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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------------
BRISTOL HOTELS & RESORTS, INC.
14295 MIDWAY ROAD
DALLAS, TEXAS 75244
ATTENTION: JOEL M. EASTMAN, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
TELEPHONE: (972) 391-3910
(Exact name, address and telephone number of Registrant)
INCORPORATED IN DELAWARE IRS EMPLOYER ID. NO.: 75-2754805
---------------------
Copies to:
JONES, DAY, REAVIS & POGUE
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
ATTENTION: ROBERT A. PROFUSEK, ESQ.
TELEPHONE: (212) 326-3939
---------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EXCHANGE
TITLE OF EACH CLASS ON WHICH EACH CLASS
TO BE SO REGISTERED IS TO BE SO REGISTERED
------------------- ----------------------
<S> <C>
Common Stock, par Application will be made
value $0.01 per share to list the Common Stock on
the New York Stock Exchange
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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INFORMATION INCLUDED IN INFORMATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION
STATEMENT AND ITEMS ON FORM 10
<TABLE>
<CAPTION>
ITEM
NO. ITEM CAPTION LOCATION IN INFORMATION STATEMENT
- ---- ------------ ---------------------------------
<C> <S> <C>
1 Business................................... "Questions and Answers about the Spin-Off
and the Company;" and "Summary -- Business
and Strategy of the Company;"
"-- Agreements with FelCor;"
"-- Management;" "-- Omaha Acquisition;"
"Risks Factors;" "The Spin-Off --
Background of the Spin-Off;" "-- The
Spin-Off;" "Business;" "Pro Forma Financial
Data -- Management's Discussion and
Analysis of Results of Operations of
Bristol Hotel Company"
2 Financial Information...................... "Summary -- Summary Historical and
Unaudited Pro Forma Financial Data;" "Pro
Forma Financial Data;" "Selected Historical
and Unaudited Pro Forma Financial Data;"
and "Index to Financial Information"
3 Properties................................. "Summary -- Omaha Acquisitions;" and
"Business -- Company Properties"
4 Security Ownership of Certain Beneficial
Owners and Management...................... "Security Ownership of Certain Beneficial
Owners and Management"
5 Directors and Executive Officers........... "Summary -- Management;" and
"Management -- Directors and Executive
Officers"
6 Executive Compensation..................... "Management -- Compensation Plans and
Arrangements"
7 Certain Relationships and Related
Transactions............................... " Summary -- Redemption of a Portion of
Bass Shares;" "-- Agreements with FelCor;"
"Risk Factors -- Conflicts of Interest;"
"Business -- FelCor Leases;" and
"Management -- Certain Relationships and
Related Transactions"
8 Legal Proceedings.......................... "Business -- Legal Proceedings"
9 Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters........................ "Questions and Answers about the Spin-Off
and the Company;" "Risk Factors -- Absence
of Prior Trading Market for Company Common
Shares; Potential Volatility;"
"-- Anti-Takeover Provisions;"
"Management -- Certain Relationships and
Related Transactions -- Preemptive Rights;"
and "Description of Capital Stock"
10 Recent Sales of Unregistered Securities.... Not applicable
</TABLE>
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<TABLE>
<CAPTION>
ITEM
NO. ITEM CAPTION LOCATION IN INFORMATION STATEMENT
- ---- ------------ ---------------------------------
<C> <S> <C>
11 Description of Registrant's Securities to
be Registered.............................. "Questions and Answers about the Spin-Off
and the Company;" and "Description of
Capital Stock"
12 Indemnification of Directors and
Officers................................... "Description of Capital Stock -- Additional
Corporate Governance and Takeover-Related
Matters -- Indemnification of Officers and
Directors"
13 Financial Statements and Supplementary
Data....................................... "Index to Financial Information"
14 Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure................................. Not applicable
</TABLE>
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INFORMATION STATEMENT
RELATING TO THE SPIN-OFF
OF
BRISTOL HOTELS & RESORTS, INC.
We are sending you this document to describe the proposed spin-off of
Bristol Hotels & Resorts, Inc. from our parent company, Bristol Hotel Company,
and the business and financial condition of Bristol Hotels & Resorts, Inc.
following this transaction. In the spin-off, you will receive one common share
of Bristol Hotels & Resorts, Inc. for every two Bristol common shares you own at
the time the spin-off occurs.
Bristol is doing the spin-off in connection with its proposed merger with
FelCor Suite Hotels, Inc. Prior to the spin-off, Bristol will separate its hotel
operating business from the hotel properties that will be acquired by FelCor in
the merger. The Company will be the largest U.S. operation of third party owned
and branded hotels, and FelCor will be the largest non-paired share lodging REIT
measured by market capitalization. Although FelCor and the Company will be
separately owned and managed, they expect to continue to work closely together
in the acquisition and leasing of hotels.
The spin-off will not occur if Bristol and FelCor stockholders do not
approve the merger and the other conditions to the merger are not met. FelCor
and Bristol have described the merger transactions in detail in the proxy
statement/prospectus that accompanies this information statement. You should
read that document and this information statement carefully, in particular, the
section captioned "Risk Factors" in the enclosed document which begins on page 8
of the information statement.
If the merger and spin-off occur, you will receive Company shares
automatically, without taking any further action. We will apply to list the
common stock of the Company for trading on the New York Stock Exchange.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED IF THIS DOCUMENT IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We first mailed this Information Statement to Bristol stockholders on April
, 1998.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE SPIN-OFF AND THE COMPANY.... 3
SUMMARY..................................................... 5
RISK FACTORS................................................ 8
Lack of Control over Hotel Properties..................... 8
Risks Associated with Fixed Obligations under the Leases
and Debt............................................... 8
Hotel Industry Risks...................................... 8
Risks Associated with Third Party Management Contracts.... 9
Conflicts of Interest..................................... 10
Absence of Prior Trading Market for Company Shares;
Potential Volatility................................... 10
Risks of Leverage and Limited Financial Resources......... 10
Substantial Reliance on Key Personnel..................... 11
Anti-Takeover Provisions.................................. 11
THE SPIN-OFF................................................ 11
Background of the Spin-Off................................ 11
The Spin-Off.............................................. 11
Distribution Agent........................................ 12
Certain Federal Income Tax Consequences of the Spin-Off... 12
BUSINESS.................................................... 13
Business and Strategy..................................... 13
Liquidity and Capital Resources........................... 14
Employees................................................. 14
Company Properties........................................ 14
Year 2000 Compliance...................................... 17
FelCor Leases............................................. 17
Government Regulation..................................... 18
Environmental Matters..................................... 19
Legal Proceedings......................................... 19
PRO FORMA FINANCIAL DATA.................................... 20
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL
DATA...................................................... 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS................................................ 27
Overview.................................................. 27
Results of Operations -- Year Ended December 31, 1997
Compared with Year Ended December 31, 1996............. 27
Results of Operations -- Year Ended December 31, 1996
Compared with Pro Forma Year Ended December 31, 1995... 28
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 30
MANAGEMENT.................................................. 31
Directors and Executive Officers.......................... 31
Compensation Plans and Arrangements....................... 33
Certain Relationships and Related Party Transactions...... 36
DESCRIPTION OF CAPITAL STOCK................................ 37
Capital Stock............................................. 37
Stock Exchange Listing.................................... 37
Shares Available for Resale............................... 38
Dividends................................................. 38
Additional Corporate Governance and Takeover-Related
Matters................................................ 38
WHERE YOU CAN FIND MORE INFORMATION......................... 40
FORWARD-LOOKING STATEMENTS.................................. 40
INDEX TO FINANCIAL INFORMATION.............................. F-1
</TABLE>
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QUESTIONS AND ANSWERS
ABOUT THE SPIN-OFF AND THE COMPANY
To avoid confusion, references to "we," "us," or the "Company" mean Bristol
Hotels & Resorts, Inc. and its subsidiaries after the spin-off, and references
to "Bristol" mean Bristol Hotel Company and its subsidiaries, which will be
merged into FelCor Suite Hotels, Inc. when Bristol's proposed merger with FelCor
is completed.
Q: WHAT WILL HAPPEN IN THE SPIN-OFF?
A: In the spin-off, Bristol Hotel Company will separate its hotel operating
business from its hotel properties to create a separate publicly traded
hotel operating company. At the time of the spin-off, Bristol Hotels &
Resorts, Inc. will change its name to Bristol Hotels & Resorts.
Q: WHY WILL BRISTOL SPIN OFF ITS HOTEL OPERATING BUSINESS?
A: The spin-off is a condition to the proposed merger of Bristol and FelCor.
The spin-off will permit you to continue to own an equity stake in
Bristol's hotel operating business, which FelCor is not permitted to own
under the special limitations that apply to REITs.
Q: WHAT DO I GET IN THE SPIN-OFF?
A: You will receive one Company share for every two Bristol shares you own
when the spin-off occurs. We will not issue any fractional shares. Instead,
you will receive cash based on the market value of any fractional shares.
EXAMPLE: If you own 75 Bristol shares, then after the spin-off you will
receive 37 Company shares and a check for the market value of the
.50 fractional share.
In the FelCor-Bristol merger, you will receive 0.685 FelCor shares for each
Bristol share you own. In addition, all persons who hold FelCor shares on
the expected December 1998 record date will participate in a special
distribution of Bristol's current and accumulated earnings and profits as
of the merger date. The merger consideration is described in detail in the
accompanying proxy materials.
Q: WHEN WILL THE SPIN-OFF OCCUR?
A: If the stockholder approval and other conditions to the merger are
satisfied, the spin-off will occur on the business day before the merger.
We expect that the spin-off will occur promptly after Bristol's and
FelCor's stockholders approve the merger. If the merger is not approved or
is terminated, the spin-off will not occur.
Q: WHAT ARE THE SPIN-OFF SHARES WORTH?
A: The value of the spin-off Company shares was estimated to be $6.38 per
share (based on a spin-off ratio of one-for-two) by the Bristol Board in
connection with its approval of the merger and spin-off. The actual trading
value of the Company shares may be higher or lower than the estimated value
and will depend on many factors.
Until an orderly trading market develops, the market price for our stock
may fluctuate significantly. Please obtain current market quotations prior
to deciding whether to purchase or sell Company shares.
Q: DO I HAVE TO PAY TAXES ON THE SHARES I RECEIVE IN THE SPIN-OFF?
A: Yes. The spin-off will be treated as a dividend and the fair market value
of the shares you receive in the spin-off will be taxed to you as ordinary
income. The amount of that dividend is based on various factors. While the
Company has assigned an estimated value of $6.38 per share, the Company
believes the actual value of the dividend could be between $5.00 and $7.00
per spin-off Company share. The final value of the spin-off dividend cannot
be determined until after the dividend is completed. We will make a public
announcement of the amount of the dividend promptly after it is determined
and will furnish you the required IRS information as early as we can. To
review the tax consequences to you in more detail, see page 12.
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Q: WHAT DO I HAVE TO DO TO PARTICIPATE IN THE SPIN-OFF?
A: Stockholder approval is not required for the spin-off to occur. However,
Bristol is asking you to vote to adopt the merger agreement with FelCor.
Unless the conditions to the merger are satisfied, the spin-off will not
occur. Accordingly, your vote to approve the merger will be deemed to
constitute approval of the spin-off. Instructions for voting your proxy in
the merger are described in the joint proxy statement/prospectus that
accompanies this document.
Q: WHEN WILL I RECEIVE MY COMPANY SHARES?
A: If the spin-off occurs, Bristol will deliver the shares to which you are
entitled as quickly as possible following the spin-off. Your shares will be
either credited electronically to your brokerage account or Bristol will
mail a stock certificate to you.
Q: WHEN WILL I BE ABLE TO BUY AND SELL COMPANY SHARES?
A: You may buy and sell Company shares once the spin-off occurs. In addition,
we believe that it is likely that the Company shares will be traded on a
"when-issued" basis beginning about the time stockholders approve the
merger. While we do not control this, if when-issued trading begins, you
will in effect be entitled to sell your right to receive Company shares.
You would then have to deliver the Company shares to your broker promptly
after you receive them. You should consult your broker or financial advisor
before you attempt to sell your Company shares.
Q: WHERE WILL THE COMPANY SHARES TRADE?
A: We will apply to list the Company shares on the New York Stock Exchange. If
they do not accept the listing, we will seek to list the Company shares on
another major national exchange or quotation system.
Q: WILL THE COMPANY PAY DIVIDENDS ON ITS SHARES?
A: The Company does not currently intend to pay any cash dividends, but rather
intends to reinvest available cash in its business.
Q: WILL THE COMPANY SHARES BE CLIPPED OR PAIRED TO FELCOR STOCK LIKE A NUMBER
OF OTHER REAL ESTATE COMPANIES?
A: No. Company and FelCor shares will trade separately.
Q: WHAT WILL BE THE RELATIONSHIP BETWEEN THE COMPANY AND FELCOR AFTER THE
MERGER?
A: FelCor will lease to the Company all of the Bristol hotels acquired in the
merger pursuant to leases having initial terms of five to ten years, with
renewal options on the same terms for a total of 15 years, with an
additional option for five years at the then current market terms. After
the merger, the two companies intend to work together in the acquisition
and leasing of hotels, but neither party will be contractually obligated to
do so.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: If you have questions about the spin-off or if you would like additional
copies of this document or any document referred to, you should contact Ed
Nolan, Vice President, Corporate Finance, at Bristol at (972) 391-3231 or
by e-mail to "[email protected]".
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SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. For a more complete
description of the legal terms of these transactions, you should read this
entire information statement and the joint proxy statement/prospectus
accompanying this information statement, as well as the additional documents we
refer to under the heading "Where You Can Find More Information."
THE SPIN-OFF
Bristol will distribute one Company share for every two Bristol shares you
own at the time the spin-off occurs. We expect the distribution to occur
promptly following Bristol's and FelCor's annual meetings of stockholders to
approve the merger of Bristol and FelCor. There are, however, other customary
conditions to the merger that need to be satisfied. As a result, the effective
time of the spin-off and the merger could be delayed.
REDEMPTION OF A PORTION OF BASS SHARES
Companies affiliated with Bass plc presently own approximately 31% of
Bristol's shares and will participate proportionately in the spin-off. Following
the merger and the spin-off, and based on the present ownership by the Bass
companies of Bristol, the Bass companies would own approximately 13% of FelCor
and 31% of the Company. The REIT rules prevent FelCor from leasing hotels to the
Company if the Bass companies own 10% or more of both FelCor's and the Company's
shares. To assure compliance with these REIT requirements FelCor required in the
legal documents that we agree to purchase all of the Company shares held by the
Bass companies that exceed the 9.9% limitation. The purchase price for these
shares totals $25.8 million. This will mean that the other stockholders'
percentage ownership interest in the Company will be approximately 31% higher
than it was in Bristol.
CONDITIONS TO THE SPIN-OFF
The spin-off is subject to the satisfaction or waiver of the same
conditions as the merger. Accordingly, the spin-off will not occur if the merger
does not occur. Please read the joint proxy statement/prospectus that
accompanies this document for a more complete description of the merger
transactions.
BUSINESS AND STRATEGY OF THE COMPANY
After the spin-off, we will own Bristol's hotel operating business and
Bristol's employees and management will generally become our employees and
management. We will operate 101 primarily full-service hotels in the upscale and
midscale segments of the hotel market, of which 89 will be operated under
long-term leases and management agreements with FelCor. We will remain the
world's largest franchisee of Holiday Hospitality's Crowne Plaza(R) and Holiday
Inn(R) hotels. Excluding pending acquisitions, we will also operate 19 hotels
under other national hotel brands, including Hampton Inn(R), Courtyard by
Marriott(R) and Fairfield Inn(R).
With FelCor's and the Company's substantial experience in the upscale and
midscale segments of the lodging industry, the two companies expect to work
together after the spin-off in the acquisition and leasing of additional hotels.
Both companies believe that there remain attractive opportunities for the
ownership and operation of hotels in this industry segment, especially utilizing
the Holiday Hospitality brand names. We expect to combine our reputation as one
of the premier operators of Crowne Plaza and Holiday Inn hotels and our
redevelopment skills with FelCor's acquisition skills, access to capital, and
rapid growth strategy to pursue new opportunities. There is no contractual
obligation to jointly pursue these opportunities. However, we believe that our
position after the merger as the largest tenant-operator of FelCor-owned hotels,
coupled with the potential economic benefits and the alignment of interests
created by the significant common stock ownership in the two companies by
Bristol's former stockholders and the FelCor stock options held by the Company's
management, will create an environment in which we will do so.
5
<PAGE> 9
We also intend to develop relationships with other property owners,
including other REITs, to lease or manage their hotels. We are considering ways
in which we may offer various real estate management-related services, including
construction management, procurement and marketing/advertising services, to
FelCor and other hotel owners and managers/operators.
At the spin-off, substantially all of Bristol's employees are expected to
become employees of the Company.
The principal office of the Company will be located at 14295 Midway Road,
Dallas, Texas 75244.
AGREEMENTS WITH FELCOR
After the spin-off and the merger, we will become one of FelCor's two major
tenants and will lease and operate all of the hotels FelCor acquires from
Bristol in the merger. The leases are for initial terms of five to ten years,
with optional renewals on the same terms that we may exercise for a total,
including the initial terms, of 15 years. If a lease has been extended to 15
years, we may renew the lease for an additional five years at then current
market rates. Each lease will provide for a monthly rent equal to the greater of
base rent or percentage rent. The percentage rent will be based on specified
percentages of certain revenue streams. Those percentages will vary within the
following ranges:
<TABLE>
<S> <C>
Room Revenues: 0% to 10% up to a revenue breakpoint amount
specified for each hotel, then 60% to 75%
above such breakpoint.
Food and Beverage Revenues: 5% to 25%.
Phone Revenues: 5% to 10%.
Other Revenues: Varying percentages depending on the nature
and source of such revenues.
</TABLE>
The base rent and the revenue breakpoint in each lease will be adjusted
annually to reflect changes in the Consumer Price Index.
As between FelCor and us, we will be responsible for the liabilities
associated with Bristol's management and leasing business and FelCor will assume
all of Bristol's other liabilities, including all of Bristol's existing
indebtedness other than trade accounts payable.
MANAGEMENT
There initially will be eight persons on our board of directors, five of
whom are currently Bristol directors. J. Peter Kline, Bristol's current
President and Chief Executive Officer, is our Chairman of the Board and Chief
Executive Officer, and John A. Beckert, Bristol's current Chief Operating
Officer, is our President and Chief Operating Officer.
OMAHA ACQUISITION
Bristol has agreed to acquire from Omaha Hotel, Inc. and another party 20
midwestern hotels with a total of 3,456 rooms. Upon completion of this
transaction and after the spin-off, the Company will operate these hotels under
leases with FelCor. We currently expect this acquisition to be completed prior
to the spin-off. Neither Bristol nor the Company can be sure that the
acquisition will occur.
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
We are providing the following financial information to aid you in your
analysis of the financial aspects of the spin-off. The following tables set
forth summary historical financial data for Bristol for the years ended December
31, 1997 and 1996, and the 11 months ended December 31, 1995 and for Bristol's
predecessor entities for the two years ended December 31, 1994 and 1993, and for
the month ended January 31, 1995. The summary balance sheet data for Bristol is
presented as of December 31, 1997, 1996 and 1995. The summary balance sheet data
for the predecessor entities is presented as of December 31, 1994 and 1993.
The summary financial data for Bristol set forth below is qualified in its
entirety by, and should be read in conjunction with, the consolidated financial
statements and notes thereto for Bristol included elsewhere in this information
statement.
The 1996 and 1997 summary financial data for Bristol has been derived from
financial statements audited by Arthur Andersen LLP and the remainder of the
summary financial data for Bristol and the predecessor entities has been derived
from financial statements audited by Price Waterhouse LLP, independent
accountants, each of which financial statements is included elsewhere in this
information statement. The summary financial data for the predecessor entities
set forth below is qualified in its entirety by, and should be read in
conjunction with, the financial statements included elsewhere in this
information statement.
The pro forma information assumes completion of the merger, the spin-off,
the Omaha acquisition and the purchase of a portion of the Bass companies'
shares as of January 1, 1997 in the case of the Income Statement Data, and on
December 31, 1997 in the case of the Balance Sheet Data. The information is only
in summary form and you should read it in conjunction with the historical
financial data and more detailed pro forma financial information appearing
elsewhere in this document. The pro forma financial data are not necessarily
indicative of the results that actually would have occurred had the merger, the
spin-off, the Omaha acquisition and the Bass purchase been consummated on the
dates indicated or that may occur in the future.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA BRISTOL PREDECESSOR
------------ ------------------------------------- ---------------------------------
FOR THE YEAR ENDED ELEVEN MONTHS ONE MONTH YEAR ENDED
YEAR ENDED DECEMBER 31, ENDED ENDED DECEMBER 31,
DECEMBER 31, --------------------- DECEMBER 31, JANUARY 31, -------------------
1997 1997 1996 1995 1995 1994 1993
------------ ---------- -------- ------------- ----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total revenues................. $672,295 $ 504,518 $211,840 $165,195 $5,943 $ 70,351 $ 64,022
Operating income............... 13,746 97,896 46,766 26,595 1,932 15,438 12,792
Tenant lease expense........... 202,501 -- -- -- -- -- --
Income before extraordinary
items........................ 7,769 33,214 17,749 4,969 1,280 8,144 5,296
Diluted earnings per common
share:
Income before extraordinary
items...................... 0.48 0.87 0.70 0.28 -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31, AS OF DECEMBER 31,
DECEMBER 31, ------------------------------------ -------------------
1997 1997 1996 1995 1994 1993
------------ ---------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents....... $ 15,000 $ 86,167 $ 4,666 $ 7,906 $ 4,118 $ 395
Working capital................. 16,620 71,308 (20,779) (8,426) 3,246 (17,412)
Total assets.................... 81,624 1,666,638 592,788 512,901 109,874 99,635
Long-term debt, including
current portion............... 200 717,319 232,694 170,544 114,054 112,963
Total equity.................... 30,000 648,794 252,157 236,122 (11,988) (20,604)
</TABLE>
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RISK FACTORS
You should carefully read and evaluate all of the information in this
document, including the risk factors listed below.
LACK OF CONTROL OVER HOTEL PROPERTIES
Following the spin-off, we will no longer own or control all matters with
respect to the hotels we lease. Our rights over the hotels we lease will be
limited to those specified in the leases with FelCor. Under the FelCor leases,
FelCor will have the right to approve and control certain key decisions relating
to each hotel, including the right to approve annual capital budgets, to sell
the hotels, to place additional debt on the hotels and to make decisions
regarding the franchise agreements for the hotels. This creates additional risks
to you if there is a conflict between us, as tenant, and FelCor, as owner of the
hotels, or if FelCor takes certain actions that are not in your best interests.
For example, FelCor could decide to delay or not make certain capital
improvements to hotels that we think appropriate, including the 51-hotel
redevelopment and rebranding program Bristol initiated toward the end of last
year. FelCor has informed us that it intends to complete this redevelopment
program, but we cannot assure you that it will do so. Moreover, many details of
the program must be agreed to by FelCor and FelCor could request changes to the
program that we may not necessarily support. Any changes to the redevelopment
program could adversely affect the leased hotels and our results of operations.
Our results of operations could also be adversely affected if FelCor
decided to sell one or more of the hotels and terminate our lease. Under the
leases with FelCor, FelCor may sell the hotels and terminate our lease without
our consent. In such event, our damages would be limited to monthly termination
payments during the remainder of the lease term equal to one-twelfth of 60% of
the average monthly profit and allocable overhead contribution associated with
operating the hotel over the 12 months ending on the termination date.
The leases are terminable by FelCor in certain events, including, among
others, if we breach the leases, if we fail to satisfy certain performance
tests, if the hotels are sold to a third party, if there is a change of control
of the Company without our Board's consent or if a lender forecloses on the
hotel. Certain of these events are beyond our control and, depending on the
circumstances, we may not be entitled to termination payments if the leases are
terminated.
RISKS ASSOCIATED WITH FIXED OBLIGATIONS UNDER THE LEASES AND DEBT
Certain of our obligations under the FelCor leases will be fixed regardless
of the actual results of operations of the hotels and we will have to make
scheduled payments on debt we expect to incur at the time of or following the
spin-off. If our results of operations decline or flatten out, we may be forced
to reduce our overhead and other expenses, which could adversely affect our
future prospects and may not be sufficient in light of our substantial fixed
obligations under the FelCor leases and any indebtedness we may incur.
HOTEL INDUSTRY RISKS
Growth Opportunities. There has been substantial consolidation in, and
capital allocated to, the U.S. lodging industry since the early 1990s. This has
generally resulted in higher prices for hotels and fewer attractive acquisition
opportunities. An important part of the Company's growth strategy is to work
with FelCor in the acquisition and leasing of hotels, even though neither party
is contractually obligated to do so. Continued industry consolidation and
competition for acquisitions could adversely affect our and FelCor's growth
prospects. The Company and FelCor compete for hotel investment opportunities
with other companies, some of which have greater financial or other resources.
The larger competitors may be able to pay higher prices or assume greater risks
than would be appropriate for the Company.
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<PAGE> 12
Operating Risks. The hotels to be leased by the Company from FelCor are
subject to all of the risks common to the hotel industry. These risks could
adversely affect hotel occupancy and the rates that can be charged for hotel
rooms, and generally include:
- The existence of competition from other hotels;
- The construction of more hotel rooms in a particular area than are needed
to meet demand;
- The increase in energy costs and other travel expenses that reduce
business and leisure travel;
- The adverse effects of declines in general and local economic activity;
and
- The risks generally associated with the operation of leased real estate.
In addition, annual adjustments (based on changes in the Consumer Price Index)
are made to the base rent and the thresholds that will be used to compute
percentage rent under the leases between us and FelCor. These adjustments,
unless offset by increases in hotel revenues, could adversely affect the
Company's results of operations.
Competition. Each of our leased hotels will compete with other hotels in
its geographic area. A number of additional hotel rooms have been or may be
built in a number of the geographic areas in which the hotels are located, which
could adversely affect the results of operations of these hotels. In addition,
the Company will compete with other hotel operating companies for management
contracts and hotel leases.
Seasonality. The hotel industry is seasonal in nature. Generally, hotel
revenues are highest in the second and third quarters of each year. Seasonality
causes quarterly fluctuations in our revenue. We may be able to reduce, but not
eliminate, the effects of seasonality by continuing to diversify the geographic
location and primary customer base of its hotels.
Investment Concentration in a Single Industry. Our entire business is
hotel-related. In the event of a downturn in the hotel industry, the adverse
effect on us may be greater than on a more diversified company with assets or
activities outside of the hotel industry.
Risks of Operating Hotels Under Franchise Agreements. Most of our hotels
are and, following the proposed spin-off will be, operated under franchise
licenses, predominantly with Holiday Hospitality Corporation. Any significant
decline in the reputation of any of the Company's franchisors could adversely
affect our results of operations. Each license agreement requires that the
franchised hotel be maintained and operated in accordance with certain
standards. The franchisors also may require substantial improvements to the
franchised hotels, for which FelCor would be responsible under our leases with
it, as a condition to the renewal or continuation of these franchise licenses.
The consent of certain franchisors (other than Holiday Hospitality) to the
transfer of Bristol's hotels to FelCor in the merger has not yet been obtained.
If a consent is withheld, the merger could result in the termination of those
licenses. If a franchise license terminates due, among others, to FelCor's
failure to make required improvements or to obtain necessary consents, our
results of operations could be adversely affected.
Governmental Regulation. The lodging industry is subject to extensive
governmental regulation, including laws which regulate the licensing of hotels
and restaurants, the sale of liquor, the disposal of hazardous wastes and the
adaption of public accommodations for use by the disabled. Although we believe
that we are in substantial compliance with these laws, the failure to comply
with, or the imposition of liability under, these laws could impose additional
costs on us that could have an adverse effect on our business.
RISKS ASSOCIATED WITH THIRD PARTY MANAGEMENT CONTRACTS
Many of the third party management agreements allow the third party owner
to terminate the contract at any time, including if the property is sold. The
Company has been advised by certain owners of their intention to sell their
properties within the next 12 months. If a property is sold, the related
management contract would likely be terminated. In addition, six of the
contracts will expire by the end of 1998 unless renewed or extended. The
termination of these contracts could adversely affect the Company's results of
operations.
9
<PAGE> 13
CONFLICTS OF INTEREST
All of the Bristol hotels to be acquired by FelCor in the merger will be
leased back to the Company. It is not anticipated that any person who is an
officer or director of the Company will at the same time be an officer or
director of FelCor. However, Donald J. McNamara, who is currently the Chairman
of the Board of Bristol, will become the Chairman of the Board of FelCor
following the merger. Mr. McNamara is a principal in a firm that after the
spin-off and merger will beneficially own 40% of the Company's shares and that
will be the general partner of two partnerships that will beneficially own 13%
of FelCor's common shares. Richard North, who will join FelCor's Board upon
completion of the merger, is an affiliate of Bass plc, whose subsidiary, Holiday
Hospitality, will be the franchisor of most of the hotels we will lease from
FelCor and whose other subsidiaries will be the beneficial owners of 9.9% of the
Company shares and 13% of FelCor's common shares after the spin-off and the
merger. Each of these two stockholders will have the right to nominate one
director of the Company and, at the time of the merger, to nominate two
directors to serve on the FelCor Board. In addition, Messrs. Kline and Beckert,
our CEO and COO, will receive in the FelCor-Bristol merger a substantial amount
of FelCor stock and will have options to purchase FelCor stock.
Issues may arise under our leases, franchise agreements and other
agreements, and in the allocation of acquisition and leasing opportunities, that
present conflicts of interest due to the affiliations of these directors and
executives.
ABSENCE OF PRIOR TRADING MARKET FOR COMPANY SHARES; POTENTIAL VOLATILITY
There is currently no public trading market for our shares. Although we
will apply to list our shares for trading on the New York Stock Exchange, we
cannot be sure that our application will be accepted or that our shares will be
actively traded. We also cannot predict what the market price for our shares
might be. Until an orderly trading market develops, the market price for our
shares may fluctuate significantly. You should not view the current trading
price of Bristol shares as a reflection of what the trading price of our shares
will be. Following the spin-off and the merger, we will be significantly smaller
than Bristol was prior to its merger with FelCor.
In general, lenders will not make margin loans in respect of stock which
trades below $5.00 per share. Accordingly, if the Company's shares were to trade
below that level, investors' ability to finance the acquisition or maintenance
of Company shares would be adversely affected.
Some of the Bristol stockholders who receive Company shares may decide that
they do not want shares in a hotel operating company, and may sell their shares.
Our two largest stockholders will have the right under certain circumstances to
require us to register their shares for resale. Any sales of stock by these or
other stockholders could lower the trading price of our stock and delay the
development of an orderly trading market.
RISKS OF LEVERAGE AND LIMITED FINANCIAL RESOURCES
Following the spin-off, we may have difficulty obtaining additional
financing because our asset base will be smaller and we will no longer own the
Bristol hotels or other real estate that Bristol historically used as collateral
for prior loans. Accordingly, we will not necessarily be able to rely on
Bristol's prior relationships with lenders. If we cannot obtain financing in
amounts or on terms acceptable to us, we may not have enough capital resources
to pay our obligations under the leases, to satisfy our cash requirements or to
pursue additional opportunities. We have obtained proposals with term sheets
from several financial institutions for a proposed $40 million revolving credit
facility. Further, FelCor has agreed to provide us with a short-term loan to the
extent our cash balances upon completion of the spin-off are less than $15
million. Neither FelCor nor any third-party financial institution is obligated
to provide us with additional funds or to assist us in obtaining additional
financing in the future.
If we were to draw down the full amount under such credit facility, we
would be highly leveraged with substantial indebtedness at a floating rate of
interest. Changes in economic conditions could result in higher interest rates,
increasing our interest expense.
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<PAGE> 14
SUBSTANTIAL RELIANCE ON KEY PERSONNEL
We will be dependent on the efforts of our executive management team.
Although we believe that we could find replacements for these key personnel, the
loss of their services could have an adverse effect on our operations. We have
entered into employment agreements only with J. Peter Kline, Chairman of the
Board and Chief Executive Officer, and John A. Beckert, President and Chief
Operating Officer.
ANTI-TAKEOVER PROVISIONS
The leases with FelCor give FelCor the right to terminate the leases upon a
change in control of the Company that is not approved by our Board. In addition,
our Certificate of Incorporation and Bylaws contain provisions that might make
it more difficult for someone to obtain control of us or replace our management
without the approval of our Board. These include provisions that prohibit
stockholders from acquiring, other than in the spin-off, more than 9.9% of our
outstanding shares until December 31, 2000, that provide for a staggered Board,
that permit our Board to issue preferred stock without your approval, that
prohibit you from taking action other than at a stockholders meeting and that
limit the right to call a stockholders meeting generally to our Board. These
provisions could delay or prevent a change in control of our Board or
transaction in which you could receive a price for your shares that is greater
than the then current market prices or is otherwise in your best interests.
THE SPIN-OFF
BACKGROUND OF THE SPIN-OFF
On March 23, 1998, the Bristol Board determined that it was in your best
interests for Bristol to merge into FelCor. The Bristol Board approved the
merger in part because FelCor, as a REIT, has a lower overall cost of capital
than Bristol, a C-corporation, and greater financial flexibility to finance the
acquisition of hotels.
FelCor is a REIT and cannot operate its owned hotels under the special
limitations that apply to REITs. Accordingly, and to provide Bristol
stockholders the opportunity to continue to have an equity stake in Bristol's
hotel operating business, prior to the merger, Bristol will separate its hotel
operating business from the hotel assets that FelCor will acquire in the merger
and spin-off this business to you.
The Bristol Board recognized that the spin-off would be taxable to you
based on the fair market value of the stock distributed to you on the date of
the spin-off. However, the Bristol Board believed that the benefits of the
merger outweighed any negative tax consequences to you from the spin-off.
The value of the spin-off company shares was estimated to be $6.38 per
share (based on a spin-off ratio of one-for-two) by the Bristol Board in
connection with its approval of the merger and spin-off. This value is
corroborated by the price the Bass companies have agreed to accept for the
purchase of their shares immediately following the spin-off.
The final value of the spin-off dividend cannot be determined until after
the dividend is completed. We will make a public announcement of the amount of
the dividend promptly after it is determined and will furnish you the required
IRS information as early as we can so that you can complete your tax returns.
The actual trading value of the Company shares may be higher or lower and
the estimated value will depend on many factors. Until an orderly trading market
develops, the market price for our stock may fluctuate significantly. Please
obtain current market quotations prior to deciding whether to purchase or sell
Company shares.
THE SPIN-OFF
Each holder of record of Bristol shares as of the close of business on the
date of the spin-off will receive one Company share for every two Bristol shares
held by them.
The terms and conditions of the spin-off are set forth in an agreement we
entered into with Bristol (the "Spin-Off Agreement"). FelCor will assume
Bristol's obligations under the Spin-Off Agreement in the merger. The Spin-Off
Agreement has been filed with the SEC as an exhibit to this document. Please see
"Where You Can Find More Information" for instructions on how to obtain a copy
of the Spin-Off Agreement.
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<PAGE> 15
Prior to the spin-off, Bristol will separate its management and leasing
business from its hotel properties. Bristol will do this through a series of
mergers, asset and stock transfers and liability assumptions among Bristol, the
Company and our respective subsidiaries. We will generally acquire all assets
and assume all liabilities associated with Bristol's hotel operating business
and Bristol will retain all other assets and all other liabilities, including
all of Bristol's existing indebtedness other than trade accounts payable. Each
party will indemnify the other for losses relating to liabilities that it has
assumed, other than liabilities relating to the intentional misconduct or gross
negligence of the other that have not been previously disclosed.
The Bass Companies presently own approximately 31% of Bristol's shares and
will participate proportionately in the spin-off. Following the spin-off, we
will redeem all of the Company shares held by the Bass companies that exceed
9.9% of our outstanding shares for $25.8 million. We are required to redeem
these shares as part of the merger transactions between Bristol and FelCor. As a
result of the merger and the spin-off, the Bass companies would own
approximately 13% of FelCor and 31% of the Company. The REIT rules prohibit
FelCor from leasing its hotels to the Company if the Bass companies own 10% or
more of both FelCor's and the Company's shares. Accordingly, as a condition to
the FelCor merger and FelCor leasing the hotels it acquires from Bristol in the
merger, we must redeem some of the Bass companies' shares. This will mean that
all other stockholders' percentage interest in the Company will be approximately
31% higher than it was in Bristol.
If the spin-off occurred on April 28, 1998 based on the then
outstanding Bristol shares and giving effect to the Bass redemption described
above, million Company shares would be distributed to Bristol
stockholders. YOU SHOULD NOT SEND CASH, CERTIFICATES OR ANY OTHER CONSIDERATION
TO THE COMPANY OR TAKE ANY OTHER ACTION TO RECEIVE YOUR COMPANY SHARES IN THE
SPIN-OFF.
We will not issue fractional shares in the spin-off. The distribution agent
will either distribute to you an amount of cash for your fractional interest
based on the market price of the Company shares at the time of the spin-off or
it will aggregate and sell in the open market within 90 days after the spin-off
all fractional shares at then prevailing prices and distribute to you the net
proceeds to which you are entitled. You will not have to pay any fees in
connection with such sales.
DISTRIBUTION AGENT
The distribution agent for the spin-off will be American Stock Transfer &
Trust Company, Stock Transfer Department, 40 Wall Street, 46th Floor, New York,
N.Y. 10005, telephone (800) 937-5449. You may contact them if you have any
questions regarding delivery of your Company shares in the spin-off.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF
Introduction. The following discussion summarizes certain federal income
tax consequences of the spin-off to you. This summary is not a complete analysis
of all of the potential tax effects of the spin-off to you or your ownership of
Company shares. We have based this summary upon current provisions of the tax
code, currently applicable Treasury regulations and judicial and administrative
decisions and rulings, all of which could change, possibly with retroactive
effect. The IRS could also disagree with our summary of these provisions. We do
not intend to obtain a ruling from the IRS.
In addition, we have not addressed tax consequences that may apply to
particular stockholders in light of their individual circumstances, such as life
insurance companies, tax-exempt organizations, regulated investment companies,
S-corporations, financial institutions, broker-dealers in securities,
stockholders who hold their shares as part of a hedge, straddle or conversion
transaction, stockholders who do not hold their shares as capital assets,
stockholders who have acquired their shares upon the exercise of options or
otherwise as compensation, foreign entities and nonresident alien individuals.
Receipt of Company Shares. The spin-off will be taxable to you for federal
income tax purposes based on the fair market value of the Company shares
(including cash you receive for fractional shares) you receive as of the
spin-off date. This amount will be taxable to you as ordinary income to the
extent of your pro rata share of Bristol's current and accumulated earnings and
profits. Based on Bristol's current estimates of its accumulated earnings and
profits, we believe that the fair market value of the Company shares distributed
to
12
<PAGE> 16
you will be taxable as ordinary income. You will acquire an initial tax basis in
your shares equal to its fair market value as of the spin-off date. Your holding
period for your shares will begin on the spin-off date.
Bristol will determine the fair market value of the shares you receive as
of the spin-off date based on a number of factors, including the trading price
of the Company shares at or near the spin-off date. Bristol will report the
amount received by you to the IRS and you on IRS Form 1099-DIV. There is no
assurance that the IRS or the courts will agree that the amount received by you
is equal to the amount determined by Bristol. If the IRS were to challenge the
amount reportable by you on your federal income tax return, you would have to
bear the expense and effort of defending against or otherwise resolving such
challenge.
Special Rules Applicable to Corporate Stockholders -- Deduction for
Dividends Received. In computing its taxable income for the tax year in which
the spin-off occurs, a corporate holder of Bristol shares generally will be
entitled to deduct 70% of the amount of the value of the Company shares received
by that holder that constitutes a dividend. However, the availability of such
deduction may be limited based on a number of specific circumstances that may
apply to a particular corporate holder, including the length of time the
corporate holder has held its Bristol shares, certain risk-reducing arrangements
the corporate holder may have entered into with respect to its Bristol shares,
the existence of corporate indebtedness attributable to the holding of those
shares, and the applicability of alternative minimum tax rules. The corporate
taxpayer's basis in the Company shares may also be reduced with respect to such
deduction. Corporate stockholders should consult their tax advisors to ascertain
whether, under their specific circumstances, the availability or benefits of the
corporate dividends received deduction may be subject to limitation.
Backup Withholding. Bristol generally will be required to withhold 31% of
the Company shares to be distributed to you if (i) you fail to furnish or
certify a taxpayer identification number to Bristol, (ii) the IRS notifies
Bristol that the taxpayer identification number furnished by you is incorrect,
(iii) the IRS notifies Bristol that you have underreported interest and/or
dividend income, or (iv) you fail to certify to Bristol that you are not subject
to withholding for underreporting interest or dividend income. Any amounts
withheld from you under these backup withholding rules will be allowed as a
credit against your federal income tax liability or as a refund.
BUSINESS
BUSINESS AND STRATEGY
After the spin-off we will own Bristol's hotel operating business and
Bristol's employees and management will generally become our employees and
management. We will operate under long-term leases and management agreements all
of the 89 hotels currently owned by Bristol containing 25,281 rooms. We will
also assume all of Bristol's obligations under Bristol's third-party management
contracts, pursuant to which Bristol operates an additional 12 hotels containing
3,557 rooms. The hotels are located in 22 states and Canada, with hotels
clustered in major metropolitan areas with concentrations in the South, East,
Southwest and Pacific regions of the United States. The 20 hotels that will be
acquired in the transactions with Omaha Hotel, Inc. as well as the acquisition
of an additional hotel (both transactions are scheduled to close before the
spin-off) will be transferred to FelCor in the merger and will be operated by
the Company under long term leases.
We will operate primarily full-service hotels in the upscale and midscale
hotel segments. We will remain the world's largest franchisee of Holiday
Hospitality's Crowne Plaza and Holiday Inn hotels and will be committed to enter
into franchise agreements with Holiday Hospitality or its affiliates for hotels
with an additional 8,700 rooms during the next five years under one or more of
their brands, including Inter-Continental(R), Crowne Plaza, Holiday Select(R),
Holiday Inn, and Holiday Express(R). Excluding pending acquisitions, we will
also operate 19 hotels under other national hotel brands, including Hampton Inn,
Homewood Suites, Courtyard by Marriott and Fairfield Inn.
With FelCor's and the Company's substantial experience in the upscale and
midscale hotel segments, the two companies expect to work together after the
spin-off and merger in the acquisition and leasing of additional hotels. Both
companies believe that there remain attractive opportunities for the ownership
and operation of hotels in these market segments, especially utilizing the
Holiday Hospitality brand names. We
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<PAGE> 17
expect to combine our reputation as one of the premier operators of Crowne Plaza
and Holiday Inn hotels and our redevelopment skills with FelCor's acquisition
skills, access to capital, and rapid growth strategy to pursue new
opportunities. There is no contractual obligation to jointly pursue these
opportunities. However, we believe that our position after the merger as the
largest tenant-operator of FelCor's owned hotels, coupled with the potential
economic benefits and the alignment of interests created by the significant
common stock ownership in the two companies by Bristol's former stockholders and
the FelCor stock options held by the Company's management will create an
environment in which we will do so.
