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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 0-23732
WINSTON HOTELS, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1624289
(State of incorporation) (I.R.S. Employer Identification Number)
2209 CENTURY DRIVE, SUITE 300
RALEIGH, NORTH CAROLINA 27612
(Address of principal executive offices) (Zip Code)
(919) 510-6010
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Common Stock, $0.01 par value per share New York Stock Exchange
Preferred Stock, $0.01 par value per share New York Stock Exchange
(Title of Class) (Name of Exchange Upon Which Registered)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulations S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock, $0.01 par
value per share, at March 15, 1999, held by those persons deemed by the
registrant to be non-affiliates was approximately $133,379,000.
As of March 15, 1999, there were 16,333,980 shares of the registrant's
Common Stock, $0.01 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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<CAPTION>
Document Where Incorporated
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1. Proxy Statement for Annual Meeting of Shareholders to be held on May 18, 1999 Part III
</TABLE>
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WINSTON HOTELS, INC.
FORM 10-K ANNUAL REPORT
INDEX
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Page
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PART I.
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 9
ITEM 3. LEGAL PROCEEDINGS 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 17
ITEM 6. SELECTED FINANCIAL DATA 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 21
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 27
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 27
ITEM 11. EXECUTIVE COMPENSATION 27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 27
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 27
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K 28
SIGNATURES
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PART I.
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Winston Hotels, Inc. ("WHI") is an equity real estate investment trust
("REIT") organized on June 2, 1994, that through WINN Limited Partnership (the
"Partnership") owns 51 hotels (the "Current Hotels") having an aggregate of
6,904 rooms as of December 31, 1998. WHI owned a 90.37% partnership interest in
the Partnership as of December 31, 1998 and is its sole general partner.
References to the "Company" herein refer to WHI and the Partnership, unless
otherwise indicated or unless the context requires otherwise.
In 1994, WHI completed an initial public offering (the "IPO") of Common
Stock (the "Common Stock") and used the majority of the offering proceeds to
acquire one hotel property and a 93.96% general partnership interest in the
Partnership. The Partnership used a substantial portion of the proceeds from WHI
to acquire nine hotel properties (together with the hotel acquired by WHI, the
"Initial Hotels"). During 1994, the Company acquired six additional hotels (the
"1994 Acquired Hotels") utilizing proceeds from the IPO and borrowings under its
line of credit. In 1995, WHI completed a second public offering (the "Follow-on
Offering") and used the proceeds to purchase five additional hotels (the "1995
Acquired Hotels"). In 1996, WHI completed an additional follow-on offering and
used the proceeds primarily to fund a portion of the purchase price of five of
the ten hotel properties acquired in 1996 (collectively the ten hotels are the
"1996 Acquired Hotels") . In 1997, WHI completed an offering of 3,000,000 shares
of 9.25% Series A Cumulative Preferred Stock ($25 liquidation preference per
share) and used the net proceeds of approximately $71,500,000 to pay down
existing debt. During 1997, the Company also acquired seven additional hotel
properties (the "1997 Acquired Hotels") utilizing borrowings under its line of
credit. During 1998, the Company acquired eight hotels and opened five
internally developed hotels (the "1998 Hotels") utilizing borrowings under its
line of credit as well as under various demand notes.
Under the REIT qualification requirements of the Internal Revenue Code,
REITs generally must lease their hotels to third party operators. Therefore, the
Company leases 49 of the 51 Current Hotels to CapStar Winston Company, L.L.C.
("CapStar Winston"), one of the Current Hotels to Bristol Hotels & Resorts, Inc.
("Bristol") and one of the Current Hotels to Prime Hospitality Corp. ("Prime").
All 51 of the Current Hotels are leased pursuant to leases that provide for rent
payments based, in part, on revenues from the Current Hotels (the "Percentage
Leases"). Under the terms of the Percentage Leases, the lessees are obligated to
pay the Company the greater of base rent or percentage rent ("Percentage Rent").
The Percentage Leases are designed to allow the Company to participate in the
growth in revenues at the Current Hotels by providing that a portion of each
Current Hotel's room revenues in excess of specified amounts will be paid to the
Company as Percentage Rent. CapStar Winston operates 39 of the 49 Current Hotels
it leases from the Company and Interstate Management and Investment Corporation
("IMIC") and Promus Hotels, Inc. ("Promus"), operate nine hotels and one hotel,
respectively, under management agreements with CapStar Winston.
Prior to November 17, 1997, 38 of the Current Hotels were leased pursuant to
the Percentage Leases to Winston Hospitality, Inc. On November 17, 1997 and
November 24, 1997, CapStar Management Company, L.P. purchased substantially all
of the assets and assumed certain liabilities of Winston Hospitality, Inc.,
including the 38 existing leases. Concurrent with these transactions, the leases
were assigned to CapStar Winston, an affiliate of CapStar Management Company,
L.P.
NARRATIVE DESCRIPTION OF BUSINESS
Growth Strategy
The Company's growth strategy is to enhance shareholder value by increasing
cash available for distribution per share of Common Stock through: (i)
participating in any increased room revenue from the Current Hotels and any
subsequently acquired or developed hotels through Percentage Leases; (ii)
acquiring additional hotels that meet the Company's investment criteria; and
(iii) selectively developing hotels and hotel additions as market conditions
warrant.
Internal Growth Strategy
The Company participates in any increased room revenue from the Current
Hotels through Percentage Leases. The Company believes that internal growth,
through increases in Percentage Rent has and, in the future, may result from:
(i) continued sales and marketing programs by the lessees; (ii) completion of
refurbishment projects as needed at the Current Hotels; (iii) maintaining hotel
franchises with demonstrated market acceptance and national reservation systems;
and (iv) continuation of the industry-wide trend of increasing average daily
room rate ("ADR") and revenue per available room ("REVPAR").
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The Percentage Leases provide that a percentage of room revenues in
specified ranges is paid as Percentage Rent. For most leases, the percentage of
room revenues paid as Percentage Rent increases as a higher specified level of
room revenues is achieved. Pursuant to each Percentage Lease, base rent and the
ranges of room revenues specified for purposes of calculating Percentage Rent
are adjusted on a quarterly or annual basis for inflation beginning on the first
day after the first full fiscal year of the Percentage Lease, based on changes
in the United States Consumer Price Index ("CPI").
Acquisition Strategy
The Company intends to acquire additional hotel properties with strong
national franchise affiliations in the mid-scale and upscale market segments, or
hotel properties with the potential to obtain such franchise affiliations. In
particular, the Company will consider acquiring limited-service hotels such as
Hampton Inn and Fairfield Inn hotels; full-service hotels such as Hilton Garden
Inn, Courtyard by Marriott and Holiday Inn hotels; and extended-stay hotel
properties such as Homewood Suites, Hampton Inn and Suites, Residence Inn,
Staybridge by Holiday Inn and Hilton Residential Suites hotels (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Forward Looking Statements").
The Company intends to consider investments in hotel properties that meet
one or more of the following criteria: (i) properties in locations with
relatively high demand for rooms, a relatively low supply of hotel properties
and barriers to easy entry into the hotel business, such as a scarcity of
suitable sites or zoning restrictions; (ii) successful hotels available at
favorable prices; and (iii) newly developed hotels that the developer does not
intend to own. The Company believes its relationship with each lessee and
franchisor will provide additional potential investment opportunities,
opportunities the Company may not otherwise have had.
Additional investments in hotel properties may be made through the
Partnership, directly by WHI or with entities affiliated with the Company. The
Company's ability to acquire additional hotel properties and develop hotels
depends primarily on its ability to obtain additional debt financing, proceeds
from subsequent issuances of Common Stock or other securities, proceeds from the
sale of hotel properties or co-investments from other investors.
Development Strategy
The Company intends to pursue hotel development as suitable opportunities
arise. The Company may finance 100% of such development or seek partners who
would co-invest in development or rehabilitation joint ventures. The Company
intends to consider development of hotels with strong national franchise
affiliations in markets where the Company believes that carefully timed and
managed development will yield returns to the Company that exceed returns from
any available hotels in those markets that meet the Company's acquisition
criteria (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Forward Looking Statements").
During 1998, the Company opened five internally developed hotels. The
following table sets forth certain information for each project.
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HOTEL AND LOCATION ROOMS DEVELOPMENT COSTS (APPX.) COMPLETION DATE
- ------------------ ----- ------------------------- ---------------
($ in thousands)
<S> <C> <C> <C>
Homewood Suites
Crabtree Valley
Raleigh, NC 137 $13,100 March 9, 1998
Homewood Suites
Lake Mary, FL 112 10,000 May 5, 1998
Homewood Suites
Alpharetta, GA 112 10,200 May 22, 1998
Courtyard by Marriott
Winston-Salem, NC 122 8,000 October 3, 1998
Homewood Suites
Durham, NC 96 9,500 November 4, 1998
</TABLE>
Operations and Property Management
CapStar Winston currently leases 49 of the Current Hotels, 39 of which they
also operate. IMIC manages nine of the Current Hotels and Promus manages one of
the Current Hotels (collectively the "Property Managers") pursuant to management
agreements with
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CapStar Winston with respect to each of such hotels. Bristol leases and
operates one of the Current Hotels and Prime leases and operates one of the
Current Hotels. The lessees and the Property Managers seek to increase revenues
at the Current Hotels by using established systems to manage the Current Hotels
for marketing, rate achievement, expense management, physical facility
maintenance, human resources, accounting and internal auditing. They are trained
in all aspects of hotel operations, including negotiation of prices with
corporate and other clients and responsiveness to marketing requirements in
their particular markets, with particular emphasis placed on customer service.
The lessees and the Property Managers employ a mix of marketing techniques
designed for each specific Current Hotel, which include individual toll-free
lines, cross-marketing of the Current Hotels' billboards and direct marketing,
as well as taking advantage of national advertising by the franchisors of the
Current Hotels.
The lessees lease the Current Hotels pursuant to the Percentage Leases.
Under the Percentage Leases, the lessees generally are required to perform all
operational and management functions necessary to operate the Current Hotels.
The lessees are entitled to all profits and cash flow from the Current Hotels
after payment of rent under the Percentage Leases and other operating expenses,
including, in the case of the ten Current Hotels managed by the Property
Managers, the management fee payable to the Property Managers. The lessees,
their affiliates and the Property Managers may manage other hotel properties in
addition to hotels owned by the Company, however, the lessees and their
affiliates may not build or develop a hotel or motel within five miles of a
leased Company hotel.
CapStar Winston is a wholly owned subsidiary of MeriStar Hotels and Resorts,
Inc. ("MeriStar"), a New York Stock Exchange company. As of February 2, 1999,
MeriStar, the nation's largest independent hotel management company, leased or
managed (including five under contract) 216 hotels with 44,831 rooms in 32
states, the District of Columbia, Canada and the U.S.
Virgin Islands.
IMIC, a hotel development and management company, operates nine of the
Current Hotels under separate management agreements with CapStar Winston. Each
year, CapStar Winston pays IMIC a base management fee for each Current Hotel
managed by IMIC based on a percentage of the budgeted gross operating profit for
that year with incentive amounts based on actual gross operating profits if they
exceed budgeted amounts. IMIC has agreed that each year it will spend a
specified percentage of the gross revenues of each Current Hotel managed by IMIC
on repairs and maintenance of the hotel. CapStar Winston and the Company have
retained the right to control the expenditure of funds budgeted for capital and
non-routine items, including, at their discretion, approving plans and selecting
and overseeing contractors and other vendors. IMIC currently operates 28 hotels
in six states, including 22 limited-service hotels and six full-service,
convention or resort hotels.
Promus manages one of the Current Hotels under a management agreement with
CapStar Winston. Each year, CapStar Winston pays Promus a management fee based
on a percentage of the gross operating profit for the hotel managed by Promus
with certain incentive amounts.
Bristol, a New York Stock Exchange company, is one of the leading independent
hotel operating companies in the United States. As of February 17, 1999, Bristol
operated 120 primarily full-service hotels in the upscale and midscale segments
of the hotel industry containing more than 32,000 rooms. Bristol is the largest
franchisee of Bass Hotels & Resorts (formerly Holiday Hospitality) branded
hotels including Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn
Express hotels.
Prime, a New York Stock Exchange company, is one of the nation's premier
lodging companies. Prime operates three proprietary brands, AmeriSuites
(all-suites), HomeGate Studios & Suites (extended-stay) and Wellesley Inns
(limited-service). It also owns and/or manages hotels operated under franchise
agreements with national hotel chains. As of February 4, 1999, Prime Hospitality
Corporation owned 151 hotels, operated 28 hotels under lease agreements with
REITs and managed 10 hotels from third parties.
Investments by Shareholders of Former Lessee
In November 1997, CapStar purchased substantially all of the assets and
assumed certain liabilities of Winston Hospitality, Inc., including 38 of the
Current Hotels' leases. In connection with the transaction, Robert W. Winston,
III and John B. Harris, Jr., shareholders of Winston Hospitality, Inc. owning
90% and 10% respectively, entered into an agreement to use their best efforts to
purchase an aggregate of 400,000 shares of the Company's Common Stock, par value
$0.01 per share, prior to November 24, 1999. If such investment is not made
prior to this date, the Company has the right to require Messrs. Winston and
Harris to purchase the number of shares equal to the difference of 400,000 less
the aggregate number of shares purchased by them during such two-year period. As
of February 28, 1999, 53,900 shares had been purchased.
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Franchise Agreements
The Company anticipates that most of the additional hotel properties in
which it invests will be operated under franchise licenses. Franchisors provide
a variety of benefits for franchisees which include national advertising,
publicity and other marketing programs designed to increase brand awareness,
training of personnel, continuous review of quality standards and centralized
reservation systems.
The hotel franchise licenses generally specify certain management,
operational recordkeeping, accounting, reporting and marketing standards and
procedures with which the lessees must comply. The franchise licenses obligate
the lessees to comply with the franchisors' standards and requirements with
respect to training of operational personnel, safety, maintaining specified
insurance, the types of services and products ancillary to guest room services
that may be provided, display of signs, and the type, quality and age of
furniture, fixtures and equipment included in guest rooms, lobbies and other
common areas.
Of the Current Hotels, two of the franchise licenses expire in 1999, one
expires in 2003, two expire in 2006, one expires in 2007, three expire in 2008,
three expire in 2009, two expire in 2010, three expire in 2011, two expire in
2014, one expires in 2015, three expire in 2016, 18 expire in 2017 and 10 expire
in 2018. The franchise agreements provide for termination at the franchisor's
option upon the occurrence of certain events, including the lessees' failure to
pay royalties and fees or perform its other covenants under the license
agreement, bankruptcy, abandonment of the franchise, commission of a felony,
assignment of the license without the consent of the franchisor, or failure to
comply with applicable law in the operation of the relevant Current Hotel. The
lessees are entitled to terminate the franchise license only by giving at least
12 months' notice and paying a specified amount of liquidated damages. The
license agreements will not renew automatically upon expiration. The lessees are
responsible for making all payments under the franchise agreements to the
franchisors. Under the franchise agreements, the lessees pay a franchise fee of
an aggregate of between 3% and 5% of room revenues, plus additional fees that
amount to between 3% and 4% of room revenues from the Current Hotels.
Prior to the sale of assets by Winston Hospitality, Inc., the Company served
as guarantor of certain obligations of Winston Hospitality, Inc. under three
franchise agreements between Winston Hospitality, Inc. and Holiday Inn. Although
CapStar Winston entered into new 18-month franchise agreements for the operation
of the three Holiday Inn hotels, Winston Hospitality, Inc. and the Company
remain obligated to Holiday Inn for certain liquidated damages in the event of a
termination of the Holiday Inn franchise agreements prior to the expiration of
the 18-month term. CapStar Winston and its affiliates shall indemnify the
Company and Winston Hospitality, Inc. for certain obligations arising from
CapStar Winston or its affiliates' failure to satisfy certain conditions in its
franchise agreements with Holiday Inn.
Competition
The hotel industry is highly competitive with various participants competing
on the bases of price, level of service and geographic location. The Current
Hotels compete with other hotel properties in their geographic markets. Some of
the Company's competitors may have greater marketing and financial resources
than the Company, the lessees, and the Property Managers. Several of the Current
Hotels are located in areas in which they may compete with other Current Hotels
for business. The Company competes for acquisition opportunities with entities
that may have greater financial resources than the Company. These entities may
generally be able to accept more risk than the Company can prudently manage,
including risks with respect to the creditworthiness of a hotel operator.
Employees
The Company had 23 employees as of February 28, 1999.
Environmental Matters
Under various federal, state and local laws and regulations, an owner or
operator of real estate may be liable for the costs of removal or remediation of
certain hazardous or toxic substances on such property. Such laws often impose
such liability without regard to whether the owner knew of, or was responsible
for, the presence of hazardous or toxic substances. Furthermore, a person that
arranges for the disposal or transports for disposal or treatment of a hazardous
substance at another property may be liable for the costs of removal or
remediation of hazardous substances released into the environment at that
property. The costs of remediation or removal of such substances may be
substantial, and the presence of such substances, or the failure to promptly
remediate such substances, may adversely affect the owner's ability to use or
sell such real estate or to borrow using such real estate as collateral. Certain
environmental laws and common law principles could be used to impose liability
for the release of and exposure to hazardous substances, including
asbestos-containing materials ("ACMs") into the air, and third parties may seek
recovery from owners or operators of real properties for personal injury or
property damage associated with exposure to released hazardous substances,
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including ACMs. In connection with the ownership and operation of the Current
Hotels, the Company, the lessees, IMIC or Promus, as the case may be, may be
potentially liable for such costs.
Phase I environmental site assessments ("ESAs") were obtained on all of the
Current Hotels. The Phase I ESAs were intended to identify potential sources of
contamination for which the Current Hotels may be responsible and to assess the
status of environmental regulatory compliance. The Phase I ESAs included
historical reviews of the Current Hotels, reviews of certain public records,
preliminary investigations of the sites and surrounding properties, screening
for the presence of asbestos, PCBs and underground storage tanks, and the
preparation and issuance of a written report. The Phase I ESAs did not include
invasive procedures, such as soil sampling or ground water analysis. The Phase I
ESA reports have not revealed any environmental condition, liability or
compliance concern that the Company believes would have a material adverse
effect on the Company's business, assets or results of operations, nor is the
Company aware of any such condition, liability or compliance concern.
Nevertheless, it is possible that these reports do not reveal all environmental
conditions, liabilities or compliance concerns or that there are material
environmental conditions, liabilities or compliance concerns that arose at a
Current Hotel after the related Phase I ESA report was completed of which the
Company is unaware. Moreover, no assurances can be given that (i) future laws,
ordinances or regulations will not impose any material environmental liability,
or (ii) the current environmental condition of the Current Hotels will not be
affected by the condition of the properties in the vicinity of the Current
Hotels (such as the presence of leaking underground storage tanks) or by third
parties unrelated to the Company.
The Company believes that the Current Hotels are in compliance in all
material respects with all federal, state and local laws, ordinances and
regulations regarding hazardous or toxic substances and other environmental
matters. The Company has not been notified by any governmental authority of any
material noncompliance, liability or claim relating to hazardous or toxic
substance or other environmental substances in connection with any of its
properties.
