<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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
AIRCOA HOTEL PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 84-1042607
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
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
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 twelve 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_____
-----
There were 5,340,214 Units outstanding of the Registrant's Class A Units, as of
August 1, 1997.
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets (Unaudited)
June 30, 1997 and December 31, 1996 2 - 3
Consolidated Statements of Operations (Unaudited)
Three Months and Six Months Ended June 30, 1997 and 1996 4
Consolidated Statement of Partners' Capital (Unaudited)
Six Months Ended June 30, 1997 5
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial
Statements (Unaudited) 7 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 14
</TABLE>
PART II. OTHER INFORMATION AND SIGNATURES 14
1
<PAGE>
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Financial Statements
- ------- ---------------------
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Assets June 30, 1997 December 31, 1996
- ------ ------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 489 $ 2,350
Accounts receivable:
Trade 3,331 3,305
Affiliates 343 ---
Inventory 397 373
Prepaid expenses 422 516
-------- ---------
Total current assets 4,982 6,544
-------- --------
Property and equipment, at cost:
Land and leasehold improvements 9,461 9,427
Buildings and leasehold improvements 68,872 68,499
Furniture, fixtures and equipment 22,925 20,251
-------- --------
101,258 98,177
Less accumulated depreciation and amortization (37,610) (35,501)
-------- --------
Net property and equipment 63,648 62,676
-------- --------
Other assets, including debt issue costs, net of
accumulated amortization of $311 in 1997 and
$337 in 1996 934 911
------- ------
$69,564 $70,131
======= =======
</TABLE>
(continued)
2
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Liabilities and Partners' Capital June 30, 1997 December 31, 1996
--------------------------------- ------------- -----------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 1,126 $ 1,122
Trade accounts payable 832 1,284
Payables to affiliates 421 444
Accrued liabilities:
Payroll 795 832
Taxes, other than income taxes 1,114 513
Other 1,726 2,223
Deferred revenue and advance deposits 1,135 1,842
------- -------
Total current liabilities 7,149 8,260
Long-term debt, excluding current installments 42,091 42,504
Notes payable to affiliates 8,100 8,100
Accrued administration, management fees and
interest payable to affiliate 632 506
------- -------
Total liabilities 57,972 59,370
------- -------
Partners' capital:
General Partner 256 245
Limited Partners:
Class A Unitholders 13,778 13,517
Class B Unitholders (deficit) (2,442) (3,001)
------- -------
Total Partners' capital 11,592 10,761
------- -------
$69,564 $70,131
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ---------------------
1997 1996 1997 1996
----------- ----------- ------- --------
<S> <C> <C> <C> <C>
Revenue:
Rooms $ 7,861 $ 7,739 $ 15,294 $ 15,056
Food and beverage 3,223 3,436 6,100 6,453
Other property operations 1,732 1,878 3,691 3,912
-------- ---------- --------- --------
12,816 13,053 25,085 25,421
-------- ----------- ---------- --------
Costs and operating expenses:
Rooms 2,143 2,056 4,089 3,942
Food and beverage 2,277 2,373 4,296 4,560
Other property operations 716 760 1,636 1,721
Administrative and general 1,235 1,343 2,754 2,558
Marketing 1,066 1,050 2,113 2,184
Energy 571 599 1,169 1,216
Property maintenance 665 633 1,273 1,206
Rent, taxes and insurance 803 654 1,497 1,337
Management fees 511 518 999 1,010
Depreciation and amortization 1,021 1,053 2,109 2,106
-------- ---------- --------- ---------
11,008 11,039 21,935 21,840
-------- ----------- ---------- -----------
Operating income 1,808 2,014 3,150 3,581
Interest expense, including
amortization of debt costs 1,165 1,164 2,319 2,359
-------- ---------- --------- ----------
Net income $ 643 $ 850 $ 831 $ 1,222
========= ========== ========= ==========
Class A Unitholders:
Income per limited partnership unit -primary $ .07 $ .10 $ .05 $ .12
======== =========== ========== ===========
Income per limited partnership unit -fully diluted $ --- $ .07 $ --- $ .10
======== =========== ========== ==========
Weighted average number of units outstanding -
primary 5,340,214 5,340,214 5,340,214 5,340,214
Weighted average number of units outstanding -
fully diluted ---- 15,775,810 --- 16,043,220
Class B Unitholders:
Income per limited partnership unit $ .31 $ .32 $ .59 $ .61
======== ============ ========= ===========
Weighted average number of units outstanding 950,000 950,000 950,000 950,000
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
Limited Partners' Capital (Deficit)
-----------------------------------
Class A Unitholders Class B Unitholders Total
General ------------------- ------------------- Partners'
Partner Units Capital Units Deficit Capital
-------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1996 $245 5,340,214 $13,517 950,000 $(3,001) $10,761
Net income 11 ---- 261 --- 559 831
------ --------- -------- -------- -------- -------
Balances at
June 30, 1997 $256 5,340,214 $13,778 950,000 $(2,442) $11,592
====== ========= ======= ======= ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 23,184 $ 23,948
Cash paid to suppliers and vendors (13,418) (13,626)
Cash paid to employees (6,831) (6,513)
Interest paid (2,014) (1,441)
Other cash receipts, net 927 863
---------- --------
Net cash provided by operating activities 1,848 3,231
---------- --------
Cash flows from investing activities -
capital expenditures (3,081) (878)
---------- --------
Cash flows from financing activities:
Principal payments on long-term debt, net (409) (540)
Payment for debt issue costs (219) ---
---------- --------
Net cash used in financing activities (628) (540)
---------- --------
(Decrease) increase in cash and cash equivalents (1,861) 1,813
Cash and cash equivalents at beginning of period 2,350 2,116
---------- --------
Cash and cash equivalents at end of period $ 489 $ 3,929
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
AIRCOA PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
(1) BASIS OF PRESENTATION
AIRCOA Hotel Partners, L.P., a Delaware limited partnership (the
"Partnership") was organized in December 1986 to acquire, own and operate
hotel 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 holds 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.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore,
do not include all information and disclosures necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. In the opinion of
management, these financial statements reflect all adjustments (which
include only normal recurring adjustments) necessary for a fair
presentation of the results of operations and financial position for the
interim periods presented. These interim financial statements should be
read in conjunction with the Annual Report on Form 10-K for the period
ended December 31, 1996. Operating results for the six months ended June
30, 1997 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1997.
(2) MERGER WITH AFFILIATE
The Partnership received in December 1996, a written proposal from an
affiliate, Regal Hotel Management, Inc. ("RHM"), to commence discussions
with respect to the possible purchase of all of the Class A and Class B
units not currently owned by RHM or its affiliates (the "Public Units") for
$2.35 per Class A Unit and $16.80 per Class B Unit. The General Partner of
the Partnership referred consideration of RHM's proposal to a Special
Committee (the "Special Committee") comprised of the independent members of
the Partnership's Advisory Committee. After negotiations with the Special
Committee, RHM agreed to increase the merger consideration to $3.10 per
Class A Unit and $20.00 per Class B Unit. The Special Committee determined
that such increased merger consideration was fair to, and in the best
interests of, unaffiliated unitholders of the Partnership and recommended
approval of the merger transaction by the Board of Directors of the
Partnership's General Partner. The General Partner's Board of Directors
approved RHM's revised proposal on May 2, 1997.
RHM's proposed acquisition of the Public Units would be made by means of a
merger of a subsidiary limited partnership owned by RHM into the
Partnership. The completion of the merger and the resulting acquisition of
the Public Units is subject to the approval of the merger by unitholders
owning a majority interest of the Partnership's units at a special meeting.
Presently, RHM and its affiliates own 71% of the Class A Units and 93.6% of
the Class B Units. RHM and its affiliates have agreed to vote in favor of
the merger thus assuring its approval. Although no date has been set for
the special meeting, it is presently expected that the meeting will be
held, and the merger will be consummated, during the third quarter of 1997.
In conjunction with approval of the merger transaction, the General Partner
has amended the Partnership Agreement in order to defer the mandatory
conversion of Class B Units into Class A Units.
7
<PAGE>
AIRCOA PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
The amendment provides that the 250,000 Class B Units scheduled to convert
into additional Class A Units during 1997 will convert on the earliest to
occur of (i) any termination of the definitive merger agreement; (ii) the
record date for any vote of the Class A Unitholders, (other than the vote
on merger), (iii) the record date for any distribution by the Partnership
to holders of Class A Units or (iv) September 30, 1997. In 1997, in
accordance with the Partnership Agreement, the number of Class A Units to
be received upon conversion of a Class B Unit will be determined by
dividing $20.00 by the average of the closing prices of Class A Units for
the five trading days ending on May 30, 1997, or $2.75. In light of the
likelihood of completion of the merger, the General Partner adopted this
amendment in order to avoid administrative and other issues arising from
the issuance of additional Class A Units pursuant to the conversion.