We also intend to develop relationships with other property owners,
including other REITs, to lease and manage their hotels. We are also considering
ways in which we may offer various real estate management related services,
including construction management, procurement and marketing/advertising
services, to FelCor and other hotel owners and managers/operators.
We will cooperate with FelCor to continue the redevelopment and
repositioning program Bristol initiated for its hotels. We believe the
redevelopment and repositioning of those hotels will enhance the hotels'
performance. Pursuant to the leases with FelCor, FelCor will devote at least 3%
of the revenues from the hotels acquired from Bristol to fund capital
improvements to those hotels.
Our senior management team has extensive experience in the hospitality
industry, with most of them working together for over 15 years. Our executive
officers are among the largest individual owners of our shares.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are expected to be cash on hand, cash
flow from operations and borrowings under a $40 million revolving credit
facility we expect to enter into at the time the spin-off is completed. We
expect that any credit facility would be secured by our assets and the stock of
our subsidiaries. We expect that up to $20 million of our credit facility would
be used to issue letters of credit to secure our obligations under the leases
with FelCor, with the balance used for working capital and other general
corporate purposes. We believe that we will have access to sufficient capital
resources to operate and manage the hotels in our portfolio for the foreseeable
future.
EMPLOYEES
We will employ most of the employees at the hotels we manage or operate as
well as those at our corporate offices. Immediately prior to the spin-off, we
expect to have 17,000 employees, 350 of whom are employed at our Dallas
headquarters. Thirteen of the properties we manage, employing approximately
1,400 workers, are subject to labor union contracts. We have not experienced any
union strikes or other material labor disruptions and believe that our ongoing
labor relations are good.
COMPANY PROPERTIES
Executive Offices. Our principal executive offices are located in Dallas,
Texas under a lease that expires on June 30, 2004. We have the right to
terminate our lease annually beginning in the year 2000 by paying termination
fees.
The Company's Hotels. The following table sets forth certain information
with respect to each hotel Bristol operated as of December 31, 1997, which if
the spin-off had occurred on that date, would be operated by the Company:
<TABLE>
<CAPTION>
NUMBER
HOTEL NAME LOCATION OF ROOMS
---------- -------- --------
<S> <C> <C>
BRISTOL'S OWNED HOTELS
Holiday Inn -- Montgomery................................... Montgomery, AL 213
Holiday Inn -- Texarkana I-30............................... Texarkana, AR 210
Days Inn -- Flagstaff....................................... Flagstaff, AZ 157
</TABLE>
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<PAGE> 18
<TABLE>
<CAPTION>
NUMBER
HOTEL NAME LOCATION OF ROOMS
---------- -------- --------
<S> <C> <C>
Fairfield Inn -- Downtown Scottsdale........................ Scottsdale, AZ 218
Holiday Inn -- Santa Barbara................................ Santa Barbara, CA 160
Holiday Inn Select -- Irvine/Orange County Airport(2)....... Irvine, CA 334
Holiday Inn Select -- Pleasanton(1)......................... Pleasanton, CA 244
Holiday Inn -- San Diego on the Bay(2)...................... San Diego, CA 600
Holiday Inn -- San Jose North............................... San Jose, CA 305
Holiday Inn -- San Francisco Financial District(2).......... San Francisco, CA 565
Holiday Inn -- San Francisco Fisherman's Wharf.............. San Francisco, CA 584
Holiday Inn Select -- San Francisco Union Square(1)......... San Francisco, CA 400
Holiday Inn Express -- Colorado Springs Central............. Colorado Springs, CO 207
Ramada Inn -- Colorado Springs North........................ Colorado Springs, CO 220
Holiday Inn -- Hartford Downtown(1)......................... Hartford, CT 342
Holiday Inn Select -- Stamford.............................. Stamford, CT 383
Holiday Inn -- Cocoa Beach Oceanfront Resort................ Cocoa Beach, FL 500
Holiday Inn -- Nikki Bird................................... Kissimmee, FL 529
Holiday Inn Select -- Miami International Airport(1)........ Miami, FL 304
Holiday Inn Select -- Orlando International Airport......... Orlando, FL 288
Holiday Inn -- Orlando International Drive Resort........... Orlando, FL 652
Holiday Inn -- Orlando North/Winter Park.................... Orlando, FL 200
Holiday Inn -- Near Busch Gardens(R) Tampa.................. Tampa, FL 395
Courtyard by Marriott -- Downtown Atlanta................... Atlanta, GA 211
Fairfield Inn -- Downtown Atlanta........................... Atlanta, GA 242
Holiday Inn -- Atlanta Airport North........................ Atlanta, GA 493
Harvey Hotel -- Atlanta Powers Ferry(1)..................... Atlanta, GA 296
Crowne Plaza -- Atlanta Airport............................. Atlanta, GA 378
Holiday Inn Select -- Atlanta Perimeter Dunwoody............ Atlanta, GA 250
Holiday Inn Express -- Atlanta I-20 East.................... Atlanta, GA 167
Holiday Inn Express -- Atlanta Northeast.................... Atlanta, GA 199
Holiday Inn -- Atlanta South/Jonesboro...................... Atlanta, GA 180
Holiday Inn -- Columbus Airport North....................... Columbus, GA 223
Hampton Inn -- Marietta..................................... Marietta, GA 140
Allerton Hotel -- Chicago(2)................................ Chicago, IL 378
Holiday Inn -- New Orleans French Quarter................... New Orleans, LA 276
Holiday Inn Select -- Boston Government Center(2)........... Boston, MA 303
Holiday Inn -- Kansas City Northeast........................ Kansas City, MO 167
Holiday Inn -- Westport..................................... St. Louis, MO 318
Holiday Inn -- Jackson Southwest............................ Jackson, MS 289
Crowne Plaza -- Downtown Jackson............................ Jackson, MS 354
Hampton Inn -- Jackson...................................... Jackson, MS 119
Harvey Hotel & Suites -- Jackson North...................... Jackson, MS 224
Whispering Woods Hotel and Conference Center................ Olive Branch, MS 181
Holiday Inn -- Albuquerque Mountainview..................... Albuquerque, NM 360
Holiday Inn Select -- Philadelphia Center City(1)........... Philadelphia, PA 445
Holiday Inn -- Independence Mall............................ Philadelphia, PA 364
The Mills House Hotel -- Charleston Holiday Inn............. Charleston, SC 214
Holiday Inn -- Columbia Airport............................. Columbia, SC 148
Holiday Inn Select -- Greenville (Roper)(1)................. Greenville, SC 208
Holiday Inn -- Spartanburg West............................. Spartanburg, SC 224
Holiday Inn -- Chattanooga Southeast I-75................... Chattanooga, TN 230
Holiday Inn -- Knoxville West............................... Knoxville, TN 242
</TABLE>
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<PAGE> 19
<TABLE>
<CAPTION>
NUMBER
HOTEL NAME LOCATION OF ROOMS
---------- -------- --------
<S> <C> <C>
Holiday Inn Select -- Nashville Opryland/Airport(2)......... Nashville, TN 384
Holiday Inn -- Amarillo I-40................................ Amarillo, TX 247
Holiday Inn -- Austin Town Lake............................. Austin, TX 320
Holiday Inn -- Beaumont Midtown I-10........................ Beaumont, TX 190
Bristol House............................................... Dallas, TX 127
Fairfield Inn -- Dallas Regal Row........................... Dallas, TX 204
Harvey Hotel -- Dallas...................................... Dallas, TX 313
Harvey Hotel -- Addison(1).................................. Dallas, TX 429
Crowne Plaza Suites -- Dallas............................... Dallas, TX 295
Hampton -- Downtown Dallas/West End......................... Dallas, TX 311
Harvey Hotel -- Dallas Brookhollow(1)....................... Dallas, TX 354
Courtyard by Marriott -- Houston Near The Galleria.......... Houston, TX 209
Fairfield Inn -- Houston Near The Galleria.................. Houston, TX 107
Holiday Inn Select -- Houston Near Greenway Plaza........... Houston, TX 355
Holiday Inn -- Medical Center(1)............................ Houston, TX 297
Fairfield Inn -- Houston I-10 East.......................... Houston, TX 160
Holiday Inn -- Houston Intercontinental Airport............. Houston, TX 413
Hampton Inn -- Houston I-10 East............................ Houston, TX 90
Holiday Inn Select -- Houston I-10 West(2).................. Houston, TX 349
Harvey Suites -- Houston Medical Center(3).................. Houston, TX 285
Harvey Suites -- DFW Airport................................ Irving, TX 164
Harvey Hotel -- DFW Airport................................. Irving, TX 506
Harvey Hotel -- Plano....................................... Plano, TX 279
Holiday Inn -- Plano........................................ Plano, TX 161
Holiday Inn -- San Antonio Downtown......................... San Antonio, TX 314
Holiday Inn Select -- San Antonio International Airport..... San Antonio, TX 397
Holiday Inn -- Waco I-35.................................... Waco, TX 171
Holiday Inn -- Salt Lake City Airport....................... Salt Lake City, UT 190
Holiday Inn -- Cambridge.................................... Cambridge, Ontario 139
Holiday Inn Select -- Toronto Airport....................... Toronto, Ontario 444
Holiday Inn -- Kitchener Waterloo........................... Kitchener, Ontario 182
Holiday Inn -- Peterborough -- Waterfront................... Peterborough, Ontario 154
Holiday Inn -- Sarnia....................................... Sarnia, Ontario 151
Holiday Inn -- Toronto Yorkdale............................. Toronto, Ontario 370
BRISTOL'S MANAGED HOTELS
Holiday Inn -- Hollywood(4)................................. Hollywood, CA 470
Holiday Inn -- City Center(5)............................... Los Angeles, CA 195
Holiday Inn -- Woodland Hills............................... Woodland Hills, CA 124
Holiday Inn -- San Francisco Civic Center................... San Francisco, CA 393
Holiday Inn -- Torrance..................................... Torrance, CA 329
Holiday Inn -- South Bend University Area(4)(5)............. South Bend, IN 229
Holiday Inn -- Lexington North(4)(5)........................ Lexington, KY 303
Holiday Inn -- Cincinnati North(4)(5)....................... Cincinnati, OH 407
Holiday Inn Select -- Pittsburgh University Center(4)....... Pittsburgh, PA 251
Holiday Inn -- Memphis East(4)(5)........................... Memphis, TN 243
Holiday Inn -- Nashville Vanderbilt......................... Nashville, TN 300
Holiday Inn -- San Antonio Riverwalk(4)(5).................. San Antonio, TX 313
</TABLE>
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<PAGE> 20
<TABLE>
<CAPTION>
NUMBER
HOTEL NAME LOCATION OF ROOMS
---------- -------- --------
<S> <C> <C>
BRISTOL'S JOINT VENTURE HOTELS
Holiday Inn -- Washington D.C. Downtown(6).................. Washington, D.C. 208
Chateau LeMoyne -- New Orleans Holiday Inn.................. New Orleans, LA 171
</TABLE>
- ---------------
(1) These hotels are expected to be converted to Crowne Plaza hotels during
1998.
(2) These hotels are expected to be converted to Crowne Plaza hotels during
1999.
(3) This hotel is expected to be converted to a Holiday Inn and Suites
during 1998.
(4) Based on discussions with the property owner, termination of the
management contract is possible due to a pending sale of the hotel.
(5) The hotel management agreement's existing term expires during 1998.
(6) This property has been the subject of litigation which is likely to
result in termination of the joint venture and the related management
agreement.
YEAR 2000 COMPLIANCE
Bristol has reviewed its computer systems and has determined that the
majority of the systems are Year 2000 compliant. There are, however, a few
computer systems, including automated time clock systems, certain embedded
systems such as phone systems and certain other third-party reservation systems
that may require reprogramming. After the spin-off, the Company will work with
FelCor and the other hotel owners to continue the program initiated by Bristol
to identify, correct or reprogram, and test these systems and anticipates that
all reprogramming efforts will be substantially complete by December 31, 1998,
thereby allowing adequate time for testing.
FELCOR LEASES
The principal terms of the FelCor leases are summarized below, although
certain terms will vary from hotel to hotel.
Term. The leases are for initial terms of five to ten years, with renewal
options on the same terms for a total of 15 years. If a lease has been extended
to 15 years, we may renew the lease for an additional five years at then current
market rates.
Rent. We will pay a monthly rent equal to the greater of base rent or
percentage rent. The percentage rent will be based on specified percentages of
various revenue streams. Those percentages will vary within the following
ranges:
<TABLE>
<S> <C>
Room Revenues: 0% to 10% up to a revenue breakpoint amount
specified for each hotel, then 60% to 75%
above such breakpoint.
Food and Beverage Revenues: 5% to 25%.
Phone Revenues: 5% to 10%.
Other Revenues: Varying percentages depending on the nature
and source of such revenues.
</TABLE>
The base rent and the thresholds for computing percentage rent under the
leases will be adjusted annually to reflect changes in the Consumer Price Index.
We have the right to require FelCor to renegotiate the rent for all the
hotels in a particular region if there is a material reduction in midscale hotel
occupancy rates in the U.S. and such region. If FelCor and the Company are
unable to agree on a reduction in rent, we may terminate all leases in the
region. We may also require FelCor to renegotiate the rent for a particular
hotel if there is an extended general decline in the travel
17
<PAGE> 21
or hotel business and a material reduction in the occupancy rate of such hotel
and the hotel's competitive set. If FelCor and the Company are unable to agree
on a change in rent, we may terminate the lease for such hotel.
Termination. A lease may also be terminated for the following reasons,
among others:
- By FelCor, if we fail to satisfy certain performance targets for any
one hotel and all other hotels in the aggregate during any three
consecutive years based on budgeted room revenues, unless we pay
FelCor the difference between the actual rent paid and 80% or 90% of
the budgeted rent;
- By FelCor, upon a change in control of the Company (defined as the
acquisition of more than 50% of Company stock by any person or group
not approved by the Company's board or the election of a majority of
directors not supported by the Company's Board);
- By FelCor or us, if FelCor or we breach agreements under the lease
and do not cure such breach within certain specified periods;
- By FelCor, if we fail to maintain a minimum liquid net worth or
provide other credit support for our lease obligations;
- By FelCor, if a franchisor terminates our franchise license as a
result of our default under the lease; and
- By FelCor if it sells the hotel to a third party.
If FelCor terminates the lease upon the sale of a hotel and we do not continue
as a manager of the hotels, our damages would be limited to monthly termination
payments during the remainder of the lease term equal to one twelfth of 60% of
the average monthly profit and allocable overhead contribution associated with
operating the hotel over the 12 months ending on the termination date.
Indemnification. We will indemnify FelCor for certain losses relating to
the hotels, including losses relating to any accident or injury to persons or
property at the hotel, our breach of the lease and certain environmental and tax
liabilities not assumed by FelCor. FelCor will indemnify the Company for its
breach of the lease, liability for the environmental condition of the hotel at
the time the lease commences and its acts of gross negligence or willful
misconduct.
Maintenance and Capital Improvements. We are responsible for maintaining
the leased hotels in good order and repair and for making all repairs that do
not constitute capital improvements. We must supply and maintain the inventory
that is necessary to operate the leased hotel. FelCor is responsible for all
hotel capital improvements (including those required under applicable laws or
the applicable franchise license) and for maintaining the underground utilities
and all hotel improvements, furniture, fixtures and equipment owned by FelCor to
the extent such maintenance constitutes capital expenditures in accordance with
generally accepted accounting principles or the capital improvements policy
approved by FelCor and us. FelCor must make available at least 3% of each
hotel's gross revenues, on a cumulative basis, for approved capital
expenditures.
Insurance and Property Taxes. FelCor will pay all real estate and personal
property taxes and property insurance premiums on the leased hotels (other than
with respect to our personal property). We will pay for all liability insurance
on the leased hotels, which includes extended coverage, comprehensive general
public liability, workers' compensation and other insurance appropriate and
customary for properties similar to the leased hotels.
GOVERNMENT REGULATION
The lodging industry is subject to extensive government regulations,
including laws which regulate the licensing of hotels and restaurants, the sale
of liquor and the disposal of hazardous wastes. Under the Americans with
Disabilities Act, all public accommodations are required to meet certain
technical requirements related to access and use by disabled persons. Although
Bristol has expended significant amounts in ADA required upgrades to the hotels
we will operate, a determination that such properties are not in compliance with
the ADA could result in a judicial order requiring compliance, imposition of
fines or an award
18
<PAGE> 22
of damages to private litigants. The hotels are likely to require additional
costs in complying with the ADA, but under the leases with FelCor these costs
will be borne by the owner of the hotel and should not have a material effect on
our business.
ENVIRONMENTAL MATTERS
Various laws impose liability for the costs of removal or remediation of
hazardous or toxic substances on the properties we own or operate, regardless of
whether or not we knew of or were responsible for, the presence of such
hazardous or toxic substances. Depending on the circumstances, we could also be
liable for personal injury associated with exposure to asbestos-containing
materials. Environmental laws also may restrict the manner in which property may
be used or businesses may be operated, and these restrictions may result in
expenditures and require interruption of such businesses. The cost of defending
against, and ultimately paying or settling, claims of liability or of
remediating a contaminated property could have a material adverse effect on our
financial condition or results of operations. FelCor has agreed to assume
environmental liabilities arising from the hotels that it will acquire from
Bristol in the merger or as to which Bristol otherwise would have been
responsible prior to the merger.
LEGAL PROCEEDINGS
In the ordinary course of its hotel operations business, Bristol is named
as a defendant in legal proceedings resulting from incidents at its hotels.
Liability for pending proceedings, other than employee claims, will be assumed
by FelCor in the merger. However, the Company would be liable for proceedings
resulting from the operation of the hotels where the incidents occurred and
employee-related claims. Legal actions for which the Company is liable that are
not covered by insurance or a contractual right to indemnification from another
party could have a material adverse effect on the Company's financial condition
or results of operations.
19
<PAGE> 23
PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data give effect to Bristol's
contribution of its hotel operating business to the Company, the spin-off, the
merger and the transactions described in the Notes below as if each event had
occurred on January 1, 1997, in the case of the pro forma statement of income
and on December 31, 1997, in the case of the pro forma balance sheet. The pro
forma financial data are presented for illustrative purposes only and do not
purport to be indicative of the results that would have actually been obtained
had such transactions been completed as of the assumed dates and for the periods
presented or that may be obtained in the future. The pro forma financial data
should be read in conjunction with the financial information appearing elsewhere
in this document. See "Management's Discussion and Analysis of Results of
Operations" and "Index to Financial Information."
20
<PAGE> 24
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
BRISTOL PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 86,167 $ (71,167)(A) $ 15,000
Trading securities............................... 103 -- 103
Accounts receivable, net......................... 31,305 1,922 (B) 33,227
Inventory........................................ 8,286 -- 8,286
Deposits and other current assets................ 9,195 (427)(C) 8,768
---------- ----------- --------
Total current assets..................... 135,056 (69,672) 65,384
---------- ----------- --------
Property and equipment............................. 1,439,167 (1,430,702)(D) 8,465
Other assets:
Restricted cash.................................. 9,283 (7,639)(E) 1,644
Investments in joint ventures, net............... 12,396 (12,396)(F) --
Goodwill, net.................................... 52,773 (52,773)(G) --
Deferred charges and other noncurrent assets,
net........................................... 17,963 (11,832)(H)(K) 6,131
---------- ----------- --------
Total assets............................. $1,666,638 (1,585,014) $ 81,624
========== =========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................ $ 8,455 $ (8,413)(I) $ 42
Accounts payable and accrued expenses............ 27,366 5,069 (J) 32,435
Accrued construction costs....................... 1,330 (1,330)(J) --
Accrued property, sales and use taxes............ 15,911 (10,310)(J) 5,601
Accrued insurance reserves....................... 9,530 -- 9,530
Advance deposits................................. 1,156 -- 1,156
---------- ----------- --------
Total current liabilities................ 63,748 (14,984) 48,764
---------- ----------- --------
Long-term debt, excluding current portion.......... 708,864 (708,706)(I) 158
Deferred income taxes.............................. 242,530 (242,530)(K) --
Other.............................................. 2,702 -- 2,702
---------- ----------- --------
Total liabilities........................ 1,017,844 (966,220) 51,624
---------- ----------- --------
Common stock....................................... 436 (92)(L) 344
Additional paid-in capital......................... 606,935 (577,279)(B)(L) 29,656
Foreign currency translation....................... 286 (286)(D) --
Retained earnings.................................. 41,137 (41,137)(B) --
---------- ----------- --------
Total stockholders' equity............... 648,794 (618,794) 30,000
---------- ----------- --------
Total liabilities and stockholders'
equity................................. $1,666,638 (1,585,014) $ 81,624
========== =========== ========
</TABLE>
21
<PAGE> 25
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(A) Represents the adjustment to implement the concept in the Spin-Off
Agreement providing for the Company's ending cash balance to be $15 million
as of the spin-off date.
(B) Represents working capital adjustments to implement the concept in the
Spin-Off Agreement providing for the Company's beginning equity being $30
million as of the spin-off date.
(C) Reflects deposits for property insurance for the real estate assets which
will be transferred to FelCor as a result of the merger.
(D) Reflects the real estate assets and related foreign currency translation
adjustment which will be transferred to FelCor as a result of the merger.
The remaining property and equipment relates to the Company's corporate
headquarters.
(E) Reflects deposits held by lenders for capital and replacement reserves,
guest advance deposits and ground rent pursuant to various debt agreements
transferred to FelCor as a result of the merger.
(F) Reflects the joint venture interests transferred to FelCor as a result of
the merger.
(G) Reflects the elimination of goodwill related to the real estate assets
acquired in the 1997 merger of Holiday Inn, Inc. (the "Holiday
Acquisition") with Bristol and transferred to FelCor as a result of the
merger.
(H) Reflects a reduction of $14.1 million in unamortized deferred financing and
acquisition costs related to the real estate and associated mortgage debt
to be transferred to FelCor as a result of the merger, and an increase in
deferred financing costs related to the Company's new credit facility.
(I) Reflects the principal balance of mortgage debt associated with the real
estate assets to be assumed by FelCor as a result of the merger.
(J) Relates to accrued expenses related to the real estate assets, including
accrued interest on mortgage debt ($3.7 million), ground rent payable
($443,000) and construction costs assumed by FelCor as a result of the
merger. Also includes Bristol's income tax benefit of $9.2 million.
(K) Represents deferred tax liabilities that relate to the allocation of the
purchase price of hotel assets and tax timing differences related to the
real estate assets to be transferred to FelCor as a result of the merger.
The deferred tax benefit of $1.9 million represents tax timing differences
that relate to the Company's assets.
(L) Reflects the issuance of Bristol shares as consideration for the pending
acquisition of 20 hotels expected to close in the second quarter of 1998
and the purchase after the spin-off of Company shares owned by the Bass
companies to reduce their combined ownership percentage to 9.9% of the
outstanding Company shares.
22
<PAGE> 26
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACQUIRED
BRISTOL BUSINESSES PRO FORMA COMPANY
HISTORICAL HISTORICAL(A) ADJUSTMENTS PRO FORMA
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Rooms............................... $377,380 $125,719 $ -- $ 503,099
Food and beverage................... 92,596 30,170 -- 122,766
Management fees..................... 4,948 1,782 (430)(B) 6,300
Construction management fee......... -- -- 2,927 (C) 2,927
Other............................... 29,594 9,909 (2,300)(D) 37,203
-------- -------- --------- -----------
Total revenue............... 504,518 167,580 197 672,295
-------- -------- --------- -----------
Operating Costs and Expenses:
Departmental expenses:
Rooms............................ 105,063 36,695 1,013 (E) 142,771
Food and beverage................ 69,766 24,554 -- 94,320
Other............................ 9,326 4,417 -- 13,743
Undistributed operating expenses:
Administrative and general....... 44,255 16,037 -- 60,292
Marketing........................ 34,439 11,682 356 (E) 46,477
Property operating costs......... 44,303 18,460 -- 62,763
Property taxes, rent and
insurance...................... 35,330 11,622 (40,267)(F) 6,685
Tenant lease expense............. -- -- 202,501 (G) 202,501
Depreciation and amortization.... 39,690 13,659 (51,066)(H) 2,283
Corporate expense................ 24,450 3,449 (1,185)(I) 26,714
-------- -------- --------- -----------
Operating income...................... 97,896 27,005 (111,155) 13,746
-------- -------- --------- -----------
Other (income) expense:
Interest expense.................... 44,591 121 (43,893)(J) 819
Equity in income of joint
ventures......................... (1,916) (747) 2,663 (K) --
-------- -------- --------- -----------
Income before income taxes and
extraordinary items................. 55,221 27,631 (69,925) 12,927
Income taxes.......................... 22,007 7,387 (24,236)(L) 5,158
-------- -------- --------- -----------
Income before extraordinary items..... $ 33,214 $ 20,244 $ (45,689) $ 7,769
======== ======== ========= ===========
Earnings per common and common
equivalent share:
Income before extraordinary item:
Basic............................... $ 0.48
Diluted............................. $ 0.47
Weighted average number of common and
common equivalent shares
outstanding:
Basic............................... 16,337,180
Diluted............................. 16,667,121
</TABLE>
\
23
<PAGE> 27
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(A) Reflects the results of operations for the hotels acquired in the Holiday
Acquisition from January 1, 1997 through April 28, 1997 and 12 months of
operations excluding depreciation, amortization and interest for the assets
included in a pending acquisition of 20 hotels that is scheduled to close
in the second quarter of 1998, and excluding intercompany interest for the
Holiday Acquisition.
(B) Reflects management fee income and contract termination fee income for
hotels no longer managed by Bristol for terminated management contracts.
(C) Represents fees to be charged to FelCor for construction management
services in connection with the renovation and rebuilding program.
(D) Represents interest income recorded by Bristol on cash assumed to be
transferred to FelCor pursuant to the merger.
(E) Represents estimated franchise fee payments and advertising fee payments to
Holiday Hospitality in respect of the assets acquired in the Holiday
Acquisition for the period January 1, 1997 to April 28, 1997. Franchise
fees and advertising fees are generally based on 5% and 2% of room
revenues, respectively.
(F) Represents property taxes, rent, property insurance and management fees
related to the real estate assets transferred to FelCor pursuant to the
merger, as follows (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C>
Property taxes............................................. 21,779
Rent....................................................... 15,472
Property insurance......................................... 2,892
Management fees............................................ 124
-------
$40,267
=======
</TABLE>
(G) Represents lease expense to be paid by the Company to FelCor under the
leases of the hotels transferred to FelCor pursuant to the merger. The
leases require the payment of rent at the greater of a base rate and
percentage rate, with percentage rent being based on specified percentages
of certain revenue categories. The leases have initial terms ranging from
five to ten years and each lease can be renewed on the same terms at the
Company's option to a total of 15 years from the beginning of the initial
term. If a lease has been extended to 15 years, we may renew the lease for
an additional five years at then current market rates.
(H) Reflects depreciation of real estate assets and the related amortization of
goodwill.
(I) Reflects the changes in corporate expenses as a result of the spin-off as
follows (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C>
Design & Construction costs................................ $ 2,927
Transfer of corporate overhead to FelCor................... (1,000)
Elimination of one-time acquisition costs of Holiday
Acquisition.............................................. (3,112)
-------
$(1,185)
=======
</TABLE>
Design and construction costs represents costs previously capitalized by
Bristol and allocated to hotel renovations. FelCor will pay the Company for
these services pursuant to a construction services contract to be entered
into before the spin-off. Also reflected is a reduction in corporate
expenses for the $3.1 million of one-time costs related to the Holiday
Acquisition in April 1997.
(J) Represents a reduction in interest expense for mortgages on real estate
assets being transferred to FelCor pursuant to the merger of $55.6 million,
offset by financing fees and amortization of deferred financing costs
related to the Company's credit facility.
(K) Reflects joint venture interests transferred to FelCor pursuant to the
merger.
(L) Taxes are based on Bristol's effective 1997 rate of 39.9%.
24
<PAGE> 28
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following tables set forth our selected historical financial data for
the years ended December 31, 1997 and 1996 and the 11 months ended December 31,
1995, unaudited pro forma financial data for the year ended December 31, 1995
and historical combined financial data for Harvey Hotel Companies, Bristol's
predecessor, for the two years ended December 31, 1994 and 1993, and for the
month ended January 31, 1995. Although we are a new company, we have adopted
Bristol's historical financial statements in this document because we are
succeeding to Bristol's business and operations, except for its owned hotels and
certain liabilities that will be assumed by FelCor as a result of the merger,
and our financial statements are very similar to Bristol's. The historical
financial information has been derived from Bristol's audited consolidated and
combined financial statements included elsewhere in this document. The unaudited
pro forma financial data for the year ended December 31, 1995 gives effect to
the February 1995 combination of Harvey Hotel Companies and United Inns, Inc.,
certain financing transactions entered into in late 1995 and Bristol's December
1995 initial public offering, as if all these transactions had been completed at
the beginning of the period, but do not give pro forma effect to Bristol's
acquisition of Holiday Inn's North American Hotels in April 1997. Pro forma
operating results for 1995 include the operations of the Sheraton -- Atlanta, a
368 room hotel purchased by Bristol in June 1995 and exclude the operations of
the Holiday Inn-West Loop, which was sold by Bristol in July 1995. The selected
balance sheet data is presented as of December 31, 1997, 1996 and 1995, and for
Harvey Hotel Companies as of December 31, 1994 and 1993.
The pro forma financial information presented is not necessarily indicative
of what the actual financial position and results of operations would have been
as of and for the periods indicated, nor does it purport to represent our future
financial position and results of operations.
25
<PAGE> 29
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PREDECESSOR
----------------------------------- PRO FORMA ------------------------------------
YEAR ENDED ELEVEN MONTHS ------------ YEAR ENDED
DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
------------------- DECEMBER 31, DECEMBER 31, MONTH ENDED -----------------
1997 1996 1995 1995(1) JANUARY 31, 1995 1994 1993
-------- -------- ------------- ------------ ---------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue:
Rooms....................... $377,380 $149,794 $115,771 $127,670 $4,006 $44,972 $39,968
Food, beverage and other.... 127,138 62,046 49,424 54,012 1,937 25,379 24,054
-------- -------- -------- -------- ------ ------- -------
Total revenue......... 504,518 211,840 165,195 181,682 5,943 70,351 64,022
-------- -------- -------- -------- ------ ------- -------
Operating Costs and Expenses:
Departmental expenses:
Rooms..................... 105,063 37,706 32,692 36,240 1,124 10,344 9,469
Food, beverage and
other................... 79,092 35,810 31,376 34,312 1,055 14,835 14,600
Undistributed operating
expenses:
Administration and
general, marketing...... 78,694 33,821 28,254 30,504 579 11,369 10,285
Property operating
costs................... 79,633 28,402 24,738 26,804 629 10,563 10,086
Depreciation and
amortization............ 39,690 18,377 13,505 14,387 309 4,041 3,963
Corporate expense......... 24,450 10,958 8,035 8,691 315 3,761 2,827
-------- -------- -------- -------- ------ ------- -------
Operating income........ 97,896 46,766 26,595 30,744 1,932 15,438 12,792
-------- -------- -------- -------- ------ ------- -------
Other (income) expenses:
Interest expense.......... 44,591 18,616 18,374 16,133 652 7,631 7,737
Other non-operating
(income) expenses....... -- -- 430 93 -- (337) (241)
Equity in income of joint
ventures................ (1,916) -- -- -- -- -- --
Income taxes.............. 22,007 10,401 2,822 5,226 -- -- --
-------- -------- -------- -------- ------ ------- -------
Income before extraordinary
item........................ 33,214 17,749 4,969 9,292 $1,280 $ 8,144 $ 5,296
Extraordinary loss on early
extinguishment of debt, net
of income taxes............. (12,741) -- (1,908) --
-------- -------- -------- -------- ------ ------- -------
Net income.................... $ 20,473 $ 17,749 $ 3,061 $ 9,292 -- -- --
======== ======== ======== ======== ====== ======= =======
Diluted earnings per common
and common
equivalent share:
Income before extraordinary
item...................... $ 0.87 $ 0.70 $ 0.28 $ 0.37 -- -- --
Net income.................. $ 0.53 $ 0.70 $ 0.17 $ 0.37 -- -- --
Weighted average number of
common and common equivalent
shares outstanding --
diluted..................... 38,332 25,526 17,909 24,892 -- -- --
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
DECEMBER 31, DECEMBER 31,
---------------------------------- --------------------
1997 1996 1995 1994 1993
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 86,167 $ 4,666 $ 7,906 $ 4,118 $ 395
Property and equipment -- net.................... 1,439,167 552,564 470,705 80,635 72,387
Total assets..................................... 1,666,638 592,788 512,901 109,874 99,635
Long-term debt, including current portion........ 717,319 232,694 170,544 114,054 112,963
Total equity..................................... 648,794 252,157 236,122 (11,988) (20,604)
</TABLE>
- ---------------
(1) Pro forma results for 1995 include the operations of the Sheraton-Atlanta, a
368 room hotel purchased by Bristol in June 1995 and exclude the operations
of the Holiday Inn-West Loop, which was sold by Bristol in July 1995.
26
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
OVERVIEW
The Company is succeeding to Bristol's business and operations.
Accordingly, Bristol's historical financial statements most accurately reflect
the historical operation of the business to which the Company will succeed. The
material difference between Bristol's business and that of the Company is that
Bristol owns the hotels it operates while following the spin-off the Company
will be the tenant and manager of the same hotels that will then be owned by
others. The principal effect of this difference is that Bristol's results of
operations reflect mortgage interest and other costs and expenses associated
with the ownership of the hotels instead of the rental payments and other costs
and expenses passed through to the tenant that the Company will incur under the
leases.
Historical results for the year ended December 31, 1997, include the 37
hotels owned by Bristol as of January 1, 1996 (the "Original Bristol Portfolio")
and Holiday Inn -- Plano, as well as the assets (the "Holiday Inn Assets")
acquired by Bristol in the Holiday Acquisition completed in April, 1997 (except
for Holiday Inn -- San Jose) and the three individual hotels acquired during
1997 (the "Single Asset Purchases"), from their respective acquisition dates.
Historical results for the year ended December 31, 1997, also reflect the
management and the 50% joint venture ownership of the Holiday Inn -- San Jose
from the Holiday Inn Acquisition date to November 1997 and the full ownership of
the hotel for the month of December 1997. Historical results for the year ended
December 31, 1996, include the Original Bristol Portfolio and Holiday
Inn -- Plano (as of May 31, 1996). The 45 owned hotels included in the Holiday
Inn Assets are referred to below as the "Acquired Hotels."
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED
DECEMBER 31, 1996
Total revenue increased 138.2% to $504.5 million for the year ended
December 31, 1997, as compared to 1996 as a result of the inclusion of the
Holiday Inn Assets and the 1997 Single Asset Purchases from their respective
acquisition dates and the improved operating performance of the Original Bristol
Portfolio. Revenue per available room ("RevPAR") for the Original Bristol
Portfolio was $47.53 for the year ended December 31, 1997, compared to $43.92
for 1996, representing an 8.2% increase. The improvement in RevPAR is primarily
attributable to the successful repositioning and/or redevelopment of several
hotels in the Original Bristol Portfolio. Occupancy and average daily room rate
("ADR") for the Original Bristol Portfolio was 70.0% and $67.91, respectively,
for the year ended December 31, 1997, compared to 64.4% and $68.21,
respectively, for 1996. The change from 1996 to 1997 was also impacted by
nonrecurring items in 1996 including the Atlanta Olympics and the renovations of
the hotels in the Original Bristol Portfolio. The Atlanta Olympics had a
positive impact on results in 1996 due to the 100% occupancy experienced by the
ten Atlanta hotels in the Original Bristol Portfolio during the 20 days of the
Olympic games. Results for 1996 were also impacted by the renovations of 13 of
the hotels in the Original Bristol Portfolio throughout the year.
Rooms revenue as a percent of total revenue was 74.8% for the year ended
December 31, 1997, as compared to 70.7% for the year ended December 31, 1996,
resulting from the Acquired Hotels having proportionally lower food and beverage
business than the Original Bristol Portfolio. This is also evidenced by the
151.9% increase in rooms revenue for the year ended December 31, 1997, compared
to the same period in 1996 as compared to a 108.8% increase in food and beverage
revenue.
Food and beverage revenue increased primarily due to the increase in the
number of hotels and also due to higher food and beverage revenues for the
Original Bristol Portfolio. Food and beverage revenue for the Original Bristol
Portfolio for the year ended December 31, 1997 was $51.6 million, representing a
12% increase over 1996. This increase is primarily attributable to the
redevelopment of several hotels in the Original Bristol Portfolio.
The increase in management fees relates primarily to the addition of the 15
management contracts acquired in the Holiday Acquisition offset by the loss of
two management contracts held by Bristol in 1996.
Gross operating margin (consisting of total revenue less department
expenses, administrative and general, marketing and property operating costs,
divided by total revenue) was 32.1% for the year ended December 31,
27
<PAGE> 31
1997, compared to 35.9% for the year ended December 31, 1996. The 3.8 percentage
point decrease in gross operating margin is primarily attributable to declines
in departmental operating margins and higher property operating costs related to
property taxes and land rentals. Declines in departmental margins relate
primarily to the integration of the Acquired Hotels, which have had historically
lower margins. Property tax increases relate to increased valuations as a result
of the significant capital improvements for several hotels in the Original
Bristol Portfolio as well as an increase in tax rates for certain hotels.
Increased land rentals relate to the Acquired Hotels having a proportionately
higher number of ground leases than the Original Bristol Portfolio.
Depreciation and amortization increased $21.3 million for the year ended
December 31, 1997 compared to 1996 as a result of the Holiday Acquisition and
the 1997 Single Asset Purchases. Depreciation expense also increased as a result
of the substantial capital improvements at several hotels in the Original
Bristol Portfolio. Following the spin-off, the Company will not have
depreciation and amortization expense, but will have lease rental expense. See
"Pro Forma Financial Data."
Corporate expenses for the year ended December 31, 1997 were $24.5 million
compared to $11.0 million for 1996. Approximately $3.1 million of the increase
relates to one-time costs incurred during the second quarter of 1997 for the
closing and integration of the Holiday Acquisition. The remaining increase
relates primarily to the increase in the number of corporate employees and
related costs and increased travel expenses as a result of the Holiday
Acquisition.
Interest expense for the year ended December 31, 1997 increased $26.0
million to $44.6 million primarily as a result of additional debt incurred to
finance the Holiday Acquisition as well as borrowings increasing ratably in 1996
to fund acquisitions and certain redevelopment costs. Following the spin-off,
the Company's interest expense will decrease substantially. See "Pro Forma
Financial Data."
Equity in income of joint ventures of $1.9 million for the year ended
December 31, 1997 represents Bristol's 50% interest in the earnings of the three
joint ventures acquired in the Holiday Inn Acquisition (which will be acquired
by FelCor as a result of the Merger).
As a result of the factors described above, historical income before
extraordinary items increased 87.1% to $33.2 million for the year ended December
31, 1997, compared to the year ended 1996 and diluted earnings per share
increased 24.3% to $.87 for the year ended December 31, 1997, compared to $.70
for 1996. Recurring earnings for the year ended December 31, 1997 of $35.1
million, which exclude the extraordinary item of $12.7 million and the one-time
costs related to the Holiday Acquisition ($1.8 million, net of tax), represents
a 138.8% increase over recurring earnings for the year ended December 31, 1996
of $14.7 million, which excludes a one-time gain related to the sale of
marketable securities ($.3 million, net of tax), the positive impact of the
Atlanta Olympics ($2.2 million, net of tax), and the litigation settlement gain
($.6 million, net of tax). Recurring diluted earnings per share of $.92 for the
year ended December 31, 1997, represents a 58.6% improvement over 1996.
Following the Spin-off, the Company's earnings will be significantly different
by reason of the factors referred to above. See "Pro Forma Financial Data."
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1996 COMPARED WITH PRO FORMA
YEAR ENDED
DECEMBER 31, 1995
Revenues increased from $181.7 million for the pro forma year ended
December 31, 1995 to $211.8 million, an increase of $30.1 million, or 16.6%, for
the year ended December 31, 1996. The increase is primarily attributable to the
addition of the Holiday Inn Plano in May 1996, the completion of the renovation
and redevelopment of 20 hotels the Original Bristol Portfolio and the
application of Bristol's operating strategies to the 26 hotels acquired in 1995.
Seven of the hotels in the Original Bristol Portfolio that had substantially
completed renovations by the end of 1995 (the "Phase I" hotels) posted gains in
total hotel revenue in excess of 60%, with only a 5.3% increase in available
rooms from 1995 to 1996. The positive impact of applying Bristol's operating
strategies to these hotels is also evidenced by the 17% increase in occupancy
for the Phase I hotels and a 16.1% increase in hotel revenue for those hotels.
(Although Bristol took over management of these hotels in February 1995, the
operating strategy integration was a several month process.) The Atlanta
Olympics also had a positive impact on 1996 results as compared to 1995.
Increases in total hotel revenues
28
<PAGE> 32
were partially offset by declines in total revenues for 13 of the hotels in the
Original Bristol Portfolio which were undergoing renovations in 1996. The
increase in total revenues reflects increases in all revenue categories, as
discussed below.
Hotel room revenues were $149.8 million for the year ended December 31,
1996, an increase of $22.1 million, or 17.3%, from the pro forma year ended
December 31, 1995, due primarily to improved occupancy and average daily room
rates of 67.4% and $68.24, respectively, for the year ended December 31, 1996,
as compared to 64.1% and $62.67, respectively, for the pro forma year ended
December 31, 1995. Rooms department operating margins increased to 74.8% from
71.6%, benefiting from a higher number of occupied rooms and the availability of
rooms in 1996 which were undergoing renovation and unavailable during 1995.
Food and beverage revenues improved by $4.7 million to $44.3 million for
the year ended December 31, 1996, from $39.6 million for the pro forma year
ended December 31, 1995, due primarily to the higher occupancy levels in Bristol
hotels and increased focus on banquet and catering business for the Original
Bristol Portfolio. Food and beverage department margins increased to 29.5% from
24.8%, primarily as a result of applying Bristol's operating strategies to these
hotels.
Other revenues increased 23.1%, or by $3.3 million, to $17.7 million for
the year ended December 31, 1996. Bristol sold marketable securities in the
third quarter of 1996, resulting in a gain of approximately $0.5 million. In
addition, Bristol recognized gains of $0.9 million and $0.5 million as a result
of the settlement of certain litigation and the early termination of a
management agreement, respectively. Other revenues also increased as a result of
improved occupancy, and the increased emphasis on maximizing telephone revenue.
Gross operating income (consisting of total revenue less rooms, food,
beverage and other expense) was $138.3 million, a $27.2 million improvement for
the year ended December 31, 1996, as compared to the pro forma year ended
December 31, 1995. Gross operating margin for the year ended December 31, 1996
was 65.3% as compared to 61.2% for the pro forma period ended December 31, 1995,
an improvement of 6.7% as a result of the factors noted above.