Tax Status
The Company elected to be taxed as a REIT under Sections 856-860 of the
Internal Revenue Code of 1986, as amended (the "Code"), effective for its short
taxable year ended December 31, 1994. The Company believes that it qualifies for
taxation as a REIT, and with certain exceptions, the Company will not be subject
to tax at the corporate level on its taxable income that is distributed to the
shareholders of the Company. A REIT is subject to a number of organizational and
operational requirements, including a requirement that it currently distribute
at least 95% of its annual taxable income. Failure to qualify as a REIT will
render the Company subject to federal income tax (including any applicable
minimum tax) on its taxable income at regular corporate rates and distributions
to the shareholders in any such year will not be deductible by the Company.
Although the Company does not intend to request a ruling from the Internal
Revenue Service (the "Service") as to its REIT status, the Company has obtained
the opinion of its legal counsel that the Company qualifies as a REIT, which
opinion is based on certain assumptions and representations and is not binding
on the Service or any court. Even if the Company qualifies for taxation as a
REIT, the Company may be subject to certain state and local taxes on its income
and properties.
Seasonality
The Current Hotels' operations historically have been seasonal in nature,
reflecting higher REVPAR during the second and third quarters. This seasonality
and the structure of the Percentage Leases, which provide for a higher
percentage of room revenues above stated equal quarterly levels to be paid as
Percentage Rent, can be expected to cause fluctuations in the Company's
quarterly lease revenue under the Percentage Leases.
Executive Officers of the Registrant
The following table lists the executive officers of the Company:
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NAME AGE POSITION
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Charles M. Winston 69 Chairman of the Board of Directors
Robert W. Winston, III 37 Chief Executive Officer
James D. Rosenberg 45 President, Chief Financial Officer, Chief Operating Officer
and Secretary
Joseph V. Green 48 Executive Vice President - Acquisitions and Finance
Kenneth R. Crockett 42 Executive Vice President of Development
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CHARLES M. WINSTON. Charles Winston has served as Chairman of the Board of
Directors since March 15, 1994. Mr. Winston is a native of North Carolina and a
graduate of the University of North Carolina at Chapel Hill with an A.B. degree.
He was Chairman of the Board of WJS Management, Inc., the former operator of
nine of the Initial Hotels, and a principal executive officer of several
corporations, which developed a total of ten hotels purchased by the Company in
1994 and 1996, positions he had held since 1987. Mr. Winston has more than 35
years of experience in developing and operating full service restaurants. Mr.
Winston also serves on the board of directors of BB&T Corporation. Mr. Winston
is Robert Winston's father and brother of James Winston, a director.
ROBERT W. WINSTON, III. Robert Winston has served as Chief Executive Officer
and Director of the Company since March 15, 1994. Mr. Winston also served as the
Company's President from March 15, 1994 through January 14, 1999 and as
Secretary for the periods from March 1994 through May 1995 and from October 1997
until May 5, 1998. Mr. Winston is a native of North Carolina and a graduate of
the University of North Carolina at Chapel Hill with a B.A. degree in economics.
From 1988 to 1991 he was employed by Hampton Inns Corporation where he was
involved in the management of several hotels. In 1991, Mr. Winston founded a
hotel management company and purchased the Hampton Inn in Wilmington, North
Carolina. His company managed that hotel from 1991 until the closing of the IPO
in June 1994. Mr. Winston developed, directly or through affiliated entities,
three hotels purchased by the Company in 1996. Mr. Winston is Charles Winston's
son and James Winston's nephew.
JAMES D. ROSENBERG. Mr. Rosenberg assumed the title of President on January
14, 1999. Mr. Rosenberg has also served as Chief Operating Officer and Chief
Financial Officer since January 5, 1998 and as Secretary from May 5, 1998. Mr.
Rosenberg is a CPA and a graduate of Presbyterian College and received an MBA
from the University of South Carolina. Prior to joining the Company, Mr.
Rosenberg held the position of Senior Vice President with Holiday Inn Worldwide
since 1994 where he was responsible for managing 85 hotels in seven countries.
Prior to joining the Holiday Inn organization, Mr. Rosenberg was a partner in
Sage Hospitality Resources and served as Executive Vice President and Chief
Financial Officer of the Denver-based hospitality firm. From 1989 to 1993, Mr.
Rosenberg served as Chief Operating Officer of Crossroads Hospitality, a
division of Pittsburgh-based Interstate Hotel Corporation. Mr. Rosenberg started
his career with Price Waterhouse, L.L.P.
JOSEPH V. GREEN. Mr. Green assumed the responsibilities of Executive Vice
President - Acquisitions and Finance effective January 1, 1998, after having
advised Winston Hospitality, Inc. on matters regarding hotel acquisitions and
finance since 1993, including the initial public offering of Winston Hotels,
Inc. Mr. Green is a graduate of East Carolina University, was awarded his J.D.
degree from Wake Forest University School of Law and received a Master of Laws
in Taxation from Georgetown University.
KENNETH R. CROCKETT. Mr. Crockett was appointed Senior Vice President of
Development of the Company in September 1995 and Executive Vice President of
Development in January 1998. Mr. Crockett is a graduate of the University of
North Carolina at Chapel Hill with a B.S. degree in Business Administration.
Prior to joining the Company, Mr. Crockett was an Associate Partner for project
development in commercial real estate at Capital Associates, a real estate
development firm located in the Raleigh, North Carolina area. From 1984 to 1986,
Mr. Crockett worked for the Oberlin Company where he was responsible for the
development and operation of nine limited-service hotels. Prior to 1984, Mr.
Crockett worked for several different financial institutions.
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ITEM 2. PROPERTIES
The following table sets forth certain unaudited pro forma information with
respect to the Current Hotels:
<TABLE>
<CAPTION>
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1998 1997
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Room Lease Room Lease
# Revenues Occupancy Revenues # Revenues Occupancy Revenues
Rooms ($000) ADR % ($000) Rooms ($000) ADR % ($000)
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hampton Inns
Boone, NC 95 $ 1,842 $ 71.16 74.65% $ 758 95 $ 1,819 $64.17 81.77% $ 751
Brunswick, GA 128 2,265 55.67 87.08% 954 128 2,092 56.96 79.14% 849
Cary, NC 130 2,455 65.89 78.52% 1,126 130 2,592 64.16 85.15% 1,230
Charlotte, NC 125 2,831 76.11 81.52% 1,368 125 2,695 70.53 83.75% 1,288
Chester, VA 66 1,396 69.47 83.42% 626 66 1,360 68.02 83.02% 607
Duncanville, TX 119 1,425 49.40 66.41% 519 119 1,425 47.76 68.68% 527
Durham, NC 137 2,858 69.64 82.08% 1,308 137 2,921 69.50 84.03% 1,358
Gwinnett, GA (Hampton Inn & Suites) 136 2,728 77.28 71.11% 1,386 135 2,696 72.99 74.60% 1,373
Hilton Head, SC 124 2,285 71.08 71.03% 923 125 2,062 65.16 69.90% 786
Jacksonville, NC 120 2,033 57.83 80.26% 860 120 1,955 53.62 83.24% 816
Las Vegas, NV* 128 1,010 60.72 57.50% 500 -- -- -- -- --
Perimeter, GA 131 2,641 78.03 70.78% 1,356 131 2,610 77.39 70.54% 1,343
Raleigh, NC 141 2,966 70.46 81.79% 1,423 141 2,936 66.60 85.65% 1,411
Southern Pines, NC 126 1,968 57.09 74.95% 793 126 1,887 53.72 76.39% 749
Southlake, GA 124 2,097 63.03 73.51% 838 124 2,107 63.77 72.99% 854
W. Springfield, MA 126 2,484 74.99 72.03% 1,122 126 2,291 70.74 70.42% 994
White Plains, NY 156 4,482 97.34 80.86% 2,235 156 4,000 91.18 77.04% 1,908
Wilmington, NC 118 2,275 66.93 78.93% 974 118 2,304 67.30 79.49% 1,001
Comfort Inns
Augusta, GA 123 1,471 52.76 62.10% 514 123 1,462 50.47 64.53% 517
Charleston, SC 128 2,548 70.40 77.47% 1,211 128 2,426 68.21 76.13% 1,138
Chester, VA 122 2,105 65.95 71.61% 960 123 2,131 67.09 70.76% 985
Clearwater/St. Petersburg, FL 120 1,850 53.18 79.42% 708 120 1,739 51.76 76.70% 644
Durham, NC 138 2,797 70.39 78.89% 1,359 138 2,887 70.64 81.14% 1,429
Fayetteville, NC 176 2,358 54.45 67.41% 1,081 176 2,487 52.24 74.10% 1,179
Greenville, SC 190 1,758 47.09 53.83% 569 190 1,540 49.90 44.43% 385
London, KY (Comfort Suites) 62 955 55.83 75.59% 408 62 900 54.14 73.50% 374
Orlando, FL (Comfort Suites) 214 4,027 59.35 86.70% 1,840 215 4,117 59.89 87.60% 1,908
Raleigh, NC 149 1,636 48.52 61.99% 556 149 1,646 49.85 60.72% 569
Wilmington, NC 146 2,423 57.13 79.59% 1,040 146 2,470 59.45 77.98% 1,081
Homewood Suites
Alpharetta, GA* 112 1,229 91.51 53.53% 577 -- -- -- -- --
Cary, NC 120 3,363 91.92 83.53% 2,060 140 3,448 80.03 84.31% 2,221
Clear Lake, TX 92 2,636 96.37 81.46% 1,237 92 2,514 93.26 80.29% 1,163
Durham, NC* 96 171 72.95 42.10% 135 -- -- -- -- --
Lake Mary, FL* 112 1,398 87.40 59.26% 650 -- -- -- -- --
Phoenix, AZ* 126 997 69.87 52.92% 617 -- -- -- -- --
Raleigh, NC* 137 1,720 82.55 51.21% 954 -- -- -- -- --
Holiday Inns
Abingdon, VA (Holiday Inn Express) 81 1,397 62.55 75.55% 675 81 1,292 58.38 75.11% 607
Clearwater, FL (Holiday Inn Express) 127 2,196 63.48 74.62% 937 127 2,229 58.73 81.88% 966
Dallas, TX (Holiday Inn Select) 244 4,503 74.66 67.73% 2,126 244 4,695 73.48 71.75% 2,263
Secaucus, NJ# 160 5,305 109.79 82.74% 2,748 160 5,001 97.02 85.44% 2,549
Tinton Falls, NJ# 171 3,946 86.75 72.88% 1,286 171 3,554 78.90 72.16% 1,098
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Room Lease Room Lease
# Revenues Occupancy Revenues # Revenues Occupancy Revenues
Rooms ($000) ADR % ($000) Rooms ($000) ADR % ($000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Courtyard by Marriott
Ann Arbor, MI 160 3,855 87.16 75.73% 1,780 160 3,951 81.47 82.83% 1,846
Houston, TX 198 3,300 75.08 60.56% 1,456 202 3,489 74.20 63.78% 1,596
Wilmington, NC 128 2,517 71.87 74.97% 1,069 128 2,377 72.32 70.34% 978
Winston-Salem, NC* 122 395 73.50 48.94% 186 -- -- -- -- --
Hilton Garden Inns
Albany, NY* 155 2,086 91.56 53.45% 1,341 -- -- -- -- --
Alpharetta, GA* 164 2,593 95.32 54.21% 1,594 -- -- -- -- --
Raleigh/Durham, NC* 155 1,923 87.29 58.01% 1,113 -- -- -- -- --
Quality Suites - Charleston, SC 168 4,113 81.80 82.00% 1,910 168 3,860 78.09 80.62% 1,753
Residence Inn - Phoenix, AZ# 168 4,200 90.74 75.48% 2,251 168 4,108 96.35 69.53% 2,198
Fairfield Inn - Ann Arbor, MI 110 1,901 66.38 71.33% 748 110 1,811 61.97 72.58% 687
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 6,904 $121,713 $ 72.14 72.11% $56,765 5,623 $105,886 $68.54 75.28% $47,979
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Hotel opened during 1998.
# Hotel acquired during 1998.
10
<PAGE> 11
THE CURRENT HOTELS
1. Hampton Inn -- 208 Linville Road, Boone, North Carolina. This five-story,
interior corridor hotel is located on an approximately 2.1 acre site near the
Blue Ridge Parkway in the northwestern part of North Carolina's Appalachian
Mountains and is within 15 minutes from snow skiing slopes. Appalachian State
University, a part of the University of North Carolina system, is located in
Boone. In addition to other amenities, the hotel has an indoor pool and jacuzzi.
The hotel was acquired contemporaneously with the IPO.
2. Hampton Inn -- 112 Tourist Drive, Brunswick, Georgia. This three-story,
interior and exterior corridor hotel is located on an approximately 2.9 acre
site just off Interstate 95. Brunswick and the nearby Golden Isles feature
beaches on the Atlantic Ocean as well as historic areas. The property also is
near an outlet shopping center and several restaurants. The hotel was acquired
contemporaneously with the IPO.
3. Hampton Inn -- 201 Asheville Avenue, Cary, North Carolina. This five-story,
interior corridor hotel is located on an approximately 2.2 acre site at the
interchange of US-1 and US-64, major area thoroughfares. Cary is located between
Raleigh and Durham, adjacent to North Carolina's Research Triangle Park and the
Raleigh-Durham International Airport. Raleigh is one of three cities, along with
Durham and Chapel Hill, that comprises the Research Triangle. The hotel was
acquired contemporaneously with the IPO.
4. Hampton Inn -- U.S. Highway 29, Charlotte, North Carolina. This six-story,
interior corridor hotel is located on an approximately 2.1 acre site off
Interstate 85. The hotel is located in Charlotte, the largest metropolitan area
in the Carolinas. The hotel is close to the Charlotte Motor Speedway, the
University of North Carolina at Charlotte, and the University Hospital. The
hotel was acquired contemporaneously with the IPO.
5. Hampton Inn -- 12610 Chestnut Hill Road, Chester (Richmond), Virginia. This
two-story, interior corridor hotel is located on an approximately 5.1 acre site
near Interstate 95 and Route 10 (approximately 15 miles south of Richmond). The
hotel is located near major components of the tobacco operations of Phillip
Morris USA and major industrial and technical centers for DuPont and Allied. In
connection with the acquisition of this hotel, the Company also acquired a
free-standing restaurant, which is on an adjacent parcel of land and which is
subject to a pre-existing lease. The property was acquired in November 1994.
6. Hampton Inn -- 4154 Preferred Place, Duncanville (Dallas), Texas. This
two-story, exterior corridor hotel is located on an approximately 2.5 acre site
near Interstate 20 and LBJ Freeway, the Texas Rangers Baseball Stadium and Six
Flags Over Texas. The property was acquired in May 1996.
7. Hampton Inn -- 1816 Hillandale Road, Durham, North Carolina. This five-story,
interior corridor hotel is located on an approximately 2.0 acre site near Duke
University, Duke University Medical Center and downtown Durham. The Research
Triangle Park, a regional research and development center just south of Durham,
is a major area employer. The property was substantially renovated and changed
from a Comfort Inn to a Hampton Inn in 1991. The hotel was acquired
contemporaneously with the IPO.
8. Hampton Inn & Suites -- 1725 Pineland Road, Duluth (Gwinnett), Georgia. This
four-story, interior corridor hotel is located on an approximately 2.5 acre site
near Interstate 85 in suburban Atlanta. Located nearby are Gwinnett Mall, Lake
Lanier, Stone Mountain and Chateau Elan. The property was acquired in July 1996.
9. Hampton Inn -- One Airport Road, Hilton Head, South Carolina. This two-story,
interior corridor hotel is located on an approximately 5.0 acre site near
Highway 278, the airport and several golf and tennis facilities. The Hilton Head
area is home for several major sporting events, including the MCI Heritage Golf
Tournament and the Family Circle Tennis Tournament. The property was acquired in
November 1994.
10. Hampton Inn -- 474 Western Boulevard, Jacksonville, North Carolina. This
two-story, exterior corridor hotel is located on an approximately 3.1 acre site
near Camp Lejeune Marine Corps Base. Camp Lejeune, a major U.S. Marine base,
accounts for a substantial amount of its business. The hotel was acquired
contemporaneously with the IPO.
11. Hampton Inn -- 7100 Cascade Valley Court, Las Vegas, Nevada. This
three-story, interior corridor hotel is located on an approximately 2.7 acre
site near Mountain View Hospital and twelve miles from the Las Vegas Strip. The
hotel was acquired in May 1998.
11
<PAGE> 12
12. Hampton Inn -- 769 Hammond Drive, Atlanta (Perimeter), Georgia. This
four-story, interior corridor hotel is located on an approximately 1.6 acre site
near Interstate 285 and Georgia 400 in the Perimeter Center Area. The property
was acquired in July 1996.
13. Hampton Inn -- 6209 Glenwood Avenue, Raleigh, North Carolina. This
four-story, interior corridor hotel is located on an approximately 1.8 acre site
near the Raleigh Beltline Highway, Interstate 40, the Crabtree Valley Mall and
the Raleigh-Durham International Airport, to which the hotel offers free airport
transportation. The property was acquired contemporaneously with the 1995
follow-on offering.
14. Hampton Inn -- 1675 U.S. Highway 1, Southern Pines, North Carolina. This
two-story, exterior corridor hotel is located on an approximately 4.2 acre site
near Pinehurst and other golfing attractions, including the World Golf Hall of
Fame. In addition to its agriculture and manufacturing industries, the Southern
Pines area attracts tourists because of the approximately 30 golf courses in the
area. Tourism, which is primarily golf related, is an important part of the
area's economy. The hotel seeks to capitalize on area golfing attractions by
organizing golf tours for large numbers of visitors. The hotel was acquired
contemporaneously with the IPO.
15. Hampton Inn -- 1533 Southlake Parkway, Morrow (Southlake), Georgia. This
five-story, interior corridor hotel is located on an approximately 2.5 acre site
off of Interstate 75 near South Lake Mall in suburban Atlanta. The hotel was
acquired contemporaneously with the IPO.
16. Hampton Inn -- 1011 Riverdale Street, West Springfield, Massachusetts. This
four-story, interior corridor hotel is located on an approximately 2.5 acre site
near Interstate 91, just a few miles from downtown West Springfield, the
Basketball Hall of Fame, and Riverside Amusement Park. The property was acquired
in July 1997.
17. Hampton Inn -- 200 Tarrytown Road, Route 119, Elmsford (White Plains), New
York. This seven-story, interior corridor hotel is located on an approximately
4.0 acre site off I-287. The hotel is 17 miles north of New York City and is
centrally located to Westchester County's major corporate headquarters such as
AT&T, Bayer, Ciba, Coca-Cola, Fuju, Hitachi, IBM, KLM, NYNEX, PepsiCo, and the
area's many corporate parks. The property was acquired in October 1997.
18. Hampton Inn -- 567 Market Street, Wilmington, North Carolina. This
two-story, exterior corridor hotel is located on an approximately 2.9 acre site
approximately six miles from Wrightsville Beach, North Carolina. Wilmington is a
resort area with light manufacturing and distribution businesses. The hotel was
acquired contemporaneously with the IPO.
19. Comfort Inn -- 629 Frontage Road, Augusta, Georgia. This five-story,
interior corridor hotel is located on an approximately 2.3 acre site near
Interstate 20, the Bobby Jones Expressway, Fort Gordon and The Augusta National
Golf Course, home of the Masters Tournament. The property was acquired in May
1995.
