acquisition by any person or group (as such term is used in Section 13(d)(3) of
the Exchange Act) of a direct or indirect interest in more than 50% of the
ownership of the Company or the voting power of the voting stock of the Company
by way of purchase, merger or consolidation or otherwise (other than a creation
of a holding company that does not involve a change in the beneficial ownership
of the Company as a result of such transaction), (iv) the merger or
consolidation of the Company with or into another corporation or the merger of
another corporation into the Company with the effect that immediately after such
transaction the stockholders of the Company immediately prior to such
transaction hold less than 50% of the total voting power of all securities
generally entitled to vote in the election of directors, managers, or trustees
of the Person surviving such merger or consolidation or (v) the first day on
which a majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"COMPANY" means CapStar Hotel Company, a Delaware corporation, until a
successor replaces it in accordance with the applicable provisions of this
Indenture, and thereafter, means such successor.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus: (a) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale, to the extent such losses were deducted in computing
Consolidated Net Income, plus (b) provisions for taxes based on income or
profits of such Person for such period, to the extent such provision for taxes
was included in computing Consolidated Net Income, plus (c) Consolidated
Interest Expense of such Person for such period to the extent such expense was
deducted in computing Consolidated Net Income, plus (d) Consolidated
Depreciation and Amortization Expense of such Person for such period, to the
extent deducted in computing Consolidated Net Income less (e) noncash items
increasing such Consolidated Net Income for such period in each case, on a
consolidated basis for such Person and its Restricted Subsidiaries and
determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, the depreciation and
amortization of and the interest expense of, a Restricted Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to such Person by
such Restricted Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders. Any calculation of the Consolidated Cash Flow
of an individual hotel property shall be calculated in a manner consistent with
the foregoing.
"CONSOLIDATED CURRENT LIABILITIES" as of the date of determination
means the aggregate amount of liabilities of the Company and its consolidated
Subsidiaries which may properly be classified as current liabilities (including
taxes payable as accrued), on a consolidated basis, after
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4
eliminating (i) all intercompany items between the Company and any Subsidiary
and (ii) all current maturities of long-term Indebtedness, all as determined in
accordance with GAAP consistently applied.
"CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means, with
respect to any Person for any period, the total amount of depreciation and
amortization expense (including amortization of goodwill and other intangibles
but excluding amortization of prepaid cash expenses that were paid in a prior
period) and the total amount of non-cash charges (other than non-cash charges
that represent an accrual or reserve for cash charges in future periods or which
involved a cash expenditure in a prior period) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis as determined in accordance
with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, without duplication, the sum of (a) interest expense, whether paid
or accrued, to the extent such expense was deducted in computing Consolidated
Net Income (including amortization of original issue discount, non-cash interest
payments, the interest component of Capital Lease Obligations, and net payments
(if any) pursuant to Hedging Obligations, but excluding amortization of deferred
financing fees), (b) commissions, discounts and other fees and charges paid or
accrued with respect to letters of credit and bankers acceptance financing and
(c) interest for which such Person or its Restricted Subsidiaries is liable,
whether or not actually paid, pursuant to Indebtedness or under a Guarantee of
Indebtedness of any other Person, in each case, calculated for such Person and
its Restricted Subsidiaries for such period on a consolidated basis as
determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, PROVIDED, that the following shall be excluded: (i) the Net Income of
any Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be excluded, whether or not distributed to the
Company or one of its Restricted Subsidiaries, (ii) the Net Income of any Person
that is a Restricted Subsidiary and that is restricted from declaring or paying
dividends or other distributions, directly or indirectly, by operation of the
terms of its charter, any applicable agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation or otherwise shall be included
only to the extent of the amount of dividends or distributions paid to the
referent Person or a Restricted Subsidiary, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded and (iv) the cumulative effect of changes
in accounting principles shall be excluded.
"CONSOLIDATED NET TANGIBLE ASSETS" as of any date of determination,
means the total amount of assets (less accumulated depreciation and
amortization, allowances for doubtful receivables, other applicable reserves and
other similar items properly deducted in determining net assets) which would
appear on a consolidated balance sheet of the Company and its consolidated
Subsidiaries, determined on a consolidated basis in accordance with GAAP, and
after giving effect to purchase accounting and after deducting therefrom
Consolidated Current Liabilities and, to the extent otherwise included, the
amounts of: (i) minority interests in consolidated Subsidiaries held by Persons
other than the Company or a Subsidiary; (ii) excess of cost over fair value of
assets of businesses acquired, as determined in good faith by the Board of
Directors; (iii) any revaluation or other write-up in book value of assets
subsequent to the Issuance Date as a result of a change in the method of
valuation in accordance with GAAP consistently applied; (iv) unamortized debt
discount and expenses and other unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights, licenses, organization or
developmental expenses and other intangible items; (v) treasury stock; and
<PAGE>
5
(vi) cash set apart and held in a sinking or other analogous fund established
for the purpose of redemption or other retirement of Capital Stock to the extent
such obligation is not reflected in Consolidated Current Liabilities.
"CONSOLIDATED NET WORTH" means, with respect to any Person, as of any
date of determination, the sum of (i) the consolidated equity of the common
stockholders of such Person and its consolidated Subsidiaries as of such date
plus (ii) the respective amount reported on such Person's balance sheet as of
such date with respect to any series of Preferred Stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such Preferred Stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Issuance Date in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all Investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, Permitted
Investments) and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Issuance Date or (ii) was nominated for election or
elected to such Board of Directors with the affirmative vote of at least a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
"CORPORATE TRUST OFFICE" shall be at the address of the Trustee
specified in Section 12.2 or such other address as the Trustee may give notice
to the Company.
"CREDIT AGREEMENT" means the senior credit facility dated June 30,
1997, entered into between and among the Company and the lenders party thereto,
providing for borrowings and letters of credit, including any related notes,
security documentation, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case as amended, modified,
supplemented, restructured, renewed, restated, refunded, replaced or refinanced
or extended, in each case on a senior basis, from time to time on one or more
occasions.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event if Default.
"DESIGNATED SENIOR DEBT" means (i) Indebtedness under or in respect of
the Credit Agreement and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25.0 million and is specifically designated in the instrument evidencing
such Senior Debt as "DESIGNATED SENIOR DEBT" by the Company.
"DISQUALIFIED STOCK" means any Capital Stock (other than OP Units and
Preferred OP Units) which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the first anniversary of the date on which the
Notes mature.
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6
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for Capital Stock).
"EVENT OF LOSS" means, with respect to any property or asset (tangible
or intangible, real or personal), any of the following: (A) any loss,
destruction or damage of such property or asset or (B) any actual condemnation,
seizure or taking by the power of eminent domain or otherwise of such property
or asset, or confiscation of such property or asset or the requisition of the
use of such property or asset.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the Issuance Date (after giving effect
to the use of proceeds of the Notes issued hereunder), excluding, for this
purpose, amounts outstanding under the Credit Agreement as in effect on the
Issuance Date.
"EXISTING PREFERRED OP UNITS" means Preferred OP Units issued and
outstanding on the date of this Indenture.
"FINAL MEMORANDUM" means the Company's Offering Memorandum dated
August 14, 1997 pertaining to the offer and sale of $150,000,000 in aggregate
principal amount of Notes, pursuant to applicable exemptions from registration
under the Securities Act.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings that provide
working capital in the ordinary course of business) or issues or redeems
Preferred Stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"CALCULATION DATE"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness, or such issuance or redemption of Preferred Stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. For purposes of making the computation referred to above, acquisitions,
dispositions and discontinued operations (as determined in accordance with GAAP)
that have been made by the Company or any of its Restricted Subsidiaries,
including all mergers, consolidations and dispositions, during the four-quarter
reference period or subsequent to such reference period and on or prior to the
Calculation Date shall be calculated on a pro forma basis assuming that all such
acquisitions, dispositions, discontinued operations, mergers, consolidations
(and the reduction of any associated fixed charge obligations resulting
therefrom) had occurred on the first day of the four-quarter reference period.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum of (a) Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income and (b) the product of
(i) all cash dividend or distribution payments on any series of Preferred Stock
of such Person or its Restricted Subsidiaries (other than Preferred Stock owned
by such Person or its Restricted Subsidiaries), times (ii) a fraction, the
numerator of which is one and the denominator of
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7
which is one minus the then current combined federal, state and local statutory
tax rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP; PROVIDED, HOWEVER, that if the cash dividend
on such Preferred Stock is deductible for federal tax purposes, then the
fraction shall be equal to one.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States of America is
pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) or otherwise
incurring, assuming or becoming liable for the payment of any principal, premium
or interest, direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness or other obligation (including agreements to
keep-well and to purchase assets, goods, securities or services).
"GUARANTOR" means a Restricted Subsidiary that become a guarantor of
the Notes pursuant to the terms of this Indenture, and its successor, if any.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or currency exchange rates.
"HOLDER" means the Person in whose name a Note is registered on the
Registrar's books.
"HOSPITALITY-RELATED BUSINESS" means the lodging business and other
businesses necessary for, incident to, in support of, connected with,
complementary to or arising out of the lodging business, including, without
limitation, (i) developing, managing, operating, improving or acquiring lodging
facilities, restaurants and other food-service facilities and convention or
meeting facilities, and marketing services related thereto, (ii) acquiring,
developing, operating, managing or improving any real estate taken in
foreclosure (or similar settlement) by the Company or any of its Restricted
Subsidiaries, or any real estate ancillary or connected to any lodging owned,
managed or operated by the Company or any of its Restricted Subsidiaries, (iii)
owning and managing mortgages in, or other Indebtedness secured by Liens on
lodging and real estate related or ancillary to lodging or (iv) other related
activities thereto.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or
<PAGE>
8
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, and also
includes, to the extent not otherwise included, the Guarantee of any
Indebtedness of such Person or any other Person.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans
(including Guarantees), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities and all other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, greater than
50% of the outstanding Common Stock of such Restricted Subsidiary, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.
"ISSUANCE DATE" means the date of this Indenture.
"LIEN" means, with respect to any asset, or income or profits
therefrom, any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"LIQUIDATED DAMAGES" has the meaning assigned to such term in the
Registration Rights Agreements.
"MAKE-WHOLE AMOUNT" with respect to a Note means an amount equal to
the excess, if any, of (i) the present value of the remaining interest, premium
and principal payments due on such Note as if such Note were redeemed on August
15, 2002, computed using a discount rate equal to the Treasury Rate plus 62.5
basis points, over (ii) the outstanding principal amount of such Note.
"TREASURY RATE" is defined as the yield to maturity at the time of the
computation of United States Treasury securities with a constant maturity (as
compiled by and published in the most recent Federal Reserve Statistical Release
H.15(519), which has become publicly available at least two business days prior
to the date of the redemption notice or, if such Statistical Release is no
longer published, any publicly available source of similar market date) most
nearly equal to the then remaining maturity of the Notes assuming redemption of
the Notes on August 15, 2002; PROVIDED, HOWEVER, that if the Make-Whole Average
Life of such Note is not equal to the constant maturity of a United States
Treasury security for which such yields are given, the Treasury Rate shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the Make-Whole Average Life of such
Notes is less than one year, the weekly average yield on actually traded United
State Treasury securities adjusted to a constant maturity of one year shall be
used. "MAKE-WHOLE AVERAGE LIFE"
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9
means the number of years (calculated to the nearest one-twelfth) between the
date of redemption and August 15, 2002.
"MAKE-WHOLE PRICE" with respect to a Note means the greater of (1) the
sum of the outstanding principal amount and the Make-Whole Amount of such Note,
and (ii) the redemption price of such Note on August 15, 2002, determined
pursuant to the first paragraph of Section 3.7 hereof (104.375% of the principal
amount).
"NET INCOME" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any Asset Sale, and excluding any
extraordinary gain (but not loss), together with any related provision for taxes
on such extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale, net
of the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions), and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness (a) as to which neither
the Company nor any of its Restricted Subsidiaries (i) provides credit support
(other than in the form of a Lien on an asset serving as security for
Non-Recourse Indebtedness) pursuant to any undertaking, agreement or instrument
that would constitute Indebtedness, (ii) is directly or indirectly liable (other
than in the form of a Lien on an asset serving as security for Non-Recourse
Indebtedness) or (iii) constitutes the lender and (b) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"NOTES" means the Notes issued under this Indenture.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICERS" means the Chairman of the Board, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, Controller, Secretary, any Assistant Secretary or any Vice President
of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of
the Board of Directors, the President, the Chief Operating Officer, or a Vice
President and by the Chief Financial officer, the Treasurer, an Assistant
Treasurer, the Controller, the Secretary or an Assistant Secretary of the
Company, as applicable, except with respect to certificates required to be
furnished by the
<PAGE>
10
Company to the Trustee pursuant to Section 4.4 hereof, in which event "OFFICERS'
CERTIFICATE" means a certificate signed by the principal executive officer or
principal financial officer.
"OP UNITS" means limited partnership interests in CapStar Management
Company, L.P., CapStar Management Company II, L.P. or any successor operating
partnership that require the issuer thereof to pay dividends or distributions
which are tied to dividends paid on the Company's common stock and which by
their terms may be converted into, or exercised or redeemed for, cash or the
Company's common stock.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of this
Indenture.
"PERMITTED INVESTMENTS" means any (a) Investments in the Company, (b)
Investments in any Restricted Subsidiary, (c) Investments in Cash Equivalents,
(d) Investments by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company, (e) Investments in Unrestricted Subsidiaries or Permitted Joint
Ventures, PROVIDED that such Investments are in entities solely or principally
engaged in Hospitality-Related Businesses and that the aggregate of such
Investments does not exceed the greater of (i) $25.0 million or (ii) 5% of
Consolidated Net Tangible Assets and (f) Investments in Unrestricted
Subsidiaries formed to acquire the Radisson Plaza, Lexington, Kentucky, the
Embassy Suites Center City, Philadelphia and the Doubletree Hotel, Austin, in an
aggregate amount not to exceed $50.0 million.
"PERMITTED JOINT VENTURE" means any corporation, partnership, limited
liability company or partnership or other similar entity formed to hold lodging
properties for which the Company holds a management contract related thereto in
which the Company owns less than a 50.1% interest.
"PERMITTED JUNIOR SECURITIES" means Equity Interest in the Company or
debt securities that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the Notes are subordinated to Senior Debt
pursuant to Article 10 of this Indenture.
"PERMITTED REFINANCING" means Refinancing Indebtedness or Refinancing
Disqualified Stock, as the case may be, to the extent (a) the principal amount
of Refinancing Indebtedness or the liquidation preference amount of Refinancing
Disqualified Stock, as the case may be, does not exceed the principal amount of
Indebtedness or the liquidation preference amount of Disqualified Stock, as the
case may be, so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of premiums and reasonable expenses incurred in connection
therewith); (b) such Refinancing Indebtedness or Refinancing Disqualified Stock,
as the case may be, is scheduled to mature or is redeemable at the option of the
holder, as the case may be, no earlier than the Indebtedness or Disqualified
Stock, as the case may be, being refinanced; (c) in the case of Refinancing
Indebtedness, the Refinancing Indebtedness has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (d) in the case of Refinancing Disqualified Stock, the Disqualified
Stock has a Weighted Average Life to Mandatory Redemption equal to or greater
than the Weighted Average Life to Mandatory Redemption of the Disqualified Stock
being extended, refinanced, renewed, replaced,
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11
defeased or refunded; (e) if the Indebtedness or the Disqualified Stock, as the
case may be, being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated or junior in right of payment to the Notes, the Refinancing
Indebtedness or Refinancing Disqualified Stock, as the case may be, is
subordinated or junior in right of payment to the Notes on terms at least as
favorable to the holders of Notes as those contained in the documentation
governing the Indebtedness or the Disqualified Stock, as the case may be, being
extended, refinanced, renewed, replaced, defeased or refunded and (f) such
Refinancing Indebtedness or Refinancing Disqualified Stock is incurred or issued
either by the Company or by a Restricted Subsidiary who is the obligor on the
Indebtedness or Disqualified Stock being extended, refinanced, renewed,
replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PREFERRED OP UNITS" means limited partnership interests in CapStar
Management Company, L.P., CapStar Management Company II, L.P. or any successor
operating partnership that require the issuer thereof to pay regularly scheduled
fixed distributions thereon, which are not related to dividends on the Company's
common stock, and which by their terms may be converted into, or exercised or
redeemed for, cash or the Company's common stock.
"PREFERRED STOCK" means (i) any Equity Interest with preferential
right in the payment of dividends or distributions or upon liquidation, and (ii)
any Disqualified Stock.
"REFINANCING DISQUALIFIED STOCK" means Disqualified Stock issued in
exchange for, or the proceeds of which are used, to extend, refinance, renew,
replace, defease or refund Disqualified Stock or Indebtedness permitted to be
issued pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.9 hereof or Indebtedness referred to in clauses (iii),
(v), (vii), (ix) and (x) of the second paragraph of Section 4.9 hereof.
"REFINANCING INDEBTEDNESS" means Indebtedness issued in exchange for,
or the proceeds of which are used to extend, refinance renew, replace, defease
or refund Indebtedness permitted to be incurred pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.9 hereof or
Indebtedness referred to in clauses (iii), (v), (vii), (ix) and (x) of the
second paragraph of Section 4.9 hereof.
"REGISTRATION RIGHTS AGREEMENTS" means those certain Registration
Rights Agreements dated as of the Issuance Date between the Company and Lehman
Brothers Inc. and between the Company and OHST setting forth certain
registration rights with respect to the Notes.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent
or representative in respect of Designated Senior Debt, PROVIDED, that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"RESTRICTED INVESTMENTS" means an Investment other than a Permitted
Investment.
"RESTRICTED SECURITY" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act.
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12
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR DEBT" means, in the case of the Company or any Guarantor, the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of the Company, whether
outstanding on the Issuance Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Notes. Without limiting the generality of the foregoing, "SENIOR DEBT" shall
also include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all Obligations of every nature of the Company under
the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, whether outstanding on the Issuance Date or thereafter
incurred, and (y) all Hedging Obligations (including Guarantees thereof),
whether outstanding on the Issuance Date or thereafter incurred.
Notwithstanding the foregoing, "SENIOR DEBT" shall not include (i) any
Indebtedness of the Company or any Guarantor to a Subsidiary of the Company or
any Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of the Company or any Subsidiary of the Company or any Subsidiary of
the Company or any Guarantor (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, (iv) any liability
for federal, state, local or other taxes owed or owing by the Company or any
Guarantor, (v) that portion of Indebtedness incurred in violation of this
Indenture provisions set forth under Section 4.9 hereof; PROVIDED, HOWEVER, that
in the case of this clause (v), (A) any Indebtedness issued to any person who
had no actual knowledge that the incurrence of such Indebtedness was not
permitted under this Indenture and who received in connection with the issuance
thereof a certificate from the Chief Financial Officer of the Company to the
effect that the issuance of such Indebtedness would not violate this Indenture
shall constitute Senior Debt and (B) any Indebtedness arising from the honoring
by a bank or other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business shall constitute Senior
Debt provided that such Indebtedness is extinguished within three business days
of occurrence, and (vi) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company or any
Guarantor.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"SIGNIFICANT SUBSIDIARY" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or
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13
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person or a
combination thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"TRUST OFFICER" means any officer in the Corporate Trust Office of the
Trustee.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a board
resolution, but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Indebtedness; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the same time from
Persons who are not affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Equity Interests or (y)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results (other than pursuant
to agreements relating to the management of hotels entered into between
Restricted Subsidiaries and Unrestricted Subsidiaries in the ordinary course of
such Subsidiaries' business, consistent with past practice); and (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the board resolution giving effect
to such designation and an officer's certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.7 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 4.9 hereof, the Company
shall be in default of such covenant). The Board of Directors of the Company
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, PROVIDED that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary, and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.9 hereof and
(ii) no Default or Event of Default would be in existence following such
designation.
"WEIGHTED AVERAGE LIFE TO MANDATORY REDEMPTION" means, when applied to
any Disqualified Stock at any date, the number of years obtained by dividing (a)
the sum of the products obtained by multiplying (x) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof, by (y)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
liquidation preference amount of such Disqualified Stock.
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14
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
SECTION 1.2 OTHER DEFINITIONS.
Defined in
TERM Section
"ACCREDITED INVESTOR" 2.1
"AFFILIATE TRANSACTION" 4.11
"AGENT MEMBERS" 2.16
"ASSET SALE OFFER" 3.9
"ASSET SALE OFFER PRICE" 4.10
"BANKRUPTCY LAW" 6.1
"BLOCKAGE PERIOD" 10.3
"CHANGE OF CONTROL OFFER" 4.14
"CHANGE OF CONTROL PAYMENT" 4.14
"CHANGE OF CONTROL PAYMENT DATE" 4.14
"COMPUTATION PERIOD" 4.7
"COVENANT DEFEASANCE" 8.3
"CUSTODIAN" 6.1
"DEFEASANCE TRUST" 8.4
"DEFAULT NOTICE" 10.3
"DEPOSITARY" 2.1
"EVENT OF DEFAULT" 7.1
"EXCESS PROCEEDS" 4.10
"GLOBAL NOTE" 2.1
"LEGAL DEFEASANCE" 8.2
"LEGAL HOLIDAY" 12.7
"OFFSHORE PHYSICAL SECURITIES" 2.1
"PAYING AGENT" 2.4
"PAYMENT BLOCKAGE NOTICE" 10.3
"PRIVATE PLACEMENT LEGEND" 2.15
"PUBLIC EQUITY OFFERING" 3.7
"REDEMPTION PERCENTAGES" 3.7
"REGISTRAR" 2.3
"RESTRICTED PAYMENTS" 4.7
"RULE 144A" 2.1
"SUBSIDIARY GUARANTEE" 11.1
"US PHYSICAL SECURITIES" 2.1
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
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15
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Notes means the Company, any Guarantor and any
successor obligor.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) provisions apply to successive events and transactions.
ARTICLE 2
THE NOTES
SECTION 2.1 FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. Subject to Section 2.7
hereof, the Notes shall be issued at any time, or from time to time, in an
aggregate principal amount not to exceed $200,000,000. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
agreements to which the Company or any Guarantor is subject or usage. Each Note
shall be dated the date of its authentication. The Notes shall be issued
initially in denominations of $1,000 and integral multiples thereof.
Notes offered and sold in reliance on Rule 144A under the Securities
Act ("RULE 144A") and to institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act ("ACCREDITED
INVESTORS") shall be issued initially in the form of one or more permanent
global notes in registered form, in substantially the form set forth in Exhibit
A (the "GLOBAL NOTE"), deposited with the Trustee, as custodian for The
Depository Trust Company (the "DEPOSITARY"),
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16
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Securities in
registered form in substantially the form set forth in Exhibit A (the "OFFSHORE
PHYSICAL SECURITIES"). Additionally, Notes offered and sold in reliance on any
other exemption from registration under the Securities Act, including pursuant
to Rule 144A, other than as described in the preceding paragraph may be issued,
in the form of permanent certificated Notes in registered form, in substantially
the form set forth in Exhibit A (the "U.S. PHYSICAL SECURITIES"). The Offshore
Physical Securities and the U.S. Physical Securities are sometimes collectively
herein referred to as the "PHYSICAL SECURITIES".
SECTION 2.2 EXECUTION AND AUTHENTICATION.
An Officer of the Company shall sign the Notes for the Company by
manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time the Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature of the Trustee shall be conclusive evidence that
the Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Notes for original issue up to an
aggregate principal amount stated in Section 2.1 hereof. The aggregate
principal amount of Notes outstanding at any time may not exceed the amount set
forth herein, except as provided in Section 2.7.
The Trustee may appoint an authenticating agent to authenticate Notes.
Unless limited by the terms of such appointment, an authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
SECTION 2.3 REGISTRAR AND PAYING AGENT.
The Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (including any
co-registrar, the "REGISTRAR") and (ii) an office or agency where Notes may be
presented for payment (the "PAYING AGENT"). The Registrar shall keep a register
of the Notes and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee of the name and address of any Agent not a party to this Indenture. If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company or any of its Subsidiaries
may act as Paying Agent
<PAGE>
17
or Registrar. The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such, and shall be entitled to appropriate compensation in accordance with
Section 7.7 hereof.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, or interest or Liquidated Damages (as defined in
the Registration Rights Agreement), if any, on the Notes, and will notify the
Trustee of any default by the Company or Guarantor, if any, in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company) shall have no
further liability for the money delivered to the Trustee. If the Company or any
of its Subsidiaries acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 2.5 HOLDERS LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven (7)
Business Days before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders, including
the aggregate principal amount thereof, and the Company and the Guarantors shall
otherwise comply with TIA Section 312(a).
SECTION 2.6 TRANSFER AND EXCHANGE.
(a) Where Notes are presented to the Registrar with a request to
register the transfer thereof or exchange them for an equal principal amount of
Notes of other denominations, the Registrar shall register the transfer or make
the exchange if its requirements for such transactions are met; PROVIDED,
HOWEVER, that any Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar and the Trustee duly executed by
the Holder thereof or by his attorney duly authorized in writing. To permit
registrations of transfer and exchanges, the Company shall issue and the Trustee
shall authenticate Notes at the Registrar's request, subject to such rules as
the Trustee may reasonably require.
(b) The Company and the Registrar shall not be required (i) to issue,
to register the transfer of, or to exchange Notes during a period beginning at
the opening of business on a Business Day fifteen (15) days before the day of
any selection of Notes for redemption or purchase under Section 3.2 and ending
at the close of business on the day of selection, (ii) to register the transfer
of or
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18
exchange any Note so selected for redemption or purchase in whole or in part,
except the unredeemed or unpurchased portion of any Note being redeemed or
purchased in part or (iii) to register the transfer or exchange of a Note
between the Record Date and the next succeeding Interest Payment Date.
(c) No service charge shall be made for any registration of a transfer
or exchange (except as otherwise expressly permitted herein), but the Company
may require payment by the Holder of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith (other than such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Section 2.10, 3.6 or 9.5).
(d) Prior to due presentment for registration of transfer of any Note,
the Trustee, any Agent and the Company may deem and treat the Person in whose
name any Note is registered as the absolute owner of such Note for the purpose
of receiving payment of principal of, premium, if any, and interest on such Note
and for all other purposes whatsoever, whether or not such Note is overdue, and
neither the Trustee, any Agent, nor the Company shall be affected by notice to
the contrary.
(e) Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
SECTION 2.7 REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or either of the
Company or the Trustee receives evidence to its satisfaction of the destruction,
loss or theft of any Note, the Company shall issue and the Trustee, upon the
written order of the Company signed by two Officers of the Company, shall
authenticate a replacement Note if an indemnity bond is supplied by the Holder
that is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, each Agent and each authenticating agent from any loss
which any of them may suffer if a Note is replaced. The Company and the Trustee
may charge for its expenses in replacing a Note.
Every replacement Note is an additional Obligation of the Company.
SECTION 2.8 OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in interest in a Global Note effected by the
Trustee in accordance with the provision hereof, and those described in this
Section as not outstanding.
If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.9 hereof, a Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Note.
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19
SECTION 2.9 TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, a Guarantor, if any, or any Affiliate of the Company or a Guarantor, if
any, shall be considered as though not outstanding, except that for purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Trust Officer knows to be so
owned shall be so considered. The Company agrees to notify the Trustee of the
existence of any Notes owned by the Company, by any Guarantor or by any
Affiliate of the Company or a Guarantor.
SECTION 2.10 TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company and the Trustee consider appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee, upon receipt of
the written order of the Company signed by two Officers of the Company, shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act) unless the Company directs them to be returned to them. The Company may
not issue new Notes to replace Notes that have been redeemed or paid or that
have been delivered to the Trustee for cancellation. All cancelled Notes held
by the Trustee shall be destroyed and certification of their destruction
delivered to the Company unless by a written order, signed by an Officer of the
Company, the Company shall direct that cancelled Notes be returned to them.
SECTION 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, which date shall be at the earliest
practicable date but in all events at least five (5) Business Days prior to the
payment date, in each case at the rate provided in the Notes and in Section 4.1
hereof. The Company shall, with the consent of the Trustee, fix or cause to be
fixed each such special record date and payment date. At least fifteen (15)
days before the special record date, the Company (or the Trustee, in the name of
and at the expense of the Company) shall mail to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
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SECTION 2.13 RECORD DATE.
The record date for purposes of determining the identity of Holders
entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA
Section 316(c).
SECTION 2.14 CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number, and if it
does so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided, that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company will
promptly notify the Trustee in writing of any change in the CUSIP number.
SECTION 2.15 RESTRICTIVE LEGENDS.
Each Global Note and Physical Security that constitutes a Restricted
Security shall bear the following legend (the "PRIVATE PLACEMENT LEGEND") unless
otherwise agreed by the Company and the Holder thereof:
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE.
<PAGE>
21
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A
SUCCESSOR DEPOSITARY, OR ANY NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF CEDE & CO., OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
SECTION 2.16 BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY.
(a) The Global Note initially shall (i) be registered in the name of
the Depositary or the nominee of such Depositary, (ii) be delivered to the
Trustee as custodian for such Depositary and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interest of beneficial owners in the Global Note may be transferred
or exchanged for Physical Securities in accordance with the rules and procedures
of the Depositary and the provisions of Section 2.17. In addition, Physical
Securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in the Global Note if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the Global
Note and a successor depositary is not appointed by the Company within 90 days
of such
<PAGE>
22
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depositary to issue Physical
Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b) above, the Registrar shall (if one or more Physical Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b) above, the Global Note shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
the Global Note, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(e) Any Physical Security constituting a Restricted Security delivered
in exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
above shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 2.17, bear the legend regarding transfer restrictions applicable to the
Physical Securities set forth in Section 2.15.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 2.17 SPECIAL TRANSFER PROVISIONS.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after August 19,
1999, or (y) (1) in the case of a transfer to an Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Registrar a certificate substantially in
the form of Exhibit C hereto or (2) in the case of a transfer to a Non-U.S.
Person, the proposed transferor has delivered to the Registrar a
certificate substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures, (a) the Registrar shall reflect on its books and records the
date and (if the transfer does not involve a transfer of outstanding
Physical Securities) a decrease in the principal amount of the Global Note
in an amount equal to the principal amount of the beneficial interest in
the Global Note to be transferred, and (b) the Company shall execute and
the Trustee shall authenticate and deliver one or more Physical Securities
of like tenor and amount.
<PAGE>
23
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been effected in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has otherwise
advised the Company and the Registrar in writing, that it is purchasing the
Notes for its own account or an account with respect to which it exercises
sole investment discretion and that any such account is a QIB within the
meaning of Rule 144A, and it is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member and the Notes to
be transferred consist of Physical Securities which after transfer are to
be evidenced by an interest in the Global Note, upon receipt by the
Registrar of instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Global Note
in an amount equal to principal amount of the Physical Securities to be
transferred, and the Trustee shall cancel the Physical Securities so
transferred.
(c) Private Placement Legend. Upon the registration of the transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of the transfer, exchange or replacement of Notes bearing
the Private Placement Legend, the Registrar shall deliver only Notes that bear
the Private Placement legend unless (i) the circumstance contemplated by
paragraph (a)(i)(x) of this Section 2.17 exists or (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to the effect that neither such legend nor the related restrictions
on transfer are required in order to maintain compliance with the provisions of
the Securities Act.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain for at least two years copies of all
letters, notices and other written communications received pursuant to Section
2.16 hereof or this Section 2.17. The Company shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable written notice to the
Registrar.
<PAGE>
24
ARTICLE 3
REDEMPTIONS AND OFFERS TO PURCHASE
SECTION 3.1 NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at
least 45 days but not more than 90 days before a redemption date (unless a
shorter notice period shall be satisfactory to the Trustee), an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the redemption shall occur, (ii) the redemption date, (iii) the principal amount
of Notes to be redeemed and (iv) the redemption price.
If the Company is required to make an offer to purchase Notes pursuant
to the provisions of Sections 4.10 or 4.14, it shall furnish to the Trustee, an
Officers' Certificate setting forth (i) the Section of this Indenture pursuant
to which the offer to purchase shall occur, (ii) the offer's terms, (iii) the
purchase price, (iv) the principal amount of the Notes to be purchased and (v) a
statement to the effect that (a) the Company or one of its Restricted
Subsidiaries has made an Asset Sale and that the conditions set forth in
Sections 3.9 and 4.10 have been satisfied or (b) a Change of Control has
occurred and the conditions set forth in Section 4.14 have been satisfied, as
applicable.
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED OR PURCHASED.
In the event that less than all of the Notes are to be purchased in an
Asset Sale Offer or redeemed at any time, the Trustee shall select the Notes to
be redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a PRO RATA basis, by
lot or by such method as the Trustee shall deem fair and appropriate (and in
such manner as complies with applicable legal requirements). The Company shall
give written notice to the Trustee of such requirements of any securities
exchange not less than forty-five (45) nor more than ninety (90) days prior to
the date on which notice of such redemption or purchase is to be given. In the
event a partial redemption is made with the proceeds of a public offering by the
Company of common equity securities, selection of the Notes or portions thereof
for redemption shall be made by the Trustee only on a PRO RATA basis or on as
nearly a PRO RATA basis as practicable (subject to procedures of the
Depositary), unless such method is otherwise prohibited. In the event of
partial redemption, other than PRO RATA, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption. In the event that less than all of
the Notes properly tendered in an Asset Sale Offer are to be purchased, the
particular Notes to be purchased shall be selected promptly upon the expiration
of such Asset Sale Offer.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption or purchase and, in the case of any Note selected for
partial redemption or purchase, the principal amount thereof to be redeemed or
purchased. Notes and portions of them selected shall be in principal amounts of
$1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder
are to be redeemed or purchased, the entire outstanding principal amount of
Notes held by such Holder shall be redeemed or purchased. Except as provided in
the preceding sentence, provisions of this Indenture that apply to Notes called
for redemption also apply to portions of Notes called for redemption.
<PAGE>
25
In the event the Company is required to make an Asset Sale Offer
pursuant to Section 3.9 and Section 4.10 hereof, and the amount of Excess
Proceeds to be applied to such purchase would result in the purchase of a
principal amount of Notes which is not evenly divisible by $1,000, the Trustee
shall promptly refund to the Company the portion of such Excess Proceeds that is
not necessary to purchase the immediately lesser principal amount of Notes that
is so divisible.
SECTION 3.3 NOTICE OF REDEMPTION.
At least thirty (30) days but not more than sixty (60) days before a
redemption date, the Company shall mail, or cause to be mailed, by first class
mail, a notice of redemption to each Holder whose Notes are to be redeemed at
its registered address.
The notice shall identify the CUSIP number of the Notes, if any, and
the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note of the same series in principal amount
equal to the unredeemed portion will be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest and Liquidated Damages, if any, on Notes called for redemption
ceases to accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.3
hereof, Notes called for redemption become due and payable on the redemption
date at the redemption price. On and after the redemption date, unless the
Company defaults in the payment of the redemption price, interest and Liquidated
Damages, if any, will cease to accrue on the Notes or portions of them called
for redemption and all rights of Holders of such Notes will terminate except for
the right to receive the redemption price. Upon surrender to the Paying Agent,
the Holders of such Notes shall be paid the redemption price plus accrued
interest and Liquidated Damages, if any, to the redemption date, but
<PAGE>
26
interest installments and unpaid Liquidated Damages, if any, whose maturity is
on or prior to the redemption date will be payable to the Holder of record at
the close of business on the relevant record dates referred to in the Notes. A
notice of redemption may not be conditional.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.
At least one Business Day before the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money in immediately
available funds sufficient to pay the redemption price of and, if applicable,
accrued interest and Liquidated Damages, if any, on all Notes to be redeemed on
that date. The Trustee or the Paying Agent shall promptly, and in any event
within two Business Days after the redemption date, return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of and, if applicable, accrued
interest and Liquidated Damages, if any, on all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, interest and Liquidated Damages, if any, on the Notes or the portions
of Notes to be redeemed will cease to accrue on the applicable redemption date,
whether or not such Notes are presented for payment. If any Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest will be
paid on the unpaid principal, from the redemption date until such principal is
paid, and to the extent lawful on any interest not paid on such unpaid
principal, from the redemption date until such unpaid interest is paid, in each
case at the rate provided in the Notes and in Section 4.1 hereof.
SECTION 3.6 NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered; PROVIDED, HOWEVER, that no Note of $1,000 or less in principal
amount shall be purchased or redeemed in part.
SECTION 3.7 OPTIONAL REDEMPTION.
At any time on or after August 15, 2002, the Notes will be subject to
redemption at the option of the Company, in whole or in part, up on not less
than 30 nor more than 60 days notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 15 of the
years indicated below:
YEAR PERCENTAGE
- ---- ----------
2002....................................................................104.375%
2003....................................................................102.917%
2004....................................................................101.458%
2005 and thereafter.....................................................100.000%
Notwithstanding the foregoing, prior to August 15, 2000, the Company
may redeem, on any one or more occasions, with the net cash proceeds of one or
more public offerings of its common equity (a "PUBLIC EQUITY OFFERING") (within
60 days of the consummation of any such Public Equity Offering), up to 35% of
the aggregate principal amount of the Notes issued at a redemption
<PAGE>
27
price equal to 108.750% of the principal amount of such Notes plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date;
PROVIDED, HOWEVER, that at least 65% of the aggregate principal amount of Notes
originally issued remains outstanding immediately after each such redemption.
In addition, the Company, at its option, at any time prior to August
15, 2002, may redeem the Notes, in whole or in part (if in part, by lot or by
such other method as the Trustee shall deem fair or appropriate) at the
Make-Whole Price, plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date.
SECTION 3.8 MANDATORY REDEMPTION.
Subject to the Company's obligation to make an offer to purchase Notes
pursuant to Section 4.10 and Section 4.14, the Company is not required to make
mandatory redemption or sinking fund payments with respect to the Notes.
SECTION 3.9 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
Within 30 days after the date that Excess Proceeds exceed $10.0
million and an Asset Sale Offer is required under Section 4.10 hereof, the
Company shall mail or cause the Trustee to mail (in the Company's name and at
its expense and pursuant to an Officers' Certificate) an offer to purchase to
each Holder of Notes pursuant to the terms of this Section 3.9 and to holders of
other Indebtedness that ranks by its terms PARI PASSU in right of payment with
the Notes and the terms of which contain substantially similar requirements with
respect to the application of net proceeds from asset sales as are contained
herein.
The Asset Sale Offer (as defined in Section 4.10) with respect to the
Notes shall be mailed by the Company (or the Trustee) to Holders of Notes at
their last registered address with a copy to the Trustee and the Paying Agent
and shall set forth (a) notice that an Asset Sale has occurred, that the Company
is making an Asset Sale Offer, pursuant to this Section 3.9, and that each
Holder of Notes then outstanding has the right to require the Company to
repurchase, for cash, such Holder's Notes at the Asset Sale Offer Price, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
payment date; (b) the purchase price per $1,000 of principal amount and the
payment date of the Asset Sale Offer, (c) the maximum amount of Excess Proceeds,
required to be applied to such Asset Sale Offer with respect to the Notes; (d)
that any Notes properly tendered pursuant to the Asset Sale Offer will be
accepted for payment (subject to reduction as provided in this Section 3.9) on
the payment date of the Asset Sale Offer and any Notes not properly tendered
will remain outstanding and continue to accrue interest and Liquidated Damages,
if applicable; (e) that unless the Company defaults in the payment of the Asset
Sale Offer Price, all Notes accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest and Liquidated Damages after the payment
date of the Asset Sale Offer; (f) that Holders electing to have any Notes
purchased pursuant to an Asset Sale Offer will be required to surrender the
Notes, with the form entitled Option of Holder to Elect Purchase on the reverse
of the Notes completed, or transfer by book-entry transfer, to the Company, the
Depository or the Paying Agent specified in the notice at the address specified
in the notice prior to the close of business on the third Business Day preceding
the payment date of the Asset Sale Offer; (g) that Holders will be entitled to
withdraw their tendered Notes and their election to require the Company to
purchase the Notes provided that the Paying Agent receives, not later than the
close of business on the second Business Day preceding the payment date of the
Asset Sale Offer, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal
<PAGE>
28
amount of Notes tendered for purchase, and a statement that such Holder is
withdrawing such Holder's tendered Notes and such Holder's election to have such
Notes purchased; (h) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the amount of the Asset Sale Offer, the Company
shall select the Notes to be purchased by lot on a PRO RATA basis (with such
adjustments as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased or
otherwise in accordance with this Indenture); and (i) that Holders whose Notes
are being purchased only in part will be issued new Notes equal in principal
amount to the unpurchased portion of the Notes surrendered (or transferred by
book-entry transfer). If the payment date of the Asset Sale Offer is on or
after an interest payment record date and on or before the related interest
payment date, any accrued interest and Liquidated Damages will be paid to the
Person in whose name a Note is registered at the close of business on such
record date, and no additional interest will be payable to Holders who tender a
Note pursuant to the Asset Sale Offer.
The Company shall fix the payment date of the Asset Sale Offer for
such purchase no earlier than 30 but no more than 60 days after the Asset Sale
Offer is mailed as set forth above, except as may otherwise be required by
applicable law.
The Company shall comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable, in the event that the Company is required to repurchase Notes
pursuant to this Section 3.9. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Section 3.9,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Indenture by
virtue thereof.
On the payment date of the Asset Sale Offer, the Company shall, to the
extent permitted by law, (x) accept for payment Notes or portions thereof
properly tendered pursuant to the Asset Sale Offer, (y) deposit with the Paying
Agent the amount of money, in immediately available funds, equal to the maximum
Excess Proceeds required under Section 4.10 to be applied to such Asset Sale
Offer with respect to such Notes and (z) deliver or cause to be delivered to the
Trustee, Notes so accepted together with an Officers' Certificate stating the
Notes or portions thereof tendered to the Company. If the aggregate purchase
price of all Notes properly tendered exceeds the maximum amount of Excess
Proceeds, required to be applied to such Asset Sale Offer with respect to such
Notes, as applicable, the Notes or portions thereof to be purchased shall be
selected pursuant to Section 3.2 hereof. The Paying Agent shall promptly mail
to each Holder of Notes so accepted for payment a check in an amount equal to
the aggregate purchase price of the Notes purchased by the Company from such
Holder and the Trustee shall promptly authenticate and mail to each Holder a new
Note of the same series equal in principal amount to any unpurchased portion of
any Note surrendered, if any, or return any unpurchased Note to such Holder;
PROVIDED, HOWEVER, that each such new Note shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company shall publicly announce in a
newspaper of national circulation or in a press release provided to a nationally
recognized financial wire service the results of the Asset Sale Offer on the
payment date.
Other than as specifically provided in this Section 3.9, each purchase
pursuant to this Section 3.9 shall be made pursuant to the provisions of
Sections 3.1, 3.2, 3.5 and 3.6 hereof.
<PAGE>
29
ARTICLE 4
COVENANTS
SECTION 4.1 PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest and Liquidated Damages, if any, on the Notes on the dates
and in the manner provided in this Indenture and the Notes. Principal, premium,
if any, and interest and Liquidated Damages, if any, shall be considered paid on
the due date if the Paying Agent, if other than the Company or a Subsidiary of
the Company, holds as of 9:00 a.m. Eastern Time on the due date money deposited
by the Company in immediately available funds and designated for and sufficient
to pay all principal, premium, if any, and interest and Liquidated Damages, if
any, then due. Such Paying Agent shall return to the Company promptly, and in
any event, no later than five days following the date of payment, any money
(including accrued interest) that exceeds such amount of principal, premium, if
any, and interest paid on the Notes. The Company shall pay all Liquidated
Damages, if any, in the same manner and on the same dates as set forth above and
in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the interest rate then applicable to the Notes to
the extent lawful. In addition, it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages, if any, (without regard to any applicable grace
period) at the same rate to the extent lawful.
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee or Registrar) where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.3.
<PAGE>
30
SECTION 4.3 SEC REPORTS.
(a) The Company shall, whether or not required by the rules and
regulations of the SEC, submit to the SEC for public availability and provide to
the Trustee and the Holders copies of all quarterly and annual reports and other
information, documents and reports specified in Sections 13 and 15(d) of the
Exchange Act for so long as the Notes are outstanding.
(b) If the Company or a Guarantor, if any, is required to furnish
annual or quarterly reports to its stockholders pursuant to the Exchange Act,
the Company shall cause such annual report or quarterly or other financial
report furnished to be filed with the Trustee and mailed to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar.
(c) The Company and the Guarantors, if any, shall deliver all reports
and other documents and information to the Holders under this Section 4.3. The
Trustee shall, if requested to by the Company, deliver such reports, other
documents and information to the Holders, but at the sole expense of the
Company.
(d) The Company, for so long as the Notes are outstanding, will
continue to provide to Holders and to prospective purchasers of Notes the
information required by Rule 144A(d)(4).
(e) Notwithstanding anything contrary herein, the Trustee shall have
no duty to review such documents for purposes of determining compliance with any
provision of this Indenture.
SECTION 4.4 COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within sixty (60) days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether each of the Company and its
Subsidiaries has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge each of the Company and
its Subsidiaries has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge and what action each of
the Company and its Subsidiaries is taking or propose to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest or Liquidated Damages, if any, on the Notes are prohibited (or if
such event has occurred, a description of the event and what action each is
taking or proposes to take with respect thereto).
(b)The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of (i) any
Default or Event of Default or (ii) any event of default under any other
mortgage, indenture or instrument which with the passage of time or giving of
notice would be a Default or an Event of Default under Section 6.1 hereof, an
Officers' Certificate specifying such Default or Event of Default and what
action the Company is taking or proposes to take with respect thereto.
SECTION 4.5 TAXES.
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The Company shall, and shall cause each of its Subsidiaries to pay
prior to delinquency, all material taxes, assessments, and governmental levies
except as contested in good faith and by appropriate proceedings.
SECTION 4.6 STAY, EXTENSION AND USURY LAWS.
The Company covenants, and the Company shall cause any Guarantor to
covenant (to the extent they may lawfully do so), that it will not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law wherever enacted, now or at any
time hereafter in force, which may affect the covenants or the performance of
this Indenture. The Company (to the extent it may lawfully do so) hereby
expressly waives, and the Company will cause any Guarantor (to the extent it may
lawfully do so) expressly to waive, all benefit or advantage of any such law,
and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.
SECTION 4.7 LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (other than: (1) dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company; (2)
dividends or distributions by a Restricted Subsidiary of the Company, provided
that to the extent that a portion of such dividend or distribution is paid to a
holder of Equity Interests of a Restricted Subsidiary other than the Company or
a Restricted Subsidiary, such portion of such dividend or distribution is not
greater than such holder's PRO RATA aggregate common equity interest in such
Restricted Subsidiary; and (3) dividends or distributions payable on Existing
Preferred OP Units and Preferred OP Units issued in compliance with Section 4.09
hereof); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary or other Affiliate
of the Company (other than (A) any Equity Interests owned by the Company or any
Restricted Subsidiary of the Company, (B) any Existing Preferred OP Units and
(C) any Preferred OP Units issued in compliance with Section 4.9 hereof); (iii)
purchase, redeem or otherwise acquire or retire for value any Indebtedness of
the Company or any Restricted Subsidiary that is subordinated or junior in right
of payment, by its terms, to the Notes or any Guarantee thereof prior to the
scheduled final maturity or sinking fund payment dates for payment of principal
and interest in accordance with the original documentation for such subordinated
or junior Indebtedness; or (iv) make any Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "RESTRICTED PAYMENTS"), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.9 hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries after
the Issuance Date (excluding Restricted Payments permitted by clauses (ii),
(iii), (iv), (v) and (vi) (X) of the next succeeding
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32
paragraph), is less than the sum, without duplication, of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one accounting
period) from June 30, 1997 to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, less 100% of such deficit), PLUS (ii) 100% of the aggregate net
proceeds (including the fair market value of non-cash proceeds as determined in
good faith by the Board of Directors) received by the Company from the issue or
sale, in either case, since the Issuance Date of either (A) Equity Interests of
the Company or of (B) debt securities of the Company that have been converted or
exchanged into such Equity Interests (other than Equity Interests (or
convertible or exchangeable debt securities) sold to a Restricted Subsidiary of
the Company and other than Disqualified Stock or debt securities that have been
converted or exchanged into Disqualified Stock), PLUS (iii) in case any
Unrestricted Subsidiary has been redesignated a Restricted Subsidiary pursuant
to the terms of this Indenture or has been merged, consolidated or amalgamated
with or into, or transfers or conveys assets to, or is liquidated into, the
Company or a Restricted Subsidiary and PROVIDED that no Default or Event of
Default shall have occurred and be continuing or would occur as a consequence
thereof, the lesser of (A) the book value (determined in accordance with GAAP)
at the date of such redesignation, combination or transfer of the aggregate
Investments made by the Company and its Restricted Subsidiaries in such
Unrestricted Subsidiary (or of the assets transferred or conveyed, as
applicable) and (B) the fair market value of such Investments in such
Unrestricted Subsidiary at the time of such redesignation, combination or
transfer (or of the assets transferred or conveyed, as applicable), in each case
as determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a resolution of such Board
and, in each case, after deducting any Indebtedness associated with the
Unrestricted Subsidiary so designated or combined or with the assets so
transferred or conveyed, PLUS (iv) 100% of any dividends or interest actually
received in cash by the Company or a Restricted Subsidiary after the Issuance
Date from (A) a Restricted Subsidiary the Net Income of which has been excluded
from the computation of Consolidated Net Income, (B) an Unrestricted Subsidiary,
(C) a Person that is not a Subsidiary or (D) a Person that is accounted for on
the equity method PLUS (v) $15.0 million.
Notwithstanding the foregoing, the provisions of this Section 4.7 will
not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture; (ii) (X) the redemption,
purchase, retirement or other acquisition of any OP Unit in exchange for
Equity Interests of the Company (other than Disqualified Stock) and (Y) the
redemption, purchase, retirement or other acquisition of any Equity
Interests of the Company or a Restricted Subsidiary (other than OP Units or
Preferred OP Units) in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of other Equity Interests of the Company (other than any
Disqualified Stock); PROVIDED that in the case of (X) and (Y) the amount of
any proceeds that is utilized for such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; (iii) the defeasance, redemption, repayment or purchase of
Indebtedness of the Company or any Restricted Subsidiary that is
subordinated or junior in right of payment, by its terms, to the Notes or
any Guarantee thereof in a Permitted Refinancing; (iv) the defeasance,
redemption, repayment or purchase of Indebtedness of the Company or any
Restricted Subsidiary; that is subordinated or junior in right of payment,
by its terms, to the Notes or any Guarantee thereof with the proceeds of a
substantially concurrent sale (other than to a Subsidiary of the Company)
of Equity Interests (other than Disqualified Stock) of the Company;
PROVIDED that the amount of any proceeds that is utilized for such
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33
defeasance, redemption, repayment or purchase shall be excluded from clause
(c) (ii) of the preceding paragraph; (v) the purchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company
pursuant to any management equity subscription agreement or stock option
agreement; PROVIDED, HOWEVER, that the aggregate price paid for all such
purchased, redeemed, acquired or retired Equity Interests shall not exceed
$1,000,000 in any 12 month period; and (vi)(X) the making of any Permitted
Investment described in clauses (a), (b), (c), (d) or (f) of the definition
thereof and (Y) the making of any Permitted Investment described in clause
(e) thereof, PROVIDED that, in the case of clauses (ii)(Y), (iii), (iv),
(v) and (vi)(Y), no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof.
In determining whether any Restricted Payment is permitted by this
Section 4.7, the Company may allocate or reallocate all or any portion of such
Restricted Payment among the clauses (i) through (vi) of the preceding paragraph
or among such clauses and the first paragraph of this Section 4.7 including
clauses (a), (b) and (c), PROVIDED that at the time of such allocation or
reallocation, all such Restricted Payments, or allocated portions thereof, would
be permitted under the various provisions of this Section 4.7.
The amount of all Restricted Payments (other than cash) shall be the
fair market value (evidenced by a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate delivered to the Trustee) on the
date of the Restricted Payment of the asset(s) proposed to be transferred by the
Company or such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. Not later than (i) the end of any calendar quarter in which
any Restricted Payment is made or (ii) the making of a Restricted Payment which,
when added to the sum of all previous Restricted Payments made in a calendar
quarter, would cause the aggregate of all Restricted Payments made in such
quarter to exceed $5.0 million, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section 4.7
were computed, which calculations may be based upon the Company's latest
available financial statements.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default or
Event of Default. For purposes of making the determination as to whether such
designation would cause a Default or Event of Default, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this Section 4.7. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of (x) the net book value of such Investments at the time
of such designation, (y) the fair market value of such Investments at the time
of such designation and (z) the original fair market value of such Investments
at the time they were made. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Any such designation by the Board of Directors shall be evidenced to
the Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
SECTION 4.8 LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.
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34
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) (i) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, or (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (b) make loans or advances or capital contributions to
the Company or any of its Restricted Subsidiaries, or (c) sell, lease or
transfer any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reasons of (i) Existing Indebtedness as in effect on the Issuance Date, (ii) the
Credit Agreement, PROVIDED that the encumbrances or restrictions contained in
such agreement as amended, modified, supplemented, restructured, renewed,
restated, refunded, replaced or refinanced or extended from time to time on one
or more occasions are no more restrictive than those contained in the Credit
Agreement as in effect on the Issuance Date, (iii) this Indenture and the Notes,
(iv) applicable law, (v) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted Subsidiaries or of
any Person that becomes a Restricted Subsidiary as in effect at the time of such
acquisition or such Person becoming a Restricted Subsidiary (except to the
extent such Indebtedness was incurred in connection with or in contemplation of
such acquisition or such Person becoming a Restricted Subsidiary), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, PROVIDED that the Consolidated Cash Flow of such Person is
not taken into account (to the extent of such restriction) in determining
whether such acquisition was permitted by the terms of this Indenture, (vi)
restrictions of the nature described in clause (c) above by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (vii) purchase money obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in this clause (c) above on the property so
acquired, (viii) Permitted Refinancing Indebtedness, PROVIDED that the
restrictions contained in the agreements governing such Permitted Refinancings
are no more restrictive than those contained in the agreements governing the
Indebtedness or Disqualified Stock being refinanced, or (ix) customary
restrictions in security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements and mortgages.
SECTION 4.9 LIMITATION ON ADDITIONAL INDEBTEDNESS AND ISSUANCE OF
CERTAIN CAPITAL STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to (collectively,
"INCUR" and correlatively, an "INCURRENCE" of) any Indebtedness (including
Acquired Debt), the Company shall not issue, and shall not permit any of its
Restricted Subsidiaries to issue, any shares of Disqualified Stock and the
Company shall not permit any of its Restricted Subsidiaries to issue any
Preferred Stock; PROVIDED, HOWEVER, that the Company or any Guarantor may incur
Indebtedness or issue shares of Disqualified Stock and the Restricted
Subsidiaries may incur Indebtedness under the Credit Agreement if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
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35
The foregoing provisions shall not apply to:
(a) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Indebtedness; PROVIDED, HOWEVER, that if any such Indebtedness
ceases to be Non-Recourse Indebtedness of an Unrestricted Subsidiary, such event
shall be deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company;
(b) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness pursuant to the Credit Agreement in an aggregate principal amount
not to exceed $300.0 million at any one time outstanding, MINUS any Net Proceeds
that have been applied to permanently reduce the outstanding amount of such
Indebtedness pursuant to clause (a) of the second paragraph of Section 4.10
hereof;
(c) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(d) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness under Hedging Obligations that do not increase the Indebtedness of
the Company or the Restricted Subsidiary, as the case may be, other than as a
result of fluctuations in interest or foreign currency exchange rates provided
that such Hedging Obligations are incurred for the purpose of providing interest
rate protection with respect to Indebtedness permitted under the Indenture or to
provide currency exchange protection in connection with revenues generated in
currencies other than U.S. dollars;
(e) the incurrence or the issuance by the Company of Refinancing
Indebtedness or Refinancing Disqualified Stock or the incurrence or issuance by
a Restricted Subsidiary of Refinancing Indebtedness or Refinancing Disqualified
Stock; PROVIDED, HOWEVER, that such Refinancing Indebtedness or Refinancing
Disqualified Stock is a Permitted Refinancing;
(f) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Restricted Subsidiaries; PROVIDED, HOWEVER, that (a) any subsequent
issuance or transfer of Equity Interests that results in any such Indebtedness
being held by a Person other than a Restricted Subsidiary and (b) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Company or such Restricted Subsidiary,
as the case may be;
(g) the incurrence of Indebtedness represented by the Notes and any
Guarantee thereof;
(h) the incurrence by the Company or any of its Restricted
Subsidiaries, in the ordinary course of business and consistent with past
practice, of surety, performance or appeal bonds;
(i) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other
clause of this paragraph) in an aggregate principal amount at any time
outstanding not to exceed $50.0 million;
(j) the incurrence by the Company or any of its Restricted
Subsidiaries of Assumed Indebtedness--PROVIDED that, after giving effect to the
incurrence thereof, the Company could incur at
<PAGE>
36
lease $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test described in the preceding paragraph; and
(k) the issuance of Preferred OP Units by the Company or any of its
Restricted Subsidiaries as full or partial consideration for the acquisition of
lodging facilities and related assets, PROVIDED that, after giving effect to the
issuance thereof, the Company could incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in the
preceding paragraph.
SECTION 4.10 LIMITATION ON SALE OF ASSETS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, conduct an Asset Sale, unless (x) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets sold or
otherwise disposed of (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) and (y) at least 75%
of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash or Cash Equivalents; PROVIDED, HOWEVER, that
the principal amount of the following shall be deemed to be cash for purposes of
this provision: (A) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet or in the notes thereto), of
the Company or any Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Notes or any Guarantee thereof) that are assumed
by the transferee of any such assets and (B) any notes or other obligations
received by the Company or any such Restricted Subsidiary from such transferee
that are converted by the Company or such Restricted Subsidiary into cash within
90 days of the closing of such Asset Sale (to the extent of the cash received).
Notwithstanding the foregoing, the restriction in clause (y) above will not
apply with respect to mortgages, other notes receivable or other securities
received by the Company or any Restricted Subsidiary from a transferee of any
assets to the extent such mortgages, other notes receivable or other securities
are Investments permitted to be made by the Company or such Restricted
Subsidiary under Section 4.7 hereof.
Within 365 days of any Asset Sale, the Company or such Restricted
Subsidiary may (a) apply the Net Proceeds from such Asset Sale to repay any
Indebtedness that ranks by its terms senior to the Notes (or any Guarantee
thereof) and, in the case of any Indebtedness under the Credit Agreement, to
effect a permanent reduction in the amount of Indebtedness that may be incurred
pursuant to clause (ii) of the second paragraph of Section 4.9 hereof, or (b)
invest the Net Proceeds from such Asset Sale in property or assets used in a
Hospitality-Related Business, PROVIDED that the Company or such Restricted
Subsidiary will have complied with this clause (b) if, within 365 days of such
Asset Sale, the Company or such Restricted Subsidiary shall have commenced and
not completed or abandoned an investment in compliance with this clause (b) and
shall have segregated such Net Proceeds from the general funds of the Company
and its Subsidiaries for that purpose and such Investment is substantially
completed within 180 days after the first anniversary of such Asset Sale. Any
Net Proceeds from an Asset Sale that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "EXCESS
PROCEEDS". When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company shall make an offer, to all Holders of Notes and to holders of other
Indebtedness that ranks by its terms PARI PASSU in right of payment with the
Notes and the terms of which contain substantially similar requirements with
respect to the application of net proceeds from asset sales as are contained in
this Indenture (an "ASSET SALE OFFER") to purchase on a PRO RATA basis the
maximum principal amount of Notes, that is an integral multiple of $1,000, that
may be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the
<PAGE>
37
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in this Indenture. To the extent that the aggregate amount of Notes and
other such Indebtedness tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds available
for purchase thereof, the Trustee shall select the Notes to be purchased in the
manner described under Section 3.3 hereof. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero. Pending the
final application of any Net Proceeds from an Asset Sale pursuant to this
paragraph, the Company or any Restricted Subsidiary may temporarily reduce
Indebtedness of the Company or a Restricted Subsidiary that ranks by its terms
senior to the Notes or otherwise invest such Net Proceeds in Cash Equivalents.
Any offer to purchase the Notes pursuant to this Section 4.10 shall be
made pursuant to the provisions of Section 3.9 hereof. Simultaneously with the
notification of such offer to the Trustee, the Company shall provide the Trustee
with an Officer's is Certificate setting forth the calculations used in
determining the amount of Excess Proceeds to be applied to the purchase of the
Notes. The Company will comply, to the extent applicable, with the requirements
of Rule 14e-1 under the Exchange Act and other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with any offer to purchase and the purchase of Notes as described above. To the
extent that the provisions of any securities laws or regulations conflict with
Section 3.9 and this Section 4.10, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the provisions of Section 3.9 and this Section 4.10 to make an
Asset Sale Offer.
SECTION 4.11 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or Guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE
TRANSACTION"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary on an arm's length basis with an unrelated Person, (b) the
Company delivers to the Trustee (i) with respect to any Affiliate Transaction
involving aggregate payments in excess of $5.0 million, an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (a) above and
such Affiliate Transaction is approved by a majority of the disinterested
members of the Board of Directors and (ii) with respect to any Affiliate
Transaction involving aggregate payments in excess of $10.0 million (other than
an Affiliate Transaction involving the acquisition or disposition of a lodging
facility by the Company or a Restricted Subsidiary of the Company), an opinion
as to the fairness to the Company or such Restricted Subsidiary from a financial
point of view issued, at the option of the Company, by an investment banking
firm of national standing or a Qualified Appraiser and (c) the Company delivers
to the Trustee in the case of an Affiliate Transaction involving the acquisition
or disposition of a lodging facility by the Company or a Restricted Subsidiary
of the Company and (x) involving aggregate payments of more than $5.0 million
and less than $25.0 million, an appraisal by a Qualified Appraiser to the effect
that the transaction is being undertaken at fair market value or (y) involving
aggregate payments of $25.0 million or more, an opinion as to the fairness of
the transaction to the Company or such Restricted Subsidiary from a financial
point of view issued by an investment banking firm of national standing;
PROVIDED, HOWEVER, that the following shall not be deemed Affiliate
Transactions: (A) any employment, deferred compensation, stock option,
noncompetition, consulting or similar agreement entered into by the
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38
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (B) transactions between or among the Company and/or its Restricted
Subsidiaries, (C) the incurrence of fees in connection with the provision of
hotel management services, provided that such fees are paid in the ordinary
course of business and are consistent with past practice and (D) Restricted
Payments permitted by Section 4.7 hereof.
SECTION 4.12 LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien that secures obligations under any Indebtedness which is PARI
PASSU with or subordinated to the Notes, unless the Notes are equally and
ratably secured with the obligations so secured or until such time as such
obligations are no longer secured by a Lien.
SECTION 4.13 CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5 hereof, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate existence and the corporate existence of each of its
Subsidiaries, in accordance with its respective organizational documents (as the
same may be amended from time to time) and (ii) its (and its Subsidiaries')
rights (charter and statutory), licenses and franchises; PROVIDED, HOWEVER, that
the Company shall not be required to preserve any such right, license or
franchise, or the corporate existence of any of its Subsidiaries, if the Board
of Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders.
SECTION 4.14 CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require that the Company purchase all or a portion of such
Holder's Notes pursuant to the offer described below (the "CHANGE OF CONTROL
OFFER"), at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase (the "CHANGE OF CONTROL PAYMENT").
Prior to the mailing of the notice referred to below, but in any event
within 30 days following any Change of Control, the Company shall (i) repay in
full and terminate all commitments under Indebtedness under the Credit Agreement
and all other Senior Debt the terms of which require repayment upon a Change of
Control or offer to repay in full and terminate all commitments under all
Indebtedness under the Credit Agreement and all other such Senior Debt and to
repay the Indebtedness owed to each lender or holder of Senior Debt which has
accepted such offer or (ii) obtain the requisite consents under the Credit
Agreement and all other Senior Debt to permit the repurchase of the Notes as
provided below. The Company shall first comply with the covenant in the
immediately preceding sentence before it shall be required to repurchase Notes
pursuant to the provisions described below, and the Company's failure to comply
with the covenant described in the immediately preceding sentence shall
constitute an Event of Default described in clause (3) and not in clause (2)
under Section 6.1 hereof.
Within 10 days following the date upon which the Change of Control
occurs, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other
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things, the purchase date, which must be no earlier than 30 days nor later than
60 days from the date such notice is mailed, other than as may be required by
law (the "CHANGE OF CONTROL PAYMENT DATE"). Holders electing to have a Note
purchased pursuant to a Change of Control Offer will be required to surrender
the Note, with the form entitled "OPTION OF HOLDER TO ELECT PURCHASE" on the
reverse of the Note completed, to the Trustee or Paying Agent, if any, at the
address specified in the notice prior to the close of business on the third
business day prior to the Change of Control Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.14, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.14 to make a Change of Control Offer.
On the Change of Control Payment Date, the Company will, to the extent
permitted by law, (x) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (y) deposit with the Paying
Agent an amount equal to the aggregate Change of Control Payment in respect of
all Notes or portions thereof so tendered and (z) deliver, or cause to be
delivered, to the Trustee for cancellation the Notes so accepted together with
an Officers' Certificate stating the aggregate principal amount of Notes or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to each Holder of Notes so accepted the Change of Control Payment
for such Notes, and the Trustee shall promptly authenticate and mail to each
Holder a new Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; PROVIDED, HOWEVER, that each such new Note shall be
in principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce in a newspaper of national circulation or in a press release
provided to a nationally recognized financial wire service the results of the
Change of Control Offer on the Change of Control Payment Date.
The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control made by the Company
and purchased all Notes validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.15 SUBSIDIARY GUARANTEES.
Prior to guaranteeing any other Indebtedness of the Company (other
than the Credit Agreement), a Restricted Subsidiary that is also a Significant
Subsidiary must execute and deliver to the Trustee a supplemental indenture in
the form of Exhibit B hereto pursuant to which such Restricted Subsidiary shall
Guarantee, on an unsecured senior subordinated basis, all of the Obligations of
the Company with respect to the Notes together with an opinion of counsel (which
counsel may be an employee of the Company) to the effect that the supplemental
indenture has been duly executed and delivered by such Restricted Subsidiary and
is in compliance in all material respects with the terms of this Indenture.
The Indebtedness represented by any such Subsidiary Guarantee (i.e.,
the payment of Obligations on the Notes) will be subordinated on the same basis
to Senior Debt of the Guarantor as the Notes are subordinated to Senior Debt of
the Company.
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SECTION 4.16 LINE OF BUSINESS.
For so long as any Notes are outstanding, the Company shall not, and
shall not permit any of its Restricted Subsidiaries to, engage in any business
or activity other than a Hospitality-Related Business.