Operating income increased to $46.8 million for the year ended December 31,
1996, from $30.7 million for the pro forma year ended December 31, 1995. This
$16.1 million, or 52.4%, increase was due primarily to increased revenues and
the improvements in departmental performance noted above. In addition,
administration and general and marketing expenses have stabilized. Combined
administrative and general and marketing expenses increased 10.9% for the year
ended December 31, 1996, compared to the pro forma year ended December 31, 1995,
in contrast to a 14.2% increase from the pro forma year ended December 31, 1994,
as compared to 1995.
Corporate expenses increased to $10.9 million for the year ended December
31, 1996, as compared to $8.7 million for the pro forma year ended December 31,
1995. The increase of $2.2 million is primarily related to additional costs
incurred during 1996 to establish Bristol as a public entity as well as costs
incurred in connection with the establishment of an acquisition department.
Depreciation expense was $18.4 million for the year ended December 31,
1996, a $3.9 million increase from the pro forma year ended December 31, 1995.
The increase is a result of the renovation costs associated with certain United
Hotels being placed in service during 1996. Following the spin-off, the Company
will not have depreciation and amortization expense, but will have lease rental
expense. See "Pro Forma Financial Data."
Interest expense increased by $2.5 million to $18.6 million for the year
ended December 31, 1996, compared to the pro forma year ended December 31, 1995.
This increase was due primarily to increased borrowings during 1996 for the
costs of the United Hotels renovations and the acquisition of the Holiday
Inn -- Plano in May 1996. Following the spin-off, the Company's interest expense
will decrease substantially. See "Pro Forma Financial Data."
As a result of the factors described above, net income increased to $17.7
million for the year ended December 31, 1996, from $9.3 million for the pro
forma year ended December 31, 1995, an increase of 91.0%.
29
<PAGE> 33
Following the Spin-off, the Company's earnings will be significantly different
by reason of the factors referred to above. See "Pro Forma Financial Data."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Executive officers and directors will receive Company shares in the
spin-off in respect of their Bristol shares. The following table sets forth the
number of Company common shares that will be beneficially owned immediately
following the spin-off and the subsequent purchase of the Bass companies' shares
in excess of 9.9% of the Company's total shares by each person known to us to
own beneficially more than 5% of Bristol shares, each director and Named
Executive Officer of the Company and all our directors and executive officers as
a group. The Company is considering a stock purchase plan that would permit
certain of its salaried employees and directors to purchase Company shares at
the price paid in the Bass repurchase, possibly with financing provided or
arranged by the Company. The table does not give effect to any such purchases.
All percentage amounts indicated are calculated assuming the issuance of
1,428,571 Bristol shares as partial consideration for the acquisition of 20
hotels, which is scheduled to be completed in the second quarter of 1998. Pro
forma beneficial ownership percentages are calculated giving effect to the
spin-off ratio.
Except as otherwise indicated, the address for each of the individuals
named below is 14295 Midway Road, Dallas, Texas 75244. For purposes of the
table, a person or group of persons is deemed to have "beneficial ownership" of
any shares as of a given date, if that person has the right to acquire the
shares within 60 calendar days after such date.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF COMPANY
COMPANY COMMON SHARES
COMMON SHARES OUTSTANDING
------------- -------------
<S> <C> <C>
United/Harvey Holdings, L.P.(1)............................. 7,029,839 40.6%
4200 Texas Commerce Tower W
2200 Ross Avenue
Dallas, Texas 75201
Bass plc.................................................... 1,713,629 9.9%
20 North Audley Street
London, W1Y1WE
Baron Capital(2)............................................ 2,692,100 15.6%
767 Fifth Avenue, 24th Floor
New York, New York 10153
Cohen & Steers Capital Management, Inc.(3).................. 1,219,250 7.0%
757 Third Avenue
New York, New York 10017
John A. Beckert(4).......................................... 424,302 2.5%
Richard N. Beckert(5)....................................... 167,380 *
Reginald K. Brack, Jr.(6)................................... 4,800 *
David A. Dittman(7)......................................... 11,250 *
J. Peter Kline(4)........................................... 671,801 3.9%
Jeffrey P. Mayer(7)......................................... 34,500 *
Robert L. Miars(8).......................................... 488,577 2.8%
Thomas R. Oliver(9)......................................... -- --
James J. Pinto.............................................. -- --
Kurt C. Read(10)............................................ -- --
Robert A. Whitman(10)....................................... -- --
All directors and executives officers
as a group (12 persons)................................... 1,804,860 10.4%
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 671,395 shares which may be purchased upon exercise of a call
option.
(2) As reported in a Schedule 13G/A filed with the SEC on February 13, 1998.
30
<PAGE> 34
(3) As reported in a Schedule 13G/A filed with the SEC on February 12, 1998.
(4) Includes 75,000 shares which each of Messrs. Kline and J. Beckert has the
right to acquire under options.
(5) Includes 78,000 shares which Mr. R. Beckert has the right to acquire
through the exercise of options.
(6) Includes 3,750 shares which Mr. Brack will have the right to acquire after
the 1998 Bristol Annual Meeting under options.
(7) Includes 34,500 shares which Mr. Mayer has the right to acquire under
options.
(8) Includes 1,500 shares which Mr. Miars has the right to acquire under
options.
(9) Mr. Oliver is a senior executive of Holiday Hospitality. He disclaims
beneficial ownership of the shares beneficially owned by Bass.
(10) Messrs. Read and Whitman are senior executives in a firm that controls
United/Harvey Holdings. They disclaim beneficial ownership of the shares
beneficially owned by that stockholder.
(11) Includes 11,250 shares which Mr. Dittman has the right to acquire under
options, including 3,750 shares which Mr. Dittman will have the right to
acquire after the 1998 Bristol Annual Meeting.
We have granted each of United/Harvey Holdings and the Bass companies
demand registration rights for offerings of at least $5 million in equity
securities and piggyback registration rights under certain circumstances. We
have also agreed to pay the expenses related to such registrations, other than
underwriting commissions, and to indemnify these stockholders for any securities
law liabilities resulting from such sales on terms that are customary for
agreements of this type.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the current
and expected future directors and executive officers. At or before the spin-off,
the composition of the Board will be changed to include the directors listed
below. The Board will be classified into three classes, with the initial members
to serve for the periods identified below. Future directors will be elected for
three-year terms. Officers serve at the discretion of the board.
<TABLE>
<CAPTION>
YEAR TERM
NAME POSITION EXPIRES
---- -------- ---------
<S> <C> <C>
J. Peter Kline....................... Chairman, Chief Executive Officer and 1999
Director
John A. Beckert...................... President, Chief Operating Officer and 1999
Director
Robert A. Whitman.................... Director (effective upon the spin-off) 1999
Reginald K. Brack, Jr. .............. Director (effective upon the spin-off) 2000
James J. Pinto....................... Director (effective upon the spin-off) 2000
David A. Dittman..................... Director (effective upon the spin-off) 2001
Thomas R. Oliver..................... Director (effective upon the spin-off) 2001
Kurt C. Read......................... Director (effective upon the spin-off) 2001
Richard N. Beckert................... Senior Vice President -- Administration
Joel M. Eastman...................... Vice President, Secretary and General
Counsel
Jeffrey P. Mayer..................... Senior Vice President and Chief Financial
Officer
Robert L. Miars...................... Senior Vice President -- Design,
Construction & Engineering
</TABLE>
J. Peter Kline, 50, has been a director of the Company since we were formed
in March 1998. Since February 1995, Mr. Kline has been a Director of Bristol.
Since 1981, Mr. Kline has been the President and Chief Executive Officer of
Bristol (and its predecessor, Harvey Hotel Company).
John A. Beckert, 44, has been a director of the Company since we were
formed in March 1998. Since February 1995, Mr. Beckert has been a Director of
Bristol. Since 1981, Mr. Beckert has been the Chief
31
<PAGE> 35
Operating Officer and Executive Vice President of Bristol (and its predecessor,
Harvey Hotel Company). Mr. Beckert is the brother of Richard N. Beckert, the
Senior Vice President, Administration of the Company.
Richard N. Beckert, 41, has been Senior Vice President -- Administration of
Bristol (and its predecessor, Harvey Hotel Company) since September 1994. Prior
thereto, Mr. Beckert served as Vice President -- Development from 1992 to 1994,
Regional Vice President from 1986 to 1992 and General Manager for a Bristol
hotel from 1983 to 1986. Richard N. Beckert is the brother of John A. Beckert.
Joel M. Eastman, 47, has been Vice President, Secretary and General Counsel
of Bristol since October 1995. From 1991 until joining Bristol, Mr. Eastman was
a partner in the law firm of Munsch, Hardt, Kopf, Harr & Dinan, P.C. From 1978
to 1991, Mr. Eastman was associated with, and became a partner of, the law firm
of Stollenwerck, Moore & Silverberg, P.C.
Jeffrey P. Mayer, 41, has been Senior Vice President and Chief Financial
Officer of Bristol since January 1996. Prior to joining Bristol, Mr. Mayer
served as Senior Vice President, Corporate Controller and Chief Accounting
Officer of Host Marriott Corporation (formerly Marriott Corporation)
("Marriott") from 1993 to 1996, as Vice President -- Project Finance of Marriott
from 1991 to 1993 and in various positions with Marriott's finance department
from 1986 to 1991. Prior to joining Marriott, Mr. Mayer was Audit Manager with
Arthur Andersen & Company in Atlanta, Georgia.
Robert L. Miars, 48, has been Senior Vice President -- Design, Construction
& Engineering of Bristol since February 1995. Prior to joining Bristol, Mr.
Miars was President of Huie Miars Custom Homes from 1989 to February 1995 and
President of Huie Miars Construction Company from 1989 to 1995.
The following persons have consented to be elected as directors of the
Company upon consummation of the spin-off.
Robert A. Whitman, 44, has been President and Co-Chief Executive Officer of
The Hampstead Group since 1991. Prior to such period, Mr. Whitman was the
Managing Partner and Chief Executive Officer of Trammell Crow Ventures. Mr.
Whitman has served as Chairman of the Board of Malibu Entertainment Worldwide,
an AMEX-listed owner/operator of entertainment centers since 1996, and
previously served as Chairman of the Board of the Forum Group, Inc., a
Nasdaq-traded operator of retirement communities, from 1993 until the sale of
that company to Marriott International, Inc. in 1996. Mr. Whitman is a director
of Covey Leadership Center and served as a director of Wyndham Hotel Company
until the sale of Wyndham to Patriot American Hospitality, Inc. earlier this
year.
Reginald K. Brack, Jr., 60, has been a director of Bristol since May 1997.
Since July 1997, Mr. Brack has been the Chairman Emeritus of Time, Inc. From
December 1986 to July 1997, Mr. Brack was the Chairman and Chief Executive
Officer of Time, Inc.
James J. Pinto, 47, has been the President of the Private Finance Group
Corp., an investment firm, since 1990. He is also a Director of the following
public companies: Andersen Group, Inc. (electronics), Biscayne Holdings, Inc.
(apparel), Empire of Carolina, Inc. (toys) and National Capital Management Corp.
(finance). Mr. Pinto is J. Peter Kline's spouse's brother-in-law.
David A. Dittman, 52, has been a director of Bristol since December 1995.
Since 1990, Mr. Dittman is the Dean of the Cornell University School of Hotel
Administration and an E.M. Statler Professor.
Thomas R. Oliver, 57, is Chairman and Chief Executive Officer of Holiday
Hospitality. Mr. Oliver is also a member of the Bass plc Executive Committee and
Board of Directors. He previously was Chairman and CEO of AudioFAX, Inc. of
Atlanta, Georgia (a high-tech telecommunications company) and President and CEO
of VoiceCom (a supplier of large-scale messaging systems). Prior to joining
VoiceCom, Mr. Oliver held senior management positions at FedEx from 1978 to
1993, including serving as COO and Executive Vice President of Worldwide
Customer Operations for FedEx.
Kurt C. Read, 35, has been a director of Bristol since April 1997. Mr. Read
has been a Senior Vice President of The Hampstead Group since 1989, and is also
a director of Malibu Entertainment Worldwide.
32
<PAGE> 36
COMPENSATION PLANS AND ARRANGEMENTS
The Company was formed in March 1998. None of our executive officers has
received compensation from us since we were formed. In the spin-off, we will
assume Bristol's obligations under its employment agreements with Messrs. Kline
and J. Beckert and will provide compensation to our executive officers similar
to that historically paid by Bristol to its executive officers. Accordingly, the
information in this section that relates to compensation paid by Bristol is
indicative of the types and amounts of compensation that the Company expects to
pay its executive officers.
Bristol Executive Compensation. The following table sets forth information
regarding the principal position and compensation paid to Bristol's Chief
Executive Officer and each of the four other most highly compensated executive
officers of Bristol who are expected to be executive officers of the Company and
who earned at least $100,000 in total salary and bonus in 1997 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(2) COMPENSATION(3)
--------------------------- ---- -------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
J. Peter Kline.................. 1997 $457,307 $91,461 30,000 $ 4,750
President and Chief 1996 250,502 69,350 -- --
Executive Officer 1995 231,353 87,183 225,000 2,073
John A. Beckert................. 1997 457,307 91,461 30,000 4,750
Chief Operating Officer and 1996 250,502 69,350 -- --
Executive Vice President 1995 231,353 79,724 225,000 2,072
Jeffrey P. Mayer(4)............. 1997 257,115 51,423 25,000 44,723
Senior Vice President and 1996 188,159 56,448 195,000 46,633
Chief Financial Officer 1995 -- -- -- --
Robert L. Miars................. 1997 229,604 68,881 20,000 4,750
Senior Vice President, 1996 144,503 35,037 15,000 --
Construction & Design 1995 126,422 74,282 49,500 --
Richard N. Beckert.............. 1997 220,386 44,077 20,000 3,649
Senior Vice President, 1996 160,503 44,384 30,000 --
Administration 1995 150,461 76,715 199,500 1,821
</TABLE>
- ---------------
(1) The bonus amounts for all years are based on amounts earned during the
calendar year regardless of when paid.
(2) Reflects options to acquire Bristol shares granted pursuant to Bristol's
1995 Equity Incentive Plan, adjusted to reflect the 1997 stock split, but
does not reflect the spin-off or the merger.
(3) Consists entirely of contributions by Bristol to Bristol's 401(k) plan
except for Mr. Mayer, whose 1997 other compensation consists of $3,462 of
contributions to Bristol's 401(k) and $41,261 for relocation expenses. Mr.
Mayer's 1996 other compensation consists entirely of relocation expenses.
(4) Mr. Mayer joined Bristol in January 1996.
33
<PAGE> 37
Bristol Stock Option Grants. The following table sets forth information
with respect to options granted to the executive officers of Bristol during 1997
(without adjustment for the spin-off or merger):
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(1)
OPTIONS TO EMPLOYEES OR BASE EXPIRATION -----------------------
NAME GRANTED IN 1997 PRICE DATE 5% 10%
---- ---------- --------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
J. Peter Kline........ 30,000 6.09% $26.00 2007 $ 490,538 $1,243,119
John A. Beckert....... 30,000 6.09% 26.00 2007 490,538 1,243,119
Jeffrey P. Mayer...... 25,000 5.07% 26.00 2007 408,782 1,035,933
Robert L. Miars....... 20,000 4.06% 26.00 2007 327,025 828,746
Richard N. Beckert.... 20,000 4.06% 26.00 2007 327,025 828,746
------- ------ ---------- ----------
125,000 25.13% $2,043,908 $5,179,663
======= ====== ========== ==========
</TABLE>
- ---------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation over the term of the options. These numbers do not take into
account provisions of certain options providing for termination of the
option following termination of employment, nontransferability or vesting
over periods. The use of the assumed 5% and 10% returns is established by
the SEC and is not intended by Bristol to forecast possible future
appreciation of the price of Bristol shares.
Management Bonus Plan. Our Management Bonus Plan will provide key
management employees with cash bonuses based upon the achievement of specified
targets and goals for the Company and for the particular employees. Each of our
officers will be eligible to receive annual bonus awards based on the
achievement of criteria established by the compensation committee of our board
of directors.
401(k) Plan. Effective as of the spin-off, we will assume the profit
sharing plan with a 401(k) feature currently offered by Bristol to its employees
and executive officers. Eligible employees may contribute to the 401(k) plan
through salary deferral elections of not less than 1% nor more than 16% of their
salary. We will match contributions with $.50 for each dollar contributed, up to
6% of a participant's salary. Our Board may, in its discretion, grant additional
matching contributions, subject to statutory limitations. Contributions by
participants are 100% vested and contributions by the Company vest over a period
of years, becoming fully vested after five years of continuous employment. The
401(k) plan is intended to qualify under Section 401 of the Code so that
contributions by participants or by the Company to the 401(k) plan, and income
earned on such contributions, are not taxable to the participants until
withdrawn from the Company 401(k) plan.
1998 Equity Incentive Plan. Our 1998 Equity Incentive Plan is designed to
attract and retain our qualified officers and other key employees. The plan
authorizes the grant of options to purchase Company shares, stock appreciation
rights, restricted stock, deferred stock, performance stock and performance
units. Our Board's Compensation Committee will administer the Equity Incentive
Plan and determine to whom awards will be granted, as well as the number of
shares, the exercise period and other terms and conditions of a particular
grant. No grants will be made under the plan unless the plan is approved by
Bristol's stockholders.
Possible Stock Purchase Plan. We are considering a stock purchase plan that
would permit certain of our employees and directors, including Mr. Kline and the
other executive officers, to purchase Company shares at the price paid for the
Bass repurchase, possibly with financing provided or arranged by the Company.
1998 Non-Employee Directors Stock Option Plan. Our 1998 Non-Employee
Directors Stock Option Plan is designed to encourage our outside directors to
own Company shares. Only directors who are not employees of the Company or any
9% affiliate of the Company will be eligible to participate in this Plan. The
34
<PAGE> 38
persons expected to receive options under the plan are Messrs. Brack, Pinto and
Dittman. No grants will be made under the plan unless the plan is approved by
Bristol's stockholders.
Under this plan, we will automatically grant to each eligible director an
option to purchase 25,000 Company shares on the date the individual becomes a
director and at each annual meeting while that person remains a director. A
portion of the initial option will become exercisable at each of the following
three annual stockholders meetings if the director has continued to serve as a
director during that time. The annual options will be fully exercisable on the
date of the next annual stockholders meeting. The exercise price of the options
granted under the Directors Plan will generally be the market value of the
Company common shares on the day the option is granted and may be paid in cash,
Company common shares held by the eligible director for at least six months, or
a combination of cash and stock. This plan will be administered by the Directors
Plan Committee of the Company's Board.
Directors are not presently expected to receive any compensation for their
services as directors other than the options.
Employment Agreements. Messrs. Kline and J. Beckert have entered into
employment agreements with Bristol that expire in 2001 and provide for the
payment of an annual base salary of at least $450,000 and provide for certain
severance benefits on a change in control of Bristol. We will assume the
obligations under those employment agreements in the spin-off. Messrs. Kline and
J. Beckert are also eligible to receive future grants of stock-based incentive
awards and other benefits provided to our senior executives, including bonuses
of up to 50% of their base pay.
In connection with the spin-off and merger, Messrs. Kline and J. Beckert
waived the rights to treat the merger as a change of control, which otherwise
would have resulted in the acceleration of the vesting Bristol options
personally granted to them and would have given them certain severance rights.
Existing Bristol Options. The following table sets forth certain
information with respect to options to purchase Bristol shares held at December
31, 1997 by Bristol's Chief Executive Officer and each of the Named Executives.
OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997(1) DECEMBER 31, 1997(2)
--------------------------- ---------------------------
NAME UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
---- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
J. Peter Kline....................... 255,000 -- $4,756,013 --
John A. Beckert...................... 255,000 -- 4,756,013 --
Jeffrey P. Mayer..................... 181,000 39,000 2,331,885 $563,831
Robert L. Miars...................... 81,500 3,000 1,223,314 33,989
Richard N. Beckert................... 243,500 6,000 4,468,693 67,977
</TABLE>
- ---------------
(1) Represents the total number of Bristol shares subject to stock options held
by the Named Executives at December 31, 1997. These options were granted on
various dates during the years 1995 through 1997.
(2) The closing price per share of Bristol shares as reported in the NYSE
Composite Transactions Report on December 31, 1997 was $29.0625. The value
of the options is calculated on the basis of the difference between the
option exercise price and $29.0625 multiplied by the number of Bristol
shares covered by the option.
Treatment of Bristol Stock Options after the Spin-Off and Merger. Upon
consummation of the spin-off, each outstanding option to purchase Bristol shares
under Bristol's stock plans will be redenominated into two options which will be
continuations of the original Bristol options. One of such options will be an
option to purchase Company shares and the other will be an option to purchase
FelCor shares. Each will have the same terms and conditions as the original
Bristol option. The Company option will be exercisable for that number of
Company shares that would have been issued had the original Bristol option been
exercised in full
35
<PAGE> 39
immediately prior to the spin-off. The FelCor option will be exercisable for
that number of FelCor shares that would have been issued had the original
Bristol option been exercised in full immediately prior to the merger. The
exercise price for the original Bristol options will be allocated between the
Company option and the FelCor option based on the relative values of the Company
and Bristol immediately following the spin-off and, in the case of the Company
option, adjusted by the ratio of shares distributed in the spin-off, and, in the
case of the FelCor option, adjusted by the merger exchange ratio.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Preemptive Rights. The Bass companies and United/Harvey Holdings will have
the right, in connection with any offering of equity securities of the Company
in excess of $10 million, to purchase on the same terms as such offering a
sufficient number of Company shares to maintain their respective percentage
ownership of Company shares immediately prior to such offering. This right does
not apply if such acquisition would violate rules which prohibit a stockholder
from owning 10% or more of the outstanding shares of a REIT and a related tenant
at the same time. This right will expire as to any stockholder who does not
exercise such right three times or as to all of those stockholders if any of
them owns less than 25% of its initial ownership of Company shares in the
spin-off, after taking into consideration the Company's redemption of the Bass
companies' Company shares that exceed 9.9% of the outstanding Company shares.
Board Representation and Voting. The Bass companies and United/Harvey
Holdings will each be entitled to nominate one director for election to serve on
the Company Board for so long as it owns at least 25% of the Company shares it
owned at the time of the spin-off, after taking into consideration the Company's
redemption of the Bass companies' shares that exceed 9.9% of the outstanding
Company shares. Each of such parties agreed to vote for the other's designee for
so long as they both own at least 25% of their initial shares. Our initial Board
includes two members originally nominated to the Bristol Board by the Bass
companies and United/Harvey Holdings.
Holiday Inn Franchise Arrangements. The Company has agreed to add 8,700
Holiday-branded rooms to its portfolio of owned or operated hotels over the next
five years. If the Company fails to meet certain threshold targets for adding
rooms over that period, it will be required to pay Holiday Hospitality damages
in accordance with a specified formula unless certain exceptions apply. The
Company's obligation will terminate upon the earlier to occur of (i) six months
after notice from Holiday Hospitality of termination of its obligation to offer
us acquisition and development opportunities, as described below, and (ii)
Holiday Hospitality no longer holding a controlling equity interest in the
entity that franchises Holiday Inn Hotel brands or in the entity that directly
or indirectly holds the intellectual property rights related to the Holiday Inn,
Holiday Inn Express or Crowne Plaza brands.
Bristol has entered into franchise agreements with Holiday Hospitality
which generally require the payment of franchise fees equal to 5% of room
revenues. Bristol paid $19.5 million in franchise fees in 1997. The Company will
assume Bristol's obligations under these franchise agreements in the spin-off.
Right of First Offer for New Opportunities. Holiday Hospitality has agreed
to offer the Company any opportunity it has to acquire or develop a midscale
lodging facility located in the United States or Canada. Holiday Hospitality
will be permitted, however, to (i) terminate such obligations at any time after
October 28, 1998, upon six months' advance notice to the Company, and (ii)
acquire up to five hotels and develop an unlimited number of hotels in the
United States and Canada for research and training other than in the same
geographic markets as the Company's hotels. If Holiday Hospitality proposes to
sell any research and training hotel that it owns, it must first offer to sell
such hotel to the Company. At the time of the spin-off, the Hotel Properties
Agreement, dated April 28, 1997, between Holiday Corporation and Bristol will
terminate. The Hotel Properties Agreement required Bristol to offer Holiday
Hospitality or its affiliates franchise rights with respect to at least 85% of
Bristol's owned and managed hotel rooms.
36
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
This summarizes the material provisions of the Company's Certificate of
Incorporation and Bylaws as they are contemplated to be in effect at the time of
the spin-off, but may not contain all of the information that is important to
you. See "Where You Can Find More Information" for information about how to
obtain a copy of the documents referred to in this section. The rights described
below are subject to any rights that may be granted to any holder of preferred
shares.
CAPITAL STOCK
We will be authorized to issue 100.0 million common shares and 25.0 million
preferred shares.
Common Stock. Holders of common shares will be entitled to receive
dividends that have been legally declared by our Board and to share ratably in
the assets of the Company that remain after we have paid our known debts and
liabilities if we liquidate or dissolve. Holders of common shares will be
entitled to one vote for each common share held by such holder on the record
date for the applicable stockholders meeting.
Preferred Stock. The preferred shares may be issued in one or more series,
with such rights and qualifications as our board of directors may determine
before such shares are issued.
Ownership Limit. Our Certificate of Incorporation will prohibit any person
from owning more than 9.9% of the outstanding shares of any class of our capital
stock before December 31, 2000 unless our Board previously approved such
ownership. Accordingly, United/Havey Holdings and Baron Capital which will own
40.6% and 15.6%, respectively, of our shares after the spin-off will be exempted
from the ownership limit. See "Security Ownership of Certain Beneficial Owners
and Management." We have the right to take any lawful action that we believe is
necessary or advisable to ensure compliance with the ownership limit, including
refusing to recognize or record any transfer of shares in violation of these
limitations. The distribution of shares in the spin-off is exempt from the
ownership limit.
The ownership limitation in our Certificate of Incorporation will be
similar in effect to the ownership limitation in FelCor's charter, which is
designed to assure its continued qualification as a REIT. The ownership limit
that will be in our Certificate of Incorporation is intended to aid in assuring
compliance by FelCor with the REIT requirements and to avoid further
concentration in the holdings of our shares. The ownership limit may have the
effect of discouraging or preventing a third party from attempting to gain
control of the Company without the approval of our Board of Directors.
Therefore, it is less likely that a change in control, even if beneficial to
stockholders, could be effected without the approval of our Board. See
"-- Additional Corporate Governance and Takeover-Related Matters."
If you hold or attempt to acquire shares in violation of the ownership
limit, any shares in excess of 9.9% of the total outstanding number of shares
will be transferred automatically and by operation of law to a charitable trust
for the benefit of a charitable beneficiary. The trustee will be entitled to
receive all dividends on, and exercise all voting rights of, the excess shares.
The trustee must sell the excess shares within 20 business days. You will have
no right or interest in such shares, except the right to receive from the
proceeds of any sale of the excess shares by the trustee the lesser of: (i) the
amount you paid for the excess shares (or the market value of the excess shares,
determined in accordance with the Company's Certificate of Incorporation, if you
received them by gift, bequest or otherwise without payment) and (ii) the amount
received by the trustee from a sale of such excess shares. Accordingly, if you
are the record owner of any excess shares you may suffer a financial loss if the
price at which the excess shares are sold by the trustee is less than what you
paid for them.
STOCK EXCHANGE LISTING
We will apply to list our common stock for trading on the New York Stock
Exchange. If the New York Stock Exchange does not approve our listing, we will
apply to another national securities exchange or quotation system.
37
<PAGE> 41
There is currently no trading market for our shares. Prices at which our
shares will trade after the spin-off cannot be predicted. Until our shares are
fully distributed and an orderly market develops, the prices at which trading in
our shares occur may fluctuate significantly. The prices at which our stock
trades will be determined by the marketplace and may be influenced by many
factors, including, among others, the depth and liquidity of the market for our
stock, investor perception of us and our businesses, our dividend policy,
interest rates and general economic and market conditions. See "Risk
Factors -- Absence of Prior Trading Market for Company Shares; Potential
Volatility."
SHARES AVAILABLE FOR RESALE
Company shares distributed to you in the spin-off may be traded freely and
without restriction if you are not deemed to be an "affiliate" of the Company
under the rules of the SEC. Persons who may be deemed to be affiliates of the
Company after the spin-off generally include individuals or entities that
control, are controlled by or are under common control with the Company, and may
include certain officers and directors of the Company and Bristol as well as
certain principal stockholders of the Company and Bristol. Persons who are
affiliates of the Company will be permitted to sell their Company shares only
pursuant to an effective registration statement or an exemption from the
registration requirements of the securities laws. We have granted the Bass
companies and United/Harvey Holdings, two of our major stockholders, demand and
piggyback registration rights.
DIVIDENDS
Bristol did not pay any cash dividends since its initial public offering in
1995. We do not currently anticipate paying any cash dividends, but rather to
reinvest available cash in our business.
ADDITIONAL CORPORATE GOVERNANCE AND TAKEOVER-RELATED MATTERS
The Certificate of Incorporation and Bylaws of the Company will be amended
to change the Company's name to "Bristol Hotels & Resorts", and to provide for
the following matters:
Actions of Stockholders. Our Certificate of Incorporation, as amended, will
not permit actions to be taken by written consent. Stockholder actions may only
be taken at annual or special meetings of the stockholders called in accordance
with our Certificate of Incorporation and Bylaws. Special meetings of
stockholders may only be called by (i) the Chairman or a Vice Chairman of our
Board or the President of the Company and (ii) the Secretary of Company upon the
written request of a majority of the total number of the directors then in
office. Annual meetings may be called by a majority of the Board. Only business
that is specified in the notice of the annual or special meeting or properly
brought before the meeting by the presiding officer or by a majority of the
entire board may be discussed at any meeting.
The first annual meeting of our stockholders will be held in 1999, on a
date and at a time designated by the Board.
Board of Directors. The business and affairs of the Company are managed
under the direction of our Board, which initially will consist of eight members.
The size of our Board may be increased or decreased only by (i) a majority
of the total number of directors that the Company would have if there were no
vacancies on the Board or (ii) the holders of at least 80% of the voting stock,
voting together as a single class. The Board may not have fewer than three nor
more than 15 members.
Our Board is divided into three classes, as nearly equal in number as
possible, designated Class I, Class II, and Class III. The term for the
directors first appointed to Class I will expire at the annual meeting of
stockholders to be held in 1999, the term of the directors first appointed to
Class II will expire at the annual meeting of the stockholders to be held in
2000 and the term for the directors first appointed to Class III will expire at
the annual meeting of stockholders to be held in 2001. At any meeting of
stockholders at which directors are elected, the number of directors elected may
not exceed the largest number of directors then in
38
<PAGE> 42
office in either class who are not standing for election at the meeting.
Accordingly, it will not be possible to change a majority of the members of the
Board.
The Bylaws provide that, except as granted to the Bass companies and to
United/Harvey Holdings in the stockholders agreement, directors may be nominated
only by the Company's Board or by any stockholder who has delivered notice of
his nominee not less than 60 days prior to the annual meeting of stockholders.
If public announcement of the date of the annual meeting is not made at least 75
calendar days prior to the annual meeting, notice must be received not later
than the close of business on the tenth calendar day following the day on which
the announcement of the meeting date is made. The stockholder's notice must
contain certain information concerning the stockholder and the stockholder's
nominees, including their names and addresses, proof that the stockholder is a
stockholder of record and plans to appear in person or by proxy at the annual
meeting, the class and number of shares of Company stock owned by such
stockholder and the stockholder's nominees, any agreements between the relevant
parties pursuant to which the nomination is to be made, any other information
regarding the stockholder's nominees that would be required to be included in a
proxy statement soliciting proxies for the election of the stockholder's
nominees and the signed consent of each nominee to serve as a director of the
Company, if so elected. The presiding officer of the annual meeting may refuse
to acknowledge the nomination of any person not made in compliance with these
requirements or the requirements of the securities laws.
Directors are elected by a plurality vote of all votes cast at a meeting
and will hold office for a three-year term. Directors may be elected by the
stockholders only at an annual meeting of stockholders.
Any vacancy that occurs on the Company's Board, including any vacancy that
results from an increase in the authorized number of directors, may be filled
only by a majority of the remaining directors then in office, even if less than
a quorum, or by a sole remaining director, except that any vacancy caused by the
death, removal or resignation of a director nominated by the Bass Companies or
United/Harvey Holdings may only be filled by the person who nominated such
director for as long as the stockholders agreement is in effect. Any director
elected to fill a vacancy will hold office for the remainder of the full term of
the class of directors in which the new directorship was created or the vacancy
occurred and until the director's successor is elected and qualified. A decrease
in the number of the directors may not shorten the term of any director then in
office.
Any director may be removed from office with or without cause by a majority
of the entire Board or for cause by the stockholders. For the stockholders to
remove a director for cause, the notice of the annual or special meeting of the
stockholders must refer to the removal of such director and at least 80% of the
stockholders entitled to vote, voting together as a single class, must approve
such removal.
Indemnification of Officers and Directors. We have agreed to indemnify our
officers and directors to the maximum extent permitted or required under
applicable law. Delaware's corporation law permits us to indemnify our directors
and officers for liabilities, costs and expenses that such persons may incur as
a result of actions they may take in performing their duties as officers and
directors. In order to be indemnified under Delaware law, the person must have
acted in good faith and in a manner he believed was in, or not opposed to, the
best interests of the Company. In the case of any criminal proceeding, the
person must not have reasonable cause to believe that his conduct was unlawful.
In Delaware, if a person is found by a court to be liable to the corporation,
that court must approve any reimbursement of expenses to such person. The
foregoing limitations do not, however, apply to the indemnity contracts to which
all officers and directors are partners with the Company. Any amendment or
repeal of the Company's Certificate of Incorporation may not adversely affect
the rights of any person entitled to indemnification for any event occurring
prior to such amendment or repeal.
Amendment of the Bylaws. The Bylaws may be amended by the stockholders or
the Company's Board. Amendment by the stockholders must be approved at a meeting
where the notice of such meeting describes the proposed amendment. No amendment
adopted by the Board may conflict with any amendment adopted by the
stockholders.
Anti-Takeover Effects. All of the provisions discussed in this section, the
ownership limitation in our Amended Certificate of Incorporation and the ability
of FelCor to terminate the leases of the hotels might
39
<PAGE> 43
make it more difficult for someone to obtain control of us unless the
transaction is approved by our Board. Certain of these provisions could also
make it more difficult for a third party to replace our management or Board
without the approval of our Board of Directors.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form 10 to register
the Company shares to be issued to you in the spin-off. As allowed by SEC rules,
this information statement does not contain all the information contained in the
registration statement or in the exhibits to the registration statement. For
further information you may read and copy documents at the principal office of
the SEC at 450 5th Street, N.W., Washington, D.C. 20549, and at the regional
offices of the SEC at 7 World Trade Center, Suite 1300, New York, New York
10048, at Citicorp Center, Suite 1400, and 500 West Madison Street, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. The SEC charges a fee for copies. Copies of this
material should also be available through the Internet by using the "Quick Forms
Lookup" at the SEC EDGAR Archive, the address of which is http://www.sec.gov. In
addition, our filings may be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
Following the spin-off, we will be required to file annual, quarterly and
other reports with the SEC. We will also be subject to the proxy rules and,
accordingly, will furnish audited financial statements to you in connection with
our annual meetings of stockholders.
No person is authorized by Bristol or the Company to give any information
or to make any representations other than those contained in this information
statement, and, if given or made, you should not rely upon such information.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this information statement contains
forward-looking statements and information that are based on our current views
of the Company and our assumptions concerning future events. Forward-looking
statements are typically identified by the words "believe," "expect,"
"anticipate," "intend," "estimate," "project" and similar expressions. These
statements are subject to risks and uncertainties that could cause the Company's
actual operations and results of operations to differ materially from those
reflected in our forward-looking statements.
Forward-looking statements are not guarantees of future performance and are
subject to the Company achieving its business strategy and the costs and
expected benefits of that strategy and having sufficient cash flow and other
sources of cash to fund our lease payments, debt service requirements, working
capital needs and other significant expenditures. Forward-looking statements are
also based on what we anticipate future trends in the lodging industry will be
and how those will be affected by industry capacity, the seasonal nature of the
lodging industry, product demand and pricing and the other matters referred to
in the "Risk Factors" section of this document. Accordingly, you are cautioned
not to place undue reliance on our forward-looking statements.
40
<PAGE> 44
INDEX TO FINANCIAL INFORMATION
<TABLE>
<S> <C>
Pro Forma Financial Data.................................... 20
Management's Discussion and Analysis of Results of
Operations................................................ 27
Report of Independent Public Accountants.................... F-2
Report of Independent Accountants........................... F-3
Financial Statements
Consolidated Balance Sheets............................... F-4
Consolidated and Combined Statements of Income............ F-5
Consolidated Statements of Changes in Stockholders'
Equity................................................. F-6
Consolidated and Combined Statements of Cash Flows........ F-7
Notes to Consolidated and Combined Financial Statements... F-8
</TABLE>
F-1
<PAGE> 45
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Bristol Hotel Company
We have audited the accompanying consolidated balance sheets of Bristol
Hotel Company (a Delaware corporation) as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bristol Hotel Company as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Dallas, Texas
February 6, 1998 (except with respect
to the matter discussed in Note 20 as
to which the date is March 25, 1998)
F-2
<PAGE> 46
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Bristol Hotel Company
In our opinion, the accompanying consolidated statements of income, of
changes in stockholders' equity and of cash flows for Bristol Hotel Company and
its subsidiaries ("Company") and the combined statements of income and cash
flows for Harvey Hotel Companies ("Predecessor") present fairly, in all material
respects, the results of operations and cash flows of the Company and its
Predecessor for the eleven months ended December 31, 1995 and for the one month
ended January 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company and
its Predecessor's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of Bristol Hotel Company and its subsidiaries
for any period subsequent to December 31, 1995.