20. Comfort Inn -- 144 Bee Street, Charleston, South Carolina. This seven-story,
interior corridor hotel is located on an approximately 1.0 acre site, which
overlooks the Ashley River, and is near US 17 and Charleston's historic
district, several full-service marinas and a medical complex, which consists of
several area hospitals. The property was acquired in May 1995.
21. Comfort Inn -- 2100 West Hundred Street, Chester (Richmond), Virginia. This
five-story, interior corridor hotel is located on an approximately 3.0 acre site
near Interstate 95 and Route 10 (approximately 15 miles south of Richmond),
several major industrial corporations and several historic attractions,
including the Confederate White House and Civil War battlefields. The property
was acquired in November 1994.
22. Comfort Inn -- 3580 Ulmerton Road, Clearwater/St. Petersburg, Florida. This
three-story, interior corridor hotel is located on an approximately 2.8 acre
site on Tampa Bay near Interstate 75, Busch Gardens amusement park, golf
courses, restaurants, shopping, and many gulf coast beaches. The Company also
owns a free-standing restaurant, which is on an adjacent parcel of land and
which is subject to a pre-existing lease. The property was acquired in May 1995.
23. Comfort Inn -- 3508 Mount Moriah Road, Durham/Chapel Hill, North Carolina.
This four-story, interior corridor hotel is located on an approximately 4.5 acre
site near the intersection of Interstate 40 and US 15-501 between Durham and
Chapel Hill, which puts it in close proximity to Duke University, the University
of North Carolina at Chapel Hill and a number of restaurants and shopping
opportunities. The property was acquired in November 1994.
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<PAGE> 13
24. Comfort Inn -- 1922 Skibbo Road, Fayetteville, North Carolina. This
four-story, interior-corridor hotel is located on an approximately 3.3 acre site
near Interstate 95 and in the heart of a large trade center in North Carolina.
Both Fort Bragg and Pope Air Force Base are nearby. The property was acquired in
November 1994.
25. Comfort Inn -- 540 North Pleasantburg Drive, Greenville, South Carolina.
This two-story, exterior corridor hotel is located on an approximately 3.0 acre
site near Interstate 385, the BMW assembly plant, and Michelin's North American
headquarters in the Greenville-Spartanburg Metropolitan area. The property was
acquired in May 1996.
26. Comfort Suites -- 1918 West 192 Bypass, London, Kentucky. This three-story
interior corridor hotel is located on an approximately 1.0 acre site near
Interstate 75, Daniel Boone National Forest and the Rockcastle River which
offers whitewater sports attractions and bass fishing. The property was acquired
in May 1996.
27. Comfort Suites -- 9350 Turkey Lake Road, Orlando, Florida. This
three-story, interior corridor hotel is located on an approximately 7.0 acre
site conveniently located close to Interstate 4 and Florida Turnpike at the
International Drive area off Sand Lake Road. Nearby attractions include
Universal Studios, Sea World, Walt Disney World, and Orange County Convention
Center. The property was acquired in May 1997.
28. Comfort Inn -- 2910 Capital Boulevard, Raleigh, North Carolina. This
four-story, interior corridor hotel is located on an approximately 2.7 acre site
and is located near the Raleigh Beltline Highway, the State Capitol, Governor's
mansion and North Carolina State University. The property was acquired in August
1994.
29. Comfort Inn -- 151 South College Road, Wilmington, North Carolina. This
six-story, interior corridor hotel is located on an approximately 2.6 acre site
near the end of Interstate 40 and the University of North Carolina at
Wilmington. The hotel was acquired contemporaneously with the IPO.
30. Homewood Suites -- 10775 Davis Drive, Alpharetta, Georgia. This six-story,
all-suites (with full kitchen), interior corridor hotel is located on an
approximately 2.8 acre site near North Point Mall and GA 400. The hotel was
internally developed and opened in May 1998.
31. Homewood Suites -- 100 MacAlyson Court, Cary, North Carolina. This
four-story, all-suites (with full kitchen), interior corridor hotel is located
on an approximately 9.1 acre site with a covered bridge entrance and a wooded
setting near Research Triangle Park. The property was acquired in July 1996.
32. Homewood Suites -- 401 Bay Area Boulevard, Clearlake, Texas. This
three-story, all-suites (with full kitchen), interior corridor hotel is located
on an approximately 2.6 acre site near NASA's Johnson Space Center and
Rockwell's Space Operations Center. The property was acquired in September 1996.
33. Homewood Suites -- 3600 Mount Moriah Road, Durham, North Carolina. This
four-story, all-suites (with full kitchen) interior corridor hotel is located on
an approximately 3.9 acre site near Interstate 40 and the University of North
Carolina at Chapel Hill. The hotel was internally developed and opened in
November 1998.
34. Homewood Suites -- 755 Currency Circle, Lake Mary, Florida. This five-story,
all-suites (with full kitchen), interior corridor hotel is located on an
approximately 2.8 acre site near Seminole Towne Center Mall and the Central
Florida Zoological Park. The hotel was internally developed and opened in May
1998.
35. Homewood Suites -- 2536 West Beryl Avenue, Phoenix, Arizona. This
five-story, all suites (with full kitchen), interior corridor hotel is located
on an approximately 3.1 acre site off of Interstate 17 and is near the Metro
Mall and the Castles and Coasters Amusement Park. The hotel was acquired in June
1998.
36. Homewood Suites -- 5400 Edwards Mill Road, Raleigh, North Carolina. This
seven-story, all-suites (with full kitchen), interior corridor hotel is located
on an approximately 3.8 acre near the Raleigh Beltline Highway, Interstate 40,
the Crabtree Valley Mall and the Raleigh-Durham International Airport, to which
the hotel offers free airport transportation. The hotel was internally developed
and opened in March 1998.
13
<PAGE> 14
37. Holiday Inn Express -- 940 East Main Street, Abingdon, Virginia. This
three-story, interior corridor hotel is located on an approximately 1.2 acre
site near Interstate 81, Abingdon's Historic District and the Barter Theater
(State Theater of Virginia). The property was acquired in May 1996.
38. Holiday Inn Express -- 13625 Icot Boulevard, Clearwater, Florida. This
three-story, interior corridor hotel is located on an approximately 2.4 acre
site near Interstate 75, Busch Gardens amusement park, golf courses,
restaurants, shopping, and many gulf and coast beaches in the Tampa Bay area,
and is just minutes from St. Petersburg. The property was acquired in August
1997.
39. Holiday Inn Select -- 11350 LBJ Freeway, Garland (Dallas), Texas. This
property consists of one five-story building and two three-story buildings, all
with interior corridors located on an approximately 6.5 acre site in suburban
Dallas. The property offers an approximately 9,800 square foot conference
center, four other meeting rooms and a 50-person auditorium. Other amenities
include a full-service restaurant and a nightclub. The property was acquired in
May 1996.
40. Holiday Inn -- 300 Plaza Drive, Secaucus, New Jersey. This eight-story,
interior corridor hotel is located on an approximately 0.57 acre site which is
adjacent to the Harmon Meadow Mall and is near the Meadowlands Sports Complex,
the Statue of Liberty and Mid-town Manhattan. This hotel offers a full-service
restaurant with evening bar and lounge. The property was acquired in May 1998.
41. Holiday Inn -- 700 Hope Road, Tinton Falls, New Jersey. This five-story,
interior corridor hotel is located on an approximately 5.2 acre site located
near Monmouth Park Racetrack, the Garden State Parkway and Fort Monmouth. This
hotel offers a full-service restaurant with evening bar and lounge. The property
was acquired in April 1998.
42. Courtyard by Marriott -- 3205 Boardwalk, Ann Arbor, Michigan. This
four-story, interior corridor hotel is located on an approximately 4.0 acre site
just off Interstate 94 and is adjacent to the Company's Fairfield Inn. Area
attractions include Briarwood Mall, Downtown Ann Arbor, the University of
Michigan, and the Henry Ford Museum. The property was acquired in September
1997.
43. Courtyard by Marriott -- 2504 N. Loop West, Houston, Texas. This
three-story, interior corridor hotel is located on an approximately 3.9 acre
site directly off Loop 610 and Highway 290. It is easily accessible to all major
thoroughfares around the city, and is only minutes from Downtown and the
Galleria area. The property was acquired in July 1997.
44. Courtyard by Marriott -- 151 Van Campen Boulevard, Wilmington, North
Carolina. This two-story, interior corridor hotel is located on an approximately
3.5 acre site near Wrightsville Beach and Revolutionary and Civil War historical
sites. The property was acquired in December 1996.
45. Courtyard by Marriott -- 1600 Westbrook Plaza Drive, Winston-Salem, North
Carolina. This four-story, interior corridor hotel is located on an
approximately 3.0 acre site near Wake Forest University, Interstate 40 and
Winston-Salem State University. The hotel offers a full-service restaurant with
evening bar and lounge. The property was internally developed and opened in
October 1998.
46. Hilton Garden Inn -- 800 Albany Shaker Road, Albany, New York. This
six-story, interior corridor hotel is located on an approximately 4.0 acre site
across from the Albany International Airport. The hotel offers a full-service
restaurant and lounge. Other amenities include an indoor swimming pool, fitness
center, pantry shop and business center. Each room has a microwave, refrigerator
and state-of-the-art telecommunications connections. The property was acquired
in May 1998.
47. Hilton Garden Inn -- 4025 Windward Plaza, Alpharetta, Georgia. This
six-story, interior corridor hotel is located on an approximately 3.4 acre site
near North Point Mall and GA 400. The offers a full-service restaurant and
lounge. Other amenities include an indoor swimming pool, fitness center, pantry
shop and business center. Each room has a microwave, refrigerator and
state-of-the-art telecommunications connections. The property was acquired in
March 1998.
48. Hilton Garden Inn -- 1500 RDU Center Drive, Morrisville (Raleigh/Durham),
North Carolina. This six-story, interior corridor hotel is located on an
approximately 6.0 acre site near the Raleigh/Durham International Airport and
the Research Triangle Park. This hotel offers a full-service restaurant. Other
amenities include an indoor swimming pool, fitness center, pantry shop and
business center. Each room has a microwave, refrigerator and state-of-the-art
telecommunications connections. The property was acquired in June 1998.
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<PAGE> 15
49. Quality Suites -- 5225 North Arco Lane, Charleston, South Carolina. This
five-story, interior corridor hotel is located on an approximately 3.8 acre site
just off Interstate 26 near Charleston's International Airport and only a few
miles away from Charleston's Historic District. The hotel is designed around a
five-story atrium. The property was acquired in May 1995.
50. Residence Inn - 8242 North Black Canyon Highway, Phoenix, Arizona. This
two-story, all suites (with full kitchen), exterior corridor hotel is located on
an approximately 4.9 acre site near Downtown Phoenix and the Black Canyon
commercial district. This hotel was acquired in March 1998.
51. Fairfield Inn -- 3285 Boardwalk, Ann Arbor, Michigan. This four-story,
interior corridor hotel is located on an approximately 2.5 acre site adjacent to
the Company's Courtyard by Marriott. Nearby attractions include Bearwood Mall,
Downtown Ann Arbor, the University of Michigan and the Henry Ford Museum.
Amenities include a heated indoor pool and whirlpool.
The property was acquired in September 1997.
THE PERCENTAGE LEASES
In order for the Company to qualify as a REIT, neither WHI nor the
Partnership can operate hotels. Therefore, WHI and the Partnership lease the
Current Hotels for terms of 10 or 15 years pursuant to Percentage Leases, which
provide for rent equal to the greater of Base Rent or Percentage Rent. The
Percentage Leases for the Current Hotels contain the provisions described below.
The Company intends that future leases with respect to its hotel property
investments will contain substantially similar provisions, although the Company
may, in its discretion, alter any of these provisions with respect to any
particular lease, depending on the purchase price paid, economic conditions and
other factors deemed relevant at the time.
Percentage Lease Terms
Each Percentage Lease for the Current Hotels has a non-cancelable term of 10
or 15 years, subject to earlier termination upon the occurrence of certain
contingencies described in the Percentage Lease.
Amounts Payable Under the Percentage Leases
During the term of each Percentage Lease, the lessees are or will be
obligated to pay (i) the greater of Base Rent or Percentage Rent (collectively,
the "Rent") and (ii) certain other additional charges. Base Rent accrues and is
required to be paid monthly. Percentage Rent consists of minimum percentage rent
and excess percentage rent, if any. Minimum percentage rent is calculated based
primarily on the amount of room revenue up to a predetermined threshold per the
lease. The percentage, which differs by hotel, is multiplied by this amount to
calculate minimum percentage rent. These percentages range from 23% to 81%.
Excess percentage rent is calculated based primarily on the amount of any room
revenue in excess of the predetermined threshold mentioned above. The
percentage, which differs by hotel, is multiplied by this amount to calculate
excess percentage rent. These percentages range from 5% to 80%. For most leases,
the percentage used to calculate excess percentage rent exceeds the percentage
used to calculate the minimum percentage rent. Percentage Rent is due either
monthly or quarterly.
Beginning in the fiscal year following the year in which most Percentage
Leases commence, and for each fiscal year thereafter, (i) the annual Base Rent
and (ii) the Percentage Rent formulas will be adjusted on a quarterly or annual
basis for inflation, based on changes in the CPI. The adjustment in any quarter
may not exceed 2%, which may be less than the change in CPI for the quarter.
Other than real estate and personal property taxes, casualty insurance,
capital improvements and maintenance of underground utilities and structural
elements, which are obligations of the Company, the Percentage Leases require
the lessees to pay rent, insurance, all costs and expenses and all utility and
other charges incurred in the operation of the Current Hotels. The Percentage
Leases also provide for rent reductions and abatements in the event of damage
to, destruction of or a partial taking of any Current Hotel.
Maintenance and Modifications
Under the Percentage Leases, the Company is required to maintain the
underground utilities and the structural elements of the improvements, including
exterior walls (excluding plate glass) and the roof of such Current Hotel. In
addition, the Percentage Leases obligate the Company to fund periodic capital
improvements (in addition to maintenance of underground utilities and structural
elements) to the buildings and grounds comprising their respective Current
Hotels, and the periodic repair, replacement and refurbishment of furniture,
fixtures and equipment in their respective Current Hotels, up to an amount equal
to 5% of room revenues
15
<PAGE> 16
(7% of room revenues and food and beverage revenue for one of its full-service
hotels). These obligations will be carried forward to the extent that the
lessees have not expended such amounts, and any unexpended amounts will remain
the property of the Company upon termination of the Percentage Leases. Except
for capital improvements and maintenance of structural elements and underground
utilities, the lessees are required, at their expense, to maintain the Current
Hotels in good order and repair, except for ordinary wear and tear, and to make
non-structural, foreseen and unforeseen, and ordinary and extraordinary repairs
which may be necessary and appropriate to keep the Current Hotels in good order
and repair.
The lessees are not obligated to bear the cost of capital improvements to
the Current Hotels. With the consent of the Company, however, the lessees, at
their expense, may make non-capital and capital additions, modifications or
improvements to the Current Hotels, provided that such action does not
significantly alter the character or purposes of the Current Hotels or
significantly detract from the value or operating efficiencies of the Current
Hotels. All such alterations, replacements and improvements shall be subject to
all the terms and provisions of the Percentage Leases and will become the
property of the Company upon termination of the Percentage Leases. The Company
owns or will own substantially all personal property not affixed to, or deemed a
part of, the real estate or improvements thereon comprising their respective
Current Hotels, except to the extent that ownership of such personal property
would cause the rents under the Percentage Leases not to qualify as "rents from
real property" for REIT income test purposes.
ITEM 3. LEGAL PROCEEDINGS
The Company currently is not involved in any material litigation nor, to the
Company's knowledge, is any material litigation currently threatened against the
Company. The lessees have advised the Company that they currently are not
involved in any material litigation, other than routine litigation arising in
the ordinary course of business, substantially all of which is expected to be
covered by liability insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1998.
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<PAGE> 17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
On August 11, 1997, Common Stock shares in the Company began trading on the
New York Stock Exchange ("NYSE") under the symbol "WXH." Prior to this date, the
Common Stock was traded on the Nasdaq National Market under the symbol "WINN."
As of March 15, 1999, the Company had approximately 17,000 common shareholders
based on the number of shareholders of record and an estimate of the number of
participants represented by security position listings. The following table sets
forth, for the indicated periods, the high and low closing prices for the Common
Stock as traded on the Nasdaq National Market or the NYSE, as applicable, and
the cash distributions declared per share:
<TABLE>
<CAPTION>
PRICE RANGE
----------- CASH DISTRIBUTIONS DECLARED
HIGH LOW PER SHARE
---- --- ---------
<S> <C> <C> <C>
1998
First Quarter $13.875 $12.813 $0.27
Second Quarter 13.50 11.25 0.27
Third Quarter 12.125 8.563 0.27
Fourth Quarter 9.50 6.938 0.28
1997
First Quarter $14.00 $12.875 $0.27
Second Quarter 15.063 12.125 0.27
Third Quarter 14.625 13.063 0.27
Fourth Quarter 14.375 13.00 0.27
</TABLE>
Although the declaration of distributions is within the discretion of the
Board of Directors and depends on the Company's results of operations, cash
available for distribution, the financial condition of the Company, tax
considerations (including those related to REITs) and other factors considered
important by the Board of Directors, the Company's policy is to make regular
quarterly distributions to its shareholders.
RECENT SALES OF UNREGISTERED SECURITIES
In the year ended December 31, 1998, the Company issued the following
securities which were not registered pursuant to the Securities Act of 1933, as
amended:
In January 1998, the Company issued David C. Sullivan, a Director, 5,687
shares of the Company's Common Stock for compensation for services to be
rendered as a director. These shares were granted under the Director's Stock
Incentive Plan and vest at the rate of 20% on the date of the grant and 20% per
year thereafter. Mr. Sullivan is entitled to vote and receive the dividends paid
on such shares prior to vesting.
Pursuant to the Partnership Agreement of the Partnership, the Partnership's
limited partners have redemption rights which enable them to cause the
Partnership to redeem their Partnership Units in exchange for shares of Common
Stock on a one-for-one basis or, at the option of the Company or in certain
other circumstances, cash.
In March 1998, Mr. John B. Harris, Jr., redeemed 30,813 Partnership Units in
exchange for shares of Common Stock on a one-for-one basis.
No underwriter was engaged in connection with the foregoing issuances of
securities. Issuances of Common Stock to the above parties were made in reliance
upon Section 4(2) of the Securities Act of 1933, as amended, as transactions not
involving any public offering.
17
<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information for the Company
for the years ended December 31, 1998, 1997, 1996, 1995 and for the period June
2, 1994 (date of inception) through December 31, 1994 and selected historical
balance sheet data as of December 31, 1998, 1997, 1996, 1995 and 1994. This
information should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the financial
statements and notes thereto included elsewhere in this report.
WINSTON HOTELS, INC.