(3) LONG-TERM DEBT
The Partnership has a first mortgage loan and a $1,000,000 revolving credit
line. The first mortgage loan bears interest at the Eurodollar rate plus 2%
(7.85% at June 30, 1997). Re-payment of the first mortgage loan is based on
a twenty-year amortization with a 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 June 30,
1997.
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- -------------
<S> <C> <C>
Mortgage loan $42,840 $43,380
Capital lease obligation 377 246
------- -------
43,217 43,626
Less current installments (1,126) (1,122)
------- -------
Long-term debt, excluding current installments $42,091 $42,504
======= =======
</TABLE>
The first mortgage loan and revolving credit line contain various covenants
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 premium 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 5%
of gross revenue and a maximum loan-to-value ratio of 65% based on the
aggregate appraised values of the Properties. 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 the
Bank's approval of any dilution in the present ownership interests of
affiliates of the General Partner in the Partnership. The Partnership pays
an annual guarantee fee calculated at .5% of the outstanding loan balance
at June 8th of each year to an affiliate of the General Partner for the
limited guarantee of the first mortgage loan and the revolving credit line.
(4) NOTES PAYABLE TO AFFILIATES
The Partnership has notes payable of $8,100,000 to AHS that are subordinate
to the first mortgage
8
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
loan. Notes payable to AHS consist of notes payable of $6,000,000 and a
note payable of $2,100,000. The notes payable totaling $6,000,000 accrue
interest at 12% per annum, payable monthly, and mature on June 8, 2000. The
note payable for $2,100,000 accrues interest at 12% per annum, with
interest and principal due on June 8, 2000. The notes payable to AHS are
convertible into Class A Units of the Partnership at $16.60 per unit. In
addition, these notes stipulate that 25% of any excess cash flow, as
defined in the first mortgage loan, will be applied against the principal
of the notes outstanding.
(5) 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.
The Class B Units entitle each Unitholder to a limited partnership interest
which is subordinate to the Class A Units, in certain circumstances. 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. Beginning in 1997, in accordance with the terms of the
Partnership Agreement, 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. As discussed above in Note 2, the Partnership Agreement was
amended to defer the 1997 conversion of Class B Units.
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. At June 30, 1997, the cumulative unpaid Minimum Annual
Distribution per Class A Unit significantly exceeds the Partnerships' net
asset value per unit based on the December 31, 1996 appraised values of the
hotel properties.
According to the first mortgage loan, the maximum annual amount that the
Partnership may distribute to the Class A Unitholders is equal to 50% of
excess cash flow as defined in the mortgage loan agreement. However, if the
debt service coverage ratio, as defined in the mortgage loan agreement, is
greater than 1.50, then the Partnership may distribute up to 75% of such
excess cash flow.
In addition, the Partnership may not make any distributions to the Class A
Unitholders if there are any amounts which are due and payable under the
mortgage loan agreement which are unpaid.
9
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
(6) RELATED PARTY TRANSACTIONS
The following amounts resulting from transactions with affiliates are
included in the accompanying consolidated statements of operations (in
thousands):
<TABLE>
<CAPTION>
For the six
months ended June 30,
---------------------
1997 1996
---- ----
<S> <C> <C>
Partnership administration fees $ 120 $ 95
===== ======
Management fees $ 999 $1,010
===== ======
Allocated data processing cost $ 23 $ 44
===== ======
Allocated insurance expenses $ 671 $ 692
===== ======
Interest expense $ 486 $ 486
===== ======
Lease income $ 149 $ 115
===== ======
License fees $ 261 $ 149
===== ======
Guarantee and financing fee
(included in interest expense) $ 112 $ 112
===== ======
</TABLE>
The properties are obligated to reimburse an affiliate for payroll,
professional fees, and certain out-of-pocket expenses incurred by the
affiliate on their behalf. Affiliates are also paid purchasing and design
fees in connection with renovations of the hotels and purchases of
furnishings, equipment and supplies.
(7) 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.
The Partnership's only significant temporary difference is an excess of the
tax basis over the book basis of the Partnership's hotels of approximately
$5,000,000 which gives rise to a net deferred tax asset of approximately
$2,000,000. The Partnership has established a 100% valuation allowance on
these net deferred tax assets. Current federal income tax regulations will
subject the Partnership to corporate taxation beginning in 1998. Following
the enactment of the Revenue Provisions of the Taxpayer Relief Act of 1997
(HR2014) issued August 1, 1997, Title IX, Miscellaneous Provisions, the
Partnership may make an election to be subject to an excise tax of 3.5% on
its gross receipts in lieu of being taxed as a corporation. Further, upon
the consummation of the merger discussed above in Note 2, the Partnership
would no longer be a publicly traded partnership and would continue to be
taxed as a partnership.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------ -----------------------------------------------------------------------
of Operations
-------------
RESULTS OF OPERATIONS
Partnership revenue for the three months ended June 30, 1997 decreased $237,000
or 1.8% compared to the three months ended June 30, 1996. Revenue for the first
six months of 1997 decreased $336,000 or 1.3% compared to the first six months
of 1996. Average occupancy and daily room rates for the portfolio of 1,586
rooms are summarized as follows:
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
---------------- ----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Average occupancy 82.0% 83.7% 77.4% 79.9%
Average daily room rates $66.51 $63.90 $69.08 $65.11
</TABLE>
The decrease in revenue at the Partnership's properties for the three months
ended June 30, 1997 when compared to the three months ended June 30, 1996 was
primarily a result of a decrease in food and beverage revenue of $213,000
offset, in part, by an increase in rooms revenue of $122,000. The decrease in
revenue for the six months ended June 30, 1997 when compared to the six months
ended June 30, 1996 was primarily a result of a decrease in food and beverage
revenue of $353,000 offset, in part by an increase in rooms revenue of $238,000.
Food and beverage revenue is influenced, in part, by occupancy levels at each of
the properties. For the three months and six months ended June 30, 1997,
occupancy levels at the Partnership's properties decreased by 2.0% and 3.1%,
respectively, as compared to the same periods in 1996. These decreases in
occupancy levels contributed, in part, to decreases in food and beverage revenue
of 6.2% and 5.5% for the three months and six months ended June 30, 1997,
respectively, when compared with the same periods in 1996. Rooms revenue is a
function of occupancy levels as well as average daily room rates. For both the
three months and six months ended June 30, 1997, rooms revenue increased by 1.6%
over the same periods in 1996, as a result of increases in average daily rates
that more than offset decreases in occupancy levels for these periods.
Increased average daily rates and decreased occupancy levels during these
periods resulted from efforts by the Partnership to increase revenue per
available room at certain of its properties through increased average daily
rates. This resulted in an overall small decrease in occupancy levels.
Net rooms margin (rooms revenue less rooms expenses) increased $35,000 or 0.6%
for the three months ended June 30, 1997 as compared to the three months ended
June 30, 1996, as rooms revenue increased by $122,000 or 1.6%, while rooms
expenses increased by $87,000 or 4.2%. Net rooms margin increased $91,000 or
0.8% for the six months ended June 30, 1997 as compared to the six months ended
June 30, 1996, as revenue increased by $238,000 or 1.6%, while expenses
increased by $147,000 or 3.7%. The increases in net rooms margins for the three
months and six months ended June 30, 1997 as compared to the same periods in
1996 were primarily due to increases at Lakeside offset, in part, by decreases
at Fourwinds. The increases in net rooms margins at Lakeside were the result of
increased average daily room rates, primarily in the wholesale market segment.
The decreases at Fourwinds are primarily due to decreased occupancy levels,
resulting from rooms taken out of service for renovation during March, April,
and May of 1997.
Net food and beverage margin (food and beverage revenue less food and beverage
expenses) decreased $117,000 or 11.0% for the three months ended June 30, 1997
as compared to the three months ended June 30, 1996, as revenue decreased
$213,000 or 6.2%, while expenses decreased $96,000 or 4.0%. Net food and
beverage margin decreased $89,000 or 4.7% for the first six months of 1997 as
compared to the same period in 1996, as revenue decreased $353,000 or 5.5% while
expenses decreased $264,000 or 5.8%. The decreases in net food and beverage
margins during these periods were primarily due to decreases at Buffalo and
University that were offset, in part, by increases at McCormick. The decreases
in net food and beverage margins at Buffalo were primarily due to changes in the
segment mix of the hotel's guests to include more contract business, which
typically does not use the hotel's food and beverage outlets as much as other
segments. Additionally, Buffalo experienced increased payroll costs.
University experienced a
11
<PAGE>
drop in occupancy levels, which contributed to decreased net food and beverage
margins. The increases in net food and beverage margins at McCormick were
primarily due to the addition of a catering pavilion at the property during
1996, which increased banquet revenue; reductions in payroll cost also occurred.