SECTION 4.17 PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.18 NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is senior in right of payment to the
Notes and subordinate or junior in right of payment to any other Indebtedness of
the Company, and no Guarantor shall incur, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is senior in right of payment to the
Guarantee by such Guarantor of the Notes and subordinate or junior in right of
payment to any other Indebtedness of the Guarantor.
ARTICLE 5
SUCCESSORS
SECTION 5.1 WHEN THE COMPANY MAY MERGE, ETC.
The Company shall not consolidate or merge with or into or wind up
into (whether or not the Company is the surviving entity), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another
corporation, Person or entity unless:
(i) the Company is the surviving corporation or the Person formed by
or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;
(ii) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person or to which such sale,
assignment, transfer, lease, conveyance or other disposition will have been
made assumes all the obligations of the Company under the Notes and this
Indenture pursuant to a supplemental indenture;
(iii) at the time of such transaction and immediately after such
transaction after giving pro forma effect thereto, no Default or Event of
Default exists or would exist;
(iv) the Company or any Person formed by or surviving such
consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have
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41
been made (A) shall have Consolidated Net Worth (immediately after the
transaction) equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and (B) shall, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.9 hereof; and
(v) the Company shall have delivered to the Trustee prior to the
consummation of the proposed transaction an Officers' Certificate and an
Opinion of Counsel to the combined effect that such sale, assignment,
transfer, lease, conveyance or other disposition, and, if applicable, any
supplemental indenture executed in connection therewith, comply with this
Indenture. The Trustee shall be entitled to conclusively rely upon such
Officers' Certificate and Opinion of Counsel.
SECTION 5.2 SUCCESSOR SUBSTITUTED.
Upon any consolidation, merger, lease, conveyance or transfer of all
or substantially all of the assets of the Company, as the case may be, in
accordance with Section 5.1 hereof, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale, lease,
conveyance or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture and the
Notes with the same effect as if such successor had been named as the Company
herein or therein and thereafter the predecessor corporation shall be relieved
of all further obligations and covenants under this Indenture and the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT.
Each of the following shall constitute an Event of Default under this
Indenture:
(1) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not such payment shall
be prohibited by the subordination provisions of this Indenture);
(2) default in payment when due of principal of or premium, if any, on
the Notes at maturity, upon redemption or otherwise (including the failure
to make a payment to purchase Notes tendered pursuant to a Change of
Control Offer or an Assets Sale Offer) (whether or not such payment shall
be prohibited by the subordination provisions of this Indenture);
(3) failure by the Company or any Restricted Subsidiary to comply with
Section 5.1;
(4) failure by the Company or any Guarantor for 30 days in the
performance of any other covenant, warranty or agreement in this Indenture
or the Notes after written notice shall have been given to the Company by
the Trustee or to the Company and the Trustee from Holders of at least 25%
in principal amount of the Notes then outstanding;
(5) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of Non-Recourse Indebtedness of the Company or any of its Restricted
Subsidiaries with an aggregate principal amount in excess of
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the lesser of (A) 10% of the total assets of the Company and its Restricted
Subsidiaries measured as of the end of the Company's most recent fiscal
quarter for which internal financial statements are available immediately
preceding the date on which such default occurred, determined on a pro
forma basis and (B) $50 million, and such failure continues for a period of
10 days or more, or the acceleration of the final stated maturity of any
such Non-Recourse Indebtedness (which acceleration is not rescinded,
annulled or otherwise cured within 10 days of receipt by the Company or
such Restricted Subsidiary of notice of any such acceleration);
(6) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness (other than Non-Recourse Indebtedness) of the Company
or any Restricted Subsidiary of the Company and such failure continues for
a period of 10 days or more, or the acceleration of the final stated
maturity of any such Indebtedness (which acceleration is not rescinded,
annulled or otherwise cured within 10 days of receipt by the Company or
such Restricted Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal at final maturity or which has been accelerated, in each case
with respect to which the 10-day period described above has passed,
aggregates $10.0 million or more at any time;
(7) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments rendered against them (other than judgment liens
without recourse to any assets or property of the Company or any of its
Restricted Subsidiaries other than assets or property securing Non-Recourse
Indebtedness) aggregating in excess of $10.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days (other than any
judgments as to which a reputable insurance company has accepted full
liability);
(8) except as permitted by this Indenture, any Subsidiary Guarantee
shall be held in a judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any Guarantor
(or its successors or assigns), or any Person acting on behalf of such
Guarantor (or its successors or assigns), shall deny or disaffirm its
obligations or shall fail to comply with any obligations under its
Subsidiary Guarantee;
(9) the Company, any Guarantor or any of the Company's Subsidiaries
that would constitute a Significant Subsidiary or any group of the
Company's Subsidiaries that, taken together, would constitute a Significant
Subsidiary pursuant to or within the meaning of the Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(d) makes a general assignment for the benefit of its creditors,
(e) admits in writing its inability to pay its debts as they
become due; and
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(10) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief in an involuntary case against the Company,
any Guarantor or any Subsidiary that is a Significant Subsidiary of
the Company or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary of the Company,
(b) appoints a Custodian of the Company, any Guarantor or any
Subsidiary that is a Significant Subsidiary of the Company or any
group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary of the Company, or for all or substantially all
of the property of the Company, any Guarantor or any Subsidiary that
is a Significant Subsidiary of the Company, or any group of
Subsidiaries that, taken together, would constitute a Significant
Subsidiary of the Company, or
(c) orders the liquidation of the Company, any Guarantor or any
Subsidiary that is a Significant Subsidiary of the Company or any
group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary of the Company,
and the order or decree remains unstayed and in effect for 60 consecutive
days.
The term "BANKRUPTCY LAW" means, title 11, U.S. Code or any similar
federal or state law for the relief of debtors, each as amended from time to
time. The term Custodian means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
SECTION 6.2 ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clauses (9) and (10) of Section 6.1 hereof) occurs and is continuing, the
Trustee by written notice to the Company, or the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes by written notice to
the Company and the Trustee, may declare all Notes to be due and payable
immediately. Upon the effectiveness of such declaration, all amounts due and
payable on the Notes, as determined in the succeeding paragraphs, shall be due
and payable effective immediately. If an Event of Default specified in clause
(9) or (10) of Section 6.1 hereof occurs, all outstanding Notes shall ipso facto
become and be immediately due and payable immediately without further action or
notice on the part of or by the Trustee or any Holder.
In the event that the maturity of the Notes is accelerated pursuant to
this Section 6.2, 100% of the principal amount thereof shall become due and
payable plus premium, if any, and accrued and unpaid interest, if any, to the
date of payment.
SECTION 6.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal of, premium, if
any, or interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
SECTION 6.4 WAIVER OF PAST DEFAULTS.
Subject to Section 9.2 hereof, Holders of a majority in aggregate
principal amount of the then outstanding Notes by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except a
continuing Default or Event of Default in the payment of the principal of,
premium, if any, or interest or Liquidated Damages, if any, on any Note held by
a non-consenting Holder. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
SECTION 6.5 CONTROL BY MAJORITY.
The Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, or that the Trustee determines may be
unduly prejudicial to the rights of other Holders or that may involve the
Trustee in personal liability; PROVIDED, HOWEVER, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction.
SECTION 6.6 LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Notes only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default or the Trustee receives such notice from the Company;
(2) the Holders of at least 25% in aggregate principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) during such 60-day period the Holders of a majority in aggregate
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
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Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest and Liquidated Damages, if any, on the Note, on or after the respective
due dates expressed in the Note, or to bring suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Holder.
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(1) or (2) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company or any Guarantor for the
whole amount of principal, premium, if any, and interest and Liquidated Damages,
if any, remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and any other
amounts due the Trustee under Section 7.7 hereof) and the Holders allowed in any
judicial proceedings relative to the Company or any Guarantor (or any other
obligor upon the Notes), their creditors or their property and shall be entitled
and empowered to collect, receive and distribute any money or securities or
other property payable or deliverable on any such claims and to distribute the
same, and any custodian in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.7 hereof. To the extent that
the payment of any such compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof out of the estate in any such proceeding shall be denied for
any reason, payment of the same shall be secured by a Lien on, and shall be paid
out of, any and all distributions, dividends, money, securities and other
properties that the Holders of the Notes may be entitled to receive in such
proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects or receives any money or securities or other
property pursuant to this Article, it shall pay out the money or securities or
other property in the following order:
First: to the Trustee, its agents and counsel for amounts due under
Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
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46
Second: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest and Liquidated Damages, if any,
ratably, without preference or priority of any kind (including defaulted
interest), according to the amounts due and payable on the Notes for principal,
premium, if any, and interest and Liquidated Damages, if any, respectively;
Third: without duplication, to Holders for any other obligations
owing to the Holders under the Notes or this Indenture; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any such
payment to Holders.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as a Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by
such party litigant. This Section does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.7 hereof, or a suit by Holders of more
than 10% in aggregate principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE.
(1) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(2) Except during the continuance of an Event of Default:
(a) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(b) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(3) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
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(a) this paragraph does not limit the effect of paragraph (2) of this
Section 7.1;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(1), (2) and (3) of this Section.
(5) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee may refuse to perform
any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(6) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.2 RIGHTS OF TRUSTEE.
Subject to TIA Section 315:
(1) The Trustee may conclusively rely and shall be protected in acting
or refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed and monitored with due
care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(6) Without limiting the provisions of Section 7.1(5), the Trustee
shall be under no obligation to exercise any of the rights or powers vested in
it by this Indenture at the request or direction of the Holders of a majority in
aggregate principal amount of the then outstanding Notes pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or
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indemnity against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction.
(7) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(8) Except with respect to Section 4.1, the Trustee shall have no duty
to inquire as to the performance of the Company's covenants in Article 4. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Sections
6.1(1), 6.1(2) or 4.1 or (ii) any Default or Event of Default of which the
Trustee shall have received written notification or obtained actual knowledge.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company or any Affiliate of the foregoing with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to Sections 7.10 and 7.11 hereof.
SECTION 7.4 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision hereof,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
SECTION 7.5 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known by a Trust Officer of the Trustee, the Trustee shall mail to Holders a
notice of the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment of principal or
interest on any Note, the Trustee may withhold the notice if and so long as a
Trust Officer in good faith determines that withholding the notice is in the
interests of Holders. The Trustee shall comply with TIA Section 315(b).
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15, 1998
following the date hereof, the Trustee shall mail to Holders a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to Holders shall be
submitted to the SEC and each stock exchange, if any, on which the Notes are
listed. The Company shall promptly notify the Trustee when the Notes are listed
on or delisted by any stock exchange.
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SECTION 7.7 COMPENSATION AND INDEMNITY.
The Company agrees to pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company agrees to reimburse the Trustee
promptly upon request for all reasonable disbursements, advances and expenses
incurred or made by it in addition to the compensation for its services. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents and counsel.
The Company agrees to indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture, except
as set forth in the next paragraph. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee
to so notify the Company shall not relieve the Company of its obligations
hereunder except to the extent the Company has been prejudiced thereby. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and, if the Company or the Trustee shall
have been advised by its respective counsel that representation of the Trustee
and the Company by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation by the
same counsel has been proposed), the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld. The
provisions of this paragraph shall survive the satisfaction and discharge of
this Indenture.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own gross negligence or
willful misconduct.
The obligations of the Company under this Section 7.7 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien on all money or property held or collected by the
Trustee, except that held in trust to pay principal and interest on particular
Notes. Such Lien shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(9) or (10) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.8 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in aggregate principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Company. The
Company may remove the Trustee at its discretion or if:
(1) the Trustee fails to comply with Section 7.10;
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(2) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in aggregate principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
Subject to the provision of TIA Section 315(e), if the Trustee after
written request by any Holder who has been a bona fide holder of a Note or Notes
for at least six months fails to comply with Section 7.10, such Holder, on
behalf of himself and others similarly situated, may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid and subject to the Lien provided for in
Section 7.7. Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 hereof shall continue
for the benefit of the retiring Trustee.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee powers, shall be subject to supervision or examination by Federal or
state authority and shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a). The Trustee is subject to TIA Section
310(b). The provisions of TIA Section 310 shall apply to the Company as the
obligor of the Notes.
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SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
The provisions of TIA Section 311 shall apply to the Company as the obligor of
the Notes.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1 DEFEASANCE AND DISCHARGE OF THIS INDENTURE AND THE
NOTES.
(a) The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, with respect
to the Notes, elect to have either Section 8.2 or 8.3 hereof be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article 8.
(b) The Company may terminate its obligations (and the obligations of
any Guarantor in respect of Subsidiary Guarantees) under the Notes and this
Indenture (except those obligations referred to in the penultimate paragraph of
this Section 8.1(b)) if all such Notes thereto authenticated and delivered
(except lost, stolen or destroyed Notes that have been replaced or paid and
Notes for whose payment cash in United States dollars has theretofore been
deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company, as provided in Section 8.6, or discharged from such
trust) have been delivered to the Trustee for cancellation and the Company has
paid all sums payable by it hereunder, or if (i) either (x) pursuant to Article
3, the Company shall have given notice to the Trustee and mailed a notice of
redemption to each Holder of the redemption of all of the Notes under
arrangements satisfactory to the Trustee for the giving of such notice or (y)
all Notes have otherwise become due and payable hereunder, (ii) the Company
shall have irrevocably deposited or caused to be deposited with the Trustee or a
trustee satisfactory to the Trustee, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, as trust funds in
trust solely for the benefit of the Holders for that purpose, cash in United
States dollars in such amount as is sufficient without consideration of
reinvestment of such interest, to pay principal of, premium, if any, interest
and Liquidated Damages, if any, on the outstanding Notes to maturity or
redemption; provided that the Trustee shall have been irrevocably instructed to
apply such deposit to the payment of said principal, premium, if any, interest
and Liquidated Damages, if any, with respect to the Notes; and, provided,
further, that from and after the time of deposit, the money deposited shall not
be subject to the rights of holders of Senior Debt pursuant to the provisions of
Article 10; (iii) no Default or Event of Default with respect to this Indenture
or the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company or any Guarantor is a party or by which it is bound; (iv) the
Company shall have paid all other sums payable by it hereunder; and (v) the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent relating to the
satisfaction and discharge of this Indenture have been complied with. Such
Opinion of Counsel shall also state that such satisfaction and discharge does
not result in a default under the Credit Agreement (if then in effect) or any
other agreement or instrument then known to such counsel that binds or affects
the Company or any Guarantor.
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Notwithstanding the foregoing paragraph, the Company's (and any
Guarantor's) obligations in Sections 2.5, 2.6, 2.7, 2.8, 4.1, 4.2, 7.7, 8.6 and
8.7 shall survive until the Notes are no longer outstanding pursuant to the last
paragraph of Section 2.8. After the Notes are not longer outstanding, the
Company's obligations in Sections 7.7, 8.6 and 8.7 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations (and the
obligations of any Guarantors in respect of Subsidiary Guarantees) under the
Notes and this Indenture except for those surviving obligations specified above.
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.1(a) hereof of the option
applicable to this Section 8.2, the Company and the Guarantors, if any, shall be
deemed to have been discharged from their obligations with respect to all
outstanding Notes and Subsidiary Guarantees, if any, on the date the conditions
set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this
purpose, such Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, which shall thereafter be deemed to be outstanding only for the purposes
of Section 8.5 hereof and the other Sections of this Indenture referred to in
clauses (i) and (ii) of this Section 8.2, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages, if any, on such Notes when such
payments are due, solely from amounts deposited with the Trustee, as provided in
Section 8.4 hereof, (ii) the Company's and the Guarantors' obligations with
respect to the Notes under Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.10 and 4.2
hereof, (iii) the rights, powers, trusts, duties, indemnities and immunities of
the Trustee and the Company's obligations in connection therewith and (iv) this
Article 8.
SECTION 8.3 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.1(a) hereof of the option
applicable to this Section 8.3, the Company and the Guarantors, if any, shall be
released from their obligations under the covenants contained in Sections 4.7,
4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.18, 5.1 and 11.2 with respect to
the outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter
be deemed not outstanding for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed outstanding for
all other purposes hereunder (it being understood that such Notes shall not be
deemed outstanding for accounting purposes). For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Notes, the Company and
the Guarantors may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1(e) hereof but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.1 hereof of the option applicable to this Section 8.3, any event described in
Sections 6.1(c) through 6.1(i) hereof
shall not constitute Events of Default.
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53
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
8.2 or Section 8.3 hereof to the outstanding Notes:
(a) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 hereof who shall agree to comply with the provisions of this
Article 8 applicable to it), in trust (the "DEFEASANCE TRUST"), for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (a) cash in
United States dollars in an amount, or (b) non-callable Government Securities
which through the scheduled payment of principal and interest in respect thereof
in accordance with their terms will provide, not later than one day before the
due date of any payment, cash in United States dollars in an amount, or (c) a
combination thereof, in such amounts as will be sufficient in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge and
which shall be applied by the Trustee (or other qualifying trustee) to pay and
discharge the principal of, premium, if any, and interest (including defaulted
interest) and Liquidated Damages, if any, on the outstanding Notes and any other
obligations owing to the Holders of the Notes, under the Notes or this Indenture
on the stated maturity or on the applicable redemption date, as the case may be,
of such principal or installment of principal of, premium, if any, interest and
Liquidated Damages, if any, on the outstanding Notes, provided that the Trustee
shall have been irrevocably instructed to apply such money or the proceeds of
such non-callable Government Securities to said payments with respect to the
Notes;
(b) in the case of an election under Section 8.2 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
(which counsel may be an employee of the Company or any Subsidiary of the
Company) reasonably acceptable to the Trustee confirming that (A) the Company
has received from, or there has been published by, the Internal Revenue Service
a ruling or (B) since the Issuance Date, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same time, as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
(which counsel may be an employee of the Company or any Subsidiary of the
Company) reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d)no Default or Event of Default with respect to the Notes shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds applied to such deposit)
or, insofar as Section 6.1(h) or 6.1(i) hereof is concerned, at any time in the
period ending on the 123rd day after the date of such deposit (or greater period
of time in which any such deposit of trust funds may remain subject to
bankruptcy or insolvency laws insofar as those apply to the deposit by the
Company) (it being understood that this condition shall not be deemed satisfied
until the expiration of such period);
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(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) in the case of an election under either Section 8.2 or 8.3 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that, as of the date of such opinion, (A) the trust funds will not be
subject to any rights of holders of Indebtedness other than the Notes and (B)
assuming no intervening bankruptcy of the Company between the date of deposit
and the 123rd day following the deposit and assuming no Holder of the Notes is
an insider of the Company, after the 123rd day following the deposit, as of the
date of such opinion, the trust funds will not be subject to avoidance under
Section 547 of the United States Bankruptcy Code (or any successor provision
thereto) and related judicial decisions or any other applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
under any United States or state law;
(g) in the case of an election under either Section 8.2 or 8.3 hereof,
the Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit made by the Company pursuant to its election under Section 8.2
or 8.3 hereof was not made by the Company with the intent of preferring the
Holders of Notes over other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or others;
and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States (which counsel may be
an employee of the Company or any Subsidiary of the Company), each stating that
all conditions precedent provided for relating to either the Legal Defeasance
under Section 8.2 hereof or the Covenant Defeasance under Section 8.3 hereof (as
the case may be) have been complied with as contemplated by this Section 8.4.
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"TRUSTEE") pursuant to Section 8.1(b) or Section 8.4 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company and the Guarantors, if any, shall pay and indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
cash or non-callable Government Securities deposited pursuant to Section 8.1(b)
or Section 8.4 hereof or the principal, premium, if any, and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any money or non-callable Government Securities held by it as provided
in Section 8.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.4(a) hereof), are
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in excess of the amount thereof which would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.6 REPAYMENT TO THE COMPANY.
The Trustee shall promptly pay to the Company after request therefor
any excess money held at such time in excess of amounts required to pay any of
the Company's Obligations then owing with respect to the Notes.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for one year after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in The New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.7 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any cash or
non-callable Government Securities in accordance with Section 8.1(b), Section
8.2 or Section 8.3 hereof, as the case may be, by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the obligations of the Company and
the Guarantors, if any, under this Indenture, the Notes and the Subsidiary
Guarantees, if any, shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.1(b), Section 8.2 or Section 8.3 hereof until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.1(b), Section 8.2 or Section 8.3 hereof, as the case
may be; PROVIDED, HOWEVER, that, if the Company or any Guarantor makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company or such Guarantor shall be
subrogated to the rights of the Holders of such Note to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.1 WITHOUT CONSENT OF HOLDERS.
The Company, any Guarantor and the Trustee, as applicable, may amend
or supplement this Indenture, the Notes, and any Subsidiary Guarantee without
the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
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(c) to provide for the assumption of the Company's obligations to
Holders of the Notes under this Indenture or any Guarantor's obligations
under its Subsidiary Guarantee in the case of a merger, consolidation or
sale of assets involving the Company or such Guarantor, as applicable,
pursuant to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes (including providing for Subsidiary
Guarantees and any supplemental indenture required pursuant to Section 4.15
hereof) or that does not adversely affect the legal rights under this
Indenture of any such Holder;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; and
(f) to release a Guarantor in accordance with Section 11.4 hereof.
Upon the request of the Company and any Restricted Subsidiary, in its
capacity as a Guarantor, accompanied by a resolution of the Board of Directors
of the Company or such Restricted Subsidiary, as applicable, authorizing the
execution of any such amended or supplemental indenture and upon receipt by the
Trustee of the documents described in Section 9.6 hereof, the Trustee shall join
with the Company and any such Restricted Subsidiary in the execution of any
amended or supplemental indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations which
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental indenture which adversely affects its own rights,
duties or immunities under this Indenture, or otherwise.
SECTION 9.2 WITH CONSENT OF HOLDERS.
Except as provided below in this Section 9.2, the Company, any
Guarantor and the Trustee together may amend this Indenture, the Notes and any
Subsidiary Guarantee with the written consent of the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes (including
consents obtained in connection with a purchase of or a tender offer or exchange
offer for Notes).
Upon the request of the Company, accompanied by a resolution of the
Board of Directors of the Company, authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon
receipt by the Trustee of the documents described in Section 9.6 hereof, the
Trustee shall join with the Company and any Guarantor, as the case may be, in
the execution of such supplemental indenture unless such supplemental indenture
adversely affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section 9.2 becomes effective,
the Company shall mail to the Holders of each Note affected thereby a notice
briefly describing the amendment or waiver. Any failure of the Company to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture or waiver. Subject to
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Sections 6.4 and 6.7 hereof, the Holders of a majority in aggregate principal
amount of the Notes then outstanding (including consents obtained in connection
with a purchase of or a tender offer or exchange offer for Notes) may waive any
existing default or compliance in a particular instance by the Company or any
Guarantor with any provision of this Indenture or the Notes. However, without
the consent of each Holder affected, an amendment or waiver under this Section
may not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or waive any of the provisions with respect to the redemption of the Notes;
(c) reduce the rate of or change the time for payment of interest on
any Note;
(d) waive a Default or an Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Note;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest or Liquidated Damages on the
Notes;
(g) waive a redemption payment with respect to any Note;
(h) modify or change any provision of this Indenture or the related
definitions affecting the subordination or ranking of the Notes in a manner
which adversely affects the Holders in any material respect;
(i) except pursuant to Article 8 or pursuant to Section 11.4, release
any Guarantor from its obligations under a Subsidiary Guarantee, or change any
such Subsidiary Guarantee in any manner that would adversely affect the Holders
in any material respect; or
(j) make any change in the foregoing amendment and waiver provisions.
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in
an amendment or supplemental indenture that complies with the TIA as then in
effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Note is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke the consent as
to his or her Note if the Trustee receives written notice of revocation before
the date the waiver or
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amendment becomes effective. An amendment or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
The Company may fix a record date for determining which Holders must
consent to such amendment or waiver. If the Company fixes a record date, the
record date shall be fixed at (i) the later of 30 days prior to the first
solicitation of such consent or the date of the most recent list of Holders
furnished to the Trustee prior to such solicitation pursuant to Section 2.5, or
(ii) such other date as the Company shall designate.
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment or
waiver on any Note thereafter authenticated. The Company in exchange for all
Notes may issue and the Trustee shall authenticate new Notes that reflect the
amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment or waiver.
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing such amendment or supplemental
indenture, the Trustee shall be entitled to receive, and, subject to Section 7.1
hereof, shall be fully protected in relying upon, an Officers' Certificate and
an Opinion of Counsel as conclusive evidence that such amendment or supplemental
indenture is authorized or permitted by this Indenture, that it is not
inconsistent herewith, and that it will be valid and binding upon the Company in
accordance with its terms. The Company may not sign an amendment or
supplemental indenture until the Board of Directors of the Company or any
Restricted Subsidiary in its capacity as a Guarantor, as applicable, approves
it.
ARTICLE 10
SUBORDINATION
SECTION 10.1 AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article, to the prior payment in
full in cash or Cash Equivalents of all Obligations on Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.
SECTION 10.2 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors or marshalling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Company or its property, whether voluntary or involuntary, all Obligations
due upon all Senior Debt shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for
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to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition by the Company or any of its Subsidiaries of
any of the Notes for cash or property or otherwise, and until all Obligations
with respect to Senior Debt are paid in full in cash or Cash Equivalents, any
distribution to which the Holders would be entitled shall be made to the Holders
of Senior Debt (except that Holders of the Notes may receive Permitted Junior
Securities and payments made pursuant to Section 8.4 or Section 8.1(b)).
(b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by Section 10.2(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Debt (PRO RATA to such holders on the basis of the
respective amount of Senior Debt held by such holders) or their respective
Representatives, or to the trustee under any indenture pursuant to which any of
such Senior Debt may have been issued, as their respective interests may appear,
for application to the payment of Senior Debt then due remaining unpaid until
all such Senior Debt has been paid in full in cash or Cash Equivalents, after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such Senior Debt.
(c) The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article 5 hereof and as long as permitted under the terms of the Senior Debt
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume the Company's obligations
hereunder in accordance with Article 5 hereof.
SECTION 10.3 NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES.
If any default occurs and is continuing in the payment when due
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by, or on behalf of, the Company
or any other Person on its behalf with respect to any Obligations on the Notes,
or to acquire any of the Notes for cash or property or otherwise (except that
Holders of Notes may receive Permitted Junior Securities and payments made from
the trust pursuant to Section 8.1(b) or Section 8.4). In addition, if any other
event of default occurs and is continuing with respect to any Designated Senior
Debt, as such event of default is defined in the instrument creating or
evidencing such Designated Senior Debt, permitting the holders of such
Designated Senior Debt then outstanding to accelerate the maturity thereof and
if the Representative for the respective issue of Designated Senior Debt gives
written notice of the event of default to the Trustee (a "DEFAULT NOTICE"),
then, unless and until all events of default have been cured or waived or have
ceased to exist or the Trustee receives notice from the Representative for the
respective issue of Designated Senior Debt terminating the Blockage Period (as
defined below), during the 179 days after the delivery of such Default Notice
(the Blockage Period), neither the Company nor any of its Subsidiaries shall (x)
make any payment of any kind or character with respect to any Obligations on the
Notes (except that Holders of Notes may receive Permitted Junior Securities and
payments made from the trust pursuant to Section 8.4 or 8.1(b)) or (y) acquire
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 179
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 365 consecutive days. No event of default
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which existed or was continuing on the date of the commencement of any Blockage
Period with respect to the Designated Senior Debt shall be, or be made, the
basis for the commencement of a second Blockage Period by the Representative of
such Designated Senior Debt whether or not within a period of 365 consecutive
days, unless such event of default shall have been cured or waived for a period
of not less than 180 consecutive days (it being acknowledged that any subsequent
action, or any breach of any financial covenants for a period commencing after
the date of commencement of such Blockage Period that, in either case, would
give rise to an event of default pursuant to any provisions under which an event
of default previously existed or was continuing shall constitute a new event of
default for this purpose).
The Trustee shall be entitled to rely on information regarding amounts
then due and owing on the Senior Debt, if any, received from the holders of
Senior Debt (or their Representatives) or, if such information is not received
from such holders or their Representatives, from the Company and only amounts
included in the information provided to the Trustee shall be paid to the holders
of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.2 or to pursue any rights or remedies hereunder.
SECTION 10.4 [THIS SECTION INTENTIONALLY OMITTED.]
SECTION 10.5 ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of the acceleration.
SECTION 10.6 WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge that such payment is prohibited by
Section 10.3 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Debt (PRO RATA to such holders
on the basis of the respective amounts of Senior Debt held by such Holders) or
their Representatives under the indenture or other agreement (if any) pursuant
to which Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to Senior
Debt remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
SECTION 10.7 NOTICE BY THE COMPANY.
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The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article.
SECTION 10.8 SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness PARI PASSU with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article to holders of Senior
Debt that otherwise would have been made to Holders is not, as between the
Company and Holders, a payment by the Company on the Notes.
SECTION 10.9 RELATIVE RIGHTS.
This Article defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms;
(b) affect the relative rights of Holders and creditors of the Company
other than their rights in relation to holders of Senior Debt; or
(c) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders.
If the Company fails because of this Article to pay principal of or
interest or Liquidated Damages, if any, on Notes on the due date, the failure is
still a Default or Event of Default.
SECTION 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and
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other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
SECTION 10.12 RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
SECTION 10.13 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.9 hereof at least 30 days before the expiration of the time to file such
claim, any Representative of Designated Senior Debt is hereby authorized to file
an appropriate claim for and on behalf of the Holders of the Notes.
SECTION 10.14 AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.1 SUBSIDIARY GUARANTEES.
The Company's Obligations under the Notes and this Indenture will be
jointly and severally guaranteed by any Restricted Subsidiary (a "GUARANTOR")
which is required to execute and deliver a supplemental indenture pursuant to
Section 4.15 hereof (the "SUBSIDIARY GUARANTEES"). Subject to the provisions of
this Article 11, any such Guarantor will, jointly and severally, unconditionally
guarantee, on an unsecured senior subordinated basis, to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes or the Obligations of the Company under this Indenture or the Notes,
that: (i) the principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes will be paid in full when due, whether at the
maturity or interest payment or mandatory redemption date, by acceleration, call
for redemption, offer to purchase or otherwise, and interest on the overdue
principal of, premium, and interest and Liquidated Damages, if any, on the Notes
and all other Obligations of the Company to the Holders or the Trustee under
this Indenture or the Notes will be promptly paid in full or performed, all in
accordance with the
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terms of this Indenture and the Notes; (ii) in case of any extension of time of
payment or renewal of any Notes or any of such other Obligations, they will be
paid in full when due or performed in accordance with the terms of the extension
or renewal, whether at maturity, by acceleration or otherwise; and (iii) any and
all costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Holder in enforcing any rights under any Subsidiary Guarantee
will be paid. Failing payment when due of any amount so guaranteed for whatever
reason, any Guarantor will be obligated (subject to any grace periods allowed
pursuant to Section 6.1 hereof) to pay the same whether or not such failure to
pay has become an Event of Default which could cause acceleration pursuant to
Section 6.2 hereof. An Event of Default under this Indenture or the Notes shall
constitute an event of default under any Subsidiary Guarantee, and shall entitle
the Holders of Notes to accelerate the Obligations of any Guarantor hereunder in
the same manner and to the same extent as the Obligations of the Company. Any
Guarantor will agree that its Obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this
Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder of the Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of any Guarantor. Any Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of either or both of the Company, protest, notice and
all demands whatsoever and covenants that its Subsidiary Guarantee will not be
discharged except by complete performance of its Obligations under the Notes and
this Indenture. If any Holder or the Trustee is required by any court or
otherwise to return to the Company, any Guarantor or any Custodian, Trustee,
liquidator or other similar official acting in relation to either the Company or
any Guarantor any amount paid by any such entity to the Trustee or such Holder,
any Subsidiary Guarantee to the Notes, to the extent theretofore discharged,
shall be reinstated in full force and effect. Any Guarantor agrees that it
shall not be entitled to any right of subrogation in relation to the Holder in
respect of any Obligations guaranteed hereby until payment in full of all
Obligations guaranteed hereby. Any Guarantor will agree that, as between it, on
the one hand, and the Holders of Notes and the Trustee, on the other hand, (x)
the maturity of the Obligations guaranteed hereby may be accelerated as provided
in Article 6 hereof for the purposes hereof, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any acceleration of such
Obligations as provided in Article 6 hereof, such Obligations (whether or not
due and payable) shall forthwith become due and payable by such Guarantor for
the purpose of such Subsidiary Guarantee. A Guarantor shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holder under its Subsidiary Guarantee.
The obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Senior Debt
of such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Debt of the Company. For the purpose of the foregoing sentence, the
Trustee and the Holders of Notes shall have the right to receive and/or retain
payments by any of the Guarantors only at such times as they may receive and/or
retain payments in respect of the Notes pursuant to this Indenture, including
Article 10 hereof. In the event that the Trustee or any Holder shall have
received any Guarantor payment that is prohibited by the foregoing sentence,
such Guarantor payment shall be paid over and delivered forthwith to the holders
of the Senior Debt remaining unpaid, to the extent necessary to pay in full all
Senior Debt.
Each Holder of a Note by its acceptance thereof (a) agrees to and
shall be bound by the provisions of this Section 11.1, (b) authorizes and
directs the Trustee on its behalf to take such
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action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee its attorney-in-fact for any and all such
purposes.
SECTION 11.2 WHEN A GUARANTOR MAY MERGE, ETC.
No Guarantor shall consolidate or merge with or into (whether or not
such Guarantor is the surviving person), another corporation, Person or entity
whether or not affiliated with such Guarantor unless:
(a) the person formed by or surviving any such consolidation or merger
(if other than such Guarantor) assumes all the Obligations of such
Guarantor pursuant to a supplemental indenture in the form of Exhibit B
hereto and under the Notes and this Indenture;
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists; and
(c) such Guarantor or any person formed by or surviving any such
consolidation or merger, (A) will have Consolidated Net Worth (immediately
after giving effect to such transaction) equal to or greater than the
Consolidated Net Worth of such Guarantor immediately preceding the
transaction and (B) would be permitted by virtue of the Company's Fixed
Charge Coverage Ratio set forth in the first paragraph of Section 4.9
hereof to incur, immediately after giving effect to such transaction, at
least $1.00 of additional Indebtedness.
The Guarantor shall deliver to the Trustee prior to the consummation
of the proposed transaction an Officers' Certificate to the foregoing effect and
an Opinion of Counsel, covering clauses (i) and (ii) (in the case of clause
(ii), to such counsel's knowledge), stating that the proposed transaction and
such supplemental indenture comply with this Indenture. The Trustee shall be
entitled to conclusively rely upon such Officers' Certificate and Opinion of
Counsel.
Notwithstanding the foregoing, (A) a Guarantor may consolidate with or
merge with or into the Company; PROVIDED, HOWEVER, that the surviving
corporation (if other than the Company) shall expressly assume by supplemental
indenture complying with the requirements of this Indenture, the due and
punctual payment of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on all of the Notes, and the due and punctual
performance and observance of all the covenants and conditions of this Indenture
to be performed by the Company and (B) a Guarantor may consolidate with or merge
with or into any other Guarantor.
SECTION 11.3 LIMITATION OF GUARANTOR'S LIABILITY.
For purposes of this Article 11 and any Subsidiary Guarantee, each
Guarantor's liability will be that amount from time to time equal to the
aggregate liability of such Guarantor hereunder and thereunder, but shall be
limited to the least of (i) the aggregate amount of the obligations of the
Company under the Notes and this Indenture or (ii) the amount, if any, which
would not have (A) rendered such Guarantor "INSOLVENT" (as such term is defined
in the federal Bankruptcy Code and in the Debtor and Creditor Law of the State
of New York) or (B) left it with unreasonably small capital at the time its
Subsidiary Guarantee was entered into, after giving effect to the incurrence of
existing Indebtedness immediately prior to such time; provided that, it shall be
a presumption in any lawsuit or other proceeding in which a Guarantor is a party
that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount
set forth in clause (i) above unless any creditor, or representative of
creditors of such guarantor, or debtor in possession or trustee in bankruptcy of
the Guarantor,
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otherwise proves in such a lawsuit that the aggregate liability of the Guarantor
is limited to the amount set forth in clause (ii). In making any determination
as to the solvency or sufficiency of capital of a Guarantor in accordance with
the previous sentence, the right of such Guarantor to contribution from other
Guarantors and any other rights such Guarantor may have, contractual or
otherwise, shall be taken into account.
SECTION 11.4 RELEASE OF A GUARANTOR.
Concurrently with the payment in full of all of the Company's
Obligations under the Notes and this Indenture (other than with respect to any
indemnification obligations), each Guarantor shall be released from and relieved
of its Obligations under this Article 11. In the event of a sale or other
disposition of all of the assets of any Guarantor, which sale or other
disposition is otherwise in compliance with the terms of this Indenture, by way
of merger, consolidation or otherwise, or a sale or other disposition of all of
the capital stock of any Guarantor, then such Guarantor (in the event of a sale
or other disposition, by way of such a merger, consolidation or otherwise, of
all of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all of the assets of
such Guarantor) will be automatically and unconditionally released and relieved
of any obligations under its Subsidiary Guarantee. The Trustee shall deliver an
appropriate instrument evidencing any such release under this Section 11.4 upon
receipt of a request by the Company accompanied by an Officers' Certificate and
an Opinion of Counsel certifying as to the compliance with this Section 11.4.
The provisions of Section 11.2 shall not apply to any merger or consolidation
pursuant to which a Guarantor is released from its Obligations under this 11.4.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by operation of TIA Section 318(c), the imposed duties shall
control.
SECTION 12.2 NOTICES.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in Person or mailed by first-class
mail (registered or certified, return receipt requested), or sent by telex,
telecopier or overnight air courier guaranteeing next Business Day delivery, to
the other's address:
If to the Company:
CapStar Hotel Company
1010 Wisconsin Avenue, N.W.
Suite 650
Washington, D.C. 20007
Attention: John Emery, Chief Financial Officer
Telecopier No.: (202) 965-4445
With a copy to:
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Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Richard S. Borisoff, Esq.
Telecopier No.: (212) 373-2523
If to the Trustee:
IBJ Schroder Bank and Trust Company
1 State Street
New York, NY 10004
Attention: Corporate Trust Department
Telecopier No.: (212) 858-2952
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next Business Day
delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail to his address shown on the register kept by the Registrar. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed or given in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 12.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5) stating that, in the
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opinion of the signers, all conditions precedent and covenants, if any,
provided for in this Indenture relating to the proposed action have been
complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with.
SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to Section 4.4 and TIA Section 314(a)(4)) shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with; PROVIDED, HOWEVER, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificate of public officials.
SECTION 12.6 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.7 LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" is a Saturday, a Sunday, or a day on which banking
institutions in The City of New York are authorized or obligated by law,
regulation or executive order to remain closed. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue on such
payment for the intervening period.
SECTION 12.8 RECOURSE AGAINST OTHERS.
No director, officer, partner, employee, agent, manager, stockholder,
incorporator or other Affiliate, as such of the Company or of a Guarantor, if
any, shall have any liability for any obligations of the Company or any
Guarantor under the Notes, or this Indenture or a Subsidiary Guarantee, if any,
or for any claim based upon, in respect of or by reason of such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. This waiver and release are part of the consideration for issuance
of the Notes. Such waiver and release may not be effective to waive or release
liabilities under the federal securities laws.
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SECTION 12.9 DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
SECTION 12.10 GOVERNING LAW.
The internal law of the State of New York shall govern and be used,
without reference to its choice of law principles (other than Sec. 5-1401 of the
General Obligation Law), to construe this Indenture, the Notes and Subsidiary
Guarantee.
SECTION 12.11 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 12.12 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 12.13 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.14 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.15 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE>
69
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective duly authorized officers as of the date first
written above.
SIGNATURES
CAPSTAR HOTEL COMPANY,
By: /s/ William H. Reynolds
-----------------------------
Name: Wiiiliam H. Reynolds
Title: Senior Vice President
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By: /s/ Luis Perez
-----------------------------
Name: Luis Perez
Title: Assistant Vice President
EXHIBIT A
(Face of Note)
____% [Series A] [Series B] Senior Subordinated Note due ____
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE UNITED STATES INTERNAL
REVENUE CODE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SECURITY IS % OF
ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS , [19 ][20 ], [AND] THE
YIELD TO MATURITY IS % [THE METHOD USED TO DETERMINE THE YIELD IS AND
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT APPLICABLE TO THE SHORT ACCRUAL PERIOD OF
, [19 ][20 ] TO [19 ][20 ], IS % OF THE PRINCIPAL AMOUNT OF THIS
SECURITY].
No. $___________
CAPSTAR HOTEL COMPANY
promises to pay to _____________, or registered assigns, the
principal sum of __________________ Dollars on __________, ____.
Interest Payment Dates: ________ __ and ______ __
Record Dates: ________ __ and ______ __
Dated:
CAPSTAR HOTEL COMPANY
By: ____________________________
Name:
Title:
Trustee's Certificate of Authentication:
This is one of the [Global] Notes
referred to in the within-
mentioned Indenture:
IBJ Schroder Bank & Trust Company,
as Trustee
By _____________________________
Authorized Signatory
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<PAGE>
(Back of Note)
_____% [Series A] [Series B] Senior Subordinated Note due ____
of
CapStar Hotel Company
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM, EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY
OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A SUCCESSOR DEPOSITARY OR ANY
NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (DTC), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
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<PAGE>
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
1. INTEREST. CapStar Hotel Company, a Delaware corporation (the
"COMPANY"), promises to pay interest on the principal amount of this _____%
[Series A] [Series B] Senior Subordinated Note due ____ (the "NOTE") at the rate
and in the manner specified below.
The Company shall pay interest on the principal amount of this Note in
cash at the rate per annum shown above and shall pay the Liquidated Damages, if
any, payable pursuant to Section 5 of the Registration Rights Agreement referred
to below. The Company shall pay interest and Liquidated Damages, if any,
semi-annually on each ________ __ and ______ __ commencing ________ __, 199_, or
if any such day is not a Business Day (as defined in the Indenture referred to
below), on the next succeeding Business Day (each an "INTEREST PAYMENT DATE").
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months for the actual number of days elapsed. Interest shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of this Note. To
the extent lawful, the Company shall pay interest on overdue principal and
premium at the rate of 1% per annum in excess of the then applicable interest
rate on this Note; it shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) at the same rate to the extent
lawful.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the _________ and
_________ next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, if any, and
interest and Liquidated Damages, if any, at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders at their addresses set forth in
the register of Holders; provided that payment by wire transfer of immediately
available funds will be required with respect to principal and premium, if any,
and interest and Liquidated Damages, if any, on all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, IBJ Schroder Bank & Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company, any Guarantor or any other of its Subsidiaries may
act in any such capacity.
A-3
<PAGE>
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of August 19, 1997 (the "INDENTURE") between the Company, as issuer, and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. The terms of the Indenture shall govern any inconsistencies between
the Indenture and the Notes.
5. OPTIONAL REDEMPTION. On or after ______ __, ____, the Company may
redeem all or any portion of the Notes, at any time upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on ______ __ of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2002...................................................................._______%
2003...................................................................._______%
2004...................................................................._______%
2005 and thereafter....................................................._______%
Notwithstanding the foregoing, prior to ______ __, 2000, the Company
may redeem, on any one or more occasions, with the net cash proceeds of one or
more public offerings of its common equity (a "PUBLIC EQUITY OFFERING") (within
60 days of the consummation of any such Public Equity Offering), up to 35% of
the aggregate principal amount of the Notes originally issued at a redemption
price equal to _______% of the principal amount of such Notes plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date;
PROVIDED, HOWEVER, that at least 65% of the aggregate principal amount of Notes
originally issued remains outstanding immediately after any such redemption.
[In addition, the Company, at its option, at any time prior to ______
____, may redeem the Notes, in whole or in part (if in part, by lot or such
other method as the Trustee shall deem fair or appropriate) at the Make-Whole
Price, plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase.]
6. OFFERS TO PURCHASE. Subject to the Company's obligation to make an
offer to purchase Notes in connection with Asset Sales and a Change of Control
(as described in the Indenture), the Company has no mandatory redemption or
sinking fund obligations with respect to the Notes. Notice of any such offer to
purchase will be given as provided in the Indenture. Holders of Notes that are
the subject of an offer to purchase may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below and taking certain other actions, all as set forth in the Indenture.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
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<PAGE>
8. SUBORDINATION. The Notes and the Subsidiary Guarantees, if any,
are subordinated to Senior Debt, as defined in the Indenture. To the extent
provided in the Indenture, Senior Debt must be paid before the Notes and the
Subsidiary Guarantees may be paid. The Company agrees, and each Holder by
accepting a Note and any Subsidiary Guarantee agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give them
effect and appoints the Trustee as attorney-in-fact for such purpose.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of $1,000
of principal amount. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Company shall not be required to exchange or register the
Notes during a period beginning at the opening of business 15 days before the
day of any selection of Notes for redemption under Section 3.2 of the Indenture
and ending at the close of business on the day of selection, or to exchange or
register any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part, or to exchange or
register a Note between a record date and the next succeeding Interest Payment
Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing Default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the Notes then outstanding. The Change of
Control and Asset Sale purchase features of the Notes may not be amended or
waived without the consent of at least 66 2/3% in principal amount of the Notes
then outstanding. Without the consent of any Holder of a Note, the Indenture or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to comply with Section 5.1, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Company's obligations to Holders of the Notes under the Indenture or any
Guarantor's Obligations under its Subsidiary Guarantee in the case of a merger,
consolidation or sale of assets involving the Company or such Guarantor, as
applicable, pursuant to Article 5 or Article 11 of the Indenture, to make any
change that would provide any additional rights or benefits to the Holders of
the Notes (including providing for Subsidiary Guarantees and any supplemental
indenture required pursuant to Section 4.15 of the Indenture) or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA and to release a Guarantor in
accordance with the Indenture.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest or Liquidated Damages, if any, on
the Notes (whether or not such payment shall be prohibited by the subordination
provisions of the Indenture); (ii) default in payment when due of the principal
of or premium, if any, on the Notes at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered pursuant to
a Change of Control Offer or an Assets Sale Offer) (whether or not such payment
shall be prohibited by the subordination provisions of the Indenture); (iii)
failure by the Company or any Restricted Subsidiary to comply with Section 5.01
of the Indenture; (iv) failure by the Company or any Guarantor for 60 days in
the performance of any other covenant, warranty or agreement in the Indenture or
the Notes after
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<PAGE>
written notice shall have been given to the Company by the Trustee or to the
Company and the Trustee from Holders of at least 25% in principal amount of the
Notes then outstanding; (v) the failure to pay at final stated maturity (giving
effect to any applicable grace periods and any extensions thereof) the principal
amount of Non-Recourse Indebtedness of the Company or any of its Restricted
Subsidiaries with an aggregate principal amount in excess of the lesser of (A)
10% of the total assets of the Company and its Restricted Subsidiaries measured
as of the end of the Company's most recent fiscal quarter for which internal
financial statements are available immediately prior to the date on which such
default occurred, determined on a pro forma basis and (B) $50 million, and such
failure continues for a period of 10 days or more, or the acceleration of the
final stated maturity of any such Non-Recourse Indebtedness (which acceleration
is not rescinded, annulled or otherwise cured within 10 days of receipt by the
Company or such Restricted Subsidiary of notice of such acceleration); (vi) the
failure to pay at final stated maturity (giving effect to any applicable grace
periods and any extensions thereof) the principal amount of any Indebtedness
(other than Non-Recourse Indebtedness) of the Company or any Restricted
Subsidiary of the Company and such failure continues for a period of 10 days or
more, or the acceleration of the final stated maturity of any such Indebtedness
(which acceleration is not rescinded, annulled or otherwise cured within 10 days
of receipt by the Company or such Restricted Subsidiary of notice of any such
acceleration) if the aggregate principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness, in default for failure
to pay principal at final maturity or which has been accelerated, in each case
with respect to which the 10-day period described above has passed, aggregates
$10.0 million or more at any time; (vii) failure by the Company or any of its
Restricted Subsidiaries to pay final judgments rendered against them (other than
judgment liens without recourse to any assets or property of the Company or any
of its Restricted Subsidiaries other than assets or property securing
Non-Recourse Indebtedness) aggregating in excess of $10.0 million, which
judgments are not paid, discharged or stayed for a period of 60 days (other than
any judgments as to which a reputable insurance company has accepted full
liability); (viii) except as permitted by the Indenture, any Subsidiary
Guarantee shall be held in a judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect or any Guarantor
(or its successors or assigns), or any Person acting on behalf of such Guarantor
(or its successors or assigns), shall deny or disaffirm its obligations or shall
fail to comply with any obligations under its Subsidiary Guarantee; and (ix)
certain events of bankruptcy or insolvency with respect to the Company, any
Guarantor or any of the Company's Subsidiaries that would constitute a
Significant Subsidiary or any group of the Company's Subsidiaries that, taken
together, would constitute a Significant Subsidiary. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, with
respect to the Company, any of its Subsidiary that would constitute a
Significant Subsidiary or any group of its Subsidiaries that, taken together,
would constitute a Significant Subsidiary or any Guarantor, all outstanding
Notes will become due and payable without further action or notice. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Notes may rescind any acceleration with respect to the Notes and its
consequences. Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power.
13. GUARANTEES OF NOTES. Payment of principal, premium, if any, and
interest and Liquidated Damages, if any, (including interest on overdue
principal and overdue interest, if lawful) on the Notes will be unconditionally
guaranteed by the Guarantors, if any, pursuant to, and subject to the terms of,
Article 11 of the Indenture.
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<PAGE>
14. SECURITY. The Notes will be unsecured obligations of the Company,
ranking subordinate in right of payment to all Senior Debt of the Company.
15. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder shall have any liability for any obligations of the
Company or any Guarantor under the Notes, any Subsidiary Guarantee or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver and release may not be
effective to waive or release liabilities under the federal securities laws.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Note Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
19. [SERIES A NOTES] REGISTRATION RIGHTS. Pursuant to the
Registration Rights Agreement (as defined in the Indenture), and subject to
certain terms and conditions stated therein, the Company will be obligated to
consummate an Exchange Offer pursuant to which the Holders of the Notes shall
have the right to exchange this Note for Exchange Notes, which have been
registered under the Securities Act, in like principal amount and having terms
identical in all material respect to the Note. In certain circumstances, and
subject to certain terms and conditions, Holders of the Notes shall have the
right to receive liquidated damages if the Company shall have failed to fulfill
its obligations under the Registration Rights Agreement.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
CapStar Hotel Company
1010 Wisconsin Avenue, N.W.
Suite 650
Washington, D.C. 20007
Attention: John Emery,
Chief Financial Officer
Telecopier No.: (202) 965-4445
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<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or
(we) assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's Social Security or tax I.D. No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: _____________________________
Your Signature: ___________________________
(Sign exactly as your name appears on the face of this
Note)
Signature Guarantee:* ______________________
- --------------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No:____________
Signature Guarantee:*/____________
- ------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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<PAGE>
Transfer and Exchange
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "SECURITIES ACT") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) March 26, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
Check One
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the Securities
Act; or
(3) ___ to an institutional "ACCREDITED INVESTOR" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) ___ outside the United States to a "FOREIGN PERSON" in compliance
with Rule 904 of Regulation S under the Securities Act; or
(5) ___ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) ___ pursuant to an effective registration statement under the
Securities Act; or
(7) ___ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Notes evidenced by this certificate in the name of any Person other
than the registered Holder thereof; provided that if box (3), (4), (5) or (7)
is checked, the Company or the Trustee may require, prior to registering any
such transfer of the Notes in its sole discretion, such legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company has reasonably requested
to confirm that such transfer is being made pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the
Securities Act. If none of the foregoing boxes is checked, the Trustee or
Registrar shall not be obligated to register this Security in the name of any
person other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Section 2.17 of the
Indenture shall have been satisfied.
Dated: ___________ Signed:_________________________________
(Sign exactly as name appears on the other side of
this Security)
Signature Guarantee:________________________________________
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<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "QUALIFIED
INSTITUTIONAL BUYER" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ___________________ Signed:_________________________
NOTICE: To be executed
by an executive officer
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<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED NOTES
The following exchanges of a part of this Global Note for Certificated
Notes have been made:
<TABLE>
<CAPTION>
Amount of Principal Amount
decrease in Amount of increase of this Global Note Signature of
Principal in Principal following such authorized officer
Amount of Amount of this decrease of Trustee or Note
Date of Exchange this Global Note Global Note (or increase) Custodian
- ---------------- ---------------- --------------- ------------- ---------
<S><C>
</TABLE>
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<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE
This "SUPPLEMENTAL INDENTURE", dated as of ________, between
_________________ (the "GUARANTOR"), a subsidiary of CapStar Hotel Company, a
Delaware corporation (the Company), and IBJ Schroder Bank & Trust Company, as
trustee under the indenture referred to below (the "TRUSTEE").
W I T N E S S E T H
WHEREAS, the Company, a Delaware corporation, has heretofore executed
and delivered to the Trustee an indenture (the "INDENTURE"), dated as of August
19, 1997, providing for the issuance of up to an aggregate principal amount of
$200,000,000 of _____% Senior Subordinated Notes due ____ (the "NOTES");
WHEREAS, Section 4.15 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Guarantor
shall unconditionally guarantee all of the Company's Obligations under the Notes
pursuant to a Guarantee on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guarantor hereby agrees, jointly and
severally with all other Guarantors, to guarantee the Company's obligations
under the Notes on the terms and subject to the conditions set forth in Article
11 of the Indenture and to be bound by all other applicable provisions of the
Indenture and to be bound by all other applicable provisions of the Indenture.
The obligations of the Guarantor hereunder shall be junior and subordinated to
the Senior Debt of such Guarantor in the manner and to the extent set forth in
Article 11 of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, shareholder or agent of the Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the Notes by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver or release may not be
effective to waive or release liabilities under the federal securities laws.
4. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
B-1
<PAGE>
5. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated:____________, ____
[Guarantor]
By: ____________________________
Name:
Title:
IBJ Schroder Bank & Trust Company,
as Trustee
By: _____________________________
Name:
Title:
B-2
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
IBJ Schroder Bank & Trust Company
1 State Street
New York, NY 10004
Attention: Corporate Trust Department
Re: CapStar Hotel Company
_____% Senior Subordinated Notes due ____
Ladies and Gentlemen:
In connection with our proposed purchase of _____% Senior Subordinated
Notes due ____ (the "NOTES") of CapStar Hotel Company (the "COMPANY"), we
confirm that:
1. We have received a copy of the Final Memorandum (the "FINAL
MEMORANDUM"), dated ______ __, 1997 relating to the Notes and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages A-1 and
A-2 of the Final Memorandum and in the section entitled "NOTICE TO INVESTORS" of
the Final Memorandum including the restrictions on duplication and circulation
of the Final Memorandum.
2. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture relating to
the Notes (as described in the Final Memorandum) and the undersigned agrees to
be bound by, and not to resell, pledge or otherwise transfer the Notes except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "SECURITIES ACT").
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell or otherwise transfer any Notes prior to the date which
is three years after the original issuance of the Notes, we will do so only (i)
to the Company or any of its subsidiaries, (ii) inside the United States in
accordance with Rule 144A under the Securities Act to a "QUALIFIED INSTITUTIONAL
BUYER" (as defined in Rule 144A under the Securities Act), (iii) inside the
United States to an institutional "ACCREDITED INVESTOR" (as defined below) that,
prior to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Trustee (as defined in the Indenture relating to the
Notes), a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes, (iv) outside the United
States in accordance with Rule 904 of Regulation S under the Securities Act, (v)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (vi) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
C-1
<PAGE>
4. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare plan (as defined in Section 3 of
the Employee Retirement Income Security Act of 1974), except as permitted in the
section entitled "NOTICE TO INVESTORS" of the Final Memorandum.
5. We understand that, on any proposed resale of any Notes, we will be
required to furnish to the Trustee and the Company such certification, legal
opinions and other information as the Trustee and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
6. We are an institutional "ACCREDITED INVESTOR" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "ACCREDITED INVESTOR")
as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereto to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:
--------------------------
Name:
C-2
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
IBJ Schroder Bank & Trust Company
1 State Street
New York, New York
Attention: Corporate Trust Department
Re: CapStar Hotel Company
(the Company) _____% Senior Subordinated Notes due ____
(the "NOTES")
Ladies and Gentlemen:
In connection with our proposed sale of $____________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "SECURITIES ACT"), and, accordingly, we represent that:
1. the offer of the Notes was not made to a Person in the United
States;
2. either (a) at the time the buy offer was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting
on our behalf knows that the transaction has been pre-arranged with a buyer
in the United States;
3. no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
4. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
5. we have advised the transferee of the transfer restrictions
applicable to the Notes.
D-1
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
By:
------------------------------
Authorized Signature
D-2
<PAGE>
Exhibit 10.1
$100,000,000
CAPSTAR HOTEL COMPANY
8.75% SENIOR SUBORDINATED NOTES DUE 2007
PURCHASE AGREEMENT
August 14, 1997
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
CapStar Hotel Company, a Delaware corporation (the "Company"),
proposes to sell to you (the "Initial Purchaser") $100,000,000 8.75% Senior
Subordinated Notes due 2007 (the "NOTES"). The Notes will be issued pursuant to
an Indenture to be dated as of August 19, 1997 (the "INDENTURE"), between the
Company and IBJ Schroder Bank & Trust Company, as trustee (the "TRUSTEE"). This
is to confirm the agreement concerning the purchase of the Notes from the
Company by the Initial Purchaser.
The Notes will be offered without being registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), in reliance on
exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum (the "PRELIMINARY MEMORANDUM") and will prepare
a final offering memorandum (the "MEMORANDUM") setting forth or including a
description of the terms of the Notes, the terms of the offering, a description
of the Company and any material developments relating to the Company occurring
after the date of the most recent financial statements included therein.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents and warrants to, and agrees with the Initial Purchaser
that as of the date hereof:
(a) The Memorandum at the date hereof, does not, and at the
Closing Date, will not, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, except that the representations and warranties set
forth in this Section 1(a) do not apply to statements or omissions in
the Memorandum based upon information furnished to the Company in
writing by or on behalf of the Initial Purchaser expressly for use
therein. Reference herein to the Memorandum shall be deemed to refer
to and include any document filed by the Company under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), which is
incorporated in the Memorandum by reference.
<PAGE>
2
(b) It is not required by applicable law or regulation in
connection with the offer, sale and delivery of the Notes to you in
the manner contemplated by this Agreement to register the Notes under
the Securities Act or to qualify the Indenture in respect of the Notes
under the Trust Indenture Act of 1939, as amended (the "TRUST
INDENTURE ACT").
(c) The Company and each of its Significant Subsidiaries (as
defined in Section 14) have been duly organized and are validly
existing and in good standing under the laws of their respective
jurisdictions of organization, are duly qualified to do business and
are in good standing in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification, save where the failure to be
so qualified would not reasonably be expected to have a material
adverse effect on the business or property of the Company and its
subsidiaries taken as a whole, and each has all power and authority
necessary to own or hold their respective properties and to conduct
the businesses in which they are engaged.
(d) The Company has an authorized capitalization as set forth in
the Memorandum, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof
contained, or incorporated by reference, in the Memorandum; all of the
issued shares of capital stock, partnership interests or limited
liability membership interests, as the case may, be of each
Significant Subsidiary of the Company have been duly and validly
authorized and issued and (except for partnership interests of general
partners and except to the extent the limited liability company
agreements governing the respective limited liability companies
provide otherwise) are fully paid and non-assessable and (except for
partnership interests in CapStar Management Company, L.P. and CapStar
Management Company II, L.P. owned by third parties) are owned directly
or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(e) The Indenture has been duly authorized and, when duly
executed and delivered by the proper officers of the Company (assuming
due execution and delivery by the Trustee) and delivered by the
Company, will constitute a valid and legally binding agreement of the
Company enforceable against the Company in accordance with its terms
except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance or transfer, reorganization,
liquidation, moratorium or other similar laws affecting the rights and
remedies of creditors generally and except as may be subject to
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
(f) This Agreement has been duly authorized, executed and
delivered by the Company and the Registration Rights Agreement has
been duly authorized and will be duly delivered and executed by the
Company.
<PAGE>
3
(g) Except where it would not reasonably be expected to have a
material adverse effect on the consolidated financial position,
stockholder's equity, results of operations, business or prospects of
the Company and its subsidiaries taken as a whole, (i) the execution,
delivery and performance of this Agreement, the Registration Rights
Agreement, the Indenture and the Notes, and the consummation by the
Company of the transactions contemplated herein (the "TRANSACTIONS")
will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of its Significant
Subsidiaries is a party or by which the Company or any of its
Significant Subsidiaries is bound or to which any of the properties or
assets of the Company or any of its Significant Subsidiaries is
subject, (ii) nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any of its
Significant Subsidiaries or any statute or order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Company, any of its Significant Subsidiaries or any of their
properties or assets; and (iii) except for such consents, approvals,
authorizations, registrations or qualifications as may be required
under applicable state securities laws in connection with the purchase
and distribution of the Notes by the Initial Purchaser, and except for
registration of the Exchange Offer (as defined in the Registration
Rights Agreement) under the Securities Act and applicable state
securities laws, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body is required for the Transactions.
(h) Neither the Company nor any of its Significant Subsidiaries
has sustained, since the date of the latest quarterly financial
statements included or incorporated by reference in the Memorandum,
any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Memorandum; and, since such date, there has not been any change in the
capital stock or long-term debt of the Company or any of its
Significant Subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Memorandum.
(i) The financial statements (including the related notes and
supporting schedules) included in the Memorandum present fairly the
financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved.
<PAGE>
4
(j) KPMG Peat Marwick LLP, who have certified certain financial
statements of the Company, whose report is included in the Memorandum
and who have delivered the initial letter referred to in Section 7(e)
hereof, are independent public accountants as required by the
Securities Act and the Rules and Regulations during the periods
covered by the financial statements on which they reported contained
in the Memorandum.
(k) There are no legal or governmental proceedings pending to
which the Company or any of its Significant Subsidiaries is a party or
of which any property or asset of the Company or any of its
Significant Subsidiaries is the subject which, if determined adversely
to the Company or any of its subsidiaries, could be expected to have a
material adverse effect on the consolidated financial position,
stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries taken as a whole; and to the best of
the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others that
is required to be disclosed in the Memorandum which is not so
disclosed.
(l) No relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which is required to be disclosed in the Memorandum which is not so
disclosed.
(m) Since the date as of which information is given in the
Memorandum through the date hereof, and except as may otherwise be
disclosed in the Memorandum, the Company has not (i) issued or granted
any securities, other than in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of
any one or more employees, officers, directors or consultants, or in
connection with a dividend reinvestment or stock purchase plan,(ii)
incurred any liability or obligation, direct or contingent, other than
liabilities and obligations which were incurred in the ordinary course
of business,(iii) entered into any transaction not in the ordinary
course of business or (iv)in the case of the Company, declared or paid
any dividend on its capital stock.
(n) Neither the Company nor any of its Significant Subsidiaries
(i) is in violation of its charter or by-laws, (ii) is in default in
any material respect, and no event has occurred which, with notice or
lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained
in any material indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it is a party or by which it is
bound or to which any of its properties or assets is subject except
where it would not reasonably be expected to have a material adverse
effect on the consolidated financial position, stockholder's equity,
results of operations, business or prospects of the Company and its
subsidiaries taken as a whole, or (iii) is in violation in any
material respect of any law, ordinance, governmental rule,
<PAGE>
5
regulation or court decree to which it or its properties or assets may
be subject or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of its properties or assets or to the
conduct of its business except where it would not reasonably be
expected to have a material adverse effect on the consolidated
financial position, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries taken as a
whole.
(o) Neither the Company nor any Significant Subsidiary is an
"INVESTMENT COMPANY" within the meaning of such term under the
Investment Company Act of 1940, as amended, and the rules and
regulations of the Securities and Exchange Commission (the
"COMMISSION") thereunder.
(p) Neither the Company nor any of its affiliates (as defined in
Rule 501(b) of Regulation D under the Securities Act, an "AFFILIATE")
has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be
integrated with the sale of the Notes in a manner that would require
the registration under the Securities Act of the Notes or (ii) engaged
in any form of general solicitation or general advertising in
connection with the offering of the Notes (as those terms are used in
Regulation D under the Securities Act), or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act.
2. PURCHASE OF THE NOTES BY THE INITIAL PURCHASER. (a) On the basis
of the representations and warranties herein contained, and subject to the terms
and conditions herein set forth, the Company agrees to sell to you and you agree
to purchase from the Company, $100,000,000 aggregate principal amount of the
Notes at a purchase price equal to 97.116% of the principal amount of such
Notes.
(b) The Company shall not be obligated to deliver any of the Notes,
except upon payment for all of the Notes to be purchased as hereinafter
provided.
3. SALE AND RESALE OF THE NOTES BY THE INITIAL PURCHASER. (a) You
have advised the Company that you propose to offer the Notes for resale upon the
terms and conditions set forth in this Agreement and in the Memorandum. You
hereby represent and warrant to, and agree with, the Company that you (i) are
purchasing the Notes pursuant to a private sale exempt from registration under
the Securities Act, (ii) will not solicit offers for, or offer or sell, the
Notes by means of any form of general solicitation or general advertising or in
any manner involving a public offering within the meaning of Section 4(2) of the
Securities Act, and (iii) will solicit offers for the Notes only from, and will
offer, sell or deliver the Notes, as part of their initial offering, only to
(A) in the case of offers inside the United States, (1) persons whom you
reasonably believe to be qualified institutional buyers ("QUALIFIED
INSTITUTIONAL BUYERS") as defined in Rule 144A under the Securities Act, as such
rule may be amended from time to time ("RULE 144A") or, if any such person is
buying for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to you that each
<PAGE>
6
such account is a Qualified Institutional Buyer, to whom notice has been given
that such sale or delivery is being made in reliance on Rule 144A or (2)
institutional accredited investors ("ACCREDITED INVESTORS") as defined in Rule
501(a)(1), (2), (3) or (7) under Regulation D who execute letters of
representation in the form included as Appendix A to the Memorandum in private
sales exempt from registration under the Securities Act and (B) in the case of
offers outside the United States, to persons other than U.S. persons (as defined
in Regulation S) in accordance with Rule 903 of Regulation S.