Selected Historical Financial and Other Data
For the years ended December 31, 1998, 1997, 1996 and 1995
and the period June 2, 1994 (date of inception) through December 31,1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME:
Revenue:
Percentage lease revenue $ 54,700 $ 35,868 $ 26,611 $ 17,148 $ 5,116
Interest and other income 249 234 97 442 92
--------- --------- --------- --------- --------
Total revenue 54,949 36,102 26,708 17,590 5,208
--------- --------- --------- --------- --------
Expenses:
Real estate and personal property taxes and
casualty insurance 5,017 2,702 1,647 1,054 362
General and administrative 3,692 2,021 1,985 1,208 339
Interest expense 8,637 3,066 2,665 2,555 218
Depreciation 16,389 10,064 6,476 3,854 1,176
Amortization 339 176 147 117 49
--------- --------- --------- --------- --------
Total expenses 34,074 18,029 12,920 8,788 2,144
--------- --------- --------- --------- --------
Income before allocation to minority interest 20,875 18,073 13,788 8,802 3,064
Income allocation to minority interest 1,349 1,329 786 417 187
--------- --------- --------- --------- --------
Net income 19,526 16,744 13,002 8,385 2,877
Preferred stock distribution 6,938 2,100 -- -- --
--------- --------- --------- --------- --------
Net income available to common shareholders $ 12,588 $ 14,644 $ 13,002 $ 8,385 $ 2,877
========= ========= ========= ========= ========
Earnings per share:
Net income per common share $ 0.77 $ 0.92 $ 1.01 $ 0.96 $ 0.42
========= ========= ========= ========= ========
Net income per common share assuming dilution $ 0.77 $ 0.91 $ 1.00 $ 0.96 $ 0.42
========= ========= ========= ========= ========
Weighted average number of common shares 16,286 15,990 12,922 8,715 6,775
Weighted average number of common shares
assuming dilution 18,040 17,555 13,768 9,167 7,211
Distributions per common share $ 1.09 $ 1.08 $ 1.005 $ 0.93 $ 0.48
BALANCE SHEET DATA:
Cash and cash equivalents $ 33 $ 164 $ 234 $ 2,496 $ 1,114
Investment in hotel properties 397,861 279,485 196,682 121,886 85,917
Total assets 412,156 287,827 203,502 123,969 88,114
Total debt 173,085 44,081 42,800 34,000 28,600
Shareholders' equity 213,425 217,490 141,813 80,872 53,705
OTHER DATA:
Lessees room revenue $ 117,752 $ 79,526 $ 58,956 $ 39,677 $ 12,474
Funds from operations (1) 30,326 26,037 20,581 12,656 4,240
Cash available for distribution 24,093 21,809 17,557 11,185 3,866
Cash provided by (used in):
operating activities 34,605 27,811 18,729 12,628 3,417
investing activities (135,398) (82,349) (74,614) (36,059) (85,973)
financing activities 100,662 54,468 53,623 24,813 83,670
</TABLE>
18
<PAGE> 19
(1) Funds from operations, as defined by NAREIT, is income (loss) before
minority interest (determined in accordance with generally accepted accounting
principles), excluding gains (losses) from debt restructuring and sales of
properties plus real estate-related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures.
The following table sets forth selected financial information for Winston
Hospitality, Inc. for the ten-months ended October 31, 1997 and 1996 and the
years ended December 31, 1996 and 1995 and for the period June 2, 1994 (date of
inception) through December 31, 1994. This information should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations and the financial statements and notes thereto included
elsewhere in this report.
Winston Hospitality, Inc.
Selected Historical Financial Data
For the ten-months ended October 31, 1997 and 1996
and the years ended December 31, 1996 and 1995
and the period June 2, 1994 (date of inception) through December 31, 1994
(in thousands)
<TABLE>
<CAPTION>
PERIOD JUNE 2,
TEN MONTHS ENDED OCTOBER 31, YEARS ENDED DECEMBER 31, 1994 THROUGH
1997 1996 1996 1995 DECEMBER 31, 1994
---- ---- ---- ---- -----------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Room revenue $67,145 $49,633 $58,956 $39,677 $12,474
Other revenue 3,944 2,390 2,969 1,100 229
------- ------- ------- ------- -------
Total revenue 71,089 52,023 61,925 40,777 12,703
------- ------- ------- ------- -------
Property and operating expenses 38,292 27,965 34,549 22,097 7,297
Percentage lease payments 30,980 22,800 26,611 17,148 5,116
------- ------- ------- ------- -------
Total expenses 69,272 50,765 61,160 39,245 12,413
------- ------- ------- ------- -------
Net income $ 1,817 $ 1,258 $ 765 $ 1,532 $ 290
======= ======= ======= ======= =======
</TABLE>
The following table sets forth selected financial information for CapStar
Winston for the year ended December 31, 1998 and the period October 15, 1997
(date of inception) through December 31, 1997. This information should be read
in conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations and the financial statements and notes thereto
included elsewhere in this report.
Capstar Winston Company, L.L.C.
Selected Historical Financial Data
for the year ended December 31, 1998 and
the period October 15, 1997 (date of inception)
through December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
PERIOD OCTOBER 15,
YEAR ENDED 1997 THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Room revenue $113,451 $ 8,197
Other revenue 12,182 846
-------- -------
Total revenue 125,633 9,043
-------- -------
Rooms expense 25,664 2,158
Percentage lease expense 52,720 3,242
Other expenses 46,653 3,704
-------- -------
Total expenses 125,037 9,104
-------- -------
Net income (loss) $ 596 $ (61)
======== =======
</TABLE>
19
<PAGE> 20
The following table sets forth selected financial information for the Initial
Hotels for the five months ended June 2, 1994.
COMBINED INITIAL HOTELS
Selected Historical Financial Data
For the five months ended June 2, 1994
(in thousands)
<TABLE>
<CAPTION>
1994
------
Revenue:
<S> <C>
Room revenue $7,415
Other, net 135
------
Total revenue 7,550
------
Expenses:
Property operating expenses 2,983
Franchise costs 646
Repairs and maintenance 465
Real estate and personal property taxes and insurance 328
Management fees 381
Interest expense 1,215
Depreciation and amortization 973
------
Total expenses 6,991
------
Income before minority interest 559
Minority interest 357
------
Net income $ 202
======
</TABLE>
20
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ($ IN THOUSANDS)
Winston Hotels, Inc. (the "Company"), which consummated an underwritten
initial public offering ("IPO") in June 1994, follow-on Common Stock offerings
in May 1995 and in June 1996, and a Preferred Stock offering in September 1997,
operates as a REIT to invest in hotel properties. The Company owned 16 hotels as
of December 31, 1994 (the "1994 Hotels"), purchased five hotels in May 1995 (the
"1995 Acquired Hotels"), acquired 10 hotels in 1996 (the "1996 Acquired
Hotels"), acquired seven hotels in 1997 (the "1997 Acquired Hotels") and
acquired eight hotels and opened five internally developed hotels in 1998 (the
"1998 Hotels"). It currently leases 49 of the total 51 Current Hotels to CapStar
Winston Company, L.L.C. ("CapStar Winston"), one of the Current Hotels to
Bristol Hotels & Resorts, Inc. ("Bristol") and one of the Current Hotels to
Prime Hospitality Corp. ("Prime") under leases that provide for rent payments
based, in part, on revenues from the Current Hotels ("Percentage Leases")
through which it receives its principal source of revenue.
Prior to November 17, 1997, the Current Hotels were leased pursuant to the
Percentage Leases to Winston Hospitality, Inc. On November 17, 1997 and November
24, 1997, CapStar Management Company, L.P. purchased substantially all of the
assets and assumed certain liabilities of Winston Hospitality, Inc., including
the Current Hotels' leases. Concurrent with the transaction, the leases were
assigned to CapStar Winston, an affiliate of CapStar Management Company, L.P.,
and the terms of the leases were extended to 15 years from the date of the
transaction.
CapStar Winston is a wholly owned subsidiary of MeriStar Hotels and Resorts,
Inc. ("MeriStar"). As of February 2, 1999, MeriStar, the nation's largest
independent hotel management company, leased or managed (including five under
contract) 216 hotels with 44,831 rooms in 32 states, the District of Columbia,
Canada and the U.S. Virgin Islands.
RESULTS OF OPERATIONS
For the periods ended December 31, 1998, 1997, and 1996, the differences in
operating results are primarily attributable to the Company owning more hotels
in 1998 than it did in 1997 and owning more hotels in 1997 than it did in 1996.
The table below outlines the Company's hotel properties owned as of December 31,
1998, 1997 and 1996:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
------------------------------- -------------------------------- --------------------------------
Acquisitions* Properties Acquisitions Properties Acquisitions Properties
during owned at during owned at during owned at
Type of Hotel the year year end the year year end The period year end
- ------------- -------- -------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Limited-service hotels 1 29 4 28 7 24
Extended-stay hotels 6 11 1 5 2 4
Full-service hotels 6 11 2 5 1 3
-- -- -- -- -- --
Total 13 51 7 38 10 31
== == == == == ==
</TABLE>
* Five of the total 13 hotels added in 1998 were internally-developed
properties.
In order to present a more meaningful comparison of operations, the
following comparisons are presented:
THE COMPANY:
o actual operating results for the year ended December 31, 1998 versus actual
operating results for the year ended December 31, 1997;
o actual operating results for the year ended December 31, 1997 versus actual
operating results for the year ended December 31, 1996;
o pro forma operating results for the year ended December 31, 1998 versus pro
forma operating results for the year ended December 31, 1997, as if the
Preferred Stock offering and the addition of the 1998 Hotels and 1997
Acquired Hotels occurred on the later of January 1, 1997 or the hotel
opening date;
o pro forma operating results for the year ended December 31, 1997 versus pro
forma operating results for the year ended December 31, 1996, as if the
follow-on Common Stock offerings, the Preferred Stock offering and the
addition of the 1997 Acquired Hotels and the 1996 Acquired Hotels occurred
on the later of January 1, 1996 or the hotel opening date.
21
<PAGE> 22
WINSTON HOSPITALITY, INC.:
o actual operating results for the ten months ended October 31, 1997 versus
actual operating results for the ten months ended October 31, 1996.
CAPSTAR WINSTON COMPANY, L.L.C.:
During November 1997, CapStar Management Company, L.P. purchased
substantially all of the assets and assumed certain liabilities of Winston
Hospitality, Inc., including all 38 of the then existing Current Hotels'
leases. Concurrent with the purchase, CapStar Management Company, L.P.
contributed/assigned the assets purchased and liabilities assumed in the
transaction to CapStar Winston.
Since CapStar Winston operated for a partial year in 1997 (November and
December) and for a full year in 1998, the operating results of these two
periods are very different and difficult to compare. Thus, no management
discussion and analysis will be included herein. (See Item 14 for CapStar
Winston's financial statement disclosure.)
THE COMPANY
ACTUAL - YEAR ENDED DECEMBER 31, 1998 VERSUS ACTUAL - YEAR ENDED DECEMBER 31,
1997
The Company had revenues of $54,949 in 1998, consisting of $54,700 of
Percentage Lease revenues and $249 of interest and other income. Percentage
Lease revenues increased $18,832, or 53%, in 1998 from $35,868 in 1997. This
increase was attributable to (i) $12,132 related to the 1998 Hotels; (ii) $6,479
related to the 1997 Acquired Hotels owned for the entire 12-month period in
1998; and (iii) an increase of $221 in lease revenues generated from the hotels
owned as of December 31, 1996.
Real estate taxes and property insurance costs incurred in 1998 were $5,017,
an increase of $2,315 from $2,702 in 1997. $940 of this increase was
attributable to the 1998 Hotels and $813 was due to the 1997 Acquired Hotels
that were owned for the entire 12-month period in 1998. The remaining increase
was due to an increase in assessed values and rates. General and administrative
expenses increased $1,671 to $3,692 in 1998 from $2,021 in 1997. The increase
was primarily attributable to (i) an increase in the number of employees and
related compensation expense throughout the year; (ii) costs related to the
increase in size and activities of the Company in 1998 over 1997; as well as
(iii) advertising costs associated with the opening of five internally developed
hotels during 1998. Interest expense increased $5,571 to $8,637 in 1998 from
$3,066 in 1997, primarily due to an increase in weighted-average outstanding
borrowings from $48,842 in 1997 to $116,296 in 1998. This increase was due to
the borrowings necessary to acquire and develop the 1998 Hotels as well as an
increase in renovation activity in 1998. Interest rates remained relatively flat
from 1997 to 1998. Depreciation increased $6,325 to $16,389 in 1998 from $10,064
in 1997, primarily due to depreciation related to the 1998 Hotels, the 1997
Acquired Hotels and renovations completed during 1998 and 1997.
ACTUAL - YEAR ENDED DECEMBER 31, 1997 VERSUS ACTUAL - YEAR ENDED DECEMBER 31,
1996
The Company had revenues of $36,102 in 1997, consisting of $35,868 of
Percentage Lease revenues and $234 of interest and other income. Percentage
Lease revenues increased $9,257, or 35%, in 1997 from $26,611 in 1996. This
increase was attributable to (i) $3,639 related to the 1997 Acquired Hotels;
(ii) $4,889 related to the 1996 Acquired Hotels owned for the entire 12-month
period in 1997; and (iii) an increase of $729 in lease revenues generated from
hotels acquired prior to 1996.
Real estate taxes and property insurance costs incurred in 1997 were $2,702,
an increase of $1,055 from $1,647 in 1996. This increase was primarily
attributable to the 1997 Acquired Hotels and the 1996 Acquired Hotels that were
owned for the entire 12-month period in 1997. General and administrative
expenses increased $36 to $2,021 in 1997 from $1,985 in 1996. This increase was
attributable to additional overhead costs related to increased activities of the
Company in 1997 and approximately $265 in one-time costs incurred in 1997 with
both listing the Company's Common Stock on the NYSE and changes in the financial
management staff. These increases were partly offset by the increase in internal
time of the development and construction department devoted to development
projects and a non-recurring charge of $317 incurred in 1996 related to the
termination of a potential business combination. Interest expense increased $401
to $3,066 in 1997 from $2,665 in 1996. The increase was attributable to (i) $28
related to the increase in weighted average interest rates from 1996 to 1997;
(ii) $1,133 related to the increase in weighted average borrowings from 1996 to
1997; and (iii) $377 of increased amortization on line of credit fees and unused
line of credit fees in connection with the $125,000 line of credit which was
obtained in the fourth quarter of 1996. These increases were offset in part by a
$1,137 increase in capitalized interest costs from 1996 to 1997. Depreciation
increased $3,588 to $10,064 in 1997 from $6,476 in 1996, primarily due to
additional depreciation related to the 1997 Acquired Hotels, the 1996 Acquired
Hotels and renovations completed during 1997 and 1996.
22
<PAGE> 23
PRO FORMA YEAR ENDED DECEMBER 31, 1998 VERSUS PRO FORMA YEAR ENDED DECEMBER 31,
1997
The Company had pro forma revenues of $56,650 for the year ended December
31, 1998, consisting of $56,401 of pro forma Percentage Lease revenues and $249
of pro forma interest and other income. Pro forma Percentage Lease revenues
increased $8,781, or 18%, to $56,401 in 1998 from $47,620 in 1997. Of this
increase, $7,667 was attributable to the opening of 10 hotel properties in 1998
(the "1998 New Hotels") and the remaining increase of $1,114 was primarily due
to an increase in room rates in 1998 from 1997.
Pro forma real estate taxes and property insurance costs incurred in 1998
were $5,257, an increase of $1,163 from $4,094 in 1997. This increase was
primarily attributable to the 1998 New Hotels and an increase in tax rates and
assessed values in 1998. Pro forma general and administrative expenses increased
$1,607 to $3,701 in 1998 from $2,094 in 1997. The increase was primarily
attributable to (i) an increase in the number of employees and related
compensation expense throughout the year; (ii) costs related to the increase in
size and activities of the Company in 1998 over 1997; as well as (iii)
advertising costs associated with the opening of five internally developed
hotels during 1998. Pro forma interest expense increased $4,852 to $8,912 in
1998 from $4,060 in 1997. The increase was primarily due to an increase in
weighted average borrowings from $68,957 in 1997 to $137,932 in 1998, which
resulted from borrowings made to acquire and develop the 10 hotel properties
opened in 1998. Interest rates remained flat from 1997 to 1998. Pro forma
depreciation increased $4,262 to $16,720 in 1998 from $12,458 in 1997, primarily
due to additional depreciation related to the 1998 New Hotels and renovations
completed during 1998 and 1997.
PRO FORMA - YEAR ENDED DECEMBER 31, 1997 VERSUS PRO FORMA - YEAR ENDED DECEMBER
31, 1996
The Company had pro forma revenues of $42,462 for the year ended December
31, 1997, consisting of $42,134 of pro forma Percentage Lease revenues and $328
of pro forma interest and other income. Pro forma Percentage Lease revenues
increased $3,652, or 9%, to $42,134 in 1997 from $38,482 in 1996. Of this
increase, $1,578 was attributable to an increase in room rates in 1997 from 1996
and $2,074 was attributable to the opening of three hotel properties in 1996
(the "1996 New Hotels").
Pro forma real estate taxes and property insurance costs incurred in 1997
were $3,072, an increase of $544 from $2,528 in 1996. This increase was
primarily attributable to the 1996 New Hotels and an increase in property tax
values in 1997. Pro forma general and administrative expenses decreased $27 to
$2,056 in 1997 from $2,083 in 1996. The decrease was primarily attributable to a
non-recurring charge of $317 in 1996 related to the termination of potential
business combinations, offset in part by a non-recurring charge of $265 in 1997
related to listing the Company's Common Stock on the NYSE and changes in the
financial management staff. Pro forma depreciation increased $1,411 to $10,920
in 1997 from $9,509 in 1996 primarily due to depreciation of the 1996 New Hotels
and renovations completed during 1997 and 1996.
WINSTON HOSPITALITY, INC.
ACTUAL - TEN MONTHS ENDED OCTOBER 31, 1997 VERSUS ACTUAL - TEN MONTHS ENDED
OCTOBER 31, 1996
Total revenues increased $19,066, or 37% to $71,089 from $52,023. This
increase was primarily attributable to an increase in room revenues of $17,512,
or 35% to $67,145 from $49,633. The increase in room revenues included: (i) an
increase of $5,220 for the 1997 Acquired Hotels; (ii) an increase of $11,275 for
the 1996 Acquired Hotels; and (iii) an increase of $1,017 for the hotels
acquired prior to 1996. Food and beverage revenue totaled $2,419 in 1997
compared to $1,240 in 1996, an increase of $1,179. This increase was
attributable primarily to the fact that the one full-service hotel was operated
for less than six of 10 months in 1996 versus 10 months in 1997.
Winston Hospitality, Inc. had total expenses in 1997 of $69,272, up $18,507
from $50,765 in 1996. The increase was attributable primarily to the operation
of a greater number of hotels for the 10 months ended October 31, 1997 as
compared with the same period of 1996.
In addition, the net income of Winston Hospitality, Inc. was positively
impacted during the 10 months ended October 31, 1997, when compared with the 10
months ended October 31, 1996, by the following conditions: (i) an increase in
the average daily rate from 1996; (ii) a short-term management contract for the
full-service hotel in Garland, Texas in 1996; and (iii) the unseasonably cold
weather experienced during the first quarter of 1996.
