<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number 1-9563
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AIRCOA HOTEL PARTNERS, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
State of Delaware 84-1042607
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5775 DTC Boulevard, Suite 300
Englewood, Colorado 80111
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 220-2000
--------------
Securities registered pursuant to
Section 12(b) of the Act: Name of each exchange on which
registered:
Class A Depository Units American Stock Exchange
Securities registered pursuant to
Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (S229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting units held by non-affiliates of
the registrant, computed by reference to the price as of the close of trading on
February 20, 1996 was $2,704,744.
There were 5,340,214 units outstanding of the registrant's Class A Units
as of February 13, 1996.
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
1995 FORM 10-K ANNUAL REPORT
Table of Contents
Page
--------
PART I
Item 1. Business................................................. I - 1
Item 2. Properties............................................... I - 3
Item 3. Legal Proceedings........................................ I - 4
Item 4. Submission of Matters to a Vote of Security Holders...... I - 4
PART II
Item 5. Market for the Registrant's Partnership Units and
Related Unitholder Matters............................... II - 1
Item 6. Selected Financial Data.................................. II - 2
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... II - 3
Item 8. Financial Statements and Supplementary Data.............. II - 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................... II - 9
PART III
Item 10. Directors and Executive Officers of the General Partner.. III - 1
Item 11. Payments and Compensation to
General Partner and Affiliates........................... III - 3
Item 12. Security Ownership of Certain Beneficial
Owners and Management.................................... III - 4
Item 13. Certain Relationships and Related Transactions........... III - 6
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K................................................. IV - 1
<PAGE>
PART I
Item 1. Business
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GENERAL DEVELOPMENT OF BUSINESS
AIRCOA Hotel Partners, L.P., a Delaware limited partnership ("AHP" or
the "Partnership") was organized in December 1986, by AIRCOA Hospitality
Services, Inc. ("AHS" or the "General Partner") to acquire, own, operate
and sell hotels and resort properties. The Partnership owns and operates
six hotel and resort properties (the "Properties") through operating
partnerships (the "Operating Partnerships") which were acquired in 1986.
The Partnership owns a 99% limited partner interest in each of the six
Operating Partnerships which hold title to the Properties and through
which the Partnership conducts all of its operations. AHS, a wholly
owned subsidiary of Richfield Hospitality Services, Inc. ("Richfield"),
is also the 1% general partner of each of the Operating Partnerships.
Richfield operates the Properties for the Partnership under certain
management agreements.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership's operations have been in one industry segment since
formation. Revenue has been generated through the ownership and
operation of the Properties. The following table reflects the sources of
revenue and gross operating profit and total assets for each of the
three years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
(In thousands, except percentages)
1995 1994 1993
-------------------- ------------------- -------------------
Revenue Percent Revenue Percent Revenue Percent
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Rooms $ 26,810 59.1% $ 26,863 58.2% $ 26,693 59.0%
Food and Beverage 11,733 25.8% 12,274 26.6% 11,664 25.8%
Other Property
Operations 6,856 15.1% 7,020 15.2% 6,911 15.2%
-------- ------- -------- ------- -------- -------
Total Revenue $ 45,399 100.0% $ 46,157 100.0% $ 45,268 100.0%
======== ======= ======== ======= ======== =======
Gross Operating Profit $ 12,799 28.1% $ 13,566 29.4% $ 13,739 30.4%
======== ======= ======== ======= ======== =======
Total Assets $ 69,406 $ 73,542 $ 77,369
</TABLE>
Gross operating profit represents operating income of the Partnership before
rent, taxes and insurance, management fees, depreciation, amortization and
impairment of property. Gross operating profit is indicative of the
profitability from operations of the Properties.
Room revenue is significantly impacted by the rates obtained for rooms and the
level of occupancy of the Properties. Although not in the same proportion, these
factors also impact revenue generated from food and beverage and other property
operations. Average daily room rates of the Properties were $59.55, $59.42 and
$60.08, in 1995, 1994 and 1993, respectively. Average occupancy levels for the
Properties were 77.6%, 77.9% and 76.6% in 1995, 1994 and 1993, respectively. For
a discussion of the changes in various operating statistics, see Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
I-1
<PAGE>
NARRATIVE DESCRIPTION OF BUSINESS
BUSINESS
The principal business of the Partnerships is the ownership and operation of
six hotel and resort properties located in geographically diverse areas of
the continental United States. The Properties are full service facilities
serving the vacation, leisure, meetings, convention and business segments of
the hotel market. In addition to lodging, various guest services are offered
by the Properties including restaurants, lounges, banquet, room, valet,
concierge, parking and shuttle services. Other services available at some of
the Properties include a marina, health and fitness facilities, swimming
pools, tennis courts, spas and retail facilities.
IMPORTANCE OF FRANCHISES AND TRADEMARKS
Four of the Properties are affiliated with national franchises and operate
under franchise agreements. The benefits of these franchise agreements
include national brand name recognition and world wide central reservation
systems, as well as operating quality standards and extensive marketing
programs. One of the Properties is licensed to use the Regal trademark,
which is sub-licensed to the hotel by an affiliate of AHS. The Partnership
considers such affiliations and licenses to be important to the operations
and success of the Properties in regard to customer recognition and
satisfaction. Other properties may be licensed in the future to use the
Regal trademark.
SEASONALITY OF BUSINESS
Because of the Properties' locations, occupancy levels are generally lower
in the first and fourth quarters and higher in the second and third quarters
of the year. These fluctuations are consistent with the normal recurring
seasonal patterns of the industry.
INDUSTRY PRACTICES
The Properties periodically offer discounts to contract and group customers
and room rates generally fluctuate during peak and non-peak times of the
year. Deposits are often obtained in advance for facility rentals and rooms.
In addition, a certain level of capital expenditures, repair and replacement
of hotel property is required under the Partnership's loan agreement.
The Properties are managed by Richfield in accordance with certain
management contracts. Management services provided under the contracts
include operations supervision, strategic business planning, yield
management, sales and marketing oversight, personnel management and
accounting and technical services.
MARKET INFORMATION AND COMPETITIVE CONDITIONS
According to Smith Travel Research, all of the U.S. lodging industry
performance measures were higher in 1995 than in 1994, but the rate of
increase has slowed significantly. Average daily room rate for the industry
increased by 4.8% to $67.34 and room occupancy increased 1.2% to 65.5%. The
hospitality industry in the U.S. experienced a rise in the rate of increase
in supply and a drop in the rate of increase in change in demand, and it was
only the continued rise in the average room rate that kept the increase in
room revenue near the level of 1994. Room revenue per available room
(Revpar) was up 6.1%, considerably below the 8.5% increase for a year ago.
Smith Travel Research estimates that performance ratios in the lodging
industry in 1996 will not improve significantly over 1995.
I-2
<PAGE>
The Partnership's occupancy levels have consistently exceeded the industry
averages noted above; however, average daily rates are slightly below the
industry levels. The Partnership's operations in certain markets are price
sensitive. The Partnership considers its primary points of competition to
include, but are not limited to, room rates, location, guest services and
responsiveness, adequacy and appearance of facilities and overall customer
satisfaction. The demand at a particular hotel of the Partnership may be
adversely affected by many factors, including changes in travel patterns,
local and regional economic conditions and the degree of competition with
other hotels in the area.
REGULATION
The Operating Partnerships are subject to regulation in connection with
their business, including liquor licensing, occupational health and safety
regulations, environmental regulations, food service regulation and labor
laws. The Operating Partnerships have not experienced significant
difficulties with regulation in these areas; however, failure to comply with
those regulations could result in loss of licenses, permits or other
authorizations which could adversely impact the Partnership's operating
revenue.
EMPLOYEES
All hotel personnel are employed by the respective Operating Partnerships.
Richfield processes the payroll on behalf of the Operating Partnerships. The
number of persons employed by the Operating Partnerships, as of December 31,
1995, was approximately 934. Management considers employee relations to be
satisfactory.
Item 2. Properties
- ------- ----------
The six hotel and resort properties including the hotel buildings and
leasehold improvements are owned by the Operating Partnerships. Three of the
hotel properties are located on land owned by the Operating Partnerships,
while the other three hotel properties are located on land leased by the
Operating Partnerships on a long-term basis. The following table presents
certain information for each of the Properties:
<TABLE>
<CAPTION>
Number
of
Property Primary Markets Served Area Served Rooms
-------- ---------------------- ----------- ------
<S> <C> <C> <C>
Aurora Inn and Pine Lake Vacation, Business Greater Cleveland/Akron, 69
Trout Club ("Aurora") Ohio
Fourwinds/A Clarion Resort Destination Resort Bloomington/Indianapolis, 126
("Fourwinds") and Marina Indiana
Regal at McCormick Ranch Vacation, Meetings Phoenix/Scottsdale, 125
("McCormick") Arizona
Sheraton Inn-Buffalo Business, Meetings Buffalo/Niagara Falls, 293
Airport ("Buffalo") and Leisure New York
Sheraton Lakeside Inn Vacation Orlando/Walt Disney 651
("Lakeside") World, Florida
Sheraton University Center Business, Meetings, Raleigh/Durham/Chapel 322
("University") Medical and Conventions Hill, North Carolina
TOTAL 1,586
</TABLE>
I-3
<PAGE>
The appraised value of the Properties is summarized below:
<TABLE>
<CAPTION>
Appraised Values
-------------------------------------------------
December 1995 December 1994 December 1993
------------- ------------- -------------
<S> <C> <C> <C>
Aurora Inn & Pine Lake Trout
Club $ 7,200,000 7,520,000 7,240,000
Fourwinds/A Clarion Resort 8,800,000 10,200,000 10,200,000
Regal at McCormick Ranch 9,875,000 9,015,000 7,900,000
Sheraton Inn-Buffalo Airport 15,000,000 17,730,000 18,140,000
Sheraton Lakeside Inn 30,000,000 34,000,000 39,000,000
Sheraton University Center 12,000,000 8,025,000 7,050,000
------------- ------------- -------------
Total appraised value $ 82,875,000 86,490,000 89,530,000
============= ============= =============
</TABLE>
The decline in the aggregate appraised value of the portfolio is
primarily the result of decreases in the value of the Sheraton Lakeside
Inn and the Sheraton Inn - Buffalo Airport in 1995, 1994 and 1993, and
the decline in the Fourwinds Resort in 1995. These declines are
primarily attributable to these hotels being located in markets with
increases in the supply of available rooms and static demand for hotel
rooms. See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Item 3. Legal Proceedings
- ------- -----------------
There are no material pending legal proceedings to which the Partnership
or any of the Operating Partnerships is a party, except for ordinary and
routine litigation incidental to the business of the Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
There were no matters submitted to a vote of Unitholders during the
quarter ended December 31, 1995.
I-4
<PAGE>
PART II
Item 5. Market for the Registrant's Partnership Units and Related Unitholder
- ------- --------------------------------------------------------------------
Matters
- -------
Class A Units of AIRCOA Hotel Partners, L.P. are traded on the American
Stock Exchange under the symbol AHT. There is no established public trading
market for the Partnership's Class B Units, the majority of which are held by
affiliates of the General Partner. Under certain circumstances (which have not
been satisfied at any time since the inception of the Partnership) described in
the Partnership's limited Partnership Agreement, the Class B Units may be
converted into Class A Units. Beginning in 1997, and each year thereafter
through 2001, a minimum of 250,000 Class B Units are required to be converted
at a redemption value of $20.00 per Class B Unit, by issuing Class A Units
valued at the then current market price of a Class A Unit. See Item 7,
Management's Discussion and Analysis of Financial Conditions and Results of
Operations. The following table sets forth the range of high and low closing
prices of Class A Units for each full quarterly period for the two most recent
years, as reported by the American Stock Exchange.
For the Quarter Ended High Low
- --------------------------------------------------------------------------------
March 31, 1994 3 11/16 3
- --------------------------------------------------------------------------------
June 30, 1994 3 5/8 2 1/2
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September 30, 1994 2 7/8 2 3/8
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December 31, 1994 3 1/4 2 5/8
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- --------------------------------------------------------------------------------
March 31, 1995 4 2 7/8
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June 30, 1995 3 5/8 2 3/16
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September 30, 1995 2 13/16 1 13/16
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December 31, 1995 2 1/8 1 1/2
- --------------------------------------------------------------------------------
As of December 31, 1995 the Partnership had approximately 1,400 Class A
Unitholders.
The Class A Unitholders have not received any distributions since 1990.
The Class B Units do not receive distributions until the Class A Unitholders
receive Minimum Annual Distributions, as defined in the Partnership Agreement.
In addition, the Partnership loan agreements stipulate certain limitations on
these distributions based on excess cash flow as defined in the mortgage loan
agreement. See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.
II-1
<PAGE>
Item 6. Selected Financial Data
- ------- -----------------------
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(In thousands, except per unit amounts)
---------------------------------------
Consolidated Operations Data
- ----------------------------
Revenue $ 45,399 46,157 45,268 42,998 42,990
Operating income (loss) (1) (630) 5,122 5,556 4,331 3,848
Net income (loss) (1) (5,421) 627 1,120 113 (1,923)
Income (loss) per unit:
Class A: Net loss (1.50) (.10) (.02) (.22) (.66)
Class B: Net income 2.86 1.25 1.27 1.17 1.00
Weighted average number of units outstanding:
Class A 5,340,214 5,340,214 5,340,214 4,490,214 4,297,954
Class B 950,000 950,000 950,000 950,000 950,000
Consolidated Balance Sheet Data
- -------------------------------
Working capital deficit (2) (2,452) (7,178) (48,180) (48,771) (5,963)
Total assets 69,406 73,542 77,369 78,589 79,029
Long-term debt and affiliate notes payable (2) 51,390 46,180 6,000 8,715 53,650
Partners' capital 9,752 15,173 14,546 13,426 12,378
Appraised values of properties 82,875 86,490 89,530 90,240 106,000
Consolidated Cash Flow Data
- ---------------------------
Capital expenditures 3,286 2,049 2,353 2,530 1,799
Net cash provided by operating activities 3,143 5,568 5,841 4,080 2,665
Net cash used in investing activities (3,306) (1,944) (2,394) (2,433) (1,513)
Net cash provided (used) by financing activities 1,018 (5,279) (3,612) (1,391) 449
</TABLE>
(1) Includes a loss for the impairment of the Partnership's Lakeside
property in the amount of $4,789 for the year ended December
31, 1995.
(2) Certain of the Partnership's indebtedness to unaffiliated financial
institutions was classified as current at December 31, 1993 and 1992.
II-2
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations
- ---------------------
RESULTS OF OPERATIONS
The following table reflects certain historical financial information and
operating statistics for the years ended December 31, 1995, 1994 and 1993.
Historical Financial Information
--------------------------------
(in thousands, except operating statistics)
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Revenue:
Rooms $ 26,810 26,863 26,693
Food and beverage 11,733 12,274 11,664
Other property operations 6,856 7,020 6,911
--------- -------- --------
Total revenue 45,399 46,157 45,268
Expenses:
Hotel operations 32,600 32,591 31,529
--------- -------- --------
Gross operating profit 12,799 13,566 13,739
Other operating expenses (1)(2) 13,429 8,444 8,183
--------- -------- --------
Operating income (630) 5,122 5,556
Other expense, net (3) (4,791) (4,495) (4,436)
--------- -------- --------
Net income (loss) $ (5,421) 627 1,120
========= ======== ========
Operating Statistics
--------------------
Average daily rate $ 59.55 59.42 60.08
Average occupancy percent 77.6% 77.9% 76.6%
Number of available rooms 1,586 1,586 1,586
</TABLE>
(1) Includes rent, taxes and insurance, management fees, depreciation and
amortization, and impairment of property.
(2) 1995 includes impairment loss on the Lakeside property in the amount of
$4,789. No impairment loss was recorded in 1994 or 1993.
(3) Principally comprised of interest expense.
II-3
<PAGE>
REVENUE
Total revenue decreased $758,000 or 1.6% in 1995, compared to an increase
of $889,000 or 2.0% in 1994. Of the total revenue in 1995, 1994 and 1993,
rooms comprised 59.1%, 58.2% and 59.0%, respectively; food and beverage
comprised 25.8%, 26.6% and 25.8%, respectively, and other property operations
comprised 15.1%, 15.2% and 15.2%, respectively.
Rooms revenue is primarily a function of the Properties' occupancy levels
and room rates. Rooms revenue decreased $53,000 in 1995 due to a decrease in
occupancy from 77.9% to 77.6% offset by an increase in average room rates of
$.13. Rooms revenue increased $170,000 in 1994 due to an increase in occupancy
from 76.6% to 77.9% offset in part by a decrease in average room rates of $.66.
Rooms revenue decreases in 1995 were primarily attributable to decreases at the
Sheraton Lakeside and Sheraton Inn Buffalo Airport. The leisure market at
Sheraton Lakeside continued to be impacted by significant competitive
pressures, resulting from an increase in room supply in the Orlando area. The
reduction in rooms revenue at Sheraton Buffalo was due to a decrease in
Canadian leisure activity resulting from declines in the value of the Canadian
dollar and loss of a substantial airline room contract. The decreases in
Lakeside and Buffalo were mitigated by the impact of increases in rooms
revenue, due to increases in average rate, at Regal McCormick Ranch, Sheraton
University Center and Aurora Inn. Rooms revenue increases in 1994 were
primarily attributable to increased sales to group and contract customers at
the Regal McCormick Ranch, Sheraton University Center and Sheraton Inn Buffalo
Airport. The rooms revenue increases were offset in part by a decrease in
rooms revenue at the Sheraton Lakeside, which was impacted by the significant
competitive pressures in the leisure market. These competitive pressures
combined with discounts offered to attract more group and contract business
resulted in the decreases in average room rates.
Food and beverage revenue decreased $541,000 or 4.4% in 1995 and increased
$610,000 or 5.2% in 1994. Food and beverage revenue is impacted by room
occupancy and the mix of room sales between leisure, group, contract and
business customers. The primary reason for the decrease in 1995 was related to
increased competition from stand-alone restaurants in the area surrounding the
Regal McCormick, the smaller percentage contribution from the Canadian leisure
market maintained at the Sheraton Buffalo and a decrease in banquet activity at
both locations. The primary increases in occupancy in 1994 were from group and
contract customers, which have a favorable impact on food and beverage revenue.
Other property operations consist of marina sales and rentals (at
Fourwinds), gift shops, food marts, lease income, phone charges and other
miscellaneous guest services. Other property operations decreased $164,000 or
2.3% in 1995 and increased $109,000 or 1.6% in 1994. The 1995 decrease in
other property operations was primarily due to storm damage at the Clarion
Fourwinds Resort, which impacted the "Marina-related" revenues. The 1994
increase in other property operations was primarily due to the overall increase
in occupancy.
While the hotel industry continues to be very competitive, the Properties,
as a group, have outperformed the industry when measuring revenue per available
room (occupancy percent times average room rate). The Properties' revenue per
available room, as a group, was $46.23, $46.29 and $46.02 in 1995, 1994 and
1993, respectively. Revenue per available room for the United States hotel
industry, accumulated by Smith Travel Research, was $44.11, $41.49 and $38.85
in 1995, 1994 and 1993, respectively.
II-4
<PAGE>
COSTS AND OPERATING EXPENSES
Total operating expenses increased $4,994,000 or 12.2% in 1995. This
increase is primarily attributable to the impairment of the Lakeside property
of $4,789,000, and an increase in other operating expenses of $196,000.
Excluding the impairment of the Lakeside property, total operating costs
increased primarily as a result of increased food and beverage costs. Food and
beverage costs as a percent of food and beverage revenue increased to 73.1% in
1995 from 71.4% in 1994. The primary reason for the increase in this
percentage is a result of costs incurred for promotional campaigns and
marketing plans to reposition the restaurant at the Clarion Fourwinds Resort,
Aurora Inn and Regal McCormick Ranch.
Included in costs and operating expenses in 1995 is a loss for the
impairment of the Lakeside property in the amount of $4,789,000, recorded in
the fourth quarter of 1995. The circumstances leading up to this impairment
loss were primarily a result of the existing and expected local market
conditions, a decreasing trend in the property's appraised value and historical
operating results in recent years. This loss was recognized in accordance with
the provisions of Statement of Financial Accounting Standards No. 121,
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of (SFAS
No. 121), which was issued by the Financial Accounting Standards Board in March
1995 and adopted by the Partnership in the fourth quarter of 1995. The
Partnership believes that expected future cash flows from the operations of its
other hotel properties will be sufficient to recover their carrying values. The
Partnership has no current plans to sell any of its properties for less than
their carrying values.
Total operating expenses increased $1,323,000 or 3.3% in 1994. This
increase is attributable to an increase in hotel operating expenses of
$1,062,000 and an increase in other operating expenses of $261,000. Hotel
operating expenses increased in 1994 primarily as a result of overall increases
in occupancy and revenue. The increase in other operating expenses in 1994 is
due to an increase of 6.9% in marketing expenses primarily as a result of
increases in franchise fee rates at two of the three Sheraton properties. The
increase in other operating expenses in 1994 is due to a 6.0% increase in
depreciation and amortization from renovations completed in June 1993 on the
Sheraton Inn - Buffalo Airport and other capital additions.