PRICE WATERHOUSE LLP
Dallas, Texas
February 23, 1996
F-3
<PAGE> 47
BRISTOL HOTEL COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $ 86,167 $ 4,666
Trading securities........................................ 103 116
Accounts receivable (net of allowance of $2,259 and
$344).................................................. 31,305 10,501
Inventory................................................. 8,286 3,320
Deposits.................................................. 7,569 5,404
Other current assets...................................... 1,626 950
---------- --------
Total current assets.............................. 135,056 24,957
---------- --------
Property and equipment (net of accumulated depreciation of
$76,172 and $31,071)...................................... 1,439,167 552,564
Other assets
Restricted cash........................................... 9,283 3,069
Investments in joint ventures, net........................ 12,396 --
Goodwill (net of accumulated amortization of $891)........ 52,773 --
Deferred charges and other noncurrent assets (net of
accumulated amortization of $1,965 and $2,144)......... 17,963 12,198
---------- --------
Total assets...................................... $1,666,638 $592,788
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt......................... $ 8,455 $ 15,769
Accounts payable and accrued expenses..................... 27,366 10,626
Accrued construction costs................................ 1,330 4,797
Accrued property, sales and use taxes..................... 15,911 7,346
Accrued insurance reserves................................ 9,530 6,920
Advance deposits.......................................... 1,156 278
---------- --------
Total current liabilities......................... 63,748 45,736
---------- --------
Long-term debt, excluding current portion................... 708,864 216,925
Deferred income taxes....................................... 242,530 75,619
Other liabilities........................................... 2,702 2,351
---------- --------
Total liabilities................................. 1,017,844 340,631
---------- --------
Common stock ($.01 par value; 150,000,000 shares authorized,
45,734,472 and 24,848,760 shares issued at December 31,
1997 and 1996, respectively, and 43,641,401 and 24,848,760
shares outstanding at December 31, 1997 and 1996,
respectively)............................................. 436 166
Additional paid-in capital.................................. 606,935 231,181
Cumulative translation adjustment........................... 286 --
Retained earnings........................................... 41,137 20,810
---------- --------
Total stockholders' equity........................ 648,794 252,157
---------- --------
Total liabilities and stockholders' equity........ $1,666,638 $592,788
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE> 48
BRISTOL HOTEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
HARVEY HOTEL COMPANIES (PREDECESSOR)
COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HARVEY HOTEL
BRISTOL HOTEL COMPANY COMPANIES
------------------------------------------ ------------
ELEVEN
MONTHS MONTH
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, JANUARY 31,
1997 1996 1995 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE:
Rooms..................................................... $377,380 $149,794 $115,771 $4,006
Food and beverage......................................... 92,596 44,344 36,070 1,505
Management fees........................................... 4,948 2,513 1,382 34
Other..................................................... 29,594 15,189 11,972 398
-------- -------- -------- ------
Total revenue....................................... 504,518 211,840 165,195 5,943
-------- -------- -------- ------
OPERATING COSTS AND EXPENSES:
Departmental expenses:
Rooms................................................... 105,063 37,706 32,692 1,124
Food and beverage....................................... 69,766 31,282 27,118 1,006
Other................................................... 9,326 4,528 4,258 49
Undistributed operating expenses:
Administrative and general.............................. 44,255 18,266 16,184 186
Marketing............................................... 34,439 15,555 12,070 393
Property operating costs................................ 44,303 17,499 16,313 360
Property taxes, rent and insurance...................... 35,330 10,903 8,425 269
Depreciation and amortization........................... 39,690 18,377 13,505 309
Corporate expense....................................... 24,450 10,958 8,035 315
-------- -------- -------- ------
Operating income............................................ 97,896 46,766 26,595 1,932
-------- -------- -------- ------
Other (income) expense:
Interest expense.......................................... 44,591 18,616 18,374 652
Equity in income of joint ventures........................ (1,916) -- -- --
Other..................................................... -- -- 257 --
-------- -------- -------- ------
Income before minority interest, income taxes, extraordinary
items and pro forma income taxes.......................... 55,221 28,150 7,964 1,280
Minority interest........................................... -- -- 173 --
-------- -------- -------- ------
Income before income taxes, extraordinary items and pro
forma income taxes........................................ 55,221 28,150 7,791 1,280
Income taxes................................................ 22,007 10,401 2,822 --
-------- -------- -------- ------
Income before extraordinary items and pro forma income
taxes..................................................... 33,214 17,749 4,969 1,280
Extraordinary loss on early extinguishment of debt, net of
tax....................................................... (12,741) -- (1,908) --
-------- -------- -------- ------
Net income before pro forma income taxes.................... $ 20,473 $ 17,749 $ 3,061 1,280
======== ======== ========
Pro forma income taxes (Unaudited).......................... 435
------
Net income after pro forma income tax expense (Unaudited)... $ 845
======
Earnings per common and common equivalent share:
Income before extraordinary item:
Basic................................................... $ 0.89 $ 0.71 $ 0.28 --
Diluted................................................. $ 0.87 $ 0.70 $ 0.28 --
Net income:
Basic................................................... $ 0.55 $ 0.71 $ 0.17 --
Diluted................................................. $ 0.53 $ 0.70 $ 0.17 --
Weighted average number of common and common equivalent
shares outstanding:
Basic..................................................... 37,359,364 24,848,760 17,857,936 --
Diluted................................................... 38,332,302 25,526,413 17,908,955 --
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-5
<PAGE> 49
BRISTOL HOTEL COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNREALIZED CUMULATIVE RETAINED
------------------- PAID-IN GAIN (LOSS) TRANSLATION EARNINGS
SHARES AMOUNT CAPITAL ON SECURITIES ADJUSTMENT (DEFICIT) TOTAL
---------- ------ ---------- ------------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1995........ 9,856,178 $ 99 $123,104 $ -- $ -- $ -- $123,203
Unrealized gain on securities,
net........................... -- -- -- 262 -- -- 262
Issuance of common stock......... 6,709,662 67 109,529 -- -- -- 109,596
Net of income.................... -- -- -- -- -- 3,061 3,061
---------- ---- -------- ----- ---- ------- --------
Balance at December 31, 1995....... 16,565,840 166 232,633 262 -- 3,061 236,122
Reclass securities to trading.... -- -- -- (262) -- -- (262)
Employee stock options........... -- -- 216 -- -- -- 216
Adjustment to offering costs for
1995 common stock issuance.... -- -- (1,668) -- -- -- (1,668)
Net income....................... -- -- -- -- -- 17,749 17,749
---------- ---- -------- ----- ---- ------- --------
Balance at December 31, 1996....... 16,565,840 166 231,181 -- -- 20,810 252,157
Employee stock options........... -- -- 296 -- -- -- 296
Exercise of employee stock
options....................... 6,619 -- 114 -- -- -- 114
Issuance of stock in Holiday Inn
Acquisition................... 9,361,308 93 267,874 -- -- -- 267,967
Issuance of common stock, net of
costs......................... 3,162,500 31 107,470 -- -- -- 107,501
Stock split...................... 14,545,134 146 -- -- -- (146) --
Foreign currency translation..... -- -- -- -- 286 -- 286
Net income....................... -- -- -- -- -- 20,473 20,473
---------- ---- -------- ----- ---- ------- --------
Balance at December 31, 1997....... 43,641,401 $436 $606,935 $ -- $286 $41,137 $648,794
========== ==== ======== ===== ==== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-6
<PAGE> 50
BRISTOL HOTEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
HARVEY HOTEL COMPANIES (PREDECESSOR)
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HARVEY HOTEL
BRISTOL HOTEL COMPANY COMPANIES
------------------------------------------ ------------
ELEVEN
YEAR ENDED YEAR ENDED MONTHS ENDED MONTH ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, JANUARY 31,
1997 1996 1995 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 20,473 $ 17,749 $ 3,061 $ 1,280
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 39,690 18,377 13,505 309
Amortization of deferred financing fees................. 2,749 2,062 -- --
Other................................................... -- -- 602 --
Equity in earnings of joint ventures.................... (1,399) -- -- --
Compensation expense recognized for employee stock
options............................................... 410 216 -- --
Unrealized gain on marketable securities................ -- (378) -- --
Non-cash portion of extraordinary item, net of tax...... 11,009 -- 1,908 --
Changes in assets and liabilities:
Changes in working capital.............................. 1,645 (684) (714) 641
Decrease (increase) in restricted cash.................. (6,214) (2,449) 2,860 (84)
Distributions from joint ventures....................... 650 -- -- --
Increase (decrease) in other liabilities................ 217 (460) (4,260) 421
Deferred tax provision.................................. 5,805 6,171 (326) --
--------- -------- --------- -------
Net cash provided by operating activities........... 75,035 40,604 16,636 2,567
--------- -------- --------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to property and equipment.................... (54,071) (93,936) (60,941) (721)
Purchases of property and equipment, net of associated
debt.................................................... (86,977) (6,300) (20,000) --
Sales of property and equipment........................... -- -- 4,711 --
Holiday Inn Acquisition, net of costs..................... (400,159) -- -- --
Sales of marketable securities............................ -- 726 -- 1,928
--------- -------- --------- -------
Net cash provided by (used in) investing
activities........................................ (541,207) (99,510) (76,230) 1,207
--------- -------- --------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Refinancing................................. 600,000 -- -- --
Proceeds from New Credit Facility......................... 560,000 -- -- --
Repayment of New Credit Facility.......................... (560,000) -- -- --
Paydown of Senior Notes................................... (40,000) -- -- --
Proceeds from Offering, net of costs...................... 107,852 -- -- --
Early extinguishment of long-term debt.................... (133,540) -- -- --
Distributions to predecessor equity holders............... -- -- (4,140) (8,009)
Additions to notes receivable -- partners................. -- -- -- 488
Principal payments and extinguishment of long-term debt... (7,058) (4,826) (156,612) (121)
Proceeds from issuance of long-term debt.................. 43,410 66,976 123,387 --
Payment of offering costs................................. -- (1,342) -- --
Proceeds from affiliate................................... -- -- 19,900 --
Proceeds from initial public offering, net of offering
costs................................................... -- -- 88,557 --
Dividend paid to minority partner......................... -- -- (335) --
Decrease in accounts receivable affiliate................. -- -- 542 --
Decrease (increase) in deferred charges and other
non-current assets...................................... (22,991) (5,142) (9,212) 316
--------- -------- --------- -------
Net cash provided by (used in) financing
activities........................................ 547,673 55,666 62,087 (7,326)
--------- -------- --------- -------
Net increase (decrease) in cash and cash equivalents........ $ 81,501 $ (3,240) $ 2,493 $(3,552)
Cash and cash equivalents at beginning of period............ 4,666 7,906 5,413 4,118
--------- -------- --------- -------
Cash and cash equivalents at end of period.................. $ 86,167 $ 4,666 $ 7,906 $ 566
========= ======== ========= =======
Supplemental cash flow information:
Interest paid............................................. $ 39,706 $ 17,696 $ 17,111 $ 330
========= ======== ========= =======
Income taxes paid......................................... $ 10,942 $ 3,543 $ 2,685 $ --
========= ======== ========= =======
Non-cash investing and financing activities:
Debt assumed to acquire property and equipment............ $ 21,813 $ -- $ 12,100 $ --
========= ======== ========= =======
Sale of non-hotel properties for assumption of
liabilities............................................. $ -- $ -- $ 4,723 $ --
========= ======== ========= =======
Purchase of minority interest for common stock............ $ -- $ -- $ 1,110 $ --
========= ======== ========= =======
Common stock issued in Holiday Inn Acquisition.............. $ 267,967 $ -- $ -- $ --
========= ======== ========= =======
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-7
<PAGE> 51
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION
Bristol Hotel Company ("Bristol") is a Delaware corporation which was
incorporated in November 1994 and began operations after the acquisitions of
Harvey Hotel Company, Ltd. and its subsidiaries (together, "Harvey Hotel
Companies" or "Predecessor") and United Inns, Inc. ("United Inns")
(collectively, the "Combination"). Bristol owns 86 hotels and manages 15
additional hotels, two of which are owned by joint ventures in which Bristol
owns a 50% interest. The properties, which contain approximately 28,800 rooms,
are located in 22 states, the District of Columbia and Canada. Bristol acquired
the ownership and/or management of 60 of these properties on April 28, 1997 (the
"Holiday Inn Acquisition"). The Combination and the Holiday Inn Acquisition are
more fully described in Note 3.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Bristol and its subsidiaries. The combined financial statements of the
Predecessor include the accounts of Harvey Hotel Company and related entities,
all of which were under common control. The owners of these entities combined
their interests for the purpose of forming a new entity which was acquired by
Bristol. The accounts of United Inns and its subsidiaries are included from
February 1, 1995, the date of acquisition. The results of operations of the
hotels acquired in the Holiday Inn Acquisition have been included in Bristol's
financial statements since April 28, 1997. All significant intercompany accounts
and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include unrestricted cash in banks and cash on
hand. Liquid investments purchased with an original maturity of three months or
less are considered to be cash equivalents.
TRADING SECURITIES
Marketable securities consist primarily of equity securities and mutual
fund shares. Equity securities have been classified as either: (i)
available-for-sale, which are reported at fair value, with net unrealized gains
and losses excluded from earnings and reported as a separate component of
changes in equity; or (ii) trading securities, which are reported at fair value,
with unrealized holding gains and losses for trading securities included in
earnings. At December 31, 1997 and 1996, all marketable securities owned by
Bristol were classified as trading securities.
ACCOUNTS RECEIVABLE
Accounts receivable in the balance sheets are expected to be collected
within one year and are net of estimated uncollectible amounts of $2,259,000 and
$344,000, at December 31, 1997 and 1996, respectively.
Valuation and qualifying accounts consist of allowance for doubtful
accounts as follows (in thousands):
<TABLE>
<CAPTION>
WRITE-OFF OF
BALANCE AT CHARGED TO AMOUNTS BALANCE AT
BEGINNING COSTS AND PREVIOUSLY END OF
OF PERIOD EXPENSES RESERVED PERIOD
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Company
Year ended December 31, 1997......... $344 $2,306 $(391) $2,259
Year ended December 31, 1996......... 620 251 (527) 344
Eleven months ended December 31,
1995.............................. 221 796 (397) 620
</TABLE>
F-8
<PAGE> 52
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORY
Inventory, consisting primarily of food and beverage products as well as
consumable supplies, is carried at the lower of cost or market. Cost is
determined on the first-in, first-out basis.
DEFERRED CHARGES AND OTHER NONCURRENT ASSETS
Deferred charges and other noncurrent assets consist primarily of financing
costs which are amortized over the life of the related loan. The amounts
reported in the balance sheets at December 31, 1997 and 1996, are net of
accumulated amortization of $1,965,000 and $2,144,000, respectively.
PROPERTY AND EQUIPMENT
Bristol recorded the Combination and the Holiday Inn Acquisition on the
basis of an allocation of the purchase price based on the fair market value of
the assets acquired at the date of acquisition. Subsequent additions and
improvements are capitalized at their cost, including interest costs associated
with the renovation of certain hotels. Interest capitalized during the years
ended December 31, 1997 and 1996 was $1,628,000 and $2,100,000, respectively.
The cost of normal repairs and maintenance that does not significantly
extend the life of the property and equipment is expensed as incurred.
Depreciation is computed on a straight-line method over the estimated useful
lives of the assets, as follows:
<TABLE>
<CAPTION>
BRISTOL HOTEL COMPANY HARVEY HOTEL COMPANIES
----------------------- -----------------------
<S> <C> <C>
Buildings................................. 35-40 years 31-35 years
Furniture, fixtures and equipment......... 3-15 years 7 years
Automobiles and trucks.................... 3 years 3 years
Leasehold improvements.................... Lease term or useful Lease term or useful
life, whichever is less life, whichever is less
</TABLE>
Depreciation and amortization expense recorded for the years ended December
31, 1997 and 1996, and the eleven months ended December 31, 1995 was $39.7
million, $18.4 million, and $13.5 million, respectively.
Bristol has adopted Statement of Financial Accounting Standards No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" ("SFAS 121"). As of December 31, 1997 and 1996, no impairment
losses have been incurred. The assets, which were classified as available for
sale as of December 31, 1996, were reclassified to held and used in the second
quarter of 1997.
RESTRICTED CASH
Restricted cash consists of (i) funds placed in reserve for the replacement
of furniture, fixtures and equipment, and (ii) tax and insurance reserves.
Bristol is required to deposit monthly with various lenders amounts of three to
four percent of hotel revenues for replacement reserves plus the tax and
insurance escrow. As tax and insurance payments are made and improvements are
completed, Bristol is reimbursed from the reserves.
ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128") was issued. Under SFAS 128, basic earnings per
share ("EPS") is computed by dividing net earnings by the weighted average
number of shares of common stock outstanding during the period. SFAS 128
replaces fully diluted EPS, which Bristol was not previously required to report,
with EPS, assuming dilution
F-9
<PAGE> 53
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
("diluted EPS"). Bristol calculates diluted EPS assuming all outstanding options
to purchase common stock have been exercised at the beginning of the year (or
the time of issuance, if later). The dilutive effect of the outstanding options
is reflected by application of the treasury stock method, whereby the proceeds
from the exercised options are assumed to be used to purchase common stock at
the average market price during the period. Bristol adopted SFAS 128 effective
December 15, 1997. All prior period EPS data have been restated. The effect of
this accounting change on previously reported EPS data is not significant. The
following table reconciles the computation of basic EPS to diluted EPS:
<TABLE>
<CAPTION>
NET PER SHARE
EARNINGS AMOUNT SHARES
-------- ---------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
For the year ended December 31, 1997:
Income before extraordinary item per share....... $33,214 37,359,364 $0.89
Effect of options................................ -- 972,938
------- ---------- -----
Income before extraordinary item per share,
assuming dilution............................. $33,214 38,332,302 $0.87
======= ========== =====
Net income per share............................. $20,473 37,359,364 $0.55
Effect of options................................ -- 972,938
------- ---------- -----
Net income per share, assuming dilution.......... $20,473 38,332,302 $0.53
======= ========== =====
For the year ended December 31, 1996:
Income before extraordinary item per share....... $17,749 24,848,760 $0.71
Effect of options................................ -- 677,653
------- ---------- -----
Income before extraordinary item per share,
assuming dilution............................. $17,749 25,526,413 $0.70
======= ========== =====
Net income per share............................. $17,749 24,848,760 $0.71
Effect of options................................ -- 677,653
------- ---------- -----
Net income per share, assuming dilution.......... $17,749 25,526,413 $0.70
======= ========== =====
For the 11 months ended December 31, 1995:
Income before extraordinary item per share....... $ 4,969 17,857,936 $0.28
Effect of options................................ -- 51,019
------- ---------- -----
Income before extraordinary item per share,
assuming dilution............................. $ 4,969 17,908,955 $0.28
======= ========== =====
Net income per share............................. $ 3,061 17,857,936 $0.17
Effect of options................................ -- 51,019
------- ---------- -----
Net income per share, assuming dilution.......... $ 3,061 17,908,955 $0.17
======= ========== =====
</TABLE>
Earnings per share have been retroactively adjusted for the effect of stock
splits.
FOREIGN CURRENCY TRANSACTIONS
As part of the Holiday Inn Acquisition, Bristol acquired six hotels in
Canada. Results of operations for those hotels are maintained in Canadian
dollars and translated using average exchange rates during the period. Currency
transaction losses are included in net income and were $303,000 for the year
ended December 31, 1997. Assets and liabilities are translated to U.S. dollars
using the exchange rate in effect at the balance sheet date. Resulting
translation adjustments are reflected in stockholders' equity as a cumulative
foreign currency
F-10
<PAGE> 54
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
translation adjustment. Cumulative currency translation gains included in
stockholders' equity at December 31, 1997 were $286,000.
INCOME TAXES
Company
Bristol accounts for income taxes under the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax basis of assets and liabilities using currently enacted tax
rates in effect for the years in which the differences are expected to reverse.
Predecessor
Harvey Hotel Company and related entities are partnership or S-Corporation
entities, and income or loss for federal income tax purposes is allocated to the
individual partners or shareholders. Accordingly, no recognition has been given
to income taxes in the combined financial statements. However, pro forma income
tax expense, at an effective rate of 34%, has been included in the combined
statements of income in order to reflect the impact on the income of Harvey
Hotel Companies.
Harvey Hotel Corporation accounted for the tax effect of net income or loss
in accordance with SFAS 109. However, because of the changes in ownership (see
Note 1), realization of the benefit of the accumulated losses is uncertain and,
therefore, has not been recorded in the combined financial statements.
EARNINGS PER SHARE
Earnings per share is determined by dividing net income by the weighted
average number of common and common equivalent shares outstanding during the
year. The 1995 weighted average shares outstanding has been calculated using the
treasury stock method and as if Holdings' shares of 1,768,000 (see Note 3) had
been outstanding since February 1, 1995. The 1997 and 1996 weighted average
shares is calculated using the treasury stock method, giving effect to the
common equivalent shares outstanding as of December 31, 1997 and 1996. The
common equivalent shares include officer and director stock options which have
been deemed exercised at the issue date using the treasury method for the
purposes of computing earnings per share. Bristol has no other potentially
dilutive securities.
All weighted average share and per share data presented are calculated in
accordance with SFAS 128, which calls for both basic and diluted weighted
average share presentation. All prior period amounts have been restated in
accordance with SFAS 128. Bristol believes that there has been no impact on its
financial statements from the implementation of SFAS 128, as the weighted
average shares previously used in calculating earnings per share are the same as
the diluted weighted average shares calculated under SFAS 128.
On June 23, 1997, Bristol's Board of Directors declared a three-for-two
stock split, effective in the form of a stock dividend for shareholders of
record June 30, 1997, which was distributed July 15, 1997 (the "Stock Split").
All per share data and the average common and common equivalent shares issued
and outstanding have been adjusted to reflect the Stock Split for all periods
presented.
F-11
<PAGE> 55
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
Bristol has made a number of estimates and assumptions relating to the
reporting of assets and liabilities, the disclosure of contingent assets and
liabilities and the reported amounts of revenues and expenses to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain financial statement items from the prior years for Bristol and the
Predecessor have been reclassified to conform with the current presentation.
3. ACQUISITIONS
UNITED INNS ACQUISITION
On January 27, 1995, United/Harvey Holdings L.P. ("Holdings") acquired the
common stock of United Inns for an aggregate purchase price of $67 million plus
the assumption of United Inns' liabilities. The acquisition was accounted for as
a purchase and the purchase price was allocated to the net assets acquired.
Under the acquisition agreement, Holdings, Harvey Hotel Companies, H. K. Huie,
Jr., the Harvey Management Equity Holders and the other parties thereto, the
following occurred: (1) Holdings contributed to Bristol all of the outstanding
capital stock of United Inns, approximately $15.1 million in cash and certain
cash advances previously made for the benefit of Harvey Hotel Companies in
exchange for an aggregate of 68.1% of Bristol's Common Stock; (2) the Harvey
Management Equity Holders collectively contributed to Bristol 46.4% of the
outstanding partnership interests in Harvey Hotel Companies in exchange for an
aggregate of 20.6% of Bristol's Common Stock; and (3) Mr. Huie contributed 25.3%
of his 50.6% outstanding partnership interest in Harvey Hotel Companies for
11.3% of Bristol's Common Stock. In addition, Mr. Huie and two of his daughters
sold to the Company approximately 27.3% of the outstanding partnership interests
in Harvey Hotel Companies for approximately $15.1 million in cash plus interest.
As a result of these transactions, Holdings, Mr. Huie and the Harvey
Management Equity Holders became the stockholders of Bristol, Bristol became the
sole stockholder of United Inns, Bristol became the indirect owner of 99% of the
outstanding partnership interests in Harvey Hotel Companies, and in connection
therewith, a wholly owned subsidiary of Bristol became the managing general
partner of Harvey Hotel Companies. Subsequently, one of Mr. Huie's daughters,
who did not participate in the Combination, sold her 1.0% limited partnership
interest in Harvey Hotel Companies (See Note 15).
The aggregate purchase price for Harvey Hotel Companies of $55 million in
stock and cash including the interests contributed by the Harvey Management
Equity Holders and Mr. Huie has been allocated, along with acquisition costs of
$1 million, to the net assets acquired. The net assets contributed were valued
at their estimated fair value on the basis of an independent valuation performed
by Holdings and as a result of the cash paid for the 27.3% owned by Mr. Huie and
his two daughters. The excess of the purchase price over the net assets acquired
of $71.5 million was principally allocated to land and buildings in accordance
with the purchase method of accounting.
The consolidated statements of income for Bristol includes the results of
operations for United Inns from February 1, 1995.
The following unaudited pro forma summary presents the combined results of
Harvey Hotel Companies as if United Inns had been acquired at the beginning of
1995. The pro forma results have been prepared for
F-12
<PAGE> 56
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
comparative purposes only and do not purport to be indicative of the results of
operations that would actually have resulted had the acquisition been in effect
on the date indicated (in thousands):
<TABLE>
<CAPTION>
MONTH ENDED
JANUARY 31,
1995
-----------
(UNAUDITED)
<S> <C>
Total revenues.............................................. $13,142
Net income after extraordinary gain and pro forma income tax
expense................................................... $ 1,111
</TABLE>
HOLIDAY INN ACQUISITION
On April 28, 1997, Bristol acquired the ownership of 45 full-service
Holiday Inns and the management of an additional 15 Holiday Inn properties,
three of which were owned by joint ventures in which Bristol acquired a 50%
interest (the owned hotels, management contracts and joint venture interests,
collectively referred to as the "Holiday Inn Assets"). As consideration for the
Holiday Inn Acquisition, Bristol paid $398 million in cash and issued 9,381,308
shares (pre-Stock Split) of its common stock. The acquisition has been accounted
for as a purchase and the results of operations of the Holiday Inn Assets have
been included in the consolidated financial statements since April 28, 1997. The
purchase price, including liabilities assumed in the acquisition (principally
deferred tax liabilities) was allocated to the assets acquired, based upon their
fair market values. The excess of the purchase price over the estimated fair
market value of the net assets acquired was recorded as goodwill and is being
amortized over 40 years.
The following unaudited pro forma summary presents the results of Bristol
as if the Holiday Inn Acquisition and related refinancing pursuant to the New
Credit Facility (see Note 6) had occurred at the beginning of 1996. The pro
forma results have been prepared for comparative purposes only and are not
indicative of the results of operations that would have occurred had the Holiday
Inn Acquisition occurred on the date indicated.
<TABLE>
<CAPTION>
1997 1996
-------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Total revenues......................................... $626,047 $571,876
Income before extraordinary item....................... $ 41,165 $ 31,981
Net income............................................. $ 29,762 $ 31,981
</TABLE>
OTHER ACQUISITIONS
In addition to the Holiday Inn Acquisition, Bristol completed the following
single-asset acquisitions in 1997 and 1996:
<TABLE>
<CAPTION>
DATE NUMBER PURCHASE MORTGAGE
ACQUIRED LOCATION OF ROOMS PRICE DEBT ASSUMED
- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C>
December 1997 Milpitas (San Jose), CA........ 305 $ 4.25 million(1) $ --
December 1997 Philadelphia, PA............... 364 $ 25.50 million $13.4 million
October 1997 St. Louis, MO.................. 318 $ 18.00 million $ 8.4 million
January 1997 Chicago, IL.................... 378 $ 35.00 million $ --
May 1996 Plano, TX...................... 161 $ 6.30 million $ --
</TABLE>
- ---------------
(1) The Holiday Inn -- Milpitas was previously owned by a joint venture in which
Bristol owned a 50% interest. Bristol purchased the remaining 50% interest
in the venture for $4.25 million and, concurrently with the acquisition,
repaid all outstanding debt associated with the property of $25.7 million.
F-13
<PAGE> 57
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Land....................................................... $ 169,611 $ 50,528
Buildings.................................................. 1,152,383 406,682
Furniture, fixtures and equipment.......................... 162,045 74,827
---------- --------
1,484,039 532,037
Less accumulated depreciation............................ (76,172) (26,091)
---------- --------
1,407,867 505,946
Assets held for sale (net of accumulated depreciation of $0
and $4,980).............................................. -- 38,279
Construction in progress................................... 31,300 8,339
---------- --------
$1,439,167 $552,564
========== ========
</TABLE>
Bristol's properties are predominantly full-service hotels that operate in
the upscale and mid-price with food and beverage segments of the lodging
industry under franchise agreements primarily with Holiday Inn. Bristol seeks to
maintain a geographically diverse portfolio of hotels to offset the effects of
regional economic cycles. Bristol operates properties in 22 states, the District
of Columbia and Canada, including 13 hotels in California, 11 in Georgia, 27 in
Texas, seven in Florida, and six in Canada.
During fiscal year 1996, Bristol classified certain limited-service hotels
as assets held for sale pursuant to the provisions of SFAS 121. During 1997,
Bristol reclassified these assets as held and used, therefore recording
depreciation expense on these assets. The results of operations for these
limited-service properties included in the income statement for the years ended
December 31, 1997, 1996 and 1995 were (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Total revenues........................................ $13,464 $16,398 $14,552
Operating income...................................... 2,186 5,580 4,020
</TABLE>
5. MARKETABLE SECURITIES
In 1995, Bristol classified certain equity securities as Available-for-Sale
Securities (per Statement of Financial Accounting Standard No. 115, "Accounting
for Certain Investments in Debt and Equity Securities"). Unrealized gains were
reported as a separate component of stockholders' equity. In May 1996,
management resolved to sell the equity securities, and accordingly, the
securities were reclassified as Trading Securities and an unrealized gain of
approximately $450,000 was recorded in earnings in 1996. These securities were
sold in August 1996.
F-14
<PAGE> 58
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Senior Notes
11.22% due December 18, 2000 (net of discount)........... $ 29,469 $ 68,340
Mortgage loans
Fixed rate:
7.66% due October 27, 2009............................ 455,000 --
7.458% due November 11, 2007.......................... 144,834 --
8% due December 31, 2002.............................. 40,263 42,126
8.55% due January 11, 2016............................ 14,324 14,626
9% due October 1, 2005................................ 13,401 --
9.5% due August 1, 2005............................... 8,366 --
Non-interest bearing due December 31, 2002............ 7,950 9,086
7.25% due September 30, 1997.......................... -- 8,110
Variable rate:
7.75% Senior Term Facility due December 18, 1998...... -- 66,976
10.26% due January 31, 2000........................... -- 9,300
10.25% due December 31, 1999.......................... -- 6,899
8.5% due September 30, 1997........................... -- 1,500
Other long-term debt....................................... 345 4,329
Capital leases............................................. 3,367 1,402
-------- --------
717,319 232,694
Less current portion..................................... (8,455) (15,769)
-------- --------
Long-term debt, excluding current portion........ $708,864 $216,925
======== ========
</TABLE>
The mortgages are amortized using varying methods as provided in the
individual debt agreements. Substantially all of Bristol's properties and
equipment are pledged as collateral on mortgage obligations.
Bristol obtained the financing for the Holiday Inn Acquisition under a new
senior term facility which provided for up to $560 million aggregate amount of
term loan borrowings (the "New Credit Facility"). The New Credit Facility was
utilized to repay existing debt of approximately $134 million, to fund the cash
portion of the Holiday Inn Acquisition and related closing costs. Bristol repaid
$108 million of borrowings from the New Credit Facility in May 1997 with
proceeds from the Offering (as defined in Note 10). The treatment of the
extraordinary costs related to the repayment of debt is more fully described in
Note 8.
On October 28, 1997, Bristol completed the refinancing of the existing $560
million New Credit Facility. The new financing (the "Refinancing") has two
tranches: (a) $145 million at a fixed interest rate of 7.458%, a term of 10
years, and secured by 15 hotel properties; and, (b) $455 million at a fixed
interest rate of 7.66%, a term of 12 years, and secured by 62 hotel properties.
Bristol prepaid $40 million of its 11.22% Senior Secured Notes (the "Senior
Notes") in December 1997. In conjunction with the prepayment, Bristol amended
the Senior Note indenture to allow for a more flexible prepayment schedule. In
connection with the Refinancing, Bristol Hotel Operating Company, a wholly owned
subsidiary of Bristol, became a joint and several guarantor of the Senior Notes
along with Bristol Hotel Asset Company.
F-15
<PAGE> 59
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
As discussed in Note 15, portions of the mortgage loans associated with
three of Bristol's properties have been allocated to a third party.
The aggregate maturities of long-term debt for the five years subsequent to
December 31, 1997, are as follows (in thousands):
<TABLE>
<S> <C>
Year ended December 31,
1998.................................................. $ 8,455
1999.................................................. 8,387
2000.................................................. 38,421
2001.................................................. 9,146
2002.................................................. 34,230
Thereafter............................................ 618,680
--------
$717,319
========
</TABLE>
7. INCOME TAXES
Components of income tax expense from continuing operations for the years
ended December 31, 1997 and 1996 and the eleven months ended December 31, 1995,
consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Federal:
Current............................................ $12,683 $ 4,486 $3,245
Deferred........................................... 4,637 5,301 (579)
State:
Current............................................ 1,837 282 190
Deferred........................................... 509 332 (34)
Canada:
Current............................................ 1,618 -- --
Deferred........................................... 723 -- --
------- ------- ------
$22,007 $10,401 $2,822
======= ======= ======
</TABLE>
Components of income tax benefit from extraordinary items for the years
ended December 31, 1997 and 1996, consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Federal:
Current................................................... $7,358 $ --
Deferred.................................................. -- --
State:
Current................................................... 1,098 --
Deferred.................................................. -- --
------ ------
$8,456 $ --
====== ======
</TABLE>
F-16
<PAGE> 60
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Bristol estimates that its effective tax rate for 1997 approximated 39.9%.
The actual income tax expense for the year ended December 31, 1997, is computed
by applying the U. S. federal statutory income tax rate, adjusted as follows:
<TABLE>
<CAPTION>
<S> <C>
Income tax expense at the U. S. federal statutory rate...... 35.0%
State income taxes, net of federal benefit.................. 3.6%
Permanent differences and effect of higher Canadian tax
rates..................................................... 1.3%
----
39.9%
====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997 and
December 31, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Purchase accounting adjustments to land and building........ $248,866 $85,134
Other....................................................... 994 --
-------- -------
Gross deferred tax liabilities.................... 249,860 85,134
-------- -------
Tax credit and NOL carryforwards............................ 4,011 5,502
Accrued reserves............................................ 1,823 2,192
Other....................................................... 1,496 1,821
-------- -------
Gross deferred tax asset.................................... 7,330 9,515
Valuation allowance......................................... -- --
Deferred tax asset.......................................... 7,330 9,515
-------- -------
Net deferred tax liability........................ $242,530 $75,619
======== =======
</TABLE>
The gross deferred tax liabilities relate principally to the temporary
differences caused by the purchase accounting adjustments recorded as a result
of the Combination and the Holiday Inn Acquisition. For financial reporting
purposes, the transactions were recorded under the principles of purchase
accounting and, accordingly, the basis of the assets have been adjusted to fair
market value. For tax reporting purposes, the transactions resulted in the bases
of the assets and liabilities being carried forward at their adjusted bases with
some adjustment for certain gains recognized on the acquisition. This differing
treatment has created book bases in excess of tax bases and, accordingly, the
related deferred tax liabilities associated with these differences have been
recorded. As Bristol depreciates and amortizes the bases of its assets for book
and tax purposes, it will record an expense for depreciation and amortization in
excess of that claimed for tax purposes. This reversal of the temporary
differences established through purchase accounting will result in Bristol
recording a credit to deferred tax expense for the tax effect of these
differences.
The remaining deferred tax assets are expected to be realized in future
periods through use of existing tax NOL and tax credit carryforwards.
F-17
<PAGE> 61
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
For federal tax reporting purposes, net operating losses of $8,988,000 and
tax credits of $657,000 generated by United Inns and Harvey Hotel Corporation in
prior years are available to be carried forward to periods expiring as follows
(in thousands):
<TABLE>
<CAPTION>
FEDERAL TAX
YEAR OF EXPIRATION NOL CREDITS
- ------------------ ------- -------
<S> <C> <C>
2001....................................................... $ -- $142
2002....................................................... -- 154
2003....................................................... -- 158
2004....................................................... -- 103
2005....................................................... 3,924 58
2006 to 2010............................................... 5,064 42
------ ----
$8,988 $657
====== ====
</TABLE>
The losses and credits are subject to an annual loss limitation equivalent
of approximately $4.8 million due to the changes in ownership of United Inns and
Harvey Hotel Corporation which occurred in 1995. These carryforwards are further
limited as they were incurred prior to the ownership of United Inns and Harvey
Hotel Corporation by Bristol. Accordingly, these carryforwards are available
only to offset income and taxes associated with the operations of the hotels
that generated them.
8. EXTRAORDINARY ITEMS
On April 28, 1997, Bristol recognized an extraordinary loss of $2.2 million
($1.3 million, net of tax) related to the early extinguishment of debt with
proceeds from the New Credit Facility. Bristol incurred $479,000 of prepayment
penalties and wrote off $1.7 million in deferred financing costs.
Bristol refinanced the New Credit Facility in October 1997 and recognized
an extraordinary loss of $14.0 million ($8.4 million, net of tax) related to the
early extinguishment of the New Credit Facility. The loss on extinguishment
reflects the write-off of deferred financing fees related to the New Credit
Facility.
Bristol prepaid a portion of its Senior Notes on December 16, 1997. Bristol
prepaid $40 million of principal, and recognized an extraordinary loss of $5.0
million ($3.0 million, net of tax). The extraordinary loss reflects the $2.4
million in prepayment penalties paid by Bristol for the Senior Notes, as well as
the write-off of approximately $2.6 million of deferred financing fees and
discount on the Senior Notes.
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Accounts payable........................................... $ 2,921 $ 1,689
Accrued payroll, payroll taxes and benefits................ 15,480 5,208
Accrued interest........................................... 3,738 993
Accrued hotel operating expenses........................... 1,405 858
Accrued Holiday Inn Acquisition costs/conversion costs..... 1,104 --
Other...................................................... 2,718 1,878
------- -------
$27,366 $10,626
======= =======
</TABLE>
F-18
<PAGE> 62
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
10. STOCKHOLDERS' EQUITY
On April 28, 1997, Bristol's shareholders voted to amend Bristol's
certificate of incorporation to increase the number of authorized shares of
common stock from 75,000,000 to 150,000,000. As part of the consideration for
the Holiday Inn Acquisition, Bristol issued 9,381,308 shares (pre-split) of its
common stock.
On May 16, 1997, Bristol issued 2,750,000 (pre-Stock Split) shares of its
common stock at a price of $36 per share (the "Offering"). Bristol issued an
additional 412,500 shares (pre-Stock Split) on May 28, 1997, pursuant to an
over-allotment agreement with the underwriters of the Offering. Proceeds from
the issuances were approximately $108 million (net of costs of $6.3 million).
NON-EMPLOYEE DIRECTOR OPTIONS
Bristol instituted a Stock Option Plan for Non-Employee Directors (the
"Director Plan") in 1995. Only members of the board who are not employees of
Bristol or an employee of a 10% beneficial owner or an affiliate thereof will be
eligible for option grants thereunder (an "Eligible Director"). An Eligible
Director receives an option to purchase 7,500 shares of Common Stock at an
exercise price equal to the market value on the date the individual becomes a
director, and those options shall become exercisable 34% at the first next
annual shareholders' meeting at which the individual is a director, and 33% at
each of the next two consecutive years during which the individual is a
director. In addition, the Eligible Director will receive options to purchase
7,500 shares at each annual meeting during which the individual is a director,
exercisable on the date of the next annual shareholders' meeting at which the
individual is a director. As of December 31, 1997, a total of 52,500 options had
been granted to the three Eligible Directors on the board, 25,050 of which are
currently exercisable.
EMPLOYEE OPTIONS
Under the Amended and Restated 1995 Equity Incentive Plan, Bristol may
award to participating officers and employees, options to purchase the Company's
stock. Employee stock options may be granted to officers and employees with an
exercise price generally not less than the fair market value of the common stock
at the date of grant. Options expire at 10 years from date of grant. Options
issued prior to December 31, 1995, have cliff vesting from 1998 -- 2000 and
options issued on or after January 1, 1996, vest ratably over a four- or five-
year period from the date of the grant. There were 2,069,441 employee options
outstanding at December 31, 1997, of which 82,800 were exercisable.
SFAS 123 DISCLOSURE
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), effective for fiscal years beginning after December
15, 1995. SFAS 123 encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Pronouncement Bulletin Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
market price of Bristol's stock at the date of the grant over the amount the
employee must pay to acquire the stock. Bristol, therefore, does not believe
that the implementation of SFAS 123 has had a material adverse impact on
Bristol's financial position or results of operations.
F-19
<PAGE> 63
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
However, had compensation cost for these plans been determined consistent
with the method of SFAS No. 123, Bristol's net income and earnings per share
would have been reduced to the following pro forma amounts (dollars in
thousands):
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C> <C>
Net Income As Reported...................... $20,473 $17,749 $3,061
Pro Forma........................ 19,060 16,865 2,621
Basic EPS As Reported...................... 0.55 0.71 0.17
Pro Forma........................ 0.51 0.68 0.15
Diluted EPS As Reported...................... 0.53 0.70 0.17
Pro Forma........................ 0.50 0.67 0.15
</TABLE>
A summary of the status of Bristol's stock option plan at December 31,
1997, 1996 and 1995, (adjusted for Stock Split) and changes during the years
then ended is presented in the table and narrative below:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- ---------------------------- ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ---------------- --------- ---------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January
1...................... 1,613,363 $10.57 1,190,766 $ 8.41 -- $ --
Options granted.......... 520,400 25.06 435,000 16.39 1,190,766 8.41
Options exercised........ (6,929) 16.47 -- -- --
Options expired.......... (4,893) 9.78 (12,403) 8.33 -- --
--------- ------ --------- ------ --------- -----
Options outstanding at
December 31............ 2,121,941 $14.10 1,613,363 $10.57 1,190,766 $8.41
========= ====== ========= ====== ========= =====
Options exercisable at
December 31............ 107,850 $16.60 5,100 $15.00 -- --
========= ====== ========= ====== ========= =====
Weighted average fair
value of options....... $ 7.82 $ 5.76 $ 4.11
========= ========= =========
</TABLE>
The 2,121,941 options outstanding at December 31, 1997, have exercise
prices between $8.33 and $28.25 with a weighted average exercise price of $14.10
and a weighted average remaining contractual life of 8.1 years. At December 31,
1997, 107,850 of these options (with a weighted average exercise price of
$16.60) are exercisable.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997, 1996 and 1995; risk-free interest rates
from 5.30% to 7.04%; no expected dividend yields; expected lives of one to seven
years; expected volatility of 33.37%.
F-20
<PAGE> 64
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
11. OPERATING LEASES
Bristol leases certain land, office space and equipment under
noncancellable operating lease commitments. Minimum rentals due under these
agreements for the next five years and thereafter are as follows (in thousands):
<TABLE>
<S> <C>
Year Ended December 31,
1998.................................................... $ 11,933
1999.................................................... 11,976
2000.................................................... 12,046
2001.................................................... 12,029
2002.................................................... 11,887
Thereafter.............................................. 216,075
--------
$275,946
========
</TABLE>
Leases include long-term ground leases for certain hotels, generally with
renewal options. Certain leases contain provisions for the payment of contingent
rentals based on a percentage of sales.
Bristol leases certain hotel space to third-party vendors. Future minimum
rentals to be received under noncancellable operating leases that have initial
or remaining lease terms in excess of one year are as follows (in thousands):
<TABLE>
<S> <C>
Year Ended December 31,
1998..................................................... $ 3,582
1999..................................................... 3,562
2000..................................................... 3,289
2001..................................................... 3,116
2002..................................................... 2,720
Thereafter............................................... 13,868
-------
$30,137
=======
</TABLE>
12. MANAGEMENT CONTRACTS
Bristol acquired the management of 15 hotels in the Holiday Inn
Acquisition, three of which were owned by joint ventures in which Bristol owned
a 50% interest. The purchase price allocated to these contracts at April 28,
1997 was $4.4 million and is being amortized on a straight-line basis over the
remaining lives of the agreements, which range from one to 11 years. The
amortization of the purchase price recorded in 1997 was $878,000. Management fee
income was $4.9 million in 1997, $2.5 million in 1996, and $1.4 million in 1995.
These management contracts may contain provisions which allow the third-party
owner to terminate the contract for such reasons as sale of the property, for
cause or without cause. Therefore, Bristol cannot guarantee that it will
continue to manage these properties to the contract expiration date.
Bristol acquired the remaining 50% interest in one of the joint ventures in
which it was a partner in December 1997. (See Note 13.)
13. INVESTMENTS IN JOINT VENTURES
Bristol acquired 50% interests in three joint ventures in the Holiday Inn
Acquisition. The purchase price allocated to these joint ventures was
approximately $12 million and is being amortized on a straight-line basis over
the estimated life of the assets acquired. Amortization expense of $308,000 was
recorded in 1997.
F-21
<PAGE> 65
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
On December 11, 1997, Bristol acquired the remaining 50% interest in the
Milpitas Joint Venture for $4.25 million. Concurrently with the acquisition,
Bristol paid off all outstanding debt related to the property of $25.7 million.
None of the original $12 million purchase price allocated to the joint ventures
in the Holiday Inn Acquisition was attributed to the Milpitas Joint Venture.
14. BENEFITS
Health (including fully insured term life and accidental death and
dismemberment), dental and disability coverage is provided to Bristol's
employees through the Welfare Benefit Trust (the "Trust"). Bristol maintains
varying levels of stop-loss and umbrella insurance policies to limit Bristol's
per occurrence and aggregate liability in any given year. Actual claims and
premiums on stop-loss insurance, medical and disability policies are paid from
the Trust. The Trust is funded through a combination of employer and employee
contributions. The Trust also pays work-related injury claims which are funded
by the employer for its employees in Texas. Since April 1, 1995, all employees
have been eligible for participation in the benefits provided through the Trust.
Bristol provided $6.1 million and $2.9 million related to these benefits for the
years ended December 31, 1997 and 1996, respectively.
Bristol offers a Profit Sharing Plan and Trust ("401(k) Plan") to certain
employees. The 401(k) Plan is designed to be a qualified trust under Section
401(a) of the Internal Revenue Code. Under the 401(k) Plan, eligible employees
are allowed to defer up to 16% of their income on a pretax basis through
contributions to the Plan; however, only the first 6% of pretax income is
subject to matching by Bristol. Bristol may elect to make matching contributions
of up to 50% of the employees' matchable contributions subject to certain
performance measures of Bristol. Bristol provided for matching contributions for
the years ended December 31, 1997 and 1996 totaling $1.5 million and $135,000,
respectively.
15. COMMITMENTS AND CONTINGENCIES
Substantially all of Bristol's hotel properties are (or will be in the next
year) operated pursuant to franchise or license agreements ("Franchise
Agreements"), primarily with Holiday Inn Franchising, Inc. or its affiliates.
Bristol also operates hotels under franchise agreements with Marriott
International, Inc., Hampton Inn (a division of Promus Hotels, Inc.), Ramada
Franchise Systems, Inc. and Days Inn Inc. of America Franchising Inc. The
Franchise Agreements generally require the payment of a monthly royalty fee
based on gross room revenue and various other fees associated with certain
marketing or advertising and centralized reservation services, also generally
based on gross room revenues. The Franchise Agreements have various durations
through the year 2017, and generally may not be terminated without the payment
of substantial fees. Franchise fees of $19.5 million and $4.1 million were paid
during the years ending December 31, 1997 and 1996, respectively.
The Franchise Agreements generally contain specific standards for, and
restrictions and limitations on, the operation and maintenance of the hotels
which are established by the franchisors to maintain uniformity in the system
created by each such franchisor. Such standards generally regulate the
appearance of the hotel, quality and type of goods and services offered, signage
and protection of trademarks. Compliance with such standards may from time to
time require significant expenditures for capital improvements.