Revenue from other property operations decreased $146,000 or 7.8% and $221,000
or 5.6% for the three months and six months ended June 30, 1997, respectively,
as compared to the three months and six months ended June 30, 1996. These
decreases are primarily a result of lower revenue generated by Fourwinds' marina
operations during the second quarter of 1997 due to poor weather in Bloomington,
Indiana.
Operating income for the three months ended June 30, 1997 decreased $206,000 or
10.2% as compared to the three months ended June 30, 1996 as revenue decreased
$237,000 or 1.8% and operating costs decreased $31,000 or 0.3%. Operating
income decreased $431,000 or 12.0% for the six months ended June 30, 1997 as
compared to the first six months of 1996, as revenue decreased $336,000 or 1.3%
and operating costs increased $95,000 or .4%. Operating costs include a
provision of approximately $200,000 for an occupancy tax assessment at McCormick
recorded during the second quarter of 1997.
Interest expense during the three months and six months ended June 30, 1997 was
comparable to the same periods in 1996. The average interest rate (inclusive of
amortization of debt issue costs) was 9.00% for the first six months of 1997 as
compared to 9.04% for the first six months of 1996.
Cash flow from operations differs from net income of the Partnership due to the
effects of depreciation, amortization and accruals as reflected in the
consolidated statements of cash flows. Net income/(loss) per Class A Unit and
the net income per Class B Unit reflect allocations of the net income as
required by the Partnership Agreement.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the first six months of 1997 was
$1,848,000, a decrease of $1,383,000 as compared with the same period in 1996.
The decrease is primarily attributable to the decrease in cash received from
customers of $573,000 and an increase in interest paid of $792,000. Cash used
in investing activities increased $2,203,000 in the first six months of 1997
compared to the first six months of 1996. The increase primarily reflects
capital expenditures at McCormick for rooms renovation and at Fourwinds for dock
and rooms renovation. Cash used in financing activities in the first six months
of 1997 increased $88,000 as compared to the first six months of 1996.
The Partnership had indebtedness at June 30, 1997 of $51,317,000 as compared to
$51,726,000 at December 31, 1996. At June 30, 1997, the Partnership had a
working capital deficit of $2,167,000 compared to a working capital deficit of
$1,716,000 at December 31, 1996. The Partnership's 1997 working capital
requirements, debt service obligations and capital expenditures are expected to
be satisfied through a combination of operating cash flows and draws on its
revolving line of credit. The Partnership has capital improvements of
approximately $4,600,000 planned in 1997 (approximately two-thirds of which is
for the renovation of guest rooms at certain of the Properties and improvements
at Fourwinds' marina dock and the remainder one-third is for other renovations
and improvements at the Properties). Approximately $3,100,000 of improvements
were made through June 30, 1997. These improvements have been and are expected
to be funded from hotel operations. In the longer term, in order to remain
competitive, the Partnership may need to make significant capital expenditures
in excess of the industry norm, 5% of annual revenue, for renovation and
improvements. Such capital expenditures would require the Partnership to obtain
financing from external sources.
The market value of the Partnership's properties differs significantly from the
historical cost of the properties of $63,648,000, as reflected in the
Partnership's balance sheet at June 30, 1997. As indicated under Item 2 in the
Partnership's 1996 Form 10-K, the aggregate appraised value of the hotel
properties at December 31, 1996 was $87,300,000. The appraised value of the
hotel properties at December 31, 1996 was revised to $86,760,000 subsequent to
the filing of the Partnership's 1996 Form 10-K. The December 1996 appraised
value may not be representative of the appraised value which will be obtained as
of December 31, 1997 and is not necessarily indicative of the ability of the
Partnership to consummate a sale of the properties or the actual sale price to
be realized from the sale of the properties. However, the appraised value does
represent the appraiser's opinion of the most probable price for which the hotel
properties should sell in a competitive market.
12
<PAGE>
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. The Partnership has not made any
distributions since 1990. Prior to making future distributions, the Partnership
will comply will its capital expenditure requirements as specified in its
mortgage loan agreement and maintain sufficient working capital balances. The
Partnership currently has a Minimum Annual Distribution requirement of $2.16 per
Class A Unit. At June 30, 1997, the cumulative unpaid Minimum Annual
Distribution per Class A Unit significantly exceeds the Partnership's net asset
value per unit based on the December 31, 1996 appraised values of the hotel
properties. At this time, it is unlikely that there will be any funds available
for distribution to the Class A Unitholders in 1997.
Beginning in 1997, in accordance with the terms of the Partnership Agreement,
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 current market price of a Class A Unit. As
discussed below in the "Other Matters" section, the Partnership Agreement was
amended to defer the 1997 conversion of Class B Units.
For purposes of calculating the conversion of 250,000 Class B Units during 1997,
the Class A Unit conversion price is $2.75, which was the average closing price
for the five trading days ending on May 30, 1997. The conversion of these Class
B Units would result in the issuance of approximately 1,818,000 Class A Units
and in an approximate 25% dilution to the Class A Unitholders.
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. The General Partner has, on the advice of
counsel, determined that Class B Units convert into identical Class A Units
because there are elective procedures, which are standard practice for publicly-
traded partnerships, that make Class A Units received upon conversion fungible
for tax purposes with all pre-existing Class A Units.
OTHER MATTERS
The Partnership received in December 1996, a written proposal from an affiliate,
Regal Hotel Management, Inc. ("RHM"), to commence discussions with respect to
the possible purchase of all of the Class A and Class B units not currently
owned by RHM or its affiliates (the "Public Units") for $2.35 per Class A Unit
and $16.80 per Class B Unit. The General Partner of the Partnership referred
consideration of RHM's proposal to a Special Committee (the "Special Committee")
comprised of the independent members of the Partnership's Advisory Committee.
After negotiations with the Special Committee, RHM agreed to increase the merger
consideration to $3.10 per Class A Unit and $20.00 per Class B Unit. The
Special Committee determined that such increased merger consideration was fair
to, and in the best interests of, unaffiliated unitholders of the Partnership
and recommended approval of the merger transaction by the Board of Directors of
the Partnership's General Partner. The General Partner's Board of Directors
approved RHM's revised proposal on May 2, 1997.
RHM's proposed acquisition of the Public Units would be made by means of a
merger of a subsidiary limited partnership owned by RHM into the Partnership.
The completion of the merger and the resulting acquisition of interests of
unaffiliated unitholders is subject to the approval of the merger by unitholders
owning a majority interest of the Partnership's units at a special meeting. RHM
and its affiliates own 71% of the Class A Units and 93.6% of the Class B Units.
RHM and its affiliates have agreed to vote in favor of the merger thus assuring
its approval. Although no date has been set for the special meeting, it is
presently expected that the meeting will be held, and the merger will be
consummated, during the third quarter of 1997.
In conjunction with approval of the merger transaction, the General Partner has
amended the Partnership Agreement in order to defer the mandatory conversion of
Class B Units into Class A Units. The amendment provides that the 250,000 Class
B Units scheduled to convert into additional Class A Units during 1997 will
convert on the earliest to occur of (i) any termination of the definitive merger
agreement; (ii) the record date for any vote of the Class A Unitholders, (other
than the vote on merger), (iii) the record date for any distribution by the
Partnership to holders of Class A Units or (iv) September 30, 1997. In 1997, in
accordance with the Partnership Agreement, the number of Class A Units to be
received upon conversion of a Class B Unit will be determined by dividing $20.00
by the average of the closing prices of Class A Units
13
<PAGE>
for the five trading days ending on May 30, 1997, or $2.75. In light of the
likelihood of completion of the merger, the General Partner adopted this
amendment in order to avoid administrative and other issues arising from the
issuance of additional Class A Units pursuant to the conversion.
RHM has agreed to reimburse the Partnership for costs associated with merger,
upon its consummation. In light of the likely completion of the merger, the
Partnership has recorded a receivable of $343,000 for costs incurred through
June 30, 1997.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share (SFAS No. 128). SFAS
No. 128 establishes standards for computing and presenting earnings per share.
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997 and earlier application is not permitted. Had the
Partnership implemented the requirements of SFAS No. 128, basic EPS for the
three months and six months ended June 30, 1997 would have been $0.07 and $0.05,
respectively and diluted EPS for both the three months and six months ended June
30, 1997 would have been $0.05.
PART II. OTHER INFORMATION
- -------- -----------------
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
a) Exhibits
(2.1) Agreement and Plan of Merger dated May 2, 1997 between and
among the Registrant, AIRCOA Hospitality Services, Inc., and Regal
Merger Limited Partnership.
b) Reports on Form 8-K
Form 8-K dated May 8, 1997 - Item 5. Other Events.