(b) In connection with the transactions described in subsection
(a)(iii)(B) of this Section 3, you have offered and sold the Notes, and will
offer and sell the Notes, (i) as part of your distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the offering and
the Closing Date (the "RESTRICTED PERIOD"), only in accordance with Rule 903 of
Regulation S. Accordingly, the Initial Purchaser represents and agrees that,
with respect to the transactions described in subsection (a)(iii)(B) of this
Section 3, neither it, nor any of its Affiliates, nor any person acting on its
or their behalf has engaged or will engage in any directed selling efforts with
respect to the Notes, and that it and they have complied and will comply with
the offering restrictions requirements of Regulation S. It agrees that, at or
prior to the confirmation of sale of the Notes pursuant to subsection
(a)(iii)(B) of this Section 3, it shall have sent to each distributor, dealer or
person receiving a selling concession, fee or other remuneration that purchases
Notes from the Initial Purchaser during the Restricted Period a confirmation or
notice to substantially the following effect:
"THE SECURITIES COVERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS
(I) AS PART OF THEIR DISTRIBUTION AT ANY TIME OR (II) OTHERWISE UNTIL 40 DAYS
AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING AND THE TIME OF DELIVERY OF
THE SECURITIES, EXCEPT IN EITHER CASE IN ACCORDANCE WITH REGULATION S OR RULE
144A UNDER THE SECURITIES ACT. THE TERMS USED ABOVE HAVE THE MEANING GIVEN TO
THEM BY REGULATION S."
(c) (i) You have not offered or sold and, prior to the completion of
the six months from the Closing Date, will not offer or sell any Notes 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 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; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Notes in, from or otherwise involving the
United Kingdom and (iii) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection with the
issuance of the Notes to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investments Advertisements)(Exemptions) Order
1996 or is a person to whom such document may otherwise lawfully be issued or
passed on.
<PAGE>
7
4. DELIVERY OF AND PAYMENT FOR THE NOTES. (a) Payment of the purchase
price for, and delivery of, the Notes shall be made at the offices of Simpson
Thacher & Bartlett, New York, New York or at such other place as shall be agreed
upon by the Company and you, at 9:30 a.m. (New York time), on August 19, 1997 or
at such other time or date as you and the Company shall determine (such date and
time of payment and delivery being herein called the "CLOSING DATE").
(b) On the Closing Date, payment shall be made to the Company in
immediately available funds by wire transfer to such account or accounts as the
Company shall specify prior to the Closing Date or by such means as the parties
hereto shall agree prior to the Closing Date against delivery to you of the
certificates evidencing the Notes. Upon delivery, the Notes shall be
registered in such names and in such denominations as the Initial Purchaser
shall request in writing not less than two full business days prior to the
Closing Date. For the purpose of expediting the checking and packaging of
certificates evidencing the Notes, the Company agrees to make such certificates
available for inspection not later than 2:00 P.M. on the business day at least
24 hours prior to the Closing Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company further agrees:
(a) To furnish to you, without charge, during the period referred
to in paragraph (c) below, as many copies of the Memorandum and any
supplements and amendments thereto as you may reasonably request.
(b) Prior to making any amendment or supplement to the
Memorandum other than by filing documents under the Exchange Act which
are incorporated by reference therein, the Company shall furnish a
copy thereof to the Initial Purchaser and counsel to the Initial
Purchaser and will not effect any such amendment or supplement to
which the Initial Purchaser shall reasonably object by notice to the
Company after a reasonable period to review, which shall not in any
case be longer than three business days after receipt of such copy.
(c) If, at any time prior to completion of the distribution of
the Notes by you to purchasers, any event shall occur or condition
exist as a result of which it is necessary, in the opinion of counsel
for you or counsel for the Company, to amend or supplement the
Memorandum in order that the Memorandum will not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in
light of the circumstances existing at the time it is delivered to a
purchaser, or if it is necessary to amend or supplement the Memorandum
to comply with applicable law, to promptly prepare such amendment or
supplement as may be necessary to correct such untrue statement or
omission so that the Memorandum, as so amended or supplemented, will
comply with applicable law and to furnish you such number of copies as
you may reasonably request.
(d) So long as the Notes are outstanding and are "RESTRICTED
SECURITIES" within the meaning of Rule 144(a)(3) under the Securities
Act during any period
<PAGE>
8
in which it is not subject to and in compliance with Section 13 or
15(d) of the Exchange Act, to furnish to holders of the Notes and
prospective purchasers of Notes designated by such holders, upon
request of such holders or such prospective purchasers, the
information required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act.
(e) For a period of five years following the date of the
Memorandum, to furnish to the Initial Purchaser copies of all
materials furnished by the Company to its shareholders and all public
reports and all reports and financial statements furnished by the
Company to the principal national securities exchange upon which the
Notes may be listed pursuant to requirements of or agreements with
such exchange or to the Commission pursuant to the Exchange Act or any
rule or regulation of the Commission thereunder.
(f) Promptly from time to time to take such action as the
Initial Purchaser may reasonably request to qualify the Notes for
offering and sale under the securities laws of such jurisdictions as
the Initial Purchaser may request and to comply with such laws so as
to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Notes.
(g) Not to offer, sell, contract to sell or otherwise dispose of
any additional securities of the Company substantially similar to the
Notes or any securities convertible into or exchangeable for or that
represent the right to receive any such similar securities, without
the consent (which consent shall not be unreasonably withheld) of the
Initial Purchaser during the period beginning from the date of this
Agreement and continuing for 180 days following the Closing Date.
(h) To use its best efforts to permit the Notes to be designated
Private Offerings, Resales and Trading through Automated Linkages
Market ("PORTAL") securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers,
Inc. relating to trading in the PORTAL Market and to permit the Notes
to be eligible for clearance and settlement through The Depository
Trust Company (the "DTC").
(i) Except following the effectiveness of the Registration
Statement (as defined in the Registration Rights Agreement), not to,
and will cause its affiliates not to, solicit any offer to buy or
offer to sell the Notes by means of any form of general solicitation
or general advertising (as those terms are used in Regulation D under
the Securities Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act.
(j) Not to, and will cause its affiliates not to, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of
any security (as defined in the Securities Act) in a transaction that
could be integrated with the sale of the
<PAGE>
9
Notes in a manner that would require the registration under the
Securities Act of the Notes.
(k) To take such steps as shall be necessary to ensure that
neither the Company nor any subsidiary of the Company shall become an
"INVESTMENT COMPANY" within the meaning of such term under the
Investment Company Act of 1940 and the rules and regulations of the
Commission thereunder.
6. EXPENSES. The Company agrees to pay (i) the costs incident to the
authorization, issuance, sale and delivery of the Notes and any taxes payable in
that connection;(ii) the costs incident to the printing or other production of
the Memorandum and any amendments or supplements thereto;(iii) the costs of
distributing the Memorandum and any amendments or supplements thereto;(iv) the
fees and expenses of qualifying the Notes under the securities laws of the
several jurisdictions, including the fees and expenses of Simpson Thacher &
Bartlett, as provided in Section 5(f);(v) any fees charged by securities rating
services for rating the Notes;(vi) all fees and expenses, if any, incurred in
connection with the admission of such Notes for trading in PORTAL;(vii) the fees
and expenses of the Trustee; and (viii) all other costs and expenses incident to
the performance of the obligations of the Company.
7. CONDITIONS TO THE INITIAL PURCHASER'S OBLIGATIONS. The obligations
of the Initial Purchaser hereunder are subject to the accuracy, when made and on
the Closing Date, of the representations and warranties of the Company contained
herein, to the performance by the Company of its respective obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Initial Purchaser shall not have discovered and
disclosed to the Company on or prior to the Closing Date that the
Memorandum or any amendment or supplement thereto contains any untrue
statement of a fact which, in the opinion of Simpson Thacher &
Bartlett, counsel for the Initial Purchaser, is material or omits to
state any fact which, in the opinion of such counsel, is material and
is required to be stated therein or is necessary to make the
statements therein not misleading.
(b) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the
Indenture, the Notes, the Memorandum, and all other legal matters
relating to this Agreement and the transactions contemplated hereby
shall be reasonably satisfactory in all respects to counsel for the
Initial Purchaser, and the Company shall have furnished to such
counsel all documents and information that they may reasonably request
to enable them to pass upon such matters.
(c) Paul, Weiss, Rifkind, Wharton & Garrison shall have
furnished to the Initial Purchaser their written opinion, as counsel
to the Company, addressed to the Initial Purchaser and dated the
Closing Date, in form and substance reasonably satisfactory to the
Initial Purchaser, to the effect set forth in Exhibit A hereto and to
such further effect as counsel to the Initial Purchaser may reasonably
request.
<PAGE>
10
(d) You shall have received on the Closing Date a letter, dated
the date hereof and the Closing Date, as the case may be, in form and
substance satisfactory to you, from KPMG Peat Marwick LLP, independent
public accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information, including the financial information contained or
incorporated by reference in the Memorandum as identified by you.
(e) The Company shall have furnished to the Initial Purchaser a
certificate, dated the Closing Date, of the Chairman of the Board,
President or a Vice President of the Company and the Treasurer or
Chief Financial Officer stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct in all material
respects as of the Closing Date and the Company has complied with
all its agreements contained herein; and
(ii) They have carefully examined the Memorandum and, in
their opinion (A) the Memorandum, as of its date, did not include
any untrue statement of a material fact and did not omit to state
any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, and (B) since the date of the Memorandum no event has
occurred which should have been set forth in a supplement or
amendment to the Memorandum.
(f)(i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Memorandum any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Memorandum or (ii) since such
date there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Memorandum, the effect of which, in any such case
described in clause (i) or (ii), is, in the judgment of the Initial
Purchaser, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Notes
on the terms and in the manner contemplated in the Memorandum.
(g) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Notes by any
"NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION", as that term is
defined by the Commission for purposes of Rule 436(g)(2) of the Rules and
Regulations and (ii) no such organization
<PAGE>
11
shall have publicly announced that it has under surveillance or review,
with possible negative implications, its rating of any of the Notes.
(h) The Initial Purchaser shall have received on the date hereof the
Registration Rights Agreement executed by the Company.
(i) The Initial Purchaser shall have received from Simpson Thacher &
Bartlett, counsel for the Initial Purchaser, such opinion or opinions,
dated the Closing Date, with respect to such matters as the Initial
Purchaser may reasonably require, and the Company shall have furnished to
such counsel such documents and information as they may reasonably request
for the purpose of enabling them to pass upon such matters.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchaser.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless the Initial
Purchaser, its officers and employees and each person, if any, who controls the
Initial Purchaser within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of Notes), to which the Initial
Purchaser, officer, employee or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon,(i) any untrue statement or alleged
untrue statement of a material fact contained (A) in the Preliminary Memorandum,
the Memorandum or in any amendment or supplement thereto, or (B) in any Blue Sky
application or other document prepared or executed by the Company (or based upon
any written information furnished by the Company) specifically for the purpose
of qualifying any or all of the Notes under the securities laws of any state or
other jurisdiction (any such application, document or information being
hereinafter called a "BLUE SKY APPLICATION"),(ii) the omission or alleged
omission to state in the Preliminary Memorandum, the Memorandum or in any
amendment or supplement thereto, or in any Blue Sky Application any material
fact required to be stated therein or necessary to make the statements therein
not misleading or (iii) any act or failure to act, or any alleged act or failure
to act, by the Initial Purchaser in connection with, or relating in any manner
to, the Notes or the offering contemplated hereby, and which is included as part
of or referred to in any loss, claim, damage, liability or action arising out of
or based upon matters covered by clause (i) or (ii) above (PROVIDED that the
Company shall not be liable in the case of any matter covered by this clause
(iii) to the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, claim, damage, liability or action
resulted directly from any such act or failure to act undertaken or omitted to
be taken by the Initial Purchaser through its gross negligence or wilful
misconduct), and shall reimburse the Initial Purchaser and each officer,
employee and controlling person promptly upon demand for any legal or other
expenses reasonably incurred by the Initial Purchaser, officer, employee or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; PROVIDED,
<PAGE>
12
HOWEVER, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in the Preliminary Memorandum, the Memorandum or in any
such amendment or supplement, or in any Blue Sky Application in reliance upon
and in conformity with the written information furnished to the Company by or on
behalf of the Initial Purchaser specifically for inclusion therein and described
in Section 8(e) and PROVIDED FURTHER that as to the Preliminary Memorandum or
Memorandum this indemnity agreement shall not inure to the benefit of the
Initial Purchaser, its officers and employees and each person or controlling
person, if any, that on account of any loss, claim, damage, liability or action
arising from the sale of Notes to any person by the Initial Purchaser if the
Initial Purchaser failed to send or give a copy of the Memorandum, as the same
may be amended or supplemented, to that person, and the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact in the Preliminary Memorandum was corrected in the
Memorandum, or a supplement or amendment thereto, as the case may be. The
foregoing indemnity agreement is in addition to any liability which the Company
may otherwise have to the Initial Purchaser or to any officer, employee or
controlling person of the Initial Purchaser.
(b) The Initial Purchaser shall indemnify and hold harmless the
Company, its officers and employees, each of its directors and the Trustee, and
each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company, any such
director or officer, or the Trustee or any controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon,(i) any untrue
statement or alleged untrue statement of a material fact contained (A) in the
Preliminary Memorandum, the Memorandum or in any amendment or supplement
thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged
omission to state in the Preliminary Memorandum, the Memorandum or in any
amendment or supplement thereto, or in any Blue Sky Application any material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with the written information furnished to the Company or
the Trustee by or on behalf of the Initial Purchaser specifically for inclusion
therein and described in Section 8(e), and shall reimburse the Company and any
such director or officer, or any such Trustee, or controlling person for any
legal or other expenses reasonably incurred by the Company or any such director
or officer, or any such Trustee, or any controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which the Initial Purchaser
may otherwise have to the Company or any such director or officer, or any such
Trustee, or any controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER,
that the failure to notify the indemnifying party shall not relieve it from
any liability which it may have under this Section 8 except to the extent it
has been materially prejudiced by such failure and, PROVIDED FURTHER, that
the failure to notify the indemnifying party shall not relieve it from any
liability
<PAGE>
13
which it may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that
the indemnified party shall have the right to employ counsel to represent
jointly the indemnified party and its respective officers, employees and
controlling persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the indemnified party against the
indemnifying party under this Section 8 if, in the reasonable judgment of the
indemnified party, it is advisable for the indemnified party and those officers,
employees and controlling persons to be jointly represented by separate counsel,
and in that event the fees and expenses of such separate counsel shall be paid
by the indemnifying party. It is understood that the indemnifying party shall
not be liable for the fees and expenses of more than one separate firm (in
addition to local counsel in each jurisdiction) for all indemnified parties in
connection with any proceeding or related proceedings. Each indemnified party,
as a condition of the indemnity agreements contained in Sections 8(a) and 8(b),
shall use its best efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall (i) without
the prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss of liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof,(i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Initial Purchaser on the other
from the offering of the Notes or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the
<PAGE>
14
Company on the one hand and the Initial Purchaser on the other with respect to
the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchaser on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Notes purchased under this Agreement (before deducting expenses) received
by the Company on the one hand, and the total underwriting commissions received
by the Initial Purchaser with respect to the Notes purchased under this
Agreement, on the other hand, bear to the total gross proceeds from the offering
of the Notes under this Agreement, in each case as set forth in the table on the
cover page of the Memorandum. The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Initial Purchaser, on the other
hand, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchaser agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were to be determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid
or payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 8(d)
shall be deemed to include, for purposes of this Section 8(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), the Initial Purchaser shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Notes sold and distributed by it were offered to the purchasers exceeds the
amount of any damages which the Initial Purchaser has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The Initial Purchaser confirms that the statements with respect
to the offering of the Notes set forth in the bottom paragraph on the cover page
of, the legend concerning stabilization and over-allotment on the inside front
cover page of, and the sixth, ninth and eleventh paragraphs under the caption
"Plan of Distribution" relating to stabilization and over-allotment in, the
Preliminary Memorandum and the Memorandum are correct and constitute the only
information furnished in writing to the Company by or on behalf of the Initial
Purchaser specifically for inclusion in the Memorandum.
9. TERMINATION. The obligations of the Initial Purchaser hereunder
may be terminated by it by notice given to and received by the Company prior to
delivery of and payment for the Notes if, prior to that time,(i) trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or in the over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market, shall have been
suspended or minimum prices shall have been established on any such exchange or
such market by the Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction,(ii) a banking moratorium shall
have been declared by Federal or New York State authorities,(iii) the United
States shall have become engaged in hostilities, there
<PAGE>
15
shall have been an escalation in hostilities involving the United States or
there shall have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such) as to make it, in the judgment of the Initial Purchaser, impracticable or
inadvisable to proceed with the offering or delivery of the Notes on the terms
and in the manner contemplated in the Memorandum.
10. REIMBURSEMENT OF INITIAL PURCHASER'S EXPENSES. If the sale of
Notes provided for herein is not consummated because any condition to the
obligations of the Initial Purchaser set forth in Section 7 hereof is not
satisfied, because of any termination pursuant to Section 9 hereof or because of
any refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by the Initial Purchaser, the Company shall reimburse the Initial
Purchaser for the reasonable fees and expenses of its counsel and for such other
out-of-pocket expenses as shall have been incurred by it in connection with this
Agreement and the proposed purchase of the Notes, and upon demand the Company
shall pay the full amount thereof to the Initial Purchaser.
11. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a)if to the Initial Purchaser, shall be delivered or sent by
mail, telex or facsimile transmission to Lehman Brothers Inc., Three
World Financial Center, New York, New York 10285, Attention:
Syndicate Department (Fax: 212-528-8822);
(b)if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Memorandum, Attention: Chief Financial Officer (Fax: 202-965-4445).
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchaser, the Company,
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (x) the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the officers and
employees of the Initial Purchaser and the person or persons, if any, who
control the Initial Purchaser within the meaning of Section 15 of the Securities
Act and (y) the indemnity agreement of the Initial Purchaser contained in
Section 8(b) of this Agreement shall be deemed to be for the benefit of
directors, officers and employees of the Company and any person controlling the
Company within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 12, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
<PAGE>
16
13. SURVIVAL. The respective indemnities, representations, warranties
and agreements of the Company and the Initial Purchaser contained in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Notes and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any of them or any person controlling any of them.
14. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SIGNIFICANT
SUBSIDIARY". For purposes of this Agreement,(a) "BUSINESS DAY" means any day on
which the New York Stock Exchange, Inc. is open for trading and (b) "SIGNIFICANT
SUBSIDIARY" has the meaning set forth in Rule 1-02 of Regulation S-X.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
If the foregoing corectly sets forth the agreement between the
Company and thd Initial Purchase, please indicate your acceptance in the
space provided for that purpose below.
Very truly yours,
CAPSTAR HOTEL COMPANY
By: /s/ John Emery
-------------------------
Name: John Emery
Title: Chief Financial Officer
Accepted:
LEHMAN BROTHERS INC.
By: /s/ Stephen Mehos
--------------------------
Name: Stephen Mehos
Title: Associate
<PAGE>
EXHIBIT A
FORM OF OPINION OF
COMPANY COUNSEL TO BE DELIVERED
PURSUANT TO SECTION 7(c)
(i) The Company, CapStar Management Company, L.P., CapStar
Management Company II, L.P., CapStar LP Corporation, CapStar General Corp.
and CapStar Limited Corp. have been duly formed and are validly existing as
corporations or limited partnerships, as the case may be, in good standing
under the laws of their respective jurisdictions of organization, are duly
qualified to do business and are in good standing as foreign corporations or
limited partnerships, as the case may be, in each jurisdiction in which their
respective ownership or lease of property or the conduct of their respective
businesses (as set forth in certificates of officers of the Company upon
which such counsel is relying without independent investigation) requires
such qualification, except where the failure to be so qualified would not
have a material adverse effect on the consolidated financial position,
stockholders equity, results of operations, business or prospects of the
Company and its subsidiaries taken as a whole (a "Material Adverse Effect"),
and have all corporate or partnership, as the case may be, power and
authority necessary to own or hold their respective properties and conduct
the businesses in which they are engaged as described in the Memorandum;
(ii) The Company has an authorized capitalization as set forth in
the Memorandum, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description thereof contained in the
Memorandum; and all of the issued shares of capital stock or partnership
interests, as the case may be, of CapStar Management Company, L.P., CapStar
Management Company II, L.P., CapStar LP Corporation, CapStar General Corp.
and CapStar Limited Corp. have been duly and validly authorized and issued
and (except for partnership interests of general partners) are fully paid,
non-assessable and (except for partnership interests in CapStar Management
Company, L.P. and CapStar Management Company II, L.P. owned by third parties)
are owned directly or indirectly by the Company, to such counsel's knowledge
free and clear of all liens, encumbrances, or claims;
(iii) To the best of such counsel's knowledge, based solely on a
review of such counsel's internal litigation docket, and other than as set forth
in the Memorandum, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any property
or assets of the Company or any of its subsidiaries is the subject which could
be expected to have a Material Adverse Effect; and, to the best of such
counsel's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(iv) The Memorandum and any further amendments or supplements
thereto made by the Company prior to the Closing Date (other than the financial
statements and related
<PAGE>
A-2
schedules and statistical data therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the requirements of the
Securities Act and the Rules and Regulations;
(v) To the best of such counsel's knowledge, there are no contracts
or other documents which are required to be described in the Memorandum which
have not been so described;
(vi) The execution and delivery of the Notes and the Exchange Notes
have been duly authorized by all necessary corporate action of the Company, and
the Notes and the Exchange Notes, when executed and authenticated in accordance
with the provisions of the Indenture and paid for in accordance with the
Purchase Agreement, will constitute the valid, binding and enforceable
obligations of the Company, entitled to the benefits of the Indenture, except as
such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or transfer, reorganization, liquidation, moratorium or other similar
laws affecting the rights and remedies of creditors generally and except as may
be subject to general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law);
(vii) Each of the Purchase Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by the Company and
each constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, liquidation, moratorium or other similar laws affecting the
rights and remedies of creditors generally and except as may be subject to
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law), and except as rights to indemnity and
contribution thereunder may be limited by applicable law and public policy, and
except that no opinion is expressed as to the enforceability of the choice of
law provision thereof;
(viii) The Indenture has been duly authorized, executed and
delivered by the Company and, assuming due authorization, executing and delivery
thereof by the Trustee, constitutes a valid and legally binding agreement of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or transfer, reorganization, liquidation, moratorium or other similar
laws affecting the rights and remedies of creditors generally and except as may
be subject to general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law);
(ix) The issue and sale of the Notes being delivered on the Closing
Date by the Company, the issue and sale of the Exchange Notes, the compliance by
the Company with all of the provisions of this Agreement, the Registration
Rights Agreement and the Indenture and the consummation of the transactions
contemplated hereby and thereby, will not conflict with or result in a material
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject which breach is reasonably likely to have a Material
Adverse Effect, nor will such actions result in any violation of the provisions
of the charter,
<PAGE>
A-3
by-laws, limited partnership agreement or operating agreement of the Company or
any of its subsidiaries or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body of the United States,
the State of New York or established pursuant to the Delaware Corporation Law
having jurisdiction over the Company or any of its subsidiaries or any of their
properties or assets; except for the registration of the Exchange Offer (as
defined in the Registration Rights Agreement) under the Securities Act and for
such consents, approvals, authorizations, registrations or qualifications as may
be required under the Exchange Act and applicable state securities laws in
connection with the purchase and distribution of the Notes by the Initial
Purchaser and the Exchange Offer, no consent approval, authorization or order
of, or filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated hereby;
(x) Neither the Company nor any of its subsidiaries is an
"INVESTMENT COMPANY" as such term is defined in the Investment Company Act of
1940, as amended; and
(xi) The statements under the captions "Certain Relationships and
Related Transactions" and "Description of Notes" in the Memorandum, insofar as
such statements constitute a summary of legal matters, documents or proceedings
referred to therein are correct in all material respects.
In rendering such opinion, such counsel may (i) state that their
opinion is limited to matters governed by the Federal laws of the United States
of America, the laws of the State of New York and the Delaware Corporation Law
and that such counsel is not admitted in the State of Delaware; Such counsel
shall also have furnished to the Initial Purchaser a written statement,
addressed to the Initial Purchaser and dated such Closing Date, in form and
substance satisfactory to the Initial Purchaser, to the effect that (x) in
connection with the preparation of the Memorandum, such counsel have
participated in conferences with certain officers of the Company, the
independent public accountants of the Company and other representatives of the
Company, at which the contents of the Memorandum and related matters were
discussed, and (y) based on such participation, no facts have come to the
attention of such counsel which lead them to believe that the Memorandum (except
for financial statements, schedules and other statistical data included therein
or omitted therefrom, as to which such counsel need make no statement), as of
the date thereof, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or that the Memorandum (except for financial statements,
schedules and other statistical data included therein or omitted therefrom, as
to which such counsel need make no statement) contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The foregoing statement may be
qualified by a statement to the effect that such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Memorandum except for the statements made in the Memorandum
under the captions "Certain Relationships and Related Transactions" and
"Description of Notes" insofar as such statements concern legal matters.
<PAGE>
Exhibit 10.2
CAPSTAR HOTEL COMPANY
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
PURCHASE AGREEMENT
August 14, 1997
Oak Hill Securities Fund, L.P.
201 Main Street
Suite 2600
Fort Worth, Texas 76102
Ladies and Gentlemen:
CapStar Hotel Company, a Delaware corporation (the "Company"),
proposes to sell to you (the "Investor") $50,000,000 aggregate principal amount
of its 83/4% Senior Subordinated Notes due 2007 (the "NOTES"). The Notes will
be issued pursuant to an Indenture to be dated as of August 19, 1997 (the
"INDENTURE"), between the Company and IBJ Schroder Bank & Trust Company, as
trustee (the "TRUSTEE"). This is to confirm the agreement concerning the
purchase of the Notes from the Company by the Investor.
Concurrently with the issuance and sale of the Notes, the Company is
issuing and selling to Lehman Brothers Inc. (the "INITIAL PURCHASER"),
$100,000,000 aggregate principal amount of its 83/4% Senior Subordinated Notes
Due 2007 (the "INITIAL PURCHASER NOTES") pursuant to the Purchase Agreement
dated the date hereof between the Issuer and the Initial Purchaser (the "INITIAL
PURCHASER PURCHASE AGREEMENT"). The Initial Purchaser Notes will be issued
pursuant to and be governed by the Indenture.
The Initial Purchaser Notes will be offered without being registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), in reliance
on exemptions therefrom. The Initial Purchaser proposes to make an offering of
the Initial Purchaser Notes upon the terms set forth in the Memorandum and the
Initial Purchaser Purchase Agreement.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum (the "PRELIMINARY MEMORANDUM") and will prepare
a final offering memorandum (the "MEMORANDUM") setting forth or including a
description of the terms of the Notes, the terms of the offering, a description
of the Company and any material developments relating to the Company occurring
after the date of the most recent financial statements included therein.
The Investor and its direct and indirect transferees of the Notes will
be entitled to the benefits of the Registration Rights Agreement dated the date
hereof (the "REGISTRATION RIGHTS AGREEMENT"), substantially in the form of the
Registration Rights Agreement between the Company and the Initial Purchaser
(together with the Registration Rights Agreement, the
<PAGE>
2
"Registration Rights Agreements"), pursuant to which the Company will agree,
among other things, to file with the Securities and Exchange Commission (the
"COMMISSION"), under the circumstances set forth therein, (i) a registration
statement under the Securities Act (the "EXCHANGE OFFER REGISTRATION
STATEMENT"), relating to Senior Subordinated Notes due 2007 of the Company (the
"EXCHANGE NOTES") to be offered in exchange (the "EXCHANGE OFFER") for the
Notes, and (ii) as and to the extent required by the Registration Rights
Agreements, a shelf registration statement pursuant to Rule 415 under the Act
(the "SHELF REGISTRATION STATEMENT" and, together with the Exchange Offer
Registration Statement, the "REGISTRATION STATEMENTS"), relating to the resale
by certain holders of the Notes, and to cause such Registration Statements to be
declared effective in accordance with the Registration Rights Agreements.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company
represents and warrants to, and agrees with the Investor that as of the date
hereof:
(A) The Memorandum at the date hereof, does not, and at the Closing Date,
will not, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this
Section 1(a) do not apply to statements or omissions in the Memorandum
based upon information furnished to the Company in writing by or on
behalf of the Investor expressly for use therein. Reference herein to
the Memorandum shall be deemed to refer to and include any document
filed by the Company under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), which is incorporated in the Memorandum
by reference.
(B) It is not required by applicable law or regulation in connection with
the offer, sale and delivery of the Notes to you in the manner
contemplated by this Agreement to register the Notes under the
Securities Act or to qualify the Indenture in respect of the Notes
under the Trust Indenture Act of 1939, as amended.
(C) The Company and each of its Significant Subsidiaries (as defined in
Section 13) have been duly organized and are validly existing and in
good standing under the laws of their respective jurisdictions of
organization, are duly qualified to do business and are in good
standing in each jurisdiction in which their respective ownership or
lease of property or the conduct of their respective businesses
requires such qualification, save where the failure to be so qualified
would not reasonably be expected to have a material adverse effect on
the business or property of the Company and its subsidiaries taken as
a whole, and each has all power and authority necessary to own or hold
their respective properties and to conduct the businesses in which
they are engaged.
(D) The Company has an authorized capitalization as set forth in the
Memorandum, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof
contained, or incorporated by reference, in the Memorandum; all of the
issued shares of capital stock, partnership interests or
<PAGE>
3
limited liability membership interests, as the case may, be of each
Significant Subsidiary of the Company have been duly and validly authorized
and issued and (except for partnership interests of general partners and
except to the extent the limited liability company agreements governing the
respective limited liability companies provide otherwise) are fully paid
and non-assessable and (except for partnership interests in CapStar
Management Company, L.P. and CapStar Management Company II, L.P. owned by
third parties) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims.
(E) The Indenture has been duly authorized and, when duly executed and
delivered by the proper officers of the Company (assuming due
execution and delivery by the Trustee) and delivered by the Company,
will constitute a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms except as
such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, liquidation,
moratorium or other similar laws affecting the rights and remedies of
creditors generally and except as may be subject to general principles
of equity (regardless of whether enforcement is sought in a proceeding
in equity or at law).
(F) This Agreement and the Initial Purchaser Purchase Agreement have each
been duly authorized, executed and delivered by the Company and the
Registration Rights Agreements have been duly authorized and will be
duly delivered and executed by the Company.
(G) Except where it would not reasonably be expected to have a material
adverse effect on the consolidated financial position, stockholder's
equity, results of operations, business or prospects of the Company
and its subsidiaries taken as a whole, (i) the execution, delivery and
performance of this Agreement, the Initial Purchaser Purchase
Agreement, the Registration Rights Agreements, the Indenture, the
Initial Purchaser Notes, the Notes and the Exchange Notes, and the
consummation by the Company of the transactions contemplated herein
and therein (the "TRANSACTIONS") will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company
or any of its Significant Subsidiaries is a party or by which the
Company or any of its Significant Subsidiaries is bound or to which
any of the properties or assets of the Company or any of its
Significant Subsidiaries is subject, (ii) nor will such actions result
in any violation of the provisions of the charter or by-laws of the
Company or any of its Significant Subsidiaries or any statute or
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company, any of its Significant
Subsidiaries or any of their properties or assets; and (iii) except
for such consents, approvals, authorizations, registrations or
qualifications as may be required under applicable state securities
laws in connection with the purchase and distribution of the Initial
Purchaser Notes by the Initial Purchaser or the purchase
<PAGE>
4
and distribution of the Notes by the Investor, and except for
registration of the Exchange Offer (as defined in the Registration
Rights Agreements) under the Securities Act and applicable state
securities laws, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body is required for the Transactions.
(H) Neither the Company nor any of its Significant Subsidiaries has
sustained, since the date of the latest quarterly financial statements
included or incorporated by reference in the Memorandum, any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Memorandum; and, since such
date, there has not been any change in the capital stock or long-term
debt of the Company or any of its Significant Subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management financial position, stockholders' equity or results of
operations of the Company and its subsidiaries taken as a whole,
otherwise than as set forth or contemplated in the Memorandum.
(I) The financial statements (including the related notes and supporting
schedules) included in the Memorandum present fairly the financial
condition and results of operations of the entities purported to be
shown thereby, at the dates and for the periods indicated, and have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods
involved.
(J) KPMG Peat Marwick LLP, who have certified certain financial statements
of the Company, whose report is included in the Memorandum, are
independent public accountants as required by the Securities Act and
the Rules and Regulations during the periods covered by the financial
statements on which they reported contained in the Memorandum.
(K) There are no legal or governmental proceedings pending to which the
Company or any of its Significant Subsidiaries is a party or of which
any property or asset of the Company or any of its Significant
Subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, could be expected to have a
material adverse effect on the consolidated financial position,
stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries taken as a whole; and to the best of
the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others that
is required to be disclosed in the Memorandum which is not so
disclosed.
(L) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders,
customers or suppliers of the
<PAGE>
5
Company on the other hand, which is required to be disclosed in the
Memorandum which is not so disclosed.
(M) Since the date as of which information is given in the Memorandum
through the date hereof, and except as may otherwise be disclosed in
the Memorandum, the Company has not (a) issued or granted any
securities, other than in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of
any one or more employees, officers, directors or consultants, or in
connection with a dividend reinvestment or stock purchase plan,(b)
incurred any liability or obligation, direct or contingent, other than
liabilities and obligations which were incurred in the ordinary course
of business, (c)entered into any transaction not in the ordinary
course of business or (d) in the case of the Company, declared or paid
any dividend on its capital stock.
(N) Neither the Company nor any of its Significant Subsidiaries (i) is in
violation of its charter or by-laws, (ii) is in default in any
material respect, and no event has occurred which, with notice or
lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained
in any material indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it is a party or by which it is
bound or to which any of its properties or assets is subject except
where it would not reasonably be expected to have a material adverse
effect on the consolidated financial position, stockholder's equity,
results of operations, business or prospects of the Company and its
subsidiaries taken as a whole, or (iii) is in violation in any
material respect of any law, ordinance, governmental rule, regulation
or court decree to which it or its properties or assets may be subject
or has failed to obtain any material license, permit, certificate,
franchise or other governmental authorization or permit necessary to
the ownership of its properties or assets or to the conduct of its
business except where it would not reasonably be expected to have a
material adverse effect on the consolidated financial position,
stockholder's equity, results of operations, business or prospects of
the Company and its subsidiaries taken as a whole.
(O) Neither the Company nor any Significant Subsidiary is an "INVESTMENT
COMPANY" within the meaning of such term under the Investment Company
Act of 1940, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder.
(P) Neither the Company nor any of its affiliates (as defined in Rule
501(b) of Regulation D under the Securities Act, an "AFFILIATE") has
directly, or through any agent, (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
defined in the Securities Act) which is or will be integrated with the
sale of the Notes or the Initial Purchaser Notes, as the case may be,
in a manner that would require the registration under the Securities
Act of the Notes or the Initial Purchaser Notes, as the case may be,
or (ii) engaged in any form of general solicitation or general
advertising in
<PAGE>
6
connection with the offering of the Notes or the Initial Purchaser
Notes, as the case may be (as those terms are used in Regulation D
under the Securities Act), or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.
2. PURCHASE OF THE NOTES BY THE INVESTOR.
(A) On the basis of the representations and warranties herein contained,
and subject to the terms and conditions herein set forth, the Company
agrees to sell to you and you agree to purchase from the Company,
$50,000,000 aggregate principal amount of the Notes at a purchase
price equal to 97.866% of the principal amount of such Notes.
(B) The Company shall not be obligated to deliver any of the Notes, except
upon payment for all of the Notes to be purchased as hereinafter
provided.
3. DELIVERY OF AND PAYMENT FOR THE NOTES.
(A) Payment of the purchase price for, and delivery of, the Notes shall be
made at the offices of Simpson, Thacher & Bartlett, New York, New York
or at such other place as shall be agreed upon by the Company and you,
at 9:30 a.m. (New York time), on August 19, 1997 or at such other time
or date as you and the Company shall determine (such date and time of
payment and delivery being herein called the "CLOSING DATE").
(B) On the Closing Date, payment shall be made to the Company in
immediately available funds by wire transfer to such account or
accounts as the Company shall specify prior to the Closing Date or by
such means as the parties hereto shall agree prior to the Closing Date
against delivery to you of the certificates evidencing the Notes.
Upon delivery, the Notes shall be registered in such names and in such
denominations as the Investor shall request in writing not less than
two full business days prior to the Closing Date. For the purpose of
expediting the checking and packaging of certificates evidencing the
Notes, the Company agrees to make such certificates available for
inspection not later than 2:00 P.M. on the business day at least 24
hours prior to the Closing Date.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company further agrees:
(A) So long as the Notes are outstanding and are "RESTRICTED SECURITIES"
within the meaning of Rule 144(a)(3) under the Securities Act during
any period in which it is not subject to and in compliance with
Section 13 or 15(d) of the Exchange Act, to furnish to holders of the
Notes and prospective purchasers of Notes designated by such holders,
upon request of such holders or such prospective purchasers, the
information required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act.
<PAGE>
7
(B) For a period of five years following the date of the Memorandum, to
furnish to the Investor copies of all materials furnished by the
Company to its shareholders and all public reports and all reports and
financial statements furnished by the Company to the principal
national securities exchange upon which the Notes may be listed
pursuant to requirements of or agreements with such exchange or to the
Commission pursuant to the Exchange Act or any rule or regulation of
the Commission thereunder.
(C) To use its best efforts to permit the Notes to be designated Private
Offerings, Resales and Trading through Automated Linkages Market
("PORTAL") securities in accordance with the rules and regulations
adopted by the National Association of Securities Dealers, Inc.
relating to trading in the PORTAL Market and to permit the Notes to be
eligible for clearance and settlement through The Depository Trust
Company.
(D) Except following the effectiveness of the Exchange Offer Registration
Statement (as defined in the Registration Rights Agreements), not to,
and will cause its affiliates not to, solicit any offer to buy or
offer to sell the Notes by means of any form of general solicitation
or general advertising (as those terms are used in Regulation D under
the Securities Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act.
(E) Not to, and will cause its affiliates not to, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) in a transaction that
could be integrated with the sale of the Notes in a manner that would
require the registration under the Securities Act of the Notes.
(F) To take such steps as shall be necessary to ensure that neither the
Company nor any subsidiary of the Company shall become an "INVESTMENT
COMPANY" within the meaning of such term under the Investment Company
Act of 1940 and the rules and regulations of the Commission
thereunder.
5. EXPENSES. Each party hereto agrees to pay its own costs and expenses
related to the negotiation, execution, delivery and performance of this
Agreement, whether or not the transactions contemplated herein are consummated
or this Agreement is terminated pursuant to Section 8 hereof.
6. CONDITIONS TO THE INVESTOR'S AND THE COMPANY'S OBLIGATIONS. The
obligations of the Investor hereunder are subject to the accuracy, when made and
on the Closing Date, of the representations and warranties of the Company
contained herein, to the performance by the Company of its respective
obligations hereunder, and to each of the following additional terms and
conditions:
(A) The Investor shall not have discovered and disclosed to the
Company on or prior to the Closing Date that the Memorandum or
any amendment or supplement thereto contains any untrue statement
of a fact which, in the
<PAGE>
8
opinion of the Investor, is material or omits to state a fact which,
in the opinion of the Investor, is material and is required to be
stated therein or is necessary to make the statements therein not
misleading.
(B) Paul, Weiss, Rifkind, Wharton & Garrison shall have furnished to
the Investor their written opinion, as counsel to the Company,
addressed to the Investor and dated the Closing Date,
substantially similar to the opinions provided on such date under
the Initial Purchaser Purchase Agreement (or, alternatively such
counsel may provide letters to the Investor stating that it may
rely on the opinion delivered by it under the Investor Purchase
Agreement as if it were addressed to the Investor).
(C) The Company shall have furnished to the Investor a certificate,
dated the Closing Date, of the Chairman of the Board, President
or a Vice President of the Company and the Treasurer or Chief
Financial Officer stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct in all material respects as
of the Closing Date and the Company has complied with all its
agreements contained herein; and
(ii) They have carefully examined the Memorandum and, in their
opinion (a) the Memorandum, as of its date, did not include any untrue
statement of a material fact and did not omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (b)
since the date of the Memorandum no event has occurred which should
have been set forth in a supplement or amendment to the Memorandum.
(D) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial
statements included or incorporated by reference in the
Memorandum any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or
contemplated in the Memorandum or (ii) since such date there
shall not have been any change in the capital stock or long-term
debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting
the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and
its subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Memorandum, the effect of which, in any such
case described in clause (i) or (ii), is, in the judgment of the
Investor, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the
Notes on the terms and in the manner contemplated in the
Memorandum.
<PAGE>
9
(E) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Notes
by any "NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION",
as that term is defined by the Commission for purposes of Rule
436(g)(2) of the Rules and Regulations and (ii) no such
organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its
rating of any of the Notes.
(F) The consummation of the sale of the Initial Purchaser Notes to
the Initial Purchaser shall have occurred.
(G) The Investor shall have received on the date hereof the
Registration Rights Agreement executed by the Company and such
agreement shall be in full force and effect at all times from and
after the date hereof.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to the Investor.
7. INVESTOR REPRESENTATIONS.
(A) The Investor understands that the offer and sale of the Notes have not
been registered under the Securities Act and that the Notes may not be
offered or sold within the United States or for the benefit of United
States persons except as permitted below. The Investor understands
that any subsequent transfer of the Notes is subject to certain
restrictions and conditions set forth in the Indenture and agrees to
be bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with, such restrictions and conditions and the
Securities Act and all applicable state securities laws. The Investor
further acknowledges that it agrees to the matters stated in the
section entitled "Notice to Investors" in the Memorandum.
(B) The Investor represents and warrants that the Notes to be acquired by
the Investor pursuant to this Agreement are to be acquired for its own
account and with no intention of distributing or reselling such Notes
or any part thereof in any transaction which would be in violation of
the Securities Act or any applicable state securities laws.
(C) The Investor represents and warrants that it is a Qualified
Institutional Buyer and an Accredited Investor and has such knowledge
and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment in the Notes and is
able to bear the economic risk of its investment.
(D) The Investor represents and warrants that it has received such
information as it deems necessary in order to make its investment
decision.
<PAGE>
10
(E) The Investor represents and warrants that the source of funds being
used by it to acquire the Notes does not include the assets of any
"employee benefit plan" (within the meaning of Section 3 of Employee
Retirement Income Security Act of 1974, as amended) or any "plan"
(within the meaning of Section 4975 of the Internal Revenue Code of
1986, as amended).
8. TERMINATION. The obligations of the Investor hereunder may be terminated
by it by notice given to and received by the Company prior to delivery of and
payment for the Notes if, prior to that time,(a) trading in securities generally
on the New York Stock Exchange or the American Stock Exchange or in the
over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or minimum
prices shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or governmental
authority having jurisdiction,(b) a banking moratorium shall have been declared
by Federal or New York State authorities,(c) the United States shall have become
engaged in hostilities, there shall have been an escalation in hostilities
involving the United States or there shall have been a declaration of a national
emergency or war by the United States or (d) there shall have occurred such a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the judgment of the Investor,
impracticable or inadvisable to proceed with the offering or delivery of the
Notes on the terms and in the manner contemplated in the Memorandum.
9. REIMBURSEMENT OF INVESTOR'S EXPENSES. If the sale of Notes provided for
herein is not consummated because any condition to the obligations of the
Investor set forth in Section 6(A) hereof is not satisfied, because of any
termination pursuant to Section 8 hereof or because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or comply
with any provision hereof other than by reason of a default by the Investor, the
Company shall reimburse the Investor for the reasonable fees and expenses of its
counsel and for such other out-of-pocket expenses as shall have been incurred by
it in connection with this Agreement and the proposed purchase of the Notes, and
upon demand the Company shall pay the full amount thereof to the Investor.
10. NOTICES, ETC. All statements, requests, notices and agreements hereunder
shall be in writing, and:
(A)if to the Investor, shall be delivered or sent by mail, telex or
facsimile transmission to Oak Hill Securities Fund, L.P., 201 Main Street,
Suite 2600, Fort Worth, Texas 76102, Attention: Chuck Irwin, with a copy
to Oak Hill Advisors, Inc., 65 East 55th Street, 32nd Floor, New York, New
York 10022, Attention: Glenn August;
(B)if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Memorandum, Attention: Chief Financial Officer (Fax: 202-965-4445).
<PAGE>
11
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof.
11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to
the benefit of and be binding upon the Investor, the Company and their
respective successors. This Agreement and the terms and provisions hereof are
for the sole benefit of only those persons. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 11, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein. No
purchaser of Notes from the Investor will be deemed a successor because of such
purchase.
12. SURVIVAL. The respective indemnities, representations, warranties and
agreements of the Company and the Investor contained in this Agreement or made
by or on behalf of them, respectively, pursuant to this Agreement, shall survive
the delivery of and payment for the Notes and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any of them or
any person controlling any of them.
13. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SIGNIFICANT SUBSIDIARY". For
purposes of this Agreement,(A) "BUSINESS DAY" means any day on which the New
York Stock Exchange, Inc. is open for trading and (B) "SIGNIFICANT SUBSIDIARY"
has the meaning set forth in Rule 1-02 of Regulation S-X.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF NEW YORK.
15. COUNTERPARTS. This Agreement may be executed in one or more counterparts
and, if executed in more than one counterpart, the executed counterparts shall
each be deemed to be an original but all such counterparts shall together
constitute one and the same instrument.
16. HEADINGS. The headings herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
12
If the foregoing correctly sets forth the agreement between the
Company and the Investor, please indicate your acceptance in the space provided
for that purpose below.
Very truly yours,
CAPSTAR HOTEL COMPANY
By: /s/ John Emery
----------------------------------
Name: John Emery
Title: Chief Financial Officer
Accepted:
OAK HILL SECURITIES FUND, L.P
By: Oak Hill Securities GenPar, L.P.
its general partner
By: Oak Hill Securities MPG, Inc.
its general partner
By: /s/ John R. Monsky
------------------------------------
Name: John R. Monsky
Title: Vice President
<PAGE>
EXHIBIT 10.3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of August 14, 1997
Between
CAPSTAR HOTEL COMPANY
and
LEHMAN BROTHERS INC.
as Initial Purchaser
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
1. Definitions........................................................ 1
2. Notes Subject to This Agreement.................................... 3
3. Registered Exchange Offer.......................................... 3
4. Shelf Registration................................................. 4
5. Liquidated Damages................................................. 5
6. Registration Procedures............................................ 6
7. Registration Expenses.............................................. 13
8. Indemnification and Contribution................................... 13
9. Rule 144A.......................................................... 16
10. Participation in Underwritten Registrations........................ 16
11. Selection of Underwriters.......................................... 16
12. Miscellaneous...................................................... 16
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 14, 1997 by and between CapStar Hotel Company, a
Delaware corporation ("the Company") and Lehman Brothers Inc. (the "Initial
Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of August 14, 1997, between the Company and the Initial
Purchaser (the "Purchase Agreement"), which provides for the sale by the Company
to the Initial Purchaser of $100,000,000 principal amount of the Company's 8.75%
Senior Subordinated Notes due 2007 (the "Notes"). Capitalized terms used but
not specifically defined herein have the respective meanings ascribed thereto in
the Purchase Agreement. As an inducement to the Initial Purchaser to enter into
the Purchase Agreement and in satisfaction of a condition to its obligations
thereunder, the Company agrees with the Initial Purchaser, for the benefit of
the holders of the Notes (including the Initial Purchaser) (the "Holders"), as
follows:
1. DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the following meanings:
BROKER-DEALER: Any broker or dealer registered under the
Exchange Act.
CLOSING DATE: The date on which the Notes were sold.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed
"Consummated" for purposes of this Agreement upon the occurrence of (i) the
filing and effectiveness under the Securities Act of the Exchange Offer
Registration Statement relating to the Exchange Notes to be issued in the
Exchange Offer, (ii) the maintenance of such Registration Statement
continuously effective and the keeping of the Exchange Offer open for a
period not less than the minimum period required pursuant to Section 3(b)
hereof, and (iii) the delivery by the Company of the Exchange Notes in the
same aggregate principal amount as the aggregate principal amount of
Transfer Restricted Securities that were validly tendered by Holders
thereof pursuant to the Exchange Offer.
DAMAGES PAYMENT DATE: With respect to the Notes, each
Distribution Date until the earlier of (i) the date on which Liquidated
Damages no longer are payable or (ii) maturity of the Notes.
EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE NOTES: The Notes to be issued pursuant to the Indenture
in the Exchange Offer.
EXCHANGE OFFER: The registration by the Company under the
Securities Act of the Exchange Notes pursuant to a Registration Statement
pursuant to which the Company offers the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such
outstanding Transfer Restricted Securities held by such Holders for
Exchange Notes in an aggregate amount equal to the aggregate amount of the
Transfer Restricted Securities tendered in such exchange offer by such
Holders.
<PAGE>
2
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration
Statement relating to the Exchange Offer, including the Prospectus which
forms a part thereof.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Notes to certain "qualified institutional buyers," as
such term is defined in Rule 144A under the Securities Act, to certain
institutional "accredited investors," as such term is defined in Rule
501(a)(1), (2), (3) and (7) of Regulation D under the Securities Act
("Accredited Institutions") and to certain non-U.S. persons.
HOLDERS: As defined in Section 2(b) hereof.
INDENTURE: The Indenture, dated as of August 19, 1997, between
the Company and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture
is amended or supplemented from time to time in accordance with the terms
thereof.
INITIAL PURCHASER: As defined in the preamble hereto.
NASD: National Association of Securities Dealers, Inc.
PERSON: An individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement,
as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the
Company relating to (a) an offering of Exchange Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, which is filed
pursuant to the provisions of this Agreement, in either case, including the
Prospectus included therein, all amendments and supplements thereto
(including post-effective amendments) and all exhibits and material
incorporated by reference therein.
SECURITIES ACT: The Securities Act of 1933, as amended.
SHELF FILING DEADLINE: As defined in Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb), as amended.
TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to
occur of (a) the date on which such Note has been exchanged by a person
other than a Broker-Dealer for Exchange Notes in the Exchange Offer, (b)
following the exchange by a Broker-Dealer in the Exchange Offer of such
Note for one or more Exchange Notes, the date on which such Exchange Notes
are
<PAGE>
3
sold to a purchaser who receives from such Broker-Dealer on or prior to the
date of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (c) the date on which such Notes have been
effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (d) the date on which
such Notes are eligible to be distributed to the public pursuant to Rule
144 under the Securities Act;
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an underwriter
for reoffering to the public.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
(a) TRANSFER RESTRICTED SECURITIES. The securities entitled to
the benefits of this Agreement are the Transfer Restricted Securities.
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is
deemed to be a holder of Transfer Restricted Securities (each, a "Holder")
whenever such Person owns Transfer Restricted Securities.
3. REGISTERED EXCHANGE OFFER.
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with) or one of the events set forth in Section
4(a)(ii) has occurred the Company shall (i) cause to be filed with the
Commission promptly after the Closing Date, but in no event later than 30 days
after the Closing Date, a Registration Statement under the Securities Act
relating to the Exchange Notes and the Exchange Offer, (ii) use its best efforts
to cause such Registration Statement to become effective no later than 90 days
after the Closing Date, (iii) in connection with the foregoing, file (A) all
pre-effective amendments to such Registration Statement as may be necessary in
order to cause such Registration Statement to become effective, (B) if
applicable, a post-effective amendment to such Registration Statement pursuant
to Rule 430A under the Securities Act and (C) cause all necessary filings in
connection with the registration and qualification of the Exchange Notes to be
made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, and (iv) unless the Exchange Offer would not
be permitted by applicable law or Commission policy, the Company will commence
the Exchange Offer and use its best efforts to issue on or prior to 30 business
days after the date on which such Registration Statement was declared effective
by the Commission, Exchange Notes in exchange for all Transfer Restricted
Securities tendered prior thereto in the Exchange Offer. The Exchange Offer
shall be on the appropriate form permitting registration of the Exchange Notes
to be offered in exchange for the Transfer Restricted Securities and to permit
resales of Exchange Notes held by Broker-Dealers as contemplated by Section 3(c)
below. The 30, 90 and 30 business day periods referred to in (i), (ii) and
(iii) of this Section 3(a) shall not include any period during which the Company
is pursuing a Commission ruling pursuant to Section 6(a)(i) below.
(b) The Company shall use its best efforts to cause the Exchange
Offer Registration Statement to be effective continuously and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 20
business days. The Company shall cause the Exchange Offer to comply in all
material respects with all applicable federal and state securities laws. No
securities other than the Exchange Notes shall be included in the Exchange Offer
Registration Statement. The Company shall use its best efforts to cause the
<PAGE>
4
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution"
section contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Notes that are Transfer Restricted
Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed
to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resales of the Exchange Notes received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may
be satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such resales by
Broker-Dealers that the Commission may require in order to permit such resales
pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Exchange Notes held by any such
Broker-Dealer except to the extent required by the Commission as a result of a
change in policy announced after the date of this Agreement.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Exchange Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Securities Act and the policies, rules and regulations of
the Commission as announced from time to time, for a period of 180 days from the
date on which the Exchange Offer Registration Statement is declared effective.
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
180-day period in order to facilitate such resales.
4. SHELF REGISTRATION.
(a) SHELF REGISTRATION. If (i) the Company is not required to
file an Exchange Offer Registration Statement or to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with) or (ii) if any Holder of Transfer Restricted Securities that
is a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) or an institutional "accredited investor" (as defined in Rule
501(A)(1), (2), (3) or (7) under the Securities Act) shall notify the Company at
least 20 business days prior to the Consummation of the Exchange Offer (A) that
such Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Notes acquired
directly from the Company or one of its affiliates, then the Company shall in
lieu of, or in the event of (ii) above, in addition to effecting the
registration of the Exchange Notes pursuant to the Exchange Offer Registration
Statement, use its best efforts to:
(x) cause to be filed a shelf registration statement
pursuant to Rule 415 under the Securities Act, which may be an
amendment to the Exchange Offer
<PAGE>
5
Registration Statement (in either event, the "Shelf Registration
Statement"), on or prior to the earlier to occur of (1) the 30th day after
the date on which the Company determines that it is not required to file
the Exchange Offer Registration Statement or (2) the 30th day after the
date on which the Company receives notice from a Holder of Transfer
Restricted Securities as contemplated by clause (ii) above (such earlier
date being the "Shelf Filing Deadline"), which Shelf Registration Statement
shall provide for resales of all Transfer Restricted Securities the Holders
of which shall have provided the information required pursuant to
Section 4(b) hereof; and
(y) cause such Shelf Registration Statement to be
declared effective by the Commission on or before the 90th day after
the Shelf Filing Deadline.
The Company shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for resales of Notes by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Securities Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period ending on the second anniversary of the Closing Date.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION
WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 20 business days after receipt of a
request therefor, such information as the Company may reasonably request for use
in connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
5. LIQUIDATED DAMAGES
(a) If (a) any of the Registration Statements required by this
Agreement is not filed with the Commission on or prior to the date specified for
such filing in this Agreement, (b) any of such Registration Statements has not
been declared effective by the Commission on or prior to the date specified for
such effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within two business days
by a post-effective amendment to such Registration Statement that cures such
failure and that is itself immediately declared effective (each such event
referred to in clauses (a) through (d), a "Registration Default"), additional
cash interest ("Liquidated Damages") shall accrue to each Holder of the Notes
commencing upon the occurrence of such Registration Default in an amount equal
to $.05 per week per $1,000 principal amount of Notes held by such Holder. The
amount of Liquidated Damages will increase by an additional $.05 per week per
$1,000 principal amount of Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.50 per week per $1,000 principal amount
<PAGE>
6
of Notes. All accrued Liquidated Damages shall be paid to Holders by the
Company in the same manner as interest is made pursuant to the Indenture.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of Liquidated Damages with respect
to such Transfer Restricted Securities will cease.
All obligations of the Company set forth in the preceding paragraph
that have accrued and are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Transfer Restricted Security shall have been satisfied in full.
(b) The Company shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which
Liquidated Damages are required to be paid (an "Event Date"). Liquidated
Damages shall be paid by depositing Liquidated Damages with the Trustee, in
trust, for the benefit of the Holders of the Notes, on or before the applicable
Interest Payment Date (whether or not any payment other than Liquidated Damages
is payable on such Notes), in immediately available funds in sums sufficient to
pay the Liquidated Damages then due to such Holders. Each obligation to pay
Liquidated Damages shall be deemed to accrue from the applicable date of the
occurrence of the Registration Default.
6. REGISTRATION PROCEDURES.
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with
the Exchange Offer, the Company shall comply with all of the provisions of
Section 6(c) below, shall use its best efforts to effect such exchange to permit
the sale of Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and shall comply with all of
the following provisions:
(i) If in the reasonable opinion of counsel to the Company
there is a question as to whether the Exchange Offer is permitted by
applicable law, the Company hereby agrees to seek a no-action letter or
other favorable decision from the Commission allowing the Company to
Consummate an Exchange Offer for such Notes. The Company hereby agrees to
pursue the issuance of such a decision to the Commission staff level but
shall not be required to take commercially unreasonable action to effect a
change of Commission policy. The Company hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange
Offer pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company, prior
to the Consummation thereof, a written representation to the Company (which
may be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an affiliate
of the Company, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate in,
a distribution of the Exchange Notes to be issued in the Exchange Offer and
(C) it is acquiring the Exchange Notes in its ordinary course of business.
In addition, all such Holders of Transfer Restricted Securities shall
otherwise cooperate in the Company's preparations for the Exchange Offer.
Each Holder hereby acknowledges and agrees that any Broker-Dealer and
<PAGE>
7
any such Holder using the Exchange Offer to participate in a distribution
of the securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in MORGAN STANLEY AND CO., INC.
(available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters (including BROWN
& WOOD LLP (available February 7, 1997), and any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection
with a secondary resale transaction and that such a secondary resale
transaction should be covered by an effective registration statement
containing the selling security holder information required by Item 507 or
508, as applicable, of Regulation S-K if the resales are of Exchange Notes
obtained by such Holder in exchange for Notes acquired by such Holder
directly from the Company.
(iii) Prior to the effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter to
the Commission (A) stating that the Company is registering the Exchange
Offer in reliance on the position of the Commission enunciated in EXXON
CAPITAL HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND
CO., INC. (available June 5, 1991), BROWN & WOOD LLP (available February 7,
1997) and, if applicable, any no-action letter obtained pursuant to clause
(i) above and (B) including a representation that the Company has not
entered into any arrangement or understanding with any Person to distribute
the Exchange Notes to be received in the Exchange Offer and that, to the
best of the Company's information and belief, each Holder participating in
the Exchange Offer is acquiring the Exchange Notes in its ordinary course
of business and has no arrangement or understanding with any Person to
participate in the distribution of the Exchange Notes received in the
Exchange Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof, and pursuant
thereto the Company will as expeditiously as possible prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Securities Act, which form shall be available for the
sale of the Transfer Restricted Securities in accordance with the intended
method or methods of distribution thereof.
(c) GENERAL PROVISIONS. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
Notes by Broker-Dealers), the Company shall:
(i) use its best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement, as
applicable; upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B), use
its best efforts to cause such amendment to be declared effective and such
Registration Statement and
<PAGE>
8
the related Prospectus to become usable for their intended purpose(s) as
soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered by
such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Securities Act, and to comply
fully with the applicable provisions of Rules 424 and 430A under the
Securities Act in a timely manner; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) in the case of a Shelf Registration, advise the
underwriter(s), if any, and selling Holders promptly and, if requested by
such Persons, to confirm such advice in writing, (A) when the Prospectus or
any Prospectus supplement or post-effective amendment has been filed, and,
with respect to any Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement under the Securities Act or
of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) in the case of a Shelf Registration, furnish to each of
the selling or exchanging Holders and each of the underwriter(s), if any,
before filing with the Commission, copies of any Registration Statement or
any Prospectus included therein or any amendments or supplements to any
such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review of such Holders
and underwriter(s), if any, for a period of at least five business days,
and the Company will not file any such Registration Statement or Prospectus
or any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which selling Holders of a majority in Liquidation Amount of Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s), if any, shall reasonably object within five business days
after the receipt thereof. A selling Holder or underwriter, if any, shall
be deemed to have reasonably objected to such filing
<PAGE>
9
if such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or
omission;
(v) in the case of a Shelf Registration, promptly prior to
the filing of any document that is to be incorporated by reference into a
Registration Statement or Prospectus, provide copies of such document to
the selling Holders and to the underwriter(s), if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) in the case of a Shelf Registration, make available at
reasonable times for inspection by the selling Holders, any underwriter
participating in any disposition pursuant to such Registration Statement,
and any attorney or accountant retained by such selling Holders or any of
the underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's officers,
directors, managers and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement subsequent to the filing
thereof and prior to its effectiveness;
(vii) in the case of a Shelf Registration, if requested
by any selling Holders or the underwriter(s), if any, promptly incorporate
in any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such selling
Holders and underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriter(s), the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered
by the Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
principal amount of Notes covered thereby or the underwriter(s), if any;
(ix) in the case of a Shelf Registration, furnish to each
selling Holder and each of the underwriter(s), if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(x) in the case of a Shelf Registration, deliver to each
selling Holder and each of the underwriter(s), if any, without charge, as
many copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use of the Prospectus and any amendment
or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto;
<PAGE>
10
(xi) in the case of a Shelf Registration, enter into such
agreements (including an underwriting agreement), and make such
representations and warranties, and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement, all to such extent as may be requested by
any Purchaser or by any Holder of Transfer Restricted Securities or
underwriter in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement; and in connection
with an Underwritten Registration, the Company shall:
(A) upon request, furnish to each selling Holder and
each underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the date of the effectiveness of
the Shelf Registration Statement:
(1) a certificate, dated the date of the
effectiveness of the Shelf Registration Statement, signed by (y)
the Chairman of the Board, its President or a Vice President and
(z) the Chief Financial Officer of the Company, confirming, as of
the date thereof, such matters as such parties may reasonably
request;
(2) an opinion, dated the date of the
effectiveness of the Shelf Registration Statement, of counsel for
the Company, covering such matters as such parties may reasonably
request, and in any event including a statement to the effect
that such counsel has participated in conferences with officers
and other representatives of the Company, representatives of the
independent public accountants for the Company, the Initial
Purchaser's representatives and the Initial Purchaser's counsel
in connection with the preparation of such Registration Statement
and the related Prospectus and have considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified the
accuracy, completeness or fairness of such statements; and that
such counsel advises that, on the basis of the foregoing (relying
as to materiality to a large extent upon facts provided to such
counsel by officers and other representatives of the Company and
without independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that the
applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became
effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that
the Prospectus contained in such Registration Statement as of its
date, contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements,
notes and schedules and other financial and statistical data
included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
<PAGE>
11
(3) a customary comfort letter, dated the date of
the effectiveness of the Shelf Registration Statement, from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings.
(B) set forth in full or incorporated by reference in
the underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence compliance
with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company pursuant to this clause (xi), if any.
If at any time the representations and warranties of the
Company contemplated in clause (A)(1) above cease to be true and
correct, the Company shall so advise the Initial Purchaser and the
underwriter(s), if any, and each selling Holder promptly and, if
requested by such Persons, shall confirm such advice in writing;
(xii) in the case of a Shelf Registration, prior to any
public offering of Transfer Restricted Securities, cooperate with the
selling Holders, the underwriter(s), if any, and their respective counsel
in connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s) may reasonably
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; PROVIDED, HOWEVER,
that the Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration Statement,
in any jurisdiction where it is not now so subject;
(xiii) in the case of a Shelf Registration, shall issue,
upon the request of any Holder of Notes covered by the Shelf Registration
Statement, Exchange Notes in the same amount as the Notes surrendered to
the Company by such Holder in exchange therefor or being sold by such
Holder; such Exchange Notes to be registered in the name of such Holder or
in the name of the purchaser(s) of such Exchange Notes, as the case may be;
in return, the Notes held by such Holder shall be surrendered to the
Company for cancellation;
(xiv) in the case of a Shelf Registration, cooperate
with the selling Holders and the underwriter(s), if any, to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive legends;
and enable such Transfer Restricted Securities to be in such denominations
and registered in such names as the Holders or the underwriter(s), if any,
may request at least two business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof
<PAGE>
12
or the underwriter(s), if any, to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in clause
(xii) above;
(xvi) if any fact or event contemplated by clause
(c)(iii)(D) above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers
of Transfer Restricted Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(xvii) provide CUSIP numbers for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide certificates for the Transfer Restricted Securities;
(xviii) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules
and regulations of the NASD, and use its best efforts to cause such
Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities; PROVIDED, HOWEVER, that
the Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration Statement,
in any jurisdiction where it is not now so subject;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if not
sold to underwriters in such an offering, beginning with the first month of
the Company's first fiscal quarter commencing after the effective date of
the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use its best efforts to cause the Trustee to
execute all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner; and
(xxi) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section
13 and Section 15 of the Exchange Act.
<PAGE>
13
Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Company of the existence
of any fact of the kind described in Section 6(c)(iii)(D) hereof, such
Holder will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing
(the "Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the Prospectus. If so directed by
the Company, each Holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Transfer Restricted Securities
that was current at the time of receipt of such notice. In the event the
Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof or shall have received the Advice.
7. REGISTRATION EXPENSES.
All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made by any Purchaser or Holder with the NASD (and, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel that may be
required by the rules and regulations of the NASD)); (ii) all fees and expenses
of compliance with federal securities and state Blue Sky or securities laws;
(iii) all expenses of printing (including printing certificates for the Exchange
Notes to be issued in the Exchange Offer and printing of Prospectuses), and
associated messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company; (v) all application and filing fees in
connection with listing Notes on a national securities exchange or automated
quotation system; and (vi) all fees and disbursements of independent certified
public accountants of the Company (including the expenses of any special audit
and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) In connection with a Shelf Registration Statement or in
connection with any delivery of a Prospectus contained in an Exchange Offer
Registration Statement by any participating Broker-Dealer or Initial Purchaser,
as applicable, who seeks to sell Exchange Notes, the Company shall indemnify and
hold harmless each Holder of Transfer Restricted Securities included within any
such Shelf Registration Statement and each participating Broker-Dealer or
Initial Purchaser selling Exchange Notes, and each person, if any, who controls
any such person within the meaning of Section 15 of the Securities Act (each, a
"Participant") from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Notes) to which such Participant or controlling person may become subject,
<PAGE>
14
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse each Participant promptly upon
demand for any legal or other expenses reasonably incurred by such Participant
in connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
PROVIDED, HOWEVER, that (i) the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability or action arises out of,
or is based upon, any untrue statement or alleged untrue statement or omission
or alleged omission made in any such Registration Statement or any prospectus
forming part thereof or in any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of any Participant specifically for inclusion therein; and PROVIDED FURTHER that
as to any preliminary Prospectus, the indemnity agreement contained in this
Section 8(a) shall not inure to the benefit of any such Participant or any
controlling person of such Participant on account of any loss, claim, damage,
liability or action arising from the sale of the Exchange Notes to any person by
that Participant if (i) that Participant failed to send or give a copy of the
Prospectus, as the same may be amended or supplemented, to that person within
the time required by the Securities Act and (ii) the untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact in such preliminary Prospectus was corrected in the Prospectus,
unless, in each case, such failure resulted from non-compliance by the Company
with Section 6(c). The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to any Participant or to any
controlling person of that Participant.