Bristol is currently involved in certain guest and customer claims,
employee wage claims and other disputes arising in the ordinary course of
business. In the opinion of management, the pending litigation will not have a
materially adverse effect on Bristol's financial position or results of
operations.
In connection with the administration of the Dallas County Probate Court of
the estate of the deceased wife of H.K. Huie, Jr., one of Mr. Huie's daughters
(the "Plaintiff"), alleged self dealing and breach of duty and trust by Mr. Huie
as executor and testamentary trustee under his wife's will and in connection
with his
F-22
<PAGE> 66
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
actions as the managing general partner of Harvey Hotel Company and related
partnerships and ventures (the "Probate Proceeding"). Several of Bristol's
officers and certain subsidiaries were also named defendants in the Probate
Proceeding. In November 1995, Bristol and the Plaintiff entered into a
settlement agreement and release (the "Settlement Agreement") pursuant to which
Plaintiff agreed to release Bristol, including its subsidiaries, from the
lawsuit. Pursuant to the Settlement Agreement, Bristol paid an aggregate of $2.4
million for the Plaintiff's 1% interest in Harvey Hotel Company and a full
release from all claims and causes of action. However, at that time, the named
officers remained defendants in the Probate Proceeding. In the summer of 1996,
during continuing mediation with the officers, the Plaintiff threatened Bristol
with further action, claiming fraud and misrepresentation in the negotiation of
the November 1995 Settlement Agreement. In August 1996, there was a final
resolution of the Probate Proceeding, a result of which Bristol paid an
additional $0.75 million for the full satisfaction of all claims and causes of
action which could be asserted against Bristol, its subsidiaries or its
officers. Bristol had reserved $1.65 million for this litigation. As a result,
Bristol recognized $0.9 million ($0.6 million after tax) as other income during
the third quarter of 1996.
On March 28, 1997, Bristol paid approximately $663,000 to the State of
Tennessee Department of Revenue in full settlement of all claims for franchise
and excise tax related to United Inns, Inc.
All of the owned hotels of Bristol have undergone Phase I environmental
assessments which generally provide a physical inspection and data base search
but not soil or groundwater analysis. In addition, most of Bristol's hotels have
been inspected to determine the presence of asbestos-containing materials
("ACM's"). While ACM's are present in certain of Bristol's properties,
operations and maintenance programs for maintaining such ACM's have been
implemented, or the ACM's have been scheduled to be or have been abated, at such
hotels. None of the environmental assessments conducted to date have revealed
any environmental condition that management believes would have a material
adverse effect on Bristol's business, assets or results of operations, nor is
management aware of any such condition. However, it is possible that these
assessments have not revealed all potential environmental liabilities or that
there are material environmental liabilities of which management is not aware.
In September 1995, Bristol disposed of certain of its non-hotel properties
to HH Land Company, L.P. ("HH Land Company"). Upon acquisition of the non-hotel
properties, HH Land Company assumed all liabilities associated with the
non-hotel properties through a formal indemnification agreement, including
environmental liabilities associated with the properties. Bristol remains
contingently liable for the environmental costs associated with the properties.
At such time that Bristol determines that it is not probable that HH Land
Company will fully pay the remediation costs related to the disposed properties,
Bristol will recognize such liabilities.
Bristol leases the land underlying several of its hotels under various
long-term leases through the year 2063. Lease payments under the agreements were
$11.0 million and $2.6 million in 1997 and 1996, respectively.
Bristol and Mr. Huie, representing various land ventures, are co-borrowers
of funds secured by Harvey Hotel -- DFW Airport, Harvey Hotel-Dallas, Bristol
Suites, and the various related land parcels. Bristol and Mr. Huie agreed to an
assignment of the debt to the various unrelated land ventures resulting in the
assignment of 23.73%, 24.24% and 22.18% of the debt associated with the
borrowings for each property,
F-23
<PAGE> 67
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
respectively. The related land parcels underlying each hotel are owned by Mr.
Huie through the land ventures. The total debt and the amount allocated to Mr.
Huie are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
TOTAL ALLOCATED TOTAL ALLOCATED
DEBT TO HUIE DEBT TO HUIE
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Harvey Hotel -- DFW Airport................ $24,275 $5,762 $25,581 $6,071
Harvey Hotel -- Dallas..................... 7,442 1,802 7,600 1,843
Bristol Suites............................. 19,378 4,298 20,756 4,604
</TABLE>
Bristol is jointly and severally liable in the event of nonpayment by Mr.
Huie of the debt allocated. For December 31, 1997 and 1996, the allocated
amounts have not been reflected in the consolidated financial statements of
Bristol. However, Bristol does not record interest expense on the allocated debt
because payments made to Mr. Huie are appropriately recorded as rental expense
under the related land leases. The land parcels at the respective hotels are
security for the additional liability.
16. RELATED PARTY TRANSACTIONS
HOTEL PROPERTIES AGREEMENT
Concurrently with the Holiday Inn Acquisition, Bristol, and Holiday
Corporation and its affiliates (collectively, "HC") entered into a hotel
properties agreement (the "Hotel Properties Agreement"). Pursuant to the Hotel
Properties Agreement, Bristol will offer to HC the opportunity to enter into a
standard HC franchise agreement for each hotel that Bristol acquires, manages or
develops that meets specified criteria. The Hotel Properties Agreement requires
that 85% of the rooms in Bristol's owned, leased and managed hotels be operated
under a Holiday Inn brand, subject to certain limitations and approvals. The
above provisions of the Hotel Properties Agreement will expire the earlier of
(i) the date that HC terminates its obligation at any time following 24 months
after the Holiday Inn Acquisition (the "Holiday Notice") or (ii) the date that
HC no longer holds a controlling interest in the franchisor of the Holiday Inn
brands.
Additionally, Bristol has a right of first refusal on any entity or other
interest meeting certain criteria that HC wishes to acquire or develop, subject
to certain limitations. HC can terminate its obligation under this provision in
accordance with the Holiday Notice.
Bristol has agreed to enter into Franchise Agreements with HC pursuant to
which certain Bristol properties will be rebranded to Holiday Inn brands,
subject to normal franchising procedures. Franchise fees for these rebranded
hotels will equal 0% of room revenue for 1997, 1% in 1998, 3% in 1999 and 5% in
2000. Amounts paid to HC pursuant to Franchise Agreements and related marketing,
advertising and reservation services were $21.8 million in 1997, including $13.1
million for franchise royalty fees and $4.5 million of franchise marketing fees.
INTERIM SERVICES AGREEMENT
Bristol entered into an interim services agreement (the "ISA Agreement")
with Holiday Hospitality Corporation ("HHC") for HHC to provide certain
accounting, payroll, employee benefit, training, treasury, management
information and construction and design services to Bristol for a transition
period following the Holiday Inn Acquisition. In consideration for such
services, Bristol reimbursed HHC for the estimated cost incurred in connection
with providing the services, totaling $1.3 million for the year ended December
31, 1997. The ISA Agreement expired in October 1997.
F-24
<PAGE> 68
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
17. FAIR VALUE
Bristol has estimated the fair value of its financial instruments at
December 31, 1997 and 1996, as required by Statement of Financial Accounting
Standards No. 107, "Disclosure about Fair Value of Financial Instruments." The
carrying values of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses are reasonable estimates of their fair values.
Marketable securities are carried at fair value, which is determined based upon
quoted market prices. The carrying values of variable and fixed rate debt are
reasonable estimates of their fair values.
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
The unaudited consolidated quarterly results of operations for Bristol and
the unaudited combined quarterly results of operations for the Predecessor are
as follows (in thousands):
<TABLE>
<CAPTION>
1995
--------------------------------------------------------------------
BRISTOL HOTEL COMPANY
HARVEY HOTEL -----------------------------------------------------
COMPANIES FEBRUARY TO SECOND THIRD FOURTH
JANUARY 1995 MARCH QUARTER QUARTER QUARTER
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues......................... $5,943 $ 29,910 $ 43,040 $ 46,205 $ 46,040
Operating income................. 1,932 6,221 8,016 5,484 6,874
Income (loss) before
extraordinary item............. 1,280 2,268 2,056 (290) 935
Net income (loss)................ 1,280 2,268 2,056 (290) (973)
Earnings per common share:
Income (loss) before
extraordinary item:
Basic....................... -- $ 0.13 $ 0.12 $ (0.02) $ 0.05
Diluted..................... -- $ 0.13 $ 0.12 $ (0.02) $ 0.05
Net income (loss):
Basic....................... -- $ 0.13 $ 0.12 $ (0.02) $ (0.05)
Diluted..................... -- $ 0.13 $ 0.12 $ (0.02) $ (0.05)
Weighted average number of common
and common equivalent shares:
Basic....................... -- 17,436,267 17,436,267 17,436,267 18,967,108
Diluted..................... -- 17,460,202 17,479,061 17,479,953 19,050,967
</TABLE>
F-25
<PAGE> 69
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996
-----------------------------------------------------
BRISTOL HOTEL COMPANY
-----------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues.................................. $ 49,677 $ 51,237 $ 58,571 $ 52,355
Operating income.......................... 10,318 11,282 16,073 9,093
Income before extraordinary item.......... 3,863 4,375 6,835 2,676
Net income................................ 3,863 4,375 6,835 2,676
Earnings per common share:
Income before extraordinary item:
Basic................................ $ 0.16 $ 0.18 $ 0.28 $ 0.11
Diluted.............................. $ 0.15 $ 0.17 $ 0.27 $ 0.10
Net income:
Basic................................ $ 0.16 $ 0.18 $ 0.28 $ 0.11
Diluted.............................. $ 0.15 $ 0.17 $ 0.27 $ 0.10
Weighted average number of common and
common equivalent shares:
Basic................................... 24,848,760 24,848,760 24,848,760 24,848,760
Diluted................................. 25,511,455 25,552,515 25,530,737 25,524,361
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------------------------
BRISTOL HOTEL COMPANY
-----------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues.................................. $ 58,261 $ 131,615 $ 163,005 $ 151,637
Operating income.......................... 13,301 26,909 32,252 25,434
Income before extraordinary item.......... 4,410 9,622 12,066 7,116
Net income (loss)......................... 4,410 8,284 12,066 (4,287)
Earnings per common share:
Income (loss) before extraordinary item:
Basic................................ $ 0.18 $ 0.26 $ 0.28 $ 0.16
Diluted.............................. $ 0.17 $ 0.25 $ 0.27 $ 0.16
Net income (loss):
Basic................................ $ 0.18 $ 0.22 $ 0.28 $ (0.10)
Diluted.............................. $ 0.17 $ 0.22 $ 0.27 $ (0.10)
Weighted average number of common and
common equivalent shares:
Basic................................... 24,848,760 37,041,425 43,635,401 43,636,444
Diluted................................. 25,796,808 37,997,744 44,643,133 44,629,022
</TABLE>
Earnings per common share amounts and weighted average number of common and
common equivalent shares have been retroactively adjusted to reflect the July
15, 1997 Stock Split and calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." The sum of the earnings
(loss) per common share for the four quarters differs from the annual earnings
per common share due to the required method of computing the weighted average
number of shares in the respective periods.
F-26
<PAGE> 70
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
19. SUBSEQUENT EVENT -- OMAHA ACQUISITION
On February 2, 1998, Bristol announced that it had entered into a
definitive agreement to acquire 20 midwestern hotels. Under the transaction,
Bristol will acquire by merger Omaha Hotel, Inc. and will purchase an individual
hotel. The total consideration for these assets is as follows: $19.1 million in
cash, $40.9 million of assumed debt and 1.43 million shares of Bristol's common
stock. The portfolio consists of nine full-service Holiday Inns, five Holiday
Inns Express hotels, five Hampton Inns and one Homewood Suites with locations in
Omaha, Nebraska; Moline, Illinois; Davenport, Iowa; central Kansas and
Midland/Odessa, Texas. The acquisition is anticipated to close in April 1998.
20. SUBSEQUENT EVENT -- PROPOSED MERGER
On March 24, 1998, Bristol announced a proposed merger with FelCor Suite
Hotels, Inc. ("FelCor"), subject to approval by shareholders of both companies
and final documentation. Under the terms of the proposed merger, FelCor will
acquire the real estate holdings and associated debt of Bristol in return for
31.7 million shares of newly issued FelCor stock. Prior to the merger, Bristol
will spin off, as a taxable dividend, all of its non-real estate holdings into a
newly formed public company to be known as Bristol Hotels & Resorts, Inc. ("New
Bristol").
Each of Bristol's outstanding common shares will be exchanged for .685
shares of FelCor common stock. In addition, Bristol shareholders will receive a
taxable distribution of one share of New Bristol common stock for each share of
Bristol.
The merger is expected to close by the end of June 1998.
F-27
<PAGE> 71
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
BRISTOL HOTELS & RESORTS, INC.
By: /s/ J. PETER KLINE
---------------------------
J. Peter Kline,
Chief Executive Officer
Date: April 21, 1998
<PAGE> 72
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
------- ----
<C> <S>
2.1 -- Spin-Off Agreement among the Company, Bristol and Bristol
Management Corporation*
3.1 -- Certificate of Incorporation
3.2 -- Form of First Amended and Restated Certificate of
Incorporation contemplated to be filed in connection with
the spin-off*
3.3 -- Bylaws*
3.4 -- Form of First Amended and Restated Bylaws contemplated to
be filed in connection with the spin-off*
3.5 -- Form of certificate for common shares
4.1 -- Form of Registration Rights Agreement among the Company,
Bass America Inc., Holiday Corporation and United/Harvey
Holdings
4.2 -- Form of Stockholders' Agreement among the Company,
Holiday Corporation, Bass America Inc., Bass plc and
United/Harvey Holdings
9.1 -- Voting and Cooperation Agreement among FelCor, Bristol,
Bass America Inc., Holiday Corporation and United/Harvey
Holdings
10.1 -- Agreement Regarding Master Hotel Agreement between the
Company and FelCor and FelCor Suites Limited Partnership*
10.2 -- Form of Hotel Properties Agreement between Holiday
Hospitality and the Company
10.3 -- Employment Agreement between the Company and J. Peter
Kline(1)
10.4 -- Employment Agreement with John A. Beckert(2)
10.5 -- Form of 1998 Equity Incentive Plan
10.6 -- Form of 1998 Non-Employee Directors Stock Option Plan
21.1 -- Subsidiaries of the Company
99.1 -- Consent of Reginald K. Brack, Jr. to being named as a
person who is to become a director
99.2 -- Consent of David A. Dittman to being named as a person
who is to become a director
99.3 -- Consent of Thomas R. Oliver to being named as a person
who is to become a director
99.4 -- Consent of James J. Pinto to being named as a person who
is to become a director
99.5 -- Consent of Kurt C. Read to being named as a person who is
to become a director
99.6 -- Consent of Robert A. Whitman to being named as a person
who is to become a director
</TABLE>
- ---------------
* To be filed by amendment
(1) Incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K
of Bristol Hotel Company filed with the SEC on March 30, 1998.
(2) Incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K
of Bristol Hotel Company filed with the SEC on March 30, 1998.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
BRISTOL HOTELS & RESORTS, INC.
The undersigned, being a natural person of the age of eighteen (18) years
or more, acting as incorporator in order to form the Corporation under the
provisions and subject to the requirements of the laws of the State of
Delaware, particularly Chapter 1, Title 8 of the Delaware code and the acts
amendatory thereof and supplemental thereto, and known, identified, and
referred to as the General Corporation Law ("GCL") of the State of Delaware for
the purposes hereinafter stated, do hereby adopt and certify the following
Certificate ("Certificate") for such Corporation:
ARTICLE ONE
The name of the corporation ("Corporation") is Bristol Hotels & Resorts,
Inc.
ARTICLE TWO
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle.
The name of its registered agent at that address is Corporation Service Company.
ARTICLE THREE
The purpose or purposes for which the Corporation is organized are to
engage in and transact any or all lawful acts, activities or businesses for
which corporations may be organized under the GCL. The period of its duration
is perpetual.
ARTICLE FOUR
The aggregate number of shares which the Corporation has the authority to
issue is 1,000 shares of the par value of $0.01 each. The shares are designated
Common Stock and have identical rights and privileges in every respect. Each
holder of Common Stock will have one vote for each share of Common Stock held.
ARTICLE FIVE
The address of the Incorporator of the Corporation in the State of
Delaware is 14295 Midway, Dallas, Texas 75244. The name of the Incorporator of
the Corporation at that address is Lynn Marie Lucier. The powers of the
Incorporator shall terminate upon the filing of the Certificate.
ARTICLE SIX
The names and mailing addresses of the initial directors who are to serve
until the first annual meeting of the stockholders, or until their successors
are elected and qualified, are:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
J. Peter Kline 14295 Midway Road
Dallas, Texas 75244
John A. Beckert 14295 Midway Road
Dallas, Texas 75244
</TABLE>
ARTICLE SEVEN
Directors shall be elected by majority vote. Cumulative voting shall not
be permitted.
PAGE 1
<PAGE> 2
ARTICLE EIGHT
No holder of any stock of the Corporation shall be entitled as a matter of
right to purchase or subscribe for any part of (i) any stock of the Corporation
authorized by this Certificate, (ii) any additional stock of any class to be
issued by reason of any increase in the authorized stock of the Corporation,
or (iii) any bonds, certificates of indebtedness, debentures, warrants, options
or other securities convertible into any class of stock of the Corporation,
but any stock authorized by this Certificate or any such additional authorized
stock or securities convertible into any stock may be issued and disposed of by
the Board of Directors to such persons, firms, Corporations, or associations
for such consideration, upon such terms and in such manner as the Board of
Directors may, in its discretion, determine to be appropriate without offering
any thereof on the same terms or on any terms to the stockholders then of
record or to any class of stockholders, provided only that such issuance may
not be inconsistent with any provision of law or with any of the provisions of
this Certificate.
ARTICLE NINE
The following provisions are inserted for the management of the business
and the conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its directors
and stockholders:
(1) The directors shall have concurrent power with and independent
from the stockholders to make, alter, amend, change, add to or repeal the
Bylaws of the Corporation.
(2) The maximum number of directors which may serve the Corporation
from time-to-time shall be fixed by the Bylaws of the Corporation in the
manner provided therein. Election of directors need not be by written
ballot unless the Bylaws so provide.
(3) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the statutes of Delaware, this Certificate and any Bylaws
adopted by the stockholders; provided, however, that no Bylaws hereafter
adopted by the stockholders shall invalidate any prior act of the directors
which would have been valid if such Bylaws had not been adopted.
ARTICLE TEN
The election of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide. Meetings of stockholders may be held within
or without the State of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of the Corporation.
ARTICLE ELEVEN
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of Title 8 of the Delaware
Code, order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders, of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders, of this
Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and
PAGE 2
<PAGE> 3
the said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on this Corporation and on all the
creditors or class of creditors, and/or on all stockholders or class of
stockholders, of this Corporation, as the case may be.
ARTICLE TWELVE
The Corporation shall indemnify directors, officers, employees and agents
of the Corporation in a manner and to the maximum extent permitted from
time-to-time by the Delaware General Corporation Law and the Bylaws of this
Corporation.
ARTICLE THIRTEEN
A director of the Corporation shall not be liable to the Corporation or
its stockholders for monetary damages for an act or omission in the director's
capacity as a director, except that this Article shall not authorize the
elimination or limitation of the liability to the extent the director is found
liable for:
(1) a breach of the director's duty of loyalty to the Corporation or
its stockholders;
(2) an act or omission not in good faith that constitutes a breach of
duty of the director to the Corporation or an act or omission that involves
intentional misconduct or a knowing violation of the law;
(3) a transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action taken within
the scope of the director's office; or
(4) an act or omission for which the liability of a director is
expressly provided by an applicable statute.
ARTICLE FOURTEEN
Stockholders, an owner of any beneficial interest in the shares, or a
subscriber for shares whose subscription has been accepted shall be under no
obligation to the Corporation or to its obligees with respect to:
(1) such shares other than the obligation to pay the Corporation the
full amount of the consideration fixed in compliance with the GCL, for
which such shares were or are to be issued;
(2) any contractual obligation of the Corporation on the basis of
actual or constructive fraud, or a sham to perpetrate a fraud, unless the
obligee demonstrates that the holder, owner, or subscriber caused the
Corporation to be used for the purpose of perpetrating, and did perpetrate,
an actual fraud on the obligee primarily for the direct personal benefit of
the holder, owner, or subscriber; or
(3) any contractual obligation of the Corporation on the basis of the
failure of the Corporation to observe any corporate formality, including,
without limitation:
(a) the failure to comply with any requirement of the GCL or the
Certificate or Bylaws of the Corporation;
(b) the failure to observe any requirement prescribed by the GCL
or the Certificate or Bylaws for acts to be taken by the Corporation,
its Board of Directors or stockholders.
PAGE 3
<PAGE> 4
IN WITNESS WHEREOF, this Certificate has been executed this 20th day of
March, 1998, by the undersigned who affirms that the statements contained
herein are true and correct under penalty of perjury.
/s/ LYNN MARIE LUCIER
-------------------------------
Lynn Marie Lucier, Incorporator
<PAGE> 1
EXHIBIT 3.5
DESCRIPTION OF SPECIMEN COMMON STOCK CERTIFICATE
[FRONT]
TEMPORARY CERTIFICATE EXCHANGEABLE FOR DEFINITIVE ENGRAVED
CERTIFICATE WHEN READY FOR DELIVERY
INCORPORATED UNDER THE LAWS OF COMMON STOCK
THE STATE OF DELAWARE PAR VALUE $.01
NUMBER SHARES
C
THIS CERTIFICATE IS TRANSFERABLE CUSIP
IN NEW YORK, NY SEE REVERSE FOR CERTAIN
DEFINITIONS
BRISTOL HOTELS & RESORTS
This certifies that
is the owner of
SHARES OF FULLY PAID AND NON-ASSESSABLE COMMON STOCK OF
Bristol Hotels & Resorts transferable on the books of the Corporation by
the holder hereof in person or by duly authorized attorney, upon surrender of
this certificate properly endorsed. This certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witnesseth
CERTIFICATE OF STOCK
/s/ J. Peter Kline DATE
Chairman of the Board COUNTERSIGNED AND REGISTERED
<PAGE> 2
AMERICAN STOCK TRANSFER & TRUST
TRANSFER AGENT
AND REGISTRAR,
BY
- ------------------------ ---------------------------------------
Secretary AUTHORIZED SIGNATURE
BRISTOL HOTELS & RESORTS
CORPORATE
SEAL
DELAWARE
[REVERSE]
BRISTOL HOTELS & RESORTS
The Corporation will furnish to any stockholder, upon request and without
charge, a statement of the powers, designations, and relative rights,
preferences and limitations of each class of stock or series thereof of the
Corporation, and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or the
Transfer Agent.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ (Cust)
TEN ENT - as tenants by the entireties Custodian ________(Minor) under Uniform
JT TEN - as joint tenants with rights of Gifts to Minors Act _________ (State)
survivorship and not as tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ________ hereby sell, assign and transfer unto
_____________ [PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE] [PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE
OF ASSIGNEE] ___________ shares of the capital stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint __________
Attorney to transfer the said stock on the books of the within-named Company
with full power of substitution in the premises. Dated, ________
<PAGE> 3
NOTICE:
THE SIGNATURE(S) TO X__________(SIGNATURE)
THIS ASSIGNMENT MUST
CORRESPOND WITH THE X__________(SIGNATURE)
NAME(S) AS WRITTEN
UPON THE FACE OF THE THE SIGNATURE(S) SHOULD BE
CERTIFICATE IN EVERY GUARANTEED BY AN ELIGIBLE
PARTICULAR WITHOUT GUARANTOR INSTITUTION (BANKS,
ALTERATION OR STOCKBROKERS, SAVINGS AND LOAN
ENLARGEMENT OR ANY ASSOCIATIONS AND CREDIT UNIONS CHANGE
WHATEVER. WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15.
SIGNATURE(S) GUARANTEED BY:
<PAGE> 1
EXHIBIT 4.1
================================================================================
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
BRISTOL HOTELS & RESORTS, INC.
BASS AMERICA INC.
HOLIDAY CORPORATION
AND
UNITED/HARVEY HOLDINGS, L.P.
DATED ___________, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Demand Registration . . . . . . . . . . . . . . . . . . . . . 3
3. Piggyback Registration . . . . . . . . . . . . . . . . . . . . 5
4. "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . 7
5. Registration Procedures . . . . . . . . . . . . . . . . . . . 8
6. Registration Expenses . . . . . . . . . . . . . . . . . . . . 14
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 14
8. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9. Underwritten Registrations . . . . . . . . . . . . . . . . . . 18
10. Indemnification of Statutory Underwriters . . . . . . . . . . 18
11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
i
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made
and entered into as of ________________, 1998, by and among Bristol Hotels &
Resorts, Inc., a Delaware corporation ("BHR"), Bass America Inc., a Delaware
corporation ("BAI"), Holiday Corporation, a Delaware corporation ("HC"), and
United/Harvey Holdings, L.P., a Delaware limited partnership ("Holdings").
RECITALS
The parties hereto have entered into, or are equity owners in entities
that have entered into, other agreements which contemplate, among other things,
the execution and delivery of this Agreement by the parties hereto.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements herein contained, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
have the respective meanings set forth below when used herein with initial
capital letters:
"Advice" has the meaning set forth in Section 5 hereto.
"Bass Parties" means BAI and HC and any of their transferees who are
Affiliates of Bass plc.
"Blackout" has the meaning set forth in Section 5 hereto.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York or Dallas, Texas are authorized or
obligated to close.
"Common Stock" means the Common Stock, par value $.01 per share, of BHR.
"Demand Notice" has the meaning set forth in Section 2(a) hereto.
"Demand Registration" has the meaning set forth in Section 2(a) hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as in effect from time to
time.
"indemnified party" has the meaning set forth in Section 7(c) hereto.
<PAGE> 4
"indemnifying party" has the meaning set forth in Section 7(c) hereto.
"Losses" has the meaning set forth in Section 7(a) hereto.
"Notice" has the meaning set forth in Section 2(b) hereto.
"Person" means an individual, corporation, partnership, association,
trust, limited liability company, joint venture or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Piggyback Registration" has the meaning set forth in Section 3(a)
hereto.
"Prospectus" means the prospectus included in any Registration Statement
(including without limitation a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means (i) all the shares of Common Stock
beneficially owned by a Stockholder as of the date hereof, (ii) all shares of
Common Stock which a Stockholder has an option to purchase as of the date
hereof (including without limitation shares of Common Stock subject to the
Amended and Restated Put/Call Option Agreement, dated as of November 16, 1995,
by and between Harvey Hotel Holdings, Inc., H.K. Huie, Jr. and the other
parties thereto, as amended from time to time), and (iii) all other shares of
Common Stock (including shares of Common Stock issued pursuant to the other
Securities of BHR that are exercisable to purchase, convertible into, or
exchangeable for shares of Common Stock), whether acquired before or after the
date of this Agreement, until, in the case of any such security, (i) such
security is effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it, (ii) such security is
saleable by the holder thereof pursuant to Rule 144(k), (iii) such security is
saleable by the holder thereof pursuant to Rule 144 without regard to any
volume limitations, or (iv) such security is distributed to the public pursuant
to Rule 144.
"Registration Statement" means any registration statement of BHR under
the Securities Act that covers any of the Registrable Securities pursuant to
the provisions of this Agreement, including the related Prospectus, all
amendments and supplements
2
<PAGE> 5
to such registration statement (including post-effective amendments), all
exhibits and all materials incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations promulgated thereunder, as in effect from time to time.
"Special Counsel" has the meaning set forth in Section 5(a) hereto.
"Spin-Off" means the consummation of the spin-off contemplated under the
Spin-Off Agreement dated as of March 23, 1998, among Bristol Hotel Company,
Bristol Hotel Management Corporation and BHR.
"Stockholder" means each of (i) the Bass Parties, as a group, (ii)
Holdings, and (iii) any of Holdings' direct or indirect constituent partners to
whom it distributes any of its shares of Common Stock.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Suspension Notice" has the meaning set forth in Section 5 hereto.
"Underwritten Registration" or "Underwritten Offering" means a
registration under the Securities Act in which securities of BHR are sold to an
underwriter or group of underwriters for reoffering to the public.
2. Demand Registration. (a) Requests for Registration. At any time
and from time to time after the date of the Spin-Off, each Stockholder will
have the right by written notice delivered to BHR (a "Demand Notice") to
require BHR to register the number of Registrable Securities requested to be so
registered in accordance with the provisions of the Securities Act (a "Demand
Registration"), but in no event fewer than would result in $5,000,000 of
Registrable Securities being registered or all Registrable Securities owned by
the Stockholder delivering the Demand Notice if it owns less than $5,000,000 of
Registrable
3
<PAGE> 6
Securities; provided, however, that no Stockholder may deliver a Demand Notice
until 120 days after the effective date of the immediately preceding Demand
Registration.
The number of Demand Registrations pursuant to this Section 2(a) will
not exceed three on behalf of the Bass Parties, and three on behalf of
Holdings; provided, however, that in determining the number of Demand
Registrations to which the Stockholders are entitled there will be excluded (i)
any Demand Registration that is an Underwritten Registration if the managing
underwriter or underwriters have advised the Stockholders whose Registrable
Securities are being registered in the Demand Registration that the total
number of Registrable Securities requested to be included in the Demand
Registration exceeds the number of Registrable Securities that can be sold in
that offering in accordance with the provisions of this Agreement without
materially and adversely affecting the success of such offering, (ii) any
Demand Registration that does not become effective or is not maintained
effective for the period required pursuant to Section 2(b), unless in the case
of this clause (ii) the Demand Registration does not become effective after
being filed by BHR solely by reason of the refusal to proceed by the holders of
Registrable Securities unless (A) the refusal to proceed is based upon the
advice of counsel relating to a matter with respect to BHR or (B) the
Stockholders that requested their Registerable Securities to be included in the
Demand Registration elect to pay all registration expenses in connection with
that Demand Registration, or (iii) any Demand Registration requested by a
Stockholder in which the other Stockholder elects to participate under Section
2(b).
(b) Filing and Effectiveness. BHR will file a Registration Statement
relating to any Demand Registration within 60 calendar days and will use its
reasonable best efforts to cause the Registration Statement to be declared
effective by the SEC within 120 calendar days of the date on which BHR received
the related Demand Notice.
Each Demand Notice must specify the number of Registrable Securities to
be registered and the intended methods of distribution of those Registerable
Securities. If the Stockholder delivering the Demand Notice specifies one
particular type of Underwritten Offering, the method of distribution will be
that type of Underwritten Offering or a series of that type of Underwritten
Offerings during the period during which the Registration Statement is
effective.
In connection with a Demand Registration pursuant to Section 2(a), BHR
will keep the Registration Statement effective for a period of not less than
180 days or such shorter period which will terminate when all Registrable
Securities covered by such Registration Statement have been sold. If any
Demand
4
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Registration is requested to be effected as a "shelf" registration, BHR will
keep the Registration Statement filed in respect of that Demand Registration
effective for a period of up to 12 months from the date on which the SEC
declares that Registration Statement effective (subject to extension pursuant
to Section 5 hereof) or such shorter period that will terminate when all
Registrable Securities covered by that Registration Statement have been sold
pursuant to that Registration Statement.
Within 10 calendar days after receipt of a Demand Notice, BHR will serve
written notice of its receipt of the Demand Notice (the "Notice") to the other
Stockholder and will, subject to the provisions of Section 2(c), include in
that Demand Registration all Registrable Securities with respect to which BHR
receives a written request for inclusion therein within 20 calendar days after
the receipt of the Notice by the other Stockholder.
(c) Priority on Demand Registration. If any of the Registrable
Securities registered pursuant to a Demand Registration are to be sold in one
or more firm commitment Underwritten Offerings, BHR may also provide written
notice to holders of its equity securities (other than Registrable Securities),
if any, who have piggyback registration rights with respect thereto and will
permit all of those holders who request to be included in the Demand
Registration to include any or all equity securities held by those holders in
that Demand Registration on the same terms and conditions as the Registrable
Securities. Notwithstanding the foregoing, if the managing underwriter or
underwriters of the Underwritten Offering to which that Demand Registration
relates advises the Stockholders whose Registrable Securities are being
registered that the total amount of Registrable Securities and securities that
the other equity security holders intend to include in that Demand Registration
is in the aggregate such as to materially and adversely affect the success of
the offering, then (i) first, the amount of securities to be offered for the
account of the holders of the other equity securities will be reduced, to zero
if necessary, pro rata among the holders on the basis of the amount of the
other securities to be included therein by each holder and (ii) the number of
Registrable Securities included in such Demand Registration will, if necessary,
be reduced and there will be included in such firm commitment Underwritten
Offering the number of Registrable Securities that in the opinion of such
managing underwriter or underwriters can be sold without materially and
adversely affecting the success of such offering, allocated pro rata among the
holders of Registrable Securities on the basis of the amount of Registrable
Securities to be included therein by each holder.
(d) Postponement of Demand Registration. BHR will be entitled to
postpone the filing period (or suspend the effectiveness) of any Demand
Registration for a reasonable period of time not in excess of 90 calendar days
during any period of 12
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consecutive months, if BHR determines, in the good faith exercise of its
reasonable business judgment, that the Demand Registration and offering could
materially interfere with bona fide financing plans of BHR or would require
disclosure of information, the premature disclosure of which could materially
and adversely affect BHR. If BHR postpones the filing of a Demand Registration
Statement, it will promptly notify the Stockholders whose Registrable
Securities are the subject of that Demand Registration in writing when the
events or circumstances permitting such postponement have ended.
3. Piggyback Registration. (a) Right to Piggyback. If at any time
BHR proposes to file a registration statement under the Securities Act with
respect to an offering of any class of equity securities (other than a
registration statement (i) on Form S-4, S-8 or any successor form thereto or
(ii) filed solely in connection with an offering made solely to employees of
BHR), whether or not for its own account, then BHR will give written notice of
the proposed filing to the Stockholders as soon as practicable but in any event
at least 30 calendar days before the anticipated filing date. That notice will
offer the Stockholders the opportunity to register such amount of Registrable
Securities as each Stockholder may request (a "Piggyback Registration").
Subject to Section 3(b), BHR will include in each Piggyback Registration all
Registrable Securities with respect to which BHR has received written requests
for inclusion in that Piggyback Registration. The Stockholders will be
permitted to withdraw all or part of the Registrable Securities from a
Piggyback Registration at any time prior to the effective date of the Piggyback
Registration.
(b) Priority on Piggyback Registrations. BHR will cause the managing
underwriter or underwriters of a proposed Underwritten Offering to permit the
Stockholders that requested their Registerable Securities to be included in the
Piggyback Registration for that offering to include therein all Registrable
Securities requested to be so included on the same terms and conditions as any
similar securities, if any, of BHR included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of the offering deliver
an opinion to the Stockholders to the effect that the total amount of
securities which the Stockholders, BHR and any other persons having rights to
participate in that registration propose to include in the offering exceeds the
number of securities that can be sold in the offering without materially and
adversely affecting the success of the offering, then:
(i) if the registration is a primary registration on behalf of
BHR, BHR will include therein (x) first, up to the full amount of
securities BHR proposes to sell that, in the opinion of the managing
underwriter or underwriters, can be sold, (y) second, the amount of
Registrable Securities
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proposed to be sold for the account of Stockholders in excess of the
amount of securities BHR proposes to sell that, in the opinion of such
managing underwriter or underwriters, can be sold (allocated pro rata
among the Stockholders on the basis of the Registrable Securities
requested to be included therein by each Stockholder), and (z) third,
the amount of securities proposed to be sold for the account of any
other Person (other than BHR and the Stockholders) in excess of the
amounts of securities and Registrable Securities BHR and the
Stockholders propose to sell that, in the opinion of such managing
underwriter or underwriters, can be sold (allocated among such Persons
as may be agreed, or if no other agreement, on the basis of the amount
of securities requested to be included therein); and
(ii) if the registration is an underwritten secondary
registration on behalf of holders of securities of BHR other than the
Stockholders, BHR will include therein: (x) first, up to the full number
of securities of the Persons exercising "demand" registration rights
that in the opinion of the managing underwriter or underwriters can be
sold or allocated among such holders or as they may otherwise so
determine, (y) second, the amount of Registrable Securities proposed to
be sold for the account of Stockholders in excess of the amount of
securities such Persons exercising "demand" registration rights propose
to sell that, in the opinion of such managing underwriter or
underwriters, can be sold (allocated pro rata among the Stockholders on
the basis of the Registrable Securities requested to be included
therein), and (z) third, the amount of securities proposed to be sold
for the account of any other Person (other than such Persons exercising
"demand" registration rights and the Stockholders) in excess of the
amounts of securities and Registrable Securities such Persons exercising
"demand" registration rights and the Stockholders propose to sell that,
in the opinion of such managing underwriter or underwriters, can be sold
(allocated among such Persons as may be agreed, or if no other
agreement, on the basis of the amount of securities requested to be
included therein).
(c) Registration of Securities Other than Registrable Securities.
Without the written consent of the Stockholders, BHR will not grant to any
person the right to request BHR to register any securities of BHR under the
Securities Act unless the rights so granted are subject to the prior rights of
the Stockholders set forth herein and, if exercised, would not otherwise
conflict or be inconsistent in any way with the provisions of this Agreement.
4. "Market Stand-Off" Agreement. The Bass Parties and Holdings will
not, to the extent requested (by timely written notice) by the managing
underwriter or underwriters for any
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Underwritten Offering of BHR's capital stock (or any securities issued by BHR
that are exercisable to purchase, convertible into or exchangeable for shares
of capital stock of BHR), for BHR's account, in which the expected gross
proceeds of such offering equal or exceed $25 million, sell, make any short
sale of, lend, grant any option for the purchase of or otherwise transfer or
dispose of any Registerable Securities (except to the extent permitted in the
Underwritten Offering) without the prior written consent of BHR and/or managing
underwriter or underwriters for such period of time (not to exceed 90 days)
from the effective date of the registration statement relating to the
Underwritten Offering as BHR and/or managing underwriter or underwriters may
specify. BHR may impose stop-transfer instructions with respect to the
Registerable Securities of each of the Bass Parties and Holdings until the end
of that 90-day period in order to enforce these restrictions. In no event,
however, will the foregoing parties be required to enter into more than one
such agreement during any period of 12 consecutive months or agree to restrict
any transfer of its Registrable Securities conducted within the volume
limitations of Rule 144.
5. Registration Procedures. In connection with BHR's registration
obligations pursuant to Sections 2 and 3, BHR will effect those registrations
to permit the sale of the Registrable Securities in accordance with the
intended method or methods of distribution of those Registrable Securities, and
pursuant thereto BHR will as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the Stockholder
in accordance with the intended method or methods of distribution
thereof, and cause each such Registration Statement to become effective
and remain effective as provided herein; provided, however, that not
less than three Business Days before filing a Registration Statement or
Prospectus or any amendments or supplements thereto (excluding documents
that would be incorporated or deemed to be incorporated therein by
reference) BHR will furnish to the Stockholder whose Registrable
Securities are covered by that Registration Statement, counsel for such
Stockholder with respect to such registration ("Special Counsel") and
the managing underwriters, if any, copies of all documents proposed to
be filed, which documents will be subject to the review of the
Stockholder, the Special Counsel and underwriters, and BHR will not file
any Registration Statement or amendment thereto or any Prospectus or any
supplement thereto (excluding any documents which, upon filing, would or
would be incorporated or deemed to be incorporated by reference therein)
to which the Stockholders whose Registrable Securities are covered by
that Registration Statement, the
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Special Counsel or the managing underwriter, if any, may reasonably
object on a timely basis;
(b) Prepare and file with the SEC any amendments and post-
effective amendments to each Registration Statement as may be necessary
to keep the Registration Statement continuously effective for the
applicable period specified in Section 2; cause the related Prospectus
to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Securities Act; and comply with the provisions
of the Securities Act with respect to the distribution of all securities
covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the sellers
thereof set forth in the Registration Statement as so amended or to the
Prospectus as so supplemented;
(c) Notify the Stockholders selling Registrable Securities,
the Special Counsel and the managing underwriters, if any, promptly, and
(if requested by any of those Persons) confirm such notice in writing,
(i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement
or any post-effective amendment, when the Registration Statement or
amendment has become effective, (ii) of any request by the SEC or any
other federal or state governmental authority for amendments or
supplements to a Registration Statement or related Prospectus or for
additional information, (iii) of the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if at any time the representations
and warranties of BHR contained in any agreement contemplated by Section
5(l) (including any underwriting agreement) cease to be true and
correct, (v) of the receipt by BHR of any notification with respect to
the suspension of the qualification or exemption from qualification of
any of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (vi) of
the occurrence of any event which makes any statement made in the
Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or which requires the making of any changes in a
Registration Statement, Prospectus or document so that, in the case of
the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and,
in the case of the Prospectus, it will not contain any
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untrue statement of a material fact or omit to state any material fact
required to be stated or that is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (vii) of BHR's reasonable determination that a post-
effective amendment to a Registration Statement would be appropriate;
(d) Use every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement, or
the lifting of any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest possible moment;
(e) If requested by the managing underwriters, if any, or the
Stockholders whose Registrable Securities are being registered, (i)
promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters, if any, and
those Stockholders agree should be included therein to comply with
applicable law and (ii) make all required filings of the Prospectus
supplement or such post-effective amendment as soon as practicable after
BHR has received notification of the matters to be incorporated in the
Prospectus supplement or post-effective amendment; provided, however,
that BHR will not be required to take any actions under this Section
5(e) that are not, in the reasonable opinion of counsel for BHR, in
compliance with applicable law;
(f) Furnish to each Stockholder whose Registrable Securities are
being registered, the Special Counsel and each managing underwriter, if
any, without charge, conformed copies of the Registration Statement and
each post-effective amendment or supplement thereto, including financial
statements (including schedules, all documents incorporated or deemed
incorporated therein by reference and all exhibits) as the Stockholder
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Stockholder;
(g) Deliver to each Stockholder whose Registrable Securities
are being registered, the Special Counsel and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses
relating to those Registrable Securities (including each preliminary
prospectus) and any amendment or supplement thereto as those Persons may
request; and BHR hereby consents to the use of that Prospectus or each
amendment or supplement thereto by each of the Stockholder whose
Registrable Securities and the underwriters, if any, in connection with
the offering and sale of the Registrable Securities covered by that
Prospectus or any amendment or supplement thereto;
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(h) Cooperate with the Stockholders that are selling
Registrable Securities and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates will
not bear any restrictive legends; and enable the Registrable Securities
to be in such denominations and registered in such names as the managing
underwriters, if any, may request at least two Business Days prior to
any sale of Registrable Securities to the underwriters;
(i) Cause the Sale of Registrable Securities covered by the
applicable Registration Statement to be registered with or approved by
such other governmental agencies or authorities within the United States
except as may be required solely as a consequence of the nature of a
Stockholder's business, in which case BHR will cooperate in all
reasonable respects with the filing of such Registration Statement and
the granting of such approvals as may be necessary to enable the
Stockholder or the underwriters, if any, to consummate the disposition
of such Registrable Securities;
(j) Upon the occurrence of any event contemplated by Section
5(c)(vi) or 5(c)(vii) hereof, promptly prepare a supplement or post-
effective amendment to each Registration Statement or a supplement to
the related Prospectus or any document incorporated therein by reference
or file any other required document so that, as thereafter delivered to
the purchasers of the Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(k) Use its best efforts to cause all Registrable Securities
covered by such Registration Statement to be (i) listed on each
securities exchange, if any, on which similar securities issued by BHR
are then listed or, if no similar securities issued by BHR are then so
listed, on the New York Stock Exchange or another national securities
exchange if the securities qualify to be so listed or (ii) authorized to
be quoted on the Nasdaq National Market System or the Nasdaq SmallCap
Market if the securities qualify to be so quoted; in each case, if
requested by the holders of a majority of the Registrable Securities
covered by such Registration Statement or the managing underwriters, if
any;
(l) Enter into such agreements (including, in the event of an
Underwritten Offering, an underwriting agreement in form, scope and
substance as is customary in underwritten
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offerings) and take all such other actions in connection therewith as
may be requested by the managing underwriters or the placement agent or
other counterparty to the transaction in order to expedite or facilitate
the disposition of the Registrable Securities and, in such connection,
whether or not an underwriting agreement is entered into and whether or
not the registration is an Underwritten Registration, (i) make such
representations and warranties to the Stockholders whose Registrable
Securities are being registered and the underwriters, if any, with
respect to the business of BHR and its Subsidiaries, the Registration
Statement, Prospectus and documents incorporated by reference or deemed
incorporated by reference, if any, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in Underwritten
Offerings and confirm those representations and warranties if and when
requested; (ii) obtain opinions of counsel to BHR and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and the
Stockholders whose Registrable Securities are being registered)
addressed to such Stockholder and each of the underwriters, if any,
covering the matters customarily covered in opinions requested in
Underwritten Offerings and such other matters as may be reasonably
requested by such Stockholders and underwriters; (iii) use its best
efforts to obtain "comfort" letters and updates thereof from the
independent certified public accountants of BHR (and, if necessary, any
other certified public accountants of any Subsidiary of BHR or of any
business acquired by BHR for which financial statements and financial
data is, or is required to be, included in the Registration Statement),
addressed to each Stockholder whose Registrable Securities are being
registered and each of the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in
"comfort" letters in connection with Underwritten Offerings; and (iv)
deliver such documents and certificates as may be requested by the
Stockholders whose Registrable Securities are being registered, the
Special Counsel and the managing underwriters, if any, to evidence the
continued validity of the representations and warranties of BHR and its
Subsidiaries made pursuant to clause (i) above and to evidence
compliance with any customary conditions contained in the underwriting
agreement or similar agreement entered into by BHR. The foregoing
actions will be taken in connection with each closing under such
underwriting or similar agreement as and to the extent required
thereunder;
(m) Make available for inspection by a representative of the
Stockholders whose Registrable Securities are being sold, any
underwriter participating in any disposition of
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Registrable Securities and any attorney or accountant retained by those
Stockholders or underwriter, all financial and other records, pertinent
corporate documents and properties of BHR and its Subsidiaries, and
cause the officers, directors and employees of BHR and its Subsidiaries
to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with
such Registration Statement; provided, however, that any records,
information or documents that are designated by BHR in writing as
confidential at the time of delivery of such records, information or
documents will be kept confidential by those Persons unless (i) those
records, information or documents are in the public domain or otherwise
publicly available, (ii) disclosure of those records, information or
documents is required by court or administrative order or is necessary
to respond to inquiries of regulatory authorities, or (iii) disclosure
of those records, information or documents, in the opinion of counsel to
such Person, is otherwise required by law (including, without
limitation, pursuant to the requirements of the Securities Act);
(n) Comply with all applicable rules and regulations of the
SEC and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 calendar days after the end of any 12-
month period (or 90 calendar days after the end of any 12-month period
if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a
firm commitment or best efforts Underwritten Offering, and (ii) if not
sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter of BHR, after the effective date of a
Registration Statement, which statements shall cover that 12-month
period;
(o) Cause its directors, officers and other appropriate
employees to participate in any presentations regarding any Underwritten
Offering reasonably requested by the Stockholders whose Registrable
Securities are being registered or the managing underwriter or
underwriters participating in the disposition of those Registrable
Securities, provided that so doing does not unreasonably interfere with
the business of BHR and the out-of-pocket costs thereof are reimbursed
to BHR;
(p) Use all reasonable efforts to facilitate the Stockholders'
purchase or sale of puts, calls and forward contracts, short sales and
other hedging transactions involving Registrable Securities; and
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(q) Use its best efforts to take all of the steps necessary or
advisable to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby.