23
<PAGE> 24
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations from operating cash flow, which is
principally derived from Percentage Leases. For the year ended December 31,
1998, cash flow provided by operating activities was $34,605 and funds from
operations, which is equal to net income before allocation to minority interest,
plus depreciation, less preferred share distributions, was $30,326. Under
Federal income tax law provisions applicable to REITs, the Company is required
to distribute at least 95% of its taxable income to maintain its tax status as a
REIT. In 1998, the Company declared distributions of $24,718 to its
shareholders. Because the Company's cash flow from operating activities is
expected to exceed its taxable income due to depreciation and amortization
expenses, the Company expects to be able to meet its distribution requirements
out of cash flow from operating activities.
The Company's net cash used in investing activities for the year ended
December 31, 1998 totaled $135,398, primarily relating to the purchase and
development of the 1998 Hotels and renovation of the 1997 Acquired Hotels.
During 1998, the Company spent $12,354, or 10.5% of lessee room revenue, in
connection with the renovation of its Current Hotels. These capital expenditures
were well in excess of the 5% of room revenues for its hotels (7% of room
revenues and food and beverage revenues for one of its full service hotels)
which the Company is required to spend under its Percentage Leases for periodic
capital improvements and the refurbishment and replacement of furniture,
fixtures and equipment at its Current Hotels. These capital expenditures are
expected to be funded from operating cash flow, and possibly from borrowings
under the Company's line of credit, which sources are expected to be adequate to
fund such capital requirements. These capital expenditures are in addition to
amounts spent on normal repairs and maintenance which have approximated 5.3% and
5.2% of room revenues in 1998 and 1997, respectively, and are paid by the
lessees.
The Company's net cash provided by financing activities in the year ended
December 31, 1998 totaled $100,662. This amount included $71,000 of proceeds
from the closing of a loan through GE Capital Corporation in November 1998,
$23,619 of proceeds from additional borrowings under its $125,000 line of credit
and $34,385 of proceeds from borrowings under various demand notes. These
proceeds were offset in part by the payment of distributions to shareholders of
$24,886 and the payment of distributions to the Partnership's minority interest
of $1,886.
On February 1, 1999, the Company entered into a new three-year, $140,000
line of credit agreement with a group of four banks led by Wachovia Bank of
North Carolina, N.A. The Company has collateralized the line of credit with 29
of its Current Hotels. The line of credit bears interest generally at rates from
LIBOR plus 1.45% to LIBOR plus 1.70%, based primarily upon the Company's level
of total indebtedness. The Company's current rate is LIBOR plus 1.45%. The
Company's Articles of Incorporation (the "Articles") limit its total amount of
indebtedness to 45% of the investments in hotel properties at cost, as defined
in the Articles. In connection with the 1999 Annual Meeting of Shareholders, the
Board of Directors has recommended, and the shareholders will vote, with respect
to an increase in the debt limitation contained in the Articles to 60% of the
investments in hotel properties at cost, as defined in the Articles.
The Company intends to acquire and develop additional hotel properties that
meet its investment criteria and is continually evaluating acquisition
opportunities. It is expected that future hotel acquisitions will be financed,
in whole or in part, from additional follow-on offerings, from borrowings under
the line of credit, from joint venture agreements, from the sale of hotel
properties and/or from the issuance of other debt or equity securities. There
can be no assurances that the Company will make an investment in any additional
hotel properties that meet its investment criteria.
During 1998, the Company opened five internally developed hotels. The
following table sets forth certain information for each project.
<TABLE>
<CAPTION>
HOTEL AND LOCATION ROOMS DEVELOPMENT COSTS (APPX.) COMPLETION DATE
------------------ ----- ------------------------- ---------------
<S> <C> <C> <C>
Homewood Suites
Crabtree Valley
Raleigh, NC 137 $13,100 March 9, 1998
Homewood Suites
Lake Mary, FL 112 10,000 May 5, 1998
Homewood Suites
Alpharetta, GA 112 10,200 May 22, 1998
Courtyard by Marriott
Winston-Salem, NC 122 8,000 October 3, 1998
Homewood Suites
Durham, NC 96 9,500 November 4, 1998
</TABLE>
24
<PAGE> 25
SEASONALITY
The Company's operations historically have been seasonal in nature,
reflecting higher REVPAR during the second and third quarters. This seasonality
and the structure of the Percentage Leases, which provide for a higher
percentage of room revenues above the minimum equal quarterly levels to be paid
as Percentage Rent, can be expected to cause fluctuations in the Company's
quarterly lease revenue under the Percentage Leases.
YEAR 2000 MANAGEMENT
The "Year 2000 Issue" is the result of computer programs that were written using
two digits rather than four to define the applicable year. If the computer
programs of the Company or one of its service providers, contractors, or
suppliers, are not Year 2000 compliant, they may recognize a date using "00" as
the Year 1900 rather than the Year 2000. If not corrected, this could result in
a system failure or miscalculations causing disruptions of operations.
The Company has identified its Year 2000 risk in three categories: internal
software and embedded chip technology, external noncompliance by service
providers, contractors and suppliers, and external noncompliance by franchisors
and lessees.
Internal Software and Embedded Chip Technology
The Company has begun its data gathering and testing phase with regard to
internal software and Embedded chip technology, with the assistance of its
systems integration consultants. Virtually all of the Company's internal
software are current versions of off-the-shelf, name-brand software. The
Company's hardware systems, which include computer hardware, a phone system,
copiers and facsimile machines, also contain embedded chip technology which
could pose a risk of noncompliance. The majority of this hardware has been
installed in the last twelve months. Based on the results of our data gathering
and tests to date, the cost of achieving Year 2000 compliance is not expected to
be material. If any of the Company's current software or hardware is not Year
2000 compliant and is not repairable, the Company plans to replace the
respective software or hardware with readily available Year 2000 compliant
software or hardware. Full compliance is expected by the third quarter of 1999.
External Noncompliance by Service Providers, Contractors and Suppliers
The Company has identified and contacted its significant service providers,
contractors and suppliers to determine the extent to which the Company is
vulnerable to those third parties' failure to remedy their own Year 2000 issues.
It is expected that identification of any Year 2000 exposure with these parties
will be completed by April 30, 1999. To the extent that responses to Year 2000
readiness are unsatisfactory, the Company's contingency plan is to attempt to
change significant service providers, contractors or suppliers to those who have
demonstrated Year 2000 readiness, but cannot be assured that it will be
successful in finding such alternative service providers, contractors or
suppliers. The Company has received information concerning the Year 2000
compliance status of several of its significant service providers, contractors
or suppliers. At this time, some of the service providers, contractors and
suppliers have indicated they are already Year 2000 compliant, however, most
have responded that they are in the process of becoming Year 2000 compliant.
None have indicated that they will not be Year 2000 compliant by December 31,
1999. In the event that any of the Company's significant service providers,
contractors or suppliers do not successfully and timely achieve Year 2000
compliance, and the Company is unable to replace them with alternate service
providers, contractors or suppliers, the Company's business or operations could
be materially and adversely affected.
External Noncompliance by Franchisors and Lessees
The Company has significant relationships with certain nationally recognized
hotel franchisors and lessees. These franchisors have national reservation
systems on which the Company relies to receive a significant portion of its
Percentage Lease revenue. The Company has contacted these franchisors and
lessees to identify the extent to which the Company is vulnerable to those third
parties' failure to remedy their own Year 2000 issues. The Company has received
initial responses that these franchisors and lessees are working on Year 2000
compliance. The Company intends to follow-up with the franchisors and lessees
during the second quarter of 1999 to determine the extent of these third
parties' Year 2000 readiness and to determine if any contingency plans of the
Company will be necessary. In the event that any of these franchisors and
lessees do not successfully and timely achieve Year 2000 compliance, the
Company's business or operations could be materially and adversely affected.
Historical costs incurred to address the Year 2000 problem include approximately
$300. The Company has not yet developed a final cost estimate related to fixing
Year 2000 issues.
25
<PAGE> 26
FORWARD LOOKING STATEMENTS
This report contains certain "forward looking" statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, including,
but not limited to, those paragraphs cross-referenced to this section. These
statements represent the Company's judgment and are subject to risks and
uncertainties that could cause actual operating results to differ materially
from those expressed or implied in the forward looking statements. Important
factors that could cause actual results to differ include, but are not limited
to the following: (i) risks associated with the Company's acquisition of hotels
with little or no operating history, including the risk that such hotels will
not achieve the level of revenue assumed by the Company in calculating the
respective Percentage Rent formulas; (ii) development risks, including risk of
construction delay, cost overruns, receipt of zoning, occupancy and other
required governmental permits and authorizations and the incurrence of
development costs in connection with projects that are not pursued to
completion; and (iii) factors identified in the Company's filings with the
Securities and Exchange Commission including the factors listed in the Company's
Registration Statement on Form S-3 filed with the Securities and Exchange
Commission on August 1, 1997.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 1998, the Company's exposure to market risk for a change in
interest rates related solely to its debt outstanding under its $45 million
revolving demand note and its $125 million line of credit (the "Facilities").
Total debt outstanding under the Facilities totaled $102.085 million at December
31, 1998. The Company does not enter into derivative or interest rate
transactions for speculative purposes.
The Company had $71 million in debt at December 31, 1998 that was subject to a
fixed interest rate and principal payments. This debt is comprised of the
Company's 25-year loan with GE Capital Corporation, which carries an interest
rate of 7.375% for the first 10 years.
As of December 31, 1998, the Company was exposed to changes in interest rates
primarily as a result of its debt outstanding under the Facilities. The
Facilities were used to maintain liquidity and fund the Company's business
operations, hotel acquisitions, development and major renovations. Pursuant to
the Company's operating strategies, it maintains minimal cash balances and is
substantially dependent upon, among other things, the availability of adequate
working capital financing to support hotel acquisitions, development and major
renovations. The Facilities provided the Company with a maximum borrowing
capacity of $170 million. Borrowings under the $45 million demand note bore
interest at the prime rate (7.75% as of December 31, 1998). Borrowings under the
$125 million line of credit bore interest generally at LIBOR plus 1.75%. The
weighted average interest rate on the line of credit for 1998 was 7.56%. (See
Note 5 to the financial statements.)
On February 1, 1999, the Company entered into a new $140 million line of credit
agreement (the "New Line"). Proceeds from the New Line were used to pay off the
outstanding balances under the Facilities. The New Line, which expires in
February 2002, bears interest generally at rates from LIBOR plus 1.45% to LIBOR
plus 1.70%, based, in part, on the Company's level of total indebtedness. The
Company's current interest rate is LIBOR plus 1.45%. The definitive extent of
the Company's interest rate risk under the New Line is not quantifiable or
predictable because of the variability of future interest rates and business
financing requirements. The New Line, combined with the $71 million loan with GE
Capital Corporation, provides the Company with a maximum borrowing capacity of
$211 million.
The Company's long-term debt has an expiration date of December 2023. The
following table presents the aggregate maturities and historical cost amounts of
the fixed debt principal and interest rates by maturity dates at December 31,
1998:
<TABLE>
<CAPTION>
MATURITY DATE FIXED RATE DEBT INTEREST RATE
------------- --------------- -------------
<S> <C> <C> <C>
1999 $ 1,025 7.375%
2000 1,103 7.375%
2001 1,187 7.375%
2002 1,278 7.375%
2003 1,376 7.375%
Thereafter 65,031 7.375%
------- -----
$71,000 7.375%
======= =====
</TABLE>
26
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item 8 are filed with this report
on Form 10-K immediately following the signature page and are listed in Item 14
of this report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the Company's directors is incorporated by reference from
pages 5 and 6, "Proposal 1 - Election of Directors", in the Company's Proxy
Statement to be filed with respect to the Annual Meeting of Shareholders to be
held May 18, 1999. Information on the Company's executive officers is included
under the caption "Executive Officers of the Registrant" on pages 7 and 8 of
this report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from pages 8 through 12,
"Executive Compensation", in the Company's Proxy Statement to be filed with
respect to the Annual Meeting of Shareholders to be held May 18, 1999.
ITEM 12. SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
This information is incorporated by reference from pages 2 through 4, "Share
Ownership of Management and Certain Beneficial Owners", in the Company's Proxy
Statement to be filed with respect to the Annual Meeting of Shareholders to be
held May 18, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from page 14 ,"Certain
Relationships and Related Transactions", in the Company's Proxy Statement to be
filed with respect to the Annual Meeting of Shareholders to be held May 18,
1999.
27
<PAGE> 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K
(a) FINANCIAL STATEMENTS AND SCHEDULES. The financial statements and schedules
listed below are included in this report.
<TABLE>
<CAPTION>
Financial Statements and Schedules Form 10-K Page
- ---------------------------------- --------------
<S> <C>
WINSTON HOTELS, INC.:
Report of Independent Accountants 34
Consolidated Balance Sheets as of December 31, 1998 and 1997 35
Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996 36
Consolidated Statements of Shareholders' Equity for the years ended December 31,
1998, 1997 and 1996 37
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996 38
Notes to Consolidated Financial Statements 39
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 1998 46
Notes to Schedule III 48
WINSTON HOSPITALITY, INC.:
Report of Independent Accountants 49
Balance Sheet as of October 31, 1997 50
Statements of Income for the ten-months ended October 31, 1997 and 1996 (unaudited)
and the year ended December 31, 1996 51
Statements of Shareholders' Equity for the ten months ended October 31, 1997 and
the year ended December 31, 1996 52
Statements of Cash Flows for the ten-months ended October 31, 1997 and 1996 (unaudited)
and the year ended December 31, 1996 53
Notes to Financial Statements 54
CAPSTAR WINSTON COMPANY, L.L.C.:
Independent Auditors' Report 56
Balance Sheets as of December 31, 1998 and 1997 57
Statements of Operations for the year ended December 31, 1998 and the period
from October 15, 1997
(date of inception) through December 31, 1997 58
Statements of Members' Capital (Deficit) for the year ended December 31, 1998 and the period from
October 15, 1997 (date of inception) through December 31, 1997 59
Statements of Cash Flows for the year ended December 31, 1998 and the period from October 15, 1997
(date of inception) through December 31, 1997 60
Notes to Financial Statements 61
</TABLE>
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the fourth
quarter of 1998.
28
<PAGE> 29
(c) EXHIBITS. The exhibits required by Item 601 of Regulation S-K are listed
below. Management contracts or compensatory plans are filed as Exhibits
10.7, 10.26, 10.27 and 10.30.
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
3.1(12) Restated Articles of Incorporation
3.2(1) Amended and Restated Bylaws
4.1(1) Specimen certificate for Common Stock, $0.01 par value per share
4.2(8) Form of Stock Certificate for 9.25% Series A Cumulative Preferred Stock
4.3(10) Restated Articles of Incorporation as amended (see Exhibits 3.1 and 3.2)
4.4(10) Amended and Restated Bylaws (see Exhibit 3.2)
10.1(6) Second Amended and Restated Agreement of Limited Partnership of WINN Limited Partnership
10.2(8) Amendment No. 1 dated September 11, 1997 to Second Amended and Restated Agreement of
Limited Partnership of WINN Limited Partnership
10.3(10) Amendment No. 2 dated December 31, 1997 to Second Amended and Restated Agreement of
Limited Partnership of WINN Limited Partnership
10.4(2) Form of Percentage Leases
10.5(9) First Amendment to Lease dated November 17, 1997 between WINN Limited Partnership and
CapStar Winston Company, L.L.C.
10.6(9) First Amendment to Lease dated November 24, 1997 between WINN Limited Partnership and
CapStar Winston Company, L.L.C.
10.7(1) Winston Hotels, Inc. Directors' Stock Incentive Plan
10.8(2) Limitation of Future Hotel Ownership and Development Agreement
10.9(3) Memorandum of Understanding, dated March 15, 1996, among Winston Hotels, Inc., Winston
Hospitality, Inc. and Promus Hotels, Inc.
10.10(3) Stock Purchase Agreement, dated April 24, 1996, between Promus Hotels, Inc. and Winston
Hotels, Inc.
10.11(3) Agreement of Purchase and Sale, dated April 24, 1996, between WINN Limited Partnership
and Promus Hotels, Inc. relating to three hotel properties being developed by
Promus Hotels, Inc.
10.12(3) Option to Purchase Additional Hotels, dated April 24, 1996, between WINN Limited
Partnership and Promus Hotels, Inc.
10.13(4) Amendment No. 1 to Stock Purchase Agreement, dated as of August 7, 1996, by and between
Promus Hotels, Inc. and Winston Hotels, Inc. amending the Stock Purchase Agreement,
dated April 24, 1996, by and between Promus Hotels, Inc. and Winston Hotels, Inc.
10.14(4) Amendment to Agreement of Purchase and Sale, dated as of August 7, 1996, by and between
WINN Limited Partnership and Promus Hotels, Inc., amending the Agreement of Purchase
and Sale, dated April 24, 1996, by and between WINN Limited Partnership and Promus Hotels,
Inc. relating to three hotel properties being developed by Promus Hotels, Inc.
</TABLE>
29
<PAGE> 30
<TABLE>
<S> <C>
10.15(4) First Amendment to Option to Purchase Additional Hotels, dated as of August 7, 1996, by
and between Promus Hotels, Inc. and WINN Limited Partnership, amending the Option to
Purchase Additional Hotels, dated April 24, 1996, by and between WINN Limited Partnership
and Promus Hotels, Inc.
10.16(5) Credit Agreement, dated as of October 29, 1996, among Winston Hotels, Inc., WINN Limited
Partnership, the banks listed therein, Wachovia Bank of North Carolina, N.A., as
Collateral Agent and Wachovia Bank of Georgia, N.A., as Administrative Agent (the "1996
Credit Agreement")
10.17(5) Promissory Note, dated October 29, 1996, from Winston Hotels, Inc. and WINN Limited
Partnership to Branch Banking and Trust Company for the principal sum of
$35,000,000 pursuant to the 1996 Credit Agreement
10.18(5) Promissory Note, dated October 29, 1996, from Winston Hotels, Inc. and WINN Limited
Partnership to Nationsbank, N.A. for the principal sum of $20,000,000 pursuant to
the 1996 Credit Agreement
10.19(5) Promissory Note, dated October 29, 1996, from Winston Hotels, Inc. and WINN Limited
Partnership to Southtrust Bank of Alabama, N.A. for the principal sum of
$20,000,000 pursuant to the 1996 Credit Agreement
10.20(5) Promissory Note, dated October 29, 1996, from Winston Hotels, Inc. and WINN Limited
Partnership to Wachovia Bank of North Carolina, N.A. for the principal sum of
$50,000,000 pursuant to the 1996 Credit Agreement
10.21(5) Form of Deed of Trust, Assignment of Rents, Security Agreement and Financing Statement
used to secure certain obligations under the 1996 Credit Agreement (not including
certain variations existing in the different states where the properties are located)
10.22(7) Redemption and Registration Rights Agreement, dated as of July 14, 1997 by and among
WINN Limited Partnership, Winston Hotels, Inc., certain partnerships listed and
certain partners or designees thereof listed therein
10.23(9) Guaranty dated November 17, 1997 between CapStar Hotel Company, WINN Limited Partnership
and Winston Hotels, Inc.
10.24(9) Investment Agreement dated November 17, 1997 between Winston Hotels, Inc., Robert W.
Winston, III and John B. Harris, Jr.
10.25(9) First Amendment to Credit Agreement dated November 17, 1997 between Winston Hotels, Inc.,
WINN Limited Partnership, Wachovia Bank, N.A., Branch Banking and Trust Company,
NationsBank, N.A., and SouthTrust Bank, N.A.