(b) Each Participant, severally and not jointly, shall indemnify and
hold harmless the Company, its directors, officers, employees or agents and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer, employees or agents or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
Prospectus, Registration Statement or Prospectus or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of that Participant specifically for inclusion herein,
and shall reimburse the Company and any such director, officer, employees or
agents or controlling person for any legal or other expenses reasonably incurred
by the Company or any such director, officer, employees or agents or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any Participant may otherwise have to the Company or any such director,
officer or controlling person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, PROVIDED FURTHER, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified
<PAGE>
15
party otherwise than under this Section 8. If any such claim or action shall be
brought against an indemnified party, and it shall have notified the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that
the indemnified party shall have the right to employ counsel to represent
jointly the indemnified party and those other Participants and its respective
officers, employees and controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Participants against the indemnifying party under this Section 8 if, in the
reasonable judgment of the indemnified party it is advisable for the indemnified
party and those Participants, officers, employees and controlling persons to be
jointly represented by separate counsel, and in that event the fees and expenses
of such separate counsel shall be paid by the indemnifying party. In no event
shall the indemnifying parties be liable for the fees and expenses of more than
one counsel (in addition to local counsel). Each indemnified party, as a
condition of the indemnity agreements contained in Section 8, shall use its best
efforts to cooperate with the indemnifying party in the defense of any such
action or claim. No indemnifying party shall (i) without the prior written
consent of the indemnified parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding, or (ii) be liable for any settlement
of any such action effected without its written consent (which consent shall not
be unreasonably withheld), but if settled with its written consent or if there
be a final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the Company
on the one hand and the Participants on the other with respect to the statements
or omissions which resulted in such loss, claim, damage or liability, or action
in respect thereof, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Participants, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Participants agree that it would not be just and equitable
if contributions pursuant to this Section 8(d) were to be determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 8(d) shall be
deemed to include, for purposes of this Section 8(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), no Participant shall be required to contribute
any
<PAGE>
16
amount in excess of the amount by which proceeds received by such Participant
from an offering of the Notes exceeds the amount of any damages which such
Participant has otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Participants' obligations to
contribute as provided in this Section 8(d) are several and not joint.
9. RULE 144A.
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Company; PROVIDED, that such
investment bankers and managers must be reasonably satisfactory to the Holders
of a majority in aggregate principal amount of the Transfer Restricted
Securities included in such offering.
12. MISCELLANEOUS.
(a) REMEDIES. The Company agrees that monetary damages
(including Liquidated Damages) would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not on or
after the date of this Agreement enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders
in this Agreement or otherwise conflicts with the provisions hereof. The
Company has not previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The
rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the
Company's securities under any agreement in effect on the date hereof.
(c) ADJUSTMENTS AFFECTING THE NOTES. The Company will not take
any action, or permit any change to occur, with respect to Notes that would
materially and adversely affect
<PAGE>
17
the ability of the Holders to Consummate any Exchange Offer unless such
action or change is required by applicable law.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company
has obtained the written consent of Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does
not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested),
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address of such Holder
maintained by the Registrar under the Indenture; and
(ii) if to the Company:
CAPSTAR HOTEL COMPANY
1010 Wisconsin Avenue, N.W.
Suite 650
Washington, DC 20007
Attention: John Emery, Chief Financial Officer
Facsimile: (202) 965-4445
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Richard S. Borisoff, Esq.
Facsimile: (212) 373-2523
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall
be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
<PAGE>
18
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be affected or
impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement together with the other
transaction documents is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of
the agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes
all prior agreements and understandings between the parties with respect to
such subject matter.
(l) REQUIRED CONSENTS. Whenever the consent or approval of
Holders of a specified percentage of Transfer Restricted Securities is
required hereunder, Transfer Restricted Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CAPSTAR HOTEL COMPANY
By: /s/ John Emery
--------------------------
Name: John Emery
Title: Chief Financial Officer
Accepted as of the date thereof
By LEHMAN BROTHERS INC.
By: /s/ Stephen Mehos
----------------------------
Name: Stephen Mehos
Title: Associate
<PAGE>
Exhibit 10.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of August 14, 1997
Between
CAPSTAR HOTEL COMPANY
and
OAK HILL SECURITIES FUND, L.P.
as Investor
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
1. Definitions........................................................ 1
2. Notes Subject to This Agreement.................................... 3
3. Registered Exchange Offer.......................................... 3
4. Shelf Registration................................................. 4
5. Liquidated Damages................................................. 5
6. Registration Procedures............................................ 6
7. Registration Expenses.............................................. 13
8. Indemnification and Contribution................................... 13
9. Rule 144A.......................................................... 16
10. Participation in Underwritten Registrations........................ 16
11. Selection of Underwriters.......................................... 16
12. Miscellaneous...................................................... 16
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 14, 1997 by and between CapStar Hotel Company, a
Delaware corporation ("the Company") and Oak Hill Securities Fund, L.P. (the
"Investor").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of August 14, 1997, between the Company and the Investor
(the "Purchase Agreement"), which provides for the sale by the Company to the
Investor of $50,000,000 principal amount of the Company's 8 3/4% Senior
Subordinated Notes due 2007 (the "Notes") which Notes shall be general unsecured
obligations of the Company and will be subordinated in right of payment to all
existing and future Senior Debt of the Company and will be effectively
subordinated to all obligations of each subsidiary of the Company as may exist
from time to time, including without limitation trade creditors of such
subsidiaries in the ordinary course. Capitalized terms used but not
specifically defined herein have the respective meanings ascribed thereto in the
Purchase Agreement. As an inducement to the Investor to enter into the Purchase
Agreement and in satisfaction of a condition to your obligations thereunder, the
Company agrees with you, for the benefit of the holders of the Notes (including
the Investor) and the Exchange Notes (collectively, the "Holders"), as follows:
1. DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the following meanings:
BROKER-DEALER: Any broker or dealer registered under the
Exchange Act.
CLOSING DATE: The date on which the Notes were sold.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed
"Consummated" for purposes of this Agreement upon the occurrence of (i) the
filing and effectiveness under the Securities Act of the Exchange Offer
Registration Statement relating to the Exchange Notes to be issued in the
Exchange Offer, (ii) the maintenance of such Registration Statement
continuously effective and the keeping of the Exchange Offer open for a
period not less than the minimum period required pursuant to Section 3(b)
hereof and (iii) the delivery by the Company of the Exchange Notes in the
same aggregate principal amount as the aggregate principal amount of
Transfer Restricted Securities that were validly tendered by Holders
thereof pursuant to the Exchange Offer.
DAMAGES PAYMENT DATE: With respect to the Notes, each
Distribution Date until the earlier of (i) the date on which Liquidated
Damages no longer are payable or (ii) maturity of the Notes.
EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE NOTES: The Notes to be issued pursuant to the Indenture
in the Exchange Offer.
EXCHANGE OFFER: The registration by the Company under the
Securities Act of the Exchange Notes pursuant to a Registration Statement
pursuant to which the Company offers the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such
outstanding Transfer Restricted Securities held by such Holders for
Exchange Notes in an
<PAGE>
2
aggregate amount equal to the aggregate amount of the Transfer Restricted
Securities tendered in such exchange offer by such Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration
Statement relating to the Exchange Offer, including the Prospectus which
forms a part thereof.
EXEMPT RESALES: The transactions in which the Investor proposes
to sell the Notes to certain "qualified institutional buyers," as such term
is defined in Rule 144A under the Securities Act, to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3)
and (7) of Regulation D under the Securities Act ("Accredited
Institutions") and to certain non-U.S. persons.
HOLDERS: As defined in Section 2(b) hereof.
INDENTURE: The Indenture, dated as of August 19, 1997, between
the Company and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture
is amended or supplemented from time to time in accordance with the terms
thereof.
INVESTOR: As defined in the preamble hereto.
NASD: National Association of Securities Dealers, Inc.
PERSON: An individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement,
as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the
Company relating to (a) an offering of Exchange Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, which is filed
pursuant to the provisions of this Agreement, in either case, including the
Prospectus included therein, all amendments and supplements thereto
(including post-effective amendments) and all exhibits and material
incorporated by reference therein.
SECURITIES ACT: The Securities Act of 1933, as amended.
SHELF FILING DEADLINE: As defined in Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb), as amended.
<PAGE>
3
TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to
occur of (a) the date on which such Note has been exchanged by a person
other than a Broker-Dealer for Exchange Notes in the Exchange Offer, (b)
following the exchange by a Broker-Dealer in the Exchange Offer of such
Note for one or more Exchange Notes, the date on which such Exchange Notes
are sold to a purchaser who receives from such Broker-Dealer on or prior to
the date of such sale a copy of the prospectus contained in the Exchange
Offer Registration Statement, (c) the date on which such Notes have been
effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (d) the date on which
such Notes are eligible to be distributed to the public pursuant to Rule
144 under the Securities Act;
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an underwriter
for reoffering to the public.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
(a) TRANSFER RESTRICTED SECURITIES. The securities entitled to
the benefits of this Agreement are the Transfer Restricted Securities.
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is
deemed to be a holder of Transfer Restricted Securities (each, a "Holder")
whenever such Person owns Transfer Restricted Securities.
3. REGISTERED EXCHANGE OFFER.
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with) or one of the events set forth in Section
4(a)(ii) has occurred, the Company shall (i) cause to be filed with the
Commission promptly after the Closing Date, but in no event later than 30
business days after the Closing Date, a Registration Statement under the
Securities Act relating to the Exchange Notes and the Exchange Offer, (ii) use
its best efforts to cause such Registration Statement to become effective no
later than 90 business days after the Closing Date, (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Registration Statement
as may be necessary in order to cause such Registration Statement to become
effective, (B) if applicable, file a post-effective amendment to such
Registration Statement pursuant to Rule 430A under the Securities Act and (C)
cause all necessary filings in connection with the registration and
qualification of the Exchange Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Company will commence the Exchange Offer and use its best
efforts to issue on or prior to 30 business days after the date on which such
Registration Statement was declared effective by the Commission, Exchange Notes
in exchange for all Transfer Restricted Securities tendered prior thereto in the
Exchange Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Exchange Notes to be offered in exchange for the Transfer
Restricted Securities and to permit resales of Exchange Notes held by
Broker-Dealers as contemplated by Section 3(c) below. The 30, 90 and 30
business day periods referred to in (i), (ii) and (iv) of this Section 3(a)
shall not include any period during which the Company is pursuing a Commission
ruling pursuant to Section 6(a)(i) below.
(b) The Company shall use its best efforts to cause the Exchange
Offer Registration Statement to be effective continuously and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to
<PAGE>
4
Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no event shall such
period be less than 20 business days. The Company shall cause the Exchange
Offer to comply in all material respects with all applicable federal and state
securities laws. No securities other than the Exchange Notes shall be included
in the Exchange Offer Registration Statement. The Company shall use its best
efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution"
section contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Notes that are Transfer Restricted
Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed
to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resales of the Exchange Notes received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may
be satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such resales by
Broker-Dealers that the Commission may require in order to permit such resales
pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Exchange Notes held by any such
Broker-Dealer except to the extent required by the Commission as a result of a
change in policy announced after the date of this Agreement.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Exchange Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Securities Act and the policies, rules and regulations of
the Commission as announced from time to time, for a period of 180 days from the
date on which the Exchange Offer Registration Statement is declared effective.
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
180-day period in order to facilitate such resales.
4. SHELF REGISTRATION.
(a) SHELF REGISTRATION. If (i) the Company is not required to
file an Exchange Offer Registration Statement or to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with) or (ii) if any Holder of Transfer Restricted Securities that
is a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) or an institutional "accredited investor" (as defined in Rule
501(A)(1), (2), (3) or (7) under the Securities Act) shall notify the Company at
least 20 business days prior to the Consummation of the Exchange Offer (A) that
such Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Notes acquired
directly from the Company or one of its affiliates, then the Company shall in
<PAGE>
5
lieu of, or in the event of (ii) above, in addition to effecting the
registration of the Exchange Notes pursuant to the Exchange Offer Registration
Statement, use its best efforts to:
(x) cause to be filed a shelf registration statement
pursuant to Rule 415 under the Securities Act, which may be an
amendment to the Exchange Offer Registration Statement (in either
event, the "Shelf Registration Statement"), on or prior to the earlier
to occur of (1) the 30th day after the date on which the Company
determines that it is not required to file the Exchange Offer
Registration Statement or (2) the 30th day after the date on which the
Company receives notice from a Holder of Transfer Restricted
Securities as contemplated by clause (ii) above (such earlier date
being the "Shelf Filing Deadline"), which Shelf Registration Statement
shall provide for resales of all Transfer Restricted Securities the
Holders of which shall have provided the information required pursuant
to Section 4(b) hereof; and
(y) cause such Shelf Registration Statement to be
declared effective by the Commission on or before the 90th day after
the Shelf Filing Deadline.
The Company shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for resales of Notes by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Securities Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period ending on the second anniversary of the Closing Date.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION
WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 20 business days after receipt of a
request therefor, such information as the Company may reasonably request for use
in connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
5. LIQUIDATED DAMAGES
(a) If (a) any of the Registration Statements required by this
Agreement is not filed with the Commission on or prior to the date specified for
such filing in this Agreement, (b) any of such Registration Statements has not
been declared effective by the Commission on or prior to the date specified for
such effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within two business days
by a post-effective amendment to such Registration Statement that cures such
failure and that is itself immediately declared effective (each such event
referred to in clauses (a) through (d), a "Registration Default"), additional
cash interest
<PAGE>
6
("Liquidated Damages") shall accrue to each Holder of the Notes commencing upon
the occurrence of such Registration Default in an amount equal to $.05 per week
per $1,000 principal amount of Notes held by such Holder. The amount of
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Notes with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.50 per week per $1,000 principal amount of Notes. All accrued
Liquidated Damages shall be paid to Holders by the Company in the same manner as
interest is made pursuant to the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of Liquidated Damages with respect to such Transfer Restricted
Securities will cease.
All obligations of the Company set forth in the preceding paragraph
that have accrued and are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Transfer Restricted Security shall have been satisfied in full.
(b) The Company shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which
Liquidated Damages are required to be paid (an "Event Date"). Liquidated
Damages shall be paid by depositing Liquidated Damages with the Trustee, in
trust, for the benefit of the Holders of the Notes, on or before the applicable
interest payment date (whether or not any payment other than Liquidated Damages
is payable on such Notes), in immediately available funds in sums sufficient to
pay the Liquidated Damages then due to such Holders. Each obligation to pay
Liquidated Damages shall be deemed to accrue from the applicable date of the
occurrence of the Registration Default.
6. REGISTRATION PROCEDURES.
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with
the Exchange Offer, the Company shall comply with all of the provisions of
Section 6(c) below, shall use its best efforts to effect such exchange to permit
the sale of Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and shall comply with all of
the following provisions:
(i) If in the reasonable opinion of counsel to the Company
there is a question as to whether the Exchange Offer is permitted by
applicable law, the Company hereby agrees to seek a no-action letter or
other favorable decision from the Commission allowing the Company to
Consummate an Exchange Offer for such Notes. The Company hereby agrees to
pursue the issuance of such a decision to the Commission staff level but
shall not be required to take commercially unreasonable action to effect a
change of Commission policy. The Company hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange
Offer pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company, prior
to the Consummation thereof, a written representation to the Company (which
may be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an affiliate
of the Company, (B) it
<PAGE>
7
is not engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of the
Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring
the Exchange Notes in its ordinary course of business. In addition, all
such Holders of Transfer Restricted Securities shall otherwise cooperate in
the Company's preparations for the Exchange Offer. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any such Holder using
the Exchange Offer to participate in a distribution of the securities to be
acquired in the Exchange Offer could not under Commission policy as in
effect on the date of this Agreement rely on the position of the Commission
enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and
EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as interpreted
in the Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including BROWN & WOOD LLP (available February
7, 1997), and any no-action letter obtained pursuant to clause (i) above).
(iii) Prior to the effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter to
the Commission (A) stating that the Company is registering the Exchange
Offer in reliance on the position of the Commission enunciated in EXXON
CAPITAL HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND
CO., INC. (available June 5, 1991), BROWN & WOOD LLP (available February 7,
1997) and, if applicable, any no-action letter obtained pursuant to clause
(i) above and (B) including a representation that the Company has not
entered into any arrangement or understanding with any Person to distribute
the Exchange Notes to be received in the Exchange Offer and that, to the
best of the Company's information and belief, each Holder participating in
the Exchange Offer is acquiring the Exchange Notes in its ordinary course
of business and has no arrangement or understanding with any Person to
participate in the distribution of the Exchange Notes received in the
Exchange Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof, and pursuant
thereto the Company will as expeditiously as possible prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Securities Act, which form shall be available for the
sale of the Transfer Restricted Securities in accordance with the intended
method or methods of distribution thereof.
(c) GENERAL PROVISIONS. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
Notes by Broker-Dealers), the Company shall:
(i) use its best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement, as
applicable; upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B), use
its best efforts to cause such amendment to be declared effective and such
Registration Statement
<PAGE>
8
and the related Prospectus to become usable for their intended purpose(s)
as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered by
such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Securities Act, and to comply
fully with the applicable provisions of Rules 424 and 430A under the
Securities Act in a timely manner; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) in the case of a Shelf Registration, advise the
underwriter(s), if any, and selling Holders promptly and, if requested by
such Persons, to confirm such advice in writing, (A) when the Prospectus or
any Prospectus supplement or post-effective amendment has been filed, and,
with respect to any Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement under the Securities Act or
of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) in the case of a Shelf Registration, furnish to each of
the selling or exchanging Holders and each of the underwriter(s), if any,
before filing with the Commission, copies of any Registration Statement or
any Prospectus included therein or any amendments or supplements to any
such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review of such Holders
and underwriter(s), if any, for a period of at least five business days,
and the Company will not file any such Registration Statement or Prospectus
or any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which selling Holders of a majority in Liquidation Amount of Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s), if any, shall reasonably object within five business days
after the receipt thereof. A selling Holder or underwriter, if any, shall
be deemed to have reasonably objected to such
<PAGE>
9
filing if such Registration Statement, amendment, Prospectus or supplement,
as applicable, as proposed to be filed, contains a material misstatement or
omission;
(v) in the case of a Shelf Registration, promptly prior to
the filing of any document that is to be incorporated by reference into a
Registration Statement or Prospectus, provide copies of such document to
the selling Holders and to the underwriter(s), if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) in the case of a Shelf Registration, make available at
reasonable times for inspection by the selling Holders, any underwriter
participating in any disposition pursuant to such Registration Statement,
and any attorney or accountant retained by such selling Holders or any of
the underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's officers,
directors, managers and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement subsequent to the filing
thereof and prior to its effectiveness;
(vii) in the case of a Shelf Registration, if requested
by any selling Holders or the underwriter(s), if any, promptly incorporate
in any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such selling
Holders and underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriter(s), the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered
by the Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
principal amount of Notes covered thereby or the underwriter(s), if any;
(ix) in the case of a Shelf Registration, furnish to each
selling Holder and each of the underwriter(s), if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(x) in the case of a Shelf Registration, deliver to each
selling Holder and each of the underwriter(s), if any, without charge, as
many copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use of the Prospectus and any amendment
or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto;
<PAGE>
10
(xi) in the case of a Shelf Registration, enter into such
agreements (including an underwriting agreement), and make such
representations and warranties, and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement, all to such extent as may be requested by
any Purchaser or by any Holder of Transfer Restricted Securities or
underwriter in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement; and in connection
with an Underwritten Registration, the Company shall:
(A) upon request, furnish to each selling Holder and
each underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the date of the effectiveness of
the Shelf Registration Statement:
(1) a certificate, dated the date of the
effectiveness of the Shelf Registration Statement, signed by (y)
the Chairman of the Board, its President or a Vice President and
(z) the Chief Financial Officer of the Company, confirming, as of
the date thereof, such matters as such parties may reasonably
request;
(2) an opinion, dated the date of the
effectiveness of the Shelf Registration Statement, of counsel for
the Company, covering such matters as such parties may reasonably
request, and in any event including a statement to the effect
that such counsel has participated in conferences with officers
and other representatives of the Company, representatives of the
independent public accountants for the Company and the Investor
(if it is a Holder) in connection with the preparation of such
Registration Statement and the related Prospectus and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the basis
of the foregoing (relying as to materiality to a large extent
upon facts provided to such counsel by officers and other
representatives of the Company and without independent check or
verification), no facts came to such counsel's attention that
caused such counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or any
post-effective amendment thereto became effective, contained an
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date,
contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements,
notes and schedules and other financial and statistical data
included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
<PAGE>
11
(3) a customary comfort letter, dated the date of
the effectiveness of the Shelf Registration Statement, from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings.
(B) set forth in full or incorporated by reference in
the underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence compliance
with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company pursuant to this clause (xi), if any.
If at any time the representations and warranties of the
Company contemplated in clause (A)(1) above cease to be true and
correct, the Company shall so advise each selling Holder and the
underwriter(s), if any, promptly and, if requested by such Persons,
shall confirm such advice in writing;
(xii) in the case of a Shelf Registration, prior to any
public offering of Transfer Restricted Securities, cooperate with the
selling Holders, the underwriter(s), if any, and their respective counsel
in connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s) may reasonably
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; PROVIDED, HOWEVER,
that the Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration Statement,
in any jurisdiction where it is not now so subject;
(xiii) in the case of a Shelf Registration, shall issue,
upon the request of any Holder of Notes covered by the Shelf Registration
Statement, Exchange Notes in the same amount as the Notes surrendered to
the Company by such Holder in exchange therefor or being sold by such
Holder; such Exchange Notes to be registered in the name of such Holder or
in the name of the purchaser(s) of such Exchange Notes, as the case may be;
in return, the Notes held by such Holder shall be surrendered to the
Company for cancellation;
(xiv) in the case of a Shelf Registration, cooperate
with the selling Holders and the underwriter(s), if any, to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive legends;
and enable such Transfer Restricted Securities to be in such denominations
and registered in such names as the Holders or the underwriter(s), if any,
may request at least two business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof
<PAGE>
12
or the underwriter(s), if any, to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in clause
(xii) above;
(xvi) if any fact or event contemplated by clause
(c)(iii)(D) above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers
of Transfer Restricted Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(xvii) provide CUSIP numbers for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide certificates for the Transfer Restricted Securities;
(xviii) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules
and regulations of the NASD, and use its best efforts to cause such
Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities; PROVIDED, HOWEVER, that
the Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration Statement,
in any jurisdiction where it is not now so subject;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if not
sold to underwriters in such an offering, beginning with the first month of
the Company's first fiscal quarter commencing after the effective date of
the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use its best efforts to cause the Trustee to
execute all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner; and
(xxi) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section
13 and Section 15 of the Exchange Act.
<PAGE>
13
Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Company of the existence
of any fact of the kind described in Section 6(c)(iii)(D) hereof, such
Holder will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing
(the "Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the Prospectus. If so directed by
the Company, each Holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Transfer Restricted Securities
that was current at the time of receipt of such notice. In the event the
Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof or shall have received the Advice.
7. REGISTRATION EXPENSES.
All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made by any Purchaser or Holder with the NASD (and, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel that may be
required by the rules and regulations of the NASD)); (ii) all fees and expenses
of compliance with federal securities and state Blue Sky or securities laws;
(iii) all expenses of printing (including printing certificates for the Exchange
Notes to be issued in the Exchange Offer and printing of Prospectuses), and
associated messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company; (v) all application and filing fees in
connection with listing Notes on a national securities exchange or automated
quotation system; and (vi) all fees and disbursements of independent certified
public accountants of the Company (including the expenses of any special audit
and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties), the expenses of any
annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) In connection with a Shelf Registration Statement or in
connection with any delivery of a Prospectus contained in an Exchange Offer
Registration Statement by any participating Broker-Dealer or Holder, as
applicable, who seeks to sell Exchange Notes, the Company shall indemnify and
hold harmless each Holder of Transfer Restricted Securities included within any
such Shelf Registration Statement and each participating Broker-Dealer or Holder
selling Exchange Notes, and each person, if any, who controls any such person
within the meaning of Section 15 of the Securities Act (each, a "Participant")
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating
<PAGE>
14
to purchases and sales of Notes) to which such Participant or controlling person
may become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in any
such Registration Statement or any prospectus forming part thereof or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse each Participant
promptly upon demand for any legal or other expenses reasonably incurred by such
Participant in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred; PROVIDED, HOWEVER, that (i) the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or action
arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any such Registration
Statement or any prospectus forming part thereof or in any such amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Participant specifically for inclusion
therein; and PROVIDED FURTHER that as to any preliminary Prospectus, the
indemnity agreement contained in this Section 8(a) shall not inure to the
benefit of any such Participant or any controlling person of such Participant on
account of any loss, claim, damage, liability or action arising from the sale of
the Exchange Notes to any person by that Participant if (i) that Participant
failed to send or give a copy of the Prospectus, as the same may be amended or
supplemented, to that person within the time required by the Securities Act and
(ii) the untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact in such preliminary
Prospectus was corrected in the Prospectus, unless, in each case, such failure
resulted from non-compliance by the Company with Section 6(c). The foregoing
indemnity agreement is in addition to any liability which the Company may
otherwise have to any Participant or to any controlling person of that
Participant.
(b) Each Participant, severally and not jointly, shall indemnify and
hold harmless the Company, its directors, officers, employees or agents and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer, employees or agents or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
Prospectus, Registration Statement or Prospectus or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of that Participant specifically for inclusion herein,
and shall reimburse the Company and any such director, officer, employees or
agents or controlling person for any legal or other expenses reasonably incurred
by the Company or any such director, officer, employees or agents or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any Participant may otherwise have to the Company or any such director,
officer or controlling person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except
<PAGE>
15
to the extent it has been materially prejudiced by such failure and, PROVIDED
FURTHER, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have to an indemnified party otherwise than
under this Section 8. If any such claim or action shall be brought against an
indemnified party, and it shall have notified the indemnifying party thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; PROVIDED, HOWEVER, that the indemnified party shall have
the right to employ counsel to represent jointly the indemnified party and those
other Participants and its respective officers, employees and controlling
persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Participants against the indemnifying party
under this Section 8 if, in the reasonable judgment of the indemnified party it
is advisable for the indemnified party and those Participants, officers,
employees and controlling persons to be jointly represented by separate counsel,
and in that event the fees and expenses of such separate counsel shall be paid
by the indemnifying party. In no event shall the indemnifying parties be liable
for the fees and expenses of more than one counsel (in addition to local
counsel). Each indemnified party, as a condition of the indemnity agreements
contained in Section 8, shall use its best efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall (i) without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding,
or (ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the Company
on the one hand and the Participants on the other with respect to the statements
or omissions which resulted in such loss, claim, damage or liability, or action
in respect thereof, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Participants, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Participants agree that it would not be just and equitable
if contributions pursuant to this Section 8(d) were to be determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 8(d) shall be
deemed to include, for purposes of this Section 8(d), any legal or other
expenses reasonably
<PAGE>
16
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section 8(d),
no Participant shall be required to contribute any amount in excess of the
amount by which proceeds received by such Participant from an offering of the
Notes exceeds the amount of any damages which such Participant has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Participants' obligations to contribute as
provided in this Section 8(d) are several and not joint.
9. RULE 144A.
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Company; PROVIDED, that such
investment bankers and managers must be reasonably satisfactory to the Holders
of a majority in aggregate principal amount of the Transfer Restricted
Securities included in such offering.
12. MISCELLANEOUS.
(a) REMEDIES. The Company agrees that monetary damages
(including Liquidated Damages) would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not on or
after the date of this Agreement enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders
in this Agreement or otherwise conflicts with the provisions hereof. The
Company has not previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The
rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the
Company's securities under any agreement in effect on the date hereof.
<PAGE>
17
(c) ADJUSTMENTS AFFECTING THE NOTES. The Company will not take
any action, or permit any change to occur, with respect to Notes that would
materially and adversely affect the ability of the Holders to Consummate
any Exchange Offer unless such action or change is required by applicable
law.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company
has obtained the written consent of Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does
not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested),
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address of such Holder
maintained by the Registrar under the Indenture; and
(ii) if to the Company:
CapStar Hotel Company
1010 Wisconsin Avenue, N.W.
Suite 650
Washington, DC 20007
Attention: John Emery, Chief Financial Officer
Facsimile: (202) 965-4445
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Richard S. Borisoff, Esq.
Facsimile: (212) 373-2523
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
<PAGE>
18
Copies of all such notices, demands or other communications shall
be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be affected or
impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement together with the other
transaction documents is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of
the agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes
all prior agreements and understandings between the parties with respect to
such subject matter.
(l) REQUIRED CONSENTS. Whenever the consent or approval of
Holders of a specified percentage of Transfer Restricted Securities is
required hereunder, Transfer Restricted Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CAPSTAR HOTEL COMPANY
By: /s/ John Emery
------------------------------
Name: John Emery
Title: Chief Financial Officer
Accepted as of the date thereof
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar, L.P.,
its general partner
By: Oak Hill Securities MGP, Inc.,
its general partner
By: /s/ John R. Monsky
----------------------------------
Name: John R. Monsky
Title: Vice President
<PAGE>
Exhibit 10.9
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT, made as of May 28, 1997 by and between
CAPSTAR HOTEL COMPANY, a Delaware corporation (the "Company"), and JOHN EMERY
(the "Executive"), an individual residing at 7308 Calvert Street, Annandale, VA
22003.
The Company desires to employ the Executive in the capacity of Chief
Financial Officer, and the Executive desires to be so employed, on the terms and
subject to the conditions set forth in this agreement (the "Agreement");
Now, therefore, in consideration of the mutual covenants set forth
herein and other good and valuable consideration the parties hereto hereby agree
as follows:
1. EMPLOYMENT; TERM. The Company hereby employs the Executive, and
the Executive agrees to be employed by the Company, upon the terms and subject
to the conditions set forth herein, for a term commencing on the date of this
Agreement (the "Commencement Date") and terminating on December 31, 1999 unless
terminated earlier in accordance with Section 4 of this Agreement (the "Term").
2. POSITION; CONDUCT.
(a) During the Term, the Executive will hold the title and office of,
and serve in the position of, Chief Financial Officer. The Executive shall
report to the executive officers of the Company and shall perform such specific
duties and services (including service as an officer, director or equivalent
position of any direct or indirect subsidiary without additional compensation)
as they shall reasonably request consistent with the Executive's position.
(b) During the Term, the Executive agrees to devote his full business
time and attention to the business and affairs of the Company and its
subsidiaries and to faithfully and diligently perform, to the best of his
ability, all of his duties and responsibilities hereunder. Nothing in this
Agreement shall preclude the Executive from devoting reasonable time and
attention to (i) serving, with the approval of the Board of Directors of the
Company, as a director, trustee or member of any committee of any organization,
(ii) engaging in charitable and community activities and (iii) managing his
personal investments and affairs; provided that such activities do not involve
any material conflict of interest with the interests of the Company or the
Subsidiary or, individually or collectively, interfere materially with the
performance by the Executive of his duties and responsibilities under this
Agreement; and provided, further, that nothing in this Agreement shall prohibit
the Executive from engaging in those activities described on Schedule A annexed
hereto (the "Exempted
<PAGE>
Activities")
(c) During the Term, the Company shall provide the Executive with
executive office space, and administrative and secretarial assistance and other
support services consistent with his position and with his duties and
responsibilities hereunder.
3. SALARY; ADDITIONAL COMPENSATION; PERQUISITES AND BENEFITS.
(a) During the Term, the Company will pay the Executive a base salary
at an annual rate of not less than $200,000 per annum, subject to annual review
by the Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee") and in the discretion of such Committee, increased
from time to time. Once increased, such base salary may not be decreased. Such
salary shall be paid in periodic installments in accordance with the Company's
standard practice, but not less frequently than semi-monthly.
(b) For each fiscal year during the Term, the Executive will be
eligible to receive a bonus under Company's Management Bonus Plan or such other
plan adopted from time to time. The award and amount of such bonus shall be
based upon the Compensation Committee's determination of actual performance as
measured against goals which goals shall give the Executive the opportunity to
earn a bonus of up to 100% of his base salary.
(c) During the Term, the Executive will participate in all plans now
existing or hereafter adopted by the Company or the Subsidiary for the
management employees or the general benefit of the their employees, such as
bonuses, stock option or other incentive compensation plans, life and health
insurance plans, or other insurance plans and benefits on the same basis and
subject to the same qualifications as other senior executive officers. To the
extent permitted by law, the Executive shall be given credit for his years of
service to any predecessor entity of the Company in determining all waiting
periods and vesting periods under such plans.
(d) The Executive shall be eligible for stock option grants from time
to time pursuant to the Company's 1996 Equity Incentive Plan in accordance with
the terms thereof. The Committee designated in accordance with such plan has
granted to the Executive, effective on the Commencement Date, options to
purchase 50,000 shares of the common stock of the Company at an exercise price
equal to the closing price of such common stock in New York
2
<PAGE>
Stock Exchange trading on the Commencement Date. Subject to the terms of
Section 6(f) of this Agreement as to the acceleration of vesting of stock
options, the such options shall vest as follows: Such options shall vest as
follows:
First anniversary of the Commencement Date.. 33-1/3% vested
Second anniversary of the Commencement Date. 66-2/3% vested
Third Anniversary of the Commencement Date.. 100% vested
Such options shall be exercisable, subject to vesting, for ten years from the
date of grant and in all other respects shall be subject to the terms and
conditions of the 1996 Equity Incentive Plan.
(e) The Company will reimburse the Executive, in accordance with its
standard policies from time to time in effect, for all out-of-pocket business
expenses as may be incurred by the Executive in the performance of his duties
under this Agreement.
(f) The Executive shall be entitled to vacation time to be credited
and taken in accordance with the Company's policy from time to time in effect
for senior executives.
(g) The Executive shall be granted a car allowance of up to $700.00
per month for the lease of an automobile to be leased by the Company for the use
of the Executive.
4. TERMINATION.
(a) The Term will terminate upon the Executive's death.
(b) Upon written notice, the Company may terminate this Agreement for
Cause. As used herein, the term "Cause" means:
(i) the Executive's inability to perform his duties and responsibilities
under this Agreement for a period of more than 120 days, whether or not
continuous, during any 365-day period, due to physical or mental incapacity
or impairment;
(ii) if the Executive commits acts of willful malfeasance or gross
negligence in connection with his employment hereunder;
(iii) the Executive's conviction of (or a plea of NOLO CONTENDERE to) an
offense which is a felony in the jurisdiction involved;
(iv) if, after written notice thereof, the Executive repeatedly fails or
neglects to perform any material duties of his employment hereunder; or
(v) if the Executive breaches any other specific provision of this
Agreement and, if such breach is curable, he fails
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<PAGE>
to cure same within thirty (30) days of written notice thereof.
(c) If the Executive's employment is terminated for Cause, or if he
dies, the Company will pay to the Executive an aggregate amount equal to the
Executive's accrued and unpaid base salary through the date of such termination,
additional salary payments in lieu of the Executive's accrued and unused
vacation time, unreimbursed business expenses, unreimbursed medical, dental and
other employee benefit expenses in accordance with the applicable plans, and any
and all other benefits provided under the terms of applicable employee plans to
terminated employees (the "Standard Termination Payments").
(d) Notwithstanding anything to the contrary contained herein, upon
written notice to the Executive, the Company may terminate his employment
without Cause at any time. In the event of such termination, the Company will
have no further obligation to the Executive or any other person in respect of
his employment other than the lump sum payment of (i) the Standard Termination
Payments through the date of such termination and (ii) an amount equal to the
greater of the Executive's base salary for the remainder of the Term or for one
year, less any amounts owed by the Executive to the Company of its Affiliates
(provided, that loans made to the Executive by the Company or its Affiliates or
predecessor entities relating to the purchase by the Executive of an equity
interest in such entities shall remain due in accordance with their terms). In
addition, immediately upon the effectiveness of such termination, (Y) all
options granted to the Executive shall immediately vest and be exercisable and
(Z) all restrictions on restricted stock issued to the Executive shall be
terminated.
(e) If the Executive so notifies the Company within thirty (30) days
after the occurrence of any of the following events, the Executive may terminate
his employment by the Company hereunder:
(i) a material reduction in the authority of the Executive or a material
adverse change in the Executive's working conditions if, after such
reduction or change, the Executive's authority or working conditions are
not commensurate with those of executives holding chief financial officer
positions at companies comparable to the Company in the lodging industry (a
"Material Adverse Change");
(ii) the Executive is required to relocate from the Washington, D.C.
metropolitan area without his consent; or
(iii) a Change of Control occurs and the Executive reasonably believes
that a Material Adverse Change will occur as a result of such Change of
Control.
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As used herein (X) the term "Change in Control" means the occurrence of any
events such that any "person", as such term is used in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, other than Acadia Partners L.P.
and its Affiliates and the Company's management becomes a "beneficial owner", as
such term is used in Rule 13d-3 promulgated under such Act, of 35% or more of
the Voting Stock of the Company; provided that no Change of Control shall be
deemed to have occurred so long as the Executive continues to report to Paul W.
Whetsell; (Y) an Affiliate of a person or other entity means a person or other
entity that directly or indirectly controls, is controlled by or is under common
control with the person or other entity specified (including without limitation
any investment entity managed by the person or other entity specified or a
person or entity that directly or indirectly controls, is controlled by or under
common control with the person or other entity specified) and (Z) the term
"Voting Stock" means capital stock of any class or classes having general voting
power under ordinary circumstances, in the absence of contingencies, to elect
the directors or their equivalent.
If the Executive's employment is terminated pursuant to this Section
4(e), the Company will have no further obligation to the Executive or any other
person in respect of his employment other than payment of (i) the Standard
Termination Payments through the date of such termination and (ii) the
Executive's base salary for two years following the effective date of such
termination; provided, that such payments under clause (ii) above shall be
reduced by any amounts earned by the Executive from the rendering of personal
services in any capacity during such two year period. In addition, immediately
upon the effectiveness of such termination, (Y) all options granted to the
Executive shall immediately vest and be exercisable and (Z) all Company imposed
restrictions on restricted stock issued to the Executive shall be terminated.
5. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the Company and its subsidiaries
or affiliated ventures ("Company Affiliates") own and have developed and
compile, and will in the future own, develop and compile certain Confidential
Information and that during the course of his rendering services hereunder
Confidential Information will be disclosed to the Executive by the Company
Affiliates. The Executive hereby agrees that, during the Term and thereafter,
he will not use or disclose, furnish or make accessible to anyone, directly or
indirectly, any Confidential Information of the Company Affiliates.
(b) As used herein, the term "Confidential Information" means any
trade secrets, confidential or proprietary information, or other knowledge,
know-how, information, documents or materials, owned, developed or possessed by
a Company Affiliate pertaining to
5
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its businesses the confidentiality of which such company takes reasonable
measures to protect, including, but not limited to, trade secrets, techniques,
know-how (including designs, plans, procedures, processes and research records),
software, computer programs, innovations, discoveries, improvements, research,
developments, test results, reports, specifications, data, formats, marketing
data and business plans and strategies, agreements and other forms of documents,
expansion plans, budgets, projections, and salary, staffing and employment
information. Notwithstanding the foregoing, Confidential Information shall not
in any event include information which (i) was generally known or generally
available to the public prior to its disclosure to the Executive, (ii) becomes
generally known or generally available to the public subsequent its disclosure
to the Executive through no wrongful act of the Executive, (iii) is or becomes
available to the Executive from sources other than the Company Affiliates which
sources are not known to the Executive to be under any duty of confidentiality
with respect thereto or (iv) the Executive is required to disclose by applicable
law or regulation or by order of any court or federal, state or local regulatory
or administrative body (provided that the Executive provides the Company with
prior notice of the contemplated disclosure and reasonably cooperates with the
Company, at the Company's sole expense, in seeking a protective order or other
appropriate protection of such information).
6. RESTRICTIVE COVENANTS. (a) The Executive agrees that for a
period of twelve months after the termination of his employment with the Company
the Executive will not, directly or indirectly, as a principal, agent or
otherwise, engage or participate in, or as an employee, consultant or advisor
render services or advise with respect to any transaction in which the Company
was actively engaged or with respect to which the Company had given active
consideration during the twelve month period immediately prior to the
termination of the Employee's employment with the Company.
(b) The Executive agrees that during his employment hereunder and for
a period of twenty-four months thereafter he will not solicit, raid, entice or
induce any person that then is or at any time during the twelve-month period
prior to the end of the Term was an employee of a Company Affiliate (other than
a person whose employment with such Company Affiliate has been terminated by
such Company Affiliate), to become employed by any person, firm or corporation.
7. SPECIFIC PERFORMANCE.
(a) The Executive acknowledges that the services to be rendered by
him hereunder are of a special, unique, extraordinary and personal character and
that the Company Affiliates would sustain irreparable harm in the event of a
violation by the Executive of Section 5 or 6 hereof. Therefore, in addition to
any
6
<PAGE>
other remedies available, the Company shall be entitled to specific enforcement
and/or an injunction from any court of competent jurisdiction restraining the
Executive from committing or continuing any such violation of this Agreement
without proving actual damages or posting a bond or other security. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of damages.
(b) If any of the restrictions on activities of the Executive
contained in Sections 5 or 6 shall for any reason be held by a court of
competent jurisdiction to be excessively broad as to duration, geographical
scope or activity of subject, such restrictions shall be construed so as
thereafter to be limited or reduced to be enforceable to the maximum extent
compatible with the applicable law as it shall then appear; it being understood
that by the execution of this Agreement the parties hereto regard such
restrictions as reasonable and compatible with their respective rights.
8. WITHHOLDING. The parties agree that all payments to be made to
the Executive by the Company pursuant to the Agreement shall be subject to all
applicable withholding obligations of the Company.
9. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed given and received when delivered personally, four
days after being mailed if sent by registered or certified mail, postage
prepaid, or by one day after delivery if sent by air courier (for next-day
delivery) with evidence of receipt thereof or by facsimile with receipt
confirmed by the addressee. Such notices shall be addressed respectively:
If to the Executive, to:
Mr. John Emery
7308 Calvert Street
Annandale, VA 22003
If to the Company or any Company Affiliate, to:
CapStar Hotel Company
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
Attention: Chief Executive Officer
or to any other address of which such party may have given notice to the other
parties in the manner specified above.
10. MISCELLANEOUS.
(a) This Agreement is a personal contract calling for
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the provision of unique services by the Executive, and the Executive's rights
and obligations hereunder may not be sold, transferred, assigned, pledged or
hypothecated by the Executive. The rights and obligations of the Company
hereunder will be binding upon and run in favor of their respective successors
and assigns.
(b) This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware.
(c) Any controversy arising out of or relating to this Agreement or
any breach hereof shall be settled by arbitration in Washington, D.C. by a
single neutral arbitrator who shall be a retired federal or state court judge in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and judgment upon any award rendered may be entered in any court
having jurisdiction thereof, except in the event of a controversy relating to
any alleged violation by the Executive of Section 5 or 6 hereof, the Company
shall be entitled to seek injunctive relief from a court of competent
jurisdiction without the requirement to seek arbitration.
(d) The headings of the various sections of this Agreement are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
(e) The provisions of this Agreement which by their terms call for
performance subsequent to the expiration or termination of the Term shall
survive such expiration or termination.
(f) The Company shall reimburse the Executive for all costs incurred
by the Executive in any proceeding for the successful enforcement of the terms
of this Agreement, including without limitation all costs of investigation and
reasonable attorneys fees and expenses.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EXECUTIVE:
---------------------------
John Emery
COMPANY:
CAPSTAR HOTEL COMPANY
By:
------------------------
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SCHEDULE A
The Exempted Activities shall mean acting as an officer of CapStar Hotels,
Inc. and Latham Hotels, Inc. and their respective subsidiaries in connection
with their general affairs and in connection with the ownership, management,
financing and sale of their interests (and the interests of entities in which
they are general partners or principals) in the following hotels.
1. Inn at Morro Bay, Morro Bay, California
2. Residence Inn, Orange California
3. Sheraton Inn Denver Airport, Denver, Colorado
4. Ramada Inn, Slidell, Louisiana
5. Cranwell Resort, Lenox, Massachusetts
6. Radisson Inn North Country, West Lebanon, New Hampshire
7. Ramada Hotel LaGuardia Airport, Queens, New York
8. Quality Inn Shenandoah Valley, New Market, Virginia
9
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EXHIBIT 10.20
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LOAN AGREEMENT
Dated as of August 12, 1997
Between
BA PARKWAY ASSOCIATES II, L.P.
as Borrower
and
LEHMAN BROTHERS HOLDINGS INC.,
DOING BUSINESS AS LEHMAN CAPITAL,
A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.
as Lender
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PAGE
TABLE OF CONTENTS
PAGE
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION...................................1
Section 1.1 Definitions..................................................1
Section 1.2 Principles of Construction..................................17
II. GENERAL TERMS...........................................................17
Section 2.1 Loan Commitment; Disbursement to Borrower...................17
2.1.1 The Loan.....................................................17
2.1.2 Disbursement to Borrower.....................................17
2.1.3 The Note.....................................................17
2.1.4 Advances.....................................................17
Section 2.2 Use of Proceeds.............................................18
Section 2.3 Loan Repayment; Extension of Maturity Date..................19
2.3.1 Repayment....................................................19
2.3.2 Extension of Maturity Date...................................19
Section 2.4 Release of Property.........................................20
(i)
<PAGE>
PAGE
2.4.1 Release of All the Properties................................20
2.4.2 Release of Individual Properties.............................21
2.4.3 Release on Payment in Full...................................22
Section 2.5 Interest....................................................22
2.5.1 Generally....................................................22
2.5.2 Determination of Interest Rate...............................23
2.5.3 Default Rate.................................................27
Section 2.6 Payments and Computations...................................27
2.6.1 Making of Payments...........................................27
2.6.2 Computations.................................................27
2.6.3 Late Payment Charge..........................................27
III. CONDITIONS PRECEDENT...................................................28
Section 3.1 Conditions Precedent to Initial Advance.....................28
Section 3.2 Conditions Precedent to Subsequent Advances Involving
Additional Properties.......................................34
Section 3.3 Conditions Precedent to Subsequent Advances Not Involving
Additional Properties.......................................44
IV. REPRESENTATIONS AND WARRANTIES..........................................48
Section 4.1 Borrower Representations....................................48
(ii)
<PAGE>
Section 4.2 Survival of Representations.................................57
V. AFFIRMATIVE COVENANTS....................................................58
Section 5.1 Borrower Covenants..........................................58
VI. NEGATIVE COVENANTS......................................................66
Section 6.1 Borrower's Negative Covenants...............................66
VII. CASUALTY; CONDEMNATION; ESCROWS........................................68
Section 7.1 Insurance; Casualty and Condemnation........................68
7.1.1 Insurance....................................................68
7.1.2 Condemnation.................................................72
7.1.3 Restoration..................................................72
Section 7.2 Required Repairs; Required Repair Funds.....................76
7.2.1 Required Repairs; Deposits...................................76
7.2.2 Grant of Security Interest...................................77
7.2.3 Release of Required Repair Funds.............................77
7.2.4 Failure to Perform Required Repairs and Make
Initial Deposit..............................................78
Section 7.3 Tax and Insurance Escrow Fund...............................79
7.3.1 Tax and Insurance Escrow Fund................................79
(iii)
<PAGE>
PAGE
7.3.2 Grant of Security Interest...................................79
7.3.3 Application of Tax and Insurance Escrow Fund.................80
Section 7.4 Replacements and Replacement Reserve........................80
7.4.1 Replacement Reserve Fund.....................................80
7.4.2 Grant of Security Interest...................................81
7.4.3 Disbursements from Replacement Reserve Account...............81
7.4.4 Performance of Replacements.................................82
7.4.5 Failure to Make Replacements and Make Initial Deposit........84
7.4.6 Balance in the Replacement Reserve Account...................85
7.4.7 Indemnification..............................................85
Section 7.5 Ground Lease Escrow Fund....................................85
VIII. DEFAULTS..............................................................86
Section 8.1 Event of Default............................................86
Section 8.2 Remedies....................................................88
Section 8.3 Remedies Cumulative.........................................90
IX. SPECIAL PROVISIONS......................................................90
Section 9.1 Sale of Notes and Securitization............................90
(iv)
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PAGE
Section 9.2 Securitization Indemnification..............................92
Section 9.3 Intentionally Omitted.......................................95
Section 9.4 Exculpation.................................................95
Section 9.5 Cash Management.............................................97
9.5.1 Lockbox Account..............................................97
9.5.2 Cash Collateral Account......................................97
Section 9.6 Servicer....................................................98
Section 9.7 Insolvency Opinion..........................................99
X. MISCELLANEOUS............................................................99
Section 10.1 Survival...................................................99
Section 10.2 Lender's Discretion........................................99
Section 10.3 Governing Law..............................................99
Section 10.4 Modification, Waiver in Writing...........................101
Section 10.5 Delay Not a Waiver........................................101
(v)
<PAGE>
Section 10.6 Notices...................................................101
Section 10.7 Trial by Jury.............................................102
Section 10.8 Headings..................................................103
Section 10.9 Severability..............................................103
Section 10.10 Preferences..............................................103
Section 10.11 Waiver of Notice.........................................104
Section 10.12 Remedies of Borrower.....................................104
Section 10.13 Expenses; Indemnity......................................104
Section 10.14 Schedules Incorporated...................................105
Section 10.15 Intentionally Omitted....................................106
Section 10.16 No Joint Venture or Partnership; No Third Party
Beneficiaries............................................106
Section 10.17 Publicity................................................106
(vi)
<PAGE>
PAGE
Section 10.18 Cross-Default; Cross-Collateralization; Waiver of
Marshalling of Assets....................................106
Section 10.19 Waiver of Counterclaim...................................107
Section 10.20 Conflict; Construction of Documents; Reliance............107
Section 10.21 Brokers and Financial Advisors...........................108
Section 10.22 Prior Agreements.........................................108
Section 10.23 Joint and Several Liability..............................108
Section 10.24 Counterparts.............................................108
(vii)
<PAGE>
SCHEDULES
Schedule I - Release Amounts
Schedule II - Required Repairs
Schedule III - Intentionally Omitted
Schedule IV - Rent Rolls
Schedule V - List of Franchise Agreements
Schedule VI - List of Management Agreements
Schedule VII - Litigation
(viii)
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, DATED AS OF AUGUST 12, 1997 (AS AMENDED, RESTATED,
REPLACED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THIS
"AGREEMENT"), between Lehman Brothers Holdings Inc., doing business as Lehman
Capital, a division of Lehman Brothers Holdings Inc., a Delaware corporation
having an address at Three World Financial Center, New York, New York 10285
("LENDER") and BA PARKWAY ASSOCIATES II, L.P., a Delaware limited partnership,
having an address at 1010 Wisconsin Avenue, N.W., Washington, D.C. 20007
("BORROWER").
All capitalized terms used herein shall have the respective meanings set
forth in Article I hereof.
W I T N E S S E T H :
WHEREAS, Borrower desires to obtain the Loan from Lender;
WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in
accordance with the terms of this Agreement and the other Loan Documents;
NOW, THEREFORE, in consideration of the making of the Loan by Lender and
the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant as
follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTIONI. DEFINITIONS; PRINCIPLES
OF CONSTRUCTION
SECTION 1.1 DEFINITIONS.Section 1.1Definitions.
FOR ALL PURPOSES OF THIS AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY REQUIRED
OR UNLESS THE CONTEXT CLEARLY INDICATES A CONTRARY INTENT:
"ADDITIONAL BORROWER" shall mean any Person assuming the Loan and the Loan
Documents and encumbering its Individual Property with a Mortgage in connection
with a Subsequent Advance pursuant to the terms and provisions hereof. Upon the
funding of the related Subsequent Advance in accordance with the terms and
provisions hereof, an Additional Borrower assuming the Loan and the Loan
Documents and encumbering its Individual Property in connection with such
Subsequent Advance shall constitute an Individual Borrower.
"ADDITIONAL PROPERTY" shall have the meaning set forth in SECTION 2.1.4(B).
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"ADJUSTED RELEASE AMOUNT" shall mean, for an Individual Property, the
product of the Release Amount for such Individual Property and one hundred
twenty-five percent (125%).
"AFFILIATE" shall mean, as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such Person or of an Affiliate
of such Person.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
"ANNUAL BUDGET" shall mean the operating budget, including all planned
capital expenditures, for the Properties prepared by Borrower for the applicable
Fiscal Year or other period.
"APPLICABLE INTEREST RATE" shall have the meaning set forth in SECTION
2.5.2(A).
"APPROVED ANNUAL BUDGET" shall have the meaning set forth in
SECTION 5.1(R).
"APPROVED APPRAISAL" shall mean, with respect to an Individual Property, an
appraisal of such Individual Property (a) executed and delivered to Lender by a
qualified MAI appraiser having no direct or indirect interest in such Individual
Property or any loan secured in whole or in part thereby and whose compensation
is not affected by the approval or disapproval of such appraisal by Lender; (b)
addressed to Lender and its successors and assigns; (c) satisfying the
requirements of the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation and Title XI of the Federal Institutions Reform,
Recovery and Enforcement Act of 1989 and the regulations promulgated thereunder,
all as in effect on the date of such calculation, with respect to such appraisal
and the appraiser making such appraisal and (d) otherwise satisfactory to Lender
in all respects in Lender's sole discretion.
"ASSIGNMENT OF LEASES" shall mean, with respect to each Individual
Property, that certain first priority Assignment of Leases and Rents, dated as
of the date hereof, from an Individual Borrower, as assignor, to Lender, as
assignee, assigning to Lender all of such Individual Borrower's interest in and
to the Leases and Rents of such Individual Property as security for the Loan, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
"ASSIGNMENT OF MANAGEMENT AGREEMENT" shall mean, with respect to each
Individual Property, that certain Assignment of Management Agreement and
Subordination of Management Fees among an Individual Borrower, as assignor,
Manager, as manager, and Lender, as assignee, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
"AUSTIN PROPERTY" shall mean the proposed Additional Property known as the
Doubletree Hotel located in Austin, Texas.
"AWARD" shall have the meaning set forth in SECTION 7.1.2.
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"BASIC CARRYING COSTS" shall mean, with respect to an Individual Property,
the sum of the following costs associated with such Individual Property for the
relevant Fiscal Year or payment period: (i) real property taxes with respect to
such Individual Property and (ii) insurance premiums with respect to such
Individual Property.
"BORROWER" shall mean, collectively, BA Parkway Associates II, L.P.,
together with any Additional Borrower, and their respective successors and
assigns.
"BORROWER GROUP" shall have the meaning set forth in SECTION 9.2(D).
"BREAKAGE COSTS" shall have the meaning set forth in SECTION 2.5.2(H).
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or any
other day on which national banks in New York, New York are not open for
business.
"CAPITAL EXPENDITURES" for any period shall mean the amount expended for
items capitalized under GAAP (including expenditures for building improvements
or major repairs, leasing commissions and tenant improvements).
"CAPITAL EXPENDITURES RESERVE FUND" shall have the meaning set forth in
SECTION 7.1.
"CASH COLLATERAL ACCOUNT" shall have the meaning set forth in SECTION
9.5.2.
"CASUALTY" shall have the meaning specified in SECTION 7.1.1(D).
"CASUALTY CONSULTANT" shall have the meaning set forth in SECTION
7.1.3(B)(III).
"CASUALTY RETAINAGE" shall have the meaning set forth in SECTION
7.1.3(B)(IV).
"CLOSING DATE" shall mean the date of the funding of the Loan.
"CLOSING DATE DEBT SERVICE COVERAGE RATIO" shall have the meaning set forth
in SECTION 2.4.2(H).
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and as it
may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
"CONDEMNATION" shall have the meaning set forth in SECTION 7.1.3(A).
"CONDEMNATION RESTORATION" shall have the meaning set forth in SECTION
7.1.3(C).
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"CONTRIBUTION AGREEMENT" shall mean that certain Contribution Agreement by
and among the Individual Borrowers dated as of the date hereof, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to
time.
"DEBT" shall mean the outstanding principal amount set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums (including the Exit Fee) due to Lender in
respect of the Loan under the Note, this Agreement, the Mortgages or any other
Loan Document.
"DEBT SERVICE" shall mean, with respect to any particular period of time,
scheduled principal and interest payments under the Note.
"DEBT SERVICE COVERAGE RATIO" shall mean a ratio for the applicable period
in which:
(a) the numerator is the Underwritten Net Operating Income (excluding
interest on credit accounts) for such period as set forth in the statements
required hereunder; and
(b) the denominator is the aggregate amount of interest payable on
the outstanding principal balance of the Loan for such period assuming a
loan constant equal to the greater of (i) 10.48% or (ii) the Applicable
Interest Rate for such period.
"DEFAULT" shall mean the occurrence of any event hereunder or under any
other Loan Document which, but for the giving of notice or passage of time, or
both, would be an Event of Default.
"DEFAULT RATE" shall mean, with respect to the Loan, a rate per annum equal
to the lesser of (a) the maximum rate permitted by applicable law, or (b) three
percent (3%) above the Applicable Interest Rate.
"DISCLOSURE DOCUMENT" shall have the meaning set forth in SECTION 9.2(A).
"DSCR CALCULATION DATE" shall mean, with respect to any Interest Period,
the twentieth (20th) day of the calendar month immediately prior to such
Interest Period.
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"ELIGIBLE ACCOUNT" shall mean a separate and identifiable account from all
other funds held by the holding institution that is either (i) an account or
accounts maintained with a federal or state-chartered depository institution or
trust company which complies with the definition of Eligible Institution or (ii)
a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company is subject to regulations substantially similar to 12 C.F.R. Section
9.10(b), having in either case a combined capital and surplus of at least Fifty
Million and No/100 Dollars ($50,000,000) and subject to supervision or
examination by federal and state authority. An Eligible Account will not be
evidenced by a certificate of deposit, passbook or other instrument.
"ELIGIBLE INSTITUTION" shall mean a depository institution or trust company
the short term unsecured debt obligations or commercial paper of which are rated
at least A-1 by Standard & Poor's Ratings Group, P-1 by Moody's Investors
Service, Inc., D-1 by Duff & Phelps Credit Rating Co. and F-1+ by Fitch
Investors Service, L.P. in the case of accounts in which funds are held for
thirty (30) days or less (or, in the case of accounts in which funds are held
for more than thirty (30) days, the long term unsecured debt obligations of
which are rated at least "AA" by Fitch, Duff and S&P and "Aaa" by Moody's).
"ELIGIBLE INVESTMENTS" shall mean any one or more of the following
investments in obligations or securities acquired at a purchase price of not
greater than par, including those issued by Lender or any Affiliate of Lender,
provided that such obligations or securities are either payable on demand or
have a maturity not later than the Business Day immediately prior to the date on
which the proceeds thereof are anticipated to be expended or applied pursuant to
the terms of the Loan Documents:
(a) direct obligations of, and obligations fully guaranteed as to payment
of principal and interest by, the United States, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association or any agency or
instrumentality of the United States of America provided such obligations are
backed by the full faith and credit of the United States of America;
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(b) general obligations of or obligations guaranteed by any state of the
United States or the District of Columbia at all times having the highest
long-term debt rating of the Rating Agencies, or such lower rating (but not
lower than the second highest such rating category of the Rating Agencies) as
will not or would not result in the qualification, reduction or withdrawal of
the initial ratings assigned in connection with a Securitization by the Rating
Agencies, as evidenced by a letter confirming such result by the Rating
Agencies;
(c) commercial or finance company paper which is rated at all times by the
Rating Agencies in its highest unsecured commercial or finance company paper
rating category or such lower unsecured commercial or finance company paper
rating category (but not lower than the second highest such rating category of
the Rating Agencies) as will not or would not result in the qualification,
reduction or withdrawal of the initial ratings assigned in connection with a
Securitization by the Rating Agencies, as evidenced by a letter confirming such
result by the Rating Agencies;
(d) certificates of deposit, demand or time deposits, federal funds or
bankers' acceptances issued by any depository institution or trust company
incorporated under the laws of the United States of America or of any state
thereof and subject to supervision and examination by federal or state banking
authorities, provided that the commercial paper or long-term unsecured debt
obligations of such depository institution or trust company (or in the case of
the principal depository institution or trust company in a holding company
system, the commercial paper or long-term unsecured debt obligations of such
holding company) are rated at all times in the highest rating category for such
securities by the Rating Agencies, or such lower category for such securities
(but not lower than the second highest such rating category of the Rating
Agencies) as will not or would not result in the qualification, reduction or
withdrawal of the initial ratings assigned in connection with a Securitization
by the Rating Agencies, as evidenced by a letter confirming such result by the
Rating Agencies;
(e) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation as will not or would not result in the
qualification, reduction or withdrawal of the initial ratings assigned in
connection with a Securitization by the Rating Agencies, as evidenced by a
letter confirming such result by the Rating Agencies;
(f) repurchase obligations with respect to any security described in
clauses (a) and (b) of this definition, in each case entered into with a
depository institution or trust company (acting as principal) described in
clause (d) above;
(g) securities (other than stripped bonds or stripped coupons) bearing
interest or sold at a discount that are issued by any corporation incorporated
under the laws of the United States of America or any state thereof or the
District of Columbia which are rated at all times in the highest rating category
of the Rating Agencies, or in such lower category (but not lower than the
second highest such rating category of the Rating Agencies) as will not or would
not result in the qualification,
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reduction or withdrawal of the initial ratings assigned in connection with a
Securitization by the Rating Agencies, as evidenced by a letter confirming such
result by the Rating Agencies;
(h) interests in money market funds which at all times have a rating of
"AAA" by the Rating Agencies, or such lower rating (but not lower than the
second highest rating category of the Rating Agencies for money market funds) as
will not or would not result in the qualification, reduction or withdrawal of
the initial ratings assigned in connection with a Securitization by the Rating
Agencies, as evidenced by a letter confirming such result from the Rating
Agencies; and
(i) such other investment bearing interest or sold at a discount
acceptable to Lender and the Rating Agencies as will or would not result in the
qualification, reduction or withdrawal of the initial ratings assigned in
connection with a Securitization by the Rating Agencies, as evidenced by a
letter confirming such result from the Rating Agencies; provided that such
investment shall be rated at all times by the Rating Agencies not lower than its
second highest rating category for investments of such type.
No obligation or security set forth above shall be an Eligible Investment
if (i) such obligation or security evidences a right to receive only interest
payments or (ii) the right to receive principal and interest payments derived
from the underlying investment provide a yield to maturity in excess of one
hundred twenty percent (120%) of the yield to maturity at par of such underlying
investment.
"ENVIRONMENTAL INDEMNITY" shall mean, with respect to each Individual
Property, that certain Environmental and Hazardous Substance Indemnification
Agreement by the related Individual Borrower, as indemnitor, for the benefit of
Lender, as indemnitee, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in the Environmental
Indemnity.
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"EURODOLLAR LOAN" shall mean each portion of the outstanding principal
amount of the Loan at such time as interest thereon accrues at a rate of
interest based upon LIBOR.
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION 8.1(A).
"EXCHANGE ACT" shall have the meaning set forth in SECTION 9.2(A).
"EXIT FEE" shall have the meaning set forth in SECTION 2.4.2(C).
"EXTRAORDINARY EXPENSE" shall have the meaning set forth in SECTION 5.1(R).
"FISCAL YEAR" shall mean each twelve (12) month period commencing on
January 1 and ending on December 31 during each year of the Term.
"FOREIGN TAXES" shall have the meaning set forth in SECTION 2.5.2(E).
"FRANCHISE AGREEMENT" shall mean, with respect to any Individual Property,
that certain franchise agreement more specifically identified on SCHEDULE V
hereto.
"FRANCHISOR" shall mean, with respect to any Individual Property that is
subject to a Franchise Agreement, the franchisor with respect thereto, as same
is identified on SCHEDULE V attached hereto.
"FRANCHISOR RECOGNITION AGREEMENT" shall mean, with respect to each
Individual Property, a recognition agreement between Franchisor under the
Franchise Agreement with respect to the Individual Property and Lender in
Franchisor's customary form with such modifications as shall be reasonably
requested by Lender.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as of the date of the applicable financial report.
"GOVERNMENTAL AUTHORITY" shall mean any court, board, agency, commission,
office or authority of any nature whatsoever for any governmental unit (federal,
state, county, district, municipal, city or otherwise) whether now or hereafter
in existence.
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"GROSS INCOME FROM OPERATIONS" shall mean all income, computed in
accordance with GAAP, derived from the ownership and operation of the Properties
from whatever source, including, but not limited to, Rents, utility charges,
escalations, forfeited security deposits, interest on credit accounts, service
fees or charges, license fees, parking fees, rent concessions or credits, and
other required pass-throughs but excluding sales, use and occupancy or other
taxes on receipts required to be accounted for by Borrower to any government or
governmental agency, refunds and uncollectible accounts, sales of furniture,
fixtures and equipment, proceeds of casualty insurance and condemnation awards
(other than business interruption or other loss of income insurance), and any
disbursements to the Borrower from the Tax and Insurance Escrow Fund, the
Replacement Reserve Fund, the Capital Expenditures Reserve Fund, the Ground
Lease Escrow Fund or any other escrow fund established pursuant to the Loan
Documents. Gross income shall not be diminished as a result of the Mortgages or
the creation of any intervening estate or interest in the Properties or any part
thereof.
"GROUND LEASE" shall mean any ground lease pursuant to which Borrower holds
a leasehold interest constituting a portion of the Properties.
"GROUND LEASE ESCROW FUND" shall have the meaning set forth in SECTION 7.5
hereof.
"IMPROVEMENTS" shall have the meaning set forth in the granting clause of
the related Mortgage with respect to each Individual Property.
"INDEBTEDNESS" of a Person, at a particular date, means the sum (without
duplication) at such date of (a) indebtedness or liability for borrowed money;
(b) obligations evidenced by bonds, debentures, notes, or other similar
instruments; (c) obligations for the deferred purchase price of property or
services (including trade obligations); (d) obligations under letters of credit;
(e) obligations under acceptance facilities; (f) all guaranties, endorsements
(other than for collection or deposit in the ordinary course of business), and
other contingent obligations with respect to the Indebtedness of any other
Person; and (g) obligations secured by any Liens, whether or not the obligations
have been assumed.
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"INDEPENDENT DIRECTOR" shall have the meaning set forth in SECTION
4.1(FF)(XVI).