BHR may require each Stockholder whose Registrable Securities are being
registered to furnish to BHR such information regarding the distribution of
such Registrable Securities as BHR may, from time to time, reasonably request
in writing and BHR may exclude from such registration the Registrable
Securities of any Stockholder that unreasonably fails to furnish such
information within a reasonable time after receiving such request.
Each Stockholder will be deemed to have agreed by virtue of its
acquisition of Registrable Securities that, upon receipt of any notice from BHR
of the occurrence of any event of the kind described in Section 5(c)(ii),
5(c)(iii), 5(c)(v), 5(c)(vi) or 5(c)(vii) (each a "Suspension Notice"), the
Stockholder will forthwith discontinue disposition of its Registrable
Securities covered by the Registration Statement or Prospectus (a "Blackout")
until the Stockholder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(j) hereof, or until it is advised in
writing (the "Advice") by BHR that the use of the applicable Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus.
If BHR gives any such notice, the time period prescribed in Section 2(b) will
be extended by the number of days during the time period from and including the
date of the giving of that notice to and including the date when each seller of
Registrable Securities covered by such Registration Statement shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(j) hereof or (y) the Advice. BHR will not give a Suspension
Notice at any time prior to the date which is 60 calendar days from the
effective date of the Spin-Off and in no event will the aggregate number of
days the Stockholders are subject to Blackout during any period of 12
consecutive months exceed 180 days.
6. Registration Expenses. (a) All fees and expenses incident to the
performance of or compliance with this Agreement by BHR will be borne by BHR
whether or not any of the Registration Statements become effective. Those fees
and expenses will include, without limitation, (i) all registration and filing
fees (including without limitation fees and expenses with respect to filings
required to be made with the National Association of Securities Dealers, Inc.),
(ii) printing expenses (including without limitation expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing or photocopying prospectuses), (iii)
messenger, telephone and delivery expenses,
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(iv) fees and disbursements of counsel for BHR and the Special Counsel for the
Stockholders whose Registrable Securities are being registered, (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(l)(iii) (including the expenses of any special audit and "comfort"
letters required by or incident to such performance), (vi) fees and expenses of
any "qualified independent underwriter" or other independent appraiser
participating in an offering pursuant to Rule 2720(c) of the National
Association of Securities Dealers, Inc. Conduct Rules, (vii) Securities Act
liability insurance if BHR so desires that insurance, and (viii) fees and
expenses of all other Persons retained by BHR, but excluding underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities. In addition, BHR will pay its internal
expenses (including without limitation all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the securities to be registered on any securities exchange on which similar
securities issued by BHR are then listed and the fees and expenses of any
Person, including special experts, retained by BHR.
(b) In connection with any Demand Registration or Piggyback
Registration under this Agreement, BHR will reimburse the Stockholders whose
Registrable Securities are being registered in such registration for the
reasonable fees and disbursements of not more than one Special Counsel,
together with appropriate local counsel, chosen by the Stockholders whose
Registrable Securities are being registered.
7. Indemnification.
(a) Indemnification by BHR. BHR will, without limitation as to time,
indemnify and hold harmless, to the fullest extent permitted by law, each
Stockholder whose Registrable Securities have been registered pursuant to this
Agreement, the officers, directors, partners, stockholders, and agents and
employees of each of them, each Person who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) a
Stockholder and the officers, directors, partners, stockholders, agents and
employees of any such controlling Person, from and against all losses, claims,
damages, liabilities, costs (including without limitation the costs of
investigation and attorneys' fees) and expenses (collectively, "Losses"), as
incurred, arising out of or based upon any untrue or alleged untrue statement
of a material fact contained in any Registration Statement, Prospectus or form
of Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not
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misleading, except insofar as the same are based solely upon information
furnished in writing to BHR by such Stockholder expressly for use therein;
provided, however, that BHR will not be liable to any Stockholder to the extent
that any such Losses arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
preliminary prospectus if either (i) (A) that Stockholder failed to send or
deliver a copy of the Prospectus with or prior to the delivery of written
confirmation of the sale by that Stockholder of a Registrable Security to the
person asserting the claim from which such Losses arise and (B) the Prospectus
would have completely corrected such untrue statement or alleged untrue
statement or such omission or alleged omission; (ii) such untrue statement or
alleged untrue statement, omission or alleged omission is completely corrected
in an amendment or supplement to the Prospectus previously furnished by or on
behalf of BHR with copies of the Prospectus as so amended or supplemented, and
that Stockholder thereafter fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale of a Registrable Security
to the Person asserting the claim from which such Losses arise; or (iii) such
untrue statement or alleged untrue statement, omission or alleged omission was
contained in any information so furnished in writing by that Stockholder to BHR
expressly for use in such Registration Statement or Prospectus and was relied
upon by BHR in the preparation of such Registration Statement, Prospectus or
preliminary prospectus.
(b) Indemnification by Holders of Registrable Securities. In
connection with any Registration Statement in which the Registrable Securities
of a Stockholder are being registered, that Stockholder will furnish to BHR in
writing such information as BHR reasonably requests for use in connection with
any Registration Statement or Prospectus and will indemnify, to the fullest
extent permitted by law, BHR, its directors and officers, agents and employees,
each Person who controls (within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act) BHR, and the directors, officers,
agents or employees of such controlling Persons, from and against all Losses
arising out of or based upon any untrue statement of a material fact contained
in any Registration Statement, Prospectus or preliminary prospectus or arising
out of or based upon any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent, that such untrue statement or omission is contained in any
information so furnished in writing by that Stockholder to BHR expressly for
use in such Registration Statement or Prospectus and was relied upon by BHR in
the preparation of such Registration Statement, Prospectus or preliminary
prospectus. In no event will the liability of any Stockholder under this
Section 7(b) be greater in amount than the dollar amount of the proceeds (net
of payment of all expenses)
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received by that Stockholder upon the sale of the Registrable Securities giving
rise to the indemnification obligation.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to this Section
7(c), such Person (the "indemnified party") will promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, will retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and will pay the fees and disbursements of such counsel related to
such proceeding; provided that the failure of any indemnified party so to
notify the indemnifying party will not relieve the indemnifying party of its
obligations hereunder except to the extent that the indemnifying party is
actually prejudiced by such failure to notify. In any such proceeding, any
indemnified party will have the right to retain its own counsel, but the fees
and expenses of such counsel will be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that the indemnifying party will not, in
respect of the legal expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all indemnified parties and that all such fees and expenses will
be reimbursed as they are incurred. The indemnifying party will not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any Loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it will be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party will,
without the prior written consent of the indemnified party, effect any
17
<PAGE> 20
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) Contribution. If the indemnification provided for in this
Section 7 is unavailable to an indemnified party under Section 7(a) or 7(b) in
respect of any Losses or is insufficient to hold the indemnified party harmless
(other than giving effect to the last sentence of Section 7(b)), then each
applicable indemnifying party, in lieu of indemnifying the indemnified party,
will, jointly and severally, contribute to the amount paid or payable by the
indemnified party as a result of the Losses, in the proportion as is
appropriate to reflect the relative fault of the indemnifying party or
indemnifying parties, on the one hand, and the indemnified party, on the other
hand, in connection with the actions, statements or omissions that resulted in
the Losses as well as any other relevant equitable considerations. The
relative fault of the indemnifying party or indemnifying parties, on the one
hand, and the indemnified party, on the other hand, will be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or related to
information supplied by, the indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses will be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
action or proceeding. In no event will the obligation of a Stockholder under
this Section 7(d) be greater in amount than the dollar amount of the proceeds
(net of payment of all expenses) received by that Stockholder upon the sale of
the Registerable Securities giving rise to the contribution obligation.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7(d), an
indemnifying party that is a Stockholder will not be required to contribute any
amount in excess of the dollar amount of the proceeds (net of payment of all
expenses) received by that Stockholder upon the sale of the Registrable
Securities giving rise to the contribution obligation over the amount of any
damages which that Stockholder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent
18
<PAGE> 21
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity, contribution and expense reimbursement obligations of BHR
hereunder will be in addition to any liability BHR may otherwise have under
this Agreement. The provisions of this Section 7 will survive so long as
Registrable Securities remain outstanding, notwithstanding any transfer of the
Registrable Securities by any holder thereof or any termination of this
Agreement.
8. Rule 144. BHR will file the reports required to be filed by it
under the Securities Act and the Exchange Act, and will cooperate with any
Stockholder (including without limitation by making any representations as any
Stockholder may reasonably request), all to the extent required from time to
time to enable the Stockholder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemptions
provided by Rule 144. Upon the request of any Stockholder, BHR will deliver to
the Stockholder a written statement as to whether it has complied with such
filing requirements. Notwithstanding the foregoing, nothing in this Section 8
will be deemed to require BHR to register any of its securities under any
section of the Exchange Act.
9. Underwritten Registrations. If any of the Registrable Securities
covered by any Demand Registration are to be sold in an Underwritten Offering
(other than an Underwritten Offering with respect to Securities that are sold
primarily on behalf of BHR), the investment banker or investment bankers and
manager or managers that will manage the offering will be selected by the
Stockholder that gave the Demand Notice with respect to such offering;
provided, that such investment banker or manager shall be reasonably
satisfactory to BHR. If any Piggyback Registration is an Underwritten
Offering, BHR will have the right to select the investment banker or investment
bankers and managers to administer the offering. Each party hereto agrees
that, in connection with any Underwritten Offering hereunder in which it
participates, it will undertake to offer customary indemnification to the
participatory underwriters.
10. Indemnification of Statutory Underwriters. Any institutional
buyer, placement agent or counterparty who is deemed to be an underwriter
pursuant to Section 2(11) of the Securities Act in connection with the sale of
Registrable Securities by a Stockholder to such Person will be entitled to the
indemnity set forth in Section 7(a).
19
<PAGE> 22
11. Miscellaneous.
(a) No Inconsistent Agreements. BHR has not, as of the date hereof,
and will not, on or after the date hereof, enter into any agreement with
respect to its securities which is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions of this
Agreement may not be given, unless BHR has obtained the written consent of the
Stockholders. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions of this Agreement with respect to a matter that relates
exclusively to the rights of a Stockholder whose Registrable Securities are
being registered pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of the other Stockholders may be given
only by affected Stockholders; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.
(c) Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as will be specified by like notice):
(i) if to BHR:
Bristol Hotels & Resorts, Inc.
14295 Midway Road
Dallas, Texas 75244
Attention: General Counsel
Telecopy: (972) 391-1515
(ii) if to the Bass Parties:
Holiday Corporation
Three Ravinia Drive
Suite 2900
Atlanta, Georgia 30346
Attention: Craig H. Hunt
Telecopy: (770) 604-5988
and
20
<PAGE> 23
Bass plc
20 North Audley Street
London, W1Y 1WE
England
Attention: Spencer Wigley
Telecopy: 011-44-171-409-8513
with copies to:
Crowne Plaza - Corporate Headquarters
Three Ravinia Drive
Suite 2900
Atlanta, Georgia 30346
Attention: James L. Kacena
Telecopy: (770) 604-2000
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Paul R. Kingsley
Telecopy: (212) 450-4800
(iii) if to Holdings:
United/Harvey Holdings, L.P.
2200 Ross Avenue
Suite 4200 West
Dallas, Texas 75201
Attention: Daniel A. Decker
Telecopy: (214) 220-4949
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek
Telecopy: (212) 755-7306
All notices will be deemed to be given only when actually received.
(d) Owner of Registrable Securities. BHR will maintain, or will
cause its registrar and transfer agent to maintain, a stock book with respect
to the Common Stock, in which all transfers of Registrable Securities of which
BHR has received notice will be recorded. BHR may deem and treat the person in
whose name Registrable Securities are registered in the stock book of BHR as
the owner thereof for all purposes, including without limitation the giving of
notices under this Agreement.
21
<PAGE> 24
(e) Successors and Assigns. This Agreement will inure to the benefit
of and be binding upon the successors and assigns of each of the parties and
will inure to the benefit of each holder of any Registrable Securities. BHR
may not assign its rights or delegate its obligations hereunder.
Notwithstanding the foregoing, transferees will succeed to the rights granted
under this Agreement provided that such transferee shall have acknowledged its
rights and obligations hereunder by a signed written statement of such
transferee's acceptance of such rights and obligations (unless the transferor
notifies BHR in writing on or prior to such transfer that the transferee shall
not have such rights).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties hereto.
(g) Headings. Article and Section headings in this Agreement are
included herein for convenience of reference only and will not constitute a
part of this Agreement for any other purpose.
(h) Governing Law. This Agreement will be governed by, and construed
in accordance with, the laws of the State of Delaware, without giving effect to
the principles of conflict of laws of that State that would apply the laws of
any other jurisdiction. Each of the parties to this Agreement hereby
irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware, and
any appellate court thereof, in any action, suit, or proceeding arising out of
or relating to this Agreement and any such action, suit or proceeding will be
brought only in such court (and waives any objection based on forum non
conveniens or any other objection to venue therein). Process in any such
action, suit or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 11(c) shall be deemed effective service of process on such
party.
(i) Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and undertakings, both written
and oral, between the parties, with respect to the subject matter of this
Agreement.
(j) Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, will
be entitled to recover
22
<PAGE> 25
reasonable attorneys' fees and related disbursements and expenses in addition
to any other available remedy.
(k) Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision will be
interpreted to be only so broad as is enforceable.
23
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BRISTOL HOTELS & RESORTS, INC.
By:
------------------------------
Name:
Title:
UNITED/HARVEY HOLDINGS, L.P.
By: Holdings Genpar, L.P., its
General Partner
By: HH Genpar Partners, its
General Partner
By: Holdings Associates, Inc., its
Managing General Partner
By:
-----------------------
Name:
Title:
BASS AMERICA INC.
By:
----------------------------------
Name:
Title:
HOLIDAY CORPORATION
By:
----------------------------------
Name:
Title:
24
<PAGE> 1
EXHIBIT 4.2
================================================================================
STOCKHOLDERS' AGREEMENT
BY AND AMONG
BRISTOL HOTELS & RESORTS, INC.
HOLIDAY CORPORATION
BASS AMERICA INC.
BASS PLC
AND
UNITED/HARVEY HOLDINGS, L.P.
DATED ___________, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Composition of the Board . . . . . . . . . . . . . . . . . . . 4
2.2 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
RIGHT OF FIRST REFUSAL; RIGHT TO PARTICIPATE IN
SALES; TRANSFERS TO AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Right of First Refusal . . . . . . . . . . . . . . . . . . . . 5
3.2 Right to Participate in Sales . . . . . . . . . . . . . . . . 8
3.3 Transfers to Affiliates . . . . . . . . . . . . . . . . . . . 9
3.4 Distributions . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV
PREEMPTIVE RIGHTS; STANDSTILL OBLIGATIONS . . . . . . . . . . . . . . . . . . 10
4.1 Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Acquisition of Securities . . . . . . . . . . . . . . . . . . 11
4.3 Regulatory Restrictions . . . . . . . . . . . . . . . . . . . 11
ARTICLE V
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 No Inconsistent Agreements . . . . . . . . . . . . . . . . . . 11
5.2 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 11
5.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Assignability . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 14
5.9 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . 14
5.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.11 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
i
<PAGE> 3
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT (this "Agreement"), is made and entered
into as of ________________, 1998, by and among Bristol Hotels & Resorts, Inc.,
a Delaware corporation ("BHR"), Bass America Inc., a Delaware corporation
("BAI"), Holiday Corporation, a Delaware corporation ("HC"), Bass plc, an
English public limited company ("PLC"), and United/Harvey Holdings, L.P., a
Delaware limited partnership ("Holdings").
RECITALS
A. HC, BAI and Holdings own the issued and outstanding shares of
common stock, par value $0.01 per share, of BHR (the "Shares") set forth on
Schedule A;
B. Bass plc has agreed to be a party to this Agreement solely with
respect to Section 4.2 hereof; and
C. The parties hereto have agreed that certain aspects of their
relationship be governed by the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements herein contained, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms
have the respective meanings set forth below when used herein with initial
capital letters:
"Adverse Person" has the meaning set forth in Section 3.1(a).
"Affiliate" means, with respect to any Person, any other Person who is
directly or indirectly Controlling, Controlled by or under common Control with
such Person; provided that no Stockholder of BHR shall be deemed an Affiliate
of any other Stockholder of BHR solely by reason of any investment in BHR or by
this Agreement.
"Attribution Rules" has the meaning set forth in Section 4.1.
"Bass Parties" means BAI, HC and any of their Permitted Transferees who
are Affiliates of PLC.
<PAGE> 4
"Beneficial ownership", "beneficially own" and "beneficial owner" shall
be determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act
as in effect on the date hereof.
"Board" means the Board of Directors of BHR.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or obligated to close.
"Buyer" has the meaning set forth in Section 3.1(c).
"Control" (including the terms "Controlling", "Controlled by" and "under
common Control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or credit arrangement or otherwise.
"Co-Sale Acceptance Period" has the meaning set forth in Section 3.2(a).
"Co-Sale Notice" has the meaning set forth in Section 3.2(a).
"Election Notice" has the meaning set forth in Section 4.1(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and all rules and regulations promulgated thereunder, as in effect from time to
time.
"Excluded Securities" means (i) options granted to directors, officers
and employees of the Company to purchase capital stock of the Company, and the
securities issued pursuant to such options or plan under which options may be
granted, which have been authorized by the Board, (ii) capital stock issued or
sold upon exercise of warrants, options or rights, or upon conversion of
convertible securities, which warrants, options, rights or convertible
securities were the subject of the preemptive rights under Article IV or (iii)
any securities which are issued to all Stockholders by means of a distribution,
stock dividend or stock split or reclassification.
"Fair Market Value" has the meaning set forth in Section 3.1(b).
"Initial Ownership" means, with respect to each Stockholder, the total
number of shares of BHR Common Stock beneficially owned by such Stockholder set
forth on Schedule A (equitably adjusted to reflect any stock spit, dividend,
reclassification or any similar event).
2
<PAGE> 5
"Non-Offering Stockholder" has the meaning set forth in Section 3.2(a).
"No-ROFR Transaction" has the meaning set forth in Section 3.1(a).
"Offer Notice" has the meaning set forth in Section 3.2(a).
"Offer Price" has the meaning set forth in Section 3.2(a).
"Offered Securities" has the meaning set forth in Section 3.2(a).
"Offering Stockholder" has the meaning set forth in Section 3.2(a).
"Ownership Percentage" means with respect to each Stockholder at any
time, the percentage derived by dividing (i) the aggregate number of Shares
beneficially owned by such Stockholder as of such time, by (ii) the total
number of Shares outstanding as of such time.
"Person" means an individual, corporation, partnership, association,
trust, limited liability company, joint venture or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Portion" has the meaning set forth in Section 3.2(a).
"Pro Rata Number" has the meaning set forth in Section 3.2(a).
"Qualified Offering" has the meaning set forth in Section 4.1(a).
"Qualified Offering Notice" has the meaning set forth in Section 4.1(a).
"Regulatory Objection" has the meaning set forth in Section 4.3.
"ROFR Acceptance Notice" has the meaning set forth in Section 3.1(b).
"ROFR Acceptance Period" has the meaning set forth in Section 3.1(b).
"ROFR Closing" has the meaning set forth in Section 3.1(c).
"ROFR Offer Notice" has the meaning set forth in Section 3.1(b).
3
<PAGE> 6
"ROFR Offer Price" has the meaning set forth in Section 3.1(b).
"ROFR Sale" has the meaning set forth in Section 3.1(b).
"ROFR Securities" has the meaning set forth in Section 3.1(b).
"Securities" means the Shares and any securities convertible into or
exchangeable for Shares and rights to purchase Shares.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations promulgated thereunder, as in effect from time to time.
"Stockholder" means each of (i) the Bass Parties, as a group, and (ii)
Holdings.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Third Party" means a prospective purchaser of Shares in an arm's-length
transaction from a Stockholder where such purchaser is not an Affiliate of such
Stockholder.
"Third Party Sale" has the meaning set forth in Section 3.2(a).
"Total Voting Power" means the aggregate number of votes which may be
cast by holders of outstanding Voting Securities.
"Voting Securities" means all securities of BHR entitled, in the
ordinary course, to vote in the election of directors of BHR.
ARTICLE II
CORPORATE GOVERNANCE
2.1 Composition of the Board. Each of the Stockholders will be
entitled to nominate one director for election to serve on the Board for so
long as it owns a number of Shares equal to at least 25% of its Initial
Ownership. Any vacancy on the Board caused by the death, removal or
resignation of a director elected pursuant to this Section 2.1 may only be
filled by the Persons entitled to nominate such director pursuant to this
Section 2.1.
2.2 Voting. Until either Stockholder owns less than 25% of its
Initial Ownership, each Stockholder will vote its Voting
4
<PAGE> 7
Securities or execute written consents, as the case may be, and each
Stockholder will take all other necessary action (including causing BHR to call
a special meeting of Stockholders) in order to ensure that the nominee of each
Stockholder is elected to the Board, and no Stockholder will vote any of its
Voting Securities in favor of the removal of any director who shall have been
so designated unless such removal shall be for cause or the Person entitled to
designate or nominate such director shall have consented to such removal in
writing. When either Stockholder no longer owns at least 25% of its Initial
Ownership, each Stockholder's obligations to take or refrain from taking
certain actions pursuant to this Section 2.2 will terminate without further
action. For the avoidance of doubt, this Article II will not apply to any
Voting Securities held or received by the constituent partners of Holdings.
ARTICLE III
RIGHT OF FIRST REFUSAL; RIGHT TO PARTICIPATE
IN SALES; TRANSFERS TO AFFILIATES
3.1 Right of First Refusal. (a) The Bass Parties have requested that
Holdings not sell its Securities to a Person who could reasonably be deemed to
have business interests that are materially adverse to the material business
interests of HC (any such Person, an "Adverse Person") unless Holdings has
complied with the provisions of this Section 3.1. The Bass Parties hereby
acknowledge and agree, however, that in no event will the restrictions in this
Section 3.1 apply to any transfer (i) pursuant to or as a result of (A) a
public offering or (B) a hedging transaction with a broker-dealer, bank or
other financial institution, (ii) in an open-market transaction effected on a
national securities exchange or national quotation system or a transaction
involving as a counterparty an underwriter, broker-dealer or other similar
Person effecting a transaction in or consistent with the ordinary course of its
business, (iii) to one or more financial institutions, investment companies,
pension or other employee benefit plans, trusts, mutual or similar funds or
"qualified institutional buyers" within the meaning of Rule 144A under the
Securities Act, (iv) pursuant to a tender offer or other transaction that has
been approved by the Board, or (v) resulting from any pledge of Securities by
Holdings made in connection with a bona fide loan to Holdings, including any
transfer resulting from a lender foreclosing on any pledge of any Security or
exercising its other rights in respect thereof. Transactions referred to in
the immediately preceding sentence are herein defined as "No-ROFR
Transactions."
(b) Holdings will notify the Bass Parties in writing of the identity
of any Third Party (and to the extent known, the identity of any Person that
Controls the Third-Party) to whom
5
<PAGE> 8
Holdings desires to transfer any or all of the Securities owned by Holdings
(the "ROFR Securities") other than in a No-ROFR Transaction. Within five
Business Days of such notice, the Bass Parties will notify Holdings in writing
whether or not the Bass Parties have determined in good faith that such Third
Party is an Adverse Person, specifying in reasonable detail the basis for any
such determination. If the Bass Parties so determine that the Third Party is
an Adverse Person, Holdings will, if it nonetheless wishes to pursue the
transaction, advise (such advice, a "ROFR Offer Notice") the Bass Parties in
writing of (A) the aggregate amount of cash consideration, the amount of any
promissory note or other debt instrument and the Fair Market Value of any other
non-cash consideration (the "ROFR Offer Price"), for which Holdings proposes to
transfer the ROFR Securities in the proposed transaction (such transaction, a
"ROFR Sale"), (B) the date the proposed ROFR Sale is expected to close, and (C)
all other material terms of the proposed ROFR Sale, including without
limitation any other contract or transaction entered into or proposed to be
entered into in connection with the ROFR Sale. If the Bass Parties deliver to
Holdings a written notice (a "ROFR Acceptance Notice") within five Business
Days following the delivery of the ROFR Offer Notice (the "ROFR Acceptance
Period") stating that the Bass Parties will purchase all of the ROFR Securities
for the ROFR Offer Price and on the other terms set forth in the ROFR Offer
Notice, Holdings will, subject to Section 4.2, sell all (but not less than all)
of the ROFR Securities to the Bass Parties, and the Bass Parties will purchase
the ROFR Securities from Holdings, on the terms and subject to the conditions
set forth in Section 3.1(c). If the consideration under the Third-Party Sale
includes a promissory note or other debt instrument payable to Holdings, the
Bass Parties may deliver a similar promissory note or debt instrument in
payment of the ROFR Offer Price. "Fair Market Value" means the price agreed
upon by a willing buyer and a willing seller both in possession of reasonable
knowledge of all relevant facts, with neither party being under any compulsion
to act or not to act; provided that if the Bass Parties, on the one hand, and
Holdings, on the other hand, disagree on the calculation of the Fair Market
Value, they will select an unaffiliated financial advisory firm to determine
the Fair Market Value and such firm's determination will be final and binding.
All costs relating to the financial advisor will be borne solely by the Bass
Parties.
(c) The consummation of any purchase and sale pursuant to Section
3.1(b) (the "ROFR Closing") will occur 15 Business Days following the delivery
of the ROFR Acceptance Notice or on such other date as may be agreed upon by
Holdings and the Bass Parties (the "ROFR Closing Period") at the time and place
as may be agreed upon by Holdings and the Bass Party delivering the ROFR
Acceptance Notice (the "Buyer"). At the ROFR Closing, (i) Holdings will
deliver to the Buyer one or more certificates evidencing all of the Offered
Securities, duly endorsed for
6
<PAGE> 9
Transfer to the Buyer, together with such other duly executed instruments or
documents as may be required to permit the Buyer to acquire the Offered
Securities free and clear of any and all encumbrances, except for encumbrances
under this Agreement, if applicable, (ii) the Buyer will deliver to Holdings by
certified or official bank check or wire transfer to an account designated by
Holdings an amount in immediately available funds equal to the ROFR Offer
Price, and (iii) Holdings will be deemed to represent and warrant to the Buyer
that, upon the ROFR Closing, Holdings will convey and the Buyer will acquire
the entire record and beneficial ownership of, and good and valid title to, the
Offered Securities, free and clear of any and all encumbrances, except for
encumbrances under this Agreement, if applicable.
(d) If no ROFR Acceptance Notice relating to a proposed ROFR Sale is
delivered to Holdings prior to the expiration of the ROFR Acceptance Period, or
a ROFR Acceptance Notice is so delivered to Holdings but the ROFR Closing fails
to occur prior to the expiration of the ROFR Closing Period (unless the Bass
Party was ready, willing and able prior to the expiration of the ROFR Closing
Period to consummate the transactions to be consummated by the Bass Party at
the ROFR Closing or the Bass Party was not so ready, willing and able to
consummate the transactions to be consummated by the Bass Party at the ROFR
Closing as a result of Holdings's failure reasonably to cooperate in good faith
with the efforts of the Bass Party to consummate such transactions), Holdings
may consummate the proposed ROFR Sale in accordance with Section 3.1(e).
(e) Holdings may consummate the ROFR Sale to the Third-Party
Purchaser identified in the ROFR Offer Notice (the "Third-Party Purchaser")
only (i) during the 60 calendar day period immediately following the expiration
of the ROFR Acceptance Period (in the event that no ROFR Acceptance Notice was
timely delivered to Holdings) or the 60 calendar day period immediately
following the expiration of the ROFR Closing Period, (ii) at a price at least
equal to the ROFR Offer Price, and (iii) upon terms not materially less
favorable to Holdings than those set forth in the ROFR Offer Notice. If it
does not so consummate the ROFR Sale, Holdings must repeat the steps specified
above if it wishes to continue to pursue the transaction.
(f) The purpose of this Section 3.1 is to permit the Bass Parties to
protect their economic interests only in the narrow circumstances specified in
the first sentence of Section 3.1(a). Accordingly, if Holdings so requests,
the Bass Parties will deliver to Holdings such documents as Holdings may
reasonably request consistent with this Section 3.1 confirming the terms hereof
for the benefit of any Third Party, including without limitation execution of a
written acknowledgment prepared by Holdings within a reasonable period of time,
not to exceed two
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<PAGE> 10
Business Days, confirming that, with respect to a particular No-ROFR
Transaction, the provisions of this Section 3.1 do not apply to a sale of any
Securities owned by Holdings in such No-ROFR Transaction.
(g) Notwithstanding any other provision hereof, Holdings' obligations
under this Section 3.1 will terminate (i) upon HC or its Affiliates no longer
holding a Controlling equity interest in the entities that directly or
indirectly hold the intellectual property rights related to the Holiday Inn,
Holiday Inn Express or Crowne Plaza brands and (ii) in the circumstances
specified in Section 5.11.
3.2 Right to Participate in Sales. (a) If a Stockholder (the
"Offering Stockholder") proposes to sell any or all of the Securities owned by
the Offering Stockholder (the "Offered Securities") to a Third-Party in a bona
fide transaction other than a No-ROFR Transaction (a "Third-Party Sale"), the
Offering Stockholder will, prior to effecting any Third-Party Sale, deliver to
the other Stockholder (the "Non-Offering Stockholder") a written notice (an
"Offer Notice") specifying (i) the aggregate amount of cash consideration, the
amount of any promissory note or other debt instrument and the Fair Market
Value of any other non-cash consideration (the "Offer Price"), for which the
Offering Stockholder proposes to sell the Offered Securities in the proposed
Third-Party Sale, (ii) the identity of the purchaser in the proposed Third
Party Sale, (iii) the date the proposed Third-Party Sale is scheduled to close,
and (iv) all other material terms of the proposed Third-Party Sale, including
without limitation any other contract or transaction entered into or proposed
to be entered into in connection with the Third-Party Sale. If the
Non-Offering Stockholder so requests in a written notice (a "Co-Sale Notice")
delivered to the Offering Stockholder within five Business Days following the
delivery of the Offer Notice (the "Co-Sale Acceptance Period"), the Non-
Offering Stockholder will be permitted to sell in that Third-Party Sale, on the
same terms as the Offering Stockholder, up to the number of Securities held by
the Non-Offering Stockholder as is specified in the Co-Sale Notice; provided
that the number of Securities to be sold by the Non-Offering Stockholder
participating in such Third-Party Sale will in no event exceed the Portion
corresponding to such Non-Offering Stockholder. As used herein, "Portion"
means, with respect to the Non-Offering Stockholder, the number of Securities
beneficially owned by such Non-Offering Stockholder multiplied by a fraction
the numerator of which is the number of Securities to be sold by the Offering
Stockholder in such Third-Party Sale and the denominator of which is the
aggregate number of Securities beneficially owned by the Offering Stockholder
immediately prior to such Third-Party Sale. If a Co-Selling Stockholder
requests to include more Securities than provided under the preceding
sentences, the Offering Stockholder will attempt to cause the Third-Party
Purchaser to
8
<PAGE> 11
acquire those additional Securities, but will have no liability for the
Third-Party Purchaser's refusal to purchase those additional Securities. To
the extent that the Third-Party Purchaser is unwilling to purchase all of the
Securities proposed to be sold by the Offering Stockholder and the Non-Offering
Stockholder, the number of Securities to be sold by each of the Offering
Stockholder and the Non-Offering Stockholder will be reduced to their
respective Pro Rata Number of Securities. "Pro Rata Number" means, with
respect to the participation of the Offering Stockholder or the Non-Offering
Stockholder in a Third-Party Sale, the product of (i) the total number of
Securities proposed to be sold by such Stockholder and (ii) a fraction, the
numerator of which is the total number of Securities proposed to be purchased
by the Third-Party Purchaser, and the denominator of which is the total number
of Securities proposed to be sold by both the Offering Stockholder and the Non-
Offering Stockholder.
(b) Notwithstanding anything to the contrary herein contained, the
Offering Stockholder (i) will have the right to elect not to consummate any
Third-Party Sale (without liability to the Non-Offering Stockholder) if it is
unable to sell all of the Offered Securities as initially set forth in the
Offer Notice and (ii) may increase the Securities included in the Offered
Securities to accommodate any Securities proposed to be sold by a Non-Offering
Stockholder.
(c) If the Non-Offering Stockholder properly elects to participate in
a Third-Party Sale, the Offering Stockholder will represent the Non-Offering
Stockholder in the sale but will not assume any fiduciary duty to the Non-
Offering Stockholder under this Agreement. The Non-Offering Stockholder will
execute and deliver the documentation providing for the Third-Party Sale as
negotiated by the Offering Stockholder; provided that, at any time prior to
such execution and delivery, the Non-Offering Stockholder may decline to
participate in the Third-Party Sale if the documentation is not reasonably
acceptable to it. If the Non-Offering Stockholder fails to execute and deliver
the documentation or timely to perform its obligations thereunder, the Offering
Stockholder may complete the Third-Party Sale without the participation of the
Non-Offering Stockholder. The Offering Stockholder will have no responsibility
to the Non-Offering Stockholder if it fails to consummate a Third-Party Sale,
and the Offering Stockholder will in all events be free to abandon any
Third-Party Sale at any time prior to its consummation without any liability to
the Non-Offering Stockholder.
3.3 Transfers to Affiliates. No Stockholder will sell, assign or
otherwise transfer any of its Shares to an Affiliate unless such Affiliate
executes a copy of this Agreement and agrees to be bound by all the provisions
herein, whereupon
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<PAGE> 12
references in this Agreement to a Stockholder will be deemed to include any
such Affiliates.
3.4 Distributions. This Article III will not apply to any
distribution by Holdings to its direct or indirect constituent partners.
ARTICLE IV
PREEMPTIVE RIGHTS; STANDSTILL OBLIGATIONS
4.1 Preemptive Rights. Except for the issuance of Excluded
Securities, BHR will provide the Stockholders with written notice of any sale
by it for cash of any Securities in which the gross proceeds of such sale to
BHR and its Subsidiaries equals or exceeds $10 million (such offering, a
"Qualified Offering") no later than the closing date of the Qualified Offering
(such notice, the "Qualified Offering Notice"). The Qualified Offering Notice
will specify the Securities that were issued, the purchase price (which, in the
case of a public offering, will be the purchase price to the public and, in all
other cases will be the purchase price to the purchasers (without regard to
underwriting discounts or commissions) of the issued securities), the issuance
date and all other material terms of such issuance. No later than five
calendar days after receipt of the Qualified Offering Notice, each Stockholder
must deliver to BHR a written notice stating whether such Stockholder desires
to acquire the same type of securities that were issued and the number of
Securities it intends to purchase (the "Election Notice"). The Election Notice
will constitute a binding contract by the Stockholder to acquire, on the terms
offered by the Company to purchasers of the Securities issued, up to that
number of the Securities such that, after giving effect to the consummation of
the Qualified Offering and the issuance to the Stockholder pursuant to this
Section 4.1, the Stockholder would hold that Ownership Percentage of BHR equal
to such Stockholder's Ownership Percentage immediately prior to such Qualified
Offering; provided, however, in no event may a Stockholder acquire any
Securities under this Section 4.1 if it would be deemed to own, by virtue of
the attribution provisions of Section 544 of the Code (as modified by Section
856(h)(i)(B) of the Code) (assuming that BHR is a REIT for such purposes)
and/or Section 318 of the Code (as modified by Section 856(d)(5) of the Code)
(together, the "Attribution Rules") more than 9.9% of the total number of
outstanding Shares and be deemed to own, by virtue of the Attribution Rules,
more than 9.9% of the total number of outstanding shares of common stock of
FelCor Suite Hotels, Inc. The issuance will be completed five days after the
Qualified Offering or such other date to which BHR and the relevant
Stockholders agree, and payment will be made in immediately available funds on
such completion date. Notwithstanding anything herein to the contrary, BHR
will be entitled not to
10
<PAGE> 13
proceed with the proposed issuance or to alter the terms hereof; provided that,
in the event that any material terms of the proposed issuance are altered, (i)
each Stockholder's Election Notice will be revoked automatically and (ii) such
Stockholder will be entitled to participate in such proposed issuance on the
revised terms in accordance with this Section 4.1 following written
confirmation by such Stockholder to such effect. This Section 4.1 will
terminate with respect to any Stockholder that fails three times to deliver an
Election Notice with respect to the full number of Shares purchasable under
Section 4.1.
4.2 Acquisition of Securities. The Bass Parties will not, and will
not permit their Affiliates to, purchase or otherwise acquire, or agree or
offer to purchase or otherwise acquire, beneficial ownership of any Securities
if after giving effect thereto the Bass Parties would be deemed to own, by
virtue of the Attribution Rules, Securities representing more than 9.9% of the
total number of outstanding Securities, without the prior written consent of
BHR.
4.3 Regulatory Restrictions. BHR may modify Section 4.1 in whole or
in part to the extent necessary to address any objections raised by the NYSE or
any other securities exchange or quotation system on which the Shares are (or
have been applied to be) listed (a "Regulatory Objection"). BHR will use all
reasonable efforts to address any Regulatory Objection so as to preserve to the
greatest extent practicable the parties' rights hereunder.
ARTICLE V
MISCELLANEOUS
5.1 No Inconsistent Agreements. BHR has not, as of the date hereof,
and will not, on or after the date hereof, enter into any agreement with
respect to the Securities which is inconsistent with the rights granted to the
holders of Securities in this Agreement or otherwise conflicts with the
provisions hereof.
5.2 Amendments and Waivers. Except as set forth in Section 4.3, no
provision of this Agreement may be waived except by an instrument in writing
executed by the party against whom the waiver is to be effective. The
provisions of this Agreement may not be amended, modified or supplemented
without the prior written consent of each of the parties hereto.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions of this Agreement with respect to a matter that relates exclusively
to the rights of a Stockholder and that does not directly or indirectly affect
the rights of the other Stockholder may be given only by the affected
Stockholder; provided, however, that the provisions of this sentence may not be
amended,
11
<PAGE> 14
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
5.3 Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as will be specified by like notice):
(a) if to BHR:
Bristol Hotels & Resorts, Inc.