Other expense increased $296,000 or 6.6% in 1995. This change is
primarily attributable to an increase in interest expense of $191,000 due to
higher levels of debt, net of a $123,000 decrease in amortization of debt issue
costs.
Other income and expense remained relatively consistent in 1994 as
compared to 1993. Interest expense increased 3.7% in 1994 primarily as a result
of increases in the interest rate offset by decreases in the total indebtedness
level. The increase in interest expense in 1994 was offset in part by a gain
of $105,000 recognized in 1994 on an insurance settlement.
II-5
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Net cash provided by operating activities was $3,143,000 in 1995, a
decrease of $2,425,000 from 1994. This decrease is the result of a decrease in
cash received from customers, due to lower hotel revenues, of $1,132,000, an
increase of $1,013,000 in interest paid, and an increase in cash paid to
employees of $493,000, offset in part by decreases in cash paid to suppliers
and vendors of $172,000 and increases in other cash receipts of $41,000.
Net cash provided by operating activities was $5,568,000 in 1994, a
decrease of $273,000 from 1993. This decrease is the result of an increase in
cash paid to suppliers and vendors for increased costs and expenses of
$2,096,000, offset in part by increases in cash received from customers for
increased hotel revenue of $1,403,000 and other cash receipts of $145,000 and
decreases in cash paid to employees of $186,000 and interest paid of $89,000.
Net cash used in investing activities increased $1,362,000 in 1995 due to
increases in capital expenditures and cash paid for other assets. Net cash
used in investing activities decreased $450,000 in 1994 due to decreases in
capital expenditures and cash paid for other assets.
Net cash generated by financing activities increased $6,297,000 in 1995
primarily due to the closing of the new first mortgage loan. Net cash used in
financing activities increased $1,667,000 in 1994, primarily due to increases
in principal payments on the Partnership's indebtedness.
The Partnership anticipates funding its 1996 debt service obligations, and
capital expenditures through a combination of operating cash flows and draws on
its line of credit, to handle seasonal demands, as necessary. The Partnership
has capital improvements of approximately $3,700,000 planned in 1996.
INDEBTEDNESS
At December 31, 1995 the Partnership had a working capital deficit of
$2,452,000. The Partnership's working capital requirements are expected to be
satisfied through the management of payables, collection of receivables, and
use of the Partnership's revolving credit line.
On June 8, 1995, the Partnership signed a credit agreement with a new
lender to provide a new $45,000,000 first mortgage loan and a $1,000,000
revolving credit line. The proceeds of the $45,000,000 first mortgage loan
were used to pay off the existing mortgage loan and the note payable to bank
with the balance available for certain property renovations and the payment of
a facility fee and closing costs. Regal Hotels International Holdings Limited
("RHL"), an affiliate of the general partner, has provided a limited guarantee
for the new first mortgage loan. The Partnership paid a loan guarantee fee of
$230,000 to RHL. This is an annual fee and is calculated as 0.5% of the
outstanding loan balance at June 8 of each year.
II-6
<PAGE>
The new credit agreement includes a variety of interest rate options, the
most favorable of which at present is the Eurodollar Rate plus 2%, which was
7.75% at December 31, 1995. Repayment of the new first mortgage loan is based
on a twenty-year amortization with a maturity date at June 2000, while the
revolving credit line is renewable annually at the option of the lender.
A condition of the credit agreement signed by the Partnership for the
first mortgage loan and revolving credit line required the subordination of the
$6,000,000 notes payable to AHS (the "Notes"). AHS has agreed to this
subordination, and as a result, on September 26, 1995, the Board of Directors
of AHS, in its capacity as General Partner, and the Advisory Committee of the
AHP authorized the extension of the term and deferral of certain past-due
interest on the Notes.
Pursuant to this extension, the Notes, which originally matured in January
1995 now become due on June 8, 2000, which is coterminous with the new mortgage
loan. Interest accrued on the Notes after December 31, 1994, was paid at
closing. Interest incurred subsequent to closing continues to be accrued at
12% per annum and is paid monthly.
The unpaid interest on the Notes accrued prior to January 1, 1995, in the
amount of $2,100,000, was converted into debt pursuant to a new promissory note
("New Note") which will also mature on June 8, 2000. The New Note accrues
interest at the rate of 12% per annum, payable at maturity.
The Notes and New Notes are convertible into Class A Units of the
Partnership at $16.60 per unit. In addition, these notes stipulate that 25% of
any excess cashflow, as defined, will be applied against the principal portion
of the notes outstanding.
The new first mortgage loan contains numerous covenants requiring, among
other matters, the maintenance of a minimum debt service coverage ratio
including the deferral of management fees payable to an affiliate if this
minimum debt service ratio is not achieved, restrictions on additional
indebtedness, limitations on annual cash distributions to Class A Unitholders,
limitations on the payment of principal on the affiliate notes payable,
prepayment premiums during the first two years, and maintenance of minimum
aggregate capital expenditures (4% of revenues in 1995 and 5% of revenues
thereafter.)
PARTNERSHIP DISTRIBUTIONS AND UNIT CONVERSIONS
The Partnership Agreement provides for periodic distribution of
distributable cash flow, as defined, to the partners subject to any applicable
restrictions and the discretion of the General Partner. Distributable cash
flow is generally defined as cash flow from operations of the hotel properties.
Such cash is allocated and distributed (net of AHS's 1% general partnership
interest in the Operating Partnerships) 99% to the Class A Unitholders and 1%
to the General Partner until the Class A Unitholders have received defined
Minimum Annual Distributions. The Minimum Annual Distribution is $2.16 per
Class A Unit. Any portion of the Minimum Annual Distribution that is not paid
by the Partnership in any year is added to the cumulative unpaid Minimum Annual
Distribution. The Partnership has not made any distributions since 1990.
Prior to making future distributions, the Partnership will comply with its
capital expenditure requirements as specified in its mortgage loan agreement
and maintain sufficient working capital balances. At December 31, 1995, the
cumulative unpaid Minimum Annual Distribution per Class A Unit significantly
exceeds the Partnership's net asset value per unit based on the appraised
values of the hotel properties. At this time it is uncertain whether there
will be any excess cash flow to be available for distribution to the Class A
unitholders in 1996.
II-7
<PAGE>
The Class B Units entitle each Unitholder to a limited partnership
interest which is subordinated to the Class A Units. The Class B Units are
redeemable or convertible in certain circumstances. The Class B Units do not
receive distributions until the Class A Unitholders receive Minimum Annual
Distributions which have not been made by the Partnership since 1990. Through
1996, the Class B Units are convertible into Class A Units only to the extent
that distributable cash flow of the Partnership in the previous year would have
been sufficient to pay Minimum Annual Distributions for the Class A Units,
including the Class B Units to be converted. The Partnership does not expect
any Class B Units to be converted in 1996. Beginning in 1997, during the 30-day
period following the release of the Partnership's annual audited financial
statements, and each year thereafter through 2001, a minimum of 250,000 Class B
Units are required to be converted at a redemption value of $20.00 per Class B
Unit, by issuing Class A Units valued at the then current market price of a
Class A Unit. Therefore, the number of Class A Units to be issued upon the
conversion of a Class B Unit will be determined at the time of conversion by
dividing $20.00 by the then current market price of a Class A Unit. Current
market price for this calculation is the average market price for a Class A Unit
during the last five days prior to conversion.
Based on current market prices of the Class A Units, such required
conversion is expected to result in substantial dilution to the preconversion
Class A Unitholders. For example, based on the average closing month end
market price of Class A Units during 1995 of approximately $2.58, the
conversion of 250,000 Class B Units in the first year of the required
conversion period would result in an approximate 27% dilution to the Class A
Unitholders upon conversion. The conversion of all 950,000 Class B Units would
result in an approximate 58% dilution to the preconversion Class A Unitholders
at the $2.58 per unit market price. In addition, using the same per unit
market price for a Class A Unit of $2.58, affiliate ownership of Class A Units
would increase to approximately 79% and 88% upon conversion of the first
250,000 Class B Units and conversion of all 950,000 Class B Units,
respectively. Changes in the market price of Class A Units do not result in
proportional changes in dilution. The market price of the Partnership's Class
A Units is subject to fluctuations and there is no assurance that such prices
upon conversion will approximate the average per unit market price in 1995.
Pursuant to the Partnership Agreement, the Class A Units to be issued upon
conversion of the Class B Units must be identical to the Class A Units existing
prior to the conversion date. If the General Partner determines, based on advice
of counsel, that no reasonable allowable convention or other method is available
to preserve the uniformity of the intrinsic tax characteristics of any
specifically identifiable group of units, such units will be separately
identified, to the extent practicable, as distinct classes to reflect intrinsic
tax differences, regardless of any such non-uniformity.
PROPERTY VALUES
The appraised value of the Properties is $82,875,000 at December 31, 1995,
which exceeds their carrying values of $62,755,000. In accordance with
Statement on Financial Accounting Standards on Accounting for the Impairment of
Long-Lived Assets, which was issued in 1995, the Partnership has recognized an
impairment on the Lakeside property. The Partnership has no current plans to
sell any of its properties for less than their carrying values.
II-8
<PAGE>
INCOME TAXES
In accordance with the Revenue Act of 1987, the Partnership will become
a taxable entity in 1998. As a result, the income of the Partnership
will be taxable as a corporation and distributions from the Partnership
will continue to be taxable to the individual partners. The Partnership
anticipates that it will have an excess of tax basis over book basis of
the hotel properties at January 1, 1998 of approximately $2,600,000,
which will result in tax deductions in 1998 and later years. Therefore,
the Partnership does not expect that the impact on net income in 1998
from becoming a taxable entity will be significant. The Partnership is
continuing to evaluate various alternatives to minimize the impact on
the Partnership as a result of these changes in tax laws.
INFLATION
The rate of inflation as measured by changes in the average consumer
price index has not had a material impact on the revenue or net income
of the Partnership in the three most recent years.
OTHER MATTERS
Management of the Partnership, the Board of Directors of the General
Partner and the Advisory Committee are seeking to increase the value of
the Partnership for all of its Unitholders. Management has been
evaluating and will continue to evaluate different strategies for
maximizing Unitholder value including; (i) continued ownership and
operation of the properties, (ii) liquidation, sale or other similar
transactions, (iii) sales of one or more of the Partnership's properties
in response to exceptional offers, and (iv) combining the Partnership or
its assets with other hotel-owning entities.
During 1995, the General Partner has received suggestions from certain
Class A Unitholders regarding; (i) the reconfiguration of the
Partnership as a real estate investment trust ("REIT"), (ii) a
reorganization of the Partnership involving the redemption of the
interests of the General Partner and its affiliates (the "Majority
Unitholders") and (iii) sales of one or more of the Partnership's
properties. The suggestions made concerning the reconfiguration of the
Partnership as a REIT and the reorganization transaction were each
rejected by the Partnership because they each called for the Majority
Unitholders to surrender substantial economic entitlements in the
Partnership without adequate compensation. The Partnership also rejected
an offer to sell the Durham property for approximately three-quarters of
its present appraised value.
Unless and until such time as management identifies one or more
preferable strategic alternatives the Partnership intends to pursue its
current strategy of owning and operating its existing portfolio of
properties.
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The financial statements of AHP are filed under this Item, beginning on
Page II-10. The financial statement schedules required under Regulation
S-X are filed pursuant to Item 14 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure
- --------------------
None.
II-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE PARTNERS
AIRCOA HOTEL PARTNERS, L.P.:
We have audited the accompanying consolidated balance sheets of AIRCOA Hotel
Partners, L.P. and subsidiary operating partnerships as of December 31, 1995
and 1994, and the related consolidated statements of operations, partners'
capital and cash flows for each of the years in the three year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AIRCOA
Hotel Partners, L.P. and subsidiary operating partnerships as of December 31,
1995 and 1994, and the results of their operations and their cash flows for
each of the years in the three year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
February 23, 1996
II-10
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ASSETS 1995 1994
- ------ -------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,116 1,261
Accounts receivable:
Trade 2,479 2,555
Affiliates 143 43
Inventory 339 401
Prepaid expenses 482 498
-------- -------
Total current assets 5,559 4,758
-------- -------
Property and equipment, at cost:
Land and leasehold improvements 8,914 8,767
Buildings and leasehold improvements 66,838 70,109
Furniture, fixtures and equipment 18,332 16,304
Construction in progress - 407
-------- -------
94,084 95,587
Less accumulated depreciation and amortization (31,329) (27,234)
-------- -------
Net property and equipment 62,755 68,353
Other assets, including debt issue costs, net
of accumulated amortization of $237 in 1995
and $212 in 1994 1,092 431
-------- -------
$ 69,406 73,542
======== =======
(Continued)
</TABLE>
II-11
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
CONSOLIDATED BALANCE SHEETS, CONTINUED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL 1995 1994
- --------------------------------- -------- --------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 1,080 2,185
Trade accounts payable 1,683 1,634
Payables to affiliates:
Trade accounts 715 444
Interest - 2,100
Accrued liabilities:
Payroll 217 327
Taxes, other than income taxes 473 982
Other 1,848 2,450
Deferred revenue and advance deposits 1,995 1,814
-------- --------
Total current liabilities 8,011 11,936
Long-term debt, excluding current installments 43,290 40,180
Notes payable to affiliates 8,100 6,000
Accrued administration and management fees
payable to affiliate 253 253
-------- --------
Total liabilities 59,654 58,369
Partners' capital:
General partner 236 376
Limited partners:
Class A Unitholders 13,603 21,605
Class B Unitholders (deficit) (4,087) (6,808)
-------- --------
Total partners' capital 9,752 15,173
-------- --------
Commitments and contingencies
$ 69,406 73,542
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
II-12
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT UNIT DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Rooms $ 26,810 26,863 26,693
Food and beverage 11,733 12,274 11,664
Other property operations 6,856 7,020 6,911
----------- ----------- -----------
45,399 46,157 45,268
----------- ----------- -----------
Costs and operating expenses:
Rooms 7,366 7,242 7,189
Food and beverage 8,577 8,769 8,186
Other property operations 3,046 3,325 3,206
Administrative and general 4,954 4,793 4,823
Marketing 3,944 4,025 3,764
Energy 2,365 2,307 2,234
Property maintenance 2,348 2,255 2,127
Rent, taxes and insurance 2,743 2,540 2,674
Management fees 1,802 1,835 1,788
Depreciation and amortization 4,095 3,944 3,721
Impairment of property 4,789 - -
----------- ----------- -----------
46,029 41,035 39,712
----------- ----------- -----------
Operating income (loss) (630) 5,122 5,556
----------- ----------- -----------
Other income (expenses):
Interest expense, including amortization
of debt issue costs of $348 in 1995,
$471 in 1994, and $458 in 1993 (4,791) (4,600) (4,436)
Gain on insurance settlements - 105 -
----------- ----------- -----------
(4,791) (4,495) (4,436)
----------- ----------- -----------
Net income (loss) $ (5,421) 627 1,120
=========== =========== ===========
Income (loss) per limited partnership
unit:
Class A Unitholders $ (1.50) (.10) (.02)
=========== =========== ===========
Weighted average number of units
outstanding 5,340,214 5,340,214 5,340,214
=========== =========== ===========
Class B Unitholders $ 2.86 1.25 1.27
=========== =========== ===========
Weighted average number of units
outstanding 950,000 950,000 950,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
II-13
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT UNIT DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited Partners' Capital (Deficit)
-----------------------------------------
Class A Unitholders Class B Unitholders Total
General ------------------- ------------------- partners'
partner Units Capital Units Capital capital
----------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1992 $ 365 5,340,214 22,249 950,000 (9,188) 13,426
Net income (loss) 10 - (92) - 1,202 1,120
----------- --------- --------- --------- --------- -----------
BALANCES AT DECEMBER 31, 1993 375 5,340,214 22,157 950,000 (7,986) 14,546
Net income (loss) 1 - (552) - 1,178 627
----------- --------- --------- --------- --------- -----------
BALANCES AT DECEMBER 31, 1994 376 5,340,214 21,605 950,000 (6,808) 15,173
Net income (loss) (140) - (8,002) - 2,721 (5,421)
----------- --------- --------- --------- --------- -----------
BALANCES AT DECEMBER 31, 1995 $ 236 5,340,214 13,603 950,000 (4,087) 9,752
=========== ========= ========= ========= ========= ===========
</TABLE>
See accompanying notes to consolidated finanical statements.
II-14
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 43,460 44,592 43,189
Cash paid to suppliers and vendors (25,054) (25,226) (23,130)
Cash paid to employees (12,916) (12,423) (12,609)
Interest paid (4,443) (3,430) (3,519)
Other cash receipts 2,096 2,055 1,910
-------- -------- --------
Net cash provided by operating
activities 3,143 5,568 5,841
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (3,286) (2,049) (2,353)
Proceeds from insurance for damaged
property and equipment - 105 236
Payments for other assets (20) - (277)
-------- -------- --------
Net cash used in investing activities (3,306) (1,944) (2,394)
-------- -------- --------
Cash flows from financing activities:
Proceeds from refinancing 45,000 - -
Principal payments on long-term debt (42,995) (4,950) (3,325)
Refinancing costs and other (987) (329) (342)
Proceeds from sale of Class A Units - - 55
-------- -------- --------
Net cash provided by (used in)
financing activities 1,018 (5,279) (3,612)
-------- -------- --------
Increase (decrease) in cash
and cash equivalents 855 (1,655) (165)
Cash and cash equivalents, beginning of year 1,261 2,916 3,081
-------- -------- --------
Cash and cash equivalents, end of year $ 2,116 1,261 2,916
======== ======== ========
</TABLE>
(Continued)
II-15
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Reconciliation of net income (loss) to
net cash provided by operating
activities:
Net income (loss) $ (5,421) 627 1,120
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,095 3,944 3,721
Impairment of property 4,789 - -
Amortization of debt issue costs 348 471 458
Gain on insurance settlements - (105) -
Decrease (increase) in accounts
receivable relating to operations (24) 284 (328)
Decrease (increase) in inventory 62 (25) (74)
Decrease (increase) in prepaid expenses 16 (124) (41)
Increase (decrease) in trade accounts
payable, payables to affiliates, accrued
liabilities, accrued administration and
management fees payable to affiliate
relating to operations (903) 290 826
Increase in deferred revenue and
advance deposits 181 206 159
-------- -------- --------
Net cash provided by operating
activities $ 3,143 5,568 5,841
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
II-16
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
- ------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
AIRCOA Hotel Partners, L.P. (the "Partnership") is a publicly traded
limited partnership formed to acquire, own and operate hotel properties.
The Partnership holds a 99% limited partner interest in six limited
partnerships (the "Operating Partnerships"). Each of the Operating
Partnerships owns and operates a hotel and resort property (the
"Properties"). AIRCOA Hospitality Services, Inc. ("AHS"), a wholly-owned
subsidiary of Richfield Hospitality Services, Inc. ("Richfield") holds a
1% General Partner interest in the Partnership and in each of the
Operating Partnerships.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Partnership and the accounts of each of the Operating
Partnerships. All significant interpartnership accounts and transactions
have been eliminated.
CASH AND CASH EQUIVALENTS
Cash equivalents, representing money market accounts, overnight
Eurodollar deposits and repurchase agreements, were $1,965,000 and
$739,000 at December 31, 1995 and 1994, respectively. For purposes of
the consolidated statements of cash flows, the Partnership considers all
highly liquid investments with original maturities of three months or
less to be cash equivalents.
Included in cash and cash equivalents at December 31, 1995 is
approximately $1,100,000 designated for use on hotel renovations and
other costs directly related to the hotel properties. These funds are
expected to be used for such expenditures prior to December 31, 1996.
FINANCIAL INSTRUMENTS
In 1995, the Partnership adopted the provisions of Statement of
Financial Accounting Standards No. 107, Disclosures About Fair Value of
Financial Instruments (SFAS No. 107). The carrying amounts of the
Partnership's financial instruments, including cash and cash
equivalents, accounts receivable, trade accounts payable, payables to
affiliates and accrued liabilities, approximate fair value primarily
because of the short maturities of those instruments. The fair value of
the Partnership's long-term debt and notes payable to affiliates
approximate their carrying values based on borrowing rates currently
available to the Partnership for loans with similar terms.
II-17
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OPERATING ASSETS
The Partnership uses an inventory method of accounting for china,
glassware, silver, linen, and uniforms. Under the inventory method,
operating assets are stated at amounts based upon the physical quantity
of such assets on hand using average costs, less a valuation allowance
to reflect deterioration from use.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Hotel property renovations
and improvements are capitalized. Repairs, maintenance, and minor
refurbishments are charged to expense as incurred. Interest incurred
during construction of facilities or major renovations is capitalized
and amortized over the life of the related assets. Interest of $43,000
was capitalized in 1993. No interest was capitalized in 1995 or 1994.
Upon the retirement or sale of property and equipment, the cost and
related accumulated depreciation are removed from the respective
accounts, and the resulting gain or loss, if any, is included in
operations.
Property and equipment held under leaseholds is amortized over the
shorter of the lease term or the estimated useful life of the asset.