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA Hospitality Services, Inc.,
General Partner
Date: August 14, 1997 By: /s/ Douglas M. Pasquale
-------------------- -------------------------------
Douglas M. Pasquale
President and Director
(Principal Executive and Financial Officer)
By: /s/ David C. Ridgley
-------------------------------
David C. Ridgley
Senior Vice President
and Chief Accounting Officer (Duly
Authorized Officer)
14
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AIRCOA HOTEL PARTNERS, L.P.,
AIRCOA HOSPITALITY SERVICES, INC.,
REGAL HOTEL MANAGEMENT, INC.
AND
REGAL MERGER LIMITED PARTNERSHIP
May 2, 1997
<PAGE>
TABLE OF CONTENTS
Page
RECITALS..........................................................1
ARTICLE I -- The Merger...........................................2
1.1 The Merger.............................................2
1.2 Effective Time of the Merger...........................2
1.3 Closing................................................2
1.4 Effects of the Merger; General Partner.................3
1.5 Governing Documents....................................3
1.6 Conversion of Securities...............................3
1.7 Payment................................................4
1.8 Delisting of Class A Units and Depositary Receipts.....5
1.9 Appraisal Rights.......................................5
ARTICLE II -- Approval of the Merger..............................5
2.1 Actions of the Partnership and the General Partner.....5
2.2 Proxy Statement........................................5
ARTICLE III -- Representations and Warranties of the Parent
and Regal..........................................6
3.1 Organization and Qualification.........................6
3.2 Authority Relative to this Agreement...................6
3.3 Compliance.............................................6
3.4 Documents and Information..............................7
3.5 Financing..............................................7
3.6 Solvency...............................................7
ARTICLE IV -- Representations and Warranties of the Partnership...8
4.1 Organization and Qualification.........................8
4.2 Capitalization.........................................8
4.3 Fees...................................................8
4.4 Documents and Information..............................8
4.5 Opinion of Financial Advisor...........................9
ARTICLE V -- Covenants............................................9
5.1 Legal Conditions to the Merger.........................9
5.2 State Statutes.........................................9
5.3 Special Committee......................................9
ARTICLE VI -- Additional Agreements...............................9
6.1 Public Announcements...................................9
6.2 Expenses..............................................10
ARTICLE VII -- Conditions Precedent..............................10
7.1 Certain Conditions on the Obligation of Regal to
Consummate the Merger.................................10
7.2 Obligation of Each Party to Effect the Merger.........11
ARTICLE VIII -- Termination......................................12
8.1 Termination...........................................12
8.2 Effect of Termination.................................12
ARTICLE IX -- General Provisions.................................13
9.1 Amendment.............................................13
9.2 Extension; Waiver.....................................13
9.3 Nonsurvival of Representations, Warranties and
Agreements............................................13
9.4 Entire Agreement; Counterparts........................13
9.5 Severability..........................................13
9.6 Notices...............................................14
9.7 Interpretation........................................15
9.8 Headings..............................................15
9.9 Assignment............................................15
9.10 Governing Law........................................16
9.11 Consent to Jurisdiction; Service of Process..........16
9.12 Limitation of Liability..............................16
9.13 Limitation of Remedies...............................16
<PAGE>
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated
as of May 2, 1997, among AIRCOA HOTEL PARTNERS, L.P., a Delaware
limited partnership (the "Partnership"), AIRCOA HOSPITALITY
SERVICES, INC., a Delaware corporation (the "General Partner"),
REGAL HOTEL MANAGEMENT, INC., a Delaware corporation (the
"Parent"), and REGAL MERGER LIMITED PARTNERSHIP, a Delaware
limited partnership and a direct, wholly owned subsidiary of the
Parent ("Regal").
RECITALS
WHEREAS, the Partnership has heretofore issued Class A
limited partnership units (the "Class A Units") and Class B
limited partnership units (the "Class B Units" and, together with
the Class A Units, the "Units"), each representing limited
partner interests in the Partnership;
WHEREAS, all outstanding Class A Units have been
deposited with a depository (the "Depositary") designated by the
General Partner, pursuant to the terms of a Deposit Agreement
(the "Deposit Agreement") among the General Partner (both
individually and as attorney-in-fact for the holders of Class A
Units), the Depositary, the Partnership and all holders from time
to time of Class A Units represented by depositary receipts
("Depositary Receipts") or certificates (together with the Class
B Units represented by certificates, "Certificates");
WHEREAS, the General Partner is the sole general
partner of the Partnership;
WHEREAS, each of the Parent and Regal is an affiliate
(as used herein, such term shall have the meaning set forth in
the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act")) of the General
Partner;
WHEREAS, the Parent wishes to merge Regal with and
into the Partnership (the "Merger") pursuant and subject to the
terms and conditions of this Agreement, whereby each issued and
outstanding Unit not owned directly or indirectly by Regal, the
Parent or their affiliates will be converted into the right to
receive $3.10 per Class A Unit and $20.00 per Class B Unit (the
"Merger Consideration");
WHEREAS, the Board of Directors of the General Partner
has established a special committee consisting of persons not
otherwise affiliated with the General Partner (the "Special
Committee"), and has charged the Special Committee to negotiate
and determine the fairness of this Agreement and to, among other
things, approve any amendment of or waiver pursuant to this
Agreement on behalf of the Partnership;
WHEREAS, the Special Committee has considered the
fairness of this Agreement and the Merger to the holders of Units
("Unitholders"), other than the Parent and its affiliates (the
"Unaffiliated Unitholders"), and, subject to the terms and
conditions of this Agreement, (i) determined that the Merger is
fair to and in the best interests of the Unaffiliated
Unitholders, (ii) recommended that the General Partner approve
this Agreement and (iii) recommended that the Merger be approved
by the Unitholders;
<PAGE>
WHEREAS, the General Partner, on its own behalf and on
behalf of the Partnership, and the Parent, on its own behalf and
on behalf of Regal, have duly approved this Agreement and the
Merger pursuant hereto, and the General Partner has determined,
upon the recommendation of the Special Committee, that the Merger
is fair to and in the best interests of the Unitholders and,
subject to the terms and conditions of this Agreement, has
recommended that the Merger be accepted by the Unitholders; and
WHEREAS, the Parent and affiliates of the Parent
holding, in the aggregate, approximately 71.0% of the outstanding
Class A Units and approximately 93.6% of the outstanding Class B
Units have agreed to submit this Agreement and the Merger to the
Unitholders for approval and adoption at a meeting of Unitholders
called for such purpose (the "Merger Meeting") pursuant to
Section 17.4 of the Agreement of Limited Partnership of AIRCOA
Hotel Partners, L.P., dated July 30, 1987 (as amended, the
"Partnership Agreement").
NOW THEREFORE, in consideration of the mutual benefits
to be derived from this Agreement and of the representations,
warranties, agreements and conditions contained in this
Agreement, the parties agree as follows:
ARTICLE I
The Merger
1.1 The Merger. In accordance with and subject to (a)
the provisions of this Agreement, (b) the Certificate of Merger
(as hereinafter defined), and (c) the Delaware Revised Uniform
Limited Partnership Act (the "Delaware Partnership Act"), at the
Effective Time (as hereinafter defined), Regal shall be merged
with and into the Partnership in the Merger. As a result of the
Merger, the separate existence of Regal shall cease, and the
Partnership shall continue as the surviving partnership. The
Partnership is hereinafter sometimes referred to as the
"Surviving Partnership."
1.2 Effective Time of the Merger. Subject to the
provisions of this Agreement, an appropriate form of certificate
of merger (the "Certificate of Merger") shall be duly executed
and filed by the Partnership and Regal on the Closing Date (as
hereinafter defined) in the manner provided in Section 17-211 of
the Delaware Partnership Act. The Merger shall become effective
at such time on the Closing Date as the Certificate of Merger is
filed with the Secretary of State of the State of Delaware (or
such later time as may be specified in the Certificate of Merger)
(the "Effective Time").
1.3 Closing. Unless this Agreement shall have been
terminated and the transactions contemplated by this Agreement
shall have been abandoned pursuant to the provisions of Article
VIII, and subject to the provisions of Sections 7.1 and 7.2
hereof, the closing of the Merger (the "Closing") will take place
at 10:00 a.m., Denver time, on the first Business Day (as
hereinafter defined) occurring after the Merger Meeting (which
shall occur after the passage of 20 business days from and after
the mailing of the Proxy Statement (as defined below) to
Unitholders) or, if later, the date which is the first Business
Day after all of the conditions set forth in Sections 7.1 and 7.2
hereof shall have been satisfied (or waived in accordance with
2
<PAGE>
Section 9.2 hereof), or such other date and time which is
agreed to in writing by the parties (the "Closing Date"). The
Closing shall take place at the offices of the Partnership at
5775 DTC Boulevard, Englewood, Colorado 80111, unless another
place is agreed to by the parties. For purposes of this
Agreement, "Business Day" shall mean any day except Saturday,
Sunday or any day on which banks are generally not open for
business in Denver, Colorado.