"INDIVIDUAL BORROWER" shall mean, individually, BA Parkway Associates II,
L.P. or any Additional Borrower from and after the funding of the related
Subsequent Advance in accordance with the terms and provisions hereof and,
individually, their respective successors and assigns.
"INDIVIDUAL PROPERTY" shall mean an Individual Borrower's fee or leasehold
interest in each parcel of real property and the improvements thereon owned by
such Individual Borrower encumbered by a Mortgage on the Closing Date and in
each Additional Property thereafter encumbered by a Mortgage from and after the
date such Additional Property is so encumbered, together with all rights
pertaining to such property and improvements, as more particularly described in
the Granting Clauses of such Mortgages and referred to therein as the "Mortgaged
Property" or the "Trust Property", as the case may be.
"INITIAL ADVANCE" shall mean Lender's initial advance of proceeds of the
Loan in the amount of Seven Million and No/100 Dollars ($7,000,000).
"INSOLVENCY OPINION" shall have the meaning set forth in SECTION 9.7.
"INSURANCE PREMIUMS" shall have the meaning set forth in SECTION 7.1.1(B)
hereof.
"INTEREST PERIOD" shall mean (a) the period commencing on the date hereof
and ending on the ninth (9th) day of September, 1997 for the first period
hereunder, and (b) for each period thereafter, the period commencing on the
tenth (10th) day of each calendar month during the Term and ending on the ninth
(9th) day of the next occurring calendar month.
"LEASE" shall mean any lease (other than a Ground Lease), sublease or
subsublease, letting, license, concession or other agreement (whether written or
oral and whether now or hereafter in effect) pursuant to which any Person is
granted a possessory interest in, or right to use or occupy all or any portion
of any space in any Individual Property of Borrower, and every modification,
amendment or other agreement relating
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to such lease, sublease, subsublease, or other agreement entered into in
connection with such lease, sublease, subsublease, or other agreement and every
guarantee of the performance and observance of the covenants, conditions and
agreements to be performed and observed by the other party thereto.
"LEGAL REQUIREMENTS" shall mean, with respect to each Individual Property,
all federal, state, county, municipal and other governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting such Individual Property or any part thereof
or the construction, use, alteration or operation thereof, or any part thereof,
whether now or hereafter enacted and in force, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Borrower, at any time in force affecting such Individual Property or
any part thereof, including, without limitation, any which may (i) require
repairs, modifications or alterations in or to such Individual Property or any
part thereof, or (ii) in any way limit the use and enjoyment thereof.
"LEHMAN" shall have the meaning set forth in SECTION 9.2(B).
"LEHMAN GROUP" shall have the meaning set forth in SECTION 9.2(B).
"LENDER" shall mean Lehman Brothers Holdings Inc., doing business as Lehman
Capital, a division of Lehman Brothers Holdings Inc., together with its
successors and assigns.
"LEXINGTON OBLIGATIONS" shall have the meaning set forth in SECTION
3.2(JJ).
"LEXINGTON PROPERTY" shall mean the proposed Additional Property known as
the Vine Center located in Lexington, Kentucky.
"LIABILITIES" shall have the meaning set forth in SECTION 9.2(B).
"LIBOR" shall mean, with respect to each Interest Period, the rate per
annum equal to the quotient of (a) the rate reported on the date one (1) Working
Day
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prior to the beginning of such Interest Period as of 11:00 a.m., London, England
time, on Telerate Access Service Page 3750 (British Bankers Association
Settlement Rate) as the London Interbank Offered Rate for U.S. Dollar deposits
having a term equal to the applicable Interest Period and in an amount
comparable to the principal amount of the Loan to be outstanding during such
Interest Period (or, if said Telerate Access Service Page shall cease to be
publicly available, as reported by the Reuters Screen LIBO Page, and if said
Reuters Screen Page shall cease to be publicly available, then as reported by
any publicly available source of similar market data selected by Lender in
Lender's sole discretion, exercised in good faith, that accurately reflects such
London Interbank Offered Rate) divided by (b) a number equal to 1.00 minus the
aggregate (without duplication) of the rates (expressed as a decimal) of reserve
requirements applicable to Lender current on the date one (1) Working Day prior
to the beginning of such Interest Period (including, without limitation, basic,
supplemental, marginal and emergency reserves) under any regulations of any
Governmental Authority as now and from time to time hereafter in effect, dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation D of the Board of
Governors of the Federal Reserve System) maintained by a member bank of such
system. For purposes of this Agreement, the amount of any Eurodollar Loan to be
outstanding during each related Interest Period shall be the related portion of
the principal balance of the Loan bearing interest at a rate of interest based
upon LIBOR at 11:00 a.m., London, England time, on the date one (1) Working Day
prior to the beginning of the related Interest Period, less (1) the amount, if
any, which Borrower has elected to voluntarily prepay and which is to be applied
in reduction of such portion of the principal balance of the Loan after such
Working Day and prior to the expiration of the Interest Period immediately
preceding such related Interest Period pursuant to a proper and timely
irrevocable notice given in accordance with the provisions of SECTION 2.3.1 and
(2) the amount of any Casualty/Condemnation Involuntary Prepayment during the
Interest Period immediately preceding such related Interest Period, but which is
not to be applied in reduction of the principal balance of the Loan until the
Payment Date commencing such related Interest Period.
"LICENSES" shall have the meaning set forth in SECTION 4.1(V).
"LIEN" shall mean, with respect to each Individual Property, any mortgage,
deed of trust, lien, pledge, hypothecation, assignment, security interest, or
any other encumbrance, charge or transfer of, on or affecting the related
Individual Property
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or any portion thereof or Borrower, or any interest therein, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement, and mechanic's, materialmen's
and other similar liens and encumbrances.
"LOAN" shall mean the loan made by Lender to Borrower in the original
principal amount set forth in, and evidenced by, the Note executed and delivered
by Borrower and secured by the Mortgages and the other Loan Documents executed
and delivered by Borrower.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Note, the
Mortgage and the Assignment of Leases encumbering each Individual Property, the
Assignment of Management Agreement for each Individual Property, the Franchisor
Recognition Agreement for each Individual Property, the Environmental Indemnity,
the Contribution Agreement and any other document pertaining to the Individual
Properties as well as all other documents executed and/or delivered in
connection with the Loan.
"LOCKBOX ACCOUNT" shall have the meaning set forth in SECTION 9.5.1(A).
"LTV RATIO" shall mean the ratio of the outstanding principal balance of
the Loan to the total of the lesser with respect to each Individual Property of
(a) the purchase price of each Individual Property if such Individual Property
was purchased by Borrower within twelve (12) months of the date of calculation
or (b) the value of each Individual Property established by an Approved
Appraisal with respect to such Individual Property.
"MAI" shall mean Member of the Appraisal Institute.
"MANAGEMENT AGREEMENT" shall mean, with respect to any Individual Property,
the management agreement(s) more specifically identified on SCHEDULE VI hereto
pursuant to which the Manager thereunder is to provide management and other
services with respect to such Individual Property.
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"MANAGER" shall mean, with respect to any individual Property that is
subject to one or more Management Agreements, the manager under such Management
Agreement(s) as identified on SCHEDULE VI hereto.
"MATURITY DATE" shall mean February 10, 1999, as such date may be extended
pursuant to SECTION 2.3.2, or such other date on which the final payment of
principal of the Note becomes due and payable as herein provided, whether at
such stated maturity date, by declaration of acceleration, or otherwise.
"MAXIMUM MANAGEMENT FEE" shall mean an amount equal to five percent (5%)
per annum of Gross Income from Operations for each Individual Property.
"MINOR LEASE" shall mean any Lease of space in any Individual Property,
which space (i) is used for a gift shop or travel related services, (ii) has no
public entrance on the exterior of the Improvements in which such space is
located and (iii) consists of less than 2,500 square feet.
"MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean the monthly payment of
interest payable pursuant to SECTION 2.5.1.
"MORTGAGE" shall mean, with respect to each Individual Property, that
certain first priority Mortgage (or Deed of Trust or Deed to Secure Debt),
Assignment of Leases and Rents and Security Agreement, dated the date hereof,
executed and delivered by an Individual Borrower as security for the Loan made
to Borrower and encumbering such Individual Property, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"NET OPERATING INCOME" means the amount obtained by subtracting Operating
Expenses from Gross Income from Operations.
"NET PROCEEDS" shall have the meaning set forth in SECTION 7.1.3(B).
"NET PROCEEDS DEFICIENCY" shall have the meaning set forth in
SECTION 7.1.3(B)(VI).
"NON-CAPSTAR PERSON" shall mean a limited partner or non-managing member of
an Individual Borrower or an Additional Borrower, as applicable, or a Person
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directly or indirectly controlled by an Individual Borrower or an Additional
Borrower, as applicable, which limited partner, non-managing member or Person is
not in control of, controlled by or under common control with, CapStar Hotel
Company.
"NOTE" shall mean that certain note of even date herewith, made by Borrower
in favor of Lender, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.
"OFFICERS' CERTIFICATE" shall mean a certificate delivered to Lender by
Borrower which is signed by an authorized senior officer of the general partner
or managing member of Borrower.
"OPERATING EXPENSES" shall mean the total of all expenditures, computed in
accordance with GAAP, of whatever kind relating to the operation, maintenance
and management of the Properties that are incurred on a regular monthly or other
periodic basis, including without limitation, utilities, ordinary repairs and
maintenance, insurance, license fees, property taxes and assessments,
advertising expenses, management fees, franchise fees, payroll and related
taxes, computer processing charges, operational equipment or other lease
payments as approved by Lender, and other similar costs, but excluding
depreciation, Debt Service, Capital Expenditures, and contributions to the
Replacement Reserve Fund, the Tax and Insurance Escrow Fund, the Capital
Expenditures Reserve Fund, the Ground Lease Escrow Fund (if applicable) and any
other reserves required under the Loan Documents.
"OTHER CHARGES" shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Properties, now or hereafter levied or assessed or
imposed against the Properties or any part thereof.
"OUTSIDE CLOSING DATE" shall have the meaning set forth in SECTION 2.1.4.
"PAYMENT DATE" shall mean the tenth (10th) day of each calendar month
during the Term or, if such day is not a Working Day, the immediately preceding
Working Day.
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"PARKWAY" shall mean BA Parkway Associates II, L.P.
"PERMITTED ENCUMBRANCES" shall mean, with respect to an Individual
Property, collectively, (a) the Liens and security interests created by the Loan
Documents , (b) all Liens, encumbrances and other matters disclosed in the Title
Insurance Policies relating to such Individual Property or any part thereof
(including, without limitation, such Liens, encumbrances and other matters with
respect to which Lender is affirmatively insured by such Title Insurance
Policies), (c) Liens, if any, for Taxes imposed by any Governmental Authority
not yet due or delinquent, and (d) such other title and survey exceptions as
Lender has approved or may approve in writing in Lender's sole discretion, which
in the aggregate do not materially adversely affect the value or use of such
Individual Property or Borrower's ability to repay the Loan.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, estate, trust, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"POLICIES" shall have the meaning set forth in SECTION 7.1.1(B).
"PREMISES" shall have the meaning set forth in the granting clause of the
related Mortgage with respect to each Individual Property.
"PREPAYMENT DATE" shall have the meaning set forth in SECTION 2.3.1.
"PRIME RATE" shall mean the annual rate of interest publicly announced by
Citibank, N.A. in New York, New York, as its base rate, as such rate shall
change from time to time. If Citibank, N.A. ceases to announce a base rate,
Prime Rate shall mean the rate of interest published in THE WALL STREET JOURNAL
from time to time as the "Prime Rate". If more than one "Prime Rate" is
published in THE WALL STREET JOURNAL for a day, the average of such "Prime
Rates" shall be used, and such average shall be rounded up to the nearest
one-eighth of one percent (0.125%). If THE WALL STREET JOURNAL ceases to
publish the "Prime Rate", the Lender shall select an equivalent publication that
publishes such "Prime Rate", and if such "Prime Rates" are no longer generally
published or are limited, regulated or administered by a governmental or
quasigovernmental body, then Lender shall select a comparable interest rate
index.
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"PRIME RATE LOAN" shall mean any portion of the outstanding principal of
the Loan at such time as interest thereon accrues at a rate of interest based
upon the Prime Rate.
"PROMUS" shall mean Promus Hotels, Inc.
"PROPERTIES" shall mean, collectively, all of the Individual Properties
which are subject to the terms of this Agreement.
"PROPERTY REQUIRED REPAIRS" shall have the meaning set forth in SECTION
7.2.1.
"PROVIDED INFORMATION" shall have the meaning set forth in SECTION 9.1(A).
"RATING AGENCIES" shall mean each of Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co. and Fitch Investors Service, L.P., or any other
nationally-recognized statistical rating agency which has been approved by
Lender.
"REGISTRATION STATEMENT" shall have the meaning set forth in SECTION
9.2(B).
"RELEASE AMOUNT" shall mean for an Individual Property the amount set forth
on SCHEDULE I hereto.
"RENTS" shall mean, with respect to each Individual Property, all rents,
rent equivalents, moneys payable as damages or in lieu of rent or rent
equivalents, royalties (including, without limitation, all oil and gas or other
mineral royalties and bonuses), income, receivables, receipts, revenues,
deposits (including, without limitation, security, utility and other deposits),
accounts, cash, issues, profits, charges for services rendered, and other
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Borrower or its agents or employees from any and all
sources arising from or attributable to the Individual Property, including,
without
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limitation, all hotel receipts, revenues and credit card receipts collected from
guest rooms, restaurants, bars, meeting rooms, banquet rooms and recreational
facilities, all receivables, customer obligations, installment payment
obligations and other obligations now existing or hereafter arising or created
out of the sale, lease, sublease, license, concession or other grant of the
right of the use and occupancy of property or rendering of services by Borrower
or any operator or manager of the hotel or the commercial space located in the
Improvements or acquired from others (including, without limitation, from the
rental of any office space, retail space, guest rooms or other space, halls,
stores, and offices, and deposits securing reservations of such space), license,
lease, sublease and concession fees and rentals, health club membership fees,
food and beverage wholesale and retail sales, service charges, vending machine
sales and proceeds, if any, from business interruption or other loss of income
insurance.
"REPLACEMENT RESERVE ACCOUNT" shall have the meaning set forth in SECTION
7.4.1.
"REPLACEMENT RESERVE FUND" shall have the meaning set forth in SECTION
7.4.1.
"REPLACEMENT RESERVE MONTHLY DEPOSIT" shall have the meaning set forth in
SECTION 7.4.1.
"REPLACEMENTS" shall have the meaning set forth in SECTION 7.4.3(A).
"REQUIRED RECORDS" shall mean, collectively, the financial statements,
certificates, reports or information required to be provided by Borrower to
Lender pursuant to SECTION 5.1(K) hereof.
"REQUIRED REPAIR ACCOUNT" shall have the meaning set forth in SECTION
7.2.1.
"REQUIRED REPAIR FUND" shall have the meaning set forth in SECTION 7.2.1.
"RESTORATION" shall have the meaning set forth in SECTION 7.1.1(G).
"SECURITIES" shall have the meaning set forth in SECTION 9.1.
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"SECURITIES ACT" shall have the meaning set forth in SECTION 9.2(A).
"SECURITIZATION" shall have the meaning set forth in SECTION 9.1.
"SEVERED LOAN DOCUMENTS" shall have the meaning set forth in SECTION
8.2(C).
"SPREAD" shall mean for each Interest Period, with respect to a Eurodollar
Loan, (a) prior to the extension of the Maturity Date pursuant to SECTION
2.3.2(B), (i) one hundred seventy-five basis points (1.75%) for any Interest
Period if the Debt Service Coverage Ratio with respect to the twelve (12) full
months immediately preceding the DSCR Calculation Date for such Interest Period
is no less than 1.50, (ii) two hundred basis points (2.00%) for any Interest
Period if the Debt Service Coverage Ratio with respect to the twelve (12) full
months immediately preceding the DSCR Calculation Date for such Interest Period
is no less than 1.35 and no greater than 1.49, (iii) two hundred twenty-five
basis points (2.25%) for any Interest Period if the Debt Service Coverage Ratio
with respect to the twelve (12) full months immediately preceding the DSCR
Calculation Date for such Interest Period is no less than 1.20 and no greater
than 1.34 or (iv) two hundred seventy basis points (2.70%) for any Interest
Period if the Debt Service Coverage Ratio with respect to the twelve (12) full
months immediately preceding the DSCR Calculation Date for such Interest Period
is no less than 1.15 and no greater than 1.19 or (b) upon the extension of the
Maturity Date pursuant to SECTION 2.3.2(B), (i) two hundred basis points (2.00%)
for any Interest Period if the Debt Service Coverage Ratio with respect to the
twelve (12) full months immediately preceding the DSCR Calculation Date for such
Interest Period is no less than 1.50, (ii) two hundred twenty-five basis points
(2.25%) for any Interest Period if the Debt Service Coverage Ratio with respect
to the twelve (12) full months immediately preceding the DSCR Calculation Date
for such Interest Period is no less than 1.35 and no greater than 1.49, (iii)
two hundred fifty basis points (2.50%) for any Interest Period if the Debt
Service Coverage Ratio with respect to the twelve (12) full months immediately
preceding the DSCR Calculation Date for such Interest Period is no less than
1.20 and no greater than 1.34 or (iv) three hundred basis points (3.00%) for any
Interest Period if the Debt Service Coverage Ratio with respect to the twelve
(12) full months immediately
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preceding the DSCR Calculation Date for such Interest Period is no less than
1.15 and no greater than 1.19.
"STATE" shall mean, with respect to an Individual Property, the State or
Commonwealth in which such Individual Property or any part thereof is located.
"SUBSEQUENT ADVANCE" shall have the meaning set forth in SECTION 2.1.4(B).
"SUBSEQUENT ADVANCE CLOSING DATE" shall mean the date of the funding of any
subsequent advance of a portion of the proceeds of the Loan pursuant to
SECTION 2.1.4(B).
"SUBSEQUENT ADVANCE REQUEST" shall have the meaning set forth in SECTION
2.1.4(B).
"TAX AND INSURANCE ESCROW FUND" shall have the meaning set forth in SECTION
7.3.1.
"TAXES" shall mean all real estate and personal property taxes,
assessments, water rates or sewer rents, now or hereafter levied or assessed or
imposed against any of the Properties or part thereof.
"TITLE INSURANCE POLICY" shall mean, with respect to each Individual
Property, ALTA mortgagee title insurance policy in the form (acceptable to
Lender) issued with respect to such Individual Property and insuring the lien of
the Mortgage encumbering such Individual Property.
"UCC" or "UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code
as in effect in the applicable State or Commonwealth in which an Individual
Property is located.
"UNDERWRITER GROUP" shall have the meaning set forth in SECTION 9.2(B).
"UNDERWRITTEN NET OPERATING INCOME" shall mean Net Operating Income for the
applicable period calculated based upon (a) Gross Income from Operations
assuming an occupancy rate equal to the lesser of the actual occupancy rate for
such period or seventy-five percent (75%) and (b) Operating Expenses assuming
(i)
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management fees payable under the Management Agreement for each Individual
Property equal to the greater of the actual management fees payable under the
related Management Agreement during such period or five percent (5%) of Gross
Income from Operations for the related Individual Property during such period,
(ii) franchise fees payable under the Franchise Agreement for each Individual
Property equal to the greater of the actual franchise fees payable under the
related Franchise Agreement during such period or four percent (4%) of the gross
revenues from the rental of hotel rooms contained in the related Individual
Property during such period and (iii) expenses incurred for the replacement of
furniture, fixtures and equipment for the Properties during such period in an
amount not less than five percent (5%) of Gross Income from Operations for the
Properties during such period, such amount being subject to increase based upon
the advice of Lender's structural engineer or Lender's determination in its sole
discretion that such amount is not adequate for the maintenance and operation of
the Properties as first class hotel properties.
"WORKING DAY" shall mean any day on which dealings in foreign currencies
and exchange are carried on in London, England and in New York, New York.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION.
All references to sections and schedules are to sections and schedules in
or to this Agreement unless otherwise specified. Unless otherwise specified,
the words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this agreement as a whole and not to any
particular provision of this Agreement. Unless otherwise specified, all
meanings attributed to defined terms herein shall be equally applicable to both
the singular and plural forms of the terms so defined.
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II. GENERAL TERMS
SECTION 2.1 LOAN COMMITMENT; DISBURSEMENT TO BORROWER.
2.1.1 THE LOAN. Subject to and upon the terms and conditions
set forth herein, Lender hereby agrees to make the Loan to Borrower on the
Closing Date, in the principal amount of up to One Hundred Million and No/100
Dollars ($100,000,000). The Loan shall mature on the Maturity Date.
2.1.2 DISBURSEMENT TO BORROWER. Borrower may request and
receive only one borrowing hereunder in respect of the Loan, which borrowing
may be advanced in any number of disbursements in accordance with the terms
hereof, and any amount borrowed and repaid hereunder in respect of the Loan
may not be reborrowed. Borrower shall, on the Closing Date, Ceceive the
Initial Advance, subject to the direction given by Borrower as to the
application of the proceeds of the Loan to pay certain closing costs and to
fund the Tax and Insurance Escrow Fund and any other reserve or escrow fund
required hereunder, all in accordance with the provisions of this Agreement.
Borrower shall, on any Subsequent Advance Closing Date, receive the related
Subsequent Advance, subject to the direction given by Borrower as to the
application of the proceeds of the Loan to pay certain closing costs and to
fund the Tax and Insurance Escrow Fund and any other reserve or escrow fund
required hereunder.
2.1.3 THE NOTE. The loan shall be evidenced by the note of
borrower, in the original principal amount of the loan. The note shall be
entitled to the benefits of this agreement and shall be secured by the
mortgages, the assignments of leases and the other loan documents.
2.1.4 ADVANCES. (A) Lender shall make, and Borrower shall
accept, the Initial Advance subject to and upon the conditions and terms
contained herein including, without limitation, the conditions contained in
SECTION 3.1. hereof.
(b) In addition to the Initial Advance, Borrower may request
and receive one or more subsequent advances of a portion of the proceeds of
the Loan not previously advanced (each, a "SUBSEQUENT ADVANCE"); provided,
however, that (1) the amount of any Subsequent Advance and the Release Amount
of any Additional Property to be
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encumbered by a Mortgage in connection with such Subsequent Advance shall be
determined by Lender in its sole discretion after Lender's review of the
Subsequent Advance Request and all due diligence materials and other information
required for the satisfaction of the conditions set forth in SECTION 3.2 or
SECTION 3.3, as applicable, and (2) Borrower shall have satisfied each of the
conditions contained in SECTION 3.2 or SECTION 3.3, as applicable. Lender shall
not be obligated to make a Subsequent Advance after the date that is ninety (90)
days prior to the Maturity Date (the "OUTSIDE CLOSING DATE"). Borrower may
submit to Lender, a written request for a Subsequent Advance in form and
substance acceptable to Lender (each such request being hereinafter referred to
as a "SUBSEQUENT ADVANCE REQUEST"), which Subsequent Advance Request (i) with
respect to an advance pursuant to SECTION 3.2, may be submitted to Lender at any
time after the Closing Date and not later than thirty (30) days prior to the
Outside Closing Date, and (ii) with respect to an advance pursuant to SECTION
3.3, may be submitted only on one occasion per calendar quarter throughout the
term of the Loan and not later than thirty (30) days prior to the Outside
Closing Date. Each Subsequent Advance Request shall, among other things, (A) if
the Subsequent Advance requested is to be made pursuant to SECTION 3.3, request
a Subsequent Advance in an amount no less than the lesser of (1) One Million and
No/100 Dollars ($1,000,000) and (2) the total amount of proceeds of the Loan
remaining undisbursed as of the date of the Subsequent Request, (B) if the
Subsequent Advance requested is to be made pursuant to SECTION 3.2, set forth
one or more properties as may be acceptable to Lender in its sole discretion
(each such property so identified being hereinafter referred to as an
"ADDITIONAL PROPERTY") which shall be encumbered by a Mortgage and included as
an Individual Property hereunder as security for the Loan, and (C) set forth the
proposed Subsequent Advance Closing Date with respect to the Subsequent Advance
requested, which Subsequent Advance Closing Date shall be a Payment Date
occurring no less than thirty (30) days subsequent to the date on which the
Subsequent Advance Request is received by Lender. Borrower hereby acknowledges
that Borrower's agreement that each Additional Property so identified secure the
related Subsequent Advance and all prior advances of proceeds of the Loan is a
material inducement to Lender to make the Loan, subject to the terms and
provisions of SECTION 3.2(JJ).
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SECTION 2.2 USE OF PROCEEDS.
Borrower shall use the proceeds of the Loan disbursed to it
pursuant to SECTION 2.1 solely to (i) pay the purchase price and other costs
and expenses incurred in connection with the acquisition of the Properties by
Borrower, (ii) purchase or repay and discharge any existing loans relating to
the Properties, (iii) fund the Tax and Insurance Escrow Fund and any other
reserve or escrow fund required pursuant to the provisions of this Agreement,
(iv) pay costs and expenses incurred by Borrower in connection with the
renovation of any Individual Property as required pursuant to the related
Franchise Agreement, and (v) pay costs and expenses incurred in connection
with the closing of the Loan, including, without limitation, any fees payable
to Lender in connection with the Loan, and other costs and expenses incurred
by Borrower, all as approved in writing by Lender.
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SECTION 2.3 LOAN REPAYMENT; EXTENSION OF MATURITY DATE
2.3.1 REPAYMENT Borrower shall repay any outstanding
principal indebtedness of the Loan in full on the Maturity Date, together
with interest thereon to (but excluding) the date of repayment. Upon the
closing of a Subsequent Advance in connection with which the Lexington
Property is encumbered with a Mortgage, the Loan may not be prepaid in whole
or in part other than a prepayment made in connection with the release of the
Lexington Property from the Lien of the Mortgage thereon (and related Loan
Documents) in accordance with SECTION 2.4.2. Notwithstanding the foregoing,
prior to such encumbrance of the Lexington Property and following such
release of the Lexington Property, Borrower shall have the right to prepay
all or any portion of the Loan prior to the Maturity Date, without the
payment of any penalty or premium (other than an Exit Fee payable in
connection with the release of an Individual Property pursuant to the terms
and provisions hereof), upon not less than ten (10) days prior written notice
to Lender, specifying the date on which prepayment is to be made (a
"PREPAYMENT DATE"), provided that no Event of Default shall have occurred and
be continuing other than as set forth in SECTION 2.4.2(A). In addition to
the amount of such prepayment, Borrower shall also pay to Lender, together
with such prepayment, all interest accrued and unpaid with respect to such
prepayment and, if such Prepayment Date is not a Payment Date, Borrower shall
also pay any applicable Breakage Costs. Each notice of prepayment of the
Loan shall be irrevocable and shall specify (i) the applicable Prepayment
Date, (ii) the amount of such prepayment and the amount of interest thereon
to be paid in connection therewith and (iii) any Individual Property that is
to be released from the Lien of the Mortgage thereon (and related Loan
Documents) in connection with such prepayment.
2.3.2 EXTENSION OF MATURITY DATE (a) Borrower may, at its
option, extend the Maturity Date for the Loan to August 10, 1999, provided
that (i) Borrower shall deliver to Lender a written notice of Borrower's
desire to so extend the Maturity Date no earlier than ninety (90) days prior
to the original Maturity Date and no later than sixty (60) days prior to the
original Maturity Date; (ii) no Default or Event of Default shall have
occurred and be continuing as of the date of such extension of the Maturity
Date; (iii) Borrower shall pay Lender no later than thirty (30) days prior to
the original
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Maturity Date a non-refundable extension fee in the amount of 0.25% of the
outstanding principal amount of the Loan as of the date on which Borrower
delivers to Lender written notice of Borrower's desire to so extend the Maturity
Date; (iv) the Debt Service Coverage ratio with respect to the twelve (12) full
months immediately preceding the date on which Borrower delivers to Lender
written notice of Borrower's desire to so extend the Maturity Date shall be no
less than 1.30; (v) the LTV Ratio as of the date on which Borrower delivers to
Lender written notice of Borrower's desire to so extend the Maturity Date shall
not exceed sixty-five percent (65%) and (vi) no later than thirty (30) days
prior to the original Maturity Date, Borrower shall deliver to Lender such
financial statements, appraisals and other materials as are reasonably necessary
for Lender to confirm Borrower's satisfaction of the terms and conditions set
forth in clauses (i)-(v) above and that no material adverse change has occurred
with respect to Borrower or the Properties.
(b) Borrower may, at its option, further extend the Maturity
Date for the Loan to February 10, 2000, provided that (i) Borrower shall have
exercised the option to extend the Maturity Date pursuant to subsection (a)
above; (ii) Borrower shall deliver to Lender a written notice of Borrower's
desire to so extend the Maturity Date no earlier than ninety (90) days prior
to the original Maturity Date, as extended pursuant to subsection (a) above,
and no later than sixty (60) days prior to the original Maturity Date, as
extended pursuant to subsection (a) above; (iii) no Default or Event of
Default shall have occurred and be continuing as of the date of such
extension of the Maturity Date; (iv) Borrower shall pay to Lender no later
than thirty (30) days prior to the original Maturity Date, as extended
pursuant to subsection (a) above, a non-refundable extension fee in the
amount of 0.375% of the outstanding principal amount of the Loan as of the
date on which Borrower delivers to Lender written notice of Borrower's desire
to so extend the Maturity Date; (v) the Debt Service Coverage Ratio with
respect to the twelve (12) full months immediately preceding the date on
which Borrower delivers to Lender written notice of Borrower's desire to so
extend the Maturity Date shall be no less than 1.30; (vi) the LTV Ratio as of
the date on which Borrower delivers to Lender written notice of Borrower's
desire to so extend the Maturity Date shall not exceed sixty-five percent
(65%); (vii) no later than thirty (30) days prior to the original Maturity
Date, as extended pursuant to subsection (a) above, Borrower shall deliver to
Lender such financial statements, appraisals and other materials as are
reasonably necessary for Lender to confirm Borrower's satisfaction of the
terms and conditions set forth in clauses (i)-(vi) above and that no material
adverse change has occurred with respect to Borrower or the Properties and
(viii) the Spread shall be increased as set forth in clause (b) of the
definition thereof contained in SECTION 1.1 commencing as of the Maturity
Date, as extended pursuant to subsection (a) above.
SECTION 2.4 RELEASE OF PROPERTY Except as set forth in this
SECTION 2.4, no repayment or prepayment of all or any portion of the Loan
shall cause, give rise to a
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right to require, or otherwise result in, the release of any Lien of any
Mortgage on any of the Properties.
2.4.1 RELEASE OF ALL THE PROPERTIES
(a) If Borrower has elected to prepay the entire outstanding
principal balance of the Loan, the requirements of SECTION 2.3.1 have been
satisfied and Borrower shall have paid to Lender the outstanding principal
amount of the Loan together with all interest accrued thereon, any applicable
Breakage Costs and any other amounts owed by Borrower to Lender pursuant to
this Agreement or any other Loan Document, then all of the Properties shall
be released from the Liens of their respective Mortgages (and related Loan
Documents).
(b) In connection with the release of the Liens, the Borrower
shall submit to Lender, not less than ten (10) days prior to the Prepayment
Date, a release of Lien (and related Loan Documents) for each Individual
Property for execution by Lender. Such release shall be in a form appropriate
in each jurisdiction in which an Individual Property is located and
satisfactory to Lender in its sole discretion. In addition, Borrower shall
provide all other documentation Lender reasonably requires to be delivered by
Borrower in connection with such release.
2.4.2 RELEASE OF INDIVIDUAL PROPERTIES Borrower on one or more
occasions may obtain (i) the individual release of an Individual Property
from the Lien of the Mortgage thereon (and related Loan Documents) and (ii)
the release of Borrower's obligations under the Loan Documents with respect
to such Individual Property (other than those expressly stated to survive),
upon satisfaction of each of the following conditions:
(a) The requirements of SECTION 2.3.1 shall have been
satisfied; provided, however, that if the Lexington Property has been
encumbered with a Mortgage in connection with a Subsequent Advance, Borrower
may obtain the individual release of the Lexington Property from the Lien of
the Mortgage thereon (and related Loan Documents) regardless of the
occurrence and continuance of an Event of Default (other than an Event of
Default with respect to the Lexington Obligations) upon the satisfaction
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of all of the other requirements of SECTION 2.3.1 and the satisfaction of the
conditions set forth in this SECTION 2.4.2.
(b) Borrower shall have (i) prepaid the Loan in the amount of
the Adjusted Release Amount for such Individual Property or, with respect to
a release of the Lexington Property, in the event that the Lexington Property
has been encumbered with a Mortgage in connection with a Subsequent Advance,
prepaid the Loan in the amount of the Release Amount for the Lexington
Property, (ii) paid to Lender all interest accrued and unpaid with respect to
the Release Amount for such Individual Property and any other amounts due and
owing to Lender with respect to such Individual Property pursuant to this
Agreement or the other Loan Documents and (iii) paid to Lender any Breakage
Costs payable in connection with the payment of such Adjusted Release Amount
(or Release Amount, as applicable).
(c) Borrower shall have paid to Lender a fee (each such
fee being hereinafter referred to as an "EXIT FEE") in the amount of one
percent (1%) of the Release Amount for such Individual Property. Any fees
payable to Lehman or an Affiliate of Lehman in connection with (i) financing
provided by Lehman or an Affiliate of Lehman, the proceeds of which are
applied in whole or in part to the repayment of the Loan in full, or (ii) any
public offering or private placement of debt or equity securities of Borrower
or an Affiliate of Borrower for which Lehman or an Affiliate of Lehman serves
as lead manager, the proceeds of which are applied in whole or in part to the
repayment of the Loan in full, shall be reduced by the amount of any Exit
Fees paid by Borrower to Lender.
(d) Other than as permitted pursuant to SECTION
2.4.2(A), all payments of principal of, and interest on, the Loan
theretofore or at such time required to be paid shall have been paid and all
other amounts theretofore or at such time required to be paid under the Loan
Documents shall have been received by Lender (including, without limitation,
all reasonable costs and expenses incurred by Lender in connection with such
release).
(e) Borrower shall submit to Lender, not less than ten (10)
days prior to the date of such release, a release of Lien (and related Loan
Documents) for such Individual Property for execution by Lender. Such release
shall be in a form appropriate for each jurisdiction in which the Individual
Property is located and
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reasonably satisfactory to Lender. In addition, Borrower shall provide all
other documentation Lender reasonably requires to be delivered by Borrower in
connection with such release.
(f) Borrower shall have delivered an Officer's Certificate to
Lender prior to the date such Individual Property is to be released from the
Lien of the Mortgage thereon (and related Loan Documents) certifying, as of
the date of such release, that (i) the conditions in this Section have been
satisfied, with detailed calculations indicating the derivation of the
amounts then payable in connection with such release pursuant to this SECTION
2.4.2, and (ii) the documentation delivered pursuant to SECTION 2.4.2.(E)
will not impair or otherwise adversely affect the Liens, security interests
and other rights of Lender under the Loan Documents not being released (or as
to the parties to the Loan Documents and Properties subject to the Loan
Documents not being released).
(g) Immediately prior to, and after giving effect to, the
proposed release, no Event of Default shall have occurred and be continuing
(other than as permitted pursuant to SECTION 2.4.2(A)).
(h) Other than with respect to a release of the Lexington
Property as permitted pursuant to the provisions of SECTION 2.4.2(A), after
giving effect to such release the Debt Service Coverage Ratio for all of the
Properties then remaining subject to the Liens of the Mortgages projected by
Lender with respect to the twelve (12) full calendar months immediately
following the release of such Individual Property shall be no less than the
greater of (i) 1.16 (the "CLOSING DATE DEBT SERVICE COVERAGE RATIO") and (ii)
the Debt Service Coverage Ratio for all of the Properties with respect to the
twelve (12) full calendar months immediately prior to the date of such
release.
2.4.3 RELEASE ON PAYMENT IN FULL.2.4.3 Release on Payment in
Full Lender shall, upon the written request and at the expense of Borrower,
upon payment in full of all principal and interest on the Loan and all other
amounts due and payable under the Loan Documents in accordance with the terms
and provisions of the Note and this Loan Agreement, release the Liens of the
Mortgages not theretofore released.
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SECTION 2.5 INTEREST.
2.5.1 GENERALLY. Interest on the Loan and the Note shall
accrue at the Applicable Interest Rate and shall be calculated in accordance
with SECTION 2.6.2. Interest on the Loan shall be paid in arrears in monthly
installments on the tenth (10th) day of each calendar month up to and
including the Maturity Date, each of such payments to be calculated at the
Applicable Interest Rate. The outstanding principal balance of the Loan
together with all accrued and unpaid interest thereon shall be due and
payable on the Maturity Date. All amounts due under the Note shall be payable
without setoff, counterclaim or any other deduction whatsoever.
2.5.2 DETERMINATION OF INTEREST RATE.
(a) The rate or rates at which the outstanding principal
amount of the Loan bears interest from time to time shall be referred to as
the "APPLICABLE INTEREST RATE". The Applicable Interest Rate with respect to
the Loan shall be: (i) LIBOR plus the Spread with respect to the applicable
Interest Period for a Eurodollar Loan or (ii) the Prime Rate for a Prime Rate
Loan if the Loan is converted to a Prime Rate Loan pursuant to the provisions
of SECTION 2.5.2(B), (C) or (F).
(b) Interest shall be charged and payable on the outstanding
principal amount of the Loan at a rate PER ANNUM equal to the Applicable
Interest Rate, but in no event to exceed the maximum rate permitted under
applicable law. Subject to the terms and conditions of this SECTION 2.5.2, the
Loan shall be a Eurodollar Loan and Borrower shall pay interest on the
outstanding principal amount of the Loan at LIBOR plus the Spread for the
applicable Interest Period. On or before each DSCR Calculation Date, Borrower
shall deliver to Lender (i) such financial statements, appraisals and other
materials as are necessary for Lender to calculate the Debt Service Coverage
Ratio with respect to the twelve (12) full months immediately preceding such
DSCR Calculation Date and (ii) Borrower's written suggestion of the Spread
determined in accordance with this Agreement that is applicable for the Interest
Period immediately following such DSCR Calculation Date. Provided that Borrower
shall have complied with the requirements of the immediately preceding sentence
with respect to the related DSCR Calculation Date, Lender shall, no later than
the first Business Day of the calendar month immediately following such DSCR
Calculation Date, notify Borrower by telephone as to the Spread determined in
accordance with this Agreement that is applicable for the
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Interest Period immediately following such DSCR Calculation Date.
Notwithstanding the foregoing, (A) as of the Closing Date, Borrower shall
have delivered to Lender such financial statements, appraisals and other
materials as are necessary for Lender to calculate the Debt Service Coverage
Ratio with respect to the twelve (12) full months immediately preceding
August 1, 1997 together with Borrower's suggestion of the Spread determined
in accordance with this Agreement to be applicable for the period from the
Closing Date through and including October 9, 1997 and Lender shall establish
the Spread with respect to such period as of the Closing Date and (B) the
Spread with respect to the period described in clause (A) above or any
Interest Period as established pursuant to this SECTION 2.5.2(B) shall be
redetermined by Lender in accordance with this Agreement in connection with
any Subsequent Advance made during such period or Interest Period and such
redetermined Spread shall be effective as of the related Subsequent Advance
Closing Date through the end of the applicable Interest Period. Any change in
the rate of interest hereunder due to a change in the Applicable Interest
Rate shall become effective as of the opening of business on the first day on
which such change in the Applicable Interest Rate shall become effective.
Each determination by Lender of the Applicable Interest Rate shall be
conclusive and binding for all purposes, absent manifest error.
(c) In the event that Lender shall have determined (which
determination shall be conclusive and binding upon Borrower absent manifest
error) that by reason of circumstances affecting the interbank eurodollar
market, adequate and reasonable means do not exist for ascertaining LIBOR,
then Lender shall forthwith give notice by telephone of such determination,
confirmed in writing, to Borrower at least one (1) day prior to the last day
of the related Interest Period. If such notice is given, the related
outstanding Eurodollar Loan shall be converted, on the last day of the then
current Interest Period, to a Prime Rate Loan. Until such notice has been
withdrawn by Lender, no further Eurodollar Loans shall be made nor shall
Borrower have the right to convert a Prime Rate Loan to a Eurodollar Loan.
(d) If, pursuant to the terms of this Agreement, any portion
of the Loan has been converted to a Prime Rate Loan and Lender shall
determine (which determination shall be conclusive and binding upon Borrower
absent manifest error) that
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the event(s) or circumstance(s) which resulted in such conversion shall no
longer be applicable, Lender shall give notice thereof to Borrower, and
Borrower may elect to convert the Prime Rate Loan to a Eurodollar Loan by
delivering to Lender written notice of such election no later than 12:00 p.m.
(New York City Time), three (3) Working Days prior to the desired conversion
date, which notice shall be irrevocable. Notwithstanding any provision of
this Agreement to the contrary, in no event shall Borrower have the right to
elect to convert a Eurodollar Loan to a Prime Rate Loan.
(e) With respect to a Eurodollar Loan, all payments made by
Borrower hereunder shall be made free and clear of, and without reduction for
or on account of, income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions, reserves or withholdings imposed, levied,
collected, withheld or assessed by any Governmental Authority, which are
imposed, enacted or become effective after the date hereof (such non-excluded
taxes being referred to collectively as "FOREIGN TAXES"), excluding income
and franchise taxes of the United States of America or any political
subdivision or taxing authority thereof or therein (including Puerto Rico).
If any Foreign Taxes are required to be withheld from any amounts payable to
Lender hereunder, the amounts so payable to Lender shall be increased to the
extent necessary to yield to Lender (after payment of all Foreign Taxes)
interest or any such other amounts payable hereunder at the rate or in the
amounts specified hereunder. Whenever any Foreign Tax is payable pursuant to
applicable law by Borrower, as promptly as possible thereafter, Borrower
shall send to Lender an original official receipt, if available, or certified
copy thereof showing payment of such Foreign Tax. Borrower hereby indemnifies
Lender for any incremental taxes, interest or penalties that may become
payable by Lender which may result from any failure by Borrower to pay any
such Foreign Tax when due to the appropriate taxing authority or any failure
by Borrower to remit to Lender the required receipts or other required
documentary evidence.
(f) If any requirement of law or any change therein or in the
interpretation or application thereof, shall hereafter make it unlawful for
Lender to make or maintain a Eurodollar Loan as contemplated hereunder, (i)
the obligation of Lender hereunder to make a Eurodollar Loan or to convert a
Prime Rate Loan to a Eurodollar Loan shall be canceled forthwith and (ii) any
outstanding Eurodollar Loan shall be converted automatically to a Prime Rate
Loan on the next succeeding Payment Date or within such earlier period as
required by law. Borrower hereby agrees promptly to pay Lender, upon demand,
any additional amounts necessary to compensate Lender for any costs incurred
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by Lender in making any conversion in accordance with this Agreement,
including, without limitation, any interest or fees payable by Lender to
lenders of funds obtained by it in order to make or maintain the Eurodollar
Loan hereunder. Lender's notice of such costs, as certified to Borrower,
shall be conclusive absent manifest error.
(g) In the event that any change in any requirement of law or
in the interpretation or application thereof, or compliance by Lender with
any request or directive (whether or not having the force of law) hereafter
issued from any central bank or other Governmental Authority:
(i) shall hereafter impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar
requirement against assets held by, or deposits or
other liabilities in or for the account of, advances
or loans by, or other credit extended by, or any
other acquisition of funds by, any office of Lender
which is not otherwise included in the determination
of LIBOR hereunder;
(ii) shall hereafter have the effect of reducing the rate
of return on Lender's capital as a consequence of its
obligations hereunder to a level below that which
Lender could have achieved but for such adoption,
change or compliance (taking into consideration
Lender's policies with respect to capital adequacy)
by any amount deemed by Lender to be material; or
(iii) shall hereafter impose on Lender any other condition
and the result of any of the foregoing is to increase
the cost to Lender of making, renewing or maintaining
loans or extensions of credit or to reduce any amount
receivable hereunder;
then, in any such case, Borrower shall promptly pay Lender, upon demand, any
additional amounts necessary to compensate Lender for such additional cost or
reduced amount receivable which Lender deems to be material as determined by
Lender (except to the extent such additional amount has already been taken into
account by the application of clause (b) of the definition of LIBOR set forth in
SECTION 1.1). If Lender becomes entitled to claim any additional amounts
pursuant to this SECTION 2.5.2(G), Lender shall provide Borrower with not less
than ninety (90) days written
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notice specifying in reasonable detail the event by reason of which it has
become so entitled and the additional amount required to fully compensate
Lender for such additional cost or reduced amount. A certificate as to any
additional costs or amounts payable pursuant to the foregoing sentence
submitted by Lender to Borrower shall be conclusive in the absence of
manifest error. This provision shall survive payment of the Note and the
satisfaction of all other obligations of Borrower under this Agreement and
the Loan Documents.
(h) Borrower agrees to indemnify Lender and to hold Lender
harmless from any loss or expense which Lender sustains or incurs as a
consequence of (i) any default by Borrower in payment of the principal of or
interest on a Eurodollar Loan, including, without limitation, any such loss
or expense arising from interest or fees payable by Lender to lenders of
funds obtained by it in order to maintain a Eurodollar Loan hereunder, (ii)
any prepayment (whether voluntary or mandatory) of the Eurodollar Loan on a
day that (A) is not the Payment Date immediately following the last day of an
Interest Period with respect thereto or (B) is the Payment Date immediately
following the last day of an Interest Period with respect thereto if Borrower
did not give the prior written notice of such prepayment required pursuant to
the terms of this Agreement, including, without limitation, such loss or
expense arising from interest or fees payable by Lender to lenders of funds
obtained by it in order to maintain the Eurodollar Loan hereunder and (iii)
the conversion (for any reason whatsoever, whether voluntary or involuntary)
of the Applicable Interest Rate from LIBOR plus the Spread to the Prime Rate
with respect to any portion of the outstanding principal amount of the Loan
then bearing interest at LIBOR plus the Spread on a date other than the
Payment Date immediately following the last day of an Interest Period,
including, without limitation, such loss or expenses arising from interest or
fees payable by Lender to lenders of funds obtained by it in order to
maintain a Eurodollar Loan hereunder (the amounts referred to in clauses (i),
(ii) and (iii) are herein referred to collectively as the "BREAKAGE COSTS").
This provision shall survive payment of the Note in full and the satisfaction
of all other obligations of Borrower under this Agreement and the other Loan
Documents.
(i) Lender shall not be entitled to claim compensation pursuant to this
SECTION 2.5.2 for any Foreign Taxes, increased cost or reduction in amounts
received or receivable hereunder, or any reduced rate of return, which was
incurred or which accrued more than the earlier of (i) ninety
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(90) days before the date Lender notified Borrower of the change in law or
other circumstance on which such claim of compensation is based and delivered
to Borrower a written statement setting forth in reasonable detail the basis
for calculating the additional amounts owed to Lender under this SECTION
2.5.2, which statement shall be conclusive and binding upon all parties
hereto absent manifest error, or (ii) any earlier date provided that Lender
notified Borrower of such change in law or circumstance and delivered the
written statement referenced in clause (i) within ninety (90) days after
Lender received written notice of such change in law or circumstance.
(j) Lender will use reasonable efforts (consistent with legal
and regulatory restrictions) to maintain the availability of the Eurodollar
Loan and to avoid or reduce any increased or additional costs payable by
Borrower under this SECTION 2.5.2, including, if requested by Borrower, a
transfer or assignment of the Loan to a branch, office or Affiliate of Lender
in another jurisdiction, or a redesignation of its lending office with
respect to the Loan, in order to maintain the availability of the Eurodollar
Loan or to avoid or reduce such increased or additional costs, provided that
the transfer or assignment or redesignation (i) would not result in any
additional costs, expenses or risk to Lender that are not reimbursed by
Borrower and (ii) would not be disadvantageous in any other respect to Lender
as determined by Lender in its sole discretion.
2.5.3 DEFAULT RATE. Upon the occurrence of a Default in the
payment of any principal or interest due under the Loan Documents or an Event
of Default, Lender shall be entitled to receive, and Borrower shall pay to
Lender, interest on the entire outstanding principal balance of the Loan and,
to the extent permitted by applicable law, on any other amounts due under the
Loan Documents at the Default Rate. Interest at the Default Rate shall be
computed from the occurrence of the Default in the payment of principal,
interest or other sums due under the Loan Documents or the Event of Default
until the actual receipt and collection of the Debt (or that portion thereof
that is then due) or the cure of any other Event of Default. Interest at the
Default Rate, to the extent permitted by applicable law, shall be added to
the Debt and shall be secured by the Mortgages. This subsection, however,
shall not be construed as an agreement or
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privilege to extend the date of the payment of the Debt, nor as a waiver of
any other right or remedy accruing to Lender by reason of the occurrence of
any Event of Default.
SECTION 2.6 PAYMENTS AND COMPUTATIONS. ONS
2.6.1 MAKING OF PAYMENTS Each payment by Borrower hereunder
or under the Note shall be made in funds settled through the New York
Clearing House Interbank Payments System or other funds immediately available
to Lender by 1:00 p.m., New York City time, on the date such payment is due,
to Lender by deposit to such account as Lender may designate by written
notice to Borrower. Notwithstanding the foregoing, all payments made in
connection with the release of an Individual Property from the Lien of the
Mortgage thereon (and related Loan Documents) pursuant to SECTION 2.4.2 or
the payment in full of the Loan and all other amounts due and payable under
the Loan Documents shall be made in funds settled through the New York
Clearing House Interbank Payment System or other funds immediately available
to Lender by 4:00 p.m., New York City time, to such account as Lender may
designate. Whenever any payment hereunder or under the Note shall be stated
to be due on a day which is not a Working Day, such payment shall be made on
the immediately preceding Working Day.
2.6.2 COMPUTATIONS. Interest payable hereunder or under the
Note by Borrower shall be calculated on the basis of the actual number of
days elapsed in a three hundred sixty (360) day year.
2.6.3 LATE PAYMENT CHARGE If any principal, interest or any
other sums due under the Loan Documents is not paid by Borrower within five
(5) days of the date on which it is due, Borrower shall pay to Lender upon
demand an amount equal to the lesser of five percent (5%) of such unpaid sum
or the maximum amount permitted by applicable law in order to defray the
expense incurred by Lender in handling and processing such delinquent payment
and to compensate Lender for the loss of the use of such delinquent payment.
Any such amount shall be secured by the Mortgages and the other Loan
Documents.
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III. CONDITIONS PRECEDENTENT
-----------------------
SECTION 3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE.
The obligation of Lender to make the Initial Advance hereunder
is subject to the fulfillment by Borrower or waiver by Lender of the following
conditions precedent no later than the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH
CONDITIONS. The representations and warranties of Borrower contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the Closing Date with the same effect as if made on and as
of such date, and no Default or Event of Default shall have occurred and be
continuing; and Borrower shall be in compliance in all material respects with
all terms and conditions set forth in this Agreement and in each other Loan
Document on its part to be observed or performed.
(b) LOAN AGREEMENT AND NOTE. Lender shall have received a
copy of this Agreement and the Note, in each case, duly executed and
delivered on behalf of Borrower.
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(c) DELIVERY OF LOAN DOCUMENTS; TITLE INSURANCE; REPORTS; LEASES.
(i) MORTGAGES, ASSIGNMENTS OF LEASES, ASSIGNMENTS OF
AGREEMENTS. Lender shall have received from each Individual Borrower fully
executed and acknowledged counterparts of the Mortgages, the Assignments of
Leases and Assignments of the Agreements relating to each of the Properties
and evidence that counterparts of the Mortgages and Assignments of Leases
have been delivered to the title company for recording, in the reasonable
judgment of Lender, so as to effectively create upon such recording valid and
enforceable Liens upon such Properties, of the requisite priority, in favor
of Lender (or such other trustee as may be required or desired under local
law), subject only to the Permitted Encumbrances and such other Liens as are
permitted pursuant to the Loan Documents. Lender shall have also received
from each Individual Borrower fully executed counterparts of the
Environmental Indemnity, the Assignments of Management Agreement relating to
each of the Properties, and the Assignments of Franchise Agreements relating
to each of the Properties.
(ii) TITLE INSURANCE. Lender shall have received Title
Insurance Policies issued by a title company acceptable to Lender and dated
as of the Closing Date, with reinsurance and direct access agreements
acceptable to Lender. Such Title Insurance Policies shall (A) provide
coverage in amounts satisfactory to Lender, (B) insure Lender that the
relevant Mortgage creates a valid Lien on the Individual Property encumbered
thereby of the requisite priority, free and clear of all exceptions from
coverage other than Permitted Encumbrances and standard exceptions and
exclusions from coverage (as modified by the terms of any endorsements), (C)
contain such endorsements and affirmative coverages as Lender may reasonably
request, and (D) name Lender as the insured. The Title Insurance Policies
shall be assignable. Lender also shall have received evidence that all
premiums in respect of such Title Insurance Policies have been paid or will
be paid from the proceeds of the Initial Advance simultaneously with the
closing of the Initial Advance.
(iii) SURVEY. Lender shall have received a current title
survey for each Individual Property, certified to the title company and
Lender and their successors and assigns, in form, scope and substance
satisfactory to Lender and prepared by a professional and properly licensed
land surveyor satisfactory to Lender in accordance with the 1992 Minimum
Standard Detail Requirements for ALTA/ACSM
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Land Title Surveys. The survey shall meet the classification of an "Urban
Survey" and the following additional items from the list of "Optional Survey
Responsibilities and Specifications" (Table A) shall be added to each survey:
2, 3, 4, 6, 8, 9, 10, 11 and 13. Such survey shall reflect the same legal
description contained in the Title Insurance Policy relating to such
Individual Property referred to in clause (ii) above and shall include, among
other things, a metes and bounds description of the real property comprising
part of such Individual Property reasonably satisfactory to Lender. The
surveyor's seal shall be affixed to each survey and the surveyor shall
provide a certification for each survey in form and substance reasonably
acceptable to Lender.
(iv) INSURANCE. Lender shall have received valid binders
and certificates of insurance for the policies of insurance required
hereunder, all satisfactory to Lender in its sole discretion, and evidence of
the payment of all premiums payable for the existing policy period. Borrower
shall deliver to Lender copies of such policies of insurance no later than
fifteen (15) days after the Closing Date, which policies shall be
satisfactory to Lender in its sole discretion.
(v) ENVIRONMENTAL REPORTS. Lender shall have received a
Phase I environmental report in respect of each Individual Property, which
Phase I environmental report shall include, among other things, the results
of testing for the presence of asbestos, lead paint and radon gas, in each
case satisfactory to Lender. Lender shall have received a Phase II
environmental report and the results of other environmental investigations in
respect of each Individual Property if such Phase II environmental report or
other environmental investigation is recommended in the Phase I environmental
report or by Lender's environmental consultant, each such Phase II
environmental report or such results of other environmental investigations to
be satisfactory to Lender.
(vi) ZONING; COMPLIANCE WITH LAWS. Evidence, in form and
substance satisfactory to Lender, confirming that each Individual Property
and the use thereof is in full compliance with the applicable Legal
Requirements with respect to zoning, subdivision, building, environmental
protection, toxic waste, asbestos and all other Legal Requirements. Such
evidence shall include any and all certificates, licenses, permits, approvals
or consents therefor and, in addition, if required by Lender an opinion
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of Borrower's counsel or architect as to the foregoing, including certificates
of occupancy or their legal equivalents permitting the use and occupancy of
each Individual Property as a hotel. Such evidence shall be based upon
Borrower's title to each Individual Property and shall not depend upon
easements or other similar interests unless disclosed in writing to Lender
and approved by Lender.
(vii) ENCUMBRANCES. Borrower shall have taken or caused to be
taken such actions in such a manner so that Lender has a valid and perfected
Lien of the requisite priority as of the Closing Date with respect to each
Mortgage in the applicable Individual Property, subject only to applicable
Permitted Encumbrances and such other Liens as are permitted pursuant to the
Loan Documents, and Lender shall have received satisfactory evidence thereof.
(d) RELATED DOCUMENTS. Each additional document not
specifically referenced in this SECTION 3.1, but relating to the transactions
contemplated herein, shall have been duly authorized, executed and delivered
by all parties thereto and Lender shall have received and approved certified
copies thereof.
(e) DELIVERY OF ORGANIZATIONAL DOCUMENTS. Borrower shall
deliver or cause to be delivered to Lender copies certified by the related
Individual Borrower or the appropriate public filing office, as designated by
Lender, of all organizational documentation related to each Individual
Borrower and its general and limited partners or members, as applicable,
and/or the formation, structure, existence, good standing and/or
qualification to do business of such Persons, as Lender may request in its
sole discretion, including, without limitation, good standing certificates,
qualifications to do business in the appropriate jurisdictions, resolutions
authorizing the entering into of the Loan and incumbency certificates, all in
form and substance satisfactory to Lender in its sole discretion.
(f) OPINIONS OF BORROWER'S COUNSEL. Lender shall have received
opinions of Borrower's counsel with respect to due execution, authority,
enforceability of the Loan Documents and such other matters as Lender may
reasonably require, all such opinions in form, scope and substance
satisfactory to Lender in its reasonable discretion; provided, however, that
Lender shall not require an Insolvency Opinion other than as may be required
pursuant to SECTION 3.2(M) or SECTION 9.1.
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(g) BUDGETS. Borrower shall have delivered, and Lender shall
have approved, the Annual Budget for the current Fiscal Year and, if
available, for Fiscal Year 1998.
(h) BASIC CARRYING COSTS. Borrower shall have paid all Basic
Carrying Costs relating to each of the Properties which are in arrears,
including without limitation, (i) accrued but unpaid insurance premiums
relating to each of the Properties, (ii) currently due Taxes (including any
in arrears) relating to each of the Properties, and (iii) currently due Other
Charges relating to each of the Properties, which amounts shall be funded
with proceeds of the Loan.
(i) COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Agreement and other Loan Documents and all documents
incidental thereto shall be satisfactory in form and substance to Lender, and
Lender shall have received all such counterpart originals or certified copies
of such documents as Lender may reasonably request.
(j) PAYMENTS. All payments, deposits or escrows required to be
made or established by Borrower under this Agreement, the Note and the other
Loan Documents on or before the Closing Date shall have been paid or shall be
paid or established from the proceeds of the Initial Advance simultaneously
with the closing of the Initial Advance.
(k) ENGINEERING REPORTS. Lender shall have received a
structural engineering report with respect to each Individual Property, which
report shall include, among other things, an analysis of deferred maintenance
and ongoing capital expenditure reserve requirements with respect to such
Individual Property and shall be satisfactory in form and substance to Lender.
(l) FINANCIAL AND OPERATING STATEMENTS. Lender shall have
received financial statements for each Individual Property, audited by a
certified public accounting firm acceptable to Lender, for Fiscal Years 1994
and 1995, if available, and for Fiscal Year 1996 and unaudited financial
statements for each Individual Property for the portion of Fiscal Year 1997
elapsed as of the Closing Date, all such financial statements to be prepared
in accordance with procedures, and in form and substance, satisfactory to
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Lender. Lender shall have received operating statements for each Individual
Property, verified by a certified public accounting firm acceptable to
Lender, for each Individual Property for Fiscal Years designated by Lender
and a current trailing twelve (12) month operating statement for each
Individual Property.
(m) UTILITY SERVICES AND PARKING. Lender shall have received
evidence satisfactory to Lender that each Individual Property is served by
all public utilities and contains adequate parking necessary or convenient
for the full use and enjoyment of such Individual Property.
(n) CREDIT REPORTS AND SEARCHES. Lender shall have received
such credit reports, references, UCC and judgment searches and other
information with respect to each Individual Borrower and their respective
principals, general and limited partners or members and the Managers, as
Lender may request, all of which shall be satisfactory in form and substance
to Lender.
(o) EQUIPMENT LEASES. Lender shall have received copies of all
equipment leases and leases of personal property in effect as of the Closing
Date with respect to each Individual Property, each of which shall be
certified by Borrower and satisfactory to Lender.
(p) UNDERLYING ASSET DOCUMENTATION. Lender shall have
received a copy of each deed conveying each Individual Property to
Borrower, each of which shall be satisfactory in form and substance to
Lender in its sole discretion.
(q) ESTOPPEL CERTIFICATES. Borrower shall have delivered to
Lender an estoppel certificate executed by the tenant under each of the
Leases listed on SCHEDULE IV demising ten percent (10%) or more of the
rentable square footage of the portion of each related Individual Property
made available for lease and under such other Leases listed on SCHEDULE IV as
shall be necessary for Lender to have received estoppel certificates from
tenants under Leases listed on SCHEDULE IV demising a total of no less than
seventy percent (70%) of the rentable square footage of each related
Individual Property made available for lease. All such estoppel certificates
shall be in form and substance satisfactory to Lender. Notwithstanding the
foregoing, Borrower shall not be required to deliver such estoppel
certificates with respect to any Individual Property having no space made
available for lease other than pursuant to one or more Minor Leases.
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(r) LEASES AND RENT ROLLS. Lender shall have received
certified copies of all Leases, each of which shall be satisfactory to
Lender. Lender shall have received a current certified rent roll of each
Individual Property (i) listing each and every Lease with respect to such
Individual Property by the names of all tenants and square footage or other
identification of space leased, (ii) listing the monthly rental and all other
charges payable under each Lease and the date to which such rental and other
charges have been paid, (iii) listing the term of each Lease, the date of
occupancy and the date of expiration, (iv) setting forth any rent arrears and
amounts taken in settlement of outstanding arrears, (v) listing any
collections of rent for more than one (1) month in advance, (vi) describing
any material special provision, concession or inducement granted to the
tenant under each Lease and (vii) setting forth such other information as is
reasonably requested by Lender. Each such rent roll shall be satisfactory in
form and substance to Lender.
(s) SUBORDINATION AND ATTORNMENT. Lender shall have received
appropriate instruments acceptable to Lender subordinating all of the Leases
affecting the Properties designated by Lender to the Mortgage, except such
Leases as Lender may specifically require to be superior to the Mortgage and
such Leases that contain self-executing subordination provisions acceptable
to Lender. Lender shall have received an agreement to attorn to Lender
satisfactory to Lender from any tenant under a Lease that does not provide
for such attornment by its terms.
(t) DEBT SERVICE COVERAGE RATIO AND LTV RATIO. The Debt
Service Coverage Ratio projected by Lender for the twelve (12) month period
immediately following the Closing Date shall be no less than 1.15 and the LTV
Ratio as of the Closing Date shall be no more than sixty-five percent (65%).
(u) TAX LOT. Lender shall have received evidence that
each Individual Property constitutes a separate tax lot, which evidence
shall be satisfactory in form and substance to Lender.
(v) MANAGEMENT AGREEMENT. Lender shall have received a
certified copy of the Management Agreement with respect to each Individual
Property satisfactory
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in form and substance to Lender. Each Manager and the related Individual
Borrower shall have executed and delivered to Lender an Assignment of
Management Agreement with respect to each Management Agreement for each
Individual Property.
(w) FRANCHISE AGREEMENT. Lender shall have received a
certified copy of the Franchise Agreement with respect to each Individual
Property satisfactory in form and substance to Lender. The related Franchisor
shall have executed and delivered to Lender a Franchisor Recognition
Agreement with respect to each Franchise Agreement for each Individual
Property.
(x) ADDITIONAL DOCUMENTATION. Lender shall have received any
additional reports, documentation, site inspections, title insurance,
property, casualty and liability insurance reviews, surveys and other due
diligence items customarily requested by Lender in connection with the
origination of mortgage loans comparable to the Loan and any other
information that Lender may deem appropriate in order to comply with Lender's
due diligence procedures.
(y) LOAN FEE AND TRANSACTION COSTS. Borrower shall have paid
Lender a fee in consideration of the underwriting and origination of the
Initial Advance in the amount of one percent (1%) of the Initial Advance.
Borrower shall have paid or reimbursed Lender for all costs and expenses in
connection with the origination of the Loan and the Initial Advance,
including, without limitation, the reasonable fees and disbursements of
Lender's New York and local counsel, the costs of all appraisals and
engineering and environmental reports, all title insurance premiums, all
survey charges, any mortgage, documentary stamp and intangible taxes, all
recording charges, any brokerage fees and commissions, any auditor's fees,
any initial fees and expenses of Servicer and any initial fees and expenses
for the establishment of the Lockbox Account, the Cash Collateral Account or
any escrow or reserve account established pursuant to the Loan Documents.
(z) MATERIAL ADVERSE CHANGE. The income and expenses of each
Individual Property, the financial statements of Borrower, the occupancy
rate, Leases and rent roll with respect to each Individual Property and all
other features of the transaction shall be as represented to Lender and all
documents and communications delivered to Lender in order to induce Lender to
make the Loan or the Initial Advance shall be without material adverse change
and Lender shall have received an Officer's Certificate as to the
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foregoing. No portion of any Individual Property shall have been damaged and
not repaired to Lender's satisfaction unless a reserve or other provision for
repair of such damage satisfactory to Lender has been established or made. No
portion of any Individual Property shall have been taken in condemnation or
other similar proceeding. No condemnation or other similar proceeding shall
be pending that may materially and adversely affect any Individual Property
or for which reserves or other provisions for restoration of the affected
Individual Property satisfactory to Lender in its sole discretion have not
been established. No structural change in the physical condition of any
portion of any Individual Property shall have occurred since the date of the
related structural engineering report delivered to Lender. None of Borrower,
Borrower's general or limited partners or members or other Person directly or
indirectly in control of, or controlled by, Borrower (other than a
Non-CapStar Person with respect to which a nonconsolidation opinion
reasonably satisfactory to Lender has been delivered to Lender) or tenants
under any Leases deemed by Lender to be material to the security for the Loan
or guarantors of any such Leases shall be the subject of any bankruptcy,
reorganization or insolvency proceeding. No Individual Borrower or general or
limited partner or member of any Individual Borrower (other than a
Non-CapStar Person with respect to which a nonconsolidation opinion
reasonably satisfactory to Lender has been delivered to Lender) shall be in
default under any loan or financing provided to such Individual Borrower,
general or limited partner or member, other than defaults under equipment
lease financings or resulting from the failure to pay trade payables, which
financings or trade payables are being disputed in good faith and do not
exceed One Hundred Thousand and No/100 Dollars ($100,000) in the aggregate.
No asbestos or other hazardous substances shall have been discovered at any
Individual Property other than as disclosed in the related Phase I
environmental report delivered to Lender and, if applicable, Phase II
environmental report delivered to Lender, unless provisions for the
remediation of such asbestos or other hazardous substances satisfactory to
Lender in its sole discretion have been made.
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SECTION 3.2 CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCES
INVOLVING ADDITIONAL PROPERTIES.