10.26(10) Employment Agreement, dated July 31, 1997, by and between Kenneth R. Crockett and Winston
Hotels, Inc.
10.27(11) Winston Hotels, Inc. Stock Incentive Plan as amended May 1998
10.28(12) Loan Agreement by and between Winston SPE LLC and CMF Capital Company LLC dated
November 3, 1998
10.29(12) Promissory note dated November 3, 1998 by and between Winston SPE LLC and CMF Capital
Company, LLC
10.30 Winston Hotels, Inc. Executive Deferred Compensation Plan
</TABLE>
30
<PAGE> 31
<TABLE>
<S> <C>
10.31 Credit Agreement, dated as of January 15, 1999, among Wachovia Bank, N.A., Branch Banking
and Trust Company, SouthTrust Bank, N.A., Centura Bank, Winston Hotels, Inc.,
WINN Limited Partnership and Wachovia Bank, N.A. as Agent (the "Credit Agreement")
10.32 Promissory Note, dated as of January 15, 1999, from Winston Hotels, Inc. and WINN Limited
Partnership to Wachovia Bank, N.A. for the principal sum of $60,000,000 pursuant to
the Credit Agreement
10.33 Promissory Note, dated as of January 15, 1999, from Winston Hotels, Inc. and WINN Limited
Partnership to Branch Banking and Trust Company for the principal sum of $40,000,000
pursuant to the Credit Agreement
10.34 Promissory Note, dated as of January 15, 1999, from Winston Hotels, Inc. and WINN Limited
Partnership to SouthTrust Bank, N.A. for the principal sum of $25,000,000 pursuant to
the Credit Agreement
10.35 Promissory Note, dated as of January 15, 1999, from Winston Hotels, Inc. and WINN Limited
Partnership to Centura Bank for the principal sum of $15,000,000 pursuant to the
Credit Agreement
10.36 Form of Deed of Trust, Assignment of Rents, Security Agreement and Financing Statement
used to secure certain obligations under the Credit Agreement (not including certain
variations existing in the different states where the properties are located)
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants (PricewaterhouseCoopers LLP)
23.2 Accountants' Consent (KPMG LLP)
24 Powers of Attorney
27.1 Financial Data Schedule to the Company's Form 10-K for the year ended December 31, 1998
</TABLE>
- ------------
(1) Exhibits to the Company's Registration Statement on Form S-11 as filed
with the Securities and Exchange Commission (Registration No. 33-76602)
effective May 25, 1994 and incorporated herein by reference.
(2) Exhibits to the Company's Registration Statement on Form S-11 as filed
with the Securities and Exchange Commission (Registration No. 33-91230)
effective May 11, 1995 and incorporated herein by reference.
(3) Exhibits to the Company's Quarterly Report on Form 10-Q as filed with
the Securities and Exchange Commission on May 14, 1996 and incorporated
herein by reference.
(4) Exhibits to the Company's Quarterly Report on Form 10-Q as filed with the
Securities and Exchange Commission on August 14, 1996 and incorporated
herein by reference.
(5) Exhibits to the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on March 27, 1997 and incorporated
herein by reference.
(6) Exhibit to the Company's report on Form 8-K as filed with the Securities
and Exchange Commission on July 24, 1997 and incorporated herein by
reference.
31
<PAGE> 32
(7) Exhibit to the Company's Quarterly Report on Form 10-Q as filed with the
Securities and Exchange Commission on August 8, 1997 and incorporated
herein by reference.
(8) Exhibits to the Company's report on Form 8-K as filed with the Securities
and Exchange Commission on September 15, 1997 and incorporated herein by
reference.
(9) Exhibits to the Company's report on Form 8-K as filed with the Securities
and Exchange Commission on December 10, 1997 and incorporated herein by
reference.
(10) Exhibits to the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on March 27, 1998 and as amended by Form
10-K/A filed with the Securities and Exchange Commission on April 1, 1998.
(11) Exhibit to the Company's Registration Statement on Form S-8 as filed with
the Securities and Exchange Commission (Registration No. 333-60079) and
incorporated herein by reference.
(12) Exhibits to the Company's Quarterly Report on Form 10-Q as filed with the
Securities and Exchange Commission on November 16, 1998 and as amended on
Form 10-Q/A filed with the Securities and Exchange Commission on February
23, 1999 and incorporated herein by reference.
32
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WINSTON HOTELS, INC.
By: /s/ Robert W. Winston, III
--------------------------
Robert W. Winston, III
Chief Executive Officer
Date: March 25, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Chairman of the Board of Directors March 25, 1999
- --------------------------------------------
Charles M. Winston
/s/ Robert W. Winston, III Chief Executive Officer and Director March 25, 1999
- -------------------------------------------- (Principal Executive Officer)
Robert W. Winston, III
/s/ James D. Rosenberg President, Chief Operating Officer, Chief March 25, 1999
- -------------------------------------------- Financial Officer and Secretary
James D. Rosenberg
/s/ Brent V. West Vice President and Controller March 25, 1999
- --------------------------------------------
Brent V. West
* Director March 25, 1999
- --------------------------------------------
Edwin B. Borden
* Director March 25, 1999
- --------------------------------------------
Thomas F. Darden, II
* Director March 25, 1999
- --------------------------------------------
Richard L. Daugherty
* Director March 25, 1999
- --------------------------------------------
James H. Winston
* Director March 25, 1999
- --------------------------------------------
David C. Sullivan
*By /s/ Robert W. Winston, III
- --------------------------------------------
Robert W. Winston, III, Attorney-in-Fact
*By /s/ James D. Rosenberg
- --------------------------------------------
James D. Rosenberg, Attorney-in-Fact
</TABLE>
33
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Winston Hotels, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the consolidated financial position of Winston
Hotels, Inc. as of December 31, 1998 and 1997, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule of
Winston Hotels, Inc. as listed on the index and included in this Form 10-K, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein. These financial statements and financial statement schedule
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements and the financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Raleigh, North Carolina
January 14, 1999, except for footnote 5
which is as of February 1, 1999
34
<PAGE> 35
WINSTON HOTELS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
1998 1997
--------- ---------
<S> <C> <C>
Investment in hotel properties:
Land $ 42,449 $ 27,504
Buildings and improvements 355,807 229,469
Furniture and equipment 32,296 17,594
--------- ---------
Operating properties 430,552 274,567
Less accumulated depreciation 37,920 21,572
--------- ---------
392,632 252,995
Properties under development 5,229 26,490
--------- ---------
Net investment in hotel properties 397,861 279,485
Corporate FF&E, net 294 23
Cash and cash equivalents 33 164
Lease revenue receivable 7,653 5,682
Deferred expenses, net 3,376 1,403
Prepaid expenses and other assets 2,939 1,070
--------- ---------
Total assets $ 412,156 $ 287,827
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt $ 71,000 $ --
Due to banks 102,085 44,081
Accounts payable and accrued expenses 3,969 3,527
Distributions payable 6,789 6,950
Minority interest in Partnership 14,888 15,779
--------- ---------
Total liabilities 198,731 70,337
--------- ---------
Shareholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
3,000,000 shares issued and outstanding (liquidation
preference of $76,734 and $77,100) 30 30
Common stock, $.01 par value, 50,000,000 shares authorized,
16,313,980 and 16,194,480 shares issued and outstanding 163 162
Additional paid-in capital 224,757 223,427
Unearned directors' compensation (310) (106)
Distributions in excess of earnings (11,215) (6,023)
--------- ---------
Total shareholders' equity 213,425 217,490
--------- ---------
Total liabilities and shareholders' equity $ 412,156 $ 287,827
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE> 36
WINSTON HOTELS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Revenue:
Percentage lease revenue $54,700 $35,868 $26,611
Interest and other income 249 234 97
------- ------- -------
Total revenue 54,949 36,102 26,708
------- ------- -------
Expenses:
Real estate taxes and property and casualty
insurance 5,017 2,702 1,647
General and administrative 3,692 2,021 1,985
Interest 8,637 3,066 2,665
Depreciation 16,389 10,064 6,476
Amortization 339 176 147
------- ------- -------
Total expenses 34,074 18,029 12,920
------- ------- -------
Income before allocation to minority interest 20,875 18,073 13,788
Income allocation to minority interest 1,349 1,329 786
------- ------- -------
Net income 19,526 16,744 13,002
Preferred stock distribution 6,938 2,100 --
------- ------- -------
Net income applicable to common Shareholders $12,588 $14,644 $13,002
======= ======= =======
Earnings per share:
Net income per common share $ 0.77 $ 0.92 $ 1.01
======= ======= =======
Net income per common share assuming dilution $ 0.77 $ 0.91 $ 1.00
======= ======= =======
Weighted average number of common shares 16,286 15,990 12,922
======= ======= =======
Weighted average number of common shares
assuming dilution 18,040 17,555 13,768
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE> 37
WINSTON HOTELS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL UNEARNED DISTRIBUTIONS TOTAL
--------------- ----------------- PAID-IN DIRECTORS' IN EXCESS OF SHAREHOLDERS'
SHARES DOLLARS SHARES DOLLARS CAPITAL COMPENSATION EARNINGS EQUITY
------ ------- ------ ------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 9,880 $ 99 -- $ -- $ 82,988 $ (256) $ (1,959) $ 80,872
Issuance of shares 5,919 59 -- -- 60,532 -- -- 60,591
Adjustment to minority interest -- -- -- -- 1,696 -- -- 1,696
Distributions ($1.005 per share) -- -- -- -- -- -- (14,423) (14,423)
Unearned compensation amortization -- -- -- -- -- 75 -- 75
Net income -- -- -- -- -- -- 13,002 13,002
------ ------ ------ ------ -------- ------ ---------- --------
Balances at December 31, 1996 15,799 158 -- -- 145,216 (181) (3,380) 141,813
Issuance of shares 395 4 3,000 30 76,451 -- -- 76,485
Adjustment to minority interest -- -- -- -- 1,760 -- -- 1,760
Distributions ($1.08 per common share) -- -- -- -- -- -- (17,287) (17,287)
Distributions ($0.70 per preferred share) -- -- -- -- -- -- (2,100) (2,100)
Unearned compensation amortization -- -- -- -- -- 75 -- 75
Net income -- -- -- -- -- -- 16,744 16,744
------ ------ ------ ------ -------- ------ ---------- --------
Balances at December 31, 1997 16,194 162 3,000 30 223,427 (106) (6,023) 217,490
Issuance of shares 120 1 -- -- 1,137 (401) -- 737
Adjustment to minority interest -- -- -- -- 193 -- -- 193
Distributions ($1.09 per common share) -- -- -- -- -- -- (17,780) (17,780)
Distributions ($2.31 per preferred share) -- -- -- -- -- -- (6,938) (6,938)
Unearned compensation amortization -- -- -- -- -- 197 -- 197
Net income -- -- -- -- -- -- 19,526 19,526
------ ------ ------ ------ -------- ------ --------- --------
Balances at December 31, 1998 16,314 $ 163 3,000 $ 30 $224,757 $ (310) $ (11,215) $213,425
====== ====== ====== ====== ======== ====== ========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE> 38
WINSTON HOTELS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 19,526 $ 16,744 $ 13,002
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest 1,349 1,329 786
Depreciation 16,389 10,064 6,476
Amortization 455 516 321
Unearned compensation amortization 197 75 75
Changes in assets and liabilities:
Lease revenue receivable (1,971) (1,071) (2,064)
Prepaid expenses and other assets (1,782) (457) (168)
Accounts payable and accrued expenses 442 611 301
--------- -------- --------
Net cash provided by operating activities 34,605 27,811 18,729
--------- -------- --------
Cash flows from investing activities:
Prepaid acquisition costs (448) (408) (565)
Deferred acquisition costs -- (64) (18)
Sale of land parcel 445 -- --
Investment in hotel properties (135,395) (81,877) (74,031)
--------- -------- --------
Net cash used in investing activities (135,398) (82,349) (74,614)
--------- -------- --------
Cash flows from financing activities:
Purchase of interest rate protection agreements -- (69) --
Fees paid to register additional common shares (45) -- --
Fees paid in connection with new financing facilities (2,125) (16) (563)
Proceeds from GE Capital Corporation loan 71,000 -- --
Proceeds from various demand notes 34,385 -- --
Net proceeds from issuance of common stock 600 200 59,091
Net proceeds from issuance of preferred stock -- 71,506 --
Payment of distributions to shareholders (24,886) (16,789) (13,062)
Payment of distributions to minority interest (1,886) (1,645) (643)
Net increase in line of credit borrowing 23,619 1,281 8,800
--------- -------- --------
Net cash provided by financing activities 100,662 54,468 53,623
--------- -------- --------
Net decrease in cash and cash equivalents (131) (70) (2,262)
Cash and cash equivalents at beginning of period 164 234 2,496
--------- -------- --------
Cash and cash equivalents at end of period $ 33 $ 164 $ 234
========= ======== ========
Supplemental disclosure:
Cash paid for interest $ 9,575 $ 4,044 $ 2,158
========= ======== ========
Summary of non-cash investing and financing activities:
Investment in hotel properties payable $ -- $ 1,134 $ 1,315
Distributions declared but not paid 6,789 6,950 4,352
Issuance of shares in exchange for hotel properties/minority
interest units 151 4,799 1,500
Issuance of units in exchange for hotel properties -- 11,287 9,555
Adjustment to minority interest due to follow-on offerings and
issuance of partnership units in connection with the acquisition
of hotel properties 193 1,760 1,696
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 39
WINSTON HOTELS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. ORGANIZATION:
Winston Hotels, Inc. ("WHI") operates so as to qualify as a real estate
investment trust ("REIT") for federal income tax purposes. During 1994, WHI
completed an initial public offering ("IPO") of $0.01 par value common stock
("Common Stock"), utilizing the majority of the proceeds to acquire one hotel
and a general partnership interest (as the sole general partner) in WINN Limited
Partnership (the "Partnership"). The Partnership used a substantial portion of
the proceeds to acquire nine hotel properties (collectively the ten hotels are
the "Initial Hotels"). The Initial Hotels were acquired from affiliates of WHI
(the "Winston Affiliates"). WHI and the Partnership (collectively the "Company")
began operations as a REIT on June 2, 1994.
During 1995 and 1996, WHI completed follow-on Common Stock offerings, as
well as a Preferred Stock offering in September 1997, and invested the net
proceeds from these offerings in the Partnership. The Partnership utilized the
proceeds to acquire 28 additional hotel properties as of December 31, 1997.
During 1998, the Company added 13 additional properties to its portfolio, five
of which were internally developed (see Note 3). As of December 31, 1998, WHI's
ownership in the Partnership was 90.37% (see Note 6). As of December 31, 1998,
the Company owned 51 hotel properties (the "Current Hotels"), primarily in the
Southeast region of the United States. 49 of the Current Hotels are leased,
pursuant to separate percentage operating lease agreements (the "Percentage
Leases"), to CapStar Winston Company, L.L.C. ("CapStar Winston"), one is leased
to Bristol Hotels and Resorts, Inc. ("Bristol") and one is leased to Prime
Hospitality Corp. ("Prime").
Prior to November 17, 1997, 38 of the Current Hotels were leased pursuant to
the Percentage Leases to Winston Hospitality, Inc. On November 17, 1997 and
November 24, 1997, CapStar Management Company, L.P. purchased substantially all
of the assets and assumed certain liabilities of Winston Hospitality, Inc.,
including the 38 then existing leases. Concurrent with the transaction, the
leases were assigned to CapStar Winston, an affiliate of CapStar Management
Company, L.P., and the terms of the leases were extended to 15 years from the
date of the transaction.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation. The consolidated financial statements include
the accounts of WHI and the Partnership. All significant inter-company balances
and transactions have been eliminated.
Investment in Hotel Properties. Hotel properties are recorded at cost and
are depreciated using the straight-line method over estimated useful lives of
the assets of 5 and 30 years for furniture and equipment, and buildings and
improvements, respectively. Upon disposition, both the assets and accumulated
depreciation accounts are relieved and the related gain or loss is credited or
charged to the income statement. Repairs and maintenance of hotel properties are
paid by the lessees.
The Company evaluates long-lived assets for potential impairment by
analyzing the operating results, trends and prospects for the Company and
considering any other events and circumstances which might indicate potential
impairment.
Cash and Cash Equivalents. All highly liquid investments with a maturity of
three months or less when purchased are considered to be cash equivalents.
Deferred Expenses. Included in deferred expenses are franchise fees and loan
costs which are recorded at cost. Amortization of franchise fees is computed
using the straight-line method over ten years. Amortization of loan costs,
computed using the straight-line method over the period of the related debt
facility, are included in interest expense.
Minority Interest in Partnership. Certain hotel properties have been
acquired, in part, by the Partnership, through the issuance of limited
partnership units of the Partnership. The equity interest in the Partnership
created by these transactions represents the Company's minority interest
liability. The Company's minority interest is: (i) increased or decreased by its
pro-rata share of the net income or net loss, respectively, of the Partnership;
(ii) decreased by distributions; and (iii) adjusted to equal the net equity of
the Partnership multiplied by the limited partners' ownership percentage
immediately after each issuance of units of the Partnership and/or Common Stock
of the Company through an adjustment to additional paid-in capital.
Earnings Per Share. Net income per common share is computed by dividing net
income applicable to common shareholders by the weighted-average number of
common shares outstanding during the period. Net income per common share
assuming dilution is computed by dividing income before allocation to minority
interest by the weighted-average number of common shares assuming
39
<PAGE> 40
dilution during the period. Weighted average number of common shares assuming
dilution includes common shares and dilutive common share equivalents, primarily
redeemable limited partnership units and stock options (see Note 6).
Distributions. The ability to pay regular quarterly distributions is
dependent upon receipt of distributions from the Partnership, which in turn are
dependent upon the results of operations of the Partnership's properties.
Income Taxes. The Company qualifies as a REIT under Section 856 to 860 of
the Internal Revenue Code and therefore no provision for federal income taxes
has been reflected in the financial statements.
Earnings and profits, which determine the taxability of distributions to
shareholders, differ from net income reported for financial reporting purposes
due to the differences for federal tax purposes in the estimated useful lives
used to compute depreciation and the carrying value (basis) of the investment in
hotel properties. Additionally, certain costs associated with the IPO are
treated differently for federal tax purposes than for financial reporting
purposes. At December 31, 1998, the net tax basis of the Company's assets and
liabilities was approximately $12,500 less than the amounts reported in the
accompanying consolidated financial statements.
For federal income tax purposes, 1998 distributions amounted to $1.09 per
common share, two percent of which is considered a return of capital.
Fair Value of Financial Instruments. The value of interest rate cap
agreements fluctuates with interest rates. As of December 31, 1997, interest
rates related to the contract period were below the contract rates, and
therefore these contracts were estimated to have nominal current fair value as
of that date. There were no such agreements as of December 31, 1998. Due to
banks consists of a line of credit and a demand note, both of which reprice
periodically to allow for the fair value to equal the carrying value. Long-term
debt consists of a fixed rate note which approximates fair value. The Company's
remaining assets and liabilities are not considered financial instruments.
Concentration of Credit Risk. The Company places cash deposits at federally
insured depository institutions. At December 31, 1998, bank account balances
exceeded federal depository insurance limits by approximately $987.