1.4 Effects of the Merger; General Partner. The Merger
shall, from and after the Effective Time, have the effects
provided for in the Delaware Partnership Act. The General Partner
shall be the general partner of the Surviving Partnership until
its resignation or removal or until its successor is duly
qualified.
1.5 Governing Documents. Following the Effective Time,
the Partnership Agreement of the Partnership shall be the
partnership agreement of the Surviving Partnership, until amended
in accordance with the provisions thereof and applicable law.
1.6 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of
Regal, the Partnership, the Surviving Partnership or any holder
of any of the following securities:
(a) Each Class A Unit which is issued and outstanding
immediately prior to the Effective Time (other than Class A
Units owned by Regal Hotels International Holdings Limited,
a Bermuda company and an indirect parent of each of the
General Partner, the Parent and Regal ("Regal Holdings"),
or any direct or indirect subsidiary of Regal Holdings)
shall be canceled, extinguished and retired, and be
converted into and become a right to receive $3.10 in cash,
without interest (the "Class A Merger Consideration");
(b) Each Class B Unit which is issued and outstanding
immediately prior to the Effective Time (other than Class B
Units owned by Regal Holdings or any direct or indirect
subsidiary of Regal Holdings) shall be canceled,
extinguished and retired, and be converted into and become
a right to receive $20.00 in cash, without interest (the
"Class B Merger Consideration" and, together with the Class
A Merger Consideration, the "Merger Consideration");
(c) Each Unit which is issued and outstanding
immediately prior to the Effective Time and owned by Regal
Holdings or any direct or indirect subsidiary of Regal
Holdings shall be and remain a unit of limited partnership
interest in the Surviving Partnership;
(d) Each partnership interest, general or limited, of
Regal issued and outstanding immediately prior to the
Effective Time shall be canceled, extinguished and retired,
and no payment shall be made thereon; and
(e) The General Partner's general partnership interest
in the Partnership shall be and remain a general
partnership interest in the Surviving Partnership.
1.7 Payment. (a) From and after the Effective Time,
a bank or trust company organized under the laws of the United
States or any state thereof with capital, surplus and
3
<PAGE>
undivided profits of at least $100,000,000 that is designated by the
Parent (the "Payment Agent") shall act as payment agent in effecting
the payment of the Merger Consideration for Units pursuant to
Sections 1.6(a) and 1.6(b) hereof. At or before the Effective
Time, the Parent or Regal shall deposit with the Payment Agent
the aggregate Merger Consideration in trust for the benefit of
the Unaffiliated Units. Promptly after the Effective Time, the
Payment Agent shall mail to each record holder of Depository
Receipts or Certificates a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss
and title to such Depositary Receipts or Certificates shall pass,
only upon delivery of such Depositary Receipts or Certificates to
the Payment Agent) and instructions for use in surrendering such
Depositary Receipts or Certificates and receiving the Merger
Consideration for each Unit previously represented thereby. Upon
the surrender of each such Depositary Receipt or Certificate and
the payment by the Payment Agent of the Merger Consideration in
exchange therefor, such Depositary Receipts and Certificates
shall forthwith be canceled. Until so surrendered and exchanged,
each such Depositary Receipt or Certificate (other than
Depositary Receipts or Certificates representing Units held by
Regal Holdings or any direct or indirect subsidiary of Regal
Holdings) shall represent solely the right to receive the Class A
Merger Consideration or the Class B Merger Consideration, as
applicable, multiplied by the number of Class A Units or Class B
Units, respectively, represented by such Depositary Receipt or
Certificate, and the holder thereof shall have no rights
whatsoever as a Unitholder of the Partnership or the Surviving
Partnership. Upon the surrender of such outstanding Depositary
Receipt or Certificate, the holder shall receive such Merger
Consideration, without any interest thereon. If any cash is to be
paid to a name other than the name in which the Depositary
Receipt or Certificate surrendered in exchange therefor is
registered, it shall be a condition to such payment that the
person requesting such payment shall pay to the Payment Agent any
transfer or other taxes required by reason of the payment of such
cash to a name other than that of the registered holder of the
Depositary Receipt or Certificate surrendered, or such person
shall establish to the satisfaction of the Payment Agent that
such tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Payment Agent nor any party hereto shall
be liable to a holder of Depositary Receipts or Certificates for
any Merger Consideration or other payments made to a public
official pursuant to applicable abandoned property laws. The
Surviving Partnership and the Payment Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise
payable to a holder of Units pursuant to the Merger any taxes or
other amounts as are required by applicable law, including
without limitation Sections 3406 and 1445 of the Internal Revenue
Code of 1986. To the extent that amounts are so withheld by the
Surviving Partnership or the Payment Agent, they shall be treated
for all purposes of this Agreement as having been paid to the
holder of the Units in respect of which such deduction and
withholding was made.
(b) Six (6) months after the Closing Date, the
Surviving Partnership shall be entitled to the return of all
amounts then held by the Payment Agent pursuant to Section 1.7(a)
(including earnings thereon), and the Payment Agent's duties
shall terminate. Thereafter, any holder of a Depositary Receipt
or Certificate shall look only to the Surviving Partnership
(subject to applicable abandoned property, escheat and similar
laws) as a general creditor to receive in exchange therefor the
Merger Consideration, without any interest thereon.
(c) At and after the Effective Time, there shall be no
transfers on the books of the Surviving Partnership of any Unit
other than Units which remain outstanding pursuant to Section
4
<PAGE>
1.6(b) hereof. As of the Effective Time, each holder of a Unit
which was converted into the right to receive cash pursuant to
Section 1.6(a) hereof shall be deemed to have withdrawn as a
limited partner and shall have no further interest in the
Partnership or the Surviving Partnership or any allocations or
distributions of income, property or otherwise, other than the
right to receive the Merger Consideration as provided in this
Article I.
1.8 Delisting of Class A Units and Depositary
Receipts. Following the Effective Time, the General Partner, on
behalf of the Partnership, shall take all actions necessary to
effect the delisting of the Class A Units and the Depositary
Receipts from the American Stock Exchange and the deregistration
of the Class A Units and the Depositary Receipts with the
Securities and Exchange Commission (the "Commission").
1.9 Appraisal Rights. Unitholders shall not have any
appraisal or dissenters' rights in connection with the Merger.
ARTICLE II
Approval of the Merger
2.1 Actions of the Partnership and the General
Partner. (a) The General Partner hereby consents to the Merger,
agrees in all respects with the terms of this Agreement and,
subject to the terms and conditions of this Agreement, the
consummation of the transactions contemplated hereby. In
connection therewith, pursuant to the Delaware Partnership Act
and Article VIII of the Partnership Agreement, by executing this
Agreement, the General Partner, as the sole general partner of
the Partnership, consents to and approves in all respects this
Agreement and the transactions contemplated hereby (including,
without limitation, the Merger) on behalf of the Partnership. The
General Partner hereby represents that, at a meeting of its Board
of Directors duly called and held on May 2, 1997, (i) such Board
approved, upon the recommendation of the Special Committee, this
Agreement and the Merger and has determined that the Merger,
considered as a whole, is fair to and in the best interests of
the Unaffiliated Unitholders and (ii) such Board recommended that
the Unitholders of the Partnership approve and adopt this
Agreement and the Merger.
(b) Each of the General Partner, the Parent and
affiliates of the Parent holding, in the aggregate, approximately
71.0% of the outstanding Class A Units and approximately 93.6% of
the outstanding Class B Units, shall approve and consent to this
Agreement and the Merger by a vote in person or by proxy at the
Merger Meeting to be held twenty (20) calendar days from and
after the mailing of the Proxy Statement to the Unitholders.
2.2 Proxy Statement. Promptly following the execution
of this Agreement, the Partnership shall prepare (and Regal shall
cooperate in preparing) and as soon as reasonably practicable
thereafter shall file with the Commission a preliminary Proxy
Statement with respect to the Merger. Subject to compliance with
the rules and regulations of the Commission, the Partnership
shall thereafter file with the Commission and mail to Unitholders
a definitive Proxy Statement with respect to the Merger (the
"Proxy Statement"). The term "Proxy Statement" shall mean such
Proxy Statement at the time it initially is mailed to the
Unitholders and all amendments
5
<PAGE>
or supplements thereto, if any, similarly filed and mailed. Regal
and the Partnership each agree to correct any information
provided by it for use in the Proxy Statement which shall have
become false or misleading in any material respect.