Depreciation and amortization are calculated using the straight-line
method over the estimated useful lives of the assets, generally as
follows:
Land improvements and leasehold improvements 15 years
Buildings and leasehold improvements 30 years
Furniture, fixtures and equipment 10 years
The Partnership assesses the carrying value of its hotel properties for
impairment when circumstances indicate such amounts may not be
recoverable from future operations. In the fourth quarter of 1995, the
Partnership adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of (SFAS No. 121). SFAS No. 121,
which was issued by the Financial Accounting Standards Board in March
1995, establishes recognition and measurement standards for the
impairment of long-lived assets expected to be held and used and long-
lived assets to be disposed. Generally, assets to be held and used in
operations are considered impaired if the sum of expected future cash
flows is less than the assets' carrying amount. If an impairment is
indicated, the loss is measured based on the amount by which the assets'
carrying value exceeds its fair value. Assets to be disposed of are
reported at the lower of their carrying value or fair value less
estimated selling costs. Prior to the adoption of SFAS No. 121, the
Partnership assessed impairment based on the expected future cash flows
from operations of its hotel properties.
II-18
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS
Other assets consist principally of debt issue costs, franchise license
costs, and liquor license costs. Debt issue and franchise license costs
are amortized using the straight-line method over the term of the
respective debt or license agreements.
DEFERRED REVENUE AND ADVANCE DEPOSITS
Deferred revenue for facility rentals and advance room deposits is
recognized as revenue when services are provided.
INCOME TAXES
No current provision or benefit for income taxes is included in the
accompanying consolidated financial statements since the taxable income
or loss of the Partnership is included in the tax returns of the
individual partners of the Partnership.
Current federal income tax regulations will subject the Partnership to
corporate taxation beginning in 1998. Accordingly, the Partnership
utilizes an asset and liability method of accounting for deferred income
taxes. Under the asset and liability method, deferred income taxes are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis expected to be recovered or
settled subsequent to 1997. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years such temporary differences are expected to be recovered or
settled. The effect on deferred taxes of a change in tax rates will be
recognized in operations in the period of the enactment date.
NET INCOME (LOSS) PER UNIT
Net income (loss) per limited partnership unit is computed by dividing
the net income (loss) attributable to each class of units by the
weighted average number of units outstanding in each class during the
period. Because of the loss attributable to A Unitholders in 1995, 1994
and 1993, Class A Units issuable upon conversion of notes payable (see
Note 5) and upon conversion of the Class B Units (see Note 2) were not
considered in the computation, as such conversions would be anti-
dilutive.
RISKS AND UNCERTAINTIES
The preparation of the Partnership's consolidated financial statements
in conformity with generally accepted accounting principles necessarily
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet dates and the reported
amounts of revenues and expenses during the reported periods. Actual
results could differ from those estimates.
II-19
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain of the Properties have agreements with various customers,
including airline carriers and tour groups that require the Properties
to provide rooms at specified rates. The loss of such agreements and
customers could adversely impact revenue.
RECLASSIFICATIONS
Certain amounts in the 1994 and 1993 consolidated financial statements
have been reclassified to conform to the 1995 presentation.
(2) PARTNERSHIP UNITS AND ALLOCATIONS
LIMITED PARTNERSHIP UNITS
The Class A Units entitle each Unitholder to a limited partnership
interest in a percentage of the profits and losses, tax allocations, and
distributions of the Partnership, as described below.
The Class B Units entitle each Unitholder to a limited partnership
interest which is subordinate to the Class A Units. The Class B Units
are redeemable by the Partnership or convertible into Class A Units, in
certain circumstances. The Class B Units do not receive distributions
until the Class A Unitholders receive defined Minimum Annual
Distributions. Through 1996 the Class B Units are convertible into Class
A Units to the extent that distributable cash flow of the Partnership in
the previous year would have been sufficient to pay Minimum Annual
Distributions for the Class A Units, including the Class B Units to be
converted. Beginning in 1997, during the 30-day period following the
release of the Partnership's annual audited financial statements, and
each year thereafter through 2001, a minimum of 250,000 Class B Units
are required to be converted into Class A Units annually through 2001 at
a redemption value of $20.00 per Class B Unit, by issuing Class A Units
valued at the then current market price of the Class A Units. Therefore,
the number of Class A Units to be issued upon conversion of a Class B
Unit will be determined at the time of conversion by dividing $20.00 by
the then current market price of a Class A Unit.
CASH DISTRIBUTIONS
The Partnership agreement provides for periodic distribution of
distributable cash flow, as defined, to the partners at the discretion
of the General Partner. Distributable cash flow is generally defined as
cash flow from operations of the hotel properties. Such cash is
allocated and distributed (net of AHS' 1% general partnership interest
in the Operating Partnerships) 99% to the Class A Unitholders and 1% to
the General Partner until the Class A Unitholders have received defined
Minimum Annual Distributions. The Minimum Annual Distribution is
presently $2.16 per Class A Unit. After payment of the Minimum Annual
Distribution, additional cash distributions, if any, will be allocated
49.5% to the Class A Unitholders, 49.5% to the Class B Unitholders and
1% to the General Partner.
II-20
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(2) PARTNERSHIP UNITS AND ALLOCATIONS (CONTINUED)
CASH DISTRIBUTIONS (CONTINUED)
Capital transaction proceeds generally consist of net proceeds from
sales and refinancing of the Partnership's hotel properties. Cash from
capital transaction proceeds is allocated and distributed 99% to the
Class A Unitholders and 1% to the General Partner until the Class A
Unitholders have received any previously unpaid Minimum Annual
Distributions, and the unrecovered capital preference amount, as
defined. Capital transaction proceeds are then allocated and distributed
99% to the Class B Unitholders and 1% to the General Partner until all
the Class B Units have been redeemed. Subsequent to the redemption of
the Class B Units, capital transaction proceeds are allocated and
distributed 75% to the Class A Unitholders and 25% to the General
Partner. The unrecovered capital preference amount of a Class A and a
Class B Unit at December 31, 1995 is $16.60 and $20.00, respectively.
The Minimum Annual Distribution amount attributable to Class A
Unitholders and the Class B Unitholders sharing percentage in
distributable cash flow are reduced proportionately based upon
distributions of capital transaction proceeds.
The Partnership has not made any distributions since 1990. At December
31, 1995, the cumulative unpaid Minimum Annual Distribution per Class A
Unit significantly exceeds the Partnership's net asset value per unit
based on the appraised values of the hotel properties.
ALLOCATION OF INCOME AND LOSSES
Partnership income and losses are allocated among the partners in
accordance with federal income tax provisions based upon the partners
ownership interests, adjusted to reflect original contribution values
agreed upon by the partners and other basis differences at the inception
of the Partnership. Income and losses are allocated among individual
units on a pro rata basis within each class of units. For financial
reporting purposes, the net income or loss of the Partnership is
generally allocated in accordance with the income tax allocation
provisions described above. In accordance with the Partnership
agreement, deductions of approximately $3,056,000, $1,148,000 and
$1,148,000 in 1995, 1994 and 1993, respectively, were transferred in the
allocation of income (loss) from the Class B Units to the Class A Units
and General Partner. In 1995, such allocation includes the impact from
the impairment of the Lakeside property (see Note 3).
(3) HOTEL PROPERTY VALUATIONS
The Partnership periodically evaluates the carrying value of its hotel
properties for impairment. These evaluations are based upon management's
estimate of future operating results considering recent performance and
existing and expected local market conditions. Based on these
evaluations, the Partnership recognized an impairment of approximately
$4,789,000 relating to the Lakeside property in 1995. The loss was
determined based on the excess of the hotel property's carrying value
over its fair value at December 31, 1995. The fair value of the hotel
property was determined through a third-party appraisal obtained in
January 1996. The impairment loss is included in costs and operating
expenses in the accompanying consolidated statements of operations.
II-21
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
The Partnership believes that the expected future cash flows from the
operations of its other hotel properties will be sufficient to recover
their carrying values. The Partnership has no current plans to sell any
of its properties for less than their carrying values.
(4) LONG-TERM dEBT
On June 8, 1995, the Partnership signed a credit agreement with a new
lender which provided a $45,000,000 first mortgage loan and a $1,000,000
revolving credit line. The proceeds of the $45,000,000 first mortgage
loan were used to refinance, on a long-term basis, the Partnership's
existing mortgage loan in the amount of $38,950,000 and the note payable
to bank of $1,790,000 which were due July 31, 1995 and October 31, 1995,
respectively, and to provide approximately $3,000,000 to fund hotel
property renovations. The balance of the funds were used for the payment
of a facility fee and closing costs.
The first mortgage loan interest rate at December 31, 1995 of 7.75% was
based on the current Eurodollar rate plus 2%. Repayment of the first
mortgage loan is based on a twenty-year amortization with a final
maturity date in June 2000. Payments under this loan consist of monthly
installments of $90,000 plus interest on the unpaid balance. The
revolving credit line is renewable annually at the option of the lender.
No amounts have been drawn on the line at December 31, 1995.
Long-term debt is summarized as follows (in thousands):
December 31,
-------------------
1995 1994
-------- -------
Mortgage loan $ 44,370 40,450
Note payable to bank - 1,915
-------- -------
44,370 42,365
Less current installments 1,080 2,185
-------- -------
Long-term debt, excluding current
installments $ 43,290 40,180
======== =======
The first mortgage loan and revolving credit line contain various
convenants including: minimum debt service ratios, restrictions on
additional indebtedness, limitations on annual cash distributions to
Class A Unitholders, limitations on the payment of principal on the
affiliate notes payable, prepayment premiums during the first two years,
deferral of management fees payable to Richfield if minimum debt service
ratios are not achieved, maintenance of a capital expenditure reserve
account equal to 4% of gross revenue in 1995 and 5% thereafter, and a
maximum loan-to-value ratio of 65% based on the aggregate appraised
values of the Properties. The Partnership is in compliance with these
covenants for the year ended December 31, 1995. The first mortgage loan
and revolving credit line are subject to certain limited guarantees of
an affiliate of the General Partner. The first mortgage loan also
requires Bank approval of any dilution in the present ownership
interests of affiliates of the General Partner in the Partnership.
II-22
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(4) LONG-TERM DEBT (CONTINUED)
In accordance with the Partnership Agreement, the General Partner
received a 1% financing fee, reduced by the amount of the financing fee
paid to the lender, for arranging the refinancing of the Partnership's
indebtedness. In addition, the Partnership has paid/will pay an annual
guarantee fee calculated as .5% of the outstanding loan balance at June
8 of each year to an affiliate of the General Partner for the limited
guarantee of the first mortgage loan and the revolving credit line.
Maturities of long-term debt are summarized as follows (in thousands):
Year ending December 31,
1996 $ 1,080
1997 1,080
1998 1,080
1999 1,080
2000 40,050
--------
$ 44,370
========
(5) NOTES PAYABLE TO AFFILIATES
A condition of the credit agreement signed by the Partnership for the
first mortgage loan and revolving credit line required the subordination
of the $6,000,000 notes payable to AHS (the "Notes"), AHS has agreed to
this subordination, and as a result, on September 26, 1995 the Board of
Directors of AHS, in its capacity as General Partner, and the Advisory
Committee of AHP authorized the extension of the term and deferral of
certain past-due interest on the Notes.
Pursuant to this extension, the Notes, which originally matured in
January 1995, are due on June 8, 2000, which is coterminous with the new
mortgage loan. The unpaid interest on the Notes accrued prior to January
1, 1995, in the amount of $2,100,000 were converted into a new
promissory note ("New Note") which also matures on June 8, 2000. The New
Note accrues interest at the rate of 12% per annum and is payable at
maturity. Interest accrued on the Notes after December 31, 1994, was
paid at closing. Interest incurred on the Notes subsequent to closing
continues to be accrued at 12% per annum and is paid monthly. These
notes are convertible into Class A Units of the Partnership at $16.60
per unit. In addition, these notes stipulate that 25% of any excess
cashflow, as defined in the new mortgage loan, will be applied against
the principal of the notes outstanding.
(6) INCOME TAXES
The Partnership's only significant temporary difference (which will
result in tax deductions in 1998 and later years) is an excess of the
tax basis over the book basis of the Properties of approximately
$6,500,000 and $2,350,000 at December 31, 1995 and 1994, respectively.
The Partnership's net deferred tax asset was approximately $2,600,000
and $940,000 at December 31, 1995 and 1994, respectively. The
Partnership has established a 100% valuation allowance on these net
deferred tax assets. The change in the valuation allowance in 1995 was
an increase of approximately $1,660,000.
II-23
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(7) RELATED PARTY TRANSACTIONS AND COMMITMENTS
PARTNERSHIP ADMINISTRATION
AHS, as General Partner, is responsible for managing the business and
affairs of the Partnership and the Operating Partnerships. The General
Partner is reimbursed monthly for all direct operating expenses incurred
on behalf of the Partnership and Operating Partnerships. In addition,
the General Partner receives an annual partnership administration fee
equal to .25% of the independently appraised value of the hotel
properties of the Partnership.
MANAGEMENT AGREEMENTS
Richfield operates the hotel properties for the Partnership in exchange
for a management fee equal to 4% of annual gross revenue from the hotel
properties. In addition, the hotel properties are obligated to reimburse
Richfield for payroll, professional fees, and certain out-of-pocket
expenses incurred by Richfield on their behalf. The management
agreements expire in 2012 and can be terminated by the Partnership prior
to expiration, in certain circumstances, by the payment of a fee equal
to three times the management fee paid for the preceding 12 months.
Richfield also provides data processing services and obtains various
types of insurance coverage, on an aggregate basis, for the hotel
properties which it owns or manages. Such data processing and insurance
costs are charged to the hotel properties.
LICENSE AGREEMENTS
One of the hotel properties has a license agreement with an affiliate to
operate as a Regal Hotel. The license agreement provides for a fee of 2%
of total sales revenue, as defined, in 1995, increasing to 2.5% in 1996,
and 3% thereafter and expires in 2012. The agreement can be terminated
by the Partnership prior to expiration in certain circumstances, through
payment of a termination fee.
HOTEL PROPERTY ACQUISITIONS AND DISPOSITIONS AND PARTNERSHIP FINANCING
The General Partner receives an acquisition fee equal to 1% of the
purchase price of any hotel property acquired by the Partnership. Upon
the sale of a hotel property, the General Partner receives either a
disposition fee equal to 1% of the sales price of the hotel property, or
a reasonable brokerage fee, based upon fees for comparable properties in
the area, less the amount of any such brokerage fees paid to third
parties. The General Partner receives a financing fee equal to 1% of the
principal amount of any new Partnership loan, or refinancing of
Partnership debt if the refinancing is completed with a lender other
than the lender whose loan is being refinanced. Such fee is required to
be reduced by the amount of the financing fee paid to the lender.
II-24
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(7) RELATED PARTY TRANSACTIONS AND COMMITMENTS (CONTINUED)
OTHER ARRANGEMENTS
The General Partner and its affiliates are paid development, purchasing,
and design fees for services performed in connection with the renovation
or expansion of the Partnership's hotel properties. In addition, an
affiliate of AHS receives fees in connection with the bulk purchase of
hotel furnishings, equipment, and supplies.
The Partnership leases a private club and recreational facility from an
affiliate of AHS, under an operating lease. The Partnership receives 90%
to 100% of available cash flow from operation of the private club and
recreational facility as lease income and management fees. The lease
expires in 2052 and may be terminated by the Partnership earlier. The
Partnership received lease income and management fees of $256,000,
$330,000, and $328,000 pursuant to these arrangements in 1995, 1994, and
1993, respectively.
Subject to the terms of the lease agreement, an affiliate of the
Partnership has an option to purchase 50 undeveloped acres from the
private club for $10. The option is only exercisable if all the permits
and consents from state and local authorities permit continued operation
of the club after conveyance of the 50 acres to the affiliate. The
affiliate pays a pro-rata share of the property taxes on the private
club. The private club is located on a tract of land consisting of
approximately 80 acres.
The following amounts resulting from transactions with affiliates are
included in the accompanying consolidated balance sheets (in thousands):
December 31
-----------------------
1995 1994
--------- -----------
Fees and costs, included in property
and equipment, net $ 1,123 1,028
========== ==========
General partner financing fee $ 144 -
========== ==========
Guarantee fee $ 115 -
========== ==========
The general partner financing fee and the guarantee fee have been
capitalized and are included in other assets. The financing fee is being
amortized over the life of the first mortgage loan, and the annual
guarantee fee is being amortized over twelve months. Amortization of
these in the amount of $131,000 is included in interest expense.
II-25
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(7) RELATED PARTY TRANSACTIONS AND COMMITMENTS (CONTINUED)
The following amounts resulting from transactions with affiliates are
included in the accompanying consolidated statements of operations (in
thousands):
1995 1994 1993
------- --------- ---------
Partnership administration fees $ 209 222 186
======= ========= =========
Management fees $ 1,802 1,835 1,788
======= ========= =========
Allocated insurance expense $ 1,411 1,505 1,502
======= ========= =========
Allocated data processing costs $ 80 45 45
======= ========= =========
Interest expense $ 851 720 720
======= ========= =========
Lease income $ 256 330 328
======= ========= =========
License fees $ 174 132 114
======= ========= =========
In December 1992, the Partnership issued 850,000 Class A Units to
affiliates of AHS for cash proceeds of $935,000, of which $55,000 was
collected in January 1993.
(8) COMMITMENTS AND CONTINGENCIES
Under terms of the Clarion and ITT Sheraton franchises, the Partnership
is committed to make annual payments for franchise and licensing fees
and reservation services. The Clarion license agreement requires
franchise fees equal to 3% of gross room revenue and expires in 2012.
The ITT Sheraton license agreements require franchise fees equal to 6%
of gross room revenue and expire in 2012. Total franchise fees on the
Clarion and ITT Sheraton license agreements were $1,650,000, $1,677,000
and $1,383,000 for 1995, 1994 and 1993, respectively.
Three of the hotel properties are subject to noncancelable operating
land leases which expire between 2000 and 2033. The leases generally
require annual rental payments of a fixed amount, ranging from $10,000
to $90,000, plus a contingent amount based upon a percentage of
specified room revenue, food and beverage revenue, or gross revenue, as
defined, ranging from 1% to 8%. The accompanying consolidated statements
of operations include land rent expense of $799,000, $803,000, and
$762,000, for 1995, 1994, and 1993, respectively.
The Partnership has capital improvements of approximately $3,700,000
planned for 1996.
The Class A Units issuable upon conversion of notes payable and upon
conversion of the Class B Units, and the Class A Units issued pursuant
to the general partner's obligations regarding cash distributions have
certain demand registration rights.
During July of 1995, the Bloomington Clarion Fourwinds property
experienced substantial damage to the dock areas due to severe weather.
As of December 31, 1995, the Partnership has estimated the total cost of
the damage to be approximately $742,000. The Partnership anticipates
that these costs will be reimbursed under its insurance policies.
II-26
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(8) COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Partnership is involved in various claims and legal actions arising
in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material effect on
the consolidated financial statements of the Partnership.
II-27
<PAGE>
PART III
Item 10. Directors and Executive Officers of the General Partner
- -------- -------------------------------------------------------
THE GENERAL PARTNER
AHS is the General Partner of the Partnership and of each of the
Operating Partnerships. From its formation in 1968 until
November 1993, AHS was engaged in the management of hotel and
resort properties. Richfield assumed the management contracts
for the properties effective November 1993 as a part of the
integration by Richfield of its hotel management subsidiaries,
including AHS.
DIRECTORS AND EXECUTIVE OFFICERS OF AHS
The directors and executive officers of AHS are listed below.
The Advisory Committee of AHP consists of one member of the AHS
Board of Directors, Anthony Williams. The other members of the
Advisory Committee include William Arthur and Frank Hughes who
do not serve in any other capacity with Richfield or its
affiliates. The functions of the AHP Advisory Committee include,
among other things, review of the policies and practices of the
Partnership and AHS regarding various matters as to which
potential conflicts of interest may arise and review of certain
acquisitions and dispositions of hotel properties by AHP. The
officers of AHS devote such time and effort as is necessary for
AHS to perform its duties as General Partner of the Partnership.
Each of the directors of AHS are elected to a one-year term at
the annual meeting of the shareholder of AHS.
IDENTIFICATION OF DIRECTORS
<TABLE>
<CAPTION>
Name and Year First Principal Occupation
Became a Director Age During the Past Five Years
------------------- --- --------------------------
<S> <C> <C>
Daniel Bong Shu Yin, 1995 56 Daniel Bong has served as a Director for Century City International Holdings
Limited ("CCIHL"), a Bermuda corporation listed in Hong Kong and engaged in
property development and hotel ownership and management since 1989. He is
also a Director of the subsidiary corporations of CCIHL, Paliburg
International Holdings Limited ("PIHL") and Deputy Chairman of Regal Hotels
International Holdings Limited ("RHIHL"). Mr. Bong is responsible for
overseeing the hotel operations and is a qualified architect. Mr. Bong has
served as President/Chief Executive Officer of Holdings since October 1995
and as a Director since May 1995.
</TABLE>
III-1
<PAGE>
<TABLE>
<S> <C> <C>
Lawrence Lau Siu Keung, 1995 45 Lawrence Lau joined CCIHL in 1994 and has served as a Director since 1995.
He also serves as a Director of PIHL and RHIHL. Mr. Lau is in charge of the
overall financial and accounting functions of CCIHL and its subsidiaries.
Mr. Lau served as Group Controller (Finance) for Shaw Brothers (H.K.) Ltd.
from 1992 to 1994. From 1989 to 1992 he was Financial Controller for Regal
Pacific Holdings Limited. Mr. Lau has served as a Director of Holdings since
May 1995.