The obligation of Lender to make any Subsequent Advance
hereunder in connection with which any Additional Property is to be added as
security for the Loan is subject to the fulfillment by Borrower or waiver by
Lender of the following conditions precedent no later than the Subsequent
Advance Closing Date with respect to such Subsequent Advance:
(a) SUBSEQUENT ADVANCE REQUEST. Lender shall have received
a Subsequent Advance Request in accordance with SECTION 2.1.4(B).
(b) REPRESENTATIONS AND WARRANTIES; DEFAULTS. The
representations and warranties of Borrower contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects
on and as of the related Subsequent Advance Closing Date with respect to
Borrower, any Additional Borrower assuming the Loan and the Loan Documents in
connection with such Subsequent Advance, the Properties and each Additional
Property to be encumbered with a Mortgage in connection with such Subsequent
Advance with the same effect as if made on and as of such date, no Default or
Event of Default shall have occurred and be continuing and Borrower shall be
in compliance in all material respects with all terms and conditions set
forth in this Agreement and in each Loan Document on Borrower's part to be
observed or performed. Lender shall have received an Officer's Certificate
confirming the foregoing and the representations and warranties set forth
herein with respect to Borrower, any Additional Borrower assuming the Loan
and the Loan Documents in connection with such Subsequent Advance, the
Properties, any Additional Property to be encumbered with a Mortgage in
connection with such Subsequent Advance or the Loan and containing such other
representations and warranties with respect to any Additional Borrower
assuming the Loan and the Loan Documents in connection with such Subsequent
Advance and any Additional Property to be encumbered with a Mortgage in
connection with such Subsequent Advance as Lender may reasonably require,
such certificate to be in form and substance satisfactory to Lender.
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(c) ASSUMPTION AND MODIFICATION OF EXISTING LOAN DOCUMENTS.
(i) If an Additional Borrower is to acquire title to any
Additional Property to be added as security for the Loan in connection with
such Subsequent Advance, (A) such Additional Borrower shall have executed,
acknowledged and delivered to Lender an assumption agreement, satisfactory in
form and substance to Lender in its sole discretion, pursuant to which, among
other things, such Additional Borrower shall assume, jointly and severally,
the Loan and all obligations of Borrower pursuant to the Note, this Agreement
and the other Loan Documents, (B) such Additional Borrower and each
Individual Borrower shall execute and deliver to Lender the Contribution
Agreement or an amendment to the Contribution Agreement adding such
Additional Borrower as a party thereto, as applicable, which Contribution
Agreement or amendment shall be satisfactory in form and substance to Lender
in its sole discretion, and (C) such Additional Borrower and/or each
Individual Borrower shall execute, acknowledge and deliver to Lender any
other document or instrument that Lender may require in connection with such
Additional Borrower's assumption of the Loan and the Loan Documents.
(ii) Borrower shall have executed, acknowledged and
delivered to Lender (i) an amendment to this Agreement setting forth the
information contained on SCHEDULE I-VII hereto with respect to any Additional
Property to be added as security for the Loan in connection with such
Subsequent Advance; (ii) any modification or amendment to any existing
Mortgage or Assignment of Leases encumbering any Individual Property as of
the Subsequent Advance Closing Date or any notice of such Subsequent Advance
that Lender reasonably determines is necessary or advisable to ensure that
such Mortgage or Assignment of Leases secures such Subsequent Advance and
evidence that counterparts of such modification, amendment or notice have
been delivered to the title company for recording and (iii) any other
modification, amendment or supplement to this Agreement or the other Loan
Documents that Lender may require in connection with such Subsequent Advance
and the related addition of any Additional Property as security for the Loan,
which modification, amendment or supplement does
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not modify or amend any material term of any Loan Document in a manner that
has a material adverse effect on Borrower unless such modification, amendment
or supplement is required due to the failure of any Individual Borrower, such
Additional Borrower, any Individual Property or any such Additional Property
to fulfill the conditions set forth in this SECTION 3.2.
(d) ADDITIONAL LOAN DOCUMENTS. An Individual Borrower or an
Additional Borrower shall have acquired title to any Additional Property to
be added as security for the Loan in connection with such Subsequent Advance
and such Individual Borrower or Additional Borrower shall have executed,
acknowledged and delivered to Lender (i) a Mortgage, an Assignment of Leases
and one or more UCC-1 Financing Statements with respect to each such
Additional Property and evidence that counterparts of such Mortgage,
Assignment of Leases and UCC-1 Financing Statements have been delivered to
the title company for recording or filing, as applicable, so as to
effectively create upon such recording valid and enforceable Liens upon such
Additional Property, of the requisite priority, in favor of Lender (or such
other trustee as may be desired under local law), subject only to the
Permitted Encumbrances and such other Liens as are permitted pursuant to the
Loan Documents; (ii) an Environmental Indemnity with respect to each such
Additional Property and (iii) any other additional document that Lender may
reasonably require with respect to the addition of each Additional Property
as security for the Loan in connection with such Subsequent Advance. If an
Additional Borrower shall have acquired title to the Lexington Property or
the Austin Property and such Additional Property is to be added as security
for the Loan in connection with such Subsequent Advance, such Additional
Borrower shall have executed and delivered to Lender a pledge of all of such
Additional Borrower's direct or indirect interest in the Individual Borrower
known as BA Parkway Associates II, L.P., which pledge shall be satisfactory
in form and substance to Lender in its sole discretion and shall constitute a
Loan Document.
(e) TITLE INSURANCE. Lender shall have received (i) any
"tie-in" or similar endorsement to each such Title Insurance Policy available
with respect to any Title Insurance Policy insuring the Lien of any Mortgage
encumbering an Additional Property delivered to Lender in connection with
such Subsequent Advance and (ii) a Title Insurance Policy (or a marked,
signed and redated commitment to issue such Title
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Insurance Policy) insuring the Lien of any Mortgage encumbering an Additional
Property delivered to Lender in connection with such Subsequent Advance,
issued by a title company acceptable to Lender and dated as of the Subsequent
Advance Closing Date, with reinsurance and direct access agreements
acceptable to Lender, which reinsurance agreements shall not include any
exception for creditors' rights if such exception may be omitted by the
issuer of such reinsurance agreements. Such Title Insurance Policies shall
(1) provide coverage in an amount equal to the amount of the Release Amount
of the related Additional Property if the tie-in or similar endorsement
described above is available, or, if such endorsement is not available, in an
amount equal to one hundred twenty-five percent (125%) of the Release Amount
of the related Additional Property, (2) insure Lender that the relevant
Mortgage creates a valid lien on such Additional Property encumbered thereby
of the requisite priority, free and clear of all exceptions from coverage
other than Permitted Encumbrances and standard exceptions and exclusions from
coverage (as modified by the terms of any endorsements), (3) contain such
endorsements and affirmative coverages as Lender may reasonably request, and
(4) name Lender as the insured. Such Title Insurance Policies shall be
assignable. Lender also shall have received evidence that all premiums in
respect of such endorsements, modifications and Title Insurance Policies have
been paid or will be paid from the proceeds of such Subsequent Advance
simultaneously with the closing of such Subsequent Advance.
(f) SURVEY. Lender shall have received a current title survey
for each Additional Property to be encumbered by a Mortgage in connection
with such Subsequent Advance, certified to the title company and Lender and
their successors and assigns, in form and substance satisfactory to Lender
and prepared by a professional and properly licensed land surveyor
satisfactory to Lender in accordance with the 1992 Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys. The Survey shall meet the
classification of an "Urban Survey" and the following additional items from
the list of "Optional Survey Responsibilities and Specifications" (Table A)
shall be added to each survey: 2, 3, 4, 6, 8, 9, 10, 11 and 13. Such survey
shall reflect the same legal description contained in the Title Insurance
Policy relating to such Additional Property and shall include, among other
things, a metes and bounds description of the real
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property comprising part of such Additional Property reasonably satisfactory
to Lender. The surveyor's seal shall be affixed to each survey and the
surveyor shall provide a certification for each survey in form and substance
reasonably acceptable to Lender.
(g) INSURANCE. Lender shall have received valid binders and
certificates of insurance for the policies of insurance required hereunder
with respect to each Additional Property to be encumbered by a Mortgage in
connection with such Subsequent Advance, all satisfactory to Lender in its
sole discretion, and evidence of the payment of all premiums payable for the
existing policy period. Borrower shall deliver to Lender copies of such
policies of insurance no later than fifteen (15) days after the Subsequent
Advance Closing Date with respect to such Subsequent Advance, which policies
shall be satisfactory to Lender in its sole discretion.
(h) ENVIRONMENTAL REPORTS. Lender shall have received a Phase
I environmental report in respect of each Additional Property to be
encumbered by a Mortgage in connection with such Subsequent Advance, which
Phase I environmental report shall include, among other things, the results
of testing for the presence of asbestos, lead paint and radon gas, in each
case satisfactory to Lender. Lender shall have received a Phase II
environmental report and the results of other environmental investigations in
respect of each Additional Property to be encumbered by a Mortgage in
connection with such Subsequent Advance if such Phase II environmental report
or other environmental investigation is recommended in the Phase I
environmental report or by Lender's environmental consultant, each such Phase
II environmental report or such results of other environmental investigations
to be satisfactory to Lender.
(i) ZONING; COMPLIANCE WITH LAWS. Evidence, in form and
substance satisfactory to Lender, confirming that each Additional Property to
be encumbered by a Mortgage in connection with such Subsequent Advance and
the use thereof is in full compliance with the applicable Legal Requirements
with respect to zoning, subdivision, building, environmental protection,
toxic waste, asbestos and all other Legal Requirements. Such evidence shall
include any and all certificates, licenses, permits, approvals or consents
therefor and, in addition, if required by Lender an opinion of Borrower's
counsel or architect as to the foregoing, including certificates of occupancy
or their legal equivalents permitting the use and occupancy of each such
Additional
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Property as a hotel. Such evidence shall be based upon title to each such
Additional Property held by the related Individual Borrower or Additional
Borrower and shall not depend upon easements or other similar interests
unless disclosed in writing to Lender and approved by Lender.
(j) ENCUMBRANCES. The applicable Individual Borrower or
Additional Borrower shall have taken or caused to be taken such actions in
such a manner so that Lender has a valid and perfected Lien of the requisite
priority as of the Subsequent Advance Closing Date with respect to each
Mortgage encumbering an Additional Property to be delivered in connection
with such Subsequent Advance, subject only to applicable Permitted
Encumbrances and such other Liens as are permitted pursuant to the Loan
Documents, and Lender shall have received satisfactory evidence thereof.
(k) RELATED DOCUMENTS. Each additional document not
specifically referenced in this SECTION 3.2, but relating to the transactions
contemplated herein, shall have been duly authorized, executed and delivered
by all parties thereto and Lender shall have received and approved certified
copies thereof.
(l) ORGANIZATIONAL DOCUMENTS. (i) Each Individual Borrower
shall deliver or cause to be delivered to Lender updates or confirmations as
to continued effectiveness without modification, certified by such Individual
Borrower or the appropriate filing office, as designated by Lender, of all
organizational documentation related to such Individual Borrower and its
general and limited partners or members, as applicable, and/or the formation,
structure, existence, good standing and/or qualification to do business of
such Persons delivered to Lender in connection with the Initial Advance and
such additional organizational and authorizing documentation as Lender may
request in its sole discretion pertaining to the Subsequent Advance
including, without limitation, good standing certificates, qualifications to
do business in the appropriate jurisdictions and taking into consideration
any Additional Property to be encumbered by a Mortgage in connection with
such Subsequent Advance, resolutions authorizing the entering into of the
Subsequent Advance and any related documentation and incumbency certificates,
all in form and substance satisfactory to Lender in its reasonable discretion
and (ii) if an Additional Borrower is to acquire title to any Additional
Property to be added as security
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for the Loan in connection with such Subsequent Advance, such Additional
Borrower (other than the Additional Borrower holding title to the Lexington
Property) shall be a newly-formed entity and such Additional Borrower shall
comply with the terms and provisions of SECTION 4.1(FF) and shall deliver or
cause to be delivered to Lender copies certified by such Additional Borrower
or the appropriate public filing office, as designated by Lender, of all
organizational documentation related to such Additional Borrower and its
general and limited partners or members, as applicable, and/or the formation,
structure, existence, good standing and/or qualification to do business of
such Persons, as Lender may request in its reasonable discretion, including,
without limitation, good standing certificates, qualifications to do business
in the appropriate jurisdictions, resolutions authorizing the assumption of
the Loan and the other transactions contemplated by this Agreement and
incumbency certificates, all in form and substance satisfactory to Lender in
its sole discretion. If the Lexington Property is to be added as security for
the Loan in connection with such Subsequent Advance, the limited partnership
interest in BA Parkway Associates II, L.P. held by CapStar Lexington Company,
L.L.C., as nominee, may be transferred to the Additional Borrower holding
title to the Lexington Property, provided that all documentation with respect
to such transfer shall be satisfactory in form and substance to Lender in its
sole discretion, all requirements with respect to such Additional Borrower
set forth in this SECTION 3.2(L) shall be satisfied and BA Parkway Associates
II, L.P. and its general and limited partners shall continue to comply with
the terms and provisions of SECTION 4.1(FF) after the consummation of such
transfer.
(m) OPINIONS OF BORROWER'S COUNSEL. Lender shall have received
opinions of Borrower's counsel, which counsel shall be reasonably acceptable to
Lender, with respect to due execution, authority, enforceability of any of the
documents described in clauses (c) and (d) above and such other matters as
Lender may reasonably require in connection with the Subsequent Advance, all
such updates and opinions in form, scope and substance customary for rated
transactions and satisfactory to Lender in its reasonable discretion; provided,
however, that Lender shall not require an Insolvency Opinion other than as may
be required to address certain concerns with respect to the partners, members or
other Affiliates of an Additional Borrower acquiring title to an Additional
Property to be added as security for the Loan in connection with such
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Subsequent Advance, which partners, members or other Affiliates are not
Affiliates of CapStar Hotel Company, or as may be required pursuant to
SECTION 9.2.
(n) GROUND LEASE. If any portion of an Additional Property to
be encumbered by a Mortgage in connection with such Subsequent Advance is a
leasehold interest, (i) the related Ground Lease shall be satisfactory in
form and substance to Lender or Borrower shall obtain such amendments or
modifications to such Ground Lease and such nondisturbance or other
agreements from the lessor under such Ground Lease that Lender shall deem
necessary or advisable in order for the leasehold interest pursuant to such
Ground Lease to constitute acceptable collateral for the Loan and (ii)
Borrower shall have delivered to Lender an estoppel certificate from the
lessor under such Ground Lease, which estoppel certificate shall be
satisfactory in form and substance to Lender.
(o) BUDGETS. Borrower shall have delivered, and Lender shall
have approved, the Annual Budget for the current Fiscal Year and, if
available, for the succeeding Fiscal Year.
(p) BASIC CARRYING COSTS. Borrower shall have paid all Basic
Carrying Costs relating to each of the Properties and each Additional
Property to be encumbered by a Mortgage in connection with such Subsequent
Advance which are in arrears, including without limitation, (i) accrued but
unpaid insurance premiums with respect to each of the Properties and each
Additional Property to be added as an Individual Property in connection with
such Subsequent Advance, (ii) currently due Taxes (including any in arrears)
relating to each of the Properties and each Additional Property to be
encumbered by a Mortgage in connection with such Subsequent Advance and (iii)
currently due Other Charges relating to each of the Properties and each
Additional Property to be encumbered by a Mortgage in connection with such
Subsequent Advance, which amounts shall be funded with proceeds of the
Subsequent Advance.
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(q) ESCROWS. Borrower shall make such additional deposits to
the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Capital
Expenditures Reserve Fund, and the Ground Lease Escrow Fund, if applicable,
as required pursuant to the terms and provisions of the Agreement with
respect to each Additional Property to be encumbered by a Mortgage in
connection with such Subsequent Advance, which amounts may be funded from the
proceeds of such Subsequent Advance.
(r) COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with such Subsequent Advance
contemplated by this Agreement and other Loan Documents and all documents
incidental thereto shall be satisfactory in form and substance to Lender, and
Lender shall have received all such counterpart originals or certified copies
of such documents as Lender may reasonably request.
(s) PAYMENTS. All payments, deposits or escrows required to be
made or established by Borrower under this Agreement, the Note and the other
Loan Documents on or before the Subsequent Advance Closing Date with respect
to such Subsequent Advance shall have been paid or shall be paid or
established from the proceeds of such Subsequent Advance simultaneously with
the closing of such Subsequent Advance.
(t) ENGINEERING REPORTS. Lender shall have received a
structural engineering report with respect to each Additional Property to be
encumbered with a Mortgage in connection with such Subsequent Advance, which
report shall include, among other things, an analysis of deferred maintenance
and ongoing capital expenditure reserve requirements with respect to such
Additional Property and shall be satisfactory in form and substance to Lender.
(u) FINANCIAL AND OPERATING STATEMENTS. Lender shall have
received (i) financial statements for each Additional Property to be
encumbered with a Mortgage in connection with such Subsequent Advance,
audited by a certified public accounting firm acceptable to Lender, for the
two (2) completed Fiscal Years occurring two (2) and three (3) years prior to
the Subsequent Advance Closing Date with respect to such Subsequent Advance,
if available, and for the completed Fiscal Year immediately prior to the
Subsequent Advance Closing Date with respect to such Subsequent Advance and
(ii) unaudited financial statements for each such Additional Property for the
portion of the current Fiscal Year elapsed as of such Subsequent Advance
Closing Date, all such
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financial statements described in clauses (i) and (ii) to be prepared in
accordance with procedures, and in form and substance, satisfactory to
Lender. Lender shall have received operating statements for each such
Additional Property, verified by a certified public accounting firm
acceptable to Lender, for each such Additional Property for Fiscal Years
designated by Lender and a current trailing twelve (12) month operating
statement for each such Additional Property.
(v) UTILITY SERVICES AND PARKING. Lender shall have received
evidence satisfactory to Lender that each Additional Property to be encumbered
with a Mortgage in connection with such Subsequent Advance is served by all
public utilities and contains adequate parking necessary or convenient for the
full use and enjoyment of such Additional Property.
(w) CREDIT REPORTS AND SEARCHES. Lender shall have received
such credit reports, references, UCC and judgment searches and other information
with respect to each Individual Borrower and any Additional Borrower assuming
the Loan and the Loan Documents in connection with such Subsequent Advance and
their respective principals, general and limited partners or members, and the
Managers as lender may request, all of which shall be satisfactory in form and
substance to Lender.
(x) EQUIPMENT LEASES. Lender shall have received copies of all
equipment leases and leases of personal property in effect as of the Closing
Date with respect to each Additional Property to be encumbered with a Mortgage
in connection with such Subsequent Advance, each of which shall be certified by
Borrower and satisfactory to Lender.
(y) UNDERLYING ASSET DOCUMENTATION. Lender shall have received
a copy of each deed conveying each Additional Property to be encumbered with a
Mortgage in connection with such Subsequent Advance to an Individual Borrower or
an Additional Borrower, as applicable, each of which shall be satisfactory in
form and substance to Lender in its sole discretion.
(z) ESTOPPEL CERTIFICATES. Borrower shall have delivered to
Lender an estoppel certificate executed by the tenant under each of the Leases
of space at each
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Additional Property to be encumbered with a Mortgage in connection with such
Subsequent Advance demising ten percent (10%) or more of the rentable square
footage of the portion of each such Additional Property made available for
lease and under such other Leases of space at each such Additional Property
as shall be necessary for Lender to have received estoppel certificates from
tenants under Leases of space at each such Additional Property demising a
total of no less than seventy percent (70%) of the rentable square footage of
each such Additional Property made available for lease. All such estoppel
certificates shall be in form and substance satisfactory to Lender.
(aa) LEASES AND RENT ROLLS. Lender shall have received
certified copies of all Leases of space at each Additional Property to be
encumbered with a Mortgage in connection with such Subsequent Advance, each
of which shall be satisfactory to Lender. Lender shall have received a
current certified rent roll of each Additional Property to be encumbered with
a Mortgage in connection with such Subsequent Advance (i) listing each and
every Lease with respect to such Additional Property by the names of all
tenants and square footage or other identification of space leased, (ii)
listing the monthly rental and all other charges payable under each Lease and
the date to which such rental and other charges have been paid, (iii) listing
the term of each Lease, the date of occupancy and the date of expiration,
(iv) setting forth any rent arrears and amounts taken in settlement of
outstanding arrears, (v) listing any collections of rent for more than one
(1) month in advance, (vi) describing any material special provision,
concession or inducement granted to the tenant under each Lease and (vii)
setting forth such other information as is reasonably requested by Lender.
Each such rent roll shall be satisfactory in form and substance to Lender.
(bb) SUBORDINATION AND ATTORNMENT. Lender shall have received
appropriate instruments acceptable to Lender subordinating all of the Leases
affecting each Additional Property to be encumbered with a Mortgage in
connection with such Subsequent Advance designated by Lender to the related
Mortgage, except such Leases as Lender may specifically require to be
superior to the related Mortgage and such Leases that contain self-executing
subordination provisions acceptable to Lender. Lender shall have received an
agreement to attorn to Lender satisfactory to Lender from any tenant under a
Lease that does not provide for such attornment by its terms.
(cc) DEBT SERVICE COVERAGE RATIO AND LTV RATIO. The Debt
Service Coverage Ratio with respect to the Loan, including such Subsequent
Advance, projected
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by Lender for the twelve (12) month period immediately following the
Subsequent Advance Closing Date with respect to such Subsequent Advance shall
be no less than 1.15 and the LTV Ratio as of such Subsequent Advance Closing
Date shall be no more than sixty-five percent (65%).
(dd) TAX LOT. Lender shall have received evidence that each
Additional Property to be encumbered with a Mortgage in connection with such
Subsequent Advance constitutes a separate tax lot, which evidence shall be
satisfactory in form and substance to Lender.
(ee) MANAGEMENT AGREEMENT. Lender shall have received a
certified copy of the Management Agreement with respect to each Additional
Property to be encumbered with a Mortgage in connection with such Subsequent
Advance satisfactory in form and substance to Lender. Each Manager and the
related Individual Borrower or Additional Borrower shall have executed and
delivered to Lender an Assignment of Management Agreement with respect to
each Management Agreement for each Additional Property to be encumbered with
a Mortgage in connection with such Subsequent Advance.
(ff) FRANCHISE AGREEMENT. Lender shall have received a
certified copy of the Franchise Agreement with respect to each Additional
Property to be encumbered with a Mortgage in connection with such Subsequent
Advance, satisfactory in form and substance to Lender. The related Franchisor
shall have executed and delivered to Lender a Franchisor Recognition
Agreement with respect to each Franchise Agreement for each such Additional
Property.
(gg) ADDITIONAL DOCUMENTATION. Lender shall have received any
additional reports, documentation, site inspections, title insurance,
property, casualty and liability insurance reviews, surveys and other due
diligence items customarily requested by Lender in connection with the
origination of mortgage loans comparable to the Loan and any other
information that Lender may deem appropriate in order to comply with Lender's
due diligence procedures with respect to such Subsequent Advance and each
Additional Property to be encumbered with a Mortgage in connection with such
Subsequent Advance.
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(hh) LOAN FEE AND TRANSACTION COSTS. Borrower shall have paid
Lender a fee in consideration of the underwriting and origination of such
Subsequent Advance in the amount of one percent (1%) of such Subsequent
Advance. Borrower shall have paid or reimbursed Lender for all costs and
expenses in connection with such Subsequent Advance, including, without
limitation, the reasonable fees and disbursements of Lender's New York and
local counsel, the costs of all appraisals and engineering and environmental
reports, all title insurance premiums, all survey charges, any mortgage,
documentary stamp and intangible taxes, all recording charges, any brokerage
fees and commissions and any auditor's fees.
(ii) MATERIAL ADVERSE CHANGE. The income and expenses of each
Individual Property and each Additional Property to be encumbered with a
Mortgage in connection with such Subsequent Advance, the financial statements
of Borrower and any Additional Borrower assuming the Loan and the Loan
Documents in connection with such Subsequent Advance, the occupancy rate,
Leases and rent roll with respect to each Individual Property and each such
Additional Property and all other features of the Loan and such Subsequent
Advance shall be as represented to Lender and all documents and
communications delivered to Lender in order to induce Lender to make the Loan
or such Subsequent Advance shall be without material adverse change and
Lender shall have received an Officer's Certificate as to the foregoing. No
portion of any Individual Property or Additional Property to be encumbered
with a Mortgage in connection with such Subsequent Advance shall have been
damaged and not repaired to Lender's satisfaction unless a reserve or other
provision for repair of such damage satisfactory to Lender has been
established or made. No portion of any Individual Property shall have been
taken in condemnation or other similar proceeding. No condemnation or other
similar proceeding shall be pending that may materially and adversely affect
any Individual Property or Additional Property to be encumbered with a
Mortgage in connection with such Subsequent Advance or for which reserves or
other provisions for restoration of the affected Individual Property or
Additional Property satisfactory to Lender in its sole discretion have not
been established. No structural change in the physical condition of any
portion of any Individual Property or Additional Property to be encumbered
with a Mortgage in connection with such Subsequent Advance shall have
occurred since the date of the related structural engineering report
delivered to Lender other than alterations to an Individual Property or an
Additional Property approved by Lender. No Individual Borrower, or Additional
Borrower assuming the Loan and the Loan Documents in connection with such
Subsequent Advance, general or limited partners or members of any Individual
Borrower or any such Additional Borrower or other Person directly or
indirectly in control of, or controlled by, any Individual Borrower or any
such Additional Borrower (other than a Non-CapStar Person with respect to
which a nonconsolidation opinion reasonably satisfactory to Lender has been
delivered ), or tenants under any Leases deemed by Lender to be material to
the security for such Subsequent Advance or the Loan or guarantors of any
such Leases shall be the subject of any bankruptcy, reorganization or
insolvency proceeding. No Individual Borrower or Additional Borrower assuming
the Loan and the
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Loan Documents in connection with such Subsequent Advance or general or
limited partner or member of any Individual Borrower or any such Additional
Borrower (other than a Non-CapStar Person with respect to which a
nonconsolidation opinion reasonably satisfactory to Lender has been delivered
to Lender) shall be in default under any loan or financing provided to such
Individual Borrower, Additional Borrower, general or limited partner or
member, other than defaults under equipment lease financings or resulting
from the failure to pay trade payables, which financings or trade payables
are being disputed in good faith and do not exceed One Hundred Thousand and
No/100 Dollars ($100,000) in the aggregate. No asbestos or other hazardous
substances shall have been discovered at any Individual Property or
Additional Property to be encumbered with a Mortgage in connection with such
Subsequent Advance other than as disclosed in the related Phase I
environmental report delivered to Lender and, if applicable, Phase II
environmental report delivered to Lender, unless provisions for the
remediation of such asbestos or other hazardous substances satisfactory to
Lender in its sole discretion have been made.
(jj) LEXINGTON PROPERTY. Notwithstanding anything to the
contrary set forth in this Agreement or any other Loan Document, if the
Lexington Property is to be added as security for the Loan in connection with
such Subsequent Advance, (i) the Lexington Property shall only secure the
portion of the Loan consisting of the Release Amount for the Lexington
Property, together with all interest thereon and all other sums (including
the Exit Fee) payable to Lender with respect to such portion of the Loan or
the Lexington Property, and the performance of all other obligations by the
related Additional Borrower under the Loan Documents with respect to the
Lexington Property only (such portion of the Loan, interest, other sums and
obligations being hereinafter
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referred to collectively as the "LEXINGTON OBLIGATIONS"); (ii) the Loan
Documents other than the Loan Documents with respect to the Lexington
Property shall not secure the Lexington Obligations and (iii) a Default or
Event of Default with respect to the Lexington Obligations shall constitute a
Default or Event of Default, as applicable, under this Agreement and the
other Loan Documents and a Default or Event of Default under this Agreement
or any other Loan Documents, regardless of whether such Default or Event of
Default shall have occurred with respect to the Lexington Obligations, shall
constitute a Default or Event of Default, as applicable, under the Loan
Documents with respect to the Lexington Property.
SECTION 3.3 CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCES NOT
INVOLVING ADDITIONAL PROPERTIES.
The obligation of Lender to make any Subsequent Advance
hereunder in connection with which no Additional Property is to be added as
security for the Loan is subject to the fulfillment by Borrower or waiver by
Lender of the following conditions precedent no later than the Subsequent
Advance Closing Date with respect to such Subsequent Advance:
(a) SUBSEQUENT ADVANCE REQUEST. Lender shall have received
a Subsequent Advance Request in accordance with SECTION 2.1.4.(B).
(b) REPRESENTATIONS AND WARRANTIES; DEFAULTS. The
representations and warranties of Borrower contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects
on and as of the related Subsequent Advance Closing Date with respect to
Borrower and the Properties with the same effect as if made on and as of such
date, no Default or Event of Default shall have occurred and be continuing
and Borrower shall be in compliance in all material respects with all terms
and conditions set forth in this Agreement and in each Loan Document on
Borrower's part to be observed or performed. Lender shall have received an
Officer's Certificate confirming the foregoing and the representations and
warranties set forth herein with respect to Borrower and the Loan Document in
connection with such Subsequent Advance, such certificate to be in form and
substance satisfactory to Lender.
(c) MODIFICATION OF EXISTING LOAN DOCUMENTS. Borrower shall
have executed, acknowledged and delivered to Lender any modification or
amendment to any existing Mortgage or Assignment of Leases encumbering any
Individual Property as of
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the Subsequent Advance Closing Date or any notice of such Subsequent Advance
that Lender reasonably determines is necessary or advisable to ensure that
such Mortgage or Assignment of Leases secures such Subsequent Advance and
evidence that counterparts of such modification, amendment or notice have
been delivered to the title company for recording and any other modification,
amendment or supplement to this Agreement or the other Loan Documents that
Lender may require in connection with such Subsequent Advance.
(d) TITLE INSURANCE. Lender shall have received any
endorsement to or other modifications of, each Title Insurance Policy
insuring the Lien of an existing Mortgage delivered in connection with any
prior advance of the proceeds of the Loan as Lender determines is necessary
or advisable to ensure the continued priority of the Lien of such existing
Mortgage as amended or modified in connection with such Subsequent Advance
and as security for the Loan, including such Subsequent Advance, and issued
by a title company acceptable to Lender and dated as of the Subsequent
Advance Closing Date, with reinsurance and direct access agreements
acceptable to Lender, which reinsurance agreements shall not include any
exception for creditors' rights if such exception may be omitted by the
issuer of such reinsurance agreements. Lender also shall have received
evidence that all premiums in respect of such endorsements and modifications
have been paid or will be paid from the proceeds of such Subsequent Advance
simultaneously with the closing of such Subsequent Advance.
(e) RELATED DOCUMENTS. Each additional document not
specifically referenced in Section 3.3, but relating to the transactions
contemplated herein, shall have been duly authorized, executed and delivered
by all parties thereto and Lender shall have received and approved certified
copies thereof.
(f) ORGANIZATIONAL DOCUMENTS. Each individual Borrower shall
deliver or cause to be delivered to Lender updates or confirmations as to
continued effectiveness without modification, certified by such Individual
Borrower or the appropriate filing office, as designated by Lender, of all
organizational documentation related to such Individual Borrower and its
general and limited partners or members, as applicable, and/or the formation,
structure, existence, good standing and/or qualification to do
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business of such Persons delivered to Lender in connection with the Initial
Advance and such additional organizational and authorizing documentation as
Lender may request in its sole discretion pertaining to the Subsequent
Advance including, without limitation, resolutions authorizing the entering
into of the Subsequent Advance and any related documentation and incumbency
certificates, all in form and substance satisfactory to Lender in its
reasonable discretion.
(g) OPINIONS OF BORROWER'S COUNSEL. Lender shall have received
opinions of Borrower's counsel, which counsel shall be reasonably acceptable
to Lender, with respect to due execution, authority, enforceability of any of
the documents described in clause (c) above and such other matters as Lender
may reasonably require in connection with the Subsequent Advance, all such
updates and opinions in form, scope and substance customary for rated
transactions and satisfactory to Lender in its reasonable discretion;
provided, however, that Lender shall not require an Insolvency Opinion other
than as may be required pursuant to SECTION 3.2(M) or SECTION 9.1.
(h) BUDGETS. Borrower shall have delivered, and Lender shall
have approved, the Annual Budget for the current Fiscal Year and, if
available, for the succeeding Fiscal Year.
(i) BASIC CARRYING COSTS. Borrower shall have paid all Basic
Carrying Costs relating to each of the Properties which are in arrears,
including without limitation, (i) accrued but unpaid insurance premiums with
respect to each of the Properties, (ii) currently due Taxes (including any in
arrears) relating to each of the Properties and (iii) currently due Other
Charges relating to each of the Properties, which amounts shall be funded
with proceeds of the Subsequent Advance.
(j) COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with such Subsequent Advance
contemplated by this Agreement and other Loan Documents and all documents
incidental thereto shall be satisfactory in form and substance to Lender, and
Lender shall have received all such counterpart originals or certified copies
of such documents as Lender may reasonably request.
(k) PAYMENTS. All payments, deposits or escrows required to be
made or established by Borrower under this Agreement, the Note and the other
Loan Documents on or before the Subsequent Advance Closing Date with respect
to such
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Subsequent Advance shall have been paid or shall be paid or established from
the proceeds of such Subsequent Advance simultaneously with the closing of
such Subsequent Advance.
(l) CREDIT REPORTS AND SEARCHES. Lender shall have received
such credit reports, references, UCC and judgment searches and other
information with respect to each Individual Borrower and their respective
principals, general and limited partners or members, and each Manager as
lender may request, all of which shall be satisfactory in form and substance
to Lender.
(m) DEBT SERVICE COVERAGE RATIO AND LTV RATIO. The Debt Service
Coverage Ratio with respect to the Loan, including such Subsequent Advance,
projected by Lender for the twelve (12) month period immediately following
the Subsequent Advance Closing Date with respect to such Subsequent Advance
shall be no less than 1.15 and the LTV Ratio as of such Subsequent Advance
Closing Date shall be no more than sixty-five percent (65%).
(n) ADDITIONAL DOCUMENTATION. Lender shall have received any
additional reports, documentation, site inspections, title insurance,
property, casualty and liability insurance reviews, surveys and other due
diligence items customarily requested by Lender in connection with the
origination of mortgage loans comparable to the Loan and any other
information that Lender may deem appropriate in order to comply with Lender's
due diligence procedures with respect to such Subsequent Advance.
(o) LOAN FEE AND TRANSACTION COSTS. Borrower shall have paid
Lender a fee in consideration of the underwriting and origination of such
Subsequent Advance in the amount of one percent (1%) of such Subsequent
Advance. Borrower shall have paid or reimbursed Lender for all costs and
expenses incurred in connection with such Subsequent Advance, including,
without limitation, the reasonable fees and disbursements of Lender's New
York and local counsel, the costs of all title insurance premiums, any
mortgage, documentary stamp and intangible taxes, all recording charges, any
brokerage fees and commissions and any auditor's fees.
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(p) MATERIAL ADVERSE CHANGE. The income and expenses of each
Individual Property, the financial statements of Borrower, the occupancy
rate, Leases and rent roll with respect to each Individual Property and all
other features of the Loan and such Subsequent Advance shall be as
represented to Lender and all documents and communications delivered to
Lender in order to induce Lender to make the Loan or such Subsequent Advance
shall be without material adverse change and Lender shall have received an
Officer's Certificate as to the foregoing. No portion of any Individual
Property shall have been damaged and not repaired to Lender's satisfaction
unless a reserve or other provision for repair of such damage satisfactory to
Lender has been established or made. No portion of any Individual Property
shall have been taken in condemnation or other similar proceeding. No
condemnation or other similar proceeding shall be pending that may materially
and adversely affect any Individual Property or for which reserves or other
provisions for restoration of the affected Individual Property satisfactory
to Lender in its sole discretion have not been established. No structural
change in the physical condition or any portion of any Individual Property or
Additional Property to be encumbered with a Mortgage in connection with such
Subsequent Advance shall have occurred since the date of the related
structural engineering report delivered to Lender other than alterations to
an Individual Property approved by Lender. No Individual Borrower, general or
limited partners or members of any Individual Borrower or other Person
directly or indirectly in control of, or controlled by, any Individual
Borrower (other than a Non-CapStar Person with respect to which a
nonconsolidation opinion reasonably satisfactory to Lender has been delivered
to Lender), or tenants under any Leases deemed by Lender to be material to
the security for such Subsequent Advance or the Loan or guarantors of any
such Leases shall be the subject of any bankruptcy, reorganization or
insolvency proceeding. No Individual Borrower or general or limited partner
or member of any Individual Borrower (other than a Non-CapStar Person with
respect to which a nonconsolidation opinion reasonably satisfactory to Lender
has been delivered to Lender) shall be in default under any loan or financing
provided to such Individual Borrower, general or limited partner or member,
other than defaults under equipment lease financings or resulting from the
failure to pay trade payables, which financings or trade payables are being
disputed in good faith and do not exceed One Hundred Thousand and No/100
Dollars ($100,000) in the aggregate. No asbestos or other hazardous
substances shall have been discovered at any Individual Property other than
as disclosed in the related Phase I environmental report delivered to Lender
and, if
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applicable, Phase II environmental report delivered to Lender, unless
provisions for the remediation of such asbestos or other hazardous substances
satisfactory to Lender in its sole discretion have been made.
IV. REPRESENTATIONS AND WARRANTIESTIES
SECTION 4.1 BORROWER REPRESENTATIONS.
Borrower represents and warrants as of the date hereof and as
of the Closing Date that:
(a) ORGANIZATION. Each Individual Borrower has been duly
organized and is validly existing and in good standing with requisite power
and authority to own its properties and to transact the businesses in which
it is now engaged. Each Individual Borrower is duly qualified to do business
and is in good standing in each jurisdiction where it is required to be so
qualified in connection with its properties, businesses and operations. Each
Individual Borrower possesses all rights, licenses, permits and
authorizations, governmental or otherwise, necessary to entitle it to own its
properties and to transact the businesses in which it is now engaged, and the
sole business of each Individual Borrower is the ownership, management and
operation of the Properties.
(b) PROCEEDINGS. Each Individual Borrower has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and the other Loan Documents. This Agreement and such other Loan
Documents have been duly executed and delivered by or on behalf of each
Individual Borrower and constitute legal, valid and binding obligations of
each Individual Borrower enforceable against each Individual Borrower in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(c) NO CONFLICTS. The execution, delivery and performance of
this Agreement and the other Loan Documents by Borrower will not conflict
with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance (other than pursuant to
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the Loan Documents) upon any of the property or assets of any Individual
Borrower pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement, partnership agreement, management agreement, franchise
agreement or other agreement or instrument to which any Individual Borrower
is a party or by which any Individual Borrower's property or assets is
subject, nor will such action result in any violation of the provisions of
any statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over any Individual Borrower or any
Individual Borrower's properties or assets, and any consent, approval,
authorization, order, registration or qualification of or with any court or
any such regulatory authority or other governmental agency or body required
for the execution, delivery and performance by Borrower of this Agreement or
any other Loan Documents has been obtained and is in full force and effect.
(d) LITIGATION. Except as otherwise set forth on SCHEDULE VII
hereto, there are no actions, suits or proceedings at law or in equity by or
before any Governmental Authority or other agency now pending or threatened
against or affecting any Individual Borrower or now pending or, to the best
knowledge of Borrower, threatened against or affecting any of the Properties,
which actions, suits or proceedings, if determined against any Individual
Borrower or any of the Properties, would materially adversely affect the
condition (financial or otherwise) or business of Borrower or the condition
or ownership of any of the Properties.
(e) AGREEMENTS. No Individual Borrower is a party to any
agreement or instrument or subject to any court order, judgment or other
legal restriction which would materially and adversely affect Borrower or any
of the Properties, or Borrower's business, properties or assets, operations
or condition, financial or otherwise. Borrower is not in default in any
material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
to which it is a party or by which any Individual Borrower or any of its
Properties are bound, other than defaults under equipment lease financings or
resulting from the failure to pay trade payables, which financings or trade
payables are being disputed in good faith and do not exceed One Hundred
Thousand and No/100 Dollars ($100,000) in the aggregate .
(f) TITLE. Each Individual Borrower has good, marketable and
insurable fee or leasehold, as applicable, title to the real property
comprising part of the Individual
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Property with respect to which such Individual Borrower has executed and
delivered a Mortgage and good title to the balance of such Individual
Property, free and clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are permitted pursuant to the Loan
Documents and the Liens created by the Loan Documents. Each Mortgage intended
to encumber any of the Properties, when properly recorded in the appropriate
records, together with any Uniform Commercial Code financing statements
required to be filed in connection therewith, will create (i) a valid,
perfected lien on the applicable Individual Property, subject only to
Permitted Encumbrances and the Liens created by the Loan Documents and (ii)
perfected security interests in and to, and perfected collateral assignments
of, all personalty (including the Leases), all in accordance with the terms
thereof, in each case subject only to any applicable Permitted Encumbrances,
such other Liens as are permitted pursuant to the Loan Documents and the
Liens created by the Loan Documents. There are no claims for payment for
work, labor or materials affecting any of the Properties which are or, to the
best of Borrower's knowledge after diligent inquiry, may become a Lien prior
to, or of equal priority with, the Liens created by the Loan Documents,
unless such claim is being contested by Borrower in accordance with SECTION
5.1(M).
(g) NO BANKRUPTCY FILING. No Individual Borrower is
contemplating either the filing of a petition by it under any state or
federal bankruptcy or insolvency laws or the liquidation of all or a major
portion of such Individual Borrower's assets or property, and no Individual
Borrower has knowledge of any Person contemplating the filing of any such
petition against it.
(h) FULL AND ACCURATE DISCLOSURE. No statement of fact made by
Borrower in this Agreement or in any of the other Loan Documents contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading.
There is no fact presently known to Borrower which has not been disclosed to
Lender which materially and adversely affects, nor as far as Borrower can
foresee, would materially and adversely affect, any of the Properties or the
business, operations or condition (financial or otherwise) of Borrower.
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(i) NO PLAN ASSETS. Borrower is not an "employee benefit plan,"
as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of
the assets of Borrower constitutes or will constitute "plan assets" of one or
more such plans within the meaning of 29 C.F.R. Section 2510.3-101.
(j) COMPLIANCE. Borrower and each of the Properties and the use
thereof comply in all material respects with all applicable Legal
Requirements, including, without limitation, building and zoning ordinances
and codes, other than violations of Legal Requirements for which reserves or
other provisions for the cure of such violations satisfactory to Lender in
its sole discretion have been established. Borrower is not in default or
violation of any order, writ, injunction, decree or demand of any
Governmental Authority, the violation of which would materially adversely
affect the condition (financial or otherwise) or business of Borrower. There
has not been committed by Borrower or, to the best knowledge of Borrower, any
other Person in occupancy of, or involved with the operation or use of, the
Properties any act or omission affording the federal government or any state
or local government the right of forfeiture as against any of the Properties
or any part thereof or any monies paid in performance of Borrower's
obligations under any of the Loan Documents. Borrower hereby covenants and
agrees not to commit, permit or suffer to exist any act or omission affording
such right of forfeiture.
(k) FINANCIAL INFORMATION. All financial data, including,
without limitation, the statements of cash flow and income and operating
expense, that have been delivered to Lender in respect of the Properties (i)
are true, complete and correct in all material respects, (ii) accurately
represent the financial condition of Borrower and the Properties as of the
date of such reports, and (iii) to the extent prepared or audited by an
independent certified public accounting firm, have been prepared in
accordance with GAAP throughout the periods covered, except as disclosed
therein. Borrower does not have any contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments that are known to Borrower and
reasonably likely to have a materially adverse effect on the Properties or
the operation thereof as hotels or the operation of any office space forming
a part of the Properties, except as referred to or reflected in said
financial statements. Since the date of such financial statements, there has
been no materially adverse change
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in the financial condition, operations or business of Borrower from that set
forth in said financial statements.
(l) CONDEMNATION. No Condemnation or other proceeding has been
commenced or, to Borrower's best knowledge, is contemplated with respect to
all or any portion of any of the Properties or for the relocation of roadways
providing access to any of the Properties, other than as disclosed to Lender
in writing and approved by Lender.
(m) FEDERAL RESERVE REGULATIONS. No part of the proceeds of the
Loan will be used for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or for any other purpose which would be inconsistent
with such Regulation U or any other Regulations of such Board of Governors,
or for any purposes prohibited by Legal Requirements or by the terms and
conditions of this Agreement or the other Loan Documents.
(n) UTILITIES AND PUBLIC ACCESS. Each of the Properties has
rights of access to public ways and is served by water, sewer, sanitary sewer
and storm drain facilities adequate to service such Property for its
respective intended uses. All public utilities necessary or convenient to the
full use and enjoyment of each of the Properties are located either in the
public right-of-way abutting such Properties (which are connected so as to
serve the Properties without passing over other property) or in recorded
easements serving such Properties and such easements are set forth in the
Title Insurance Policies. All roads necessary for the use of each of the
Properties for their current respective purposes have been completed and
dedicated to public use and accepted by all Governmental Authorities, other
than as disclosed to Lender in writing and approved by Lender.
(o) NOT A FOREIGN PERSON. No Individual Borrower is a
"foreign person" within the meaning of ss.1445(f)(3) of the Code.
(p) SEPARATE LOTS. Each Individual Property is comprised of
one (1) or more parcels which constitutes a separate tax lot and does
not constitute a portion of any other tax lot not a part of such
Individual Property.
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(q) ASSESSMENTS. There are no pending or proposed special or
other assessments for public improvements or otherwise affecting any of the
Properties, nor are there any contemplated improvements to any of the
Properties that may result in such special or other assessments, other than
as are currently being paid by Borrower in a timely manner or as otherwise
disclosed to Lender in writing and approved by Lender.
(r) ENFORCEABILITY. The Loan Documents are not subject to any
right of rescission, set-off, counterclaim or defense by any Individual
Borrower, including the defense of usury, nor would the operation of any of
the terms of the Loan Documents, or the exercise of any right thereunder,
render the Loan Documents unenforceable, and no Individual Borrower has
asserted any right of rescission, set-off, counterclaim or defense with
respect thereto.
(s) NO PRIOR ASSIGNMENT. There are no prior assignments of
the Leases or any portion of the Rents due and payable or to become due and
payable which are presently outstanding.
(t) INSURANCE. Borrower has obtained and has delivered to
Lender valid binders and certificates of insurance for all insurance policies
reflecting the insurance coverages, amounts and other requirements set forth
in this Agreement. No Person, including Borrower, has done, by act or
omission, anything which would impair the coverage of any such policy, except
as disclosed to Lender in writing and approved by Lender.
(u) USE OF PROPERTIES. Each of the Properties is used
exclusively for hotel and/or office purposes and other appurtenant and
related uses including, but not limited to, restaurants and lounges.
(v) CERTIFICATE OF OCCUPANCY; LICENSES. All certifications,
permits, licenses and approvals, including without limitation, certificates
of completion and occupancy permits and any applicable liquor license
required for the legal use, occupancy and operation of each of the Properties
as a hotel or a hotel and office building, as applicable (collectively, the
"LICENSES"), have been obtained and are in full force and effect. The
Borrower shall keep and maintain all licenses necessary for the operation of
each of the Properties as a hotel or a hotel and office building, as
applicable. The use
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being made of each Individual Property is in conformity with the certificate
of occupancy issued for such Individual Property.
(w) FLOOD ZONE. Except as set forth on the surveys of the
Properties delivered to Lender, none of the Improvements on any of the
Properties are located in an area as identified by the Federal Emergency
Management Agency as an area having special flood hazards.
(x) PHYSICAL CONDITION. Except items for which reserves or
other provisions for the correction thereof satisfactory to Lender in its
sole discretion have been established or as otherwise disclosed to Lender in
writing and approved by Lender, (i) each of the Properties, including,
without limitation, all buildings, improvements, parking facilities,
sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems,
fire protection systems, electrical systems, equipment, elevators, exterior
sidings and doors, landscaping, irrigation systems and all structural
components, are in good condition, order and repair in all material respects;
(ii) there exists no structural or other material defects or damages in any
of the Properties, whether latent or otherwise, and (iii) Borrower has not
received notice from any insurance company or bonding company of any defects
or inadequacies in any of the Properties, or any part thereof, which would
adversely affect the insurability of the same or cause the imposition of
extraordinary premiums or charges thereon or of any termination or threatened
termination of any policy of insurance or bond.
(y) INTENTIONALLY OMITTED.
(z) LEASES. The Properties are not subject to any Leases other
than the Leases described in SCHEDULE IV hereto. No Person has any possessory
interest in any of the Properties or right to occupy the same other than
pursuant to the provisions of the Leases. Except as set forth on SCHEDULE IV,
the current Leases are in full force and effect and there are no defaults
thereunder by Borrower or, to the best of Borrower's knowledge after diligent
inquiry, any other party and there are no conditions that, with the passage of
time or the giving of notice, or both, would constitute defaults thereunder by
Borrower or, to the best of Borrower's knowledge after diligent inquiry, any
other party. Except as set forth on SCHEDULE IV, no Rent (including security
deposits) has been
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paid more than one (1) month in advance of its due date. Except as set forth
on SCHEDULE IV, all work to be performed by Borrower under each Lease has
been performed as required and has been accepted by the applicable tenant,
and any payments, free rent, partial rent, rebate of rent or other payments,
credits, allowances or abatements required to be given by Borrower to any
tenant has already been received by such tenant. There has been no prior
sale, transfer or assignment, hypothecation or pledge of any Lease or of the
Rents received thereunder. Except as set forth on SCHEDULE IV, no tenant
listed on SCHEDULE IV has assigned its Lease or sublet all or any portion of
the premises demised thereby, no such tenant holds its leased premises under
assignment or sublease, nor does anyone except such tenant and its employees
occupy such leased premises. Except as set forth on SCHEDULE IV, no tenant
under any Lease has a right or option pursuant to such Lease or otherwise to
purchase all or any part of the leased premises or the building of which the
leased premises are a part. No tenant under any Lease has any right or option
for additional space in the Improvements. Except as disclosed in the Phase I
and Phase II environmental reports with respect to the Properties delivered
to Lender in connection with the Loan, no hazardous wastes or toxic
substances, as defined by applicable federal, state or local statutes, rules
and regulations, have been disposed, stored or treated by any tenant under
any Lease on or about the leased premises (other than substances of the kind
and in amounts ordinarily and customarily used or stored at similar
properties for the purpose of cleaning or other maintenance or operations and
used and stored in compliance with all Environmental Laws) nor does Borrower
have any knowledge of any tenant's intention to use its leased premises for
any activity which, directly or indirectly, involves the use, generation,
treatment, storage, disposal or transportation of any petroleum product or
any toxic or hazardous chemical, material, substance or waste.
(aa) INTENTIONALLY OMITTED.
(bb) LOAN TO VALUE. The Loan is secured by interest in real
property having a fair market value as of the date hereof at least equal to
sixty-five percent (65%) of the original principal balance of the Loan.
(cc) FILING AND RECORDING TAXES. All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the transfer of the Properties to
Borrower have been paid. All mortgage, mortgage
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recording, stamp, intangible or other similar tax required to be paid by any
Person under applicable Legal Requirements currently in effect in connection
with the execution, delivery, recordation, filing, registration, perfection
or enforcement of any of the Loan Documents, including, without limitation,
the Mortgages encumbering the Properties have been paid, and, under current
Legal Requirements, the Mortgages encumbering the Properties are enforceable
in accordance with their respective terms by Lender (or any subsequent holder
thereof) subject to applicable bankruptcy, insolvency and similar laws
affecting rights of creditors generally, and to general principles of equity.
(dd) MANAGEMENT AGREEMENTS. Each Management Agreement with
respect to each Individual Property is in full force and effect and there is
no default thereunder by any party thereto and no event has occurred (other
than payments due but not yet delinquent) that, with the passage of time
and/or the giving of notice would constitute a default thereunder.
(ee) FRANCHISE AGREEMENTS. The Franchise Agreement with respect
to each Individual Property is in full force and effect and there is no
default thereunder by the related Individual Borrower or, to the best of
Borrower's knowledge, any other party thereto and no event has occurred
(other than payments due but not yet delinquent) that, with the passage of
time and/or the giving of notice would constitute a default thereunder.
(ff) SINGLE-PURPOSE. Borrower hereby represents and warrants
to, and covenants with, Lender that as of the date hereof and until such time
as the Debt shall be paid in full:
(i) Borrower and each Individual Borrower do not own and
will not own any asset or property other than (A) the Properties, (B)
incidental personal property necessary for the ownership or operation of the
Properties and (C) an interest in one or more other Individual Borrowers.
(ii) Borrower and each Individual Borrower will not
engage in any business other than the ownership, management and operation of
the Properties and
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Borrower and each Individual Borrower will conduct and operate its business
as presently conducted and operated.
(iii) Borrower and each Individual Borrower will not
enter into any contract or agreement with any Affiliate of any Individual
Borrower, any constituent party of any Individual Borrower or any Affiliate
of any constituent party, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available
on an arms-length basis with third parties other than any such party.
(iv) Borrower and each Individual Borrower have not
incurred and will not incur any Indebtedness, secured or unsecured, direct or
indirect, absolute or contingent (including guaranteeing any obligation)
other than (A) the Debt and (B) unsecured trade payables incurred by Borrower
with respect to one or more of the Properties in the ordinary course of
business and not outstanding for more than sixty (60) days and equipment
leases entered into by Borrower with respect to one or more of the Properties
in the ordinary course of business, which equipment leases shall require
total payments in a calendar year not to exceed One Hundred Thousand and
No/100 Dollars ($100,000) at any time. No Indebtedness other than the Debt
may be secured (subordinate or PARI PASSU) by the Properties.
(v) No Individual Borrower has made or will make any
loans or advances to any third party (including any Affiliate or
constituent party), and no Individual Borrower shall acquire obligations or
securities of its Affiliates.
(vi) Borrower represents and warrants that each
Individual Borrower is solvent and covenants that each Individual Borrower
will remain solvent and will pay its debts and liabilities (including, as
applicable, shared personnel and overhead expenses) from its assets as the
same shall become due.
(vii) Each Individual Borrower has done or caused to be
done and will do all things necessary to observe partnership formalities and
preserve its existence, and each Individual Borrower will not, nor will any
Individual Borrower permit any constituent party to amend, modify or
otherwise change the partnership certificate, partnership agreement, articles
of incorporation and bylaws, trust or other organizational documents of such
Individual Borrower or such Individual Borrower's general partner or managing
member (or the general partner or managing member of such Individual
Borrower's general partner or managing member if such Individual Borrower's
general
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partner or managing member is a limited partnership or limited liability
company) without the prior written consent of Lender.
(viii) Borrower will maintain all of its books,
records, financial statements and bank accounts separate from those of its
Affiliates and any constituent party and Borrower will file its own tax
returns. Borrower shall maintain its books, records, resolutions and
agreements as official records.
(ix) Each Individual Borrower will be, and at all times
will hold itself out to the public as, a legal entity separate and distinct
from any other entity (including any Affiliate of such Individual Borrower or
any constituent party of such Individual Borrower), shall correct any known
misunderstanding regarding its status as a separate entity, shall conduct
business in its own name, shall not identify itself or any of its Affiliates
as a division or part of the other and Borrower shall maintain and utilize a
separate telephone number and separate stationery, invoices and checks.
(x) Each Individual Borrower covenants to maintain
adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations.
(xi) No Individual Borrower or constituent party will
seek or effect the liquidation, dissolution, winding up, consolidation or
merger, in whole or in part, of any Individual Borrower.
(xii) Borrower will not commingle the funds and other
assets of Borrower with those of any Affiliate or constituent party or any
other Person.
(xiii) Borrower has and will maintain its assets in such
a manner that it will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any Affiliate or constituent
party or any other Person.
(xiv) Each Individual Borrower does not and will not hold
itself out to be responsible for the debts or obligations of any other Person
other than those of another Individual Borrower pursuant to the Loan
Documents.
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(xv) If an Individual Borrower is a limited partnership,
each general partner is a corporation, limited partnership or limited
liability company whose sole asset is its interest in such Individual
Borrower and each general partner will at all times comply, and will cause
such Individual Borrower to comply, with each of the representations,
warranties, and covenants contained in this SECTION 4.1(FF) as if such
representation, warranty or covenant was made directly by such general
partner. If an Individual Borrower is a limited liability company, its
managing member is a corporation, limited partnership or limited liability
company whose sole asset is its interest in such Individual Borrower and the
managing member will at times comply, and will cause such Individual Borrower
to comply, with each of the representations, warranties, and covenants
contained in this SECTION 4.1(FF) as if such representation, warranty or
covenant was made directly by such managing member. If the general partner or
managing member of an Individual Borrower is a limited partnership or limited
liability company, each general partner or managing member thereof is a
corporation, limited partnership or limited liability company whose sole
asset is its interest in such general partner or managing member of such
Individual Borrower and each general partner or managing member thereof will
at all times comply, and will cause the general partner or managing member of
such Individual Borrower to comply, with each of the representations,
warranties and covenants contained in this Section 4.1(ff) as if such
representation, warranty or covenant was made directly by such general
partner.
(xvi) Each Individual Borrower shall at all times
cause there to be at least one duly appointed member of the board of
directors (an "INDEPENDENT DIRECTOR") of each general partner or managing
member of each Individual Borrower (or of each general partner or managing
member of any such general partner or managing member that is a limited
partnership or limited liability company) reasonably satisfactory to Lender
who shall not have been at the time of such individual's appointment, and may
not have been at any time during the preceding five (5) years (A) a
shareholder of, or an officer, director, partner or employee of, any
Individual Borrower or any of their respective shareholders, subsidiaries or
Affiliates, (B) a customer of, or supplier to, any Individual Borrower or any
of their respective shareholders, subsidiaries or Affiliates, (C) a Person
controlling or under common control with any such shareholder, partner
supplier or customer, or (D) a member of the immediate family of any such
shareholder, officer, director, partner, employee, supplier or customer of
any other director of any
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Individual Borrower. As used herein, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
(xvii) No Individual Borrower shall cause or permit the
board of directors of any general partner or managing member of any
Individual Borrower (or of any general partner or managing member of any such
general partner or managing member that is a limited partnership or limited
liability company) to take any of the following actions which, under the
terms of any certificate of incorporation, by-laws or any voting trust
agreement with respect to any common stock, shall require a vote of the board
of directors of the general partner or managing member of such Individual
Borrower, unless at the time of such action there shall be at least one
member of such board of directors who is an Independent Director:
(A) File or consent to the filing of any
bankruptcy, insolvency or reorganization case or proceeding;
institute any proceedings under any applicable insolvency law
or otherwise seek any relief under any laws relating to the
relief from debts or the protection of debtors generally;
(B) Seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official for such Individual Borrower
or a substantial portion of its properties;
(C) Make any assignment for the
benefit of such Individual Borrower's creditors;
(D) Amend the organizational documentation
of such Individual Borrower or any general partner or managing
member of such Individual Borrower in any manner that does not
comply with each of the representations, warranties and
covenants contained in this SECTION 4.1(FF) without the
consent of Lender, or, after the Securitization, without
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(1) confirmation from each of the Rating Agencies rating the
Securities that such amendment would not result in the
qualification, withdrawal or downgrade of the initial ratings
assigned in connection with the Securitization and (2)
approval of such amendment by Lender; or
(E) Take any action in furtherance of
any of the foregoing. Section 4.2 Survival of
Representations.
Borrower agrees that all of the representations and warranties
of Borrower or any Individual Borrower set forth in SECTION 4.1 and elsewhere
in this Agreement and in the other Loan Documents shall survive for so long
as any amount remains owing to Lender under this Agreement or any of the
other Loan Documents by Borrower. All representations, warranties, covenants
and agreements made in this Agreement or in the other Loan Documents by
Borrower or any Individual Borrower shall be deemed to have been relied upon
by Lender notwithstanding any investigation heretofore or hereafter made by
Lender or on its behalf.
V. AFFIRMATIVE COVENANTSNANTS
SECTION 5.1 BORROWER COVENANTS. NTS
From the date hereof and until payment and performance in full
of all obligations of Borrower under the Loan Documents or the earlier
release of the Liens of all Mortgages encumbering the Properties (and all
related obligations) in accordance with the terms of this Agreement and the
other Loan Documents, Borrower hereby covenants and agrees with Lender that:
(a) EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS; INSURANCE.
Borrower shall do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its existence, rights, licenses, permits
and franchises and comply with all Legal Requirements applicable to it and
its Properties. Borrower shall at all times maintain, preserve and protect
all franchises and trade names and preserve all the remainder of its property
used or useful in the conduct of its business and shall keep all of the
Properties in good working order and repair, and from time to time make, or
cause to be made, all reasonably necessary repairs, renewals, replacements,
betterments and improvements
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thereto, all as more fully provided in the Mortgages encumbering such
Properties. Borrower shall keep each of the Properties insured at all times
by financially sound and reputable insurers, to such extent and against such
risks, and maintain liability and such other insurance, as is more fully
provided in this Agreement.
(b) TAXES AND OTHER CHARGES. Borrower shall pay all Taxes and
Other Charges now or hereafter levied or assessed or imposed against the
Properties or any part thereof as the same become due and payable; provided,
however, that Borrower's obligation to directly pay Taxes shall be suspended
for so long as Borrower complies with the terms and provisions of SECTION 7.3
hereof. Borrower will deliver to Lender receipts for payment or other
evidence satisfactory to Lender that the Taxes and Other Charges have been so
paid or are not then delinquent no later than ten (10) days prior to the date
on which the Taxes and/or Other Charges would otherwise be delinquent if not
paid. Borrower shall furnish to Lender receipts for the payment of the Taxes
and the Other Charges prior to the date the same shall become delinquent
(provided, however, that Borrower is not required to furnish such receipts
for payment of Taxes in the event that such Taxes have been paid by Lender
pursuant to SECTION 7.3 hereof). Borrower shall not suffer and shall promptly
cause to be paid and discharged any lien or charge whatsoever which may be or
become a lien or charge against the Properties, and shall promptly pay for
all utility services provided to the Properties. After prior written notice
to Lender, Borrower, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any
Taxes or Other Charges, provided that (i) no Default or Event of Default has
occurred and remains uncured; (ii) Borrower is permitted to do so under the
provisions of any mortgage or deed of trust superior in lien to the
applicable Mortgage; (iii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which
Borrower is subject and shall not constitute a default thereunder and such
proceeding shall be conducted in accordance with all applicable statutes,
laws and ordinances; (iv) no Individual Property nor any part thereof or
interest therein will be in danger of being sold, forfeited, terminated,
cancelled or lost; (v) Borrower shall promptly upon final determination
thereof pay the amount of any such Taxes or Other Charges, together with all
costs, interest and penalties which may be payable in connection therewith;
(vi) such
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proceeding shall suspend the collection of Taxes or Other Charges from the
applicable Individual Property; and (vii) Borrower shall furnish such
security as may be required in the proceeding, or as may be requested by
Lender, to insure the payment of any such Taxes or Other Charges, together
with all interest and penalties thereon. Lender may pay over any such cash
deposit or part thereof held by Lender to the claimant entitled thereto at
any time when, in the judgment of Lender, the entitlement of such claimant is
established.
(c) LITIGATION. Borrower shall give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened
against Borrower which would materially adversely affect Borrower's condition
(financial or otherwise) or business or any of the Properties.
(d) ACCESS TO PREMISES. Borrower shall permit agents,
representatives and employees of Lender to inspect any of its Properties or
any part thereof at reasonable hours upon reasonable advance notice.
(e) NOTICE OF DEFAULT. Borrower shall promptly advise Lender of
any material adverse change in Borrower's condition, financial or otherwise,
or of the occurrence of any Default or Event of Default of which Borrower has
knowledge.
(f) COOPERATE IN LEGAL PROCEEDINGS. Borrower shall cooperate
fully with Lender with respect to any proceedings before any court, board or
other Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan
Documents and, in connection therewith, permit Lender, at its election, to
participate in any such proceedings.
(g) PERFORM LOAN DOCUMENTS. Borrower shall observe, perform and
satisfy all the terms, provisions, covenants and conditions of, and shall pay
when due all costs, fees and expenses to the extent required under the Loan
Documents executed and delivered by, or applicable to, Borrower.
(h) INSURANCE BENEFITS. Borrower shall cooperate with Lender in
obtaining for Lender the benefits of any Insurance Proceeds lawfully or
equitably payable in connection with any of the Properties, and Lender shall
be reimbursed for any expenses incurred in connection therewith (including
attorneys' fees and disbursements, and the payment by Borrower of the expense
of an appraisal on behalf of Lender in case
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of a fire or other casualty affecting any of the Properties or any part
thereof) out of such Insurance Proceeds.
(i) FURTHER ASSURANCES; SUPPLEMENTAL MORTGAGE AFFIDAVITS.
Borrower shall, at Borrower's sole cost and expense:
(A) furnish to Lender all instruments, documents, boundary
surveys, footing or foundation surveys, certificates, plans and
specifications, appraisals, title and other insurance reports and agreements,
and each and every other document, certificate, agreement and instrument
required to be furnished by Borrower pursuant to the terms of the Loan
Documents or reasonably requested by Lender in connection therewith;
(B) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do such other
acts necessary or desirable, to evidence, preserve and/or protect the
collateral at any time securing or intended to secure the obligations of
Borrower under the Loan Documents, as Lender may reasonably require; and
(C) do and execute all and such further lawful and
reasonable acts, conveyances and assurances for the better and more effective
carrying out of the intents and purposes of this Agreement and the other Loan
Documents, as Lender shall reasonably require from time to time.
If at any time Lender determines, based on applicable law, that Lender is not
being afforded the maximum amount of security available from any one or more
of the Properties as a direct or indirect result of applicable taxes not
having been paid with respect to any such Properties, Borrower agrees that
Borrower will execute, acknowledge and deliver to Lender, immediately upon
Lender's request, supplemental affidavits increasing the amount of the Debt
attributable to any such Individual Property (as set forth on SCHEDULE I
hereto) for which all applicable taxes have been paid to an amount determined
by Lender to be equal to the lesser of (y) the greater of the fair market
value of the applicable Individual Property (i) as of the date hereof and
(ii) as of the date such supplemental affidavits are to be delivered to
Lender, and (z) the amount of the Debt
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attributable to any such Individual Property (as set forth on SCHEDULE I
hereto), and Borrower shall, on demand, pay any additional taxes.
(j) FINANCIAL REPORTING. (i) Borrower shall keep and maintain
or shall cause to be kept and maintained on a Fiscal Year basis, in
accordance with GAAP (or such other accounting basis reasonably acceptable to
Lender), proper and accurate books, records and accounts reflecting all of
the financial affairs of Borrower and all items of income and expense in
connection with the operation on an individual basis of each of the
Properties. Lender shall have the right from time to time at all times during
normal business hours upon reasonable notice to examine such books, records
and accounts at the office of Borrower or other Person maintaining such
books, records and accounts and to make such copies or extracts thereof as
Lender shall desire. After the occurrence of an Event of Default, Borrower
shall pay any costs and expenses incurred by Lender to examine Borrower's
accounting records with respect to the Properties, as Lender shall determine
to be necessary or appropriate in the protection of Lender's interest.