ARTICLE III
Representations and Warranties of the Parent and Regal
The Parent and Regal, jointly and severally, represent
and warrant at the date hereof to the Partnership as follows:
3.1 Organization and Qualification. Regal is a limited
partnership duly formed, validly existing and in good standing
under the laws of the State of Delaware, with the requisite power
and authority to carry on its respective business as now
conducted. The Parent is the sole general partner of Regal. The
Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to carry on its
respective business as now conducted. Each of the Parent and
Regal is duly qualified to do business, and is in good standing,
in each jurisdiction where the character of its properties owned
or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so
qualified or in good standing would not, in the aggregate, have a
material adverse effect on the Parent and its subsidiaries, taken
as a whole. Copies of the charter and bylaws of the Parent and
the Certificate of Limited Partnership and the Limited
Partnership Agreement of Regal (such documents, the
"Organizational Documents") previously delivered to the
Partnership are accurate and complete as of the date hereof.
3.2 Authority Relative to this Agreement. Each of the
Parent and Regal has the requisite power and authority to enter
into this Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement by the
Parent and Regal and the consummation by the Parent and Regal of
the transactions contemplated hereby have been duly authorized by
the Board of Directors of the Parent, including in the Parent's
capacity as general partner of Regal, and no other action or
proceeding on the part of the Parent or Regal is necessary to
authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by
the Parent and Regal and constitutes a valid and binding
obligation of each of them, enforceable in accordance with its
terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or
other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
3.3 Compliance. (a) Neither the execution and delivery
of this Agreement by the Parent and Regal nor the consummation of
the transactions contemplated hereby nor compliance by the Parent
and Regal with any of the provisions hereof will (i) violate,
conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result
in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Parent or
Regal or any other direct or indirect subsidiary of the Parent
6
<PAGE>
under, any of the terms, conditions or provisions of (x)
the respective Organizational Documents of the Parent or Regal or
any partnership agreement or charter or bylaws of any other
direct or indirect subsidiary of the Parent or (y) any material
note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Parent
or Regal or any other direct or indirect subsidiary of the Parent
is a party, or to which any of them, or any of their respective
properties or assets, may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in the
next paragraph, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to the
Parent or Regal or any other direct or indirect subsidiary of the
Parent or any of their respective properties or assets, except,
in the case of each of clauses (i) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests, charges
or encumbrances, which, in the aggregate, would not have a
material adverse effect on the transactions contemplated hereby
or on the condition (financial or other), business or operations
of the Parent and its subsidiaries taken as a whole (a "Material
Adverse Effect on the Parent").
(b) Other than in connection with or in compliance
with the provisions of the Delaware Partnership Act, the Exchange
Act, any state "anti-takeover" ("State Takeover Laws") or "blue
sky" laws ("Blue Sky Laws") or other similar statutes and
regulations, no notice to, filing with, or authorization, consent
or approval of, any domestic or foreign public body or authority
is necessary for the consummation by the Parent or Regal of the
transactions contemplated by this Agreement, except where failure
to give such notice, make such filings, or obtain authorizations,
consents or approvals would not, in the aggregate, have a
Material Adverse Effect on the Parent.
3.4 Documents and Information. The information
supplied by the Partnership, Parent or Regal expressly for
inclusion in the Proxy Statement shall not, (i) at the time of
the mailing thereof and (ii) at the Closing Date, contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
3.5 Financing. The Parent has sufficient available
funds to consummate the Merger, and shall make such funds
available to Regal for such purposes.
3.6 Solvency. At the Effective Time and after giving
effect to any changes in the Parent's, Regal's or the Surviving
Partnership's assets and liabilities as a result of the Merger,
none of the Parent, Regal or the Surviving Partnership will (i)
be insolvent (either because its financial condition is such that
the sum of its debts is greater than the fair value of its assets
or because the present fair salable value of its assets will be
less than the amount required to pay its probable liability on
its debts as they become absolute and matured); (ii) have
unreasonably small capital with which to engage in its business;
or (iii) have incurred or plan to incur debts beyond its ability
to pay as they become absolute and matured.
7
<PAGE>
ARTICLE IV
Representations and Warranties of the Partnership
The Partnership represents and warrants to each of the
Parent and Regal at the date hereof as follows:
4.1 Organization and Qualification. The Partnership is
a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware and has the
requisite power and authority to carry on its business as it is
now being conducted. The Partnership is duly qualified to do
business, and is in good standing, in each jurisdiction where the
character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the
failure to be so qualified or in good standing would not, in the
aggregate, have a material adverse effect on the Partnership and
its subsidiaries, taken as a whole. Copies of the Partnership
Agreement and the Certificate of Limited Partnership of the
Partnership which have heretofore been delivered to the Parent
are accurate and complete as of the date hereof.
4.2 Capitalization. As of the date hereof, there are
5,340,214 Class A Units and 950,000 Class B Units issued and
outstanding. All such Units have been validly issued. Other than
such Class A Units and Class B Units and the General Partner's
general partnership interest, there are no equity securities of
the Partnership authorized or outstanding, and, other than (a)
the Class B Units which are convertible into Class A Units and
(b) two promissory notes of the Partnership dated June 8, 1995,
payable to the General Partner, in the principal amounts of $2.1
million and $6 million, which are convertible into Class A Units,
there are no outstanding options, warrants, rights to subscribe
to (including any preemptive rights), calls or commitments of any
character whatsoever to which the Partnership or any subsidiary
of the Partnership is a party or may be bound, requiring the
issuance or sale of any Units or other equity securities of the
Partnership or securities or rights convertible into or
exchangeable for such Units or other equity securities, and there
are no contracts, commitments, understandings or arrangements by
which the Partnership is or may become bound to issue additional
Units or other equity securities or options, warrants or rights
to purchase or acquire any additional Units or other equity
securities or securities convertible into or exchangeable for
such Units or other equity securities.
None of the Units are held by the Partnership in treasury.
4.3 Fees. The Special Committee has not paid or agreed
to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated
hereby.
4.4 Documents and Information . The information
supplied by the Partnership expressly for inclusion in the Proxy
Statement shall not, (i) at the time of the mailing thereof and
(ii) at the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
8
<PAGE>
4.5 Opinion of Financial Advisor. Houlihan Lokey,
the financial advisor to the Special Committee (the "Financial
Advisor"), has delivered to the Special Committee its written
opinion, dated May 2, 1997, that the Merger Consideration to be
received by the Unitholders pursuant to the Merger, taken as a
whole, is fair, from a financial point of view, to the
Unaffiliated Unitholders.
ARTICLE V
Covenants
5.1 Legal Conditions to the Merger. The General
Partner (on behalf of itself and the Partnership), Regal and the
Parent shall take all reasonable actions necessary to comply
promptly with all legal requirements with respect to the Merger
and shall take all reasonable action necessary to cooperate
promptly with and furnish information to the other parties in
connection with any such requirements. The General Partner (on
behalf of itself and the Partnership), Regal and the Parent shall
take all reasonable actions necessary (i) to obtain (and will
take all reasonable actions necessary to promptly cooperate with
the other parties in obtaining) any consent, authorization, order
or approval of, or any exemption by, any administrative agency or
commission or other governmental authority or instrumentality (a
"Governmental Entity"), or other third party, required to be
obtained or made (or cooperate in the obtaining of any thereof
required to be obtained) in connection with the Merger or the
taking of any action contemplated by this Agreement; (ii) to
lift, rescind or mitigate the effect of any injunction or
restraining order or other order adversely affecting the
consummation of the transactions contemplated hereby; (iii) to
fulfill all conditions pursuant to this Agreement; and (iv) to
prevent, with respect to a threatened or pending temporary,
preliminary or permanent injunction or other order, decree or
ruling, the entry thereof.
5.2 State Statutes. If any State Takeover Law shall
become applicable to the transactions contemplated by this
Agreement, the parties hereto shall use their reasonable efforts
to take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and
otherwise to minimize the effects of such State Takeover Law on
the transactions contemplated by this Agreement.
5.3 Special Committee. Prior to the Effective Time or
the earlier termination of this Agreement, the Parent and the
General Partner shall take all actions necessary such that the
Special Committee shall continue in existence without diminution
of any of its powers or duties.
ARTICLE VI
Additional Agreements
6.1 Public Announcements. The General Partner, on behalf
of itself and the Partnership, and the Parent, on behalf of itself
and Regal, shall consult with each other before issuing any press
release or otherwise making any public statements with respect to
this Agreement or the Merger and shall not issue any such press
release or make such public statement
9
<PAGE>
prior to such consultation except as may be required by law or the
rules of the American Stock Exchange.
6.2 Expenses. Parent shall bear all costs and expenses
of each party hereto incurred in connection with the transactions
contemplated by this Agreement.
ARTICLE VII
Conditions Precedent
7.1 Certain Conditions on the Obligation of Regal to
Consummate the Merger.