Sandy Leung Sun So, 1996 41 Sandy Leung has served as Senior Vice President of AHS and Holdings since
February 1996. He joined CCIHL in November 1995 as General Manager-Corporate
Finance. Prior to joining CCIHL, Mr. Leung served as a Director of Shanghai
International Capital (H.K.) Limited from May 1994 to September 1995. Mr.
Leung also served as an Executive Director of Seapower Corporate Finance
Limited from May 1992 to April 1994. From July 1991 to April 1992, Mr. Leung
served as Senior Manager of Lippo Asia Limited.
Douglas M. Pasquale, 1995 41 Douglas M. Pasquale has served as President/CEO of AHS since February 1996.
He previously served as Executive Vice President since February 1992 and was
appointed Chief Financial Officer in August 1994. Mr. Pasquale joined AHS in
1986 as Vice President of Investor Services. Mr. Pasquale did not serve as
an officer of AHS from August 1989 to February 1992, but continued to serve
as Vice President of Holdings during this time period. Mr. Pasquale became a
Director of Holdings in February 1993.
Michael Sheh, 1995 38 Michael Sheh has served as Senior Vice President and Treasurer of AHS since
June 1995. Mr. Sheh served as Vice President/Treasurer of Holdings from 1989
to March 1995, when he was elected Senior Vice President. He became a
Director of Holdings in May 1995.
</TABLE>
III-2
<PAGE>
<TABLE>
<C> <S> <C> <C>
w Paul J. Sistare, 1994 41 Paul J. Sistare served as President/CEO of AHS from April 1994 to February
- - (Resigned, February, 1996) 1996. He previously served as Executive Vice President from September 1992.
Mr. Sistare served as Executive Vice President of Holdings from September
1992 to February 1996. He was elected a Director of Holdings in February
1993. Mr. Sistare joined Forte Hotels International in 1983 and served as
Senior Vice President from 1989 to 1992.
Carol K. Werner, 1989 41 Carol K. Werner served as General Counsel, Secretary and Executive Vice
President of AHS from 1989 to March 1995. She also served as Director,
Executive Vice President and Secretary of Holdings and certain affiliates
from 1989 to 1995. Since August 1995, Ms. Werner has been working with the
Denver, Colorado office of Coudert Brothers, an international law firm. Ms.
Werner was an associate of Coudert Brothers, prior to her employment with
AHS.
Anthony Williams, 1989 50 Anthony Williams is the Chairman of the executive committee of Coudert
Brothers, an international law firm, and has been a partner since 1981.
He has served as a directory of Holdings since 1989.
</TABLE>
There are no family relationships between any of the directors
or the executive officers of AHS. Coudert Brothers, an
international law firm of which Anthony Williams and Carol
Werner are attorneys, has provided legal services for the
Partnership and affiliates since the beginning of 1989. CCIHL,
PIHL, RHIHL are affiliates of AHP.
Item 11. Payments and Compensation to General Partner and Affiliates
- -------- -----------------------------------------------------------
As set out in the Partnership's agreement of limited
partnership, various fees are payable to AHS, as General
Partner, for services rendered to the Partnership. These fees
include Partnership administration fees equal to .25% of the
appraised value of the Properties determined as of December 31st
of each year; acquisition fees equal to 1% of the purchase price
of any additional hotel property purchased by the Partnership;
mortgage or refinancing fees equal to 1% of the loan amount;
annual guarantee fees equal to .5% of the outstanding loan
balance to an affiliate of AHS; and brokerage and disposition
fees equal to 1% of the total contract price of the property
with respect to the sale of a Partnership property to a third
party. Affiliates of AHS receive property management service
fees, data processing and risk management fees pursuant to the
hotel management agreements with the Operating Partnerships. The
Properties may also reimburse AHS and its affiliates for certain
costs paid by AHS and its affiliates on behalf of the Operating
Partnerships including payroll, professional fees and certain
out-of-pocket expenses. For a detailed description of amounts
paid or owed to AHS and its affiliates by the Partnership or the
Operating Partnerships for various services performed by AHS and
its affiliates during 1995, see Item 8, Financial Statements and
Supplementary Data. The McCormick Ranch property has also
entered into a license agreement with Holdings for use of the
Regal name. For a detailed description of amounts paid or owed
to Holdings, see Item 8, Financial Statements and Supplementary
Data.
III-3
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
(a) The following table sets forth information as of March 4, 1996
with respect to persons who are known to the Partnership (based
on statements filed with the Securities and Exchange Commission
pursuant to section 13(d) or 13(g) of the Securities Act of
1934) to be the beneficial owner of more than five percent of
any class of the Partnership's voting securities.
<TABLE>
<CAPTION>
Name and address of Amount and nature of Percent
Title of Class beneficial owner beneficial ownership of Class
- -------------- ------------------- -------------------- --------
<S> <C> <C> <C>
Class A Units Century City International 3,794,646(1) 71.0%
Paliburg Plaza
68 Ye Woo Street Indirect
Hong Kong Ownership
Class A Units Regal Hotel Management, Inc. 1,825,065(1) 34.2%
5775 DTC Boulevard Direct
Suite 300 Ownership
Englewood, Colorado
80111
Class A Units Gateway Hotel Holdings, Inc. 769,041(1) 14.4%
5775 DTC Boulevard Direct
Suite 300 Ownership
Englewood, Colorado
80111
Class A Units AIRCOA Equity Interests, Inc. 650,000(1) 12.2%
5775 DTC Boulevard Direct
Suite 300 Ownership
Englewood, Colorado
80111
Class A Units Richfield Holdings, Inc. 546,740(1)(2) 10.2%
5775 DTC Boulevard Direct
Suite 300 Ownership
Englewood, Colorado
80111
Class A Units Investing Group: 409,000(3) 7.65%
Direct
Ownership
Hatfield Family Trust, UA
RR1, Box 162
Ridgeland, South Carolina
29936
(108,700 units 2.03%)
</TABLE>
III-4
<PAGE>
<TABLE>
<CAPTION>
Name and address of Amount and nature of Percent
Title of Class beneficial owner beneficial ownership of Class
- -------------- ------------------- -------------------- --------
<S> <C> <C> <C>
J. Mark Grosvenor
3145 Sports Arena
Boulevard
San Diego, California
92110
(110,000 units 2.02%)
Gerald Loehr Trust
c/o Gerald G. Loehr
P.O. Box 675207
Rancho Santa Fe, California
92067
(43,500 units .814%)
Gardner-Smith Living
Trust, UA
7825 Fay Avenue, Suite 250
La Jolla, California 92037
(43,200 units .81%)
Narans Investment
Management, Inc.
3440 South Vance Avenue,
Suite 700
Lakewood, Colorado 80227
(32,200 units .60%)
Blacor, Inc.
8235 Douglas Avenue,
Suite 1300
Dallas, Texas 75225
(25,400 units .47%)
Lance T. Shaner
303 Science Park Road
State College, Pennsylvania
16803
(25,500 units .51%)
Don W. Cockroft
P. O. Box 770577
Memphis, Tennessee 38177
(10,500 units .20%)
Michael McNulty
8235 Douglas Avenue, Suite
1300
Dallas, Texas 75225
(10,000 units .20%)
</TABLE>
III-5
<PAGE>
Class B Units Century City International 950,000(4)(5) 100.0%
Holdings Limited Indirect
Ownership
(1) Each of Richfield Holdings, Inc. ("Holdings"), AIRCOA Equity
Interests, Inc. ("AEI"), Regal Hotel Management, Inc. ("RHM") and
Gateway Hotel Holdings, Inc. ("Gateway") share voting and
investment power with Century City International Holdings Limited
("Century City").
(2) Holdings has direct ownership of 546,740 Class A Units, an
indirect ownership of 650,000 Class A Units through AEI, and
indirect ownership of 3,800 Class A Units through Richfield
Hospitality Services, Inc., for a total direct and indirect
ownership of 1,200,540, which represent 22.5% of the Class A
Units.
(3) Individuals or trusts listed have jointly filed a Schedule 13-D
indicating that they are acting as a group. Ownership information
is based on Amendment No. 2 to the Schedule 13-D filed February 3,
1996.
(4) Class B Units are not tradeable securities however, they are
convertible into Class A Units under certain conditions as set
forth in the limited partnership agreement of the Partnership. No
conversion rights have been exercisable since the Partnership's
inception through the date hereof.
(5) Holdings directly owns 200,000 Class B Units. RHM directly owns
688,746 Class B Units of the Partnership. Buffalo Hotel Investors,
Ltd., an affiliate, directly owns 61,254 Class B Units.
In addition to its direct interest in the Partnership's voting
securities, Holdings indirectly owns 100% of the outstanding common
shares of AHS. In February, 1989 Novolane, B.V., a Netherlands company
("Novolane") and Kingsfield Investment B.V., a Netherlands company
("Kingsfield") together acquired 51% of the voting securities of
Holdings. Kingsfield sold the 5% interest it held in Holdings to an
unaffiliated party during 1990. Novolane currently owns 49.77% of
Holdings outstanding voting securities and 100% of the voting securities
of RHM. In December 1994, Regal International Limited purchased 45.58% of
Holdings outstanding voting securities from an unaffiliated entity.
Century City, a Bermuda company, indirectly controls Novolane, Gateway
and Regal International Limited. More than 60% of the voting stock of
Century City is beneficially owned by Mr. Lo Yuk Sui, a citizen of Hong
Kong.
(b) Security Ownership of Management
As of March 4, 1996, no officers or directors of AHS have beneficial
ownership of any equity securities of the Partnership or AHS.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
(a) Transaction with Management and Others - See (b)
(b) Certain Business Relationships
The Partnership is provided services by, and engages in certain
other transactions with AHS, its general partner, and other
affiliates. See Item 11, Payments and Compensation to the General
Partner and Affiliates and Item 8, Financial Statements and
Supplementary Data.
III-6
<PAGE>
PART IV
<TABLE>
<CAPTION>
Page
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Number
- -------- ---------------------------------------------------------------- ------
<S> <C> <C>
(a) (1) Financial Statements - Included in Part II of this Report:
Independent Auditors' Report II-9
Consolidated Balance Sheets, December 31, 1995 and 1994 II-10
Consolidated Statements of Operations II-12
Years Ended December 31, 1995, 1994, and 1993
Consolidated Statements of Partners' Capital II-13
Years Ended December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows II-14
Years Ended December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements, December 31, 1995 and 1994 II-16
(a) (2) Financial Statement Schedules
The financial statement schedules are omitted as they are either
not required or are not applicable or the required information
is included in the financial statements or notes thereto.
(a) (3) Exhibits
3.1 Agreement of Limited Partnership of the Partnership, as amended
and restated, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 3.1,
declared effective by the Securities and Exchange Commission on
July 23, 1987.
3.3 Certificate of Limited Partnership for the Partnership, as
amended, incorporated herein by reference to the Partnership's
Registration Statement No. 33-13418, Exhibit 3.3, declared
effective by the Securities and Exchange Commission on July 23,
1987.
3.4 Agreement of Limited Partnership for the Operating Partnerships,
incorporated herein by reference to the Partnership's
Registration Statement No. 33-13418, Exhibit 3.4, declared
effective by the Securities and Exchange Commission on July 23,
1987.
3.5 Certificate of Limited Partnership for the Operating
Partnerships, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 3.5,
declared effective by the Securities and Exchange Commission on
July 23, 1987.
4.1 Form of Deposit Agreement, incorporated herein by reference to
the Partnership's Registration Statement No. 33-13418, Exhibit
4.1, declared effective by the Securities and Exchange
Commission on July 23, 1987.
</TABLE>
IV-1
<PAGE>
4.2 Form of Depositary Receipt, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 4.2, declared
effective by the Securities and Exchange Commission on July 23, 1987.
4.3 The form of Transfer Application, incorporated herein by reference to
the Partnership's Registration Statement No. 33-13418, Exhibit 4.3,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.1 Hotel Contribution Agreement for Sheraton Buffalo, dated December 30,
1986, between the Partnership, Buffalo Inn Associates, a Colorado
general partnership, Newpart, and ABI, Ltd., a Colorado limited
partnership ("ABI"), as amended, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 10.1,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.2 Assignment, Assumption and Indemnification Agreement for Sheraton
Buffalo, dated December 31, 1986, between Buffalo Inn Associates,
Newpart, ABI and the Partnership, incorporated herein by reference to
the Partnership's Registration Statement No. 33-13418, Exhibit 10.2,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.3 Assignment and Assumption Agreement between Sheraton Buffalo, dated
February 20, 1987, between the Partnership and Buffalo Operating
Partnership, L.P., a Delaware limited partnership, incorporated herein
by reference to the Partnership's Registration Statement No. 33-13418,
Exhibit 10.3, declared effective by the Securities and Exchange
Commission on July 23, 1987.
10.4 Hotel Contribution Agreement for Sheraton University Center ("Sheraton
University"), dated December 30, 1986, between the Partnership, Durham
Joint Venture, a Florida joint venture ("Durham JV"), and Newpart, as
amended, incorporated herein by reference to the Partnership's
Registration Statement No. 33-13418, Exhibit 10.4, declared effective by
the Securities and Exchange Commission on July 23, 1987.
10.5 Assignment, Assumption and Indemnification Agreement for Sheraton
University, dated December 31, 1986, between Durham JV and the
Partnership, incorporated herein by reference to the Partnership's
Registration Statement No. 33-13418, Exhibit 10.5, declared effective by
the Securities and Exchange Commission on July 23, 1987.
10.6 Assignment and Assumption Agreement for Sheraton University, dated
February 20, 1987, between the Partnership and Durham Operating
Partnership, L.P., a Delaware limited partnership, incorporated herein
by reference to the Partnership's Registration Statement No. 33-13418,
Exhibit 10.6, declared effective by the Securities and Exchange
Commission on July 23, 1987.
10.7 Hotel Contribution Agreement for Fourwinds, Aurora Inn, Clarion
McCormick, Sheraton Lakeside, dated December 30, 1986, between the
Partnership and Newpart and Amendment thereto dated effective December
30, 1986, between the same parties relating to The Pine Lake Trout Club
("Pine Lake"), as amended, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 10.7,
declared effective by the Securities and Exchange Commission on July 23,
1987.
IV-2
<PAGE>
10.8 Assignment, Assumption and Indemnification Agreement for Fourwinds,
dated December 31, 1986, between Newpart and the Partnership,
incorporated herein by reference to the Partnership's Registration
Statement No. 33-13418, Exhibit 10.8, declared effective by the
Securities and Exchange Commission on July 23, 1987.
10.9 Assignment and Assumption Agreement for Fourwinds, dated February 20,
1987, between the Partnership and Fourwinds Operating Partnership, L.P.,
a Delaware limited partnership, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 10.9,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.10 Assignment, Assumption and Indemnification Agreement for Aurora Inn,
dated December 31, 1986, between Newpart and the Partnership,
incorporated herein by reference to the Partnership's Registration
Statement No. 33-13418, Exhibit 10.10, declared effective by the
Securities and Exchange Commission on July 23, 1987.
10.11 Assignment and Assumption Agreement for Aurora Inn, dated February 20,
1987, between the Partnership and Aurora Inn Operating Partnership,
L.P., a Delaware limited partnership, incorporated herein by reference
to the Partnership's Registration Statement No. 33-13418, Exhibit 10.11,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.12 Assignment, Assumption and Indemnification Agreement for Clarion
McCormick, dated December 31, 1986, between Newpart and the Partnership,
incorporated herein by reference to the Partnership's Registration
Statement No. 33-13418, Exhibit 10.12, declared effective by the
Securities and Exchange Commission on July 23, 1987.
10.13 Assignment and Assumption Agreement for Clarion McCormick, dated
February 20, 1987, between the Partnership and McCormick Ranch Operating
Partnership, L.P., a Delaware limited partnership, incorporated herein
by reference to the Partnership's Registration Statement No. 33-13418,
Exhibit 10.13, declared effective by the Securities and Exchange
Commission on July 23, 1987.
10.14 Assignment, Assumption and Indemnification Agreement for Sheraton
Lakeside, dated December 31, 1986, between Newpart and the Partnership,
incorporated herein by reference to the Partnership's Registration
Statement No. 33-13418, Exhibit 10.14, declared effective by the
Securities and Exchange commission on July 23, 1987.
10.15 Agreement for the Purchase and Sale of Partnership Interest for
Sheraton Lakeside, dated as of January 1, 1987, between Lakeside Inns
Limited, a British Virgin Islands corporation, and Newpart; as amended,
incorporated herein by reference to the Partnership's Registration
Statement No. 33-13418, Exhibit 10.15, declared effective by the
Securities and Exchange Commission on July 23, 1987.
10.16 Partnership Interest Purchase Agreement and Consent and Waiver for
Sheraton Lakeside, dated December 30, 1986, between Newpart and the
Orlando S.L. Ltd., an Ohio limited partnership, incorporated herein by
reference to the Partnership's Registration Statement No. 33-13418,
Exhibit 10.16, declared effective by the Securities and Exchange
Commission on July 23, 1987.
IV-3
<PAGE>
10.17 Confirmatory Assignment of Agreement for the Purchase and Sale of
Partnership Interest for Sheraton Lakeside, dated as of February 20,
1987, between Newpart and the Partnership, incorporated herein by
reference to the Partnership's Registration Statement No. 33-13418,
Exhibit 10.17, declared effective by the Securities and Exchange
Commission on July 23, 1987.
10.18 Assignment for Sheraton Lakeside, dated February 20, 1987, by Orlando
Lakeside Associates Limited, a Florida limited partnership, to the
Partnership, incorporated herein by reference to the Partnership's
Registration Statement No. 33-13418, Exhibit 10.18, declared effective
by the Securities and Exchange Commission on July 23, 1987.
10.19 Assignment and Assumption Agreement for Sheraton Lakeside, dated
February 20, 1987, between the Partnership and Lakeside Operating
Partnership, L.P., a Delaware limited partnership, incorporated herein
by reference to the Partnership's Registration Statement No. 33-13418,
Exhibit 10.19, declared effective by the Securities and Exchange
Commission on July 23, 1987.
10.20 Assignment, Assumption and Indemnification Agreement for Pine Lake,
executed on January 31, 1987, to be effective as of December 31, 1986,
between Newpart and the Partnership, incorporated herein by reference to
the Partnership's Registration Statement No. 33-13418, Exhibit 10.20,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.21 Assignment and Assumption Agreement for Pine Lake, dated February 20,
1987, between the Partnership and Aurora Inn Operating Partnership,
L.P., incorporated herein by reference to the Partnership's Registration
Statement No. 33-13418, Exhibit 10.21, declared effective by the
Securities and Exchange Commission on July 23, 1987.
10.22 Option to Purchase, dated as of February 20, 1987, between the
Partnership and Newpart, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 10.22a,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.22a Lease, dated as of February 20, 1987, between the Partnership and
MHM, Inc., a Delaware corporation d/b/a Motor Hotel Management, Inc.,
incorporated herein by reference to the Partnership's Registration
Statement No. 33-13418, Exhibit 10.22b, declared effective by the
Securities and Exchange Commission on July 23, 1987.
10.22b Agency Agreement, dated as of February 20, 1987, between the
Partnership and MHM, Inc., incorporated herein by reference to Exhibit
10.22b filed with the Registrant's annual report on Form 10-K filed with
the Commission on March 31, 1989.
10.23 Form of Management Agreement between the Partnership and the General
Partner, as assigned to the Operating Partnerships, incorporated herein
by reference to the Partnership's Registration Statement No. 33-13418,
Exhibit 10.26, declared effective by the Securities and Exchange
Commission on July 23, 1987.
10.23a Assignment and Assumption of Management Agreement for Aurora Inn
Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
November 5, 1993, incorporated herein by reference to Exhibit 10.23a
filed with the Registrant's Annual Report on Form 10-K filed with the
commission on April 8, 1994.
IV-4
<PAGE>
10.23b Assignment and Assumption of Management Agreement for Buffalo
Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
November 5, 1993, incorporated herein by reference to Exhibit 10.23b
filed with the Registrant's Annual Report on Form 10-K filed with the
commission on April 8, 1994.
10.23c Assignment and Assumption of Management Agreement for Durham
Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
November 5, 1993, incorporated herein by reference to Exhibit 10.23c
filed with the Registrant's Annual Report on Form 10-K filed with the
commission on April 8, 1994.
10.23d Assignment and Assumption of Management Agreement for Fourwinds
Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
November 5, 1993, incorporated herein by reference to Exhibit 10.23d
filed with the Registrant's Annual Report on Form 10-K filed with the
commission on April 8, 1994.
10.23e Assignment and Assumption of Management Agreement for Lakeside
Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
November 5, 1993, incorporated herein by reference to Exhibit 10.23e
filed with the Registrant's Annual Report on Form 10-K filed with the
commission on April 8, 1994.
10.23f Assignment and Assumption of Management Agreement for McCormick Ranch
Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
November 5, 1993, incorporated herein by reference to Exhibit 10.23f
filed with the Registrant's Annual Report on Form 10-K filed with the
commission on April 8, 1994.