(ii) Borrower shall furnish to Lender annually, within
ninety (90) days following the end of each Fiscal Year of Borrower, a
complete copy of Borrower's annual financial statements audited by a "Big
Six" accounting firm or other independent certified public accountant
acceptable to Lender in accordance with GAAP (or such other accounting basis
acceptable to Lender) covering the Properties on a combined basis as well as
each Individual Property for such Fiscal Year and containing statements of
operations (profit and loss) and of cash flows for the Borrower and the
Properties and a balance sheet for Borrower. Such statements shall set forth
the financial condition and the results of operations for the Properties for
such Fiscal Year, and shall include, but not be limited to, amounts
representing annual Gross Income from Operations and Operating Expenses and
such other information and reports as Lender may reasonably request.
Borrower's annual financial statements shall be accompanied by (A) a
comparison of the budgeted income and expenses and the actual income and
expenses for the prior Fiscal Year, (B) an Officer's Certificate stating that
each such annual financial statement presents fairly the financial condition
and the results of operations of Borrower and the Properties being reported
upon and has been prepared in accordance with GAAP and (C) an unqualified
opinion of a "Big Six" accounting firm or other independent certified public
accountant reasonably acceptable to Lender. Together with Borrower's annual
financial statements, Borrower shall furnish to Lender an Officer's
Certificate certifying as of the date thereof whether there exists an event
or
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circumstance which constitutes a Default or Event of Default under the
Loan Documents executed and delivered by, or applicable to, Borrower, and if
such Default or Event of Default exists, the nature thereof, the period of
time it has existed and the action then being taken to remedy the same.
(iii) Borrower shall furnish or cause to be furnished to
Lender on or before forty-five (45) days after the end of each quarter of
each Fiscal Year, Borrower's quarterly financial statements for such quarter
covering the Properties on a combined basis as well as each Individual
Property and containing statements of operations (profit and loss) and of
cash flows for the Borrower and the Properties and a balance sheet for
Borrower. Such statements shall set forth the financial condition and the
results of operations of the Properties for such quarter and shall include
but not be limited to, amounts representing Gross Income from Operations and
Operating Expenses for such quarter and such other information and reports as
Lender may reasonably request. Borrower's quarterly financial statements
shall be accompanied by (A) a comparison of the budgeted income and expenses
and the actual income and expenses for the prior quarter; (B) updated
occupancy statements and rent rolls for the Properties for the subject
quarter (including an average daily rate statement and any franchise
inspection reports received by Borrower during the subject quarter) and (C)
an Officer's Certificate stating that each such quarterly statement,
occupancy statement and rent roll presents fairly the financial condition and
the results of operations of Borrower and the Properties being reported upon
on a combined and individual property basis (subject to normal year-end
adjustments).
(iv) Borrower shall furnish, or cause to be furnished, to
Lender on or before thirty (30) days after the end of each calendar month the
following items, accompanied by an Officer's Certificate stating that such
items are true, correct, accurate, and complete and fairly present the
financial condition and results of the operations of Borrower and the
Properties on a combined and individual property basis (subject to normal
year-end adjustments) as applicable: (A) occupancy reports and rent rolls for
the Properties for the subject month; (B) monthly and year-to-date operating
statements (including Capital Expenditures) prepared for each calendar month,
noting Gross Income from Operations and Operating Expenses and other
information necessary
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and sufficient to fairly represent the financial position and results of
operation of the Properties during such calendar month, and containing a
comparison of budgeted income and expenses and the actual income and expenses
together with a detailed explanation of any variances of five percent (5%) or
more between budgeted and actual amounts for such periods, all in form
satisfactory to Lender and (C) a calculation reflecting the Debt Service
Coverage Ratio for the immediately preceding twelve (12) month period as of
the last day of such month. In addition, the Officer's Certificate
accompanying such items shall include a certification that the
representations and warranties of Borrower and each Individual Borrower set
forth in SECTION 4.1(FF)(IV) are true and correct as of the date of such
certificate and that there are no trade payables outstanding for more than
sixty (60) days other than trade payables being disputed in good faith, which
disputed trade payables do not exceed One Hundred Thousand and No/100 Dollars
($100,000) in the aggregate.
(v) Borrower shall furnish to Lender, within ten (10) Business
Days after request (or as soon thereafter as may be reasonably possible),
such further detailed information with respect to the operation of any of the
Properties and the financial affairs of Borrower as may be reasonably
requested by Lender.
(l) BUSINESS AND OPERATIONS. Borrower shall continue to engage
in the businesses presently conducted by it as and to the extent the same are
necessary for the ownership, maintenance, management and operation of each of
the Properties. Borrower shall qualify to do business and will remain in good
standing under the laws of each jurisdiction as and to the extent the same
are required for the ownership, maintenance, management and operation of each
of the Properties.
(m) TITLE TO THE PROPERTIES. Borrower shall warrant and defend
(i) the title to each of the Properties and every part thereof, subject only
to Liens permitted hereunder (including Permitted Encumbrances), and (ii) the
validity and priority of the Liens of the Mortgages and the Assignments of
Leases on the Properties, subject only to Liens permitted hereunder
(including Permitted Encumbrances), in each case against the claims of all
Persons whomsoever. Notwithstanding the foregoing, after prior written notice
to Lender, Borrower, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any
claim for payment for work, labor or materials affecting any of the
Properties which may become a Lien prior to,
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or of equal priority with, the Liens created by the Loan Documents, provided
that (i) no Default or Event of Default has occurred and remains uncured;
(ii) Borrower is permitted to do so under the provisions of any mortgage or
deed of trust superior in lien to the applicable Mortgage; (iii) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; (iv) no
Individual Property nor any part thereof or interest therein will be in
danger of being sold, forfeited, terminated, cancelled or lost; (v) Borrower
shall promptly upon final determination thereof pay the amount of any such
claim, together with all costs, interest and penalties which may be payable
in connection therewith; (vi) such proceeding shall suspend the collection of
such claim through recourse to the applicable Individual Property; and (vii)
Borrower shall furnish such security as may be required in the proceeding, or
as may be requested by Lender, to insure the payment of any such claim,
together with all interest and penalties thereon. Lender may pay over any
such cash deposit or part thereof held by Lender to the claimant entitled
thereto at any time when, in the judgment of Lender, the entitlement of such
claimant is established. Borrower shall reimburse Lender for any losses,
costs, damages or expenses (including reasonable attorneys' fees and court
costs) incurred by Lender if an interest in any of the Properties, other than
as permitted hereunder, is claimed by another Person.
(n) COSTS OF ENFORCEMENT. In the event (i) that any Mortgage
encumbering any of the Properties is foreclosed in whole or in part or that
any such Mortgage is put into the hands of an attorney for collection, suit,
action or foreclosure, (ii) of the foreclosure of any mortgage prior to or
subsequent to any Mortgage encumbering any of the Properties, to which
proceeding Lender is made a party, or (iii) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of Borrower or an
assignment by Borrower for the benefit of its creditors, Borrower and its
successors or assigns, shall be chargeable with and agree to pay all costs of
collection and defense, including attorneys' fees in connection therewith and
in connection with any appellate proceeding or post-judgment action involved
therein, which shall be due and payable together with all required service or
use taxes.
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(o) ESTOPPEL STATEMENT. (i) After request by Lender, Borrower
shall within ten (10) days furnish Lender with a statement, duly acknowledged
and certified, setting forth (A) the amount of the original principal amount
of the Note, (B) the unpaid principal amount of the Note, (C) the Applicable
Interest Rate of the Note, (D) the date installments of interest were last
paid, (E) any offsets or defenses to the payment of the Debt, if any, and (F)
that the Note, this Agreement, the Mortgages and the other Loan Documents are
valid, legal and binding obligations and have not been modified or if
modified, giving particulars of such modification, provided that Borrower
shall not be required to deliver such statements more frequently than two (2)
times in any calendar year.
(ii) Borrower shall deliver to Lender upon request, an
estoppel certificate executed by the tenant under each of the Leases demising
ten percent (10%) or more of the rentable square footage of the portion of
each related Individual Property made available for lease and under such
other Leases as shall be necessary for Lender to have received estoppel
certificates from tenants under Leases demising a total of no less than
seventy percent (70%) of the rentable square footage of each related
Individual Property made available for lease. All such estoppel certificates
shall be in form and substance satisfactory to Lender. Notwithstanding the
foregoing, Borrower shall not be required to deliver such estoppel
certificates (A) with respect to any Individual Property having no space made
available for lease other than pursuant to one or more Minor Leases or (B)
more frequently than two (2) times in any calendar year.
(p) LOAN PROCEEDS. Borrower shall use the proceeds of the
Loan disbursed to Borrower pursuant to the terms and provisions hereof
only for the purposes set forth in SECTION 2.2.
(q) PERFORMANCE BY BORROWER. Borrower shall in a timely manner
observe, perform and fulfill each and every covenant, term and provision of
each Loan Document executed and delivered by, or applicable to, Borrower, and
shall not enter into or otherwise suffer or permit any amendment, waiver,
supplement, termination or other modification of any Loan Document executed
and delivered by, or applicable to, Borrower without the prior written
consent of Lender.
(r) ANNUAL OPERATING BUDGET AND CAPITAL EXPENDITURES BUDGET.
For each fiscal year commencing on January 1, 1998, and for each Fiscal Year
thereafter,
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Borrower shall submit to Lender for Lender's written approval an annual
budget (an "ANNUAL BUDGET") not later than thirty (30) days prior to the
commencement of such Fiscal Year, in form satisfactory to Lender setting
forth in reasonable detail budgeted monthly operating income and monthly
operating capital and other expenses for the Properties, including all
planned capital expenditures in respect of the Properties for such Fiscal
Year. Each Annual Budget shall contain, among other things, limitations on
management fees, franchise fees, third party service fees, and other expenses
as Borrower may reasonably determine. Lender shall have the right to approve
such Annual Budget and in the event that Lender objects to the proposed
Annual Budget submitted by Borrower, Lender shall advise Borrower of such
objections within fifteen (15) days after receipt thereof (and deliver to
Borrower a reasonably detailed description of such objections) and Borrower
shall promptly revise such Annual Budget and resubmit the same to Lender.
Lender shall advise Borrower of any objections to such revised Annual Budget
within ten (10) days after receipt thereof (and deliver to Borrower a
reasonably detailed description of such objections) and Borrower shall
promptly revise the same in accordance with the process described in this
subparagraph until the Lender approves an Annual Budget. Each such Annual
Budget approved by Lender in accordance with terms hereof shall hereinafter
be referred to as an "APPROVED ANNUAL BUDGET." Until such time that Lender
approves a proposed Annual Budget, the most recently Approved Annual Budget
shall apply; provided that, such Approved Annual Budget shall be adjusted to
reflect actual increases in real estate taxes, insurance premiums and
utilities expenses. In the event that the Borrower must incur an
extraordinary operating expense or capital expense not set forth in the
Annual Budget (each an "EXTRAORDINARY EXPENSE"), then Borrower shall promptly
deliver to Lender a reasonably detailed explanation of such proposed
Extraordinary Expense for the Lender's approval.
(s) REPLACEMENT OF FRANCHISOR. If a default on the part of a
Franchisor has occurred under any Franchise Agreement, which default
continues beyond any applicable notice or cure period, and Lender determines
in its reasonable discretion that such default would materially and adversely
affect the value of the related Individual Property, Borrower shall
diligently pursue the termination of such Franchise Agreement and the
replacement of such Franchisor with another franchisor acceptable to Lender
in its sole discretion.
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(t) LEASING MATTERS. Any renewals of Leases or Leases with
respect to an Individual Property written after the date hereof shall be
approved by Lender, which approval shall not be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, (i) renewals of Minor
Leases and proposed Minor Leases shall not be subject to the prior approval
of Lender and (ii) renewals of Leases (other than Minor Leases) and proposed
Leases (other than Minor Leases) shall not be subject to the prior approval
of Lender, provided that (A) the rental income pursuant to the renewal or
proposed Lease does not exceed ten percent (10%) of the total rental income
derived from the applicable Individual Property, (B) the premises demised,
pursuant to the Lease to be renewed or the proposed Lease constitutes less
than ten percent (10%) of the total leaseable area of the related Individual
Property, (C) no rent credits, free rents or concessions are granted under
the renewal or proposed Lease, (D) the renewal or proposed Lease provides for
rental rates and other terms comparable to existing local market rates and
terms, (E) the renewal or proposed Lease is an arm's-length transaction with
a bona fide, independent third-party tenant, on commercially reasonable terms
and does not contain any terms that would materially affect Lender's rights
under the Loan Documents, (F) the renewal or proposed Lease is subject and
subordinate to the Mortgage with respect to the related Individual Property
and the tenant thereunder agrees to attorn to Lender and (G) the proposed
Lease is written on the standard form of lease which shall have been approved
by Lender. Upon request, Borrower shall furnish Lender with executed copies
of all Leases. All renewals of Leases and all proposed Leases shall provide
for rental rates comparable to existing local market rates, shall be
arm's-length transactions with bona fide, independent third-party tenants,
shall be on commercially reasonable terms and shall not contain any terms
that would materially affect Lender's rights under the Loan Documents. All
Leases executed after the date hereof shall provide that they are subordinate
to the Mortgage encumbering the applicable Individual Property and that the
lessee agrees to attorn to Lender. Borrower (1) shall observe and perform the
obligations imposed upon the lessor under the Leases in a commercially
reasonable manner; (2) shall enforce and may amend or terminate the terms,
covenants and conditions contained in the Leases upon the part of the lessee
thereunder to be observed or performed in a commercially reasonable manner;
(3) shall not collect any of the rents more than one (1) month in advance
(other than security deposits); (4) shall not execute any other assignment of
lessor's interest in the Leases or the Rents (except as contemplated by the
Loan Documents); (5) shall not alter, modify
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or change the terms of any Lease in a manner inconsistent with the provisions
of the Loan Documents; (6) shall make no material change to the standard form
of lease approved by Lender without Lender's prior written approval and (7)
shall execute and deliver at the request of Lender all such further
assurances, confirmations and assignments in connection with the Leases as
Lender shall from time to time reasonably require.
(u) DEBT SERVICE COVERAGE RATIO. Prior to the extension of the
Maturity Date pursuant to Section 2.3.2, if the Debt Service Coverage Ratio
as determined on the DSCR Calculation Date in any month with respect to the
twelve (12) full months immediately preceding such DSCR Calculation Date
shall be less than 1.15, then, Borrower shall, no later than the Payment Date
occurring in the month following such DSCR Calculation Date, make a
prepayment to Lender of the then outstanding principal amount of the Loan in
an amount sufficient to increase the Debt Service Coverage Ratio to not less
than 1.15. After the extension of the Maturity Date pursuant to Section
2.3.2, if the Debt Service Coverage Ratio as determined on the DSCR
Calculation Date in any month with respect to the twelve (12) full months
immediately preceding such DSCR Calculation Date shall be less than 1.30,
then, Borrower shall, no later than the Payment Date occurring in the month
following such DSCR Calculation Date, make a prepayment to Lender of the then
outstanding principal amount of the Loan in an amount sufficient to increase
the Debt Service Coverage Ratio to not less than 1.30. Any prepayment
required pursuant to this SECTION 5.1(U) shall not be applied to the
principal balance of the Loan until the first Payment Date occurring after
the receipt by Lender of such prepayment and shall be accompanied by a
payment of all interest to have accrued on such prepayment as of such Payment
Date.
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VI. NEGATIVE COVENANTS
SECTION 6.1 BORROWER'S NEGATIVE COVENANTS.
From the date hereof until payment and performance in full of
all obligations of Borrower under the Loan Documents or the earlier release
of the Liens of all Mortgages encumbering each of the Properties in
accordance with the terms of this Agreement and the other Loan Documents,
Borrower covenants and agrees with Lender that it will not do, directly or
indirectly, any of the following:
(a) OPERATION OF PROPERTIES. No Individual Borrower shall,
without the prior consent of Lender (which consent shall not be unreasonably
withheld), terminate, cancel, modify, renew or extend any Franchise Agreement
or any Management Agreement or otherwise replace any Franchisor with respect
to any Individual Property or any Manager or enter into any other management
or franchise agreement with respect to any of the Properties. The total base
management fees payable with respect to any Individual Property pursuant to
the related Management Agreement(s) shall not exceed the Maximum Management
Fee.
(b) LIENS. Borrower shall not, without the prior written
consent of Lender, create, incur, assume or suffer to exist any Lien on any
portion of any of the Properties or permit any such action to be taken,
except:
(i) Permitted Encumbrances;
(ii) Liens created by or permitted pursuant to the Loan
Documents;
(iii) Liens for Taxes, or Other Charges not yet due; or
(iv) Liens arising from utility and other similar
easements granted by an Individual Borrower and approved by Lender, which
approval shall not be unreasonably withheld.
(c) DISSOLUTION. No Individual Borrower shall dissolve,
terminate, liquidate, merge with or consolidate into another Person.
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(d) CHANGE IN BUSINESS. Borrower and each Individual Borrower
shall not enter into any line of business other than the ownership and
operation of the Properties, or make any material change in the scope or
nature of its business objectives, purposes or operations, or undertake or
participate in activities other than the continuance of its present business.
(e) DEBT CANCELLATION. No Individual Borrower shall cancel or
otherwise forgive or release any claim or debt (other than termination of
Leases in accordance herewith) owed to such Individual Borrower by any
Person, except for adequate consideration and in the ordinary course of such
Individual Borrower's business.
(f) AFFILIATE TRANSACTIONS. No Individual Borrower shall enter
into, or be a party to, any transaction with an Affiliate of any Individual
Borrower or any of the partners of any Individual Borrower except in the
ordinary course of business and on terms which are fully disclosed to Lender
in advance and are no less favorable to such Individual Borrower or such
Affiliate than would be obtained in a comparable arm's-length transaction
with an unrelated third party.
(g) ZONING. Borrower and each Individual Borrower shall not
initiate or consent to any zoning reclassification of any portion of any of
the Properties or seek any variance under any existing zoning ordinance or
use or permit the use of any portion of any of the Properties in any manner
that could result in such use becoming a non-conforming use under any zoning
ordinance or any other applicable land use law, rule or regulation, without
the prior consent of Lender.
(h) ASSETS. Borrower and each Individual Borrower shall
not purchase or own any properties other than the Properties or an
interest in another Individual Borrower.
(i) NO JOINT ASSESSMENT. No Individual Borrower shall suffer,
permit or initiate the joint assessment of any Individual Property (i) with
any other real property constituting a tax lot separate from such Individual
Property, and (ii) with any portion of such Individual Property that may be
deemed to constitute personal property,
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or any other procedure whereby the Lien of any taxes which may be levied
against such personal property shall be assessed or levied or charged to such
Individual Property.
(j) PRINCIPAL PLACE OF BUSINESS. No Individual Borrower shall
change its principal place of business set forth on the first page of this
Agreement without first giving Lender thirty (30) days prior written notice.
VII. CASUALTY; CONDEMNATION; ESCROWS
SECTION 7.1 INSURANCE; CASUALTY AND CONDEMNATION.
7.1.1 INSURANCE
(a) Borrower shall obtain and maintain, or cause to be
maintained, insurance for Borrower and each of the Properties providing at
least the following coverages:
(i) comprehensive all risk insurance on the Improvements
and the Personal Property, including contingent liability from Operation of
Building Laws, Demolition Costs and Increased Cost of Construction
Endorsements, in each case (A) in an amount equal to the greater of (1) one
hundred percent (100%) of the "Full Replacement Cost," which for purposes of
this Agreement shall mean actual replacement value (exclusive of costs of
excavations, foundations, underground utilities and footings) with a waiver
of depreciation, (2) such amount as to ensure that Borrower would not be
deemed to be a co-insurer under such coverage or (3) the outstanding
principal balance of the Loan; (B) containing an agreed amount endorsement
with respect to the Improvements and Personal Property waiving all
co-insurance provisions; (C) providing for no deductible in excess of Ten
Thousand and No/100 Dollars ($10,000) per occurrence for all such insurance
coverage, except (1) with respect to flood insurance and earthquake insurance
for an Individual Property not located in California, for which the
deductible shall not be in excess of Twenty-Five Thousand and No/100 Dollars
($25,000) per occurrence and (2) with respect to earthquake insurance for an
Individual Property located in California, for which the deductible shall not
be in excess, per occurrence, of the greater of (I) an amount equal to five
percent (5%) of the Full Replacement Cost of the damaged Individual Property
and (II) One Hundred Thousand and No/100 Dollars ($100,000); and (D)
containing an "Ordinance or Law Coverage" or "Enforcement" endorsement if any
of the Improvements or the use of the Individual Property shall at any
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time constitute legal non-conforming structures or uses. In addition,
Borrower shall obtain (x) if any portion of the Improvements is currently or
at any time in the future located in a federally designated "special flood
hazard area", flood hazard insurance in an amount equal to the lesser of (1)
the outstanding principal balance of the Note or (2) the maximum amount of
such insurance available under the National Flood Insurance Act of 1968, the
Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform
Act of 1994, as each may be amended or such greater amount as Lender shall
require; (y) windstorm insurance in amounts and in form and substance
satisfactory to Lender in the event the Individual Property is located in an
area prone to hurricanes and (z) earthquake insurance in amounts and in form
and substance satisfactory to Lender in the event the Individual Property is
located in an area with a high degree of seismic activity, provided that the
insurance pursuant to clauses (x), (y) and (z) hereof shall be on terms
consistent with the comprehensive all risk insurance policy required under
this subsection (i).
(ii) commercial general liability insurance against claims
for personal injury, bodily injury, death or property damage occurring upon,
in or about the Individual Property, such insurance (A) to be on the
so-called "occurrence" form with a combined limit, including umbrella
coverage, of not less than Fifty Million and No/100 Dollars ($50,000,000) ;
(B) to continue at not less than the aforesaid limit until required to be
changed by Lender in writing by reason of changed economic conditions making
such protection inadequate; and (C) to cover at least the following hazards:
(1) premises and operations; (2) products and completed operations on an "if
any" basis; (3) independent contractors; (4) blanket contractual liability
for all legal contracts; and (5) contractual liability covering the
indemnities contained in ARTICLE 9 of the Mortgages to the extent the same is
available;
(iii) business income insurance (A) with loss payable to
Lender; (B) covering all risks required to be covered by the insurance
provided for in subsection (i) above; (C) containing an extended period of
indemnity endorsement which provides that after the physical loss to the
Improvements and Personal Property has been repaired, the continued loss of
income will be insured until such income either returns to the same level it
was at prior to the loss, or the expiration of twelve (12) months from
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the date that the Individual Property is repaired or replaced and operations are
resumed, whichever first occurs, and notwithstanding that the policy may
expire prior to the end of such period; and (D) in an amount equal to the
greater of (1) one hundred percent (100%) of the projected gross income from
the Individual Property for a period of twenty-four (24) months from the date
that the Individual Property is repaired or replaced and operations are
resumed or (2) one hundred percent (100%) of the projected operating expenses
(including, without limitation, Debt Service) to be incurred in connection
with the operation of the Individual Property for a period of twelve (12)
months from the date that the Individual Property is repaired or replaced and
operations are resumed. The amount of such business income insurance shall be
determined prior to the date hereof and at least once each year thereafter
based on Borrower's reasonable estimate of the gross income from the Property
for the succeeding twelve (12) month period. All proceeds payable to Lender
pursuant to this subsection shall be held by Lender and shall be applied to
the obligations secured by the Loan Documents from time to time due and
payable hereunder and under the Note; provided, however, that (y) nothing
herein contained shall be deemed to relieve Borrower of its obligations to
pay the obligations secured by the Loan Documents on the respective dates of
payment provided for in the Note and the other Loan Documents except to the
extent such amounts are actually paid out of the proceeds of such business
income insurance and (z) upon fifteen (15) days prior notice from Lender to
Borrower that the period covered by such business income insurance must be
increased in connection with a Securitization, Borrower shall increase the
period covered by such business income insurance from twelve (12) months to
eighteen (18) months and shall deliver to Lender a certificate of insurance
satisfactory to Lender evidencing such increase, and Borrower's failure to
comply with this clause (z) shall constitute an Event of Default ;
(iv) at all times during which structural construction,
repairs or alterations are being made with respect to the Improvements, and
only if the Individual Property coverage form does not otherwise apply, (A)
owner's contingent or protective liability insurance covering claims not
covered by or under the terms or provisions of the above mentioned commercial
general liability insurance policy; and (B) the insurance provided for in
subsection (i) above written in a so-called builder's risk completed value
form (1) on a non-reporting basis, (2) against all risks insured against
pursuant to subsection (i) above, (3) including permission to occupy the
Individual Property, and (4) with an agreed amount endorsement waiving
co-insurance provisions;
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(v) workers' compensation, subject to the statutory limits
of the state in which the Individual Property is located, and employer's
liability insurance, all in amounts not less than the amount required under
the Legal Requirements of the state in which the Individual Property is
located in respect of any work or operations on or about the Individual
Property, or in connection with the Individual Property or its operation (if
applicable);
(vi) comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably required by Lender on terms
consistent with the commercial property insurance policy required under
subsection (i) above;
(vii) motor vehicle liability coverage for all owned and
non-owned vehicles, including rented and leased vehicles containing minimum
limits per occurrence, including umbrella coverage, of Five Million and
No/100 Dollars ($5,000,000); and
(viii) upon sixty (60) days' written notice, such other
reasonable insurance and in such reasonable amounts as Lender from time to
time may reasonably request against such other insurable hazards which at the
time are commonly insured against for property similar to the Individual
Property located in or around the region in which the Individual Property is
located.
(b) All insurance provided for in SECTION 7.1.1(A) shall be
obtained under valid and enforceable policies (collectively, the "POLICIES"
or individually, the "POLICY"), and shall be subject to the approval of
Lender as to insurance companies, amounts, deductibles, loss payees and
insureds. The Policies shall be issued by financially sound and responsible
insurance companies authorized to do business in the state in which the
Property is located and having a claims paying ability rating of "AA" or
better by at least two (2) of the Rating Agencies, one of which shall be
Standard & Poor's Ratings Group. The Policies described in SECTION 7.1.1
shall designate Lender as loss payee. Not less than ten (10) days prior to
the expiration dates of the Policies theretofore furnished to Lender,
certificates of insurance evidencing the Policies accompanied by evidence
satisfactory to Lender of payment of the premiums due
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thereunder (collectively, the "INSURANCE Premiums"), shall be delivered by
Borrower to Lender.
(c) Any blanket insurance Policy shall specifically allocate to
the Individual Property the amount of coverage from time to time required
hereunder and shall otherwise provide the same protection as would a separate
Policy insuring only the Property in compliance with the provisions of
SECTION 7.1.1(A).
(d) All Policies of insurance provided for or contemplated by
SECTION 7.1.1(A), except for the Policy referenced in SECTION 7.1.1(A)(V),
shall name Borrower, or the Tenant, as the insured and Lender as the
additional insured, as its interests may appear, and in the case of property
damage, boiler and machinery, flood and earthquake insurance, shall contain a
so-called New York standard non-contributing mortgagee clause in favor of
Lender providing that the loss thereunder shall be payable to Lender.
(e) All Policies of insurance provided for in SECTION
7.1.1(A)(V) shall contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting
for Borrower, or of any Tenant or other occupant, or failure to comply with
the provisions of any Policy, which might otherwise result in a forfeiture of
the insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other
than to increase the coverage provided thereby) or canceled without at least
thirty (30) days' written notice to Lender and any other party named therein
as an additional insured;
(iii) each Policy shall provide that the issuers thereof
shall give written notice to Lender if the Policy has not been renewed
fifteen (15) days prior to its expiration; and
(iv) Lender shall not be liable for any Insurance Premiums
thereon or subject to any assessments thereunder.
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(f) If at any time Lender is not in receipt of written evidence
that all insurance required hereunder is in full force and effect, Lender
shall have the right, without notice to Borrower, to take such action as
Lender deems necessary to protect its interest in the Property, including,
without limitation, the obtaining of such insurance coverage as Lender in its
sole discretion deems appropriate and all premiums incurred by Lender in
connection with such action or in obtaining such insurance and keeping it in
effect shall be paid by Borrower to Lender upon demand and until paid shall
be secured by the Mortgages and shall bear interest at the Default Rate.
(g) If the Individual Property shall be damaged or destroyed,
in whole or in part, by fire or other casualty, Borrower shall give prompt
notice of such damage to Lender and shall promptly commence and diligently
prosecute the completion of the repair and restoration of the Individual
Property as nearly as possible to the condition the Individual Property was
in immediately prior to such fire or other casualty, with such alterations as
may be reasonably approved by Lender (a "RESTORATION") and otherwise in
accordance with SECTION 7.1.3. Borrower shall pay all costs of such
Restoration whether or not such costs are covered by insurance. Lender may,
but shall not be obligated to make proof of loss if not made promptly by
Borrower;
(h) In the event of foreclosure of the Mortgage with respect to
the Individual Property, or other transfer of title to the Individual
Property in extinguishment in whole or in part of the Debt all right, title
and interest of Borrower in and to the Policies that are not blanket Policies
then in force concerning the Individual Property and all proceeds payable
thereunder shall thereupon vest in the purchaser at such foreclosure or
Lender or other transferee in the event of such other transfer of title.
7.1.2 CONDEMNATION. Borrower shall promptly give Lender notice
of the actual or threatened commencement of any condemnation or eminent
domain proceeding affecting any of the Properties and shall deliver to Lender
copies of any and all papers served in connection with such proceedings.
Lender may participate in any such proceedings, and Borrower shall from time
to time deliver to Lender all instruments requested by it to permit such
participation. Borrower shall, at its expense, diligently prosecute any such
proceedings, and shall consult with Lender, its attorneys and experts,
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and cooperate with them in the carrying on or defense of any such
proceedings. Notwithstanding any taking by any public or quasi-public
authority through eminent domain or otherwise (including but not limited to
any transfer made in lieu of or in anticipation of the exercise of such
taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Agreement and the
Debt shall not be reduced until any award or payment therefor (an "AWARD")
shall have been actually received and applied by Lender, after the deduction
of expenses of collection, to the reduction or discharge of the Debt. Lender
shall not be limited to the interest paid on the Award by the condemning
authority but shall be entitled to receive out of the award interest at the
rate or rates provided herein or in the Note. If the Property or any portion
thereof is taken by a condemning authority, Borrower shall promptly commence
and diligently prosecute the Restoration of the Property and otherwise comply
with the provisions of SECTION 7.1.3. If the Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender
shall have the right, whether or not a deficiency judgment on the Note shall
have been sought, recovered or denied, to receive the Award, or a portion
thereof sufficient to pay the Debt.
7.1.3 RESTORATION. The following provisions shall apply in
connection with the Restoration of any Individual Property:
(a) If the Net Proceeds shall be less than Five Hundred
Thousand and No/100 Dollars ($500,000) and the costs of completing the
Restoration shall be less than Five Hundred Thousand and No/100 Dollars
($500,000), the Net Proceeds will be disbursed by Lender to Borrower upon
receipt, provided that all of the conditions set forth in SECTION 7.1.3(B)(I)
are met and Borrower delivers to Lender a written undertaking to
expeditiously commence and to satisfactorily complete with due diligence the
Restoration in accordance with the terms of this Agreement.
(b) If the Net Proceeds are equal to or greater than Five
Hundred Thousand and No/100 Dollars ($500,000) or the costs of completing the
Restoration is equal to or greater than Five Hundred Thousand and No/100
Dollars ($500,000) Lender shall make the Net Proceeds available for the
Restoration in accordance with the provisions of this SECTION 7.1.3. The term
"NET PROCEEDS" for purposes of this SECTION 7.1.3 shall mean: (i) the net
amount of all insurance proceeds received by Lender pursuant to SECTION 7.1.1
(a)(i), (iv), (vi) and (vii) as a result of such damage or
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destruction, after deduction of its reasonable costs and expenses (including,
but not limited to, reasonable counsel fees), if any, in collecting same
("INSURANCE PROCEEDS"), or (ii) the net amount of the Award, after deduction
of its reasonable costs and expenses (including, but not limited to,
reasonable counsel fees), if any, in collecting same ("CONDEMNATION
PROCEEDS"), whichever the case may be.
(i) The Net Proceeds shall be made available to Borrower
for Restoration provided that each of the following conditions
are met:
(A) no Event of Default shall have occurred
and be continuing;
(B) (1) in the event the Net Proceeds are
Insurance Proceeds, less than twenty-five percent
(25%) of the total floor area of the Improvements on
the Individual Property has been damaged, destroyed
or rendered unusable as a result of such fire or
other casualty or (2) in the event the Net Proceeds
are Condemnation Proceeds, less than ten percent
(10%) of the land constituting the Individual
Property is taken, and such land is located along the
perimeter or periphery of the Individual Property,
and no portion of the Improvements is located in such
land;
(C) the Leases with respect to the
Individual Property, other than Minor Leases, shall
remain in full force and effect during and after the
completion of the Restoration, notwithstanding the
occurrence of any such fire or other casualty or
taking, whichever the case may be.
(D) Borrower shall commence the Restoration
as soon as reasonably practicable (but in no event
later than sixty (60) days after such damage or
destruction or taking,
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whichever the case may be, occurs) and shall diligently
pursue the same to satisfactory completion;
(E) Lender shall be satisfied that any
operating deficits, including all scheduled payments
of principal and interest under the Note, which will
be incurred with respect to the Individual Property
as a result of the occurrence of any such fire or
other casualty or taking, whichever the case may be,
will be covered out of (1) the Net Proceeds, (2) the
insurance coverage referred to in SECTION
7.1.1(A)(III), if applicable, or (3) by other funds
of Borrower;
(F) Lender shall be satisfied that the
Restoration will be completed on or before the
earliest to occur of (1) the Maturity Date, (2) the
earliest date required for such completion under the
terms of any Lease, (3) such time as may be required
under applicable zoning law, ordinance, rule or
regulation in order to repair and restore the
Property to the condition it was in immediately prior
to such fire or other casualty or to as nearly as
possible the condition it was in immediately prior to
such taking, as applicable or (4) the expiration of
the insurance coverage referred to in SECTION
7.1.1(A)(III);
(G) the Individual Property and the use
thereof after the Restoration will be in compliance
with and permitted under all applicable zoning laws,
ordinances, rules and regulations;
(H) the Restoration shall be done and
completed by Borrower in an expeditious and diligent
fashion and in compliance with all applicable
governmental laws, rules and regulations (including,
without limitation, all applicable environmental
laws); and
(I) such fire or other casualty or taking,
as applicable, does not result in the loss of access
to the Individual
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Property or the related Improvements beyond the period
of Restoration.
(ii) The Net Proceeds shall be held by Lender in an
interest-bearing account and, until disbursed in accordance
with the provisions of this SECTION 7.1.3(B), shall constitute
additional security for the Debt and other obligations under
the Loan Documents. The Net Proceeds shall be disbursed by
Lender to, or as directed by, Borrower from time to time
during the course of the Restoration, upon receipt of evidence
satisfactory to Lender that (A) all materials installed and
work and labor performed (except to the extent that they are
to be paid for out of the requested disbursement) in
connection with the Restoration have been paid for in full,
and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to
file same, or any other liens or encumbrances of any nature
whatsoever on the Individual Property arising out of the
Restoration which have not either been fully bonded to the
satisfaction of Lender and discharged of record or in the
alternative fully insured to the satisfaction of Lender by the
title company issuing the Title Insurance Policy.
(iii) All plans and specifications required in
connection with the Restoration shall be subject to prior
review and acceptance in all respects by Lender and by an
independent consulting engineer selected by Lender (the
"CASUALTY CONSULTANT"). Lender shall have the use of the plans
and specifications and all permits, licenses and approvals
required or obtained in connection with the Restoration. The
identity of the contractors, subcontractors and materialmen
engaged in the Restoration, as well as the contracts under
which they have been engaged, shall be subject to prior review
and acceptance by Lender and the Casualty Consultant. All
costs and expenses incurred by Lender in connection with
making the Net Proceeds available for the Restoration
including, without limitation, reasonable counsel fees and
disbursements and the Casualty Consultant's fees, shall be
paid by Borrower.
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(iv) In no event shall Lender be obligated to make
disbursements of the Net Proceeds in excess of an amount equal
to the costs actually incurred from time to time for work in
place as part of the Restoration, as certified by the Casualty
Consultant, MINUS the Casualty Retainage. The term "CASUALTY
RETAINAGE" shall mean an amount equal to ten percent (10%) of
the costs actually incurred for work in place as part of the
Restoration, as certified by the Casualty Consultant, until
the Restoration has been completed. The Casualty Retainage
shall in no event, and notwithstanding anything to the
contrary set forth above in this SECTION 7.1.3(B), be less
than the amount actually held back by Borrower from
contractors, subcontractors and materialmen engaged in the
Restoration. The Casualty Retainage shall not be released
until the Casualty Consultant certifies to Lender that the
Restoration has been completed in accordance with the
provisions of this SECTION 7.1.3(B) and that all approvals
necessary for the re-occupancy and use of the Individual
Property have been obtained from all appropriate governmental
and quasi-governmental authorities, and Lender receives
evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out
of the Casualty Retainage; provided, however, that Lender will
release the portion of the Casualty Retainage being held with
respect to any contractor, subcontractor or materialman
engaged in the Restoration as of the date upon which the
Casualty Consultant certifies to Lender that the contractor,
subcontractor or materialman has satisfactorily completed all
work and has supplied all materials in accordance with the
provisions of the contractor's, subcontractor's or
materialman's contract, the contractor, subcontractor or
materialman delivers the lien waivers and evidence of payment
in full of all sums due to the contractor, subcontractor or
materialman as may be reasonably requested by Lender or by the
title company issuing the Title Insurance Policy, and Lender
receives an endorsement to the Title Insurance Policy insuring
the continued priority of the lien of the related Mortgage and
evidence of payment of any premium payable for such
endorsement. If required by Lender, the release of any such
portion of the Casualty Retainage shall be approved by the
surety company, if any, which has issued a payment or
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performance bond with respect to the contractor, subcontractor
or materialman.
(v) Lender shall not be obligated to make
disbursements of the Net Proceeds more frequently than once
every calendar month.
(vi) If at any time the Net Proceeds or the
undisbursed balance thereof shall not, in the opinion of
Lender in consultation with the Casualty Consultant, be
sufficient to pay in full the balance of the costs which are
estimated by the Casualty Consultant to be incurred in
connection with the completion of the Restoration, Borrower
shall deposit the deficiency (the "NET PROCEEDS DEFICIENCY")
with Lender before any further disbursement of the Net
Proceeds shall be made. The Net Proceeds Deficiency deposited
with Lender shall be held by Lender and shall be disbursed for
costs actually incurred in connection with the Restoration on
the same conditions applicable to the disbursement of the Net
Proceeds, and until so disbursed pursuant to this SECTION
7.1.3(B) shall constitute additional security for the Debt and
other obligations under the Loan Documents.
(vii) The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds Deficiency
deposited with Lender after the Casualty Consultant certifies
to Lender that the Restoration has been completed in
accordance with the provisions of this SECTION 7.1.3(B), and
the receipt by Lender of evidence satisfactory to Lender that
all costs incurred in connection with the Restoration have
been paid in full, shall be remitted by Lender to Borrower,
provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of
the Other Security Documents.
(c) All Net Proceeds not required (i) to be made available for
the Restoration or (ii) to be returned to Borrower as excess Net Proceeds
pursuant to SECTION 7.1.3(B)(VII) may be retained and applied by Lender on the
next occurring Payment Date toward the payment of the Debt whether or not then
due and payable in such order,
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priority and proportions as Lender in its sole discretion shall deem proper,
or, at the discretion of Lender, the same may be paid, either in whole or in
part, to Borrower for such purposes as Lender shall designate, in its
discretion.
SECTION 7.2 REQUIRED REPAIRS; REQUIRED REPAIR FUNDS.
7.2.1 REQUIRED REPAIRS; DEPOSITS. Borrower shall perform the
repairs at its Properties, as more particularly set forth on SCHEDULE II
hereto (such repairs hereinafter referred to as "PROPERTY REQUIRED REPAIRS").
Borrower shall complete each of the Property Required Repairs on or before
the required deadline for each repair as set forth on SCHEDULE II. Upon
thirty (30) days prior notice from Lender to Borrower that a reserve for
Property Required Repairs shall be required in connection with a
Securitization, Borrower shall deposit with Lender the amount for each
Individual Property set forth on SCHEDULE II hereto to perform the Property
Required Repairs for such Individual Property to the extent such Property
Required Repairs have not yet been performed in accordance with this SECTION
7.2. Amounts so deposited shall hereinafter be referred to as the "REQUIRED
REPAIR FUND". Lender will maintain the Required Repair Fund in a segregated
account (the "REQUIRED REPAIR ACCOUNT") and the Required Repair Fund shall be
invested and reinvested by Lender, at Borrower's direction, in one or more
Eligible Investments, subject to the following restrictions: (A) such
Eligible Investments and the proceeds thereof shall be deemed a part of the
Required Repair Fund; (B) each such Eligible Investment shall be made in the
name of Lender (in its capacity as such) or in the name of a nominee of
Lender under its complete and exclusive dominion and control or, if
applicable law provides for perfection of pledges of an instrument not
evidenced by a certificate or other instrument through registration of such
pledge on books maintained by or on behalf of the issuer of such investment,
such pledge may be so registered; (C) Lender shall have the sole control over
such investment, the income thereon and the proceeds thereof; (D) other than
investments described in clause (B) above, any certificate or other
instrument evidencing such investment shall be delivered directly to Lender
or its agent; (E) the proceeds of each investment shall be remitted by the
purchaser thereof directly to Lender and (F) Lender shall not be liable for
any loss sustained on the investment of any funds constituting a part of the
Required Repair Fund.
7.2.2 GRANT OF SECURITY INTEREST. Borrower shall grant a first
priority security interest to Lender, as security for payment of all sums due
under the
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Loan and the performance of all other terms, conditions and covenants of the
Loan Documents and this Agreement on Borrower's part to be paid and
performed, in all of Borrower's right, title and interest in and to the
Required Repair Fund and the Required Repair Account and shall execute and
deliver to Lender such UCC-1 Financing Statements and other documents or
instruments as Lender may request in order to grant and perfect such security
interest. Borrower shall not, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in the Required
Repair Fund or the Required Repair Account or permit any lien or encumbrance
to attach thereto, or any levy to be made thereon, or any UCC-1 Financing
Statements, except those naming Lender as the secured party, to be filed with
respect thereto. Upon the occurrence of an Event of Default, Lender may apply
any sums then present in the Required Repair Fund to the payment of the Debt
in any order in its sole discretion. Until expended or applied as herein
provided, the Required Repair Fund shall constitute additional security for
the Debt.
7.2.3 RELEASE OF REQUIRED REPAIR FUNDS. After Borrower's
initial deposit into the Required Repair Account pursuant to SECTION 7.2.1,
Lender shall disburse to Borrower the Required Repair Funds from the Required
Repair Account from time to time upon satisfaction by Borrower of each of the
following conditions: (a) Borrower shall submit a written request for payment
to Lender at least ten (10) days prior to the date on which Borrower requests
such payment be made and specifies the Property Required Repairs to be paid;
(b) on the date such request is received by Lender and on the date such
payment is to be made, no Default or Event of Default shall exist and remain
uncured; (c) Lender shall have received a certificate from Borrower (i)
stating that all Property Required Repairs at the applicable Individual
Property funded by the prior requested disbursement have been completed in
good and workmanlike manner and in accordance with all applicable federal,
state and local laws, rules and regulations, (ii) any license, permit or
other approval by any Governmental Authority required to commence and/or
complete the Property Required Repairs to be funded by the requested
disbursement have been obtained, (iii) identifying each Person that will
supply materials or labor in connection with the Property Required Repairs to
be performed at such Individual Property and to be funded by the requested
disbursement and including copies of invoices or statements from each such
Person setting forth the
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costs for such materials or labor, and (iv) stating that each Person that
supplied materials or labor in connection with the Property Required Repairs
performed at an Individual Property and funded by the prior requested
disbursement has been paid all amounts to be paid to such Person as set forth
in the written request with respect to such prior requested disbursement and
setting forth the amount paid to each such Person and, if such requested
disbursement includes amounts constituting the final payment to any Person on
account of any Property Required Repairs, such certificate shall be
accompanied by lien waivers or other evidence of payment satisfactory to
Lender; (d) at Lender's option if the amount disbursed for Property Required
Repairs with respect to one Individual Property under the prior requested
disbursement exceeded a total of Two Hundred Fifty Thousand and No/100
Dollars ($250,000), a title search for any Individual Property indicating
that such Individual Property is free from all liens, claims and other
encumbrances not previously approved by Lender, and (e) Lender shall have
received such other evidence as Lender shall reasonably request that the
Property Required Repairs at any Individual Property funded by the prior
requested disbursement have been completed and the related costs and expenses
have been paid. Lender shall not be required to make disbursements from the
Required Repair Account with respect to any Individual Property more
frequently than once per calendar month and unless such requested
disbursement is in an amount greater than Fifteen Thousand and No/100 Dollars
($15,000) (or a lesser amount if the total amount in the Required Repair
Account is less than Fifteen Thousand and No/100 Dollars ($15,000), in which
case only one disbursement of the amount remaining in the account shall be
made) and such disbursement shall be made only upon satisfaction of each
condition contained in this SECTION 7.2.3. Prior to Borrower's initial
deposit of funds into the Required Repair Fund in accordance with SECTION
7.2.2 or thereafter with respect to any calendar month during which a request
for payment from the Required Repair Fund is not submitted to Lender pursuant
to this SECTION 7.2.3, Borrower shall deliver to Lender, as a part of the
monthly reports to be delivered pursuant to SECTION 5.1(J)(IV), an Officer's
Certificate setting forth the amounts paid during the preceding calendar
month for Property Required Repairs and setting forth each Person to whom
such amounts were paid, the amount paid to each such Person and the related
Property Required Repairs performed by each such Person.
7.2.4 FAILURE TO PERFORM REQUIRED REPAIRS AND MAKE INITIAL
DEPOSIT. It shall be an Event of Default under this Agreement if (i) Borrower
does not exercise diligent efforts to complete the Property Required Repairs
at each Individual
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Property by the required deadline for each repair as set forth on SCHEDULE
II, or (ii) Borrower does not make the initial deposit into the Required
Repair Fund in accordance with SECTION 7.2.2. Upon the occurrence of an Event
of Default, Lender, at its option, may withdraw all Required Repair Funds
from the Required Repair Account and Lender may apply such funds either to
completion of the Property Required Repairs at one or more of the Properties
or toward payment of the Debt in such order, proportion and priority as
Lender may determine in its sole discretion. Lender's right to withdraw and
apply Required Repair Funds shall be in addition to all other rights and
remedies provided to Lender under this Agreement and the other Loan Documents.
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SECTION 7.3 TAX AND INSURANCE ESCROW FUND.
7.3.1 TAX AND INSURANCE ESCROW FUND. Borrower shall pay to
Lender on each Payment Date (a) one-twelfth of the Taxes that Lender
estimates will be payable during the next ensuing twelve (12) months in order
to accumulate with Lender sufficient funds to pay all such Taxes at least ten
(10) days prior to their respective due dates, and (b) one-twelfth of the
Insurance Premiums that Lender estimates will be payable for the renewal of
the coverage afforded by the Policies upon the expiration thereof in order to
accumulate with Lender sufficient funds to pay all such Insurance Premiums at
least thirty (30) days prior to the expiration of the Policies (said amounts
in (a) and (b) above being hereinafter referred to as the "TAX AND INSURANCE
ESCROW FUND"). The Tax and Insurance Escrow Fund and the payments of interest
or principal or both, payable pursuant to the Note, shall be added together
and shall be paid as an aggregate sum by Borrower to Lender. Lender will
apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance
Premiums required to be made by Borrower pursuant to SECTION 5.1 hereof and
under the Mortgages. In making any payment relating to the Tax and Insurance
Escrow Fund, Lender may do so according to any bill, statement or estimate
procured from the appropriate public office (with respect to Taxes) or
insurer or agent (with respect to Insurance Premiums), without inquiry into
the accuracy of such bill, statement or estimate or into the validity of any
tax, assessment, sale, forfeiture, tax lien or title or claim thereof. If the
amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to SECTION 5.1 hereof, Lender shall, in
its sole discretion, return any excess to Borrower or credit such excess
against future payments to be made to the Tax and Insurance Escrow Fund. Any
amount remaining in the Tax and Insurance Escrow Fund after the Debt has been
paid in full shall be returned to Borrower. In allocating such excess, Lender
may deal with the person shown on the records of Lender to be the owner of
the Properties. If at any time Lender reasonably determines that the Tax and
Insurance Escrow Fund is not or will not be sufficient to pay the items set
forth in (a) and (b) above, Lender shall notify Borrower of such
determination and Borrower shall increase its monthly payments to Lender by
the amount that Lender estimates is sufficient to make up the deficiency at
least ten (10) days prior to delinquency of the Taxes and/or thirty (30) days
prior to expiration of the Policies, as the case may be.
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7.3.2 GRANT OF SECURITY INTEREST. Borrower hereby pledges,
assigns and grants a security interest to Lender, as security for payment of
all sums due under the Loan and the performance of all other terms,
conditions and provisions of the Loan Documents and this Agreement on
Borrower's part to be paid and performed, of all Borrower's right, title and
interest in and to the Tax and Insurance Escrow Fund. Borrower shall not,
without obtaining the prior written consent of Lender, further pledge, assign
or grant any security interest in the Tax and Insurance Escrow Fund or permit
any lien or encumbrance to attach thereto, or any levy to be made thereon, or
any UCC-1 Financing Statements, except those naming Lender as the secured
party, to be filed with respect thereto.
7.3.3 APPLICATION OF TAX AND INSURANCE ESCROW FUND. Until
expended or applied as above provided, any amounts in the Tax and Insurance
Escrow Fund shall constitute additional security for the Debt. Upon the
occurrence of an Event of Default, Lender may apply any sums then present in
the Tax and Insurance Escrow Fund to the payment of the following items in
any order in its sole discretion: (i) Taxes and Other Charges; (ii) Insurance
Premiums; (iii) interest on the unpaid principal balance of the Note; (iv)
amortization of the unpaid principal balance of the Note; or (v) all other
sums payable pursuant to this Agreement and the other Loan Documents.
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SECTION 7.4 REPLACEMENTS AND REPLACEMENT RESERVE.
7.4.1 REPLACEMENT RESERVE FUND. Commencing no later than
thirty (30) days after Lender's notice to Borrower that a replacement reserve
shall be required in connection with a Securitization, Borrower shall pay to
Lender on each Payment Date one twelfth of the amount (the "REPLACEMENT
RESERVE MONTHLY DEPOSIT") equal to five percent (5%) of the Gross Income from
Operations projected by Lender for the current calendar year to be applied to
replacements and repairs of the type listed on SCHEDULE III hereof required
to be made to the Mortgaged Property during the calendar year. Amounts so
deposited shall hereinafter be referred to as the "REPLACEMENT RESERVE FUND".
Lender will maintain the Replacement Reserve Fund in a segregated account
(the "REPLACEMENT RESERVE ACCOUNT") and the Replacement Reserve Fund shall be
invested and reinvested by Lender, at Borrower's direction, in one or more
Eligible Investments, subject to the following restrictions: (A) such
Eligible Investments and the proceeds thereof shall be deemed a part of the
Replacement Reserve Fund; (B) each such Eligible Investment shall be made in
the name of Lender (in its capacity as such) or in the name of a nominee of
Lender under its complete and exclusive dominion and control or, if
applicable law provides for perfection of pledges of an instrument not
evidenced by a certificate or other instrument through registration of such
pledge on books maintained by or on behalf of the issuer of such investment,
such pledge may be so registered; (C) Lender shall have the sole control over
such investment, the income thereon and the proceeds thereof; (D) other than
investments described in clause (B) above, any certificate or other
instrument evidencing such investment shall be delivered directly to Lender
or its agent; (E) the proceeds of each investment shall be remitted by the
purchaser thereof directly to Lender and (F) Lender shall not be liable for
any loss sustained on the investment of any funds constituting a part of the
Replacement Reserve Fund. Lender may reassess its estimate of the amount
necessary for the Replacement Reserve Fund from time to time and, and may
increase the monthly amounts required to be deposited into the Replacement
Reserve Fund by thirty (30) days notice to Borrower if it determines in its
reasonable discretion that an increase is necessary to maintain the proper
maintenance and operation of the Properties. Any amount held in the
Replacement Reserve Account and allocated for an Individual Property shall be
retained by Lender and credited toward the future Replacement Reserves
Monthly Deposits required by Lender hereunder in the event such Individual
Property is released from the Lien of its related Mortgage in accordance with
SECTION 2.4 hereof.
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7.4.2 GRANT OF SECURITY INTEREST. Borrower shall grant a first
priority security interest to Lender, as security for payment of all sums due
under the Loan and the performance of all other terms, conditions and
provisions to be paid and performed, of all Borrower's right, title and
interest in and to the Replacement Reserve Fund and the Replacement Reserve
Account and shall execute and deliver to Lender such UCC-1 Financing
Statements and other documents or instruments as Lender may request in order
to grant and perfect such security interest. Borrower shall not, without
obtaining the prior written consent of Lender, further pledge, assign or
grant any security interest in the Replacement Reserve Fund or the
Replacement Reserve Account or permit any lien or encumbrance to attach
thereto, or any levy to be made thereon, or any UCC-1 Financing Statements,
except those naming Lender as the secured party, to be filed with respect
thereto. Upon the occurrence of an Event of Default, Lender may apply any
sums then present in the Replacement Reserve Fund to the payment of the Debt
in any order in its sole discretion. Until expended or applied as above
provided, the Replacement Reserve Fund shall constitute additional security
for the Debt.
7.4.3 DISBURSEMENTS FROM REPLACEMENT RESERVE ACCOUNT. (a) After
the commencement of Borrower's obligation to make the Replacement Reserve
Monthly Deposit pursuant to SECTION 7.4.1, Lender shall make disbursements
from the Replacement Reserve Account to pay Borrower only for the costs to
maintain and replace the furniture, fixtures and equipment used in connection
with the operation of the Properties as set forth in the Approved Annual
Budget (collectively, the "REPLACEMENTS"). Lender shall not be obligated to
make disbursements from the Replacement Reserve Account to reimburse Borrower
for the costs of routine maintenance (other than the regular replacement of
furniture, fixtures and equipment constituting Replacements) to an Individual
Property or for costs which are to be reimbursed from the Required Repair
Fund.
(b) Lender shall, upon written request from Borrower and
satisfaction of the requirements set forth in this SECTION 7.4.3 and SECTION
7.4.4 of this Agreement, disburse to Borrower amounts from the Replacement
Reserve Account to pay for the actual approved costs of Replacements or to
reimburse the Borrower therefor in accordance with the Approved Annual Budget
within ten (10) days of Lender's receipt
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of a request for disbursement in accordance with SECTION 7.4.3(C). In no
event shall Lender be obligated to disburse funds from the Replacement
Reserve Account if a Default or an Event of Default exists.
(c) Each request for disbursement from the Replacement Reserve
Account shall be in a form specified or approved by Lender and shall certify
as to (i) the specific Replacements for which the disbursement is requested,
(ii) the quantity and price of each item purchased, if the Replacement
includes the purchase or replacement of specific items, (iii) the price of
all materials (grouped by type or category) used in any Replacement other
than the purchase or replacement of specific items, and (iv) the cost of all
contracted labor or other services applicable to each Replacement for which
such request for disbursement is made. With each request for disbursement,
Borrower shall certify that all Replacements that were the subject of the
prior request for disbursement have been made in accordance with all
applicable Legal Requirements of any Governmental Authority having
jurisdiction over the applicable Individual Property to which the
Replacements are being provided. Each request for disbursement shall include
copies of invoices for all items or materials to be purchased and all
contracted labor or services to be provided in connection with the
Replacements for which the disbursement is requested. Each request for
disbursement shall include a statement setting forth each Person that
supplied materials or labor in connection with Replacements that were the
subject of the prior request for disbursement and setting forth the amount
paid to each such Person and shall include evidence satisfactory to Lender of
payment of all such amounts evidence of completion of the Replacements for
which the prior request for disbursement was made, which evidence shall be
satisfactory to Lender in its reasonable discretion. Prior to Borrower's
making of the initial Replacement Reserve Monthly Deposit in accordance with
SECTION 7.4.1 or thereafter with respect to any calendar month during which a
request for disbursement from the Replacement Reserve Fund is not submitted
to Lender pursuant to this SECTION 7.4.3, Borrower shall deliver to Lender,
as a part of the monthly reports to be delivered pursuant to SECTION
5.1(J)(IV), an Officer's Certificate setting forth the amounts paid during
the preceding calendar month for Replacements and setting forth each Person
to whom such amounts were paid, the amount paid to each such Person and the
related Replacement provided by each such Person.
(d) Borrower shall not make a request for disbursement from
the Replacement Reserve Account more frequently than once in any calendar month
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and (except in connection with the final disbursement) the total cost of all
Replacements in any request shall not be less than Fifteen Thousand and
No/Dollars ($15,000).
7.4.4 PERFORMANCE OF REPLACEMENTS. (a) Borrower shall make
Replacements when required in order to keep each Individual Property in
condition and repair consistent with other first class, full service hotel or
first class, full service hotel and office properties, as applicable, in the
same market segment and under the same franchisor in the metropolitan area in
which the respective Individual Property is located, and to keep each
Individual Property or any portion thereof from deteriorating. Borrower shall
complete all Replacements in a good and workmanlike manner as soon as
practicable following the commencement of making each such Replacement.
(b) Lender reserves the right, at its option, to approve all
material contracts or work orders with materialmen, mechanics, suppliers,
subcontractors, contractors or other parties providing labor or materials in
connection with the Replacements. Upon Lender's request, Borrower shall
assign any contract or subcontract to Lender.
(c) In the event Lender determines in its reasonable discretion
that any Replacement is not being performed in a workmanlike or timely manner
or that any Replacement has not been completed in a workmanlike or timely
manner, Lender shall have the option to withhold any further disbursements
from the Replacement Reserve Account and, upon ten (10) days prior written
notice, to proceed under existing contracts or to contract with third parties
to complete such Replacement and to apply the Replacement Reserve Fund toward
the labor and materials necessary to complete such Replacement and, without
providing any prior notice to Borrower, to exercise any and all other
remedies available to Lender upon an Event of Default hereunder.
(d) In order to facilitate Lender's completion or making of the
Replacements pursuant to SECTION 7.4.4(C) above, Borrower grants Lender the
right to enter onto any Individual Property and perform any and all work and
labor necessary to complete or make the Replacements and/or employ watchmen
to protect such Individual Property from damage. All sums so expended by
Lender shall be deemed to have been advanced under the Loan to Borrower and
secured by the Mortgages. For this purpose
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Borrower constitutes and appoints Lender its true and lawful attorney-in-fact
with full power of substitution to complete or undertake the Replacements in
the name of Borrower. Such power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked. Borrower empowers said
attorney-in-fact as follows: (i) to use any funds in the Replacement Reserve
Account for the purpose of making or completing the Replacements; (ii) to
make such additions, changes and corrections to the Replacements as shall be
necessary or desirable to complete the Replacements; (iii) to employ such
contractors, subcontractors, agents, architects and inspectors as shall be
required for such purposes; (iv) to pay, settle or compromise all existing
bills and claims which are or may become Liens against any Individual
Property, or as may be necessary or desirable for the completion of the
Replacements, or for clearance of title; (v) to execute all applications and
certificates in the name of Borrower which may be required by any of the
contract documents; (vi) to prosecute and defend all actions or proceedings
in connection with any Individual Property or the rehabilitation and repair
of any Individual Property; and (vii) to do any and every act which Borrower
might do in its own behalf to fulfill the terms of this Agreement.
(e) Nothing in this SECTION 7.4.4 shall: (i) make Lender
responsible for making or completing the Replacements; (ii) require Lender to
expend funds in addition to the Replacement Reserve Fund to make or complete
any Replacement; (iii) obligate Lender to proceed with the Replacements; or
(iv) obligate Lender to demand from Borrower additional sums to make or
complete any Replacement.
(f) Upon reasonable prior notice by Lender, Borrower shall
permit Lender and Lender's agents and representatives (including, without
limitation, Lender's engineer, architect, or inspector) or third parties
making Replacements pursuant to this SECTION 7.4.4 to enter onto each
Individual Property during normal business hours (subject to the rights of
tenants under their Leases) to inspect the progress of any Replacements and
all materials being used in connection therewith and to examine all plans and
shop drawings relating to such Replacements which are or may be kept at each
Individual Property. Borrower shall cause all contractors and subcontractors
to cooperate with Lender or Lender's representatives or such other persons
described above in connection with inspections described in this SECTION
7.4.4(F) or the completion of Replacements pursuant to this SECTION 7.4.4.
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(g) If Lender has determined in its reasonable discretion that
any Replacements are not being completed in a timely and workmanlike manner
or in the event that the amount disbursed for the completion of a single
Replacement pursuant to a prior disbursement from the Replacement Reserve
Account exceeded One Hundred Thousand and No/100 Dollars ($100,000), Lender
may require an inspection of the applicable Individual Property at Borrower's
expense prior to making a monthly disbursement from the Replacement Reserve
Account in order to verify completion of such Replacements. Lender may
require that such inspection be conducted by an appropriate independent
qualified professional selected by Lender and/or may require a copy of a
certificate of completion by an independent qualified professional acceptable
to Lender prior to the disbursement of any amounts from the Replacement
Reserve Account. Borrower shall pay the expense of the inspection as required
hereunder, whether such inspection is conducted by Lender or by an
independent qualified professional.
(h) The Replacements and all materials, equipment, fixtures, or
any other item comprising a part of any Replacement shall be constructed,
installed or completed, as applicable, free and clear of all mechanic's,
materialman's or other liens (except for those Liens existing on the date of
this Agreement which have been approved in writing by Lender).
(i) In the event that the prior request for disbursement
included any amount in excess of Two Hundred Fifty Thousand and No/100
Dollars ($250,000) for any single Replacement requiring construction,
installation or completion, Lender may require Borrower to provide Lender
with a search of title to the applicable Individual Property prior to making
any additional disbursements from the Replacement Reserve Account, which
search shows that no mechanic's or materialmen's liens or other liens of any
nature have been placed against the applicable Individual Property since the
date of recordation of the related Mortgage and that title to such Individual
Property is free and clear of all Liens (other than the lien of the related
Mortgage and any other Liens previously approved in writing by the Lender, if
any).
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(j) All Replacements shall comply with all applicable Legal
Requirements of all Governmental Authorities having jurisdiction over the
applicable Individual Property and applicable insurance requirements
including, without limitation, applicable building codes, special use
permits, environmental regulations, and requirements of insurance
underwriters.
(k) In addition to any insurance required under the Loan
Documents, Borrower shall provide or cause to be provided workmen's
compensation insurance, builder's risk, and public liability insurance and
other insurance to the extent required under applicable law in connection
with a particular Replacement. All such policies shall be in form and amount
reasonably satisfactory to Lender. All such policies which can be endorsed
with standard mortgagee clauses making loss payable to Lender or its assigns
shall be so endorsed. Certified copies of such policies shall be delivered to
Lender.
7.4.5 FAILURE TO MAKE REPLACEMENTS AND MAKE INITIAL DEPOSIT.
(a) It shall be an Event of Default under this Agreement if (i) Borrower
fails to make the initial Replacement Reserve Monthly Deposit in accordance
with SECTION 7.4.1 or (ii) fails to comply with any other provision of this
SECTION 7.4 and such failure is not cured within thirty (30) days after
notice from Lender. Upon the occurrence of an Event of Default, Lender may
use the Replacement Reserve Fund (or any portion thereof) for any purpose,
including but not limited to completion of the Replacements as provided in
SECTION 7.4.4, or for any other repair or replacement to any Individual
Property or toward payment of the Debt in such order, proportion and priority
as Lender may determine in its sole discretion. Lender's right to withdraw
and apply the Replacement Reserve Funds shall be in addition to all other
rights and remedies provided to Lender under this Agreement and the other
Loan Documents.
(b) Nothing in this Agreement shall obligate Lender to apply
all or any portion of the Replacement Reserve Fund on account of an Event of
Default to payment of the Debt or in any specific order or priority.
7.4.6 BALANCE IN THE REPLACEMENT RESERVE ACCOUNT. The
insufficiency of any balance in the Replacement Reserve Account shall not
relieve Borrower from its obligation to fulfill all preservation and
maintenance covenants in the Loan Documents.
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7.4.7 INDEMNIFICATION. Borrower shall indemnify Lender and
hold Lender harmless from and against any and all actions, suits, claims,
demands, liabilities, losses, damages, obligations and costs and expenses
(including litigation costs and reasonable attorneys fees and expenses)
arising from or in any way connected with the performance of the
Replacements. Borrower shall assign to Lender all rights and claims Borrower
may have against all persons or entities supplying labor or materials in
connection with the Replacements; provided, however, that Lender may not
pursue any such right or claim unless an Event of Default has occurred and
remains uncured.
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SECTION 7.5 GROUND LEASE ESCROW FUNDS
If any portion of any Additional Property shall be a
leasehold interest, commencing upon the Subsequent Advance Closing Date on
which such Additional Property is encumbered by a Mortgage, Borrower shall
pay to Lender on each Payment Date an amount that is estimated by Lender to
be due and payable by the applicable Individual Borrower under the related
Ground Lease for all rent and any and all other charges which may be due by
such Individual Borrower under the related Ground Lease in order to
accumulate with Lender sufficient funds to pay all sums payable under the
related Ground Lease at least ten (10) Business Days prior to the dates due
(said amounts, hereinafter called the "GROUND LEASE ESCROW FUND"). Upon such
Individual Borrower's failure to pay any rent or other charges due under the
related Ground Lease after the receipt of any notice and the expiration of
any cure period available to such Individual Borrower pursuant to the related
Ground Lease, Lender may, in its discretion, apply any amounts held in the
Ground Lease Escrow Fund to the payment of such rent or other charges;
provided however, that the provisions of this SECTION 7.5 shall not be deemed
to create any obligation on the part of Lender to pay any such rent or other
charges from amounts on deposit in the Ground Lease Escrow Fund. Borrower
shall grant a first priority security interest to Lender, as security for
payment of all sums due under the Loan and the performance of all other
terms, conditions and provisions to be paid and performed, of all Borrower's
right, title and interest in and to the Ground Lease Escrow Fund and shall
execute and deliver to Lender such UCC-1 Financing Statements and other
documents or instruments as Lender may request in order to grant and perfect
such security interest. Borrower shall not, without obtaining the prior
written consent of Lender, further pledge, assign or grant any security
interest in the Ground Lease Escrow Fund or permit any lien or encumbrance to
attach thereto, or any levy to be made thereon, or any UCC-1 Financing
Statements, except those naming Lender as the secured party, to be filed with
respect thereto. Upon the occurrence of an Event of Default, Lender may apply
any sums then present in the Ground Lease Escrow Fund to the payment of the
Debt in any order in its sole discretion. Notwithstanding the foregoing, the
Borrower shall not be required to make monthly deposits to the Ground Lease
Escrow Fund so long as on the applicable Subsequent Advance Closing Date and
for the remainder of the Term, the Borrower has deposited and maintains in
the Ground Lease Escrow Fund sufficient amounts for the payment of three (3)
months of rent and any and all other charges under the related Ground Lease.