(a) The obligations of Regal to effect the Merger
shall be subject to the fulfillment of the following
conditions, any or all of which may be waived by Regal in
its sole discretion:
(i) except for changes in the business or
conditions of the Partnership, financial or otherwise,
or in the results of operations of the Partnership,
occurring prior to the date of this Agreement, or
expected by the management of the General Partner to
occur based on events occurring prior to the date of
this Agreement, there shall not have occurred any
material adverse change in the business or condition
of the Partnership, financial or otherwise, or in the
results of operations of the Partnership from that set
forth in or contemplated by the financial statements
of the Partnership for the year ended December 31,
1996;
(ii) there shall not be pending or threatened
against the Partnership, or any subsidiary of the
Partnership, any action, suit or proceeding involving
a claim at law or in equity or before or by any
Governmental Entity, domestic or foreign, that would
be reasonably likely to have a Material Adverse Effect
on the Partnership; and
(iii) there shall not be pending or threatened
against the Partnership, the General Partner, the
Parent, Regal, or any of their respective affiliates
or their respective properties or businesses, any
other action, suit or proceeding involving a claim at
law or in equity or before or by any federal, state,
or municipal or other court of competent jurisdiction
or other Governmental Entity, relating to the Merger
or this Agreement that would be reasonably likely to
have a Material Adverse Effect on the Partnership.
(b) The parties hereto agree that in exercising its
discretion to waive or require the fulfillment of the
conditions prescribed in Section 7.1(a) above, Regal shall
not be required to consider the interests of any person or
entity that may be affected by the Merger other than Regal,
and that Regal shall have no obligation, fiduciary or
otherwise, to the limited partners of the Partnership or
the General Partner in exercising its discretion under
Section 7.1(a).
10
<PAGE>
7.2 Obligation of Each Party to Effect the Merger. The
respective obligations of each party generally to effect the
Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) This Agreement and the Merger shall have been approved
and adopted by a Majority Interest (as defined in the Partnership
Agreement);
(b) Neither the execution and delivery of this Agreement
by the Partnership nor the consummation of the transactions
contemplated hereby nor compliance by the Partnership with
any of the provisions hereof shall (i) violate, conflict
with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the
performance required by, or result in a right of
termination or acceleration under, or result in the
creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the
Partnership or any direct or indirect subsidiary of the
Partnership under any of the terms, conditions or
provisions of (x) the Partnership Agreement or any other
partnership agreement or charter or bylaws of any direct or
indirect subsidiary of the Partnership or (y) any material
note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which
the Partnership or any direct or indirect subsidiary of the
Partnership is a party, or to which any of them, or any of
their respective properties or assets, may be subject, or
(ii) violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to the
Partnership or any direct or indirect subsidiary of the
Partnership or any of their respective properties or
assets, except, in the case of each of clauses (i) and (ii)
above, for such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security
interests, charges or encumbrances, which would not, in the
aggregate, have a material adverse effect on the
transactions contemplated hereby or on the condition
(financial or other), business or operations of the
Partnership and its subsidiaries, taken as a whole (a
"Material Adverse Effect on the Partnership");
(c) The Financial Advisor shall not have withdrawn or
modified in any manner materially adverse to the Parent,
Regal, the Partnership or any holder of Units its opinion
as described in Section 4.5; and
(d) No preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent
jurisdiction or by a Governmental Entity nor any statute,
rule, regulation or executive order promulgated or enacted
by any Governmental Entity shall be in effect, which would
make the acquisition or holding by the Parent, its
subsidiaries or affiliates of the Units of the Surviving
Partnership illegal or otherwise prevent the consummation
of the Merger or make the consummation of the Merger
illegal.
11
<PAGE>
ARTICLE VIII
Termination
8.1 Termination. This Agreement may be terminated, and
the Merger contemplated herein may be abandoned, at any time
prior to the Effective Time, whether prior to or after approval
of the Merger by the Unitholders:
(a) by mutual written consent of the Board of
Directors of the Parent, on behalf of the Parent and Regal,
and the General Partner of the Partnership, with the
concurrence of the members of the Special Committee; or
(b) by the Partnership (which shall so act only if
requested by the Special Committee) if the Parent or Regal
breaches in any material respect any of its
representations, warranties, covenants or agreements
contained in this Agreement (other than any breach caused
by the Partnership) or if the Financial Advisor shall have
withdrawn or modified in any manner adverse to the
Partnership, the holder of any Units, the Parent or Regal
its opinion as described in Section 4.5; or
(c) by the Parent, if the Partnership breaches in any
material respect any of its representations, warranties,
covenants or agreements contained in this Agreement (other
than any breach caused by the Parent or any affiliate of
the Parent) or if the Special Committee shall have
withdrawn or modified in any manner adverse to the Parent
or Regal its recommendation of the Merger or this Agreement
or if the Financial Advisor shall have withdrawn or
modified in any manner adverse to the Partnership, the
holder of any Units, the Parent or Regal its opinion as
described in Section 4.5; or
(d) by either the Parent or the Partnership (with the
concurrence of the members of the Special Committee, if
terminated by the Partnership):
(i) if the Merger has not been consummated prior
to September 30, 1997; or
(ii) if any court of competent jurisdiction or
other Governmental Entity shall have issued an order,
decree or ruling, or taken any other action
restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action
shall have become final and non-appealable.
8.2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 8.1 hereof,
this Agreement shall forthwith become void, and there shall be no
liability on the part of the Parent, Regal, the General Partner
or the Partnership.
12
<PAGE>
ARTICLE IX
General Provisions
9.1 Amendment. This Agreement may not be amended except
by (i) an instrument in writing signed on behalf of each of the
parties hereto and (ii) prior approval of such amendment by the
members of the Special Committee; provided, however, that after
approval of the Merger by the Unitholders, no amendment may be
made without the further approval of a Majority Interest (as
defined in the Partnership Agreement) which would either (a)
alter or change the Merger Consideration or (b) alter or change
any other terms and conditions of this Agreement, if any of such
alterations or changes, alone or in the aggregate, would
materially adversely affect the Unitholders.
9.2 Extension; Waiver. At any time prior to the
Effective Time, whether before or after the mailing of the Proxy
Statement, any party hereto may (i) extend the time for the
performance of any of the obligations or other acts of any other
party hereto; (ii) waive any inaccuracies in the representations
and warranties contained in this Agreement; and (iii) waive
compliance with any of the agreements of the other parties or
conditions to its own obligations contained in this Agreement.
Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party by a duly authorized
officer and, if given by the Partnership, approved by the members
of the Special Committee. No such consent or waiver of compliance
given by any of the parties hereto shall operate as a consent or
waiver of compliance in respect of any subsequent default, breach
or non-observance, whether of the same or any other nature.
9.3 Nonsurvival of Representations, Warranties and
Agreements. The respective representations and warranties of the
Partnership, the Parent and Regal contained herein shall expire
with, and be terminated and extinguished upon, consummation of
the Merger, and thereafter none of the Partnership, the Parent or
Regal or any officer, director or principal thereof shall be
under any liability whatsoever with respect to any such
representation or warranty. This Section 9.3 shall have no effect
upon any other obligation of the parties hereto, whether to be
performed before or after the consummation of the Merger.
9.4 Entire Agreement; Counterparts. (a) This Agreement
contains the entire agreement among the Partnership, the Parent
and Regal with respect to the subject matter hereof and
supersedes all prior arrangements and understandings, both
written and oral, among such parties with respect thereto.
(b) This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.5 Severability. It is the desire and intent of the
parties that the provisions of this Agreement be enforced to the
fullest extent permissible under the law and public policies
applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any
13
<PAGE>
provision of this Agreement would be held in any jurisdiction to
be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any
other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid,
prohibited or unenforceable in such jurisdiction, the parties
shall adopt an amendment hereto in accordance with the provisions
of Section 9.1 hereof in which such provision, as to such
jurisdiction, is so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity
or enforceability of such provision in any other jurisdiction.
9.6 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to be
sufficient if contained in a written instrument and shall be
deemed to have been duly given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or
mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following
addresses (or at such other addresses as shall be specified by a
party by like notice):
(a) If to the Parent or Regal:
REGAL HOTEL MANAGEMENT, INC.
5775 DTC Boulevard
Englewood, Colorado 80111
Attention: Douglas M. Pasquale, President
Telecopier: (303) 220-2120
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Paul J. Shim, Esq.
Telecopier: (212) 225-3999
(b) If to the Partnership or the General Partner:
AIRCOA HOTEL PARTNERS, L.P.
5775 DTC Boulevard
Englewood, Colorado 80111
Attention: Douglas M. Pasquale, President
Telecopier: (303) 220-2120
14
<PAGE>
with a copy to:
Holland & Hart LLP
Suite 3200
555 Seventeenth Street
Denver, Colorado 80201
Attention: Michael S. Quinn, Esq.
Telecopier: (303) 295-8261
and
Hire & Associates
1383 Solitude Lane
Evergreen, Colorado 80439
Attention: Mr. James W. Hire
Telecopier: (303) 670-9967
and
Miramar Asset Management, Inc.