10.24 Clarion License Agreement between the Clarion Hotel Corporation, a
Colorado corporation, and the Partnership, as assigned to the Clarion
Operating Partnerships, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 10.27,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.24a Assignment and Consent to Assignment dated as of February 28, 1987,
between The Clarion Hotel Corporation, a Colorado corporation, the
Partnership, and Clarion Hotels and Resorts, a Maryland joint venture,
assigning the Clarion License Agreement previously filed as Exhibit
10.27, incorporated herein by reference to the Partnership's
Registration Statement No. 33-13418, Exhibit 10.27a, declared effective
by the Securities and Exchange Commission on July 23, 1987.
10.24b Amendment between Clarion Hotels and Resorts, a Maryland joint
venture and Fourwinds Operating Partnership L.P., a Delaware limited
partnership dated August 3, 1989 amending certain provisions of the
License Agreement incorporated herein by reference to Exhibit 10.24b
filed with the Registrant's Annual Report on Form 10-K filed with the
Commission on March 31, 1990.
10.25 Sheraton Lakeside License Agreement dated May 14, 1992, incorporated
herein by reference to Exhibit 10.25 filed with the Registrant's Annual
Report on Form 10-K filed with the commission on April 8, 1994.
10.25a Sheraton Lakeside Amendment of License Agreement and License Fee
Deferral Agreement dated November 5, 1993, incorporated herein by
reference to Exhibit 10.25a filed with the Registrant's Annual Report on
Form 10-K filed with the commission on April 8, 1994.
IV-5
<PAGE>
10.25b Sheraton Buffalo License Agreement dated November 2, 1991,
incorporated herein by reference to Exhibit 10.25b filed with the
Registrant's Annual Report on Form 10-K filed with the commission on
April 8, 1994.
10.25c Sheraton Buffalo Amendment of License Agreement and License Fee
Deferral Agreement dated November 5, 1993, incorporated herein by
reference to Exhibit 10.25c filed with the Registrant's Annual Report on
Form 10-K filed with the commission on April 8, 1994.
10.25d Sheraton University License Agreement, incorporated herein by
reference to the Partnership's Registration Statement No. 33-13418,
Exhibit 10.28c, declared effective by the Securities and Exchange
Commission on July 23, 1987.
10.25e Regal McCormick Sublicense Agreement dated February 15, 1996. (1)
10.26 Credit Agreement dated June 8, 1995, between the Partnership and the
Operating Partnerships as makers, to The HongKong and Shanghai Banking
Corporation Limited as payee, incorporated herein by reference to
Exhibit 10.40, filed with the Registrant's Quarterly Report on Form 10-Q
filed with the Commission on August 14, 1995.
10.26a Promissory Note dated June 8, 1995, by the Partnership and the
Operating Partnerships as makers, to The HongKong Shanghai Banking
Corporation Limited as payee in the principal amount of $18,085,000,
incorporated herein by reference to Exhibit 10.40a, filed with the
Registrant's Quarterly Report on Form 10-Q filed with the Commission on
August 14, 1995.
10.26b Promissory Note dated June 8, 1995, by the Partnership and the
Operating Partnerships as makers, to The HongKong Shanghai Banking
Corporation Limited as payee in the principal amount of $1,000,000,
incorporated herein by reference to Exhibit 10.40b, filed with the
Registrant's Quarterly Report on Form 10-Q filed with the Commission on
August 14, 1995.
10.26c Renewal Note dated June 8, 1995, by the Partnership and the Operating
Partnerships as makers, to The HongKong Shanghai Banking Corporation
Limited as payee in the principal amount of $17,690,000, incorporated
herein by reference to Exhibit 10.40c, filed with the Registrant's
Quarterly Report on Form 10-Q filed with the Commission on August 14,
1995.
10.26d Promissory Note dated June 8, 1995, by the Buffalo Operating
Partnership, L.P. as maker, to The HongKong and Shanghai Banking
Corporation Limited as payee in the principal amount of $9,225,000,
incorporated herein by reference to Exhibit 10.40d, filed with the
Registrant's Quarterly Report on Form 10-Q filed with the Commission on
August 14, 1995.
10.27 Forwinds Ground Lease, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 10.36a,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.27a Clarion McCormick Ground Lease, incorporated herein by reference to
the Partnership's Registration Statement No. 33-13418, Exhibit 10.36b,
declared effective by the Securities and Exchange Commission on July 23,
1987.
IV-6
<PAGE>
10.27b Sheraton Buffalo Ground Lease, incorporated herein by reference to
the Partnership's Registration Statement No. 33-13418, Exhibit 10.36d,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.27c Amendment No. 4 to Sheraton Buffalo Ground Lease dated June 28, 1988
incorporated herein by reference to Exhibit 10.34d filed with the
Registrant's Annual Report on Form 10-K filed with the Commission on
March 31, 1989.
10.27d Fourwinds Amended and Restated Indenture of Ground Lease dated May
20, 1991, incorporated herein by reference to Exhibit 10.25c filed with
the Registrant's Annual Report on Form 10-K filed with the Commission on
April 14, 1992.
10.29 Other material contracts, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 10.37,
declared effective by the Securities and Exchange Commission on July 23,
1987.
10.30 Management Contract for Clarion McCormick, dated as of October 23,
1982, between ARI, Inc., an Ohio corporation and the Board of Directors
of the Council of Co-owners of the Shores, as amended, incorporated
herein by reference to the Partnership's Registration Statement No. 33-
13418, Exhibit 10.37h, declared effective by the Securities and Exchange
Commission on July 23, 1987.
10.31 Letter Agreement for Aurora Inn, dated December 23, 1986, between
Aurora Inn Co., an Ohio limited partnership and Aurora Inn Operating
Partnership, L.P., incorporated herein by reference to the Partnership's
Registration Statement No. 33-13418, Exhibit 10.37l, declared effective
by the Securities and Exchange Commission on July 23, 1987.
10.31a Sublease and License Agreement for Sheraton Buffalo, dated as of
December 31, 1986 between the Partnership, Buffalo Inn Associates, a
Colorado general partnership ("BIA"), and AEI, incorporated herein by
reference to the Partnership's Registration Statement No. 33-13418,
Exhibit 10.37m, declared effective by the Securities and Exchange
Commission on January 23, 1987.
10.31b Sublease and License Agreement for Sheraton Buffalo, dated February
20, 1987, between Buffalo Operating Partnership, L.P., BIA and AEI,
incorporated herein by reference to the Partnership's Registration
Statement No. 33-13418, Exhibit 10.37n, declared effective by the
Securities and Exchange Commission on July 23, 1987.
10.32 Subscription Agreement dated November 19, 1990 incorporated herein by
reference to Exhibit 10.41 filed with the Registrant's Annual Report on
Form 10-K filed with the Commission on April 26, 1991.
10.33 Subscription Agreement dated December 11, 1992 incorporated herein by
reference to Exhibit 10.38 filed with the Registrant's Annual Report on
Form 10-K filed with the Commission on April 15, 1993.
10.34 Promissory Note dated as of June 8, 1995 by AHP as maker, to AHS as
payee in the principal amount of $6,000,000. (1)
IV-7
<PAGE>
10.35 Promissory Note dated as of June 8, 1995 by AHP as maker, to AHS as
payee in the principal amount of $2,100,000. (1)
22. The Partnership holds a 99% limited partner interest in each of the
following Delaware limited partnerships: Aurora Inn Operating
Partnership, L.P.; Buffalo Operating Limited Partnership, L.P.; Durham
Operating Partnership, L.P.; Fourwinds Operating Partnership, L.P.;
Lakeside Operating Partnership, L.P.; and McCormick Ranch Operating
Partnership, L.P.
27. Financial Data Schedule (1)
28.1 Certificate of Incorporation of AIRCOA Hospitality Services, Inc.
(formerly Associated Inns & Restaurants Company of America), as amended,
incorporated herein by reference to the Partnership's Registration
Statement No. 33-13418, Exhibit 28.1, declared effective by the
Securities and Exchange Commission on July 23, 1987.
28.2 By-laws of AIRCOA Hospitality Services, Inc. (formerly Associated Inns
& Restaurants Company of America), as amended, incorporated herein by
reference to the Partnership's Registration Statement No. 33-13418,
Exhibit 28.2, declared effective by the Securities and Exchange
Commission on July 23, 1987.
28.3 Appraisal of Fourwinds, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 28.3,
declared effective by the Securities and Exchange Commission on July 23,
1987.
28.4 Appraisal of Sheraton University, incorporated herein by reference to
the Partnership's Registration Statement No. 33-13418, Exhibit 28.4,
declared effective by the Securities and Exchange Commission on July 23,
1987.
28.6 Appraisal of Sheraton Lakeside, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 28.6,
declared effective by the Securities and Exchange Commission on July 23,
1987.
28.7 Appraisal for Sheraton Buffalo, incorporated herein by reference to the
Partnership's Registration Statement No. 33-13418, Exhibit 28.7,
declared effective by the Securities and Exchange Commission on July 23,
1987.
(1) Filed herewith
IV-8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf of the undersigned, thereunto duly authorized.
By: AIRCOA HOTEL PARTNERS, L.P.
a Delaware limited partnership
By: AIRCOA HOSPITALITY SERVICES, INC.
its General Partner
By: /s/ Douglas M. Pasquale
----------------------------------
Douglas M. Pasquale, Chief Executive Officer,
President and Director
Dated:
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Dougas M. Pasquale
- ----------------------------
Douglas M. Pasquale Chief Executive Officer,
President and Director
(Principal Executive and Financial Officer)
of AIRCOA Hospitality Services, Inc.
/s/ David C. Ridgley
- ----------------------------
David C. Ridgley Chief Accounting Officer
of AIRCOA Hospitality Services, Inc.
(Principal Accounting Officer)
/s/ Daniel Bong Shu Yin
- ----------------------------
Daniel Bong Shu Yin Director
of AIRCOA Hospitality Services, Inc.
/s/ Lawrence Lau Siu Keung
- ----------------------------
Lawrence Lau Siu Keung Director
of AIRCOA Hospitality Services, Inc.
/s/ Sandy Leung Sun So
- ----------------------------
Sandy Leung Sun So Director
of AIRCOA Hospitality Services, Inc.
/s/ Michael Sheh
- ----------------------------
Michael Sheh Director
of AIRCOA Hospitality Services, Inc.
</TABLE>
IV-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
/s/ Carol K. Werner
- ----------------------------
Carol K. Werner Director
of AIRCOA Hospitality Services, Inc.
/s/ Anthony Williams
- ----------------------------
Anthony Williams Director
of AIRCOA Hospitality Services, Inc.
</TABLE>
IV-10
<PAGE>
REGAL SUBLICENSE AGREEMENT
This Sublicense Agreement is made and entered into as of the 15th day of
February, 1996, to be effective as of January 1, 1996 (the "Effective Date") by
and between Richfield Holdings, Inc., a Colorado corporation ("Licensor") and
McCormick Ranch Operating Partnership, L.P., a Delaware limited partnership
("Licensee").
RECITALS
A. Licensor has the exclusive license to use the Regal trademarks, service
marks, tradenames, logos, and other property in North America (the "Trademarks")
and the full right to further sublicense the Trademarks to certain of its
affiliates and subsidiaries for the purpose of using the Trademarks in the
business of owning and operating full service hotels and restaurant services.
B. Licensor is willing to license the Trademarks to Licensee for use and
in connection with the REGAL MCCORMICK RANCH located at 7401 North Scottsdale
Road, Scottsdale, Arizona 85253 (the "Hotel");
THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, Licensor and Licensee hereby agree as follows:
AGREEMENT
1. Grant of License. Licensor hereby grants to Licensee, during the term
-----------------
of this Agreement and subject to the terms and conditions set forth below, the
non-exclusive right and license to use the Trademarks in connection with the
business of the Hotel (the "License"). No license is granted under this
Agreement for the use of the Trademarks for any purpose other than in connection
with the business of the Hotel.
2. Term. The term of this Agreement shall begin on the Effective Date and
-----
(unless earlier terminated pursuant to Sections 16 and 17 hereof) shall expire
on February 20, 2012 (the "Term"). The Term shall be automatically extended for
successive one-year periods unless either party notifies the other no later than
90 days prior to the next scheduled expiration date that it does not elect to
renew. Notwithstanding the foregoing, either party shall have the right to
terminate this Agreement at any time without cause on 90 days' written notice to
the other party.
3. License Fees. In consideration of the License, Licensee agrees to pay
-------------
to Licensor, on a monthly basis, a License Fee equal to 2.5% of Total Sales
Revenues from the Hotel (the "License Fee") for the calendar year 1996. In the
calendar year 1997 and thereafter the License Fee shall be 3% of Total Sales
Revenues from the Hotel. "Total Sales Revenues" means all revenues derived from
the rental, sale, use, or occupancy of the guest rooms or meeting rooms in the
Hotel and all adjacent facilities and all revenues derived from: vending
machines, food and beverage services, including room service; local and long
distance telephone calls; and all other services of every kind and nature
available to Hotel guests. Total Sales Revenues include cash and credit
transactions whether or not actually collected by Licensee but excludes sales
taxes or other similar taxes that Licensee is required by law to collect from
guests or in conjunction with the rental of guest rooms or meeting rooms; food
and beverage services; or other Hotel services.
4. Marketing. Licensor agrees to apply a portion of the License Fee
----------
actually received by Licensor from Licensee on an annualized basis for the
purposes of national and international advertising, promotion, publicity,
marketing research, and other marketing programs and related activities designed
by Licensor, in its sole discretion, to promote the Regal hotel name and the
Hotel or other hotels and resorts so licensed by Licensor.
<PAGE>
5. Representations of Licensor. Licensor represents and warrants that:
----------------------------
the Trademarks have been registered or applications for registrations have been
lodged with the U.S. Patent and Trademark office; it has all necessary rights,
power, and authority to enter into this Agreement; it has not entered into any
agreement or commitment with any third party that would materially impair,
interfere with, or infringe upon the rights granted under this Agreement; and,
to the best of its knowledge, no infringement or similar claims or actions
related to the Trademarks and the rights granted in this Agreement have been
filed or threatened.
6. Limitations on Licensee's Rights. Licensee recognizes the considerable
---------------------------------
value of the goodwill associated with the Trademarks and acknowledges that all
rights therein and goodwill attached thereto in North America belong exclusively
to the Licensor and that such Trademarks have secondary meanings in the minds of
the public. Licensee acknowledges the validity of the Trademarks and agrees not
to contest such validity or to perform any act adverse to Licensor's rights
therein. Licensee agrees that nothing in this Agreement shall be deemed in any
way to constitute an assignment by Licensor of the Trademarks or any rights
therein or to give Licensee any right, title, or interest therein other than the
right to use the Trademarks as expressly provided in this Agreement. Licensee
agrees that any goodwill arising out of its use of the Trademarks shall inure
solely to the benefit of Licensor.
7. Cooperation. Licensee agrees that, both during and after the Term or
------------
any extension hereof, it will cooperate fully and in good faith with the
Licensor and execute such documents as Licensor may reasonably request for the
purposes of securing and preserving the rights of Licensor in and to the
Trademarks.
8. Infringement. Licensee shall promptly notify Licensor in writing of
-------------
any infringement, imitation, passing-off, or other use of the Trademarks by any
third party that comes to Licensee's attention. If Licensor determines that
action should be taken against any such third party, Licensor may take such
action in its own name and at its own expense or, where required by law, in
Licensee's name, in which event Licensor shall bear the cost of such action and
shall be entitled to control the prosecution thereof. Licensee agrees to
cooperate fully with Licensor to whatever extent is necessary to prosecute any
such action.
9. Books and Records. Licensee agrees to keep accurate books of account
------------------
and records covering all transactions relating to the License, and Licensor or
its duly authorized representatives shall have the right during normal business
hours to examine all of Licensee's books of account and records and all other
documents and materials in the possession or under the control of Licensee with
respect to the subject matter and terms of this Agreement, and shall have free
and full access thereto for such purpose and for the purpose of making
photocopies therefrom. All books of account and records shall be kept available
by Licensee for at least one year after the calendar quarter or part thereof to
which they relate.
10. Licensor's Right to Monitor Trademark Use.
------------------------------------------
(a) The Licensor or its duly authorized representatives shall have
the right during regular business hours and upon reasonable notice to enter and
inspect the Hotel where the Trademarks are being used and all documents,
depictions, and materials in which the Trademark is used.
(b) From time to time, Licensee shall furnish to Licensor, free of
any cost or charge, for the Licensor's approval, samples of any documents,
depiction, or materials using the Trademarks (including all advertising,
promotional and display material on which the Trademarks are to be used). Any
items submitted by pre-paid air express to the Licensor that are not approved
and rejected within 45 days after receipt by the Licensor shall be deemed to
have been approved.
2
<PAGE>
(c) Without the prior approval of Licensor, Licensee shall not sell
or distribute any product, document, depiction, or material containing the
Trademarks that deviate from the standard then in effect or from the uses
approved by Licensor as provided above.
11. Trademark Notice. Licensee agrees that it will cause to be affixed,
-----------------
in connection with any use of the Trademarks, the letter "R" encircled, the
letters "TM," or such other trademark notice or other notice as may be required
by Licensor from time to time.
12. Indemnification.
----------------
(a) Licensee shall indemnify, defend, and hold harmless the Licensor
from and against: (i) all losses, liabilities, actions, claims, costs, damages,
and expenses including without limitation attorneys' fees and court costs that
arise out of or are in any way based upon the use or exploitation of any of the
Trademarks including, without limitation, all losses, liabilities, actions,
claims, costs, damages and expenses relating to any claim for product liability
or otherwise arising in any way related to this Agreement and (ii) any claims
of any nature related to the operation, maintenance, management, or physical
attributes of the Hotel, including without limitation its compliance with the
Americans with Disabilities Act, as amended (the "ADA") or any state or local
law that is similar to the ADA or is otherwise related to the rights of
disadvantaged or disabled persons to public accommodations.
(b) Licensor shall indemnify, defend, and hold harmless Licensee from
against all actions, claims, costs, demands and expenses that arise from any
claim that the use of the Trademarks by Licensee accordance with this Agreement
constitutes an infringement of the rights of any third party with respect to the
Trademarks.
(c) Any legal proceedings that are instituted by any third party
against Licensor or Licensee related to this Agreement shall be defended at
Licensee's expense except for claims that specifically refer to a claim of
infringement of the rights of any third party with respect to the Trademarks,
which shall be defended at Licensor's expense. The party obligated to pay the
expenses of defense under this subsection (c) shall have the right to select
counsel to provide such defense, subject to the approval of the other party of
the counsel selected, which approval shall not be unreasonably withheld. No
claim for which one party has any indemnity obligation under this Section 12
shall be settled or compromised, or the defense thereof terminated, without the
prior approval of the indemnifying party. The party entitled to indemnification
under this Section 12 shall have the right to affirmative injunctive relief to
compel the provision of the defense required in this subsection (c) and the
right to pursue such defense at the indemnifying party's expense until such
defense is fully undertaken by the indemnifying party.
13. No Partnership or Agency. This Agreement does not constitute a
-------------------------
partnership agreement and nothing herein is intended to constitute, nor shall
anything herein be construed to constitute, Licensor and Licensee as partners of
each other. Nothing herein shall operate to constitute either party as agent of
the other party, and neither party has any authority to act on behalf of the
other party. Neither party shall incur, accept any liability, or enter into any
commitments or contracts on behalf of the other party. No obligation of either
party under this Agreement shall be enforceable by any person other than a party
hereto and no third party is intended to be or shall be deemed to be a third-
party beneficiary of this Agreement.
14. Assignment.
-----------
(a) Assignment by Licensor. Licensor shall have the right to assign
-----------------------
all or any part of its rights or obligations under this Agreement to any person
or legal entity. No such assignment shall, however, relieve Licensor of its
obligations under this Agreement.
(b) Assignment by Licensee. Licensee acknowledges that the rights
-----------------------
and duties set forth in this Agreement are personal to Licensee and that
Licensor has granted this license to
3
<PAGE>
Licensee in reliance on Licensee's business skills and financial capacity and
the personal character of it officers. Accordingly, Licensee shall not sell,
assign, transfer, or otherwise encumber or convey any direct or indirect
interest in the Trademarks or in this Agreement or any rights or obligations
created in this Agreement without the prior written consent of Licensor, which
may be withheld by Licensor in its sole discretion.
15. Licensee's Covenants and Duties. Licensee covenants and agrees:
--------------------------------
(a) to operate the Hotel in strict conformity with this Agreement and
to feature the Trademarks in all advertising together with the distinguishing
characteristics of the Regal license prescribed by the Licensor or under such
other name and trademark as may be adopted by Licensor for use in connection
with the Regal license such that the Hotel will be recognizable by the general
public as an integral part of the Regal system.
(b) to maintain the Hotel interior and exterior, including parking
and automotive areas and any food and beverage facilities located on the
premises of the Hotel in a clean, sound and attractive condition and good repair
at all times. Licensee shall undertake all repairs, cleaning, redecoration,
periodic repainting, and replacement of obsolete or out-moded signs, equipment,
furnishings, fixtures, and furniture and such other corrective action as may be
directed by Regal or is otherwise necessary to comply with the standards to be
set forth by Regal from time to time.