14295 Midway Road
Dallas, Texas 75244
Attention: General Counsel
Telecopy: (972) 391-1515
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek
Telecopy: (212) 755-7306
(b) if to the Bass Parties or Bass plc:
Holiday Corporation
Three Ravinia Drive
Suite 2900
Atlanta, Georgia 30346
Attention: Craig H. Hunt
Telecopy: (770) 604-5988
Bass plc
20 North Audley Street
London, W1Y 1WE
England
Attention: Spencer Wigley
Telecopy: 011-44-171-409-8513
with copies to:
Crowne Plaza - Corporate Headquarters
Three Ravinia Drive
Suite 2900
Atlanta, Georgia 30346
Attention: James L. Kacena
Telecopy: (770) 604-2000
12
<PAGE> 15
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Paul R. Kingsley
Telecopy: (212) 450-4800
(c) if to Holdings:
United/Harvey Holdings, L.P.
2200 Ross Avenue
Suite 4200 West
Dallas, Texas 75201
Attention: Daniel A. Decker
Telecopy: (214) 220-4949
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek
Telecopy: (212) 755-7306
All notices will be deemed to be given only when actually received.
5.4 Assignability. Except as otherwise provided herein, (a) BHR may
not assign its rights or delegate its obligations hereunder and (b) no
Stockholder may assign its rights or delegate its obligations hereunder without
the prior written consent of the other Stockholder; provided, however, no
consent will be required if the Stockholder transfers any or all of its rights
under this Agreement to an Affiliate that agrees in writing to be bound by the
terms of this Agreement. No transferee will have any rights under this
Agreement until such transferee has acknowledged its rights and obligations
hereunder by a signed written statement of such transferee's acceptance of such
rights and obligations. In the case of an assignment by a Stockholder in
accordance with this Section 5.4, the transferee shall thence forth be a
"Stockholder."
5.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties hereto.
5.6 Headings. Article and Section headings in this Agreement are
included herein for convenience of reference only
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<PAGE> 16
and will not constitute a part of this Agreement for any other purpose.
5.7 Governing Law. This Agreement will be governed by, and construed
in accordance with, the laws of the State of Delaware, without giving effect to
the principles of conflict of laws of that State that would apply the laws of
any other jurisdiction. Each of the parties to this Agreement hereby
irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware, and
any appellate court thereof, in any action, suit, or proceeding arising out of
or relating to this Agreement and any such action, suit or proceeding will be
brought only in such court (and waives any objection based on forum non
conveniens or any other objection to venue therein). Process in any such
action, suit or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 5.3 shall be deemed effective service of process on such
party.
5.8 Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and undertakings, both written
and oral, among the parties with respect to the subject matter of this
Agreement.
5.9 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, will
be entitled to recover reasonable attorneys' fees and related disbursements and
expenses in addition to any other available remedy.
5.10 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision will be
interpreted to be only so broad as is enforceable.
5.11 Termination. This Agreement shall terminate on the earliest of
(a) the voluntary or involuntary dissolution or liquidation of BHR, (b) the
mutual agreement of the parties hereto, (c) the date on which any Stockholder
ceases to beneficially own a number of Shares equal to at least 25% of its
Initial Ownership and (d) the date on which Holdings distributes its Shares to
its direct or indirect constituent partners.
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<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BRISTOL HOTELS & RESORTS, INC.
By:
------------------------------
Name:
Title:
UNITED/HARVEY HOLDINGS, L.P.
By: Hampstead Genpar, L.P., its
General Partner
By: HH GenPar Partners, its
General Partner
By: Hampstead Associates, Inc.,
its Managing General Partner
By:
-----------------------
Name:
Title:
BASS AMERICA INC.
By:
------------------------------
Name:
Title:
HOLIDAY CORPORATION
By:
------------------------------
Name:
Title:
15
<PAGE> 18
The undersigned agrees to the terms
of Section 4.2.
BASS PLC
By:
------------------------------
Name:
Title:
16
<PAGE> 19
SCHEDULE A
<TABLE>
<CAPTION>
Stockholder Number of Shares
----------- ----------------
<S> <C>
Bass America Inc.
Holiday Corporation
United/Harvey Holdings, L.P.
</TABLE>
<PAGE> 1
EXHIBIT 9.1
================================================================================
VOTING AND COOPERATION AGREEMENT
BY AND AMONG
FELCOR SUITE HOTELS, INC.
BRISTOL HOTEL COMPANY
BASS AMERICA INC.
HOLIDAY CORPORATION
AND
UNITED/HARVEY HOLDINGS, L.P.
DATED MARCH 23, 1998
================================================================================
<PAGE> 2
VOTING AND COOPERATION AGREEMENT
This VOTING AND COOPERATION AGREEMENT (this "Agreement"), is made and
entered into as of March 23, 1998, by and among FelCor Suite Hotels, Inc., a
Maryland corporation ("FelCor"), Bristol Hotel Company, a Delaware corporation
("Bristol"), Bass America Inc., a Delaware corporation ("BAI"), Holiday
Corporation, a Delaware corporation ("HC"), and United/Harvey Holdings, L.P., a
Delaware limited partnership ("Holdings" and, together with BAI, HC and any
transferee that acquires Subject Shares that agrees to be bound by this
Agreement, the "Stockholders").
RECITALS
A. FelCor and Bristol propose to enter into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Bristol will merge with and into FelCor (the "Merger") upon the terms and
subject to the conditions set forth in the Merger Agreement.
B. Prior to the consummation of the Merger, Bristol intends to
distribute to the holders of Bristol Common Shares all of the issued and
outstanding common stock, par value $0.01 per share ("BHR Common Shares"), of
Bristol Hotels and Resorts, Inc., a Delaware corporation ("BHR") (the "Spin-
Off").
C. As of the date hereof, each Stockholder owns of record the number
of Bristol Common Shares set forth opposite the Stockholder's name on Schedule
A hereto (such Bristol Common Shares, together with any other Bristol Common
Shares acquired by, and not including any Bristol Common Shares sold by, such
Stockholder from the date hereof through the Record Date for the Bristol
Stockholders Meeting, are collectively referred to herein as such Stockholder's
"Subject Shares").
D. Bristol, Holdings, HC, BAI and Bass plc entered into a
Stockholders' Agreement, dated as of April 28, 1997 (the "Old Stockholders'
Agreement"), and Bristol, Holdings, HC and BAI entered into a Registration
Rights Agreement, dated as of April 28, 1997 (the "Old Registration Rights
Agreement").
E. The parties hereto desire that the Merger and the Spin-Off occur,
and accordingly have agreed to take certain actions that are necessary in order
to satisfy certain of the conditions precedent to the Spin-Off and the Merger.
F. As a condition and inducement to FelCor's willingness to enter
into the Merger Agreement, FelCor has requested that
2
<PAGE> 3
each Stockholder agree, and each Stockholder has agreed, to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Agreement to Vote Shares. During the Term, at any meeting of the
stockholders of Bristol called to consider and vote upon the adoption of the
Merger Agreement or approval of the Spin-Off (if such approval is sought) (and
at any and all postponements and adjournments thereof), and in connection with
any action to be taken in respect of the adoption of the Merger Agreement and
approval of the Spin-Off by written consent of the stockholders of Bristol,
each Stockholder will vote or cause to be voted (including by written consent,
if applicable) all of such Stockholder's Subject Shares in favor of the
adoption of the Merger Agreement and approval of the Spin-Off and against any
Adverse Proposal. For purposes of this Agreement, (a) the term "Term" means
the period commencing on the date hereof and ending as of the earlier of (i)
the Effective Time and (ii) FelCor's or Bristol's giving of notice of the
termination of the Merger Agreement, regardless of whether the validity of such
notice or right to exercise termination is being or may thereafter be
contested, and (b) the term "Adverse Proposal" means any (i) Acquisition
Proposal, (ii) any change in the composition of a majority of the Board of
Directors of Bristol, and (iii) any other intentional action which is intended
or could reasonably be expected to hinder, delay or result in the failure of
the Merger to occur. Nothing herein, however, will prohibit or restrict any
Stockholder from pledging or otherwise disposing of (collectively, "Transfer")
any Subject Shares, provided, however, that (i) in connection with any Transfer
of more than 100,000 Subject Shares to a single purchaser effected pursuant to
a privately negotiated transaction or series of transactions, any Stockholder
will be required to obtain the agreement of such purchaser to be bound by the
covenants in this Section 1 and (ii) no Stockholder may Transfer any Subject
Shares if, following such Transfer, the aggregate number of Subject Shares that
is subject to the provisions of this Agreement would be less than a majority of
the issued and outstanding Bristol Common Shares as of the Record Date for the
Bristol Stockholders Meeting.
2. Other Agreements of BAI and HC. (a) On the date the Spin-Off is
effected, BAI and HC will, and will cause Holiday Hospitality Corporation to,
as appropriate:
(i) Enter into the Hotel Properties Agreement in substantially
the form attached hereto as Exhibit A;
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<PAGE> 4
(ii) Enter into the Confirmation Agreement in substantially the
form attached hereto as Exhibit B;
(iii) Enter into the Stockholders' and Registration Rights
Agreement in substantially the form attached hereto as Exhibit C (the
"FelCor Stockholders' Agreement");
(iv) Enter into the Stockholders' Agreement in substantially
the form attached hereto as Exhibit D (the "BHR Stockholders'
Agreement"); and
(v) Enter into the Registration Rights Agreement in
substantially the form attached hereto as Exhibit E (the "BHR
Registration Rights Agreement").
(b) On or before the date the Spin-Off is effective, BAI and HC will
review and approve the form of lease to be entered into by BHR and FelCor, such
approval not to be unreasonably withheld or delayed.
(c) Immediately after the Spin-Off and prior to the Effective Time,
BAI and HC will Transfer to BHR for redemption that number of BHR Common Shares
equal to the excess of (i) the aggregate number of shares of BHR Common Shares
that such Stockholders may be deemed to own immediately following the Spin-Off
by virtue of the attribution provisions of Section 544 of the Code (as modified
by Section 856(h)(i)(B) of the Code) (assuming that BHR is a REIT for such
purposes) and/or Section 318 of the Code (as modified by Section 856(d)(5) of
the Code) (together, the "Attribution Rules") over (ii) the number of shares
that represent 9.9% of the total number of outstanding BHR Common Shares as of
the Spin-Off Time after giving effect to the redemption herein contemplated
(such shares, the "Excess Shares") in consideration for payment by BHR to BAI
and HC by wire transfer of cash in the aggregate amount of $25,814,200 (the
"Excess Shares Redemption Amount"). Each of BAI and HC will transfer a pro
rata portion of the Excess Shares based on the number of BHR Common Shares held
by it as compared to the aggregate BHR Common Shares held by BAI and HC. Upon
such redemption, BAI and HC will deliver to BHR such stock transfer forms,
stock powers, certificates and other documents evidencing the redemption of the
Excess Shares and confirming BAI's and HC's ownership of BHR Common Shares
immediately prior to the Effective Time and following the Excess Shares
Redemption as BHR may reasonably request.
(d) In the event that BAI, HC or any of their respective Affiliates
decreases the number of Bristol Common Shares held by such Stockholders between
the date hereof and the Spin-Off Time, the Excess Shares Redemption Amount will
be decreased, as appropriate, proportionately by an amount corresponding to the
4
<PAGE> 5
decrease in Excess Shares resulting from a change in such number of Bristol
Common Shares. In the event that BAI, HC or any of their respective Affiliates
increases the number of Bristol Common Shares held by such Stockholders between
the date hereof and the Spin-Off Time so as to result in an increase in the
number of Excess Shares from the number of Excess Shares determined as of the
date hereof, such Excess Shares will also be redeemed pursuant to Section 2(b)
with no corresponding increase in the Excess Shares Redemption Amount. Bristol
will not take any action without the prior written consent of the parties
hereto that would have the effect of increasing or decreasing the number of
Bristol Common Shares held by HC or BAI.
(e) Prior to the Effective Time, BAI and HC will not, and will cause
their Affiliates not to, increase or decrease the number of BHR Common Shares
held by such Stockholders (other than by virtue of a change in the number of
Bristol Common Shares held by such Stockholders between the date hereof and the
Spin-Off Time).
(f) Any Stockholder may transfer any or all of its Subject Shares to
an Affiliate of which such Stockholder owns a majority of the equity or other
ownership interests as long as such Affiliate agrees to be bound by the terms
of this Agreement on the same terms as the transferring Stockholder.
3. Other Agreements of Holdings. (a) Immediately after the
Spin-Off Time and prior to the Effective Time, Holdings will contribute all the
Bristol Common Shares it owns to two limited partnerships to be organized by
Holdings and its partners of which an affiliate of Holdings will be the general
partner (the "Partnerships") in such proportion as Holdings deems appropriate
and as FelCor approves, such approval not to be unreasonably withheld or
delayed. Upon such distribution, Holdings will deliver to BHR such stock
transfer forms, stock powers, certificates and other documents confirming
Holdings' and the Partnerships' ownership of Bristol Common Shares and BHR
Common Shares immediately prior to the Effective Time and following such
distributions.
(b) Prior to the Effective Time, Holdings will cause the Partnerships
to enter into the FelCor Stockholders' Agreement and Holdings will enter into
the BHR Stockholders' Agreement and the BHR Registration Rights Agreement.
4. Termination of Old Stockholders' Agreement and Old Registration
Rights Agreement. Effective as of the Effective Time, each of the parties
acknowledges and agrees that the Old Stockholders' Agreement and the Old
Registration Rights Agreement will, without any further action, terminate and
be of no further force and effect. Effective as of the Effective Time, each of
the parties acknowledges that the Management Stockholders
5
<PAGE> 6
Agreement, dated as of April 28, 1997, will, without any further action
terminate and be of no further force and effect.
5. Certain Representations, Warranties and Covenants of the
Stockholders. Each Stockholder, severally and not jointly, represents,
warrants and covenants to FelCor and Bristol as follows:
(a) Ownership. Except as specified on Schedule A, such Stockholder
is the sole record and beneficial owner of the number of Bristol Common Shares
set forth opposite such Stockholder's name on Schedule A and will have full and
unrestricted power to vote such shares. Such Stockholder does not own any
securities of Bristol on the date of this Agreement other than the Bristol
Common Shares and the options to purchase Bristol Common Shares described on
Schedule A. Except for transfers permitted pursuant to Section 1, at the
Record Date for the Bristol Stockholders Meeting, such Stockholder will be the
sole record and beneficial owner of the number of Bristol Common Shares set
forth opposite such Stockholder's name on Schedule A and will have full and
unrestricted power to vote such shares.
(b) Due Authorization. Such Stockholder has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by such
Stockholder and the consummation by such Stockholder of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Stockholder. This Agreement has been duly executed and delivered
by such Stockholder and constitutes a valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally and to general principles of equity.
(c) No Conflicts. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not, conflict with,
result in a breach or violation of or default (with or without notice or lapse
of time or both) under, or give rise to a material obligation, a right of
termination, cancellation or acceleration of any obligation or a loss of a
material benefit under, or require notice to or the consent of any person under
any agreement, instrument, undertaking, law, rule, regulation, judgment, order,
injunction, decree, determination or award binding on such Stockholder, other
than any such conflicts, breaches, violations, defaults, rights or losses that,
individually and in the aggregate, would not (a) impair the ability of such
Stockholder to perform such Stockholder's obligations under this Agreement or
(b) prevent or
6
<PAGE> 7
delay the consummation of any of the transactions contemplated by this
Agreement.
(d) Reliance by FelCor. Each Stockholder understands and
acknowledges that FelCor is entering into the Merger Agreement in reliance upon
the Stockholder's execution and delivery of this Agreement.
(e) Non-Interference. Such Stockholder will not, except as permitted
by this Agreement, (i) grant any proxies or powers of attorney with respect to
any of such Stockholder's Subject Shares, (ii) deposit any of such
Stockholder's Subject Shares into a voting trust or enter into a voting
agreement with respect to such Stockholder's Subject Shares, or (iii) take any
action that would make any representation or warranty contained herein untrue
or incorrect or have the effect of preventing such Stockholder from performing
its obligations under this Agreement.
(f) Survival. Each Stockholder's representations and warranties set
forth in this Section 5 will survive the Effective Time for one year after the
date of this Agreement.
6. Release. Effective without further action as of the Effective
Time, each Stockholder hereby releases any and all claims such Stockholder has
or may have against Bristol and Bristol's directors, officers and other
employees for all acts, actions, events or occurrences arising or occurring at
any time prior to and including the Effective Time that would give rise to a
claim for indemnification by such directors, officers or employees under the
Bristol Certificate, the Bristol Bylaws, any indemnification agreement for the
benefit of such persons, or Bristol's directors' and officers' insurance
policy; provided, however the foregoing release will not affect any
Stockholder's rights under any written agreement with Bristol.
7. Indemnification. FelCor hereby agrees to indemnify, defend and
hold harmless each Stockholder to the fullest extent permitted by law against
any and all judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection therewith) and all expenses (including without limitation attorneys'
fees), costs and obligations paid or incurred (a "Loss") in connection with
investigating, defending, participating in or preparing to defend any Claim
relating to, resulting from or arising out of the execution or delivery of this
Agreement or the consummation of the transactions contemplated hereby
(including without limitation the execution and delivery of the agreements
described in Sections 2 and 3 of this Agreement); provided however, the
foregoing indemnity will not include any Loss incurred by a Stockholder as a
result of any breach of a representation, warranty or covenant under this
Agreement. For purposes of this Agreement, "Claim" means any
7
<PAGE> 8
threatened, pending or completed action, suit or proceeding, or any inquiry or
investigation, whether instituted, made or conducted by the Company or any
other party, that any Stockholder determines might lead to the institution of
any such action, suit or proceeding, whether civil, criminal, administrative,
investigative or other.
8. Miscellaneous.
(a) Fees and Expenses. Each party hereto will pay its own expenses
incident to preparing for, entering into and carrying out this Agreement and
the performance of its obligations hereunder.
(b) Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(c) Extension; Waiver. Any agreement on the part of a party to waive
any provision of this Agreement, or to extend the time for any performance
hereunder, will be valid against the other parties only if set forth in an
instrument in writing signed on behalf of each such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise will not constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, and is not intended to confer upon any person
other than the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable conflict of laws principles
thereof.
(f) Notices. All notices, requests, claims, demands and other
communications under this Agreement must be in writing and will be deemed given
if delivered personally, or sent by overnight courier (providing proof of
delivery), in the case of the Stockholders, to the address set forth on
Schedule A hereto or, in the case of FelCor or Bristol, to the address set
forth below (or, in each case, at such other address as shall be specified by
like notice).
8
<PAGE> 9
(i) If to FelCor, to:
FelCor Suite Hotels, Inc.
545 E. John Carpenter Freeway
Suite 1300
Irving, Texas 75062
Attention: President
Attention: General Counsel
Telecopy: (972) 444-4949
with copy to:
Jenkens & Gilchrist, P.C.
1445 Ross Avenue
Suite 3200
Dallas, Texas 75202
Attention: Robert W. Dockery
Telecopy: (214) 855-4300
(ii) If to Bristol, to:
Bristol Hotel Company
14295 Midway Road
Dallas, Texas 75244
Attention: General Counsel
Telecopy: (972) 391-1515
with copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek
Telecopy: (212) 755-7306
(g) Assignment. Neither this Agreement nor any of the rights,
interest or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by any Stockholder without
the prior written consent of FelCor and Bristol, and any such assignment or
delegation that is not consented to will be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
(h) Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached,
and that such breach would cause the other parties hereto to sustain damages
for which they would not have an adequate remedy at law for money damages. It
is accordingly agreed that each party will be entitled to an
9
<PAGE> 10
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Delaware or in any Delaware state court,
this being in addition to any other remedy to which it is entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of any federal court located in the State of
Delaware or in any Delaware state court in the event any dispute arises out of
this Agreement or any of the transactions contemplated by this Agreement and
(b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court. All
rights, powers and remedies provided under this Agreement or otherwise
available in respect hereof at law or in equity will be cumulative and not
alternative, and the exercise of any thereof by any party will not preclude the
simultaneous or later exercise of any other such right, power or remedy by such
party.
(i) Exclusive Remedy. If any Stockholder fails to perform any
covenant to be performed by it under this Agreement, and if, pursuant to
Section 7.2 of the Merger Agreement, the Break-Up Fee is paid to FelCor by
Bristol, such Break-Up Fee will constitute liquidated damages and will be
FelCor's sole and exclusive remedy for any breach by a Stockholder of any of
its representations, warranties or covenants under this Agreement.
(j) Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provisions will be
interpreted to be only so broad as is enforceable.
(k) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR PROCEEDING.
(l) Descriptive Headings. The descriptive headings used 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.
(m) Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each
party and delivered to the other parties.
10
<PAGE> 11
(n) Defined Terms. Capitalized terms used herein that are not
otherwise defined herein have the meanings set forth in the Merger Agreement.
[Signature page follows]
11
<PAGE> 12
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be signed as of the day and year first written above.
STOCKHOLDERS:
UNITED/HARVEY HOLDINGS, L.P.
By: Holdings Genpar, L.P.,
its General Partner
By: H H Genpar Partners,
its General Partner
By: Holdings Associates,
Inc., its Managing
General Partner
By: /s/ Daniel A. Decker
----------------------------
Title: Executive Vice
President
BASS AMERICA INC.
By: /s/ F. Andrew Simpson
----------------------------
Title: President
HOLIDAY CORPORATION
By: /s/ Robert J. Chitty
----------------------------
Title: Vice President/
Treasurer
The undersigned agrees to the
terms of Sections 2 and 4.
BASS PLC
By: /s/ F. S. Wigley
----------------------------
Title: General Counsel
and Secretary
12
<PAGE> 13
FELCOR SUITE HOTELS, INC.
By: /s/ Lawrence D. Robinson
----------------------------
Title: Senior Vice
President
BRISTOL HOTEL COMPANY
By: /s/ Peter Kline
----------------------------
Title: President and
Chief Executive Officer
13
<PAGE> 14
SCHEDULE A
<TABLE>
<CAPTION>
Name and Address Number of Bristol Options to purchase
of Stockholder Common Shares Bristol Common Shares
---------------- ---------------- ---------------------
<S> <C> <C>
Holiday Corporation 3,586,929
Three Ravinia Drive
Suite 2900
Atlanta, Georgia 30346
Attn: Craig H. Hunt
Bass America, Inc. 10,455,033
c/o Holiday Corporation
Three Ravinia Drive
Suite 2900
Atlanta, Georgia 30346
Attn: James L. Kacena
United/Harvey 12,716,986 1,342,791
Holdings, L.P.
2200 Ross Avenue
Suite 4200 West
Dallas, Texas 75201
Attn: Daniel A. Decker
</TABLE>
<PAGE> 1
EXHIBIT 10.2
================================================================================
HOTEL PROPERTIES AGREEMENT
BETWEEN
HOLIDAY HOSPITALITY CORP.
AND
BRISTOL HOTELS & RESORTS, INC.
DATED __________, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
HOTEL PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Franchise Offer . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Right of First Offer on Future Opportunities . . . . . . . . . 3
1.3. Right of First Offer on Research & Training
Hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4. Assignment and Conversion of Certain Hotels . . . . . . . . . 5
ARTICLE 2
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3. Amendment; Waiver; Termination . . . . . . . . . . . . . . . . 6
2.4. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6. Counterparts; Effectiveness . . . . . . . . . . . . . . . . . 7
2.7. Successors and Assigns . . . . . . . . . . . . . . . . . . . . 7
2.8. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9. Specific Enforcement . . . . . . . . . . . . . . . . . . . . . 7
2.10. Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . 7
2.11. Original Agreement . . . . . . . . . . . . . . . . . . . . . . 8
2.12. Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.13. Acknowledgment of No Liability. . . . . . . . . . . . . . 8
2.14. Failure of Merger to Occur. . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 3
HOTEL PROPERTIES AGREEMENT
This Hotel Properties Agreement is entered into as of _______________,
1998 (this "Agreement") between Holiday Hospitality Corp., a Delaware
corporation ("HHC"), and Bristol Hotels & Resorts, Inc., a Delaware corporation
("BHR").
W I T N E S S E T H:
WHEREAS, HHC and its affiliates are engaged in, among other things, the
business of franchising certain hotel properties under the Holiday Hospitality
Hotel Brands (as defined herein), including certain hotels owned, leased or
managed by Bristol Hotel Company, a Delaware corporation ("Bristol"), or its
subsidiaries, which are the subject of franchise agreements with HHC (the
"Existing Hotels");
WHEREAS, pursuant to the Spin-Off Agreement dated as of March 23, 1998
(the "Spin-Off Agreement") among Bristol, Bristol Hotel Management Corporation
and BHR, (i) BHR and its subsidiaries will continue Bristol's hotel management
business and will manage, lease and operate, or own and operate all of the
hotels presently owned, managed, or leased by Bristol, a list of which is set
forth on Exhibit A hereto, (ii) Bass America Inc., a Delaware corporation
("BAI"), and Holiday Corporation, a Delaware corporation ("HC") will acquire in
the aggregate ________ shares of common stock, par value $.01 per share, of BHR
and (iii) BHR or one of its subsidiaries will become the franchisee under one
or more franchise agreements with HHC in respect of the Existing Hotels;
WHEREAS, HC and Bristol are parties to the Hotel Properties Agreement
dated April 28, 1997 (the "Original Agreement"), and they now desire to
terminate that agreement in its entirety.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
HOTEL PROPERTIES
1.1. Franchise Offer. (a) BHR and its subsidiaries may offer from time
to time to HHC, or an Affiliate (as defined in the Spin-Off Agreement) thereof,
the opportunity to enter into a standard franchise agreement in effect at such
time (a "Standard Franchise Agreement") for a Hotel (a "Franchise Offer"). BHR
must make any such Franchise Offer to HHC pursuant to a written notice from BHR
to the Vice President of Franchise Development at HHC for the particular
Holiday Hospitality Hotel Brand desired by BHR (a "Franchise Offer Notice").
If HHC desires to accept such Franchise Offer (which acceptance shall not be
unreasonably withheld), HHC must so notify BHR in writing (a "Franchise
<PAGE> 4
Acceptance Notice") within 30 days of its receipt of the notice from BHR. If
HHC delivers a Franchise Acceptance Notice within that 30-day period, BHR and
HHC will cause the Hotel to become subject to a Standard Franchise Agreement on
market terms. As used in this Section 1.1, "Hotel" means a lodging facility
providing a degree of sophistication and amenities and facilities which is of a
type and standard generally consistent with hotels operated as Holiday
Hospitality Hotel Brand hotels. As used in this Agreement, "Holiday
Hospitality Hotel Brands" means Holiday Inn, Holiday Inn Select, Holiday Inn
Express, Crowne Plaza, Inter-Continental, and any other hotel brand owned or
controlled by HHC or any of its Affiliates (the "HC Entities").
(b) BHR and its subsidiaries must make Franchise Offers and enter
into Standard Franchise Agreements with respect to Hotels (other than Existing
Hotels) having an aggregate of 3,000; 5,200; and 8,700 rooms (each, a
"Threshold") by April 1, 2001, April 1, 2002 and April 1, 2003 (each, a
"Measurement Date"), respectively. If BHR fails to meet the applicable
Threshold by a Measurement Date, BHR will pay to HHC a monthly fee equal to
$73.50 multiplied by the excess of the applicable Threshold over the number of
rooms that were subjected to Standard Franchise Agreements under Section 1.1(a)
through that Measurement Date. BHR will continue to pay that fee until the
earlier of (i) with respect to the first Measurement Date, March 31, 2002; with
respect to the second Measurement Date, March 31, 2003; and with respect to the
third Measurement Date, March 31, 2006, or (ii) the date on which BHR satisfies
the applicable Threshold. Notwithstanding the foregoing, if on any Measurement
Date no more than 15% of the aggregate number of rooms in Hotels which BHR or
any of its subsidiaries develops, acquires, leases, or is appointed manager
after the date of this Agreement, are not subjected to Standard Franchise
Agreements, BHR will not be required to make any payment under this Section
1.1(b) as to that Measurement Date. Any Hotel that was the subject of a
Franchise Offer that HHC failed to accept will not be taken into consideration
in calculating the percentage of rooms in Hotels not subject to Standard
Franchise Agreements pursuant to this Section 1.1(b).
(c) BHR's obligations under this Section 1.1 will terminate on the
earliest to occur of (i) the effectiveness of HHC's termination notice
described in Section 1.2(b), (ii) the HC Entities are no longer holding a
Controlling interest in the entities that directly or indirectly hold the
intellectual property rights related to the Holiday Inn, Holiday Inn Express or
Crowne Plaza brands, and (iii) BHR having made Franchise Offers with respect to
Hotels which are subjected to Standard Franchise Agreements and have an
aggregate of at least 8,700 rooms. For purposes of this Section 1.1, any Hotel
that is subjected to a Standard Franchise Agreement under Section 2.1 of the
Original Agreement after March 31, 1998 (other than those
2
<PAGE> 5
acquired in the transaction with Omaha Hotel, Inc.), will be deemed to have
been the subject of a Franchise Offer and a Standard Franchise Agreement under
this Section 1.1.
1.2. Right of First Offer on Future Opportunities. (a) If the HC
Entities wish to acquire a direct or indirect equity, or other similar interest
in, or the right to develop, a Mid-Scale Lodging Facility located in the United
States or Canada (each an "Opportunity"), subject to Sections 1.2(c) and (d),
the HC Entities will first offer the Opportunity to BHR pursuant to a written
notice (an "Opportunity Notice") that describes the Opportunity and will be
accompanied by any relevant information held by the HC Entities regarding the
Opportunity, and any analysis performed by the HC Entities regarding the
Opportunity. If BHR desires to pursue the Opportunity, it will notify the HC
Entities in writing of its desire to pursue the Opportunity within 10 days of
receipt of the Opportunity Notice. Upon receipt of BHR's notice that it
desires to pursue the Opportunity, (i) the HC Entities will assign to BHR all
rights the HC Entities may have in respect of the Opportunity and will take all
reasonable actions to permit BHR to acquire all rights related to the
Opportunity and to enter into definitive agreements with any other Person
related or necessary to the Opportunity, (ii) BHR will actively pursue the
Opportunity, (iii) the HC Entities will not be entitled to pursue any aspect of
the Opportunity (other than entering into a franchise arrangement under Section
1.1 with BHR) and (iv) BHR and the HC Entities will enter into a Standard
Franchise Agreement with respect to the Mid-Scale Lodging Facility that is
subject to the Opportunity. If requested by HHC, but subject to
confidentiality or other requirements applicable to BHR, BHR will provide to
HHC drafts of letters of intent or material agreements relating to BHR's
pursuit of the Opportunity. HHC will hold any such information in strict
confidence and will not provide any such information to any Person who does not
have an appropriate reason to receive such information. If BHR determines that
it no longer wishes to actively pursue an Opportunity, BHR will promptly
deliver written notice of such determination to HHC (an "Abandonment Notice").
If BHR delivers an Abandonment Notice to HHC, or if the HC Entities do not
receive a notice from BHR indicating its desire to pursue an Opportunity within
that 10-day period, the HC Entities may pursue the Opportunity without being
subject to Section 1.2(b) and BHR will have no further rights regarding the
Opportunity. The HC Entities shall not be subject to the provisions of this
Section 1.2(a) if (i) the HC Entities pursue minority equity interests in or
advance loans to Opportunities provided that such equity interests or loans are
primarily taken or made as an inducement to a Person to enter into or maintain
franchise arrangements for the Holiday Hospitality Hotel Brands or enter into
or maintain a management opportunity pursuant to Section 1.2(d) below or (ii)
the HC Entities would beneficially own less than 5 percent of the
3
<PAGE> 6
Opportunity in a publicly-traded company. As used herein, "Mid-Scale Lodging
Facility" means a full service lodging facility providing a degree of
sophistication and full service amenities and facilities which (i) is of a type
and standard generally consistent with hotels operated as Holiday Inn hotels in
the United States and Canada (which will include any Hotel that is then
operated as a Holiday Inn or Holiday Inn Select Hotel), (ii) does not primarily
offer suites, (iii) is not designed to accommodate "extended stays" (generally
more than five days) and (iv) does not generally compete as an "upscale" or
"economy" hotel. By way of example and for the guidance of the parties, the
parties acknowledge that as of this date they would, without dispute, classify
the hotel operations listed on Schedules 1.2(a)(1) and 1.2(a)(2) as "upscale"
hotels and "economy" hotels, respectively.
(b) At any time after October 28, 1998, the HC Entities may terminate
their obligations under Section 1.2(a) upon six months' advance written notice
to BHR.
(c) From the date of the Original Agreement, HHC will be permitted to
acquire up to five hotels in the United States and Canada that will not be
subject to the provisions of this Section 1.2 for research and training
("Research & Training Hotels"); provided that (i) HHC must provide BHR with
prior written notice of its intention to acquire any Research & Training Hotel
and (ii) none of such hotels is located in the same geographic markets of the
hotels owned, leased or managed by BHR or any of its subsidiaries. Subject to
clauses (i) and (ii) of the foregoing sentence, HHC will be permitted to
develop an unlimited number of Research & Training Hotels. If an HC Entity
proposes to pursue a sale of any facility under this Section 1.2(c), such
facility will be subject to Section 1.3 of this Agreement.
(d) Nothing in this Section 1.2 is intended to prohibit the HC
Entities from engaging in the business of managing Mid-Scale Lodging
Facilities; provided however, the HC Entities will notify BHR pursuant to a
written notice that the HC Entities intend to engage in such business. Upon
receipt of the HC Entities' notice that they intend to engage in such
management business, Section 1.2(a) will no longer apply to such management
Opportunities. The HC Entities will provide BHR an additional written notice
of their intent to pursue each management opportunity. That additional notice
must be delivered contemporaneously with their bidding on the management
Opportunity and will identify the hotel subject to the management Opportunity.
1.3. Right of First Offer on Research & Training Hotels. If an HC
Entity proposes to pursue a sale of any Research & Training Hotel that it owns,
the HC Entity will provide written
4
<PAGE> 7
notice to BHR of its intention to pursue such sale. If BHR desires to purchase
the hotel, BHR and the HC Entity will promptly enter into good faith
negotiations to finalize a definitive agreement to acquire such hotel, but the
parties will have no obligation to enter into such an agreement.
1.4. Assignment and Conversion of Certain Hotels. (a) Upon BHR's
submission of appropriate documentation in accordance with HHC's standard
practices, HHC will consent to BHR's or its subsidiary's becoming the
franchisee under the existing franchise agreements that relate to an Existing
Hotel and each existing franchise agreement will continue on the same terms.
The fee for effecting such assignments shall be $1,000 per Hotel.
(b) HHC and BHR will use their respective reasonable efforts to cause
the hotels described in Section 2.4 of the Original Agreement to enter into
franchise agreements with HHC for the Holiday Hospitality Hotel Brand as agreed
upon, such franchise agreements to be on the same terms contemplated by the
Original Agreement.
ARTICLE 2
MISCELLANEOUS
2.1. Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understandings, both written and oral, with respect to
the subject matter hereof and except as otherwise expressly provided herein and
therein. This Agreement will have no effect on any rights or obligations HC,
BAI, Holdings (as defined in the Spin-Off Agreement) or BHR may have under any
registration rights agreement or shareholders agreement.
2.2. Notices. (a) All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given,
if to BHR, to:
Bristol Hotels & Resorts, Inc.
14295 Midway Road
Dallas, Texas 75244
Attention: General Counsel
Telecopy: (972) 391-1515
5
<PAGE> 8
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek
Telecopy: (212) 755-7306
if to HHC, to:
Holiday Corporation
Three Ravina Drive
Suite 2900
Atlanta, Georgia 30346
Attention: Craig H. Hunt
Telecopy: (770) 604-5988
with copies to:
Crowne Plaza - Corporate Headquarters
Three Ravina Drive
Suite 2900
Atlanta, Georgia 30346
Attention: James L. Kacena
Telecopy: (770) 604-2000
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Paul R. Kingsley
Telecopy: (212) 450-4800
(b) Each party hereto may hereafter specify such other address or
telecopy number for the purpose by notice to the other parties hereto. Each
such notice, request or other communication shall be effective (a) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section 2.2(a) and the appropriate telecopy confirmation is received or
(b) if given by any other means, when delivered at the address specified in
this Section 2.2(a).
2.3. Amendment; Waiver; Termination. (a) No provision of this
Agreement may be waived except by an instrument in writing executed by the
party against whom the waiver is to be effective. No provision of this
Agreement may be amended or otherwise modified except by an instrument in
writing executed by each party.
6
<PAGE> 9
(b) This Agreement shall terminate on the earliest of (i) 6 months
after the HC Entities have delivered to BHR the notice described in Section
1.2(b) and (ii) the mutual agreement of the parties hereto.
2.4. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense; provided, however, that, in any action or
proceeding brought to enforce any provision of this Agreement or where any
provision of this Agreement is validly asserted as a defense, the successful
party will be entitled to recover its cost and expense (including reasonable
attorneys' fees and charges) in addition to any other available remedy.
2.5. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER THE PRINCIPLES OF CONFLICT OF LAWS APPLICABLE
THERETO.
2.6. Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received counterparts hereof signed by all of the other parties hereto.
2.7. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto.
2.8. Headings. The headings contained in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
2.9. Specific Enforcement. Each party hereto acknowledges that the
remedies at law of the other parties for a breach or threatened breach of this
Agreement would be inadequate and, in recognition of this fact, any party to
this Agreement, without posting any bond, and in addition to all other remedies
which may be available, shall be entitled to obtain equitable relief in the
form of specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy which may then be available.
2.10. Consent to Jurisdiction. Any suit, action or proceeding seeking
to enforce any provision of; or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in the Court
7
<PAGE> 10
of Chancery in the State of Delaware, and each of the parties hereby consents
to the non-exclusive jurisdiction of such court (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 2.2 shall
be deemed effective service of process on such party.
2.11. Original Agreement. Upon the effectiveness of the Spin-Off (as
defined in the Spin-Off Agreement), the Original Agreement will terminate and
the parties to the Original Agreement will be released from any obligations
under the Original Agreement other than with respect to any claims asserted in
writing before the effectiveness of the Spin-Off.
2.12. Cooperation. BHR will follow HHC's standard procedures for
entering into franchise arrangements in entering into any Standard Franchise
Agreement with respect to Hotels pursuant to this Agreement.
2.13. Acknowledgment of No Liability. HC and HHC acknowledge that the
obligations of BHR under this Agreement shall not be assumed by FelCor pursuant
to the merger of Bristol with and into FelCor pursuant to the Merger Agreement,
dated March 23, 1998, between Bristol and FelCor (the "Merger Agreement") or
otherwise.
2.14. Failure of Merger to Occur. If the Spin-Off is consummated and
the Merger Agreement is terminated, the parties to this Agreement and the
Original Agreement will negotiate in good faith to amend the provisions of this
Agreement in such a manner that the terms of this Agreement will provide
substantially the same effect as those under the Original Agreement.
8
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
HOLIDAY HOSPITALITY CORP.
By:
----------------------------------
Name:
Title:
BRISTOL HOTELS & RESORTS, INC.
By:
----------------------------------
Name:
Title:
The undersigned hereby agree
to the terms of Sections 2.11,
2.13 and 2.14.
BRISTOL HOTEL COMPANY
By:
----------------------------------
Name:
Title:
HOLIDAY CORPORATION
By:
----------------------------------
Name:
Title:
9
<PAGE> 12
SCHEDULE 1.2(a)(1)
"UPSCALE HOTELS"
Crowne Plaza
Doubletree
Hilton Hotels
Marriott
Hyatt
Westin
Inter-Continental
<PAGE> 13
SCHEDULE 1.2(a)(2)
"ECONOMY HOTELS"
Budgetel
Comfort Inn
Days Inn
Holiday Inn Express
Red Roof Inn
Ramada Limited
Econo Lodge
Motel 6
<PAGE> 1
EXHIBIT 10.5
BRISTOL HOTELS & RESORTS
1998 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of this Plan is to attract and retain qualified
officers and other key employees, or consultants, for Bristol Hotels & Resorts,
Inc. (the "Corporation") and its Subsidiaries and to provide such persons with
appropriate incentives.
2. DEFINITIONS. As used in this Plan,
"APPRECIATION RIGHT" means a right granted pursuant to Section 5 of this
Plan, including a Free-standing Appreciation Right and a Tandem Appreciation
Right.
"BASE PRICE" means the price to be used as the basis for determining the
Spread upon the exercise of a Freestanding Appreciation Right.
"BOARD" means the Board of Directors of the Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMITTEE" means the Compensation Committee of the Board of Directors, as
described in Section 14(a) of this Plan, and, to the extent the administration
of the Plan has been assumed by the Board pursuant to Section 14(a), the Board.
"COMMON SHARES" means (i) shares of the Common Stock, par value $0.01 per
share, of the Corporation and (ii) any security into which Common Shares may be
converted by reason of any transaction or event of the type referred to in
Section 10 of this Plan.
"DATE OF GRANT" means the date specified by the Committee on which a grant
of Option Rights, Appreciation Rights or Performance Shares or Performance Units
or a grant or sale of Restricted Shares or Deferred Shares shall become
effective, which shall not be earlier than the date on which the Committee takes
action with respect thereto.
"DEFERRAL PERIOD" means the period of time during which Deferred Shares are
subject to deferral limitations under Section 7 of this Plan.
"DEFERRED SHARES" means an award pursuant to Section 7 of this Plan of the
right to receive Common Shares at the end of a specified Deferral Period.
"FREE-STANDING APPRECIATION RIGHT" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right or similar right.
"INCENTIVE STOCK OPTION" means an Option Right that is intended to qualify
as an "incentive stock option" under Section 422 of the Code or any successor
provision thereto.
"MANAGEMENT OBJECTIVES" means the achievement of a performance objective or
objectives established pursuant to this Plan for Participants who have received
grants of Performance Shares or Performance Units or, when so determined by the
Committee, Restricted Shares, Option Rights or Appreciation Rights. Management
Objectives may be described in terms of Corporation-wide objectives or
objectives that are related to the performance of the individual Participant or
the Subsidiary, division, department or function within the Corporation or
Subsidiary in which the Participant is employed or with respect to which the
Participant provides consulting services. The Management Objectives applicable
to any award to a Participant who is, or is determined by the Committee to be
likely to become, a "covered employee" within the meaning of Section 162(m) of
the Code (or any successor provision) shall be limited to specified levels of or
growth in:
(i) return on invested capital;
(ii) return on equity;
(iii) return on operating assets;
<PAGE> 2
(iv) earnings per share; and/or
(v) market value per share.
Except in the case of such a covered employee, if the Committee determines that
a change in the business, operations, corporate structure or capital structure
of the Corporation, or the manner in which it conducts its business, or other
events or circumstances render the Management Objectives unsuitable, the
Committee may modify such Management Objectives or the related minimum
acceptable level of achievement, in whole or in part, as the Committee deems
appropriate and equitable.
"MARKET VALUE PER SHARE" means the fair market value of the Common Shares
as determined by the Committee from time to time.
"NONQUALIFIED OPTION" means an Option Right that is not intended to qualify
as a Tax-qualified Option.
"OPTIONEE" means the person so designated in an agreement evidencing an
outstanding Option Right.
"OPTION PRICE" means the purchase price payable upon the exercise of an
Option Right.