617 Veterans Boulevard
Suite 212
Redwood City, California 94063
Attention: Mr. Anthony C. Dimond
Telecopier: (415) 599-9234
All such notices and other communications shall be deemed to have
been received (a) in the case of personal delivery, on the date
of such delivery if received prior to 5:00 p.m. New York City
time on such date, (b) in the case of a telecopy, when the party
receiving such telecopy shall have confirmed receipt of the
communication, (c) in the case of delivery by nationally
recognized overnight courier, on the Business Day following
dispatch and (d) in the case of mailing, on the third Business
Day following such mailing.
9.7 Interpretation. When a reference is made in this
Agreement to subsidiaries of Regal Holdings, the Parent, Regal or
the Partnership, the word "subsidiaries" means any corporation
more than 50% of whose outstanding voting securities, or any
partnership, joint venture or other entity more than 50% of whose
total equity interest, is directly or indirectly owned by the
Parent, Regal, or the Partnership, as the case may be. For
purposes of this Agreement, the Partnership shall not be deemed
to be an affiliate or subsidiary of the Parent or Regal.
9.8 Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.9 Assignment. This Agreement is not intended to confer
upon any person other than the parties any rights or remedies hereunder.
This Agreement shall not be assigned by operation of law or otherwise;
provided, however, that notwithstanding the foregoing, the parties
15
<PAGE>
hereto acknowledge that Regal shall have the unrestricted
right to assign all of its respective rights hereunder to a
wholly-owned affiliate of the Parent or Regal; provided, further,
that notwithstanding such assignment, Regal shall not be released
from its obligations hereunder nor shall such assignment
prejudice the rights of holders of Units entitled to receive
payment pursuant to Section 1.6(a) hereof to receive such payment
for Units properly delivered to the Payment Agent and accepted
for payment.
9.10 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware,
without reference to the conflicts of laws provisions thereof.
9.11 Consent to Jurisdiction; Service of Process. (a)
The parties hereto irrevocably submit to the jurisdiction of the
Court of Chancery of the State of Delaware or the U.S. District
Court for the District of Delaware over any dispute arising out
of or relating to this Agreement or any of the transactions
contemplated hereby and each party hereby irrevocably agrees that
all claims in respect of such dispute or proceeding shall be
heard and determined in such court. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable
law, any objection which they may now or hereafter have to the
laying of venue of any such dispute brought in such court or any
defense of inconvenient forum for the maintenance of such
dispute. Each of the parties hereto agrees that a judgment in any
such dispute may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to
process being served by any party to this Agreement in any suit,
action or proceeding of the nature specified in subsection (a)
above by mailing a copy thereof in accordance with the provisions
of Section 9.6 hereof.
9.12 Limitation of Liability. In no event shall any
partner (other than the General Partner) or representative of the
Partnership or any direct or indirect stockholder, officer,
director, partner or representative of the General Partner or any
other such person, be personally liable for any obligation of the
Partnership or the General Partner under this Agreement. In no
event shall recourse with respect to the obligations under this
Agreement of the Partnership or the General Partner be had to the
assets or business of any person other than the Partnership or
the General Partner, respectively.
9.13 Limitation of Remedies. The sole remedy of any
party hereto for breach by any other party of a covenant,
representation or warranty made under this Agreement shall be
limited to termination of this Agreement.
16
<PAGE>
IN WITNESS WHEREOF, the Partnership, the General
Partner, the Parent and Regal have caused this Agreement to be
executed as of the date first written above by their respective
officers thereunder duly authorized.
AIRCOA HOTEL PARTNERS, L.P.
By AIRCOA Hospitality Services, Inc.,
its General Partner
By: /s/
------------------------------------
Name:
Title:
By: /s/
------------------------------------
Name:
Title:
AIRCOA HOSPITALITY SERVICES, INC.
By: /s/
------------------------------------
Name:
Title:
By: /s/
------------------------------------
Name:
Title:
REGAL HOTEL MANAGEMENT, INC.
By: /s/
------------------------------------
Name:
Title:
By: /s/
------------------------------------
Name:
Title:
REGAL MERGER LIMITED PARTNERSHIP
By: Regal Hotel Management, Inc.,
its General Partner
By: /s/
------------------------------------
Name:
Title:
By: /s/
------------------------------------
Name:
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> APR-01-1997 APR-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> 489 2,350
<SECURITIES> 0 0
<RECEIVABLES> 3,674 3,305
<ALLOWANCES> 0 0
<INVENTORY> 397 373
<CURRENT-ASSETS> 4,982 6,544
<PP&E> 101,258 98,177
<DEPRECIATION> (37,610) (35,501)
<TOTAL-ASSETS> 69,564 70,131
<CURRENT-LIABILITIES> 7,149 8,260
<BONDS> 50,191 50,604
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 11,592 10,761
<TOTAL-LIABILITY-AND-EQUITY> 69,564 70,131
<SALES> 12,816 13,053
<TOTAL-REVENUES> 12,816 13,053
<CGS> 0 0
<TOTAL-COSTS> (11,008) (11,039)
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,165) (1,164)
<INCOME-PRETAX> 643 850
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 643 850
<EPS-PRIMARY> 0<F1> 0<F2>
<EPS-DILUTED> 0 0<F3>
<FN>
<F1>Class A Unitholders .07
Class B Unitholders .31
<F2>Class A Unitholders .10
Class B Unitholders .32
<F3>Class A Unitholders .07
</FN>
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
May 8, 1997
AIRCOA HOTEL PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
State of Delaware
(State or other jurisdiction of incorporation)
1-9563 84-1042607
(Commission File Number) (IRS Employer Identification No.)
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
<PAGE>
Item 5. Other Events.
The following press release was issued on May 5, 1997.
AIRCOA HOTEL PARTNERS, L.P.
AGREES TO MERGER TRANSACTION
Englewood, Colorado, May 5, 1997 -- AIRCOA Hotel Partners, L.P. (AMEX:AHT), a
Denver-based master limited partnership (the "Partnership" or "AHP") engaged in
the ownership of hotels, announced today that it has agreed to be merged with a
subsidiary of Regal Hotel Management, Inc. ("RHM"). In the merger, all Class A
Units and Class B Units in the Partnership not currently held by RHM or its
affiliates will be converted into the right to receive $3.10 per Class A Unit
and $20.00 per Class B Unit in cash.
The acquisition would be made by means of a merger of a subsidiary limited
partnership owned by RHM into AHP. The completion of the merger and the
resulting acquisition of the interests of unaffiliated unitholders is subject to
the approval of the merger by unitholders owning a majority interest of the
Partnership's units at a special meeting.
Presently, RHM and its affiliates own 71% of the Class A Units and 93.6% of the
Class B Units. RHM and its affiliates have agreed to vote in favor of the merger
thus assuring its approval. Although no date has been set for the special
meeting, it is presently expected that the meeting will be held, and the merger
will be consummated, during the third quarter of 1997.
RHM had originally proposed to acquire the interests of non-affiliated
unitholders in the Partnership in December 1996 for $2.35 per Class A Unit and
$16.80 per Class B Unit. AHP referred consideration of RHM's proposal to a
special committee comprised of independent members of the Partnership's Advisory
Committee. Pursuant to negotiations between the special committee and RHM, RHM
agreed to increase the merger consideration to $3.10 per Class A Unit and $20.00
per Class B Unit. The special committee determined that such increased merger
consideration is fair to, and in the best interests of, unaffiliated unitholders
of the Partnership and recommended approval of the merger transaction by the
Board of Directors of the Partnership's General Partner.
The Board of Directors approved RHM's revised merger proposal at a meeting held
May 2.
In conjunction with approval of the merger transaction, the General Partner has
amended the AHP Partnership Agreement in order to defer the mandatory conversion
of Class B Units into Class A Units. The amendment provides that the 250,000
Class B Units scheduled to convert into additional Class A Units during 1997
will convert on the earliest to occur of (i) any termination of the definitive
merger agreement; (ii) the record date for any vote of the Class A Unitholders,
(other than the vote on merger), (iii) the record date for any distribution by
the Partnership to holders of Class A Units and (iv) September 30, 1997. The
number of Class A Units to be received upon conversion of a Class B Unit will be
determined by dividing $20.00 by the average of the closing prices of Class A
Units for the five trading days ending on May 30, 1997. In light of the
likelihood of completion of the merger, the General Partner adopted this
amendment in
<PAGE>
order to avoid administrative and other issues arising from the issuance of
additional Class A Units pursuant to the conversion.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA Hospitality Services, Inc.,
General Partner
Date: May 8, 1997 By:/s/ Douglas M. Pasquale
---------------- ----------------------------------
Douglas M. Pasquale
President and Director
(Principal Executive and
Financial Officer)