(c) to use its best efforts to insure that: (i) all items on which
the Trademarks are used are of high standard, style, appearance, and quality;
(ii) such items are manufactured, packaged, sold, distributed, and advertised in
accordance with this Agreement and all applicable laws and regulations; (iii)
the policy of sales, distribution, or other exploitation of the Trademarks by
Licensee shall be of high standard and to the best advantage of the Trademarks;
(iv) all such policies shall in no manner reflect adversely upon the good name
of Licensor or the Trademarks.
(d) to use in connection with the Hotel only business stationery,
business cards, marketing materials, advertising materials, printed materials,
and forms that are approved by Licensor.
(e) to refrain from using or permitting the use of the Trademarks for
any purpose or activity not contemplated herein at any time without first
obtaining the prior written consent of Licensor.
(f) to obtain and display in a prominent location at the Hotel
approved by Licensor one or more illuminated signs using the Trademarks as may
be directed and approved by Licensor from time to time and to maintain such
exterior signs in good working condition and appearance at all times.
(g) to obtain and install at the Hotel reservations equipment that
meets all specifications prescribed from time to time by Licensor and to
maintain such equipment in good working condition at all times.
(h) to permit Licensor and its agents to enter the Hotel at any
reasonable time with or without prior notice and to inspect, photograph or
videotape the Hotel and operations therein and to otherwise evaluate the
Licensee's compliance with this Agreement. Licensee agrees to cooperate with
Licensor's representatives in such inspections by rendering such assistance as
they may reasonably request during any inspection visit. Licensee agrees to
provide one room night four times per year at the Hotel free of charge to
Licensor's representatives. If a re-inspection is required due to the
Licensee's failure to comply with the standards set forth herein, Licensor may
assess the Licensee a reasonable fee for such re-inspection.
(i) to submit the Hotel's rate information and accurate descriptive
information for inclusion in such directories as Licensor may from time to time
publish on or before the deadlines for
4
<PAGE>
the receipt of such information that are established by Licensor. If such
information is not submitted, Licensor is authorized to publish the latest
available rates and descriptive information submitted by Licensee and Licensee
shall be deemed to have waived any claims related to the accuracy of the
information so published.
(j) to honor the terms of any discount or promotional program that
Licensor elects to offer to the public and to honor the rate quoted to any guest
at the time of making an advance reservation whether made through an advance
reservation system or otherwise.
(k) to pay reasonable travel agent commissions in the form and manner
specified by Licensor.
(l) to use its best efforts to maximize the business conducted at the
Hotel and to promote the increase of business at all hotels affiliated with the
Regal license. If Licensee is unable to accommodate a potential guest, the
Licensee agrees to refer the guest to other hotels, if any, affiliated with the
Regal name or license near the Hotel.
(m) to participate in any advance reservation systems designated by a
Licensor to make reservations and to accept reservations in accordance with
Licensor's procedures promulgated from time to time.
(n) to conduct all advertising and promotion of the Hotel in a
dignified manner that conforms to the standards and requirements specified from
time to time by Licensor.
(o) to comply with all operational standards and specifications
adopted from time to time by Licensor.
16. Insurance.
----------
(a) The Licensee shall procure and maintain in full force and effect
during the entire term of this Agreement, at the Licensee's sole cost and
expense, all-risk physical damage coverage, insuring the Hotel for an amount not
less than 80% of the replacement cost thereof as well as full coverage for 12
months of business interruption losses. Subject to the provisions of any
mortgage or deed of trust that encumbers the Hotel, if the Hotel or any portion
thereof is damaged or destroyed by any casualty, the proceeds of any such
insurance shall be used to repair or restore the Hotel in accordance with plans
and specifications prepared by the Licensee and approved in writing by Licensor.
Such insurance shall contain a waiver of subrogation.
(b) Licensee agrees to procure and maintain in full force and affect
during the entire term of this Agreement, at Licensee's sole cost and expense,
Commercial General Liability Insurance Policies written on an occurrence form
protecting the Licensee, with the Licensor as an additional insured party, from
and against all types of losses and liabilities, including without limitation,
personal injury and property damage of any nature, together with the costs and
expenses of the defense and settlement of adjustment thereof, without exception,
arising out of or in any way related to any operation or activity at the Hotel
or related in any way to this Agreement, inclusive of adjacent areas. Such
policies shall respond to lawsuits or actions brought anywhere in the world.
Such policies shall provide limits of not less than $10,000,000.00 per
occurrence and shall be accompanied by a waiver of subrogation. These total
minimum limits can be provided through a combination of primary and umbrella
policies.
Comprehensive General Liability coverages shall include, without
limitation, Broad Form Contractual, Products and Completed Operations,
Automobile, Independent Contractors, Personal Injury, Broad Form Property
Damage, Extended Bodily Injury, Owner's and Contractor's Protective, and Host
Liquor Liability. In addition, if alcoholic beverages are sold at the Hotel,
Dram Shop/Liquor Liability Insurance shall also be provided. The Automobile
Liability Policy shall cover owned, hired, and non-owned vehicles.
5
<PAGE>
Furthermore, the Hotel shall also provide statutory Workers'
Compensation insurance coverage and Employers Liability insurance in an amount
satisfactory to Licensor.
Licensor may, from time to time, during the term of this Agreement, at
its sole option, require that the minimum limits of insurance coverage, as
aforesaid, be reasonably adjusted in any area in amounts determined solely by
Licensor and Licensee hereby agrees to comply with such requirements, at
Licensee's sole cost and expense, and to deliver evidence of such compliance to
Licensor within 30 days of receipt of Licensor's written request.
The foregoing insurance shall be placed with an insurance company or
companies satisfactory to Licensor.
(c) Within 10 days after Licensor's execution of this Agreement,
Licensee agrees to furnish to Licensor certificates of such insurance indicating
thereon the name and address of the Hotel and that Licensor is an additional
insured party, together with evidence showing that all premiums therefor have
been paid. Additionally, evidence of renewal will be furnished to Licensor
prior to the expiration date of each such insurance policy. Such policy or
policies shall be endorsed to require that Licensor shall receive 30-days' prior
written notice of cancellation, reduction in coverage, or other modification of
the policy or policies.
(d) If Licensee fails to comply with the provisions of this
paragraph, Licensor may, at its option, (a) without notice, in addition to such
other rights and remedies that it may have, procure and maintain such insurance,
and charge all costs and premiums related thereto to Licensee or (b) immediately
terminate this Agreement.
(e) The procuring and maintenance of such insurance and the
performance by Licensee of its obligations under this Agreement shall not
relieve Licensee of any liability imposed by or under Section 12 of this
Agreement, which shall survive any termination hereof.
17. Termination by Licensor.
------------------------
(a) If Licensee makes any assignment of its assets or business for
the benefit of creditors, or if a trustee or receiver is appointed to administer
or conduct its business, or if it is adjudged in any legal proceeding to be a
voluntary or involuntary bankrupt, then Licensor shall have the option to
terminate this Agreement on five days' written notice.
(b) If Licensee violates its obligation to pay the License Fee,
Licensor shall have the right to terminate this Agreement upon 15 days' written
notice, and such notice of termination shall become effective (except with
respect to Licensee's obligation to pay the License Fee) unless Licensee
completely cures the violation within such 15 day period to Licensor's
satisfaction.
(c) If Licensee defaults under any of its obligations under the terms
of this Agreement other than its obligation to pay the License Fee, Licensor
shall have the right to terminate this Agreement on ten days' written notice,
and such notice of termination shall become effective unless Licensee completely
cures the default within such ten-day period to Licensor's satisfaction;
provided, however, that, if the default giving rise to Licensor's notice of
termination is of such character that it cannot be completely cured within such
ten-day period, then Licensee shall have a further reasonable period not to
exceed 30 additional days in which to cure the default completely. The
foregoing extension shall be available only if Licensee commences action within
the first ten-day period to cure such default and diligently pursues such cure
efforts thereafter.
(d) Upon any default by Licensee under this Agreement, the license to
use the Trademarks granted under this Agreement shall be immediately revoked,
subject to reinstatement only as the result of a cure permitted under this
Section 17.
6
<PAGE>
18. Termination by the Licensee.
----------------------------
If Licensor defaults in the performance of any of its obligations
under this Agreement, Licensee shall have the right to terminate this Agreement
on 30 days' written notice to Licensor unless Licensor cures the default within
such 30-day period; provided, however, that, if the default giving rise to
Licensor's notice of termination is of such character that it cannot be
completely cured within such 30-day period, then Licensor shall have a further
reasonable period in which to cure the default. The foregoing extension shall
be available only if Licensor commences action within the first 30-day period to
cure the default and diligently pursues such cure efforts thereafter.
19. Effect of Termination or Expiration.
------------------------------------
(a) Licensee acknowledges and agrees that the damages that may be
suffered by Licensor as a result of a termination of this Agreement under
Section 17 are difficult if not impossible to ascertain, and therefore the
parties hereto agree that should the Agreement be terminated, Licensee shall pay
to Licensor as liquidated damages and not as a penalty a sum equal to twelve
times the average monthly License Fee under this Agreement for the 12 months
that immediately preceded the effective date of termination.
(b) After termination of this Agreement for any reason, Licensee
shall not use or otherwise dispose of items it may have on hand on which the
Trademarks appear without the express written consent of Licensor.
(c) Upon and after the termination of this Agreement, Licensee shall:
(i) discontinue all further use of the Trademarks; (ii) make no further
reference to the Trademarks direct or indirect; (iii) discontinue the use of
anything deemed by Licensor to be similar to the Trademarks in any respect
whatsoever; and (iv) at Licensor's request and at Licensee's expense, deliver
to Licensor all advertising, promotional pieces, and similar materials that bear
any of the Trademarks that are then at the Hotel or otherwise in the possession
of Licensee or any of its contractors or agents. Licensee acknowledges that the
failure of Licensee to cease the use of the Trademarks at the termination or
expiration of this Agreement will result in immediate and irremediable damage to
Licensor and to the rights of any subsequent licensee. Licensee acknowledges
and agrees that there is no adequate remedy at law for such failure and agrees
that, in the event of such failure, Licensor shall be entitled (without
prejudice to any other rights it may have, including any rights to monetary
damages) to equitable relief, including without limitation affirmative
injunctive relief, to secure the compliance of Licensee with the provisions of
this Section 17(c).
20. No Waiver. Any failure of any party hereto to comply with any of the
----------
obligations or agreements set forth in this Agreement or to fulfill any
condition set forth herein may be waived only by a written instrument signed by
the other party. No failure by any party to exercise, and no delay in
exercising, any right under this Agreement shall operate as a waiver of such
right, nor shall any single or partial exercise of any right provided in this
Agreement by any party preclude any other or future exercise of that right or
any other right.
21. Notices. All notices, requests, or other communications required or
--------
permitted under this Agreement shall be given in writing by hand delivery or by
registered or certified mail, return receipt requested, postage prepaid, to the
party at its respective address set forth below, or at such other address as may
from time to time be designated by such party to the other in accordance with
this Section 21:
If to the Licensor:
Richfield Holdings, Inc.
5775 DTC Boulevard, Suite 300
Englewood, Colorado 80111
Attention: General Counsel
7
<PAGE>
If to the Licensee:
McCormick Ranch Operating Partnership, L.P.
5775 DTC Boulevard, Suite 300
Englewood, Colorado 80111
Attention: Operations
22. This Agreement shall be governed by and interpreted under the laws of
the State of Colorado.
23. If any legal proceedings are required to enforce any provision of this
Agreement, the prevailing party shall be entitled to recover all of its costs
and expenses related to such proceedings, including without limitation,
reasonable attorneys' fees.
24. This Agreement can be modified only by a written instrument executed
by Licensee and Licensor.
25. This Agreement constitutes the entire agreement of the parties hereto
and supersedes all prior agreements, whether oral or written.
RICHFIELD HOLDINGS, INC.,
a Colorado corporation
By: /s/ PAUL J. SISTARE
--------------------
Name: Paul J. Sistare
Title: President/CEO
By: /s/ DOUGLAS M. PASQUALE
------------------------
Name: Douglas M. Pasquale
Title: Executive Vice President
Chief Financial Officer
MCCORMICK RANCH OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: AIRCOA HOSPITALITY SERVICES, INC.,
a Delaware corporation,
managing general partner
By: /s/ PAUL J. SISTARE
-------------------
Name: Paul J. Sistare
Title: President/CEO
By: /s/ MICHAEL SHEH
----------------
Name: Michael Sheh
Title: Sr. Vice President
c:\nancy\regal\mccranch.lic
8
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THIS NOTE IS SUBJECT
TO CERTAIN SUBORDINATION PROVISIONS SET FORTH
HEREIN, AND THE HOLDER OF THIS NOTE SHALL
BE SUBJECT TO ALL OF SUCH PROVISIONS
AIRCOA HOTEL PARTNERS, L.P.
AMENDED AND RESTATED
PROMISSORY NOTE
As of June 8, 1995
Denver, Colorado
FOR VALUE RECEIVED, AIRCOA HOTEL PARTNERS, L.P., a Delaware limited
partnership, ("Maker" or the "Partnership") hereby promises to pay to AIRCOA
HOSPITALITY SERVICES, INC., a Delaware corporation, or its assigns (the "Holder"
or "Payee"), the principal sum of Six Million Dollars ($6,000,000.00), on June
8, 2000 (the "Maturity Date"), with interest (computed on the basis of a 360-day
year of twelve 30-day months) on the unpaid balance of such principal sum from
June 8, 1995 until June 8, 2000, at the interest rate of 12% per annum from June
8, 1995, until the principal balance is paid in full. Interest only shall be
payable monthly on or before the first day of each month beginning on July 1,
1995; subject, however, to the additional payment of Annual Excess Cash Flow as
may be required under paragraph 3 below. Unless the Maturity Date is extended
by Holder in its sole discretion, the entire unpaid principal balance, all
unpaid accrued interest thereon, and any other amounts due to Holder under the
terms of this Promissory Note (referred to as the "Note" herein) shall be due
and payable in full on or before the Maturity Date.
1. This Note, together with that certain Promissory Note even date
herewith in the principal amount of $2,100,000.00, made by the Partnership
payable to Payee (the "$2.1MM Note") are being issued in replacement of the
following three Promissory Notes: (a) Promissory Note dated as of March 29,
1988, made by the Partnership payable to Regal-Aircoa Companies, Inc., in the
original principal amount of $1,500,000.00 (the "$1.5MM Note"); (b) Promissory
Note dated as of March 29, 1988, made by the Partnership payable to Aircoa
Credit Company in the original principal amount of $4,000,000.00 (the "$4MM
Note); and (c) Promissory Note dated as of March 29, 1988, made by the
Partnership payable to Aircoa Credit Company in the original principal amount of
$500,000.00 (the "$500K Note"). The $1.5MM Note has been assigned by Regal-
Aircoa Companies, Inc. to Payee and the $4MM Note and the $500K Note have been
assigned by Aircoa Credit Company to Payee. Upon execution of this Note and the
$2.1MM Note by the Partnership, the $1.5MM Note, the $4MM Note, and the $500K
Note will be marked canceled by Payee and returned to the Partnership.
2. Payments of principal and interest shall be made in lawful money of
the United States of America at the principal office of the Holder in Denver,
Colorado, or at such other place as the Holder designates for such purpose to
the Partnership in writing and may be paid by check or wire transfer.
1
<PAGE>
3. This Note is subordinate and subject to obligations under that certain
Credit Agreement dated as of June 8, 1995 (the "Credit Agreement"), among the
Partnership and certain related entities and The Hongkong and Shanghai Banking
Corporation Limited (the "Bank"), including without limitation payments due
under the Notes, as such term is defined in the Credit Agreement. Specifically,
the Holder acknowledges and consents to the Partnership's obligations under
Section 8.08 of the Credit Agreement, the terms of which are incorporated herein
by this reference. The Partnership hereby agrees to pay to Holder on an annual
basis, subject to Section 8.08 of the Credit Agreement, an amount equal to 25%
of Annual Excess Cash Flow, as defined in the Credit Agreement, which amount
shall be applied pari passu to pay this Note and the $2.1MM Note, subject to the
respective provisions therein for the application of payments received by
Holder.
4. This Note shall not be prepayable in whole or in part at any time
prior to June 8, 2000, without the consent of the Holder. Thereafter, it shall
be prepayable upon such terms and upon payment of such premiums as may be
determined in accordance with paragraph 7.
5. Upon any payment or distribution of assets of or in respect of the
Partnership of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution or winding up or total or partial liquidation
or reorganization of the Partnership, either voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due under the Notes (as defined in the Credit Agreement as provided
therein) shall first be paid in full, or payment thereof fully provided for,
before the Holder shall be entitled to receive or retain any assets so paid or
distributed in respect hereof and/or thereof; and upon any such dissolution or
winding up or liquidation or reorganization, any payment or distribution of
assets of or in respect of the Partnership or any kind or character, whether in
cash, property or securities, to which the Holder would been entitled, except
for these provisions, shall be paid by the Partnership or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the Holder if received by it, directly to the
holder(s) of the Notes (pro rata to each such holder on the basis of the
respective amounts of the Notes held by such holder(s)), to the extent necessary
to pay the Notes in full, in money or money's worth, after giving effect to any
concurrent payment or distribution to or for the holder(s) of the Notes, before
any payment or distribution is made to the Holder. Any such payment or
distribution to which Holder is entitled shall be made pari passu with the
payment or distribution to the holder of the $2.1MM Note.
6. Holder, in accepting this Note, shall be deemed to acknowledge and
agree that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration of the Bank, and the Bank shall be deemed
conclusively to have relied on such subordination provisions.
7. Notwithstanding anything herein to the contrary, this Note may not be
amended (or any provision hereof waived) without the prior written consent of
the Bank. Subject to the foregoing, this Note may be amended by the Partnership
to provide for prepayment of this Note on or after June 8, 2000, at the option
of the Partnership on such terms (including, without limitation, the amount of
prepayment premiums, if any, conditions to prepayment and whether this Note may
be prepaid in whole or in part) as the Partnership may reasonably require;
provided that the terms of such prepayment shall be comparable to prepayment
terms of similar notes at the time this Note is amended and shall be amended
only with the approval of the Holder. This Note also may be amended from time
2
<PAGE>
to time at the option of the Holder to provide for other terms that reasonably
may be required by the Holder in connection with any proposed sale or other
transfer of this Note by the Holder; provided, that the terms of this Note as
proposed to be amended (i) are approved by the Advisory Committee (as defined in
the Agreement of Limited Partnership dated of even date herewith of the
Partnership, as it may be amended (the "Partnership Agreement")) of the
Partnership and (ii) are comparable to terms of similar notes at the time this
Note is amended, the Holder so certifies to the Partnership and provides the
Partnership with such evidence regarding the comparability of the terms as the
Advisory Committee of the Partnership may reasonably request and provided
further that no amendment provided for in this paragraph shall (i) increase the
rate at which interest accrues or is payable hereunder or (ii) alter the
provisions of paragraphs 3 or 5 hereof without the consent of the Bank.
8. No provisions hereof shall alter or impair the obligation of the
Partnership, which is absolute and unconditional, to pay the principal hereof
and interest hereon at the respective times and places herein described. The
Partnership and endorsers herein waive demand, protest and notice of dishonor
and all defenses on grounds of any extension of the time of payment of this Note
that may be given by the holder hereof.
9. This Note may be assigned or otherwise transferred as provided in this
Note; provided that (i) the assignment or transfer is made in compliance with
applicable laws and (ii) the assignee or transferee acknowledges in writing to
the Holder that it takes this Note subject to all of the provisions hereof,
including without limitation the subordination provisions.
10. At any time and from time to time, this Note may be assigned or
transferred to one or more persons, in whole or in part, in integral multiples
of $1,000. Upon surrender of this Note to the Partnership for transfer pursuant
to this paragraph, duly endorsed or accompanied by written instruments of
transfer satisfactory to the Partnership, the Partnership, at the Holder's
expense, shall execute and deliver to the designated transferee(s), in the name
of the designated transferee(s), a new note or notes in an authorized designated
principal amount, which new note or notes when so issued shall be the valid
obligation of the Partnership, evidencing the same debt, and entitled to the
same benefits as this Note (or portion thereof) surrendered upon such transfer;
and the Partnership, at the Holder's expense, shall execute and deliver to the
Holder, in the name of the Holder at the Holder's address, a new note in the
aggregate principal amount equal to and in exchange for the untransferred
portion of the principal of this Note so surrendered, which new note when so
issued shall be the valid obligations of the Partnership, evidencing the same
debt, and entitled to the same benefits as this Note (or portion thereof)
surrendered upon such exchange. The Partnership shall establish a register for
the purpose of registering, and registering the transfer of, this Note and any
new notes as permitted hereunder and shall adopt such other reasonable
procedures as it may deem necessary or appropriate to effect the registration
and transfer of this Note and any new notes, as applicable. Accrued interest on
this Note (or portion thereof) at the time of transfer shall be apportioned
between the transferor and the transferee.
11. (a) Subject to and upon compliance with the provisions of this
paragraph 11, the Holder may convert this Note, or any portion of the principal
amount thereof which is at least $1,000 and any larger integral multiple of
$1,000, at any time after 120 days from the effective date hereof and before
payment or satisfaction of this Note, into Class A Units of limited partner
interests in the
3
<PAGE>
Partnership ("Class A Units") issued pursuant to Section 4.6 of the Partnership
Agreement, as hereinafter provided.