Such initial deposit may be
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increased by Lender in the amount Lender deems is necessary in its reasonable
discretion based on any increases in the rent due under the related Ground
Lease.
VIII. DEFAULTS
SECTION 8.1 EVENT OF DEFAULT.
(a) Each of the following events shall constitute an event of
default hereunder (an "EVENT OF DEFAULT"):
(i) if any portion of the Debt is not paid when
due;
(ii) if any of the Taxes or Other Charges are
not paid when the same are due and payable;
(iii) if any payment required pursuant to SECTION
5.1(U) is not made when due;
(iv) if the Policies are not kept in full force
and effect, or if certified copies of the Policies are not delivered to
Lender within ten (10) days of Lender's request therefor;
(v) if any Individual Borrower transfers or
encumbers any portion of the Properties other than as permitted under the
Loan Documents without Lender's prior written consent;
(vi) if any representation or warranty made by
Borrower or any Individual Borrower herein or in any other Loan Document, or
in any report, certificate, financial statement or other instrument,
agreement or document furnished to Lender shall have been false or misleading
in any material adverse respect as of the date the representation or warranty
was made;
(vii) if any Individual Borrower shall make an
assignment for the benefit of creditors;
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(viii) if a receiver, liquidator or trustee shall be
appointed for any Individual Borrower or if any Individual Borrower shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, any Individual Borrower, or if any proceeding for the
dissolution or liquidation of any Individual Borrower shall be instituted;
provided, however, if such appointment, adjudication, petition or proceeding
was involuntary and not consented to by any Individual Borrower, upon the
same not being discharged, stayed or dismissed within sixty (60) days;
(ix) if any Individual Borrower attempts to assign
its rights under this Agreement or any of the other Loan Documents or any
interest herein or therein in contravention of the Loan Documents;
(x) if Borrower or any Individual Borrower
breaches any covenant contained in SECTION 4.1 (FF) hereof;
(xi) (A) if Promus shall not have executed and
delivered to Parkway the License Agreement that Parkway has executed and
delivered to Promus for execution and a copy of such fully executed License
Agreement shall not have been delivered to Lender prior to the expiration of
the interim period during which Parkway is authorized to continue to operate
the Individual Property known as the Embassy Suites Hotel, Philadelphia,
Pennsylvania as an Embassy Suites Hotel as described in that certain letter
dated August 12, 1997 from Promus to Lender, as such interim period may be
extended from time to time in writing by Promus, or (B) if a default by
Borrower has occurred under any Franchise Agreement and continues beyond any
applicable cure period and such default permits the Franchisor thereunder to
terminate such Franchise Agreement;
(xii) with respect to any term, covenant or
provision set forth herein which specifically contains a notice requirement
or grace period, if Borrower or any Individual Borrower shall be in default
under such term, covenant or condition after the giving of such notice or the
expiration of such grace period;
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(xiii) if any of the assumptions contained in any
Insolvency Opinion delivered to Lender in connection with the Loan is or
shall become untrue in any material respect;
(xiv) if Borrower or any Individual Borrower
shall continue to be in Default under any of the other terms, covenants or
conditions of this Agreement not specified in subsections (i) to (xi) above,
for ten (10) days after notice to Borrower from Lender, in the case of any
Default which can be cured by the payment of a sum of money, or for thirty
(30) days after notice from Lender in the case of any other Default;
provided, however, that if such non-monetary Default is susceptible of cure
but cannot reasonably be cured within such 30-day period and provided further
that Borrower shall have commenced to cure such Default within such 30-day
period and thereafter diligently and expeditiously proceeds to cure the same,
such 30-day period shall be extended for such time as is reasonably necessary
for Borrower in the exercise of due diligence to cure such Default, such time
not to exceed an additional sixty (60) days; or
(xv) if there shall be default under any of the
other Loan Documents beyond any applicable cure periods contained in such
documents, whether as to Borrower, any Individual Borrower or any of the
Properties;
(b) Upon the occurrence of an Event of Default (other than an
Event of Default described in clauses (vii), (viii) or (ix) above) and at any
time thereafter the Lender may, in addition to any other rights or remedies
available to it pursuant to this Agreement and the other Loan Documents or at
law or in equity, Lender may take such action, without notice or demand, that
Lender deems advisable to protect and enforce its rights against Borrower or
any Individual Borrower and in and to all or any of the Properties,
including, without limitation, declaring the Debt to be immediately due and
payable, and Lender may enforce or avail itself of any or all rights or
remedies provided in the Loan Documents against Borrower or any Individual
Borrower and any or all of the Properties, including, without limitation, all
rights or remedies available at law or in equity; and upon any Event of
Default described in clauses (vii), (viii) or (ix) above, the Debt and all
other obligations of Borrower hereunder and under the other Loan Documents
shall immediately and automatically become due and payable, without
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notice or demand, and Borrower hereby expressly waives any such notice or
demand, anything contained herein or in any other Loan Document to the
contrary notwithstanding.
SECTION 8.2 REMEDIES.
(a) Upon the occurrence of an Event of Default, all or any one
or more of the rights, powers, privileges and other remedies available to
Lender against Borrower under this Agreement or any of the other Loan
Documents executed and delivered by, or applicable to, Borrower or at law or
in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and
whether or not Lender 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 all or any of the Properties. Any such actions
taken by Lender shall be cumulative and concurrent and may be pursued
independently, singly, successively, together or otherwise, at such time and
in such order as Lender may determine in its sole discretion, to the fullest
extent permitted by law, without impairing or otherwise affecting the other
rights and remedies of Lender permitted by law, equity or contract or as set
forth herein or in the other Loan Documents. Without limiting the generality
of the foregoing, Borrower agrees that if an Event of Default is continuing
(i) Lender is not subject to any "one action" or "election of remedies" law
or rule, and (ii) all liens and other rights, remedies or privileges provided
to Lender shall remain in full force and effect until Lender has exhausted
all of its remedies against the Properties and each Mortgage has been
foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt
or the Debt has been paid in full.
(b) Except as otherwise set forth in Section 3.2(jj), with
respect to Borrower and the Properties, nothing contained herein or in any
other Loan Document shall be construed as requiring Lender to resort to any
Individual Property for the satisfaction of any of the Debt in preference or
priority to any other Individual Property, and Lender may seek satisfaction
out of all of the Properties or any part thereof, in its absolute discretion
in respect of the Debt. In addition and except as otherwise set forth in
SECTION 3.2(JJ), Lender shall have the right from time to time to partially
foreclose the Mortgages in any manner and for any amounts secured by the
Mortgages then due and payable as determined by Lender in its sole discretion
including, without limitation, the following circumstances: (i) in the event
Borrower defaults beyond any applicable grace
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period in the payment of one or more scheduled payments of principal and
interest, Lender may foreclose one or more of the Mortgages to recover such
delinquent payments, or (ii) in the event Lender elects to accelerate less
than the entire outstanding principal balance of the Loan, Lender may
foreclose one or more of the Mortgages to recover so much of the principal
balance of the Loan as Lender may accelerate and such other sums secured by
one or more of the Mortgages as Lender may elect. Notwithstanding one or more
partial foreclosures, the Properties shall remain subject to the Mortgages to
secure payment of sums secured by the Mortgages and not previously recovered.
(c) Lender shall have the right from time to time to sever the
Note and the other Loan Documents into one or more separate notes, mortgages
and other security documents (the "SEVERED LOAN DOCUMENTS") in such
denominations as Lender shall determine in its sole discretion for purposes
of evidencing and enforcing its rights and remedies provided hereunder.
Borrower shall execute and deliver to Lender from time to time, promptly
after the request of Lender, a severance agreement and such other documents
as Lender shall request in order to effect the severance described in the
preceding sentence, all in form and substance reasonably satisfactory to
Lender. Borrower hereby absolutely and irrevocably appoints Lender as its
true and lawful attorney, coupled with an interest, in its name and stead to
make and execute all documents necessary or desirable to effect the aforesaid
severance, Borrower ratifying all that its said attorney shall do by virtue
thereof; provided, however, Lender shall not make or execute any such
documents under such power until three (3) days after notice has been given
to Borrower by Lender of Lender's intent to exercise its rights under such
power. Except as may be required in connection with a securitization pursuant
to SECTION 9.1 hereof, (i) Borrower shall not be obligated to pay any costs
or expenses incurred in connection with the preparation, execution, recording
or filing of the Severed Loan Documents, and (ii) the Severed Loan Documents
shall not contain any representations, warranties or covenants not contained
in the Loan Documents and any such representations and warranties contained
in the Severed Loan Documents will be given by Borrower only as of the
Closing Date.
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SECTION 8.3 REMEDIES CUMULATIVE.
The rights, powers and remedies of Lender under this Agreement
shall be cumulative and not exclusive of any other right, power or remedy
which Lender may have against Borrower or any Individual Borrower pursuant to
this Agreement or the other Loan Documents, or existing at law or in equity
or otherwise. Lender's rights, powers and remedies may be pursued singly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender's sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any
such remedy, right or power or shall be construed as a waiver thereof, but
any such remedy, right or power may be exercised from time to time and as
often as may be deemed expedient. A waiver of one Default or Event of Default
with respect to Borrower or any Individual Borrower shall not be construed to
be a waiver of any subsequent Default or Event of Default by Borrower or any
Individual Borrower or to impair any remedy, right or power consequent
thereon.
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IX. SPECIAL PROVISIONSIONS
SECTION 9.1 SALE OF NOTES AND SECURITIZATION.
At the request of the holder of the Note and, to the extent not
already required to be provided by Borrower under this Agreement, Borrower
shall use reasonable efforts to satisfy the market standards to which the
holder of the Note customarily adheres or which may be reasonably required in
the marketplace or by the Rating Agencies in connection with the sale or
transfer of the Note or participations or other interests therein or the
first successful securitization (such sale, transfer and/or securitization,
the "SECURITIZATION") of rated single or multi-class securities (the
"SECURITIES") secured by or evidencing ownership interests in the Note and
the Mortgages, including, without limitation, to:
(a) (i) provide such financial and other
information with respect to the Properties, the
Borrower, the Managers and the Franchisors, (ii)
provide existing budgets relating to the
Properties and (iii) to perform or permit or cause
to be performed or permitted such site inspection,
appraisals, market studies, environmental reviews
and reports (Phase I's and, if appropriate, Phase
II's), engineering reports and other due diligence
investigations of the Properties, as may be
reasonably requested by the holder of the Note or
the Rating Agencies or as may be necessary or
appropriate in connection with the Securitization
(the "PROVIDED INFORMATION"), together, if
customary, with appropriate verification and/or
consents of the Provided Information through
letters of auditors or opinions of counsel of
independent attorneys acceptable to the Lender and
the Rating Agencies;
(b) at Borrower's expense, cause counsel to render the
Insolvency Opinion or any other opinion customary in
securitization transactions with respect to the
Properties and Borrower and its affiliates, which
counsel and opinions shall be reasonably satisfactory
to the holder of the Note and the Rating Agencies;
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(c) (i) deliver one or more Officer's
Certificates certifying as to the accuracy of all
representations made by Borrower in the Loan
Documents as of the date of the closing of the
Securitization in all relevant jurisdictions or
setting forth any then existing facts conflicting
with any such representations, (ii) deliver
certificates of the relevant Governmental
Authorities in all relevant jurisdictions
indicating the good standing and qualification of
each individual Borrower and their respective
general partners or managing members, as
applicable, as of the date of the Securitization
and (iii) make such additional representations and
warranties as of the closing date of the
Securitization with respect to the Properties,
Borrower, and the Loan Documents as are
customarily provided in securitization
transactions and as may be reasonably requested by
the holder of the Note or the Rating Agencies and
consistent with the facts covered by such
representations and warranties as they exist on
the date thereof; and
(d) execute such amendments to the Loan Documents
and organizational documents, enter into a lockbox
or similar arrangement with respect to the Rents
as and to the extent provided herein and establish
and fund such reserve funds (including, without
limitation, the Required Repair Fund and the
Replacement Reserve Fund) as and to the extent
provided herein or as otherwise may be reasonably
requested by the holder of the Note or as may be
requested by the Rating Agencies or otherwise to
effect the Securitization; provided, however, that
the Borrower shall not be required to modify or
amend any Loan Document if such modification or
amendment would (i) change the interest rate, the
stated maturity or the amortization of principal
amount of the Loan set forth herein, or (ii)
modify or amend any other economic term or other
material term of any Loan Document in a manner
that has a material adverse effect on Borrower.
Borrower shall be responsible only for all legal fees and
disbursements incurred by Borrower in connection with Borrower's complying
with the requirements of this SECTION 9.1 and SECTION 9.2 and for all legal
fees and disbursements incurred by Lender for the amendment or modification
of the Loan Documents, preparation of any additional Loan Documents, review
of organizational documents and opinions and other services provided by
Lender's counsel in order to ensure compliance with the market standards
described in SECTION 9.1 where the failure to so comply is the result of
concessions made by Lender at the request of Borrower in connection with the
closing of the Initial Advance or any Subsequent Advance.
SECTION 9.2 SECURITIZATION INDEMNIFICATION.
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(a) Borrower understands that certain of the Provided
Information and the Required Records may be included in disclosure documents
in connection with the Securitization, including, without limitation, a
prospectus, prospectus supplement or private placement memorandum (each, a
"DISCLOSURE DOCUMENT") and may also be included in filings with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or the Securities and Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), or provided or made available to investors
or prospective investors in the Securities, the Rating Agencies, and service
providers relating to the Securitization, provided that no Provided
Information or Required Records shall be so included, provided or made
available without Borrower's review and approval of such Provided Information
and/or Required Records. In the event that any Disclosure Document is
required to be revised prior to the sale of all Securities, the Borrower will
cooperate with the holder of the Note in updating the Disclosure Document by
providing all current information necessary to keep the Disclosure Document
accurate and complete in all material respects. The holder of the Note will
promptly discontinue the use of any Disclosure Document upon such holder's
receipt of written notice from Borrower that such Disclosure Document
requires revision to correct any inaccuracy.
(b) Borrower agrees to provide in connection with each of (i) a
preliminary and a private placement memorandum or (ii) a preliminary and
final prospectus or prospectus supplement, as applicable, an indemnification
certificate (A) certifying that Borrower has carefully examined certain
specified sections of such memorandum or prospectus, as applicable, including
without limitation, the sections entitled "Special Considerations,"
"Description of the Mortgages," "Description of the Mortgage Loans and
Mortgaged Properties," "The Manager," "The Borrower" and "Certain Legal
Aspects of the Mortgage Loan," and such sections (and any other sections
reasonably requested) do not contain any untrue statement of a material fact
with respect to Borrower, the Properties or the terms and provisions of the
Loan or the Loan Documents or omit to state a material fact necessary in
order to make the statements made, in the light of the circumstances under
which they were made, not misleading, (B) indemnifying Lender (and for
purposes of this SECTION 9.2, Lender hereunder shall
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include its officers and directors), the affiliate of Lehman Brothers Inc.
("LEHMAN") that has filed the registration statement relating to the
securitization (the "REGISTRATION STATEMENT"), each of its directors, each of
its officers who have signed the Registration Statement and each person or
entity who controls the affiliate within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the "LEHMAN
Group"), and Lehman, each of its directors and each person who controls
Lehman within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act (collectively, the "UNDERWRITER GROUP") for any losses,
claims, damages or liabilities (collectively, the "LIABILITIES") to which
Lender, the Lehman Group or the Underwriter Group may become subject insofar
as the Liabilities arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such sections or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated in such sections or necessary
in order to make the statements in such sections or in light of the
circumstances under which they were made, not misleading and (C) agreeing to
reimburse Lender, the Lehman Group and the Underwriter Group for any legal or
other expenses reasonably incurred by Lender and Lehman in connection with
investigating or defending the Liabilities; provided, however, that Borrower
will be liable in any such case under clauses (B) or (C) above only to the
extent that any such loss claim, damage or liability arises out of or is
based upon any such untrue statement or omission made therein in reliance
upon and in conformity with written information furnished to Lender by or on
behalf of Borrower in connection with the preparation of the memorandum or
prospectus or in connection with the underwriting of the debt, including,
without limitation, financial statements of Borrower, operating statements,
rent rolls, environmental site assessment reports and property condition
reports with respect to the Properties. This indemnity agreement will be in
addition to any liability which Borrower may otherwise have.
(c) In connection with filings under the Exchange Act and
provided that the holder of the Note complies with the proviso to SECTION
9.2(A), Borrower agrees to indemnify (i) Lender, the Lehman Group and the
Underwriter Group for Liabilities to which Lender, the Lehman Group or the
Underwriter Group may become subject insofar as the Liabilities arise out of
or are based upon the omission or alleged omission to state in the Provided
Information or Required Records a material fact required to be stated in the
Provided Information or Required Records in order to make the statements in
the Provided Information or Required Records, in light of the circumstances
under which
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they were made not misleading and (ii) reimburse Lender, the Lehman Group or
the Underwriter Group for any legal or other expenses reasonably incurred by
Lender, the Lehman Group or the Underwriter Group in connection with
defending or investigating the Liabilities.
(d) Lehman agrees to indemnify and hold harmless Borrower, each
of its directors and each person who controls Borrower within the meaning of
Section 15 of the Securities Act (the "BORROWER GROUP") against any and all
losses, claims, damages or liabilities, joint or several, to which such group
may become subject, under the Securities Act or otherwise, and will reimburse
such group for any legal or other expenses reasonably incurred by such group
in connection with investigating or defending any such loss, claim, damage,
liability or action, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in a
Disclosure Document or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, but only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission relates to information that does not accurately reflect the
Provided Information.
(e) Promptly after receipt by an indemnified party under this
SECTION 9.2 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this SECTION 9.2, notify the indemnifying party in
writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to any indemnified party hereunder
except to the extent that failure to notify causes prejudice to the
indemnifying party. In the event that any action is brought against any
indemnified party, and its notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled, jointly with
any other indemnifying party, to participate therein and, to the extent that
it (or they) may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with
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counsel reasonably satisfactory to such indemnified party. After notice from
the indemnifying party to such indemnified party under this SECTION 9.2, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there are any legal defenses available to it
and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assert such legal defenses
and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. The indemnifying party shall not be liable for
the expenses of more than one separate counsel unless an indemnified party
shall have reasonably concluded that there may be legal defenses available to
it that are different from or additional to those available to another
indemnified party.
(f) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in SECTION
9.2(B), (C) or (d) is for any reason held to be unenforceable by an
indemnified party in respect of any losses, claims, damages or liabilities
(or action in respect thereof) referred to therein which would otherwise be
indemnifiable under SECTION 9.2(B), (C) or (D), the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result
of such losses, claims, damages or liabilities (or action in respect
thereof); provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. In determining the amount of contribution to
which the respective parties are entitled, the following factors shall be
considered: (i) Lehman's and Borrower's relative knowledge and access to
information concerning the matter with respect to which claim was asserted;
(ii) the opportunity to correct and prevent any statement or omission; and
(iii) any other equitable considerations appropriate in the circumstances.
Lender and Borrower hereby agree that it would not be equitable if the amount
of such contribution were determined by pro rata or per capita allocation.
(g) The liabilities and obligations of both Borrower and Lender
under this SECTION 9.2 shall survive the termination of this Agreement and
the satisfaction and discharge of the Debt.
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SECTION 9.3 INTENTIONALLY OMITTED.
SECTION 9.4 EXCULPATION.
Subject to the qualifications below, Lender shall not enforce
the liability and obligation of Borrower to perform and observe the
obligations contained in the Note, this Agreement, the Mortgages or the other
Loan Documents by any action or proceeding wherein a money judgment shall be
sought against Borrower, except that Lender may bring a foreclosure action,
an action for specific performance or any other appropriate action or
proceeding to enable Lender to enforce and realize upon its interest under
the Note, this Agreement, the Mortgages and the other Loan Documents, or in
the Properties, the Rents, or any other collateral given to Lender pursuant
to the Loan Documents; provided, however, that, except as specifically
provided herein, any judgment in any such action or proceeding shall be
enforceable against Borrower only to the extent of Borrower's interest in the
Properties, in the Rents and in any other collateral given to Lender, and
Lender, by accepting the Note, this Agreement, the Mortgages and the other
Loan Documents, agrees that it shall not sue for, seek or demand any
deficiency judgment against Borrower in any such action or proceeding under
or by reason of or under or in connection with the Note, this Agreement, the
Mortgages or the other Loan Documents. The provisions of this section shall
not, however, (a) constitute a waiver, release or impairment of any
obligation evidenced or secured by any of the Loan Documents; (b) impair the
right of Lender to name Borrower or any Individual Borrower as a party
defendant in any action or suit for foreclosure and sale under any of the
Mortgages; (c) affect the validity or enforceability of any guaranty made by
a Person other than Borrower or an Individual Borrower in connection with the
Loan or any of the rights and remedies of the Lender thereunder; (d) impair
the right of Lender to obtain the appointment of a receiver; (e) impair the
enforcement of any of the Assignments of Leases; (f) constitute a prohibition
against Lender to seek a deficiency judgment against Borrower or any
Individual Borrower in order to fully realize the security granted by each of
the Mortgages or to commence any other appropriate action or proceeding in
order for Lender to exercise its remedies against all of the Properties; or
(g) constitute a waiver of the right of Lender to enforce the liability and
obligation of
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Borrower or any Individual Borrower, by money judgment or otherwise, to the
extent of any loss, damage, cost, expense, liability, claim or other
obligation incurred by Lender (including attorneys' fees and costs reasonably
incurred) arising out of or in connection with the following:
(i) fraud or intentional misrepresentation by Borrower, any
Individual Borrower or any guarantor in connection with
the Loan;
(ii) the gross negligence or willful misconduct of Borrower or
any Individual Borrower;
(iii) the breach of any representation, warranty, covenant
or indemnification provision in the Environmental
Indemnity or in the Mortgages concerning
environmental laws, hazardous substances and asbestos
and any indemnification of Lender with respect
thereto in either document;
(iv) the removal or disposal of any portion of the Properties
after an Event of Default;
(v) the misapplication or conversion by Borrower or any
Individual Borrower of (A) any insurance proceeds
paid by reason of any loss, damage or destruction to
the Properties, (B) any Awards or other amounts
received in connection with the condemnation of all
or a portion of the Properties, or (C) any Rents
following an Event of Default;
(vi) failure to pay charges for labor or materials or other
charges resulting in a Lien on any portion of the
Properties prior to the Lien created by the Loan
Documents;
(vii) any security deposits, advance deposits or any other
deposits collected with respect to the Properties
which are not delivered to Lender upon a foreclosure
of the Properties or action in lieu thereof, except
to the extent any such security deposits were applied
in accordance with the terms and conditions of any of
the Leases prior to the occurrence of the Event of
Default that gave rise to such foreclosure or action
in lieu thereof; and
(viii) Borrower's indemnification of Lender set forth in SECTION
9.2 hereof.
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Notwithstanding anything to the contrary in this Agreement, the
Note or any of the Loan Documents, (A) Lender shall not be deemed to have
waived any right which Lender may have under Section 506(a), 506(b), 1111(b)
or any other provisions of the U.S. Bankruptcy Code to file a claim for the
full amount of the Debt secured by the Mortgages or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Loan Documents, and (B) the Debt shall be fully recourse
to Borrower in the event that: (i) the first full monthly payment of
principal and interest under the Note is not paid when due; (ii) Borrower
fails to permit on-site inspections of the Properties on more than two (2)
occasions per calendar year after written notice from Lender requesting such
inspections, fails to provide financial information as required pursuant to
this Agreement on more than two (2) occasions per calendar year after written
notice from Lender requesting such financial information, fails to maintain
its status as a single purpose entity or fails to appoint a new property
manager upon the request of Lender after an Event of Default, each as
required by, and in accordance with the terms and provisions of, this Loan
Agreement and the Mortgages; (iii) Borrower fails to obtain Lender's prior
written consent to any subordinate financing (other than equipment lease
financings entered into by Borrower with respect to equipment to be used at
one or more of the Properties in the ordinary course of business, which
equipment leases shall not require total payments in a calendar year in
excess of One Hundred Thousand and No/100 Dollars ($100,000) at any time) or
other voluntary lien encumbering the Properties; or (iv) Borrower fails to
obtain Lender's prior written consent to any assignment, transfer, or
conveyance of the Properties or any interest therein as required by the
Mortgage.
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SECTION 9.5 CASH MANAGEMENT.
9.5.1 LOCKBOX ACCOUNT. (a) Upon thirty (30) days prior notice
from Lender to Borrower that a lockbox account shall be required in
connection with a Securitization or upon the occurrence and continuance of an
Event of Default, Borrower shall establish and maintain a segregated Eligible
Account (the "LOCKBOX ACCOUNT") to be held by the Servicer in the trust for
the benefit of Lender, which Lockbox Account shall be under the sole dominion
and control of Lender. The Lockbox Account shall be entitled "BA Parkway
Associates II, L.P., as Borrower, and Lehman Brothers Holdings Inc., as
Lender, pursuant to Loan Agreement dated as of August 12, 1997 - Lockbox
Account" and the title of the Lockbox Account shall be modified as necessary
to include the name of any Additional Borrower becoming an Individual
Borrower in connection with a Subsequent Advance after the date hereof.
Borrower hereby grants to Lender a first priority security interest in the
Lockbox Account and all deposits at any time contained therein and the
proceeds thereof and will take all actions necessary to maintain in favor of
Lender a perfected first priority security interest in the Lockbox Account,
including, without limitation, executing and filing UCC-1 Financing
Statements and continuations thereof. Borrower will not in any way alter or
modify the Lockbox Account and will notify Lender of the account number
thereof. Lender and Servicer shall have the sole right to make withdrawals
from the Lockbox Account and all costs and expenses for establishing and
maintaining the Lockbox Account shall be paid by Borrower.
(b) Upon the establishment of the Lockbox Account, Borrower
shall, or shall cause each Manager to, deliver written instructions to all
tenants under Leases to deliver all Rents payable thereunder directly to the
Lockbox Account. Borrower shall, and shall cause each Manager to, deposit all
amounts received by Borrower or Manager constituting Rents into the Lockbox
Account promptly upon receipt.
(c) Upon the establishment of the Lockbox Account, Borrower
shall obtain from Account Holder an agreement that Account Holder will
commence to transfer to the Cash Collateral Account in immediately available
funds by federal wire transfer all amounts on deposit in the Lockbox Account
once every other Business Day throughout the Term.
9.5.2 CASH COLLATERAL ACCOUNT. (a) Simultaneously with the
establishment of the Lockbox Account pursuant to SECTION 9.5.1(A), Borrower
shall establish and maintain a segregated Eligible Account (the "CASH
COLLATERAL ACCOUNT") to be held by Servicer in trust for the benefit of
Lender, which Cash Collateral Account
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shall be under the sole dominion and control of Lender. The Cash Collateral
Account shall be entitled "BA Parkway Associates II, L.P., as Borrower, and
Lehman Brothers Holdings Inc., as Lender, pursuant to Loan Agreement dated as
of August 12, 1997 - Cash Collateral Account" and the title of the Cash
Collateral Account shall be modified as necessary to include the name of any
Additional Borrower becoming an Individual Borrower in connection with a
Subsequent Advance after the date hereof. Borrower hereby grants to Lender a
first priority security interest in the Cash Collateral Account and all
deposits at any time contained therein and the proceeds thereof and will take
all actions necessary to maintain in favor of Lender a perfected first
priority security interest in the Cash Collateral Account, including, without
limitation, executing and filing UCC-1 Financing Statements and continuations
thereof. Borrower will not in any way alter or modify the Cash Collateral
Account and will notify Lender of the account number thereof. Lender and
Servicer shall have the sole right to make withdrawals from the Cash
Collateral Account and all costs and expenses for establishing and
maintaining the Cash Collateral Account shall be paid by Borrower.
(b) Provided no Event of Default shall have occurred and be
continuing, on each Payment Date occurring after the establishment of the
Lockbox Account and the Cash Collateral Account, all funds on deposit in the
Cash Collateral Account shall be applied by Lender to the payment of the
following items in the order indicated:
(i) First, payments to the Ground Lease Escrow Fund, if
any, in accordance with the terms and provisions of SECTION 7.5;
(ii) Second, payments to the Tax and Insurance Escrow
Fund in accordance with the terms and conditions of SECTION 7.3 hereof;
(iii) Third, payment of the Monthly Debt Service Payment
Amount;
(iv) Fourth, payments to the Replacement Reserve Fund in
accordance with the terms and conditions hereof;
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(v) Fifth, payment to Lender of any other amounts then
due and payable under the Loan Documents; and
(vi) Sixth, payment of any excess amounts to Borrower.
(c) The insufficiency of funds on deposit in the Cash
Collateral Account shall not absolve Borrower of the obligation to make any
payments, as and when due pursuant to this Agreement and the other Loan
Documents, and such obligations shall be separate and independent, and not
conditioned on any event or circumstance whatsoever.
SECTION 9.6 SERVICER.
At the option of Lender, the Loan may be serviced by a
servicer/trustee (the "SERVICER") selected by Lender and Lender may delegate
all or any portion of its responsibilities under this Agreement and the other
Loan Documents to the Servicer pursuant to a servicing agreement (the
"SERVICING AGREEMENT") between Lender and Servicer. Borrower shall be
responsible for the payment of (a) any set-up fees or any other initial costs
relating to or arising under the Servicing Agreement and (b) the monthly
servicing fee due to the Servicer under the Servicing Agreement.
SECTION 9.7 INSOLVENCY OPINION.
Within thirty (30) days after Lender's request in connection
with a Securitization, Borrower shall deliver to Lender an opinion of
Borrower's counsel that may be relied upon by Lender and any Rating Agency
rating any Securities issued in connection with the Securitization, and their
respective successors and assigns, as to nonconsolidation and true sale, if
applicable, with respect to each Individual Borrower and their Affiliates and
the Properties (the "INSOLVENCY OPINION"), which opinion and counsel shall be
reasonably satisfactory to Lender and satisfactory to any such Rating Agency.
X. MISCELLANEOUS
SECTION 10.1 SURVIVAL.
This Agreement and all covenants, agreements, representations
and warranties made herein and in the certificates delivered pursuant hereto
shall survive the
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making by Lender of the Loan and the execution and delivery to Lender of the
Note, and shall continue in full force and effect so long as all or any of
the Debt is outstanding and unpaid unless a longer period is expressly set
forth herein or in the other Loan Documents. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to
include the legal representatives, successors and assigns of such party. All
covenants, promises and agreements in this Agreement, by or on behalf of
Borrower, shall inure to the benefit of the legal representatives, successors
and assigns of Lender.
SECTION 10.2 LENDER'S DISCRETION.
Whenever pursuant to this Agreement, Lender exercises any right
given to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Lender, the decision of Lender 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 Lender and shall be final and conclusive.
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SECTION 10.3 GOVERNING LAW.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND
MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE
PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE
OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO
THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT
LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT
ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE
LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW
OF THE STATE IN WHICH THE APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT BEING
UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE,
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND
ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING
HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER
HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE
LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS
AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER ARISING OUT OF OR RELATING TO
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THIS AGREEMENT MAY AT LENDER'S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, AND BORROWER WAIVES ANY
OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON
CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION
OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT DECAMPO, DIAMOND &
ASH, 805 THIRD AVENUE, NEW YORK, NEW YORK 10022, ATTENTION: THOMAS M. ASH
III, ESQ. AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF
SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER,
IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I)
SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED
AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A
SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH
SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR
SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF
ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS
DISSOLVED WITHOUT LEAVING A SUCCESSOR.
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SECTION 10.4 MODIFICATION, WAIVER IN WRITING.
No modification, amendment, extension, discharge, termination
or waiver of any provision of this Agreement, or of the Note, or of any other
Loan Document, nor consent to any departure by Borrower therefrom, shall in
any event be effective unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such waiver or consent
shall be effective only in the specific instance, and for the purpose, for
which given. Except as otherwise expressly provided herein, no notice to, or
demand on Borrower, shall entitle Borrower to any other or future notice or
demand in the same, similar or other circumstances.
SECTION 10.5 DELAY NOT A WAIVER.
Neither any failure nor any delay on the part of Lender in
insisting upon strict performance of any term, condition, covenant or
agreement, or exercising any right, power, remedy or privilege hereunder, or
under the Note or under any other Loan Document, or any other instrument
given as security therefor, shall operate as or constitute a waiver thereof,
nor shall a single or partial exercise thereof preclude any other future
exercise, or the exercise of any other right, power, remedy or privilege. In
particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under this Agreement, the Note or any other Loan
Document, Lender shall not be deemed to have waived any right either to
require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
SECTION 10.6 NOTICES.
All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in
writing and shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, or (b)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, and by telecopier (with answer
back acknowledged), addressed as follows (or at such other address and person
as shall be designated from time to time by any party hereto, as the case may
be, in a written notice to the other parties hereto in the manner provided
for in this Section):
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If to Lender:
Lehman Brothers Holdings Inc.,
doing business as Lehman Capital, a
division of Lehman Brothers Holding Inc.
Three World Financial Center, 12th Floor
Commercial Mortgage Surveillance Group
New York, New York 10285
Attention: Mr. Larry J. Kravetz
Facsimile No. (212) 526-2768
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: W. Christopher White, Esq.
Facsimile No. (212) 504-6666
If to Borrower:
c/o CapStar Hotel Company
1010 Wisconsin Avenue, N.W.
Washington, DC 20007
Attention: Mr. Paul W. Whitsell
Facsimile No. (202) 965-4445
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with a copy to:
DeCampo, Diamond & Ash
805 Third Avenue
New York, New York 10022
Attention: Thomas M. Ash III, Esq.
Facsimile No. (212) 758-1728
A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case
of expedited prepaid delivery and telecopy, upon the first attempted delivery
on a Business Day.
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SECTION 10.7 TRIAL BY JURY.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THE LOAN, 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 SECTION 10.7 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 LOAN
MADE PURSUANT TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
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<PAGE>
SECTION 10.8 HEADINGS.
The Article and/or Section headings and the Table of Contents
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
SECTION 10.9 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 10.10 PREFERENCES.
Lender shall have the continuing and exclusive right to apply
or reverse and reapply any and all payments by Borrower to any portion of the
obligations of Borrower hereunder. To the extent Borrower makes a payment or
payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable
cause, then, to the extent of such payment or proceeds received, the
obligations hereunder or part thereof intended to be satisfied shall be
revived and continue in full force and effect, as if such payment or proceeds
had not been received by Lender.
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SECTION 10.11 WAIVER OF NOTICE.
Borrower shall not be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this
Agreement or the other Loan Documents specifically and expressly provide for
the giving of notice by Lender to Borrower and except with respect to matters
for which Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Borrower hereby expressly waives the
right to receive any notice from Lender with respect to any matter for which
this Agreement or the other Loan Documents do not specifically and expressly
provide for the giving of notice by Lender to Borrower.
SECTION 10.12 REMEDIES OF BORROWER.
In the event that a claim or adjudication is made that Lender
or its agents have acted unreasonably or unreasonably delayed acting in any
case where by law or under this Agreement or the other Loan Documents, Lender
or such agent, as the case may be, has an obligation to act reasonably or
promptly, Borrower agrees that neither Lender nor its agents shall be liable
for any monetary damages, and Borrower's sole remedies shall be limited to
commencing an action seeking injunctive relief or declaratory judgment. The
parties hereto agree that any action or proceeding to determine whether
Lender has acted reasonably shall be determined by an action seeking
declaratory judgment.
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SECTION 10.13 EXPENSES; INDEMNITY.
(a) Borrower covenants and agrees to pay, or if Borrower fails
to pay to reimburse, Lender upon receipt of written notice from Lender for
all reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by Lender in connection with (i) the preparation,
negotiation, execution and delivery of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the fees and disbursements of
Lender's New York and local counsel, the costs of all appraisals and
engineering and environmental reports, all title insurance premiums, all
survey charges, any mortgage, documentary stamp and intangible taxes, all
recording charges, any brokerage fees and commissions and any auditor's fees;
(ii) the establishment and maintenance of the Lockbox Account, the Cash
Collateral Account or any escrow or reserve account established pursuant to
this Agreement or the other Loan Documents and the grant or perfection of any
security interest therein; (iii) Borrower's ongoing performance of and
compliance with Borrower's respective agreements and covenants contained in
this Agreement and the other Loan Documents on its part to be performed or
complied with after the Closing Date, including, without limitation,
confirming compliance with environmental and insurance requirements; (iv)
other than as set forth in the final sentence of SECTION 9.1 or in SECTION
9.2(D) or (F), Lender's ongoing performance and compliance with all
agreements and conditions contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing
Date; (v) other than as set forth in the final sentence of SECTION 9.1 or in
SECTION 9.2(D) or (F), the negotiation, preparation, execution, delivery and
administration of any consents, amendments, waivers or other modifications to
this Agreement and the other Loan Documents and any other documents or
matters requested by Lender; (vi) securing Borrower's compliance with any
requests made pursuant to SECTION 9.1 hereof; (vii) enforcing or preserving
any rights, in response to third party claims or the prosecuting or defending
of any action or proceeding or other litigation, in each case against, under
or affecting Borrower, this Agreement, the other Loan Documents, the
Properties, or any other security given for the Loan; and (viii) enforcing
any obligations of or collecting any payments due from Borrower under this
Agreement, the other Loan Documents or with respect to the Properties or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or of any
insolvency or bankruptcy proceedings; provided,
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however, that Borrower shall not be liable for the payment of any such costs
and expenses to the extent the same arise by reason of the gross negligence,
illegal acts, fraud or willful misconduct of Lender. Any cost and expenses
due and payable to Lender may be paid from any amounts in the Cash Collateral
Account.
(b) Borrower shall indemnify, defend and hold harmless Lender
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for Lender in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not Lender shall be designated a party
thereto), that may be imposed on, incurred by, or asserted against Lender in
any manner relating to or arising out of (i) any breach by Borrower of its
obligations under, or any material misrepresentation by Borrower contained
in, this Agreement or the other Loan Documents, or (ii) the use or intended
use of the proceeds of the Loan (collectively, the "INDEMNIFIED
LIABILITIES"); provided, however, that Borrower shall not have any obligation
to Lender hereunder to the extent that such Indemnified Liabilities arise
from the gross negligence, illegal acts, fraud or willful misconduct of
Lender or from the use of Provided Information or Required Records pursuant
to SECTION 9.2(A) without complying with the proviso thereto. To the extent
that the undertaking to indemnify, defend and hold harmless set forth in the
preceding sentence may be unenforceable because it violates any law or public
policy, Borrower shall pay the maximum portion that it is permitted to pay
and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Lender.
SECTION 10.14 SCHEDULES INCORPORATED.
The Schedules annexed hereto are hereby incorporated herein as
a part of this Agreement with the same effect as if set forth in the body
hereof.
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SECTION 10.15 INTENTIONALLY OMITTED.
SECTION 10.16 NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY
BENEFICIARIES
(a) Borrower and Lender intend that the relationships created
hereunder and under the other Loan Documents be solely that of borrower and
lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between
Borrower and Lender nor to grant Lender any interest in the Properties other
than that of mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for
the benefit of Lender and the Borrower and nothing contained in this
Agreement or the other Loan Documents shall be deemed to confer upon anyone
other than the Lender and the Borrower any right to insist upon or to enforce
the performance or observance of any of the obligations contained herein or
therein. All conditions to the obligations of Lender to make the Loan
hereunder are imposed solely and exclusively for the benefit of Lender and no
other Person shall have standing to require satisfaction of such conditions
in accordance with their terms or be entitled to assume that Lender will
refuse to make the Loan in the absence of strict compliance with any or all
thereof and no other Person shall under any circumstances be deemed to be a
beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by Lender if, in Lender's sole discretion, Lender deems it
advisable or desirable to do so.
SECTION 10.17 PUBLICITY.
All news releases, publicity or advertising by any party hereto
or their respective Affiliates through any media intended to reach the
general public which refers to the Loan Documents or the financing evidenced
by the Loan Documents, to Borrower, Lender, Lehman, or any of their
respective Affiliates in connection with the Loan shall be subject to the
prior written approval of the other party hereto.
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SECTION 10.18 CROSS-DEFAULT; CROSS-COLLATERALIZATION;
WAIVER OF MARSHALLING OF ASSETS
(a) Borrower acknowledges that Lender has made the Loan to the
Borrower upon the security of its collective interest in the Properties
(other than the Lexington Property) and in reliance upon the aggregate of the
Properties taken together (other than the Lexington Property) being of
greater value as collateral security than the sum of the Properties taken
separately. Other than as set forth in Section 3.2(jj), Borrower agrees that
the Mortgages are and will be cross-collateralized and cross-defaulted with
each other so that (i) an Event of Default under any of the Mortgages shall
constitute an Event of Default under each of the other Mortgages which secure
the Note; (ii) an Event of Default under the Note or this Loan Agreement
shall constitute an Event of Default under each Mortgage; and (iii) each
Mortgage shall constitute security for the Note as if a single blanket lien
were placed on all of the Properties as security for the Note.
(b) To the fullest extent permitted by law, Borrower, for
itself and its successors and assigns, waives all rights to a marshalling of
the assets of Borrower, Borrower's partners and others with interests in
Borrower, and of the Properties, or to a sale in inverse order of alienation
in the event of foreclosure of all or any of the Mortgages, and agrees not to
assert any right under any laws pertaining to the marshalling of assets, the
sale in inverse order of alienation, homestead exemption, the administration
of estates of decedents, or any other matters whatsoever to defeat, reduce or
affect the right of Lender under the Loan Documents to a sale of the
Properties for the collection of the Debt without any prior or different
resort for collection or of the right of Lender to the payment of the Debt
out of the net proceeds of the Properties in preference to every other
claimant whatsoever. In addition, Borrower, for itself and its successors and
assigns, waives in the event of foreclosure of any or all of the Mortgages,
any equitable right otherwise available to the Borrower which would require
the separate sale of the Properties or require Lender to exhaust its remedies
against any Individual Property or any combination of the Properties before
proceeding against any other Individual Property or combination of
Properties; and further in the event of such foreclosure the Borrower does
hereby expressly consents to and authorizes, at the option
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of the Lender, the foreclosure and sale either separately or together of any
combination of the Properties.
SECTION 10.19 WAIVER OF COUNTERCLAIM.
Borrower hereby waives the right to assert a counterclaim,
other than a compulsory counterclaim, in any action or proceeding brought
against it by Lender or its agents.
SECTION 10.20 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.
In the event of any conflict between the provisions of this
Loan Agreement and any of the other Loan Documents, the provisions of this
Loan Agreement shall control. The parties hereto acknowledge that they were
represented by competent counsel in connection with the negotiation, drafting
and execution of the Loan Documents and that such Loan Documents shall not be
subject to the principle of construing their meaning against the party which
drafted same. Borrower acknowledges that, with respect to the Loan, Borrower
shall rely solely on its own judgment and advisors in entering into the Loan
without relying in any manner on any statements, representations or
recommendations of Lender or any parent, subsidiary or affiliate of Lender.
Lender shall not be subject to any limitation whatsoever in the exercise of
any rights or remedies available to it under any of the Loan Documents or any
other agreements or instruments which govern the Loan by virtue of the
ownership by it or any parent, subsidiary or affiliate of Lender of any
equity interest any of them may acquire in Borrower, and Borrower hereby
irrevocably waives the right to raise any defense or take any action on the
basis of the foregoing with respect to Lender's exercise of any such rights
or remedies. Borrower acknowledges that Lender engages in the business of
real estate financings and other real estate transactions and investments
which may be viewed as adverse to or competitive with the business of the
Borrower or its affiliates.
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SECTION 10.21 BROKERS AND FINANCIAL ADVISORS.
Borrower and Lender each hereby represents that it has dealt
with no financial advisors, brokers, underwriters, placement agents, agents
or finders in connection with the transactions contemplated by this Agreement
and each hereby agrees to indemnify, defend and hold Lender harmless from and
against any and all claims, liabilities, costs and expenses of any kind
(including Lender's attorneys' fees and expenses) in any way relating to or
arising from the failure of its respective representation contained in this
SECTION 10.21 to be true and correct. The provisions of this SECTION 10.21
shall survive the expiration and termination of this Agreement and the
payment of the Debt.
SECTION 10.22 PRIOR AGREEMENTS.
This Agreement and the other Loan Documents contain the entire
agreement of the parties hereto and thereto in respect of the transactions
contemplated hereby and thereby, and all prior agreements among or between
such parties, whether oral or written, are superseded by the terms of this
Agreement and the other Loan Documents.
SECTION 10.23 JOINT AND SEVERAL LIABILITY.
If Borrower consists of more than one Person, the obligations
and liabilities of each such Person pursuant to this Agreement and the other
Loan Documents shall be joint and several.
SECTION 10.24 COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
each of which counterparts shall be deemed an original instrument and all of
which together shall constitute a single agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
BA PARKWAY ASSOCIATES II, L.P.
By: CapStar PA, Inc.
By: /s/ John E. Plunket
-----------------------------
Name: John E. Plunket
Title: Vice President
LEHMAN BROTHERS HOLDINGS
INC., DOING BUSINESS AS LEHMAN
CAPITAL, A DIVISION OF LEHMAN
BROTHERS HOLDINGS INC.
By: /s/ Michael Mazzei
-----------------------------
Name: Michael Mazzei
Title: Managing Director
<PAGE>
SCHEDULE I
----------
RELEASE AMOUNTS
PROPERTY RELEASE AMOUNT
-------- --------------
EMBASSY SUITES HOTEL $7,000,000
PHILADELPHIA, PENNSYLVANIA
<PAGE>
SCHEDULE II
-----------
REQUIRED REPAIRS
SCH II-1
<PAGE>
SCHEDULE III
------------
INTENTIONALLY OMITTED
SCH III-1
<PAGE>
SCHEDULE IV
-----------
RENT ROLLS
SCH IV-1
<PAGE>
SCHEDULE V
----------
LIST OF FRANCHISE AGREEMENTS
1. Embassy Suites License Agreement between Promus Hotels, Inc., as
licensor, and BA Parkway Associates II, L.P., as licensee, with respect
to Embassy Suites Hotel at 1776 Benjamin Franklin Parkway,
Philadelphia, Pennsylvania.
SCH V-1
<PAGE>
SCHEDULE VI
-----------
LIST OF MANAGEMENT AGREEMENTS
1. Hotel Management Agreement dated as of August 12, 1997 between BA
Parkway Associates II, L.P. and CapStar Management Company, L.P. with
respect to the Individual Property known as the Embassy Suites Hotel,
Philadelphia, Pennsylvania.
SCH VI-1
<PAGE>
SCHEDULE VII
------------
LITIGATION
SCH VIII-1
<PAGE>
Exhibit 10.21
================================================================================
FIRST AMENDMENT TO LOAN AGREEMENT
Dated as of August 18, 1997
Between
BA PARKWAY ASSOCIATES II, L.P., MCV VENTURE, LLC
AND
CAPSTAR AP PARTNERS, L.P.
as Borrower
and
LEHMAN BROTHERS HOLDINGS INC.,
DOING BUSINESS AS LEHMAN CAPITAL,
A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.
as Lender
================================================================================
<PAGE>
================================================================================
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT, dated as of August 18, 1997
(as amended, restated, replaced, supplemented or otherwise modified from time to
time, this "AMENDMENT"), between LEHMAN BROTHERS HOLDINGS INC., DOING BUSINESS
AS LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC., a Delaware
corporation having an address at Three World Financial Center, New York, New
York 10285 ("LENDER") and BA PARKWAY ASSOCIATES II, L.P., a Delaware limited
partnership, MCV VENTURE, LLC, a Kentucky limited liability company, and CAPSTAR
AP PARTNERS, L.P., a Delaware limited partnership, having an address at 1010
Wisconsin Avenue, N.W., Washington, D.C. 20007 (collectively, "BORROWER").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Lender has made a loan (the "LOAN") to BA Parkway Associates
II, L.P. ("PARKWAY") in the principal sum of up to One Hundred Million and
No/100 Dollars ($100,000,000), or so much thereof as may be advanced pursuant to
the terms and provisions of that certain Loan Agreement dated as of August 12,
1997 between BA Parkway II, L.P. and Lender (the "LOAN AGREEMENT"), which Loan
is evidenced by that certain Promissory Note dated August 12, 1997 made by BA
Parkway II, L.P. to Lender (the "NOTE");
WHEREAS, Borrower has requested that Lender make a subsequent advance
of the proceeds of the Loan in the amount of Forty-Five Million Seven Hundred
Fifty Thousand and No/100 Dollars ($45,750,000) (the "SUBSEQUENT ADVANCE");
WHEREAS, in connection with the Subsequent Advance, Lender and
Borrower wish to modify certain terms of the Loan Agreement as set forth herein;
NOW, THEREFORE, in consideration of the covenants, agreements, representations
and warranties set forth in this Amendment and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby covenant, agree, represent and warrant as follows:
SECTION 1. PRINCIPAL BALANCE.
Lender and Borrower hereby acknowledge that the total amount of the
proceeds of the Loan advanced by Lender to Borrower pursuant to the terms and
provisions of the Loan Agreement and the outstanding principal balance of the
Loan, as of the date hereof (including the Subsequent Advance) is Fifty-Two
Million Seven Hundred Fifty Thousand and No/100 Dollars ($52,750,000).
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SECTION 2. DEFINITIONS.
All capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Loan Agreement.
SECTION 3. ASSUMPTION OF LOAN AND LOAN AGREEMENT.
MCV Venture, LLC hereby assumes all of the obligations of an
Individual Borrower under the Loan Agreement and shall hereafter constitute an
Individual Borrower under the Loan Agreement; provided, however that the
obligations of MCV Venture, LLC thereunder and hereunder shall be limited to the
Lexington Obligations as set forth in Section 3.2(jj) thereof. CapStar AP
Partners, L.P., hereby assumes all of the obligations of an Individual Borrower
under the Loan Agreement and the other Loan Documents, subject to the provisions
of Section 3.2(jj) of the Loan Agreement, and shall hereafter constitute an
Individual Borrower thereunder.
SECTION 4. MODIFICATION OF LOAN TERMS AND LOAN AGREEMENT.
The terms and provisions of the Loan Agreement are hereby amended and
modified as follows:
(a) BORROWER. The definition of "Borrower" as set forth in Section
1.1 of the Loan Agreement is hereby amended and restated in its entirety to read
and provide as follows:
"BORROWER" shall mean collectively, BA Parkway Associates II, L.P.,
MCV Venture, LLC, and CapStar AP Partners, L.P., together with any
Additional Borrower, and their respective successors and assigns.
(b) LEXINGTON NOTE. Section 1.1 of the Loan Agreement is hereby
amended to include the following definition immediately after the defined term
"Lender":
"LEXINGTON NOTE" shall mean that certain Promissory Note dated August
___, 1997 made by MCV Venture, LLC to Lender in the original principal
amount of Twenty-Four Million and No/100 Dollars ($24,000,000), as the same
may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
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(c) DEFINITION OF NOTE. The definition of "Note" as set forth in
Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety
to read and provide as follows:
"NOTE" shall mean, collectively, the Promissory Note and the Lexington
Note; provided, however, that all references to the "Note" contained in any
Loan Document other than this Agreement shall be deemed to refer solely to
the Promissory Note.
(d) PLEDGE AGREEMENTS. The defined term "Loan Documents" set forth
in Section 1.1 of the Loan Agreement is hereby amended to include that certain
Pledge and Security Agreement dated as of August ___, 1997 made by MCV Venture,
LLC to Lender and that certain Pledge and Security Agreement dated as of August
___, 1997 made by CapStar AP Partners, L.P. to Lender, as each may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
(e) PROMISSORY NOTE. Section 1.1 of the Loan Agreement is hereby
amended to include the following definition immediately after the defined term
"Promus":
"PROMISSORY NOTE" shall mean that certain Amended and Restated
Promissory Note dated August ___, 1997 made by BA Parkway Associates II,
L.P. and CapStar AP Partners, L.P. to Lender in the original principal
amount of Seventy-Six Million and No/100 Dollars ($76,000,000) or such
portion thereof as may be advanced pursuant to this Agreement, as the same
may be amended, assumed, restated, replaced, supplemented or otherwise
modified from time to time.
(f) SPREAD. The definition of "Spread" as set forth in Section 1.1
of the Loan Agreement is hereby amended and restated in its entirety to read and
provide as follows:
"SPREAD" shall have the meaning set forth in the Promissory Note with
respect to the portion of the Loan evidenced by the Promissory Note and the
meaning set forth in the Lexington Note with respect to the portion of the
Loan evidenced by the Lexington Note.
(g) THE NOTE. Section 2.1.3 of the Loan Agreement is hereby amended
and restated in its entirety as follows:
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SECTION 2.1.3. THE NOTE. The Loan shall be evidenced by the
Promissory Note and the Lexington Note, in the total principal amount of
the Loan. The Note shall be entitled to the benefit of this Agreement and
(a) the Promissory Note shall be secured by the Mortgages, the Assignments
of Leases and the other Loan Documents other than such documents relating
to the Lexington Property and (b) the Lexington Note shall be secured by
the Mortgage, the Assignment of Leases and the other Loan Documents
relating to the Lexington Property.
(h) DETERMINATION OF INTEREST RATE. Section 2.5.2(b) of the Loan
Agreement is hereby amended and restated in its entirety as follows:
(b) Interest shall be charged and payable on the outstanding
principal amount of the Loan at a rate PER ANNUM equal to the Applicable
Interest Rate, but in no event to exceed the maximum rate permitted under
applicable law. Subject to the terms and conditions of this SECTION 2.5.2,
the Loan shall be a Eurodollar Loan and Borrower shall pay interest on the
outstanding principal amount of the Loan at LIBOR plus the Spread for the
applicable Interest Period. Any change in the rate of interest hereunder
due to a change in the Applicable Interest Rate shall become effective as
of the opening of business on the first day on which such change in the
Applicable Interest Rate shall become effective. Each determination by
Lender of the Applicable Interest Rate shall become effective. Each
determination by Lender of the Applicable Interest Rate shall be conclusive
and binding for all purposes, absent manifest error.
(i) ASSUMPTION AND MODIFICATION OF EXISTING LOAN DOCUMENTS. Section
3.2(c)(i) of the Loan Agreement is hereby amended so that the word "Note"
contained in clause (A) is replaced with the phrase "Promissory Note".
(j) EVENT OF DEFAULT. Section 8.1(a)(xi) is hereby amended and
restated in its entirety as follows:
(xi) (A) if Promus shall not have executed and delivered to
Parkway the License Agreement that Parkway has executed and delivered to
Promus for execution and a copy of such fully executed License Agreement
shall not have been delivered to Lender prior to the expiration of the
interim period during which Parkway is authorized to continue to operate
the Individual Property known as the Embassy Suites Hotel, Philadelphia,
Pennsylvania as an Embassy Suites Hotel as described in that certain letter
dated August 12, 1997 from Promus to Lender, as such interim period may be
extended from time to time in writing by Promus, (B) if Doubletree Hotel
Systems, Inc. and CapStar AP Partners, L.P. shall not have executed and
delivered a License Agreement in the form previously submitted to Lender
for review and approval and a copy of such fully executed License Agreement
shall not have been delivered to Lender prior
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to the expiration of the interim period during which CapStar AP, LLC is
authorized to continue to operate the Individual Property known as the
Doubletree Hotel, Austin, Texas as a DoubleTree Hotel as described in that
certain letter dated August 14, 1997 from DoubleTree Hotels Corporation to
Lender, as such interim period may be extended from time to time in writing
by DoubleTree Hotels Corporation, or (C) if a default by Borrower has
occurred under any Franchise Agreement and continues beyond any applicable
cure period and such default permits the Franchisor thereunder to terminate
such Franchise Agreement;
(k) SCHEDULES. SCHEDULES I-VII of the Loan Agreement are hereby
amended and restated in their entirety to respectively read and provide as set
forth on SCHEDULES I-VII hereto.
SECTION 5. DEBT SERVICE RESERVE FUND.
A portion of the Subsequent Advance in the amount of One Million Seven
Hundred Fifty Thousand and No/100 Dollars ($1,750,000) (the "DEBT SERVICE
RESERVE FUND") shall be retained by Lender and deposited in an account (the
"DEBT SERVICE ESCROW ACCOUNT") under the sole dominion and control of Lender.
Borrower hereby pledges, assigns and grants a first priority security interest
in the Debt Service Reserve Fund as additional security for the payment of all
sums due under the Loan and the performance of all other terms, conditions, and
provisions, of the Loan Documents on Borrower's part to be paid and performed.
Upon the occurrence of an Event of Default, Lender may apply such sums then
present in the Debt Service Escrow Account to the payment of the Debt in any
order in its sole discretion. Borrower shall have the right to the release of
the funds on deposit upon the satisfaction of the following conditions
precedent:
(i) RELEASE REQUEST. Lender shall have received a written request
from Borrower for the release of the entire Debt Service Reserve Fund no less
than fifteen (15) days prior to the date of the requested release and in no
event shall a request for the release of the Debt Service Reserve Fund be made
later than thirty (30) days prior to the Outside Closing Date.
(ii) REPRESENTATIONS AND WARRANTIES; DEFAULTS. The representations
and warranties of Borrower contained in the Loan Agreement and the other Loan
Documents shall be true and correct in all material respects on and as of the
date of the release of the Debt Service Fund and, as of such date, no Default or
Event of Default shall have occurred and be continuing and Borrower shall be in
compliance in all material respects with all terms and conditions set forth in
the Loan Agreement and in each Loan Document on Borrower's part to be observed
or performed. Lender shall have received an Officer's Certificate confirming
the foregoing, such certificate to be in form and substance satisfactory to
Lender.
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(iii) DEBT SERVICE COVERAGE RATIO AND LTV RATIO. The Debt Service
Coverage Ratio with respect to the Loan, including the Debt Service Reserve
Fund, projected by Lender for the twelve (12) month period immediately following
the date of the release of the Debt Service Reserve Fund shall be no less than
1.15 and the LTV Ratio as of the date of the release of the Debt Service Reserve
Fund shall be no more than sixty-five percent (65%).
(iv) MATERIAL ADVERSE CHANGE. The income and expenses of each
Individual Property, the financial statements of Borrower, the occupancy
rate, Leases and rent roll with respect to each Individual Property and all
other features of the Loan shall be as represented to Lender and all
documents and communications delivered to Lender in order to induce Lender to
make the Loan shall be without material adverse change and Lender shall have
received an Officer's Certificate as to the foregoing. No portion of any
Individual Property shall have been damaged and not repaired to Lender's
satisfaction unless a reserve or other provision for repair of such damage
satisfactory to Lender has been established or made. No portion of any
Individual Property shall have been taken in condemnation or other similar
proceeding. No condemnation or other similar proceeding shall be pending
that may materially and adversely affect any Individual Property or for which
reserves or other provisions for restoration of the affected Individual
Property satisfactory to Lender in its sole discretion have not been
established. No structural change in the physical condition or any portion
of any Individual Property shall have occurred since the date of the related
structural engineering report delivered to Lender other than alterations to
an Individual Property approved by Lender. No Individual Borrower, general or
limited partners or members of any Individual Borrower or other Person
directly or indirectly in control of, or controlled by, any Individual
Borrower (other than a Non-CapStar Person with respect to which a
nonconsolidation opinion reasonably satisfactory to Lender has been delivered
to Lender), or tenants under any Leases deemed by Lender to be material to
the security for the Loan or guarantors of any such Leases shall be the
subject of any bankruptcy, reorganization or insolvency proceeding. No
Individual Borrower or general or limited partner or member of any Individual
Borrower (other than a Non-CapStar Person with respect to which a
nonconsolidation opinion reasonably satisfactory to Lender has been delivered
to Lender) shall be in default under any loan or financing provided to such
Individual Borrower, general or limited partner or member, other than
defaults under equipment lease financings or resulting from the failure to
pay trade payables, which financings or trade payables are being disputed in
good faith and do not exceed One Hundred Thousand and No/100 Dollars
($100,000) in the aggregate. No asbestos or other hazardous substances shall
have been discovered at any Individual Property other than as disclosed in
the related Phase I environmental report delivered to Lender and, if
applicable, Phase II environmental report delivered to Lender, unless
provisions for the remediation of such asbestos or other hazardous substances
satisfactory to Lender in its sole discretion have been made.
Prior to the release of the Debt Service Reserve Fund pursuant to this
SECTION 5, the Debt Service Reserve Fund shall not be included in the
outstanding principal balance of the
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Loan for purposes of calculating the Debt Service Coverage Ratio or the LTV
Ratio, other than as set forth in clause (iii) above.
SECTION 6. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
(b) NO FURTHER MODIFICATION. Except as modified and amended by this
Amendment, the Loan and the Loan Agreement, the Note and the other Loan
Documents shall remain unmodified and in full force and effect.
(c) COUNTERPARTS. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
[NO FURTHER TEXT ON THIS PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their duly authorized representatives, all as of the day and
year first above written.
BA PARKWAY ASSOCIATES II, L.P.
By: CapStar PA, Inc.
By: /s/ John E. Plunket
----------------------------
Name: John E. Plunket
Title: Vice President
MCV VENTURE, LLC
By: CapStar Lexington, Inc.
By: /s/ John E. Plunket
----------------------------
Name: John E. Plunket
Title: Vice President
CAPSTAR AP PARTNERS, L.P.
By: CapStar Austin, Inc.
By: /s/ John E. Plunket
----------------------------
Name: John E. Plunket
Title: Vice President
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LEHMAN BROTHERS HOLDINGS INC.,
DOING BUSINESS AS LEHMAN CAPITAL, A DIVISION
OF LEHMAN BROTHERS HOLDINGS INC.
By: /s/ Michael Mazzei
----------------------------
Name: Michael Mazzei
Title: Managing Director
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SCHEDULE I
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RELEASE AMOUNTS
======================================= =======================================
Property RELEASE AMOUNT
-------- --------------
================================== ==============================
EMBASSY SUITES HOTEL $8,750,000
1776 BENJAMIN FRANKLIN PARKWAY
PHILADELPHIA, PENNSYLVANIA
================================== ==============================
THE VINE CENTER $24,000,000
(RADISSON PLAZA HOTEL)
369 WEST VINE STREET
LEXINGTON, KENTUCKY
================================== ==============================
DOUBLETREE HOTEL $20,000,000
6505 IH-35 NORTH
AUSTIN, TEXAS
================================== ==============================
I-1
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SCHEDULE II
REQUIRED REPAIRS
II-1
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SCHEDULE III
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INTENTIONALLY OMITTED
III-1
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SCHEDULE IV
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RENT ROLLS
IV-1
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SCHEDULE V
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LIST OF FRANCHISE AGREEMENTS
1. Embassy Suites License Agreement between Promus Hotels, Inc., as
licensor, and BA Parkway Associates II, L.P., as licensee, with
respect to Embassy Suites Hotel at 1776 Benjamin Franklin Parkway,
Philadelphia, Pennsylvania.
2. Franchise Agreement between Radisson Hotels International, Inc.
(formerly Carlson Hospitality Group, Inc.) and MCV Venture dated
October 19, 1988, as amended by First Amendment to License Agreement
dated October 1, 1994, as assigned to and assumed by MCV Venture LLC
by Assignment and Assumption of License Agreement dated February 28,
1997, with respect to the Radisson Plaza Hotel at 369 West Vine
Street, Lexington, Kentucky.
3. License Agreement between Doubletree Hotel Systems, Inc., as
licensor, and CapStar AP Partners, L.P., as licensee, with respect to
the Doubletree Hotel at 6505 IH-35 North, Austin, Texas.
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SCHEDULE VI
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LIST OF MANAGEMENT AGREEMENTS
1. Hotel Management Agreement dated as of August 12, 1997 between BA
Parkway Associates II, L.P. and CapStar Management Company, L.P., with
respect to the Individual Property known as the Embassy Suites Hotel,
Philadelphia, Pennsylvania.
2. Property Management and Leasing Agreement dated October 19, 1988
between MCV Venture (predecessor in interest to MCV Venture, LLC) and
The Webb Companies, as amended by that certain First Amendment to
Property Management and Leasing Agreement dated February 17, 1997
between MCV Venture and The Webb Companies and as further amended by
that certain Second Amendment to Property Management and Leasing
Agreement dated August 14, 1997 between MCV Venture, LLC and The Webb
Companies, with respect to the Individual Property known as the Vine
Center, Lexington, Kentucky.
3. Hotel Management Agreement dated as of August 7, 1997 between MCV
Venture, LLC and CapStar Management Company, L.P. with respect to the
Individual Property known as the Vine Center, Lexington, Kentucky.
4. Hotel Management Agreement dated as of August 14, 1997 between
CapStar AP Partners, L.P. and CapStar Management Company, L.P. with
respect to the Individual Property known as the Doubletree Hotel,
Austin, Texas.
VI-1
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SCHEDULE VII
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LITIGATION
VII-1
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EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
CapStar Hotel Company:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Washington, D.C.
September 16, 1997
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EXHIBIT 23.2
ACCOUNTANTS' CONSENT
The Board of Directors
CapStar Hotel Company:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
Wertheim & Company
New York, New York
September 16, 1997
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EXHIBIT 23.3
ACCOUNTANTS' CONSENT
The Board of Directors
CapStar Hotel Company:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
King Griffin & Adamson P.C.
Dallas, Texas
September 16, 1997
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EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
CapStar Hotel Company:
We consent to the incorporation by reference in this Registration Statement on
Form S-4 of our report, dated January 31, 1997, except as to Note 8 for which
the date is July 16, 1997, on our audit of the combined financial statements of
Chi-Town Partners, L.P. and St. Elmo's Partners, L.P. for the year ended
December 31, 1996. We also consent to the reference to our firm under the
caption "Experts."
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
September 16, 1997
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EXHIBIT 23.5
ACCOUNTANTS' CONSENT
The Board of Directors
CapStar Hotel Company:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
Mann Frankfort Stein & Lipp, P.C.
Houston, Texas
September 16, 1997