"OPTION RIGHT" means the right to purchase Common Shares from the
Corporation upon the exercise of a Nonqualified Option or a Tax-qualified Option
granted pursuant to Section 4 of this Plan.
"PARTICIPANT" means a person who is selected by the Committee to receive
benefits under this Plan and (i) is at that time an officer, including without
limitation an officer who may also be a member of the Board, or other key
employee of or a consultant to the Corporation or any Subsidiary or (ii) has
agreed to commence serving in any such capacity.
"PERFORMANCE PERIOD" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating thereto are to be achieved.
"PERFORMANCE SHARE" means a bookkeeping entry that records the equivalent
of one Common Share awarded pursuant to Section 8 of this Plan.
"PERFORMANCE UNIT" means a bookkeeping entry that records a unit equivalent
of $1.00 awarded pursuant to Section 8 of this Plan.
"PLAN" means this Bristol Hotels & Resorts 1998 Equity Incentive Plan, as
amended from time to time.
"RELOAD OPTION RIGHTS" means additional Option Rights automatically granted
to an Optionee upon the exercise of Option Rights pursuant to Section 4(f) of
this Plan.
"RESTRICTED SHARES" means Common Shares granted or sold pursuant to Section
6 of this Plan as to which neither the substantial risk of forfeiture nor the
restrictions on transfer referred to in Section 6 hereof has expired.
"RULE 16b-3" means Rule 16b-3, as promulgated and amended from time to time
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, or any successor rule to the same effect.
"SPREAD" means, in the case of a Free-standing Appreciation Right, the
amount by which the Market Value per Share on the date when the Appreciation
Right is exercised exceeds the Base Price specified therein or, in the case of a
Tandem Appreciation Right, the amount by which the Market Value per Share on the
date when the Appreciation Right is exercised exceeds the Option Price specified
in the related Option Right.
"SUBSIDIARY" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Corporation has a direct
or indirect ownership or other equity interest; provided, however, for purposes
of determining whether any person may be a Participant for purposes of any grant
of Incentive Stock Options, "Subsidiary" means any corporation in which the
Corporation owns or controls directly or indirectly more than 50% of the total
combined voting power represented by all classes of stock issued by such
corporation at the time of the grant.
2
<PAGE> 3
"TANDEM APPRECIATION RIGHT" means an Appreciation Right granted pursuant to
Section 5 of this Plan that is granted in tandem with an Option Right or any
similar right granted under any other plan of the Corporation.
"TAX-QUALIFIED OPTION" means an Option Right that is intended to qualify
under particular provisions of the Code, including without limitation an
Incentive Stock Option.
3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as provided
in Section 10 of this Plan, the number of Common Shares which may be (i) issued
or transferred upon the exercise of Option Rights or Appreciation Rights, (ii)
awarded as Restricted Shares and released from substantial risk of forfeiture
thereof or Deferred Shares or (iii) issued or transferred in payment of
Performance Shares or Performance Units that have been earned, shall not in the
aggregate exceed five million Common Shares, which may be Common Shares of
original issuance or Common Shares held in treasury or a combination thereof;
provided, however, that the number of Restricted Shares shall not in the
aggregate exceed one million (excluding any forfeitures), subject to adjustment
as provided in Section 10 of this Plan. For the purposes of this Section 3(a):
(i) Upon payment in cash of the benefit provided by any award granted
under this Plan, any Common Shares that were covered by that award shall
again be available for issuance or transfer hereunder.
(ii) Upon the full or partial payment of any Option Price by the
transfer to the Company of Common Shares or upon satisfaction of tax
withholding obligations in connection with any such exercise or any other
payment made or benefit realized under this Plan by the transfer or
relinquishment of Common Shares, there shall be deemed to have been issued
or transferred under this Plan only the net number of Common Shares
actually issued or transferred by the Corporation less the number of Common
Shares so transferred or relinquished.
(b) Notwithstanding anything in Section 3(a) hereof, or elsewhere in this
Plan, to the contrary, and subject to adjustment as provided in Section 10 of
this Plan, (i) the aggregate number of Common Shares actually issued or
transferred by the Corporation upon the exercise of the Incentive Stock Options
shall not exceed the total number of Common Shares first specified in Section
3(a) hereof; (ii) no Participant shall be granted Option Rights and Appreciation
Rights, in the aggregate, for more than 750,000 Common Shares during any
calendar year; and (iii) the number of shares issued as Restricted Shares that
are not conditioned on the attainment of Management Objectives, plus the number
of Deferred Shares, shall not exceed one million Common Shares in the aggregate.
(c) The number of Performance Units that may be granted under this Plan
shall not in the aggregate exceed five million. Performance Units that are
granted under this Plan and are paid in Common Shares or are not earned by the
Participant at the end of the Performance Period shall be available for future
grants of Performance Units hereunder.
(d) Notwithstanding any other provision of this Plan to the contrary, in no
event shall any Participant in any calendar year receive awards of Restricted
Stock conditioned on attainment of Management Objectives, Performance Shares or
Performance Units having an aggregate value as of their respective Dates of
Grant in excess of $250,000.
4. OPTION RIGHTS. The Committee may from time to time authorize grants to
Participants of options to purchase Common Shares upon such terms and conditions
as the Committee may determine in accordance with the following provisions:
(a) Each grant shall specify the number of Common Shares to which it
pertains.
(b) Each grant shall specify an Option Price per Common Share, which
may be equal to, greater than or less than the Market Value per Share on
the Date of Grant.
(c) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check
or other cash equivalent acceptable to the Corporation, (ii)
nonforfeitable, unrestricted Common
3
<PAGE> 4
Shares, which are already owned by the Optionee, (iii) any other legal
consideration that the Committee may deem appropriate, including without
limitation any form of consideration authorized under Section 4(d) below,
on such basis as the Committee may determine in accordance with this Plan
and (iv) any combination of the foregoing.
(d) Any grant of a Nonqualified Option may provide that payment of the
Option Price may also be made in whole or in part in the form of Restricted
Shares or other Common Shares that are subject to risk of forfeiture or
restrictions on transfer. Unless otherwise determined by the Committee on
or after the Date of Grant, whenever any Option Price is paid in whole or
in part by means of any of the forms of consideration specified in this
Section 4(d), the Common Shares received by the Optionee upon the exercise
of the Nonqualified Option shall be subject to the same risks of forfeiture
or restrictions on transfer as those that applied to the consideration
surrendered by the Optionee; provided, however, that such risks of
forfeiture and restrictions on transfer shall apply only to the same number
of Common Shares received by the Optionee as applied to the forfeitable or
restricted Common Shares surrendered by the Optionee.
(e) Any grant may, if there is then a public market for the Common
Shares, provide for deferred payment of the Option Price from the proceeds
of sale through a broker of some or all of the Common Shares to which the
exercise relates.
(f) Any grant may provide for the automatic grant to the Optionee of
Reload Option Rights upon the exercise of Option Rights, including Reload
Option Rights, for Common Shares or any other noncash consideration
authorized under Sections 4(c) and (d) above; provided, however, that the
term of any Reload Option Right shall not extend beyond the term of the
Option Right originally exercised.
(g) Successive grants may be made to the same Optionee regardless of
whether any Option Rights previously granted to the Optionee remain
unexercised.
(h) Each grant shall specify the period or periods of continuous
employment, or continuous engagement of the consulting services, of the
Optionee by the Corporation or any Subsidiary and/or the Management
Objectives to be achieved before the Option Rights or installments thereof
shall become exercisable, and any grant may provide for the earlier
exercise of the Option Rights in the event of a change in control of the
Corporation or other similar transaction or event.
(i) Option Rights granted pursuant to this Section 4 may be
Nonqualified Options or Tax-qualified Options or combinations thereof.
(j) Any grant of an Option Right (other than Incentive Stock Options)
may provide for the payment to the Optionee of dividend equivalents thereon
in cash or Common Shares on a current, deferred or contingent basis, or the
Committee may provide that any dividend equivalents shall be credited
against the Option Price.
(k) No Option Right granted pursuant to this Section 4 may be
exercised more than 10 years from the Date of Grant.
(l) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any of the Chairman, the
President, a Vice President or a Secretary thereof and delivered to and
accepted by the Optionee and shall contain such terms and provisions as the
Committee may determine consistent with this Plan.
5. APPRECIATION RIGHTS. The Committee may also authorize grants to
Participants of Appreciation Rights. An Appreciation Right shall be a right of
the Participant to receive from the Corporation an amount, which shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100%) of the Spread at the time of the exercise of an Appreciation
Right. Any grant of Appreciation Rights under this Plan shall be upon such terms
and conditions as the Committee may determine in accordance with the following
provisions:
(a) Any grant may specify that the amount payable upon the exercise of
an Appreciation Right may be paid by the Corporation in cash, Common Shares
or any combination thereof and may (i) either grant
4
<PAGE> 5
to the Participant or reserve to the Committee the right to elect among
those alternatives or (ii) preclude the right of the Participant to receive
and the Corporation to issue Common Shares or other equity securities in
lieu of cash.
(b) Any grant may specify that the amount payable upon the exercise of
an Appreciation Right shall not exceed a maximum specified by the Committee
on the Date of Grant.
(c) Any grant may specify (i) a waiting period or periods before
Appreciation Rights shall become exercisable, (ii) permissible dates or
periods on or during which Appreciation Rights shall be exercisable, and
(iii) the Management Objectives to be achieved before the Appreciation
Right or installments thereof will become exercisable.
(d) Any grant may specify that an Appreciation Right may be exercised
only in the event of a change in control of the Corporation or other
similar transaction or event.
(e) Any grant may provide for the payment to the Participant of
dividend equivalents thereon in cash or Common Shares on a current,
deferred or contingent basis.
(f) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any of the Chairman, the
President, a Vice President or a Secretary thereof and delivered to and
accepted by the Optionee and shall describe the subject Appreciation
Rights, identify any related Option Rights, state that the Appreciation
Rights are subject to all of the terms and conditions of this Plan and
contain such other terms and provisions as the Committee may determine
consistent with this Plan.
(g) Regarding Tandem Appreciation Rights only: Each grant shall
provide that a Tandem Appreciation Right may be exercised only (i) at a
time when the related Option Right (or any similar right granted under any
other plan of the Corporation) is also exercisable and the Spread is
positive and (ii) by surrender of the related Option Right (or such other
right) for cancellation.
(h) Regarding Free-standing Appreciation Rights only:
(i) Each grant shall specify in respect of each Free-standing
Appreciation Right a Base Price per Common Share, which shall be equal
to or greater than the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same Participant
regardless of whether any Free-standing Appreciation Rights previously
granted to the Participant remain unexercised;
(iii) Each grant shall specify the period or periods of continuous
employment, or continuous engagement of the consulting services, of the
Participant by the Corporation or any Subsidiary that are necessary
before the Free-standing Appreciation Rights or installments thereof
shall become exercisable; and any grant may provide for the earlier
exercise of the Free-standing Appreciation Rights in the event of a
change in control of the Corporation or other similar transaction or
event; and
(iv) No Free-standing Appreciation Right granted under this Plan
may be exercised more than 10 years from the Date of Grant.
6. RESTRICTED SHARES. The Committee may also authorize grants or sales to
Participants of Restricted Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute an immediate transfer of the
ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to dividend, voting and
other ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each grant or sale may be made without additional consideration
from the Participant or in consideration of a payment by the Participant
that is less than the Market Value per Share on the Date of Grant.
5
<PAGE> 6
(c) Each grant or sale shall provide that the Restricted Shares
covered thereby shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined
by the Committee on the Date of Grant, and any grant or sale may provide
for the earlier termination of such period in the event of a change in
control of the Corporation or other similar transaction or event.
(d) Each grant or sale shall provide that, during the period for which
such substantial risk of forfeiture is to continue, the transferability of
the Restricted Shares shall be prohibited or restricted in the manner and
to the extent prescribed by the Committee on the Date of Grant. Such
restrictions may include without limitation rights of repurchase or first
refusal in the Corporation or provisions subjecting the Restricted Shares
to a continuing substantial risk of forfeiture in the hands of any
transferee.
(e) Any grant of Restricted Shares may specify Management Objectives
that, if achieved, will result in termination or early termination of the
restrictions applicable to such shares. Each grant may specify in respect
of such Management Objectives a minimum acceptable level of achievement and
may set forth a formula for determining the number of Restricted Shares on
which restrictions will terminate if performance is at or above the minimum
level, but falls short of full achievement of the specified Management
Objectives.
(f) Any grant or sale may require that any or all dividends or other
distributions paid on the Restricted Shares during the period of such
restrictions be automatically sequestered and reinvested on an immediate or
deferred basis in additional Common Shares, which may be subject to the
same restrictions as the underlying award or such other restrictions as the
Committee may determine.
(g) Each grant or sale shall be evidenced by an agreement, which shall
be executed on behalf of the Corporation by an officer thereof and
delivered to and accepted by the Participant and shall contain such terms
and provisions as the Committee may determine consistent with this Plan.
Unless otherwise directed by the Committee, all certificates representing
Restricted Shares, together with a stock power that shall be endorsed in
blank by the Participant with respect to the Restricted Shares, shall be
held in custody by the Corporation until all restrictions thereon lapse.
7. DEFERRED SHARES. The Committee may also authorize grants or sales of
Deferred Shares to Participants upon such terms and conditions as the Committee
may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute the agreement by the
Corporation to issue or transfer Common Shares to the Participant in the
future in consideration of the performance of services, subject to the
fulfillment during the Deferral Period of such conditions as the Committee
may specify.
(b) Each grant or sale may be made without additional consideration
from the Participant or in consideration of a payment by the Participant
that is less than the Market Value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the Deferred Shares covered
thereby shall be subject to a Deferral Period, which shall be fixed by the
Committee on the Date of Grant, and any grant or sale may provide for the
earlier termination of the Deferral Period in the event of a change in
control of the Corporation or other similar transaction or event.
(d) During the Deferral Period, the Participant shall not have any
right to transfer any rights under the subject award, shall not have any
rights of ownership in the Deferred Shares and shall not have any right to
vote the Deferred Shares, but the Committee may on or after the Date of
Grant authorize the payment of dividend equivalents on the Deferred Shares
in cash or additional Common Shares on a current, deferred or contingent
basis.
(e) Each grant or sale shall be evidenced by an agreement, which shall
be executed on behalf of the Corporation by any officer thereof and
delivered to and accepted by the Participant and shall contain such terms
and provisions as the Committee may determine consistent with this Plan.
6
<PAGE> 7
8. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Committee may also
authorize grants of Performance Shares and Performance Units, which shall become
payable to the Participant upon the achievement of specified Management
Objectives, upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which may be subject to adjustment
to reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Performance Share or
Performance Unit shall be determined by the Committee on the Date of Grant
and may be subject to earlier termination in the event of a change in
control of the Corporation or other similar transaction or event.
(c) Any grant of Performance Shares or Performance Units shall specify
Management Objectives that, if achieved, will result in payment or early
payment of the award, and each grant may specify in respect of such
Management Objectives a minimum acceptable level of achievement and may set
forth a formula for determining the number of Performance Shares or
Performance Units that will be earned if performance is at or above the
minimum level, but falls short of full achievement of the specified
Management Objectives. The grant of Performance shares or Performance Units
shall specify that, before the Performance Shares or Performance Units
shall be earned and paid, the Committee must certify that the Management
Objectives have been satisfied.
(d) Each grant shall specify in respect of the specified Management
Objectives a minimum acceptable level of achievement below which no payment
will be made and shall set forth a formula for determining the amount of
any payment to be made if performance is at or above the minimum acceptable
level but falls short of full achievement of the specified Management
Objectives.
(e) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that shall have been earned, and
any grant may specify that any such amount may be paid by the Corporation
in cash, Common Shares or any combination thereof and may either grant to
the Participant or reserve to the Committee the right to elect among those
alternatives.
(f) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the
Committee on the Date of Grant. Any grant of Performance Units may specify
that the amount payable, or the number of Common Shares issued, with
respect thereto may not exceed maximums specified by the Committee on the
Date of Grant.
(g) On or after the Date of Grant of Performance Shares, the Committee
may provide for the payment to the Participant of dividend equivalents
thereon in cash or additional Common Shares on a current, deferred or
contingent basis.
(h) The Committee may adjust Management Objectives and the related
minimum acceptable level of achievement if, in the sole judgment of the
Committee, events or transactions have occurred after the Date of Grant
that are unrelated to the performance of the Participant and result in
distortion of the Management Objectives or the related minimum acceptable
level of achievement.
(i) Each grant shall be evidence by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and delivered
to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan.
9. TRANSFERABILITY. (a) Except as otherwise determined by the Committee,
(i) no Option Right, Appreciation Right or other derivative security (as that
term is used in Rule 16b-3) granted under this Plan may be transferred by a
Participant except by will or the laws of descent and distribution, and (ii)
Option Rights and Appreciation Rights granted under this Plan may not be
exercised during a Participant's lifetime except by the Participant or by his or
her guardian or legal representative.
(b) Any grant made under this Plan may provide that all or any part of the
Common Shares that are to be issued or transferred by the Corporation upon the
exercise of Option Rights or Appreciation Rights or upon the termination of the
Deferral Period applicable to Deferred Shares or in payment of Performance
Shares or
7
<PAGE> 8
Performance Units, or are no longer subject to the substantial risk of
forfeiture and restrictions on transfer referred to in Section 6 of this Plan,
shall be subject to further restrictions upon transfer.
10. ADJUSTMENTS. (a) The Committee may make or provide for such adjustments
in the number of Common Shares covered by outstanding Option Rights,
Appreciation Rights, Deferred Shares and Performance Shares granted hereunder,
the Option Prices per Common Share or Base Prices per Common Share applicable to
any such Option Rights and Appreciation Rights, and the kind of shares
(including shares of another issuer) covered thereby, as the Committee may in
good faith determine to be equitably required in order to prevent dilution or
expansion of the rights of Participants that otherwise would result from (i) any
stock dividend, stock split, combination of shares, recapitalization or similar
change in the capital structure of the Corporation or (ii) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of warrants or
other rights to purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. In the event of any such
transaction or event, the Committee may provide in substitution for any or all
outstanding awards under this Plan such alternative consideration as it may in
good faith determine to be equitable under the circumstances and may require in
connection therewith the surrender of all awards so replaced. Moreover, the
Committee may on or after the Date of Grant provide in the agreement evidencing
any award under this Plan that the holder of the award may elect to receive an
equivalent award in respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having a similar effect, or the
Committee may provide that the holder will automatically be entitled to receive
such an equivalent award. The Committee may also make or provide for such
adjustments in the maximum numbers of Common Shares specified in Section 3 of
this Plan as the Committee may in good faith determine to be appropriate in
order to reflect any transaction or event described in this Section 10.
(b) If another corporation is merged into the Corporation or the
Corporation otherwise acquires another corporation, the Committee may elect to
assume under this Plan any or all outstanding stock options or other awards
granted by such corporation under any stock option or other plan adopted by it
prior to such acquisition. Such assumptions shall be on such terms and
conditions as the Committee may determine; provided, however, that the awards as
so assumed do not contain any terms, conditions or rights that are inconsistent
with the terms of this Plan. Unless otherwise determined by the Committee, such
awards shall not be taken into account for purposes of the limitations contained
in Section 3 of this Plan.
11. FRACTIONAL SHARES. The Corporation shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Committee may provide for
the elimination of fractions or for the settlement thereof in cash.
12. WITHHOLDING TAXES. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Corporation for the withholding are insufficient,
it shall be a condition to the receipt of any such payment or the realization of
any such benefit that the Participant or such other person make arrangements
satisfactory to the Corporation for payment of the balance of any taxes required
to be withheld. At the discretion of the Committee, any such arrangements may
without limitation include voluntary or mandatory relinquishment of a portion of
any such payment or benefit or the surrender of outstanding Common Shares. The
Corporation and any Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.
13. CERTAIN TERMINATIONS OF EMPLOYMENT OR CONSULTING SERVICES, HARDSHIP,
AND APPROVED LEAVES OF ABSENCE. Notwithstanding any other provision of this Plan
to the contrary, in the event of termination of employment or consulting
services by reason of death, disability, normal retirement, early retirement
with the consent of the Corporation, termination of employment or consulting
services to enter public or military service with the consent of the Corporation
or leave of absence approved by the Corporation, or in the event of hardship or
other special circumstances, of a Participant who holds an Option Right or
Appreciation Right that is not immediately and fully exercisable, any Restricted
Shares as to which the substantial risk of forfeiture or the prohibition or
restriction on transfer has not lapsed, any Deferred Shares as to which the
8
<PAGE> 9
Deferral Period is not complete, any Performance Shares or Performance Units
that have not been fully earned, or any Common Shares that are subject to any
transfer restriction pursuant to Section 9(b) of this Plan, the Committee may
take any action that it deems to be equitable under the circumstances or in the
best interests of the Corporation, including without limitation waiving or
modifying any limitation or requirement with respect to any award under this
Plan.
14. ADMINISTRATION OF THE PLAN. (a) Unless the administration of the Plan
has been expressly assumed by the Board pursuant to a resolution of the Board,
this Plan shall be administered by the Compensation Committee of the Board (or a
subcommittee thereof), which shall be composed of not less than two members of
the Board. All of the members of the Committee (or a subcommittee thereof) are
intended at all times to qualify as "outside directors" within the meaning of
Section 162(m) of the Code, and as "non-employee directors" within the meaning
of Rule 16b-3, but the failure of a member of such Committee or subcommittee to
so qualify shall not be deemed to invalidate any award granted by such Committee
or subcommittee. A majority of the Committee (or subcommittee) shall constitute
a quorum, and the acts of the members of the Committee (or subcommittee) who are
present at any meeting thereof at which a quorum is present, or acts unanimously
approved in writing, shall be the acts of the Committee.
(b) The Committee has the full authority and discretion to administer the
Plan and to take any action that is necessary or advisable in connection with
the administration of the Plan, including without limitation the authority and
discretion to interpret and construe any provision of the Plan or of any
agreement, notification or document evidencing the grant of an award under the
Plan. The interpretation and construction by the Committee of any provision of
this Plan or any agreement, notification or document evidencing the grant of
Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares,
Performance Shares or Performance Units, and any determination by the Committee
pursuant to any provision of this Plan or any such agreement, notification or
document, shall be final and conclusive. No member of the Committee shall be
liable for any such action taken or determination made in good faith.
15. AMENDMENTS AND OTHER MATTERS. (a) The Board may terminate the Plan at
any time, and may at any time and from time to time amend the Plan in whole or
in part; provided, however, that any amendment which must be approved by the
shareholders of the Company in order to comply with applicable law or the rules
of the New York Stock Exchange or, if the Common Shares are not traded on the
New York Stock Exchange, the principal national securities exchange upon which
the Common Shares are traded or quoted, shall not be effective unless and until
such approval has been obtained. Presentation of this Plan or any amendment
hereof for shareholder approval shall not be construed to limit the Company's
authority to offer similar or dissimilar benefits under other plans without
shareholder approval.
(b) With the concurrence of the affected Participant, the Committee may
cancel any agreement evidencing Option Rights or any other award granted under
this Plan. In the event of any such cancellation, the Committee may authorize
the granting of new Option Rights or other awards hereunder, which may or may
not cover the same number of Common Shares as had been covered by the cancelled
Option Rights or other award, at such Option Price, in such manner and subject
to such other terms, conditions and discretion as would have been permitted
under this Plan had the cancelled Option Rights or other award not been granted.
(c) The Board may permit Participants to elect to defer the issuance of
Common Shares or the settlement of awards in cash under the Plan pursuant to
such rules, procedures or programs as it may establish for purposes of this
Plan. The Board also may provide that deferred issuances and settlements include
the payment or crediting of dividend equivalents or interest on the deferral
amounts.
(d) The Committee may condition the grant of any award or combination of
awards authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Corporation or a Subsidiary to the Participant.
(e) This Plan shall not confer upon any Participant any right with respect
to continuance of employment or other service with the Corporation or any
Subsidiary and shall not interfere in any way with any right that
9
<PAGE> 10
the Corporation or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time.
(f) To the extent that any provision of this Plan would prevent any Option
Right that was intended to qualify as a Tax-qualified Option from so qualifying,
any such provision shall be null and void with respect to any such Option Right;
provided, however, that any such provision shall remain in effect with respect
to other Option Rights, and there shall be no further effect on any provision of
this Plan.
10
<PAGE> 1
EXHIBIT 10.6
BRISTOL HOTELS & RESORTS
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
1. PURPOSES. The purposes of this Plan are to encourage outside directors
of Bristol Hotels & Resorts, Inc. (the "Company") to own shares of the Company's
stock and thereby to align their interests more closely with the interests of
the other stockholders of the Company, to encourage the highest level of
director performance by providing such directors with a direct interest in the
Company's attainment of its financial goals, and to provide financial incentives
that will help attract and retain the most qualified outside directors.
2. DEFINITIONS. As used in this Plan:
"ANNUAL OPTION" means an Option Right granted to an Eligible Director
pursuant to Section 5 of this Plan.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMITTEE" means a committee of the Board which shall be composed of not
less than two Directors and which is described in Section 9 of this Plan and, to
the extent the administration of the Plan has been assumed by the Board pursuant
to Section 9, the Board.
"COMMON SHARES" means (i) shares of the Common Stock, $.01 par value, of
the Company and (ii) any security into which Common Shares may be converted by
reason of any transaction or event of the type referred to in Section 7 of this
Plan.
"DATE OF GRANT" means the date on which an Initial Option or an Annual
Option is granted as provided in Sections 4(a) and 5(a), respectively.
"DIRECTOR" means a member of the Board.
"DISABILITY" means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months. An Optionee shall
not be considered to be subject to a Disability until he or she furnishes a
certification from a practicing physician in good standing to the effect that
such Optionee meets the criteria described in this definition.
"EFFECTIVE DATE" means the date the spin-off of the Company from its
parent, Bristol Hotel Company, is effective.
"ELIGIBLE DIRECTOR" means a Director who does not beneficially own (within
the meaning of Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) 9% or more of the outstanding Common Shares and who is not an
employee of the Company or any person or entity which beneficially owns 9% or
more of the outstanding Common Shares or an affiliate thereof. For purposes of
this Plan, an employee is an individual whose wages are subject to the
withholding of federal income tax under Sections 3401 and 3402 of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"FIRST ANNUAL MEETING" means the first annual meeting of stockholders of
the Company following the Date of Grant of an Option Right.
"INITIAL OPTION" means an Option Right granted to an Eligible Director
pursuant to Section 4 of this Plan.
"MARKET VALUE" as of a given date means the greater of (i) the stated par
value of the Common Shares or (ii) the closing sale price of the Common Shares
as reported on the Composite Tape of the New York Stock Exchange (the "NYSE") on
such date. If there are no Common Share transactions on such date, the
<PAGE> 2
Market Value per Share shall be determined as of the immediately preceding date
on which there were Common Share transactions.
"OPTIONEE" means a Director who has been granted an Option Right under the
Plan.
"OPTION PRICE" means the purchase price payable upon the exercise of an
Option Right.
"OPTION RIGHT" means the right to purchase Common Shares from the Company
upon the exercise of an Initial Option or an Annual Option granted pursuant to
this Plan. Option Rights may be evidenced by written agreements, notifications
or other documents containing terms and conditions not inconsistent with this
Plan.
"PLAN" means the Bristol Hotels & Resorts Stock Option Plan for
Non-Employee Directors, as the same may be amended from time to time.
"RULE 16b-3" means Rule 16b-3 or any successor rule to the same effect, as
promulgated and amended from time to time by the Securities and Exchange
Commission under the Exchange Act.
"TERMINATION OF SERVICE" means the time at which the Optionee ceases to
serve as a Director for any reason, with or without cause, which includes
termination by resignation, removal, death or retirement.
3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to Sections 3(b) and 7 of
this Plan, the number of Common Shares issued upon exercise of Option Rights,
plus the number of Common Shares covered by outstanding Option Rights, shall not
in the aggregate exceed 500,000 Common Shares, which may be Common Shares of
original issuance or Common Shares held in treasury or a combination thereof. In
connection with the issuance of Common Shares pursuant to the Plan, the Company
may repurchase Common Shares in the open market or otherwise.
(b) For the purposes of this Section 3, Common Shares subject to an Option
Right that has been cancelled or terminated prior to exercise shall again be
available for the grant of Option Rights to the extent of such cancellation or
termination.
4. INITIAL OPTIONS. (a) With respect to each person who first becomes an
Eligible Director of the Company after the Effective Date of this Plan, an
option to purchase 25,000 Common Shares shall be automatically granted to
such Eligible Director as of the date such person first becomes an Eligible
Director.
(b) (i) Subject to subsection (ii) of this Section 4(b) and Section 13 of
this Plan, each Initial Option, until terminated as provided in Section 6(c),
shall become exercisable to the extent of 34% of the Common Shares subject
thereto after the Optionee has continuously served as a Director through the
date of the First Annual Meeting, and to the extent of an additional 33% of the
Common Shares subject to the Initial Option after the Optionee has continuously
served as a Director through the date of the annual stockholders' meeting
immediately succeeding the First Annual Meeting and to the extent of an
additional 33% of the Common Shares subject to the Initial Option after the
Optionee has continuously served as a Director through the date of the second
annual stockholders' meeting succeeding the First Annual meeting.
(ii) If an Optionee ceases to be a Director by reason of death or
Disability, all Initial Options held by such Optionee that would have otherwise
become exercisable had such Director continuously served as a Director through
the date of the Company's annual meeting of stockholders immediately following
such death or Disability shall, notwithstanding subsection (i) of this Section
4(b), become immediately exercisable in full.
5. ANNUAL OPTIONS. (a) On the date of each annual meeting of the Company's
stockholders (beginning with the annual meeting of stockholders in 1999), an
option to purchase 25,000 Common Shares shall be automatically granted as
such date to each Eligible Director who is elected a Director at such meeting or
whose term of office as a Director continues after such meeting.
(b) (i) Subject to subsection (ii) of this Section 5(b) and Section 13 of
this Plan, each Annual Option, until terminated as provided in Section 6(c),
shall become exercisable to the extent of 100% of the Common Shares subject
thereto after the Optionee has continuously served as a Director until the date
of the First Annual Meeting.
2
<PAGE> 3
(ii) If an Optionee ceases to be a Director by reason of death or
Disability, all Annual Options held by such Optionee shall, notwithstanding
subsection (i) of this Section 5(b), become immediately exercisable in full.
6. TERMS OF OPTION RIGHTS.
(a) The Option Price per share of each Option Right shall be equal to the
Market Value per Common Share on the Date of Grant.
(b) To the extent exercisable, each Option Right shall be exercisable in
whole or in part from time to time by written notice to the Company at its
principal executive office specifying the number of Common Shares with respect
to which the Option Right is being exercised and payment of the Option Price for
such Common Shares in accordance with Section 6(d) of the Plan.
(c) Each Option Right shall terminate on the earliest to occur of the
following dates:
(i) Three months following the effective date of the Optionee's
Termination of Service, if such Termination of Service results other than
from the Optionee's death or Disability;
(ii) One year following the effective date of the Optionee's
Termination of Service, if such Termination of Service results from the
Optionee's death or Disability; or
(iii) Five years from the Date of Grant.
(d) The Option Price shall be payable (a) in cash or by check acceptable to
the Company, (b) by transfer to the Company of Common Shares which have been
owned by the Optionee for more than six months prior to the date of exercise and
which have a Market Value on the date of exercise equal to the Option Price, or
(c) by a combination of such methods of payment. The requirement of payment in
cash shall be deemed satisfied if the Optionee shall have made arrangements
satisfactory to the Company with a broker who is a member of the National
Association of Securities Dealers, Inc. to sell on the exercise date a
sufficient number of Common Shares being purchased so that the net proceeds of
the sale transaction will at least equal the Option Price of the Common Shares
being purchased, and pursuant to which the broker undertakes to deliver the full
Option Price of the Common Shares being purchased to the Company not later than
the date on which the sale transaction will settle in the ordinary course of
business.
(e) No Optionee shall have any rights as a stockholder with respect to
Common Shares subject to an Option Right until a certificate or certificates
representing such Common Shares has been issued.
(f) Except as otherwise determined by the Committee no Option Right shall
be transferable other than by will or the laws of descent and distribution.
Except as otherwise determined by the Committee, during an Optionee's lifetime,
Option Rights held by such Optionee shall be exercisable only by the Optionee
or, in the event of the Optionee's incapacity, including incapacity arising from
a Disability, by the Optionee's guardian or legal representative acting in a
fiduciary capacity. Any transferee shall be subject to the same terms and
conditions hereunder as the Participant.
(g) Option Rights granted pursuant to this Plan shall be options that are
not intended to qualify under any particular provision of the Code.
7. ADJUSTMENTS. The Committee shall make or provide for such adjustments in
the number of Common Shares covered by outstanding Option Rights, the Option
Prices per Common Share applicable to any such Option Rights, and the kind of
shares (including shares of another issuer) covered thereby, as the Committee
shall in good faith determine to be equitably required in order to prevent
dilution or expansion of the rights of Optionees that otherwise would result
from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or (b)
any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of warrants or other rights to purchase securities or any other
corporate transaction or event having an effect similar to any of the foregoing.
The Committee shall also make or provide for such adjustments in the maximum
number of Common Shares specified in Section 3(a) of this Plan and the
3
<PAGE> 4
number of Common Shares specified in Sections 4(a) and 5(a) of this Plan as the
Committee may in good faith determine to be appropriate in order to reflect any
transaction or event described in this Section 7.
8. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. Whenever under the terms of this
Plan a fractional Common Share would otherwise be required to be issued, an
amount in lieu thereof shall be paid in cash based upon the Market Value of such
fractional Common Share.
9. ADMINISTRATION OF THE PLAN. Unless the administration of the Plan has
been expressly assumed by the Board pursuant to a resolution of the Board, the
Plan shall be administered by the Committee. The Committee has the full
authority and discretion to administer the Plan and to take any action that is
necessary or advisable in connection with the administration of the Plan,
including without limitation the authority and discretion to interpret and
construe any provision of the Plan or of any agreement, notification or document
evidencing the grant of an Option Right. The interpretation and construction by
the Committee of any provision of this Plan or any agreement, notification or
document evidencing the grant of Option Rights, and any determination by the
Committee pursuant to any provision of this Plan or any such agreement,
notification or document, shall be final and conclusive. No member of the
Committee shall be liable for any such action taken or determination made in
good faith.
10. AMENDMENTS AND OTHER MATTERS. This Plan may be terminated, and from
time to time amended, by the Board; provided, however, that any amendment which
must be approved by the shareholders of the Company in order to comply with
applicable law or the rules of the New York Stock Exchange or, if the Common
Shares are not traded on the New York Stock Exchange, the principal national
securities exchange upon which the Common Shares are traded or quoted, shall not
be effective unless and until such approval has been obtained. Presentation of
this Plan or any amendment hereof for shareholder approval shall not be
construed to limit the Company's authority to offer similar or dissimilar
benefits under other plans without shareholder approval. No amendment or
termination of the Plan shall adversely affect any outstanding Option Right
without the consent of the Optionee.
11. NO ADDITIONAL RIGHTS. Nothing contained in this Plan or in any award
granted under this Plan shall interfere with or limit in any way the right of
the stockholders of the Company to remove any Director from the Board pursuant
to state law or the Certificate of Incorporation or Bylaws of the Company, nor
confer upon any Director any right to continue in the service of the Company.
12. SECURITIES LAW MATTERS. (a) The Company may require any Optionee, as a
condition of receiving Option Rights, to give written assurances in substance
and form satisfactory to the Company and its counsel to the effect that such
person is acquiring the Common Shares subject to the Option Rights for his own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
(b) Each award of Option Rights shall be subject to the requirement that,
if at any time counsel to the Company shall determine that the listing,
registration or qualification of the Common Shares subject to such Option Rights
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance of shares thereunder, such grant of
Option Rights may not be accepted or exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained on conditions acceptable to such counsel. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
(c) To the extent necessary for the grant of an Option Right, its exercise
or the sale of Common Shares acquired thereunder to be exempt from Section 16(b)
of the Exchange Act, such Option Right shall be held six months from the Date of
Grant, or at least six months shall elapse from the Date of Grant to the date of
disposition of the Common Shares acquired upon exercise of such Option Right.
4
<PAGE> 5
13. TERMINATION OF THE PLAN. No further Option Rights shall be granted
under this Plan after the passage of ten years from the Effective Date.
5
<PAGE> 1
EXHIBIT 21.1
BRISTOL HOTELS & RESORTS, INC.
SUBSIDIARIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
NAME JURISDICTION OF DATE OF INCORPORATION
INCORPORATION
- --------------------------------------------------------------------------------------------
<S> <C> <C>
AIRPORT UTILITIES, INC. TEXAS 5/2/69
- --------------------------------------------------------------------------------------------
AUSTIN INNKEEPERS, INC. TEXAS 3/26/95
- --------------------------------------------------------------------------------------------
BHMC CANADA INC. ONTARIO, CANADA 4/3/97
- --------------------------------------------------------------------------------------------
BRISTOL ACQUISITION BEVERAGE COMPANY DELAWARE 11/18/97
- --------------------------------------------------------------------------------------------
BRISTOL HOSPITALITY BEVERAGE COMPANY TEXAS 10/20/97
- --------------------------------------------------------------------------------------------
BRISTOL HOTEL BEVERAGE COMPANY DELAWARE 5/1/95
- --------------------------------------------------------------------------------------------
BRISTOL HOTEL MANAGEMENT CORPORATION DELAWARE 02/24/95
- --------------------------------------------------------------------------------------------
BRISTOL HOTELS AND RESORTS, INC. DELAWARE 3/20/98
- --------------------------------------------------------------------------------------------
BRISTOL IP COMPANY DELAWARE 11/28/95
- --------------------------------------------------------------------------------------------
BRISTOL KANSAS BEVERAGE COMPANY KANSAS 3/19/98
- --------------------------------------------------------------------------------------------
BRISTOL LODGING BEVERAGE COMPANY TEXAS 9/10/97
- --------------------------------------------------------------------------------------------
HARVEY HOTEL PURCHASING COMPANY TEXAS 5/28/91
- --------------------------------------------------------------------------------------------
BRISTOL SLC MANAGEMENT COMPANY TEXAS 3/2/94
- --------------------------------------------------------------------------------------------
GLENJON, INC. TEXAS 11/29/63
- --------------------------------------------------------------------------------------------
HARVEY HOTEL DFW, INC. TEXAS 8/7/86
- --------------------------------------------------------------------------------------------
HARVEY HOTEL MANAGEMENT CORPORATION TEXAS 9/26/85
- --------------------------------------------------------------------------------------------
HARVEY HOTEL PURCHASING COMPANY TEXAS 5/28/91
- --------------------------------------------------------------------------------------------
HOUSTON INNS SERVICE CO. TEXAS 6/11/71
- --------------------------------------------------------------------------------------------
NATIONAL INNS, INC. TENNESSEE 10/23/59
- --------------------------------------------------------------------------------------------
UNITED INNS, INC., OF TENNESSEE TENNESSEE ________
- --------------------------------------------------------------------------------------------
[MANAGEMENT CORP. TENANTS (3) - TBD] DELAWARE ________
- --------------------------------------------------------------------------------------------
[OMAHA SPIN SUBS - TBD]
- --------------------------------------------------------------------------------------------
NOTE: ALL RIGHTS AND INTEREST IN THE FOLLOWING NON-PROFIT LIQUOR
CORPS ARE TRANSFERRED AS SPIN SUBS.
- --------------------------------------------------------------------------------------------
PENROD CLUB TEXAS 4/25/83
- --------------------------------------------------------------------------------------------
REDNOR, INC. UTAH 5/8/90
- --------------------------------------------------------------------------------------------
SOLO'S TEXAS ________
- --------------------------------------------------------------------------------------------
BRISTOL HOUSE CLUB TEXAS 8/15/97
- --------------------------------------------------------------------------------------------
BRISTOL PLANO CLUB TEXAS 4/30/96
- --------------------------------------------------------------------------------------------
CAFE BARRITZ TEXAS
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 99.1
April 20, 1998
Bristol Hotels & Resorts, Inc.
14295 Midway Road
Dallas, Texas 75244
Re: Consent to Being Named in Registration Statement
Gentlemen:
I hereby consent to my being named as a person who is to become a member
of the Board of Directors of Bristol Hotels & Resorts, Inc. (the "Company") in
the Company's Registration Statement on Form 10.
Sincerely,
/s/ REGINALD K. BRACK, JR.
--------------------------
Reginald K. Brack, Jr.
<PAGE> 1
EXHIBIT 99.2
April 20, 1998
Bristol Hotels & Resorts, Inc.
14295 Midway Road
Dallas, Texas 75244
Re: Consent to Being Named in Registration Statement
Gentlemen:
I hereby consent to my being named as a person who is to become a member
of the Board of Directors of Bristol Hotels & Resorts, Inc. (the "Company") in
the Company's Registration Statement on Form 10.
Sincerely,
/s/ DAVID A. DITTMAN
--------------------
David A. Dittman
<PAGE> 1
EXHIBIT 99.3
April 20, 1998
Bristol Hotels & Resorts, Inc.
14295 Midway Road
Dallas, Texas 75244
Re: Consent to Being Named in Registration Statement
Gentlemen:
I hereby consent to my being named as a person who is to become a member
of the Board of Directors of Bristol Hotels & Resorts, Inc. (the "Company") in
the Company's Registration Statement on Form 10.
Sincerely,
/s/ THOMAS R. OLIVER
--------------------
Thomas R. Oliver
<PAGE> 1
EXHIBIT 99.4
April 20, 1998
Bristol Hotels & Resorts, Inc.
14295 Midway Road
Dallas, Texas 75244
Re: Consent to Being Named in Registration Statement
Gentlemen:
I hereby consent to my being named as a person who is to become a member
of the Board of Directors of Bristol Hotels & Resorts, Inc. (the "Company") in
the Company's Registration Statement on Form 10.
Sincerely,
/s/ JAMES PINTO
---------------
James Pinto
<PAGE> 1
EXHIBIT 99.5
April 20, 1998
Bristol Hotels & Resorts, Inc.
14295 Midway Road
Dallas, Texas 75244
Re: Consent to Being Named in Registration Statement
Gentlemen:
I hereby consent to my being named as a person who is to become a member
of the Board of Directors of Bristol Hotels & Resorts, Inc. (the "Company") in
the Company's Registration Statement on Form 10.
Sincerely,
/s/ KURT C. READ
----------------
Kurt C. Read
<PAGE> 1
EXHIBIT 99.6
April 20, 1998
Bristol Hotels & Resorts, Inc.
14295 Midway Road
Dallas, Texas 75244
Re: Consent to Being Named in Registration Statement
Gentlemen:
I hereby consent to my being named as a person who is to become a member
of the Board of Directors of Bristol Hotels & Resorts, Inc. (the "Company") in
the Company's Registration Statement on Form 10.
Sincerely,
/s/ ROBERT A. WHITMAN
---------------------
Robert A. Whitman