(b) Upon surrender of this Note or authorized portion of the principal
amount thereof to the Partnership at its principal office, accompanied by
appropriate endorsements and transfer documents satisfactory to the Partnership,
the Partnership at the Holder's expense shall issue and deliver to such Holder
in the name of the Holder at the Holder's address (or such other name and
address as the Holder specifies), a certificate or certificates evidencing the
whole number of Class A Units obtained by dividing the aggregate principal
amount of this Note so surrendered by $18.50 (the "Conversion Price"), subject
to adjustment as hereinafter provided. No payment or adjustment shall be made
upon any conversion on account of any interest accrued on this Note surrendered
for conversion or on account of any dividends on the Class A Units issued upon
such conversion.
(c) If this Note is converted in part only, upon such conversion the
Partnership at the Holder's expense shall issue and deliver to or on the order
of the Holder thereof, a new note in principal amount equal to the unconverted
portion of this Note.
(d) Such conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which this Note and other
documents have been surrendered to and received in proper order for conversion
by the Partnership as aforesaid unless such Holder shall have so surrendered
such Note and shall have instructed the Partnership to effect the conversion on
a particular date following such surrender and such Holder shall be entitled to
convert such Note on such date, in which case such conversion shall be deemed to
be effected immediately prior to the close of business on such date. At such
time the rights of the Holder of such Note as the Holder shall cease and the
person or persons in whose name or names any certificate or certificates for
Class A Units shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the Class A Units represented thereby.
(e) The number of Class A Units issuable upon exercise of the
conversion right provided herein shall be adjusted from time to time as follows:
(i) In case the Partnership shall hereafter (A) pay a dividend or make a
distribution on Class A Units or other of its securities, (B) subdivide or
reclassify its outstanding Class A Units into a greater number of Class A Units,
or (C) combine or reclassify its outstanding Class A Units into a smaller number
of Class A Units, the Conversion Price and the number of Class A Units that the
Holder shall be entitled to receive upon conversion in effect at the time of the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be adjusted so that the
Holder of this Note surrendered for conversion after such date shall be entitled
to receive, upon payment by surrender of the principal amount or authorized
portion thereof of this Note as would have been payable before such date, the
number and kind of Class A Units or other securities which, if this Note had
been converted immediately prior to such date such Holder would have owned upon
such conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
(f) In case the Partnership shall issue rights or warrants to all
holders of Class A Units entitling them (for a period expiring within 45 days
after the record date for the determination of
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holders of Class A Units entitled to receive such rights or warrants) to
subscribe for or purchase Class A Units (or securities convertible into Class A
Units) at a price per Class A Unit (or having a conversion price per Class A
Unit, if a security convertible into Class A Units) less than the current market
price per Class A Unit (as defined in subsection (i) of this paragraph 11) on
such record date, the Conversion Price shall be adjusted by multiplying the
Conversion Price in effect immediately prior to such record date by a fraction,
of which the numerator shall be the number of Class A Units outstanding on such
record date plus the number of Class A Units which the aggregate offering price
of the total number of Class A Units so to be offered (or the aggregate initial
Conversion Price of the convertible securities so to be offered) would purchase
at such current market price and of which the denominator shall be the number of
Class A units outstanding on such record date plus the number of additional
Class A units to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible). Such
adjustment shall become effective at the close of business on such record date;
however, to the extent that Class A Units (or securities convertible into Class
A Units) are not delivered after the expiration of such rights or warrants, the
Conversion Price shall be readjusted (but only with respect to notes exercised
after such expiration) to the Conversion Price which would then be in effect had
the adjustments made upon the issuance of such rights or warrants been made upon
the basis of delivery of only the number of Class A Units (or securities
convertible into Class A Units) actually issued. In case any subscription price
may be paid in a consideration part or all of which shall be in a form other
than cash, the value of such consideration shall be as determined by the
Advisory Committee of the Partnership. Class A Units owned by or held for the
account of the Partnership or any Operating Partnership (as defined in the
Partnership Agreement) shall not be deemed outstanding for the purpose of any
such computation.
(g) In case of any reclassification of or change to the outstanding
Class A Units issuable upon conversion (other than a change as a result of a
subdivision or combination), or in case of any consolidation of the Partnership
with or the merger of the Partnership into any other business organization
(other than a consolidation or merger in which the Partnership continues and
which does not result in any reclassification of or change to the outstanding
Class A Units), or in case of any sale or transfer of all or substantially all
of the assets of the Partnership, the Holder shall thereafter (in each case
prior to the expiration of the conversion right) receive, upon conversion of
this Note in the manner herein provided, the kind and amount of cash, securities
or other property properly receivable upon such reclassification, change,
consolidation, merger, sale or transfer by a holder of the number of Class A
Units then deliverable upon conversion, and the Partnership shall take such
steps in connection with such reclassification, change, consolidation, merger,
sale or transfer as may be necessary to assure that the provisions hereof shall
thereafter be applicable as nearly as reasonably may be, in relation to any cash
securities or other property thereafter deliverable upon conversion of this
Note. The above provisions of this paragraph shall apply to successive
reclassifications, changes, consolidations, mergers, sales or transfers.
(h) In case the Partnership shall distribute to all holders of Class A
Units (including any such distribution made in connection with a consolidation
in which the Partnership is the continuing entity) evidences of its indebtedness
or assets (including distributions of Capital Transaction Proceeds (as defined
in the Partnership Agreement) but excluding other cash dividends or
distributions and dividends payable in Class A Units) or subscription right or
warrants (excluding those referred to in subsection (f) of this paragraph 11),
the Conversion Price shall be adjusted by multiplying the
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Conversion Price in effect immediately prior to the record date for the
determination of Class A Unitholders entitled to receive such distribution by a
fraction, of which the numerator shall be the current market price per Class A
Unit (as defined in subsection (i) of this paragraph 11) on such record date,
less the fair market value (as determined by the Advisory Committee of the
Partnership, whose determination shall be conclusive) of the portion of the
evidences of indebtedness or assets so to be distributed or of such subscription
rights or warrants applicable to one Class A Unit and of which the denominator
shall be such current market price per Class A Unit.
(i) For the purpose of any computation under subsection (f) or (h) of
this paragraph 11, the current market price per Class A Unit on any record date
shall be deemed to be the average of the daily representative closing prices for
the 30 consecutive trading days commencing 45 trading days before such date.
The closing price for each day shall be the last sale price regular way or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices regular way, in either case on the principal national securities
exchange on which the Class A Units are listed or admitted to trading, or if the
Class A Units are not listed or admitted to trading on any national securities
exchange the average of the highest reported bid and lowest reported asked
prices as furnished by the National Association of Securities Dealers, Inc.
through NASDAQ or a similar organization if NASDAQ is no longer reporting such
information. If on any such date the Class A Units are not quoted by any such
organization, the fair value of Class A Units on such date, as determined by the
Advisory Committee of the Partnership, shall be used.
(j) No fractional Class A Units shall be issued upon conversion of
this Note. Instead, the Partnership will deliver a number of Class A Units that
reflects a rounding to the nearest whole number (with .5 rounded up).
(k) The Partnership shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Class A Units,
the full number of Class A Units then issuable upon conversion of this Note. The
Partnership covenants that all Class A Units which may be issued upon conversion
of this Note will upon issue be duly and validly issued and fully paid and,
except as otherwise provided in the Partnership Agreement and Delaware law,
nonassessable.
(l) At least 20 days prior to the record date or effective date of the
occurrence of any event described in subparagraphs (e) and (f) of this paragraph
11, the Partnership shall give notice thereof to the Holder. Upon any adjustment
provided in this paragraph 11, the Partnership may cause a firm of independent
public accountants selected by it to calculate the number of Units or securities
that the Holder shall be entitled to receive upon conversion after giving effect
to the event causing such adjustment. The Partnership shall be entitled to rely
on any certificate provided by such firm as conclusive evidence of the
correctness of such calculation.
12. (a) At any time or from time to time the Holder shall have the right
(the "Demand Rights"), upon request, to cause the Partnership to file with the
Securities and Exchange Commission as promptly as practicable after receiving
such request, and to use its best efforts to cause to become effective as soon
as possible, a registration statement under the Securities Act of 1933 (the
"Securities Act") on the appropriate form registering the offering and sale of
this Note or the number of Class A Units held by the Holder upon conversion of
this Note as hereinafter provided. In connection with any
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<PAGE>
such requests, the Partnership promptly shall prepare and file such documents as
may be necessary to register or qualify this Note and such Class A Units under
the securities laws of such states as the Holder shall reasonably request, and
shall do any and all other acts and things that may reasonably be necessary or
advisable to enable the Holder to consummate a public sale of this Note or such
Class A Units in such states; provided, however, that in no event shall the
Partnership be obligated to qualify to do business in any jurisdiction where it
is not now so qualified or to take any action which would subject it to the
service of process in suits other than those arising out of the offer or sale of
the securities covered by such registration statement in any jurisdictions where
it is not now so subject or to subject itself to taxation in any such
jurisdiction. Notwithstanding the foregoing, in no event shall the Partnership
be required to effect a registration relating to this Note or the Class A Units
more frequently than once in any 12-month period. The Partnership shall be
entitled to postpone, for a reasonable period of time, the filing of any
registration pursuant to this paragraph if, at the time it receives a request
for registration pursuant to this paragraph, the General Partner (or, if the
General Partner is the Holder at the time, the Advisory Committee of the
Partnership) determines in its reasonable business judgment that such
registration and offering would interfere with any material financing,
acquisition, corporate reorganization or other material transaction or
development involving the Partnership and promptly gives the Holder written
notice of such determination; provided that upon such postponement by the
Partnership, the Partnership shall be required to file such registration
statement as soon as practicable after the General Partner (or, if the General
Partner is the Holder at the time, the Advisory Committee of the Partnership)
shall determine, in its reasonable business judgment, that such registration and
offering will not interfere with the aforesaid material transaction or
development. If this Note has been transferred and new notes issued as provided
for herein, the Partnership shall, upon receipt of a request for registration
hereunder, provide notice of such request to other holders of notes (or holders
of Class A Units issued on conversion thereof). Such holders may, by written
notice to the Partnership within 15 days of receipt of the notice from the
Partnership, request inclusion of their notes (or Class A Units) in such
registration. If this Note has been transferred and new notes issued as provided
for herein, this paragraph shall apply only if holders of new notes representing
at least $500,000 in aggregate principal amount (or, if this Note has been
converted, holders of at least 27,000 Class A Units) request registration of
their notes or Class A Units. Any registration statement filed pursuant hereto
shall be continued in effect for a period of not less than six months following
its effective date unless the Holder agrees to a shorter period.
(b) If the Partnership shall at any time propose to file a
registration statement under the Securities Act for an offering of securities of
the Partnership for cash (other than an offering relating solely to an employee
benefit plan), the Partnership shall use its best efforts to include this Note
and such number or amount of Class A Units held by the Holder pursuant to a
conversion of this Note as hereinafter provided in such registration statement,
at the Holder's request (the "Request Rights"). If the proposed offering
pursuant to this paragraph shall be an underwritten offering, then in the event
that the managing underwriter advises the Partnership in writing that in its
opinion the inclusion of this Note or of all or some of the Holder's Class A
Units would adversely and materially affect the success of the offering, the
Partnership shall include in such offering only this Note or that number or
amount, if any, of Class A Units held by the Holder which, in the opinion of the
managing underwriter will not so adversely affect the offering.
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<PAGE>
(c) Except as expressly prohibited under the blue sky or securities
laws of any jurisdiction under which a registration or qualification is being
effected, the Partnership shall pay all fees and expenses in connection with the
first such registration or qualification effected pursuant to the Demand Rights
and any registration or qualification effected under the Request Rights, other
than any underwriting discounts, fees, commissions or similar charges relating
to this Note or the Class A Units of the person being qualified or registered.
The Holder requesting registration shall bear all of the fees and expenses in
connection with any subsequent registration or qualification under the Demand
Rights. The Partnership shall provide indemnification and other assurances to
the underwriters, and the Holder shall provide indemnification and other
assurances to the Underwriters and the Partnership, in form and substance
reasonably satisfactory to the general partner of the Partnership and the
underwriters.
(d) The foregoing registration rights of the Holders with respect to
the Class A Units issued upon conversion of this Note shall survive the payment
or other satisfaction of this Note. The registration rights of the Holder
hereunder may be assigned by the Holder to any person acquiring from the Holder
this Note or Class A Units held by the Holder upon conversion of this Note as
herein provided, and any such assignee shall be entitled to the benefits of such
registration rights during such period as the assignor is so entitled; provided,
that the registration rights shall expire at such time as a registration
statement covering this Note or the Class A Units becomes effective and is not
subsequently withdrawn.
13. In case one or more of the following events ("Events of Default")
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(a) default in the payment of any installment of interest upon this
Note as and when the same shall become due and payable, and continuance of such
default for a period of five business days; or
(b) default in the payment of all or any part of the principal of this
Note as and when the same shall become due and payable either at maturity, by
declaration or otherwise; or
(c) a court having proper jurisdiction shall enter a decree or order
for relief in respect of the Partnership in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Partnership or for any substantial
part of the property of the Partnership or ordering the winding up or
liquidation of the affairs of the Partnership, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(d) the Partnership shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consent to the entry of any order for relief in an involuntary case
under any such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Partnership or for any substantial part of the property of the
Partnership, or the Partnership shall make
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<PAGE>
any general assignment for the benefit of creditors or shall fail generally to
pay its debts as they become due; or
(e) the occurrence of any event of default or condition that results
in the acceleration of the maturity of the Notes and such acceleration shall not
be rescinded or annulled or waived or such indebtedness repaid within 10 days
after the holder thereof shall have given notice thereof to the Partnership;
provided that if such event of default shall be remedied or cured by the
- --------
Partnership or waived by the holders of such indebtedness, then the Event of
Default hereunder by reason thereof shall be deemed likewise to have been
thereupon remedied, cured or waived without further action by any person; or
(f) failure on the part of the Partnership in any material respect to
observe or perform its obligations under this Note with respect to registration
rights and conversion rights of the Holder for a period of 30 days after written
notice, specifying such failure and stating that such notice is a "notice of
default" hereunder, shall have been given by registered or certified mail,
return receipt requested, to the Partnership by the Holder;
then, and in each and every such case, unless the principal of this Note shall
have already become due and payable, by notice in writing to the Partnership,
the Holder may declare the entire principal of this Note and the interest
accrued thereon, to be due and payable immediately, and, subject to the other
provisions of this Note, including, without limitation paragraphs 3 and 5, upon
any such declaration the same shall become immediately due and payable.
14. The Partnership will pay any and all taxes that may be payable in
respect of the transfer or conversion of this Note or issuance and delivery of
Class A Units on conversion of this Note pursuant hereto. The Partnership shall
not, however, be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of a new note or certificates
evidencing Class A Units in a name other than that of the Holder to be
transferred or converted, and no such issue or delivery shall be made unless and
until the person requesting such issue has paid to the Partnership the amount of
any such tax or has established, to the satisfaction of the Partnership, that
such tax has been paid.
15. Unless otherwise expressly provided herein, all payments, notices,
communications, surrenders for transfer or conversion and consents hereunder,
shall be as follows: if to the Partnership, at 5775 DTC Boulevard, Suite 300,
Englewood, Colorado 80111; if to the Holder, at the address given or changed in
writing to the Partnership by the Holder.
16. This Note is delivered in and shall be construed and enforced in
accordance with and governed by the laws of the State of Colorado.
17. Notwithstanding anything to the contrary contained herein or any other
instrument evidencing or securing the indebtedness evidenced by this Note, or
executed in connection herewith, there shall be no personal liability of the
partners of Maker for satisfaction of any obligation or claim arising under this
Note and Payee and any subsequent holder of this Note shall look solely to the
assets of Maker for satisfaction of such obligation or claim. Payee and any
subsequent holder of this Note
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<PAGE>
will not seek any money judgment, deficiency or otherwise, against the partners
of Maker, on the condition, however that nothing herein shall in any way
constitute, or be deemed to constitute, a release, impairment or limitation of
the Maker's obligations hereunder.
IN WITNESS WHEREOF, the Maker has caused this instrument to be dated,
executed and delivered on its behalf by its general partner thereunder duly
authorized and its corporate seal to be hereunto duly affixed.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA HOSPITALITY SERVICES, INC.,
its managing general partner
By:
-----------------------
Name:
Title:
By:
------------------------------
Name:
Title:
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<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THIS NOTE IS SUBJECT
TO CERTAIN SUBORDINATION PROVISIONS SET FORTH
HEREIN, AND THE HOLDER OF THIS NOTE SHALL
BE SUBJECT TO ALL OF SUCH PROVISIONS
AIRCOA HOTEL PARTNERS, L.P.
AMENDED AND RESTATED
PROMISSORY NOTE
As of June 8, 1995
Denver, Colorado
FOR VALUE RECEIVED, AIRCOA HOTEL PARTNERS, L.P., a Delaware limited
partnership, ("Maker" or the "Partnership") hereby promises to pay to AIRCOA
HOSPITALITY SERVICES, INC., a Delaware corporation, or its assigns (the "Holder"
or "Payee"), the principal sum of $2,100,000.00, on June 8, 2000 (the "Maturity
Date"), with interest (computed on the basis of a 360-day year of twelve 30-day
months) on the unpaid balance of such principal sum from January 1, 1996 until
June 8, 2000, at the interest rate of 12% per annum, until the principal balance
is paid in full. No payments of principal or interest shall be payable before
June 8, 2000 except for the payment of Annual Excess Cash Flow as may be
required under paragraph 3 below. Unless the Maturity Date is extended by Holder
in its sole discretion, the entire unpaid principal balance, all unpaid accrued
interest thereon, and any other amounts due to Holder under the terms of this
Promissory Note (referred to as the "Note" herein) shall be due and payable in
full on or before the Maturity Date.
1. This Note, together with that certain Promissory Note even date
herewith in the principal amount of $6,000,000.00, made by the Partnership
payable to Payee (the "$6.0MM Note") are being issued in replacement of the
following three Promissory Notes: (a) Promissory Note dated as of March 29,
1988, made by the Partnership payable to Regal-Aircoa Companies, Inc., in the
original principal amount of $1,500,000.00 (the "$1.5MM Note"); (b) Promissory
Note dated as of March 29, 1988, made by the Partnership payable to Aircoa
Credit Company in the original principal amount of $4,000,000.00 (the "$4MM
Note); and (c) Promissory Note dated as of March 29, 1988, made by the
Partnership payable to Aircoa Credit Company in the original principal amount of
$500,000.00 (the "$500K Note"). The $1.5MM Note has been assigned by Regal-
Aircoa Companies, Inc. to Payee and the $4MM Note and the $500K Note have been
assigned by Aircoa Credit Company to Payee. Upon execution of this Note and the
$6.0MM Note by the Partnership, the $1.5MM Note, the $4MM Note, and the $500K
Note will be marked canceled by Payee and returned to the Partnership.
2. Payments of principal and interest shall be made in lawful money of
the United States of America at the principal office of the Holder in Denver,
Colorado, or at such other place as the Holder designates for such purpose to
the Partnership in writing and may be paid by check or wire transfer.
3. This Note is subordinate and subject to obligations under that certain
Credit Agreement dated as of June 8, 1995 (the "Credit Agreement"), among the
Partnership and certain related entities
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<PAGE>
and The Hongkong and Shanghai Banking Corporation Limited (the "Bank"),
including without limitation payments due under the Notes, as such term is
defined in the Credit Agreement. Specifically, the Holder acknowledges and
consents to the Partnership's obligations under Section 8.08 of the Credit
Agreement, the terms of which are incorporated herein by this reference. The
Partnership hereby agrees to pay to Holder on an annual basis, subject to
Section 8.08 of the Credit Agreement, an amount equal to 25% of Annual Excess
Cash Flow, as defined in the Credit Agreement, which amount shall be applied
pari passu to pay this Note and the $6.0MM Note, subject to the respective
provisions therein for the application of payments received by Holder.
4. This Note shall not be prepayable in whole or in part at any time
prior to June 8, 2000, without the consent of the Holder. Thereafter, it shall
be prepayable upon such terms and upon payment of such premiums as may be
determined in accordance with paragraph 7.
5. Upon any payment or distribution of assets of or in respect of the
Partnership of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution or winding up or total or partial liquidation
or reorganization of the Partnership, either voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due under the Notes (as defined in the Credit Agreement as provided
therein) shall first be paid in full, or payment thereof fully provided for,
before the Holder shall be entitled to receive or retain any assets so paid or
distributed in respect hereof and/or thereof; and upon any such dissolution or
winding up or liquidation or reorganization, any payment or distribution of
assets of or in respect of the Partnership or any kind or character, whether in
cash, property or securities, to which the Holder would been entitled, except
for these provisions, shall be paid by the Partnership or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the Holder if received by it, directly to the
holder(s) of the Notes (pro rata to each such holder on the basis of the
respective amounts of the Notes held by such holder(s)), to the extent necessary
to pay the Notes in full, in money or money's worth, after giving effect to any
concurrent payment or distribution to or for the holder(s) of the Notes, before
any payment or distribution is made to the Holder. Any such payment or
distribution to which Holder is entitled shall be made pari passu with the
payment or distribution to the holder of the $6.0MM Note.
6. Holder, in accepting this Note, shall be deemed to acknowledge and
agree that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration of the Bank, and the Bank shall be deemed
conclusively to have relied on such subordination provisions.
7. Notwithstanding anything herein to the contrary, this Note may not be
amended (or any provision hereof waived) without the prior written consent of
the Bank. Subject to the foregoing, this Note may be amended by the Partnership
to provide for prepayment of this Note on or after June 8, 2000, at the option
of the Partnership on such terms (including, without limitation, the amount of
prepayment premiums, if any, conditions to prepayment and whether this Note may
be prepaid in whole or in part) as the Partnership may reasonably require;
provided that the terms of such prepayment shall be comparable to prepayment
terms of similar notes at the time this Note is amended and shall be amended
only with the approval of the Holder. This Note also may be amended from time
to time at the option of the Holder to provide for other terms that reasonably
may be required by the Holder in connection with any proposed sale or other
transfer of this Note by the Holder; provided,
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<PAGE>
that the terms of this Note as proposed to be amended (i) are approved by the
Advisory Committee (as defined in the Agreement of Limited Partnership dated of
even date herewith of the Partnership, as it may be amended (the "Partnership
Agreement")) of the Partnership and (ii) are comparable to terms of similar
notes at the time this Note is amended, the Holder so certifies to the
Partnership and provides the Partnership with such evidence regarding the
comparability of the terms as the Advisory Committee of the Partnership may
reasonably request and provided further that no amendment provided for in this
paragraph shall (i) increase the rate at which interest accrues or is payable
hereunder or (ii) alter the provisions of paragraphs 3 or 5 hereof without the
consent of the Bank.
8. No provisions hereof shall alter or impair the obligation of the
Partnership, which is absolute and unconditional, to pay the principal hereof
and interest hereon at the respective times and places herein described. The
Partnership and endorsers herein waive demand, protest and notice of dishonor
and all defenses on grounds of any extension of the time of payment of this Note
that may be given by the holder hereof.
9. This Note may be assigned or otherwise transferred as provided in this
Note; provided that (i) the assignment or transfer is made in compliance with
applicable laws and (ii) the assignee or transferee acknowledges in writing to
the Holder that it takes this Note subject to all of the provisions hereof,
including without limitation the subordination provisions.
10. At any time and from time to time, this Note may be assigned or
transferred to one or more persons, in whole or in part, in integral multiples
of $1,000. Upon surrender of this Note to the Partnership for transfer pursuant
to this paragraph, duly endorsed or accompanied by written instruments of
transfer satisfactory to the Partnership, the Partnership, at the Holder's
expense, shall execute and deliver to the designated transferee(s), in the name
of the designated transferee(s), a new note or notes in an authorized designated
principal amount, which new note or notes when so issued shall be the valid
obligation of the Partnership, evidencing the same debt, and entitled to the
same benefits as this Note (or portion thereof) surrendered upon such transfer;
and the Partnership, at the Holder's expense, shall execute and deliver to the
Holder, in the name of the Holder at the Holder's address, a new note in the
aggregate principal amount equal to and in exchange for the untransferred
portion of the principal of this Note so surrendered, which new note when so
issued shall be the valid obligations of the Partnership, evidencing the same
debt, and entitled to the same benefits as this Note (or portion thereof)
surrendered upon such exchange. The Partnership shall establish a register for
the purpose of registering, and registering the transfer of, this Note and any
new notes as permitted hereunder and shall adopt such other reasonable
procedures as it may deem necessary or appropriate to effect the registration
and transfer of this Note and any new notes, as applicable. Accrued interest on
this Note (or portion thereof) at the time of transfer shall be apportioned
between the transferor and the transferee.
11. (a) Subject to and upon compliance with the provisions of this
paragraph 11, the Holder may convert this Note, or any portion of the principal
amount thereof which is at least $1,000 and any larger integral multiple of
$1,000, at any time after 120 days from the effective date hereof and before
payment or satisfaction of this Note, into Class A Units of limited partner
interests in the Partnership ("Class A Units") issued pursuant to Section 4.6 of
the Partnership Agreement, as hereinafter provided.
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<PAGE>
(b) Upon surrender of this Note or authorized portion of the principal
amount thereof to the Partnership at its principal office, accompanied by
appropriate endorsements and transfer documents satisfactory to the Partnership,
the Partnership at the Holder's expense shall issue and deliver to such Holder
in the name of the Holder at the Holder's address (or such other name and
address as the Holder specifies), a certificate or certificates evidencing the
whole number of Class A Units obtained by dividing the aggregate principal
amount of this Note so surrendered by $18.50 (the "Conversion Price"), subject
to adjustment as hereinafter provided. No payment or adjustment shall be made
upon any conversion on account of any interest accrued on this Note surrendered
for conversion or on account of any dividends on the Class A Units issued upon
such conversion.
(c) If this Note is converted in part only, upon such conversion the
Partnership at the Holder's expense shall issue and deliver to or on the order
of the Holder thereof, a new note in principal amount equal to the unconverted
portion of this Note.
(d) Such conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which this Note and other
documents have been surrendered to and received in proper order for conversion
by the Partnership as aforesaid unless such Holder shall have so surrendered
such Note and shall have instructed the Partnership to effect the conversion on
a particular date following such surrender and such Holder shall be entitled to
convert such Note on such date, in which case such conversion shall be deemed to
be effected immediately prior to the close of business on such date. At such
time the rights of the Holder of such Note as the Holder shall cease and the
person or persons in whose name or names any certificate or certificates for
Class A Units shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the Class A Units represented thereby.
(e) The number of Class A Units issuable upon exercise of the
conversion right provided herein shall be adjusted from time to time as follows:
(i) In case the Partnership shall hereafter (A) pay a dividend or make a
distribution on Class A Units or other of its securities, (B) subdivide or
reclassify its outstanding Class A Units into a greater number of Class A Units,
or (C) combine or reclassify its outstanding Class A Units into a smaller number
of Class A Units, the Conversion Price and the number of Class A Units that the
Holder shall be entitled to receive upon conversion in effect at the time of the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be adjusted so that the
Holder of this Note surrendered for conversion after such date shall be entitled
to receive, upon payment by surrender of the principal amount or authorized
portion thereof of this Note as would have been payable before such date, the
number and kind of Class A Units or other securities which, if this Note had
been converted immediately prior to such date such Holder would have owned upon
such conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
(f) In case the Partnership shall issue rights or warrants to all
holders of Class A Units entitling them (for a period expiring within 45 days
after the record date for the determination of holders of Class A Units entitled
to receive such rights or warrants) to subscribe for or purchase Class A Units
(or securities convertible into Class A Units) at a price per Class A Unit (or
having a
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conversion price per Class A Unit, if a security convertible into Class A Units)
less than the current market price per Class A Unit (as defined in subsection
(i) of this paragraph 11) on such record date, the Conversion Price shall be
adjusted by multiplying the Conversion Price in effect immediately prior to such
record date by a fraction, of which the numerator shall be the number of Class A
Units outstanding on such record date plus the number of Class A Units which the
aggregate offering price of the total number of Class A Units so to be offered
(or the aggregate initial Conversion Price of the convertible securities so to
be offered) would purchase at such current market price and of which the
denominator shall be the number of Class A units outstanding on such record date
plus the number of additional Class A units to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible). Such adjustment shall become effective at the close of
business on such record date; however, to the extent that Class A Units (or
securities convertible into Class A Units) are not delivered after the
expiration of such rights or warrants, the Conversion Price shall be readjusted
(but only with respect to notes exercised after such expiration) to the
Conversion Price which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of delivery of only
the number of Class A Units (or securities convertible into Class A Units)
actually issued. In case any subscription price may be paid in a consideration
part or all of which shall be in a form other than cash, the value of such
consideration shall be as determined by the Advisory Committee of the
Partnership. Class A Units owned by or held for the account of the Partnership
or any Operating Partnership (as defined in the Partnership Agreement) shall not
be deemed outstanding for the purpose of any such computation.
(g) In case of any reclassification of or change to the outstanding
Class A Units issuable upon conversion (other than a change as a result of a
subdivision or combination), or in case of any consolidation of the Partnership
with or the merger of the Partnership into any other business organization
(other than a consolidation or merger in which the Partnership continues and
which does not result in any reclassification of or change to the outstanding
Class A Units), or in case of any sale or transfer of all or substantially all
of the assets of the Partnership, the Holder shall thereafter (in each case
prior to the expiration of the conversion right) receive, upon conversion of
this Note in the manner herein provided, the kind and amount of cash, securities
or other property properly receivable upon such reclassification, change,
consolidation, merger, sale or transfer by a holder of the number of Class A
Units then deliverable upon conversion, and the Partnership shall take such
steps in connection with such reclassification, change, consolidation, merger,
sale or transfer as may be necessary to assure that the provisions hereof shall
thereafter be applicable as nearly as reasonably may be, in relation to any cash
securities or other property thereafter deliverable upon conversion of this
Note. The above provisions of this paragraph shall apply to successive
reclassifications, changes, consolidations, mergers, sales or transfers.
(h) In case the Partnership shall distribute to all holders of Class A
Units (including any such distribution made in connection with a consolidation
in which the Partnership is the continuing entity) evidences of its indebtedness
or assets (including distributions of Capital Transaction Proceeds (as defined
in the Partnership Agreement) but excluding other cash dividends or
distributions and dividends payable in Class A Units) or subscription right or
warrants (excluding those referred to in subsection (f) of this paragraph 11),
the Conversion Price shall be adjusted by multiplying the Conversion Price in
effect immediately prior to the record date for the determination of Class A
Unitholders entitled to receive such distribution by a fraction, of which the
numerator shall be the
5
<PAGE>
current market price per Class A Unit (as defined in subsection (i) of this
paragraph 11) on such record date, less the fair market value (as determined by
the Advisory Committee of the Partnership, whose determination shall be
conclusive) of the portion of the evidences of indebtedness or assets so to be
distributed or of such subscription rights or warrants applicable to one Class A
Unit and of which the denominator shall be such current market price per Class A
Unit.
(i) For the purpose of any computation under subsection (f) or (h) of
this paragraph 11, the current market price per Class A Unit on any record date
shall be deemed to be the average of the daily representative closing prices for
the 30 consecutive trading days commencing 45 trading days before such date.
The closing price for each day shall be the last sale price regular way or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices regular way, in either case on the principal national securities
exchange on which the Class A Units are listed or admitted to trading, or if the
Class A Units are not listed or admitted to trading on any national securities
exchange the average of the highest reported bid and lowest reported asked
prices as furnished by the National Association of Securities Dealers, Inc.
through NASDAQ or a similar organization if NASDAQ is no longer reporting such
information. If on any such date the Class A Units are not quoted by any such
organization, the fair value of Class A Units on such date, as determined by the
Advisory Committee of the Partnership, shall be used.
(j) No fractional Class A Units shall be issued upon conversion of
this Note. Instead, the Partnership will deliver a number of Class A Units that
reflects a rounding to the nearest whole number (with .5 rounded up).
(k) The Partnership shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Class A Units,
the full number of Class A Units then issuable upon conversion of this Note. The
Partnership covenants that all Class A Units which may be issued upon conversion
of this Note will upon issue be duly and validly issued and fully paid and,
except as otherwise provided in the Partnership Agreement and Delaware law,
nonassessable.
(l) At least 20 days prior to the record date or effective date of the
occurrence of any event described in subparagraphs (e) and (f) of this paragraph
11, the Partnership shall give notice thereof to the Holder. Upon any adjustment
provided in this paragraph 11, the Partnership may cause a firm of independent
public accountants selected by it to calculate the number of Units or securities
that the Holder shall be entitled to receive upon conversion after giving effect
to the event causing such adjustment. The Partnership shall be entitled to rely
on any certificate provided by such firm as conclusive evidence of the
correctness of such calculation.
12. (a) At any time or from time to time the Holder shall have the right
(the "Demand Rights"), upon request, to cause the Partnership to file with the
Securities and Exchange Commission as promptly as practicable after receiving
such request, and to use its best efforts to cause to become effective as soon
as possible, a registration statement under the Securities Act of 1933 (the
"Securities Act") on the appropriate form registering the offering and sale of
this Note or the number of Class A Units held by the Holder upon conversion of
this Note as hereinafter provided. In connection with any such requests, the
Partnership promptly shall prepare and file such documents as may be necessary
to register or qualify this Note and such Class A Units under the securities
laws of such states as the
6
<PAGE>
Holder shall reasonably request, and shall do any and all other acts and things
that may reasonably be necessary or advisable to enable the Holder to consummate
a public sale of this Note or such Class A Units in such states; provided,
however, that in no event shall the Partnership be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to the service of process in suits other than
those arising out of the offer or sale of the securities covered by such
registration statement in any jurisdictions where it is not now so subject or to
subject itself to taxation in any such jurisdiction. Notwithstanding the
foregoing, in no event shall the Partnership be required to effect a
registration relating to this Note or the Class A Units more frequently than
once in any 12-month period. The Partnership shall be entitled to postpone, for
a reasonable period of time, the filing of any registration pursuant to this
paragraph if, at the time it receives a request for registration pursuant to
this paragraph, the General Partner (or, if the General Partner is the Holder at
the time, the Advisory Committee of the Partnership) determines in its
reasonable business judgment that such registration and offering would interfere
with any material financing, acquisition, corporate reorganization or other
material transaction or development involving the Partnership and promptly gives
the Holder written notice of such determination; provided that upon such
postponement by the Partnership, the Partnership shall be required to file such
registration statement as soon as practicable after the General Partner (or, if
the General Partner is the Holder at the time, the Advisory Committee of the
Partnership) shall determine, in its reasonable business judgment, that such
registration and offering will not interfere with the aforesaid material
transaction or development. If this Note has been transferred and new notes
issued as provided for herein, the Partnership shall, upon receipt of a request
for registration hereunder, provide notice of such request to other holders of
notes (or holders of Class A Units issued on conversion thereof). Such holders
may, by written notice to the Partnership within 15 days of receipt of the
notice from the Partnership, request inclusion of their notes (or Class A Units)
in such registration. If this Note has been transferred and new notes issued as
provided for herein, this paragraph shall apply only if holders of new notes
representing at least $500,000 in aggregate principal amount (or, if this Note
has been converted, holders of at least 27,000 Class A Units) request
registration of their notes or Class A Units. Any registration statement filed
pursuant hereto shall be continued in effect for a period of not less than six
months following its effective date unless the Holder agrees to a shorter
period.
(b) If the Partnership shall at any time propose to file a
registration statement under the Securities Act for an offering of securities of
the Partnership for cash (other than an offering relating solely to an employee
benefit plan), the Partnership shall use its best efforts to include this Note
and such number or amount of Class A Units held by the Holder pursuant to a
conversion of this Note as hereinafter provided in such registration statement,
at the Holder's request (the "Request Rights"). If the proposed offering
pursuant to this paragraph shall be an underwritten offering, then in the event
that the managing underwriter advises the Partnership in writing that in its
opinion the inclusion of this Note or of all or some of the Holder's Class A
Units would adversely and materially affect the success of the offering, the
Partnership shall include in such offering only this Note or that number or
amount, if any, of Class A Units held by the Holder which, in the opinion of the
managing underwriter will not so adversely affect the offering.
(c) Except as expressly prohibited under the blue sky or securities
laws of any jurisdiction under which a registration or qualification is being
effected, the Partnership shall pay all fees and expenses in connection with the
first such registration or qualification effected pursuant to the
7
<PAGE>
Demand Rights and any registration or qualification effected under the Request
Rights, other than any underwriting discounts, fees, commissions or similar
charges relating to this Note or the Class A Units of the person being qualified
or registered. The Holder requesting registration shall bear all of the fees and
expenses in connection with any subsequent registration or qualification under
the Demand Rights. The Partnership shall provide indemnification and other
assurances to the underwriters, and the Holder shall provide indemnification and
other assurances to the Underwriters and the Partnership, in form and substance
reasonably satisfactory to the general partner of the Partnership and the
underwriters.
(d) The foregoing registration rights of the Holders with respect to
the Class A Units issued upon conversion of this Note shall survive the payment
or other satisfaction of this Note. The registration rights of the Holder
hereunder may be assigned by the Holder to any person acquiring from the Holder
this Note or Class A Units held by the Holder upon conversion of this Note as
herein provided, and any such assignee shall be entitled to the benefits of such
registration rights during such period as the assignor is so entitled; provided,
that the registration rights shall expire at such time as a registration
statement covering this Note or the Class A Units becomes effective and is not
subsequently withdrawn.
13. In case one or more of the following events ("Events of Default")
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(a) default in the payment of any installment of interest upon this
Note as and when the same shall become due and payable, and continuance of such
default for a period of five business days; or
(b) default in the payment of all or any part of the principal of this
Note as and when the same shall become due and payable either at maturity, by
declaration or otherwise; or
(c) a court having proper jurisdiction shall enter a decree or order
for relief in respect of the Partnership in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Partnership or for any substantial
part of the property of the Partnership or ordering the winding up or
liquidation of the affairs of the Partnership, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(d) the Partnership shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consent to the entry of any order for relief in an involuntary case
under any such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Partnership or for any substantial part of the property of the
Partnership, or the Partnership shall make any general assignment for the
benefit of creditors or shall fail generally to pay its debts as they become
due; or
8
<PAGE>
(e) the occurrence of any event of default or condition that results
in the acceleration of the maturity of the Notes and such acceleration shall not
be rescinded or annulled or waived or such indebtedness repaid within 10 days
after the holder thereof shall have given notice thereof to the Partnership;
provided that if such event of default shall be remedied or cured by the
- --------
Partnership or waived by the holders of such indebtedness, then the Event of
Default hereunder by reason thereof shall be deemed likewise to have been
thereupon remedied, cured or waived without further action by any person; or
(f) failure on the part of the Partnership in any material respect to
observe or perform its obligations under this Note with respect to registration
rights and conversion rights of the Holder for a period of 30 days after written
notice, specifying such failure and stating that such notice is a "notice of
default" hereunder, shall have been given by registered or certified mail,
return receipt requested, to the Partnership by the Holder;
then, and in each and every such case, unless the principal of this Note shall
have already become due and payable, by notice in writing to the Partnership,
the Holder may declare the entire principal of this Note and the interest
accrued thereon, to be due and payable immediately, and, subject to the other
provisions of this Note, including, without limitation paragraphs 3 and 5, upon
any such declaration the same shall become immediately due and payable.
14. The Partnership will pay any and all taxes that may be payable in
respect of the transfer or conversion of this Note or issuance and delivery of
Class A Units on conversion of this Note pursuant hereto. The Partnership shall
not, however, be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of a new note or certificates
evidencing Class A Units in a name other than that of the Holder to be
transferred or converted, and no such issue or delivery shall be made unless and
until the person requesting such issue has paid to the Partnership the amount of
any such tax or has established, to the satisfaction of the Partnership, that
such tax has been paid.
15. Unless otherwise expressly provided herein, all payments, notices,
communications, surrenders for transfer or conversion and consents hereunder,
shall be as follows: if to the Partnership, at 5775 DTC Boulevard, Suite 300,
Englewood, Colorado 80111; if to the Holder, at the address given or changed in
writing to the Partnership by the Holder.
16. This Note is delivered in and shall be construed and enforced in
accordance with and governed by the laws of the State of Colorado.
17. Notwithstanding anything to the contrary contained herein or any other
instrument evidencing or securing the indebtedness evidenced by this Note, or
executed in connection herewith, there shall be no personal liability of the
partners of Maker for satisfaction of any obligation or claim arising under this
Note and Payee and any subsequent holder of this Note shall look solely to the
assets of Maker for satisfaction of such obligation or claim. Payee and any
subsequent holder of this Note will not seek any money judgment, deficiency or
otherwise, against the partners of Maker, on the condition, however that nothing
herein shall in any way constitute, or be deemed to constitute, a release,
impairment or limitation of the Maker's obligations hereunder.
9
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this instrument to be dated,
executed and delivered on its behalf by its general partner thereunder duly
authorized and its corporate seal to be hereunto duly affixed.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA HOSPITALITY SERVICES, INC.,
its managing general partner
By:
-----------------------
Name:
Title:
By:
------------------------------
Name:
Title:
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<CASH> 2,116 1,261
<SECURITIES> 0 0
<RECEIVABLES> 2,622 2,598
<ALLOWANCES> 0 0
<INVENTORY> 339 401
<CURRENT-ASSETS> 5,559 4,758
<PP&E> 94,084 95,587
<DEPRECIATION> 31,329 27,234
<TOTAL-ASSETS> 69,406 73,542
<CURRENT-LIABILITIES> 8,011 11,936
<BONDS> 51,390 46,180
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 9,752 15,173
<TOTAL-LIABILITY-AND-EQUITY> 69,406 73,542
<SALES> 45,399 46,157
<TOTAL-REVENUES> 45,399 46,157
<CGS> 0 0
<TOTAL-COSTS> (46,029) (41,035)
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (4,791) (4,495)
<INCOME-PRETAX> (5,421) 627
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,421) 627
<EPS-PRIMARY> 0<F1> 0<F2>
<EPS-DILUTED> 0 0
<FN>
<F1>Class A Unitholders..........$(1.50)
Class B Unitholders..........$ 2.86
<F2>Class A Unitholders..........$(0.10)
Class B Unitholders..........$ 1.25
</FN>
</TABLE>