Reclassifications. Certain reclassifications have been made to the 1996 and
1997 financial statements to conform with the 1998 presentation. These
reclassifications have no effect on net income or shareholders' equity
previously reported.
Estimates. The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts of assets and liabilities
and the disclosure of contingent assets and liabilities as of the balance sheet
dates and the reported amounts of revenues and expenses during the periods
reported. Actual results could differ from those estimates.
3. HOTEL PROPERTIES:
The Company owned 51 hotels, consisting of 6,904 rooms, as of December 31,
1998. The Company's acquisition of hotel properties for the years 1998, 1997 and
1996 are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
YEAR PURCHASE COST HOTEL PROPERTIES ROOMS/SUITES
---- ------------- ---------------- ------------
<S> <C> <C> <C> <C>
1996* $ 73,200 10 1,322
1997 62,625 7 1,096
1998 140,794 13 1,803
-------- ------ ------
Total $276,619 30 4,221
======== ====== ======
</TABLE>
* Includes $38,313 paid to Winston Affiliates for the acquisition of four
hotels with 534 rooms/suites.
The Partnership issued 722,024 limited partnership units in connection with
the acquisition of three hotels acquired in 1996 from Winston Affiliates.
40
<PAGE> 41
All acquisitions were accounted for by the purchase method of accounting and
results of operations for these hotels are included in the Consolidated
Statements of Income for the period in which they were owned by the Company. The
following unaudited pro forma financial information assumes the acquisitions
were acquired as of the later of January 1, 1997 or their date of opening and
the 1997 Preferred Stock offerings took place on January 1, 1997:
<TABLE>
<CAPTION>
PRO FORMA FOR THE
YEAR ENDED DECEMBER 31,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Percentage lease and other revenue $ 56,650 $ 47,949
----------- -----------
Expenses:
Real estate taxes and property and
casualty insurance 5,257 4,094
General and administrative 3,701 2,094
Interest expense 8,912 4,060
Depreciation 16,720 12,458
Amortization 658 627
----------- -----------
Total expense 35,248 23,333
----------- -----------
Income before allocation to minority interest 21,402 24,616
Income allocation to minority interest 1,400 1,975
Preferred stock distribution 6,938 6,938
----------- -----------
Net income applicable to common shareholders $ 13,064 $ 15,703
=========== ===========
Net income per common share $ 0.80 $ 0.98
=========== ===========
Net income per common share assuming dilution $ 0.80 $ 0.98
=========== ===========
Weighted average number of common shares 16,288,458 15,990,042
=========== ===========
Weighted average number of common shares assuming dilution 18,041,765 17,990,135
=========== ===========
</TABLE>
41
<PAGE> 42
4. DEFERRED EXPENSES:
At December 31, 1998 and 1997 deferred expenses consist of:
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Franchise fees $ 1,617 $ 1,254
Debt facility fees 2,125 658
Interest rate caps -- 69
Registration costs 30 --
Acquisition costs -- 86
-------- -------
3,772 2,067
Less accumulated amortization 396 664
-------- -------
Deferred expenses, net $ 3,376 $ 1,403
======== =======
</TABLE>
During 1995, the Company entered into interest rate cap agreements to
eliminate the exposures to increases in 90-day LIBOR over 7.25%, and therefore
from exposures in interest rate increases under the collateralized line of
credit over 8.50%, on $30,000, for the period May 30, 1995 through May 30, 1997.
During 1997, the Company entered into interest rate cap agreements to eliminate
the exposure to increases in 90-day LIBOR over 6.25%, and therefore from its
exposure to interest rate increases over 8.00% under its line of credit, on a
principal balance of $40 million for the period June 4, 1997 through June 4,
1998.
5. DEBT:
The Company's outstanding debt balance as of December 31, 1998 consisted of
amounts due under three separate debt facilities.
On October 30, 1998, the Company signed a $45,000 revolving demand note with
Wachovia Bank, N.A. Interest accrued on the note at the prime rate (7.75% as of
December 31, 1998). Six of the Company's Current Hotels served as collateral for
the note. The outstanding balance on the note as of December 31, 1998 totaled
$34,385.
On November 3, 1998, the Company closed a $71,000 loan with GE Capital
Corporation. The 25-year loan bears interest at a fixed rate of 7.375% for the
first 10 years. 14 of the Company's Current Hotels, with a carrying value of
$128,239, serve as collateral for the loan. As of December 31, 1998, the entire
$71,000 balance was outstanding. The first principal payment was made January 1,
1999. The Company used the net proceeds from the loan to pay down the then
existing line of credit balance. The loan agreement with GE Capital Corporation
requires the Company to establish escrow reserves for the purposes of debt
service, capital improvements and property taxes and insurance. These reserves,
which are held by GE Capital Corporation, totaled $2,202 as of December 31, 1998
and are included in prepaid expenses and other assets on the accompanying
consolidated balance sheets.
As of December 31, 1998 and 1997 the Company's outstanding debt balance under
its previous $125,000 line of credit (the "Previous Line") totaled $67,700 and
$44,081, respectively. Interest on borrowings was generally at LIBOR plus 1.75%
and was payable monthly in arrears. As of December 31, 1998 and 1997 the
weighted average interest rate on the outstanding balance under the Previous
Line was 7.56% and 7.55%, respectively. A commitment fee of 0.0625% was also
paid quarterly on the unused portion of the Previous Line. Prior to the closing
of the $71,000 GE Capital loan mentioned above, 28 of the Company's Current
Hotels served as collateral for the Previous Line. Upon closing of the GE
Capital loan, nine of these properties were removed as collateral on the
Previous Line and were transferred as part of the 14 Current Hotels which
currently serve as collateral for the $71,000 GE Capital loan. During the years
ended December 31, 1998, 1997 and 1996, the Company capitalized interest of
$1,513, $1,284 and $148, respectively, related to hotels under development or
major renovation.
On February 1, 1999, the Company entered into a new three-year $140,000 line of
credit agreement (the "New Line") with a group of banks led by Wachovia Bank of
North America, N.A. This New Line replaces the Company's Previous Line. The New
Line bears interest at rates from LIBOR plus 1.45% to prime, based on the
Company's level of total indebtedness. The Company's current rate is LIBOR plus
1.45%. A commitment fee of 0.05% is also payable quarterly on the unused portion
of the New Line. The Company used the proceeds from the New Line to pay off the
outstanding balances under the Previous Line and under the $45,000 revolving
demand note mentioned above. The Company has collateralized the New Line with 29
of its Current Hotels, with a carrying value of $223,400 as of January 31, 1999.
Included within these 29 hotels are six of the Current Hotels which served as
collateral for the
42
<PAGE> 43
$45,000 revolving demand note, 19 of the Current Hotels which served as
collateral for the Previous Note, as well as four other Current Hotels.
6. CAPITAL STOCK:
On September 11, 1997, the Company issued 3,000,000 shares of 9.25% Series A
Cumulative Preferred Stock ($25 liquidation preference per share plus unpaid
cumulative distributions). Except in the event of certain occurrences, the
preferred shares are not redeemable prior to September 28, 2001. The Company
used the net proceeds from the offering of approximately $71,500 to pay down
most of the then outstanding debt under its line of credit, and thereby created
additional borrowing capacity to finance the acquisition and development of
additional hotel properties.
Pursuant to the Partnership Agreement of the Partnership, the holders of
limited partnership units have certain redemption rights (the "Redemption
Rights") which enable them to cause the Partnership to redeem their units in the
Partnership in exchange for shares of Common Stock on a one-for-one basis or, in
certain circumstances, for cash. The number of shares issuable upon exercise of
the Redemption Rights will be adjusted upon the occurrence of stock splits,
mergers, consolidations or similar pro-rata share transactions, which otherwise
would have the effect of diluting the ownership interests of the limited
partners or the shareholders of WHI. As of December 31, 1998, the Partnership
had 18,052,560 units outstanding, of which 16,313,980 units were held by WHI.
WHI issued 7,500 shares to each of its five initial independent directors
which shares vested at a rate of 1,500 shares per year beginning on June 2,
1994. These shares became fully vested on May 5, 1998. WHI also issued 5,687
shares to a new independent director on January 2, 1998. These shares vest 20%
on the date of grant and 20% on each anniversary thereafter. Any unvested shares
are subject to forfeiture if the director does not remain a director of WHI.
Each director is entitled to vote and receive distributions paid on such shares
prior to vesting.
7. EARNINGS PER SHARE:
The following is a reconciliation of the net income applicable to common
shareholders used in the net income per common share calculation to the income
before allocation to minority interest used in the net income per common share -
assuming dilution:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net income $19,526 $16,744 $13,002
Less: preferred shares distribution 6,938 2,100 --
------- ------- -------
Net income applicable to common shareholders 12,588 14,644 13,002
Plus: income allocation to minority interest 1,349 1,329 786
------- ------- -------
Net income assuming dilution $13,937 $15,973 $13,788
======= ======= =======
</TABLE>
The following is a reconciliation of the weighted average shares used in net
income per common share to the weighted average shares used in the net income
per common share - assuming dilution:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of common shares 16,286,233 15,990,096 12,921,552
Units with redemption rights 1,746,791 1,493,306 813,831
Stock options 7,214 71,376 32,617
---------- ---------- ----------
Weighted average number of common shares
assuming dilution 18,040,238 17,554,778 13,768,000
========== ========== ==========
</TABLE>
8. STOCK OPTION PLAN:
During 1998, the Company amended the Winston Hotels, Inc. Stock Incentive
Plan (the "Plan"). The amendment increased the number of shares of Common Stock
that may be issued under the Plan to 1,600,000 shares plus an annual increase to
be added as of January 1 of each year, beginning January 1, 1999, equal to the
lesser of (i) 500,000 shares; (ii) 8.5% of any increase in the number of
authorized and issued shares (on a fully diluted basis) since the immediately
preceding January 1; or (iii) a lesser number determined by the Board of
Directors. Incentive stock options under the Plan may not exceed 350,000 without
shareholder approval. The Plan
43
<PAGE> 44
permits the grant of incentive or nonqualified stock options, stock
appreciation rights, stock awards or performance shares to participants. Under
the Plan, the exercise price of each option equals the market price of the
Company's Common Stock on the date of grant and an option's maximum term is ten
years. Options are granted upon approval of the Board of Directors and generally
contain vesting requirements over a period of years.
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"). As
permitted by SFAS 123, no compensation cost has been recognized for options
granted under the Plan. Had the fair value method been used to determine
compensation cost, the impact on the Company's 1998 net income and net income
per Common Share would have been a decrease of $789 and $0.05 per share,
respectively. The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions used for grants in 1998, 1997 and 1996: dividend yield of 9%;
expected volatility of 30%; risk-free interest rate of 5.5%; and an expected
life of five years for all options.
A summary of the status of the Plan as of December 31, 1998, 1997 and 1996,
and changes during the years ended on those dates, is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- ------------------------- -------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------- -------------- ------- -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 436,000 11.34 401,000 $ 10.93 376,000 $ 10.80
Granted 450,000 13.10 55,000 13.88 25,000 12.88
Exercised (58,000) 10.33 (20,000) 10.00 -- --
Forfeited (30,000) 11.38 -- -- -- --
-------- ------- ------- ------- ------- -------
Outstanding at end of year 798,000 $ 12.40 436,000 $ 11.34 401,000 $ 10.93
======== ======= ======= ======= ======= =======
Options exercisable at year-end 309,250 254,750 206,000
======== ======= =======
</TABLE>
The following table summarizes information about the Plan at December 31,
1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE AVERAGE REMAINING
EXERCISE PRICES AT 12/31/98 AT 12/31/98 CONTRACTUAL LIFE (YEARS)
--------------- ------------------- ------------------- ------------------------
<S> <C> <C> <C> <C>
$10.00 50,000 50,000 1.0
$10.00 28,000 28,000 5.4
$11.00 50,000 50,000 0.4
$11.31 50,000 50,000 6.8
$11.38 90,000 45,000 7.0
$12.38 50,000 10,000 9.4
$12.88 25,000 12,500 7.8
$13.19 400,000 50,000 9.0
$13.88 55,000 13,750 8.8
</TABLE>
9. COMMITMENTS:
The Company has future lease commitments from the lessees through 2012.
Minimum future rental payments contractually due to the Company under these
non-cancelable operating leases are as follows:
<TABLE>
<CAPTION>
AMOUNT
Year ended December 31: --------
<S> <C> <C>
1999 $ 33,468
2000 33,468
2001 33,468
2002 33,468
2003 33,468
2004 and thereafter 290,825
--------
Total $458,165
========
</TABLE>
44
<PAGE> 45
Under the terms of the Percentage Leases, the lessees are obligated to pay
the Company the greater of base rents or percentage rents. The Company earned
minimum base rents of $28,033, $16,114 and $11,426 for the years ended December
31, 1998, 1997, and 1996, respectively, and percentage rents of $26,667, $19,754
and $15,185 for the years ended December 31, 1998, 1997, and 1996, respectively.
The percentage rents are based on percentages of gross room revenue and certain
food and beverage revenues of the lessees. MeriStar Hospitality Corporation, an
affiliate of CapStar Winston, has guaranteed amounts due and payable to the
Company under the 49 properties leased by CapStar Winston up to $20,000. The
lessees operate the hotel properties pursuant to franchise agreements, which
require the payment of fees based on a percentage of hotel revenue. These fees
are paid by the lessees.
Pursuant to the Percentage Leases, the Company reserves 5% of room revenues
(7% of gross room, food and beverage revenues from one of its full-service
hotels) to fund periodic improvements to the buildings and grounds, and the
periodic replacement and refurbishment of furniture, fixtures and equipment.
For one of the Current Hotels, the Company leases the land under an
operating lease which expires December 31, 2062. Expenses incurred in 1998
related to this land lease totaled $245. Minimum future rental payments
contractually due by the Company under this lease are as follows: 1999 - $110,
2000 - $110, 2001 - $110, 2002 - $110, 2003 - $110, 2004 and thereafter -
$7,040.
10. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized unaudited quarterly results of operations for the years ended
December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998
FIRST SECOND THIRD FOURTH
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenue $10,122 $15,064 $16,305 $13,458
Total expenses 5,448 8,406 10,204 10,016
------- ------- ------- -------
Income before minority interest 4,674 6,658 6,101 3,442
Income allocation to minority interest 297 469 420 163
------- ------- ------- -------
Income after minority interest 4,377 6,189 5,681 3,279
Preferred share distribution 1,734 1,734 1,735 1,735
------- ------- ------- -------
Net income applicable to common shareholders
$ 2,643 $ 4,455 $ 3,946 $ 1,544
======= ======= ======= =======
Earnings per share:
Net income per common share $ 0.16 $ 0.27 $ 0.24 $ 0.09
======= ======= ======= =======
Net income per common share
assuming dilution $ 0.16 $ 0.27 $ 0.24 $ 0.09
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1997
FIRST SECOND THIRD FOURTH
------ ------ ------- ------
<S> <C> <C> <C> <C>
Total revenue $7,178 $9,646 $10,406 $8,872
Total expenses 4,012 4,468 5,027 4,522
------ ------ ------- ------
Income before minority interest 3,166 5,178 5,379 4,350
Income allocation to minority interest 230 381 490 228
------ ------ ------- ------
Income after minority interest 2,936 4,797 4,889 4,122
Preferred share distribution -- -- 366 1,734
====== ====== ======= ======
Net income applicable to common shareholders
$2,936 $4,797 $ 4,523 $2,388
====== ====== ======= ======
Earnings per share:
Net income per common share $ 0.19 $ 0.30 $ 0.28 $ 0.15
====== ====== ======= ======
Net income per common share
assuming dilution
$ 0.18 $ 0.30 $ 0.28 $ 0.15
====== ====== ======= ======
</TABLE>
45
<PAGE> 46
WINSTON HOTELS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Cost Capitalized Gross Amounts
Subsequent to Carried
Initial Cost Acquisition at Close of Period
- ----------------------------------------------------------------------------------------------------------------------------
Buildings Buildings Buildings
and and and
Description Encumbrances Land Improvements Land Improvements Land Improvements Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hampton Inn
Boone, NC * $ 264 $ 2,750 $ -- $ 361 $ 264 $ 3,111 $ 3,375
Hampton Inn
Brunswick, GA * 716 3,887 -- 355 716 4,242 4,958
Hampton Inn
Cary, NC * 613 4,596 -- 348 613 4,944 5,557
Hampton Inn
Charlotte, NC # 833 3,609 -- 116 833 3,725 4,558
Hampton Inn
Chester, VA * 461 2,238 -- 60 461 2,298 2,759
Hampton Inn
Duncanville, TX * 480 2,689 25 522 505 3,211 3,716
Hampton Inn
Durham, NC 634 4,582 -- 613 634 5,195 5,829
Hampton Inn & Suites
Gwinnett, GA # 557 6,959 -- 1 557 6,960 7,517
Hampton inn
Hilton Head, SC * 310 3,969 -- 558 310 4,527 4,837
Hampton Inn
Jacksonville, NC * 473 4,140 -- 328 473 4,468 4,940
Hampton Inn
Las Vegas, NV * 856 7,945 -- -- 856 7,945 8,801
Hampton Inn
Perimeter , GA # 914 6,293 -- 41 914 6,334 7,248
Hampton Inn
Raleigh, NC # 697 5,955 -- 966 697 6,921 7,618
Hampton Inn
Southern Pines, NC * 614 4,280 -- 663 614 4,943 5,557
Hampton Inn
Southlake, GA * 680 4,065 -- 393 680 4,458 5,138
Hampton Inn
W. Springfield, MA # 916 5,253 -- 515 916 5,768 6,684
Hampton Inn
White Plains, NY # 1,382 10,763 -- 211 1,382 10,974 12,357
Hampton Inn
Wilmington, NC * 460 3,208 2 341 462 3,549 4,012
Comfort Inn
Augusta, GA 404 3,541 -- 325 404 3,866 4,270
Comfort Inn
Charleston, SC # 438 5,853 -- 774 438 6,627 7,065
Comfort Inn
Chester, VA * 661 6,447 -- 230 661 6,677 7,338
Comfort Inn
Clearwater, FL * 532 3,436 -- 661 532 4,097 4,629
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
Accumulated Life Upon Which
Depreciation Net Book Value Depreciation in
Buildings Land, Buildings Latest Income
and and Date of Statement is
Description Improvements Improvements Acquisition Computed
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hampton Inn
Boone, NC $ 586 $ 2,790 6/2/94 30
Hampton Inn
Brunswick, GA 686 4,272 6/2/94 30
Hampton Inn
Cary, NC 862 4,696 6/2/94 30
Hampton Inn
Charlotte, NC 614 3,943 6/2/94 30
Hampton Inn
Chester, VA 308 2,451 11/29/94 30
Hampton Inn
Duncanville, TX 308 3,408 5/7/96 30
Hampton Inn
Durham, NC 870 4,960 6/2/94 30
Hampton Inn & Suites
Gwinnett, GA 561 6,956 7/18/96 30
Hampton inn
Hilton Head, SC 676 4,161 11/29/94 30
Hampton Inn
Jacksonville, NC 743 4,197 6/2/94 30
Hampton Inn
Las Vegas, NV 154 8,646 5/20/98 30
Hampton Inn
Perimeter , GA 509 6,739 7/19/96 30
Hampton Inn
Raleigh, NC 959 6,658 5/18/95 30
Hampton Inn
Southern Pines, NC 818 4,739 6/2/94 30
Hampton Inn
Southlake, GA 755 4,383 6/2/94 30
Hampton Inn
W. Springfield, MA 289 6,395 7/14/97 30
Hampton Inn
White Plains, NY 425 11,932 10/29/97 30
Hampton Inn
Wilmington, NC 649 3,362 6/2/94 30
Comfort Inn
Augusta, GA 509 3,762 5/18/95 30
Comfort Inn
Charleston, SC 854 6,210 5/18/95 30
Comfort Inn
Chester, VA 963 6,375 11/29/94 30
Comfort Inn
Clearwater, FL 551 4,078 5/18/95 30
</TABLE>
46
<PAGE> 47
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Cost Capitalized Gross Amounts
Subsequent to Carried
Initial Cost Acquisition at Close of Period
- ----------------------------------------------------------------------------------------------------------------------------
Buildings Buildings Buildings
and and and
Description Encumbrances Land Improvements Land Improvements Land Improvements Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Comfort Inn
Durham, NC * 947 6,208 -- 317 947 6,525 7,472
Comfort Inn
Fayetteville, NC 1,223 8,047 -- 668 1,223 8,715 9,938
Comfort Inn
Greenville, SC 871 3,551 -- 1,296 871 4,847 5,718
Comfort Suites
London, KY 345 2,170 -- 432 345 2,602 2,947
Comfort Inn
Raleigh, NC 459 4,075 8 584 467 4,659 5,126
Comfort Inn
Wilmington, NC 532 5,889 -- 583 532 6,472 7,004
Comfort Suites
Orlando, FL # 1,357 10,180 -- 215 1,357 10,395 11,752
Homewood Suites
Alpharetta, GA * 985 6,621 -- 213 985 6,834 7,820
Homewood Suites
Cary, NC # 1,010 12,367 8 12 1,018 12,379 13,397
Homewood Suites
Clear Lake, TX # 879 5,978 -- 15 879 5,993 6,872
Homewood Suites
Durham, NC * 1,074 6,136 -- -- 1,074 6,136 7,210
Homewood Suites
Lake Mary, FL * 871 6,987 -- -- 871 6,987 7,858
Homewood Suites
Phoenix, AZ * 1,402 9,763 -- -- 1,402 9,763 11,164
Homewood Suites
Raleigh, NC * 1,008 10,076 -- 11 1,008 10,087 11,095
Holiday Inn Express
Abingdon, VA 918 2,263 -- 387 918 2,650 3,567
Holiday Inn Express
Clearwater, FL * 510 5,854 -- 707 510 6,561 7,071
Holiday Inn Select
Dallas, TX * 1,060 13,615 -- 2,413 1,060 16,028 17,088
Holiday Inn
Secaucus, NJ * -- 13,699 -- -- -- 13,699 13,699
Holiday Inn
Tinton Falls, NJ * 1,261 4,337 -- 1,158 1,261 5,495 6,756
Courtyard by Marriott
Ann Arbor, MI # 902 9,850 -- 807 902 10,657 11,559
Courtyard by Marriott
Houston, TX * 1,211 9,154 -- 1,439 1,211 10,593 11,804
Courtyard by Marriott
Wilmington, NC # 742 5,907 -- 5 742 5,912 6,655
Courtyard by Marriott
Winston-Salem, NC * 915 5,202 -- 76 915 5,278 6,193
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
Accumulated Life Upon Which
Depreciation Net Book Value Depreciation in
Buildings Land, Buildings Latest Income
and and Date of Statement is
Description Improvements Improvements Acquisition Computed
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Comfort Inn
Durham, NC 916 6,556 11/29/94 30
Comfort Inn
Fayetteville, NC 1,331 8,607 11/29/94 30
Comfort Inn
Greenville, SC 491 5,227 5/6/96 30
Comfort Suites
London, KY 268 2,679 5/7/96 30
Comfort Inn
Raleigh, NC 707 4,419 8/16/94 30
Comfort Inn
Wilmington, NC 1,078 5,925 6/2/94 30
Comfort Suites
Orlando, FL 578 11,174 5/1/97 30
Homewood Suites
Alpharetta, GA 151 7,669 5/22/98 30
Homewood Suites
Cary, NC 1,034 12,363 7/9/96 30
Homewood Suites
Clear Lake, TX 466 6,407 9/13/96 30
Homewood Suites
Durham, NC 34 7,176 11/14/98 30
Homewood Suites
Lake Mary, FL 146 7,712 11/4/98 30
Homewood Suites
Phoenix, AZ 190 10,975 6/1/98 30
Homewood Suites
Raleigh, NC 273 10,822 3/9/98 30
Holiday Inn Express
Abingdon, VA 202 3,365 5/7/96 30
Holiday Inn Express
Clearwater, FL 295 6,776 8/6/97 30
Holiday Inn Select
Dallas, TX 1,412 15,676 5/7/96 30
Holiday Inn
Secaucus, NJ 266 13,433 5/27/98 30
Holiday Inn
Tinton Falls, NJ 106 6,650 4/21/98 30
Courtyard by Marriott
Ann Arbor, MI 449 11,110 9/30/97 30
Courtyard by Marriott
Houston, TX 519 11,285 7/14/97 30
Courtyard by Marriott
Wilmington, NC 394 6,260 12/19/96 30
Courtyard by Marriott
Winston-Salem, NC 30 6,163 10/3/98 30
</TABLE>
47
<PAGE> 48
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Cost Capitalized Gross Amounts
Subsequent to Carried
Initial Cost Acquisition at Close of Period
- ----------------------------------------------------------------------------------------------------------------------------
Buildings Buildings Buildings
and and and
Description Encumbrances Land Improvements Land Improvements Land Improvements Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hilton Garden Inn
Albany, NY * 1,168 11,236 -- -- 1,168 11,236 12,404
Hilton Garden Inn
Alpharetta, GA * 1,425 11,719 -- -- 1,425 11,719 13,144
Hilton Garden Inn
Raleigh, NC * 1,901 9,209 -- -- 1,901 9,209 11,110
Quality Suites
Charleston, SC # 912 11,224 -- 720 912 11,944 12,855
Residence Inn
Phoenix, AZ # 2,076 13,311 5 61 2,081 13,371 15,452
Fairfield Inn
Ann Arbor, MI * 542 3,743 -- 477 542 4,221 4,763
------- --------- ------ ------- -------- -------- --------
$42,401 $ 334,829 $ 48 $20,978 $ 42,449 $355,807 $398,256
======= ========= ====== ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
Accumulated Life Upon Which
Depreciation Net Book Value Depreciation in
Buildings Land, Buildings Latest Income
and and Date of Statement is
Description Improvements Improvements Acquisition Computed
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hilton Garden Inn
Albany, NY 250 12,154 5/8/98 30
Hilton Garden Inn
Alpharetta, GA 325 12,818 3/17/98 30
Hilton Garden Inn
Raleigh, NC 179 10,931 5/8/98 30
Quality Suites
Charleston, SC 1,488 11,369 5/18/95 30
Residence Inn
Phoenix, AZ 371 15,082 3/3/98 30
Fairfield Inn
Ann Arbor, MI 176 4,586 9/30/97 30
------- --------
$27,774 $370,482
======= ========
</TABLE>
* Property serves as collateral for the $140,000 line of credit which closed
on February 1, 1999 (see Note 5).
# Property serves as collateral for the $71,000 note through GE Capital
Corporation (see Note 5).
WINSTON HOTELS, INC.
NOTES TO SCHEDULE III
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
(a) Reconciliation of Real Estate:
Balance at beginning of period $ 256,973 $ 189,782
Acquisitions during period 131,183 61,619
Additions during period 10,100 5,572
--------- ---------
Balance at end of period $ 398,256 $ 256,973
========= =========
(b) Reconciliation of Accumulated Depreciation:
Balance at beginning of period 16,281 8,973
Depreciation for period 11,493 7,308
--------- ---------
Balance at end of period $ 27,774 $ 16,281
========== =========
(c) The aggregate cost of land, buildings and furniture and equipment for
federal income tax purposes is approximately $425,800.
(d) Refer to Notes 1 and 3 to the financial statements of Winston Hotels, Inc.
for transactions with affiliates.
</TABLE>
48
<PAGE> 49
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders
Winston Hospitality, Inc.
We have audited the accompanying balance sheet of Winston Hospitality, Inc.
as of October 31, 1997 and the related statements of income, shareholders'
equity and cash flows for the ten months ended October 31, 1997 and the year
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Winston Hospitality, Inc. as
of October 31, 1997 and the results of its operations and its cash flows for the
ten months ended October 31, 1997 and the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
February 6, 1998
49
<PAGE> 50
WINSTON HOSPITALITY, INC.
BALANCE SHEET
AS OF OCTOBER 31, 1997
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
1997
-------
<S> <C>
Current assets:
Cash and cash equivalents $ 6,926
Accounts receivable:
Trade 2,303
Lessor 768
Affiliates 125
Prepaid expenses and other assets 182
-------
Total current assets 10,304
-------
Furniture, fixtures and equipment:
Furniture and equipment 399
Leasehold improvements 113
-------
512
Less accumulated depreciation and amortization 245
-------
Net furniture, fixtures and equipment 267
-------
$10,571
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 1,918
Percentage lease payable to Lessor 3,882
Accrued salaries and wages 1,204
Accrued sales and occupancy taxes 814
Other current liabilities 842
-------
Total current liabilities 8,660
-------
Commitments (Note 3)
Shareholders' equity:
Common stock, $.01 par value, 100 shares authorized,
issued and outstanding 1
Additional paid-in capital 49
Retained earnings 1,861
-------
Total shareholders' equity 1,911
-------
$10,571
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE> 51
WINSTON HOSPITALITY, INC.
STATEMENTS OF INCOME
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997 AND 1996 AND
THE YEAR ENDED DECEMBER 31, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS ENDED
OCTOBER 31, YEAR ENDED
-------------------- DECEMBER 31,
1997 1996 1996
------- ------- -------
(unaudited)
<S> <C> <C> <C>
Revenue:
Room $67,145 $49,633 $58,956
Food and beverage 2,419 1,240 1,685
Other operating, net 1,373 1,068 1,191
Interest income 152 82 93
------- ------- -------
Total revenue 71,089 52,023 61,925
------- ------- -------
Expenses:
Property and operating 24,112 17,388 21,550
Property repairs and maintenance 3,193 2,614 3,181
Food and beverage 1,715 924 1,281
General and administrative 2,090 1,603 2,050
Franchise costs 6,167 4,327 5,361
Management fees 1,015 1,109 1,126
Percentage lease payments 30,980 22,800 26,611
------- ------- -------
Total expenses 69,272 50,765 61,160
------- ------- -------
Net income $ 1,817 $ 1,258 $ 765
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE> 52
WINSTON HOSPITALITY, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID-IN RETAINED SHAREHOLDERS'
SHARES DOLLARS CAPITAL EARNINGS EQUITY
------ ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1995 100 $ 1 $ 49 $ 435 $ 485
Net income -- -- -- 765 765
Distributions -- -- -- (556) (556)
----- ------- ------ -------- -------
Balances at December 31, 1996 100 1 49 644 694
Net income -- -- -- 1,817 1,817
Distributions -- -- -- (600) (600)
----- ------- ------ -------- -------
Balances at October 31, 1997 100 $ 1 $ 49 $1,861 $1,911
===== ======= ====== ======== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
52
<PAGE> 53
WINSTON HOSPITALITY, INC.
STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997 AND 1996
AND THE YEAR ENDED DECEMBER 31, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
TEN MONTHS ENDED OCTOBER 31, DECEMBER 31,
1997 1996 1996
------- ------- ------------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,817 $ 1,258 $ 765
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 67 65 83
Changes in assets and liabilities:
Accounts receivable - trade (1,137) (1,525) (330)
Prepaid expenses and other assets 38 (137) (103)
Accounts payable - trade 659 547 666
Percentage lease payable to Lessor (729) 532 2,064
Accrued expenses and other liabilities 906 1,045 914
------- ------- -------
Net cash provided by operating
activities 1,621 1,785 4,059
------- ------- -------
Cash flows from investing activities:
Purchases of furniture, fixtures and equipment (76) (107) (144)
Repayments from (advances to) Lessor, affiliates and
shareholders, net
518 (265) (145)
------- ------- -------
Net cash provided by (used in)
investing activities 442 (372) (289)
------- ------- -------
Cash flows from financing activities:
Distributions to shareholders (600) (485) (556)
------- ------- -------
Net cash used in financing activities (600) (485) (556)
------- ------- -------
Net increase in cash and cash equivalents 1,463 928 3,214
Cash and cash equivalents at beginning of the period 5,463 2,249 2,249
------- ------- -------
Cash and cash equivalents at end of the period $ 6,926 $ 3,177 $ 5,463
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
53
<PAGE> 54
WINSTON HOSPITALITY, INC.
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. ORGANIZATION:
Winston Hospitality, Inc. ("Hospitality") was formed to lease and operate
hotels owned by WINN Limited Partnership (the "Partnership") and Winston Hotels,
Inc. ("WHI") (collectively, the "Company"). Approximately 90.37% of the
Partnership was owned by WHI as of December 31, 1998. The two shareholders of
Hospitality (Robert W. Winston, III and John B. Harris, Jr.) are also
shareholders of WHI and/or partners in the Partnership. The Company owned 21
hotels as of December 31, 1995, 31 hotels as of December 31, 1996 and 38 hotels
as of October 31, 1997 (collectively, all 38 hotels are the "Current Hotels").
Each hotel was separately leased by the Company to Hospitality under a
Percentage Lease Agreement. These leases required minimum base rental payments
to be made to the Company on a monthly basis and additional quarterly payments
to be made based on a percentage of gross room revenue and certain food and
beverage revenues.
Twenty-eight of the 38 hotels are limited-service hotels, five are
extended-stay hotels and five are full-service hotels. All 38 hotels are
operated under franchise agreements with Promus Hotels, Inc., Choice Hotels
International, Inc., Holiday Inns Franchising, Inc. and Marriott International,
Inc. The cost of obtaining the franchise licenses was paid by the Company and
the on-going franchise fees were paid by Hospitality.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition. Revenue is recognized as earned. Ongoing credit
evaluations are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable which is estimated to be
uncollectible.
Cash Equivalents. All highly liquid investments with a maturity date of
three months or less when purchased are considered to be cash equivalents.
Hospitality places cash deposits with federally insured depository institutions.
At October 31, 1997, bank account balances exceeded federal depository insurance
limits by approximately $6,252.
Fair Value of Financial Instruments. Hospitality's financial instruments
consist of cash and cash equivalents whose carrying value approximates fair
value because of their short maturity. Hospitality's remaining assets and
liabilities are not considered financial instruments.
Furniture, Fixtures and Equipment. Furniture and equipment are recorded at
cost and are depreciated using the straight-line method over estimated useful
lives of the assets of five and seven years. Leasehold improvements are being
amortized using the straight-line method over the terms of the related leases.
Upon disposition, both the asset and accumulated depreciation accounts are
relieved and the related gain or loss is credited or charged to the income
statement. Repairs and maintenance of hotel properties owned by the Company are
paid by Hospitality and are charged to expense as incurred.
Income Taxes. Hospitality has made an election under Subchapter S of the
Internal Revenue Code of 1986, as amended. Any taxable income or loss is
recognized by the shareholders and, therefore, no provision for income taxes has
been provided in the accompanying financial statements.
Reclassifications. Certain reclassifications have been made to the 1996
financial statements to conform with the 1997 presentation. These
reclassifications have no effect on net income or shareholders' equity as
previously reported.
Unaudited October 31, 1996 operating results. Operating results for the 10
months ended October 31, 1996, presented for comparison purposes, are unaudited.
The unaudited financial statements for the period ended October 31, 1996
reflect, in the opinion of management, all adjustments necessary for a fair
presentation of the financial statements. All such adjustments are normal and
recurring in nature.
54
<PAGE> 55
3. COMMITMENTS:
Under the terms of the Percentage Lease Agreements, Hospitality had future
lease commitments to the Company through 2006. As disclosed in Note 6 below, all
Percentage Leases were sold as of November 24, 1997.
Hospitality incurred minimum base rents of $13,535 and $11,154 as well as
percentage rents of $17,445 and $15,457 for the ten months ended October 31,
1997 and the year ended December 31, 1996, respectively.
Hospitality had entered into separate contracts with unrelated parties for
the management of 10 of the hotels. The terms of these agreements provided for
management fees to be paid based on predetermined formulas for a period of ten
years through 2006. The contracts were cancelable under certain circumstances as
outlined in the agreements. As disclosed in Note 6 below, all such contracts
were sold as of November 24, 1997.
Various legal proceedings against Hospitality have arisen from time to time
in the normal course of business. Management believes liabilities arising from
these proceedings, if any, will have no material adverse effect on the financial
positions or results of operations of Hospitality.
4. DISTRIBUTIONS:
Beginning with the year ended December 31, 1996, the shareholders agreed to
limit distributions by Hospitality to amounts necessary to pay their income
taxes on the net income derived from Hospitality until such time as the tangible
net worth of Hospitality reached $4,000. Thereafter, they agreed to invest at
least 75% of their after-tax distributions of net income from Hospitality in
Common Stock of the Company. These agreements terminated effective November 24,
1997, due to the sale of the leases to CapStar.
5. PROFIT SHARING PLAN:
On January 1, 1996, Hospitality adopted the Winston 401(k) Plan (the "Plan")
for substantially all employees, (except any highly compensated employee, as
defined in the Plan), who had attained the age of 21 and completed one year of
service. Under the Plan, employees were able to contribute from 1% to 15% of
compensation, subject to an annual maximum as determined under the Internal
Revenue Code. Hospitality made matching contributions of a specified percentage
of the employee's contribution. Hospitality contributed $54, $50 (unaudited) and
$61 during the 10-month periods ended October 31, 1997 and 1996, and the year
ended December 31, 1996, respectively.
6. SUBSEQUENT EVENT:
On November 24, 1997, Hospitality completed the sale of substantially all of
its assets and all 38 existing Percentage Leases to CapStar Management Company,
L.P. ("CMC") for total consideration of $34,000. The $34,000 sale price
consisted of $10,000 in cash and 674,236 CMC Partnership Units.
55
<PAGE> 56
INDEPENDENT AUDITORS' REPORT
The Members
CapStar Winston Company, L.L.C.:
We have audited the accompanying balance sheets of CapStar Winston Company,
L.L.C. (the "Company") as of December 31, 1998 and 1997 and the related
statements of operations, members' capital (deficit), and cash flows for the
year ended December 31, 1998 and the period from October 15, 1997 (date of
inception) through December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CapStar Winston Company,
L.L.C. as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for the year ended December 31, 1998 and the period from October
15, 1997 (date of inception) through December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
Washington, D.C.
February 23, 1999
56
<PAGE> 57
CAPSTAR WINSTON COMPANY, L.L.C.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
1998 1997
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,075 $ 3,393
Accounts receivable, net of allowance for doubtful accounts of
$111 and $0 3,230 1,614
Due from Winston Hospitality, Inc. -- 1,636
Due from affiliates 5,392 385
Deposits and other assets 355 197
------- -------
Total current assets 11,052 7,225
------- -------
Furniture, fixtures and equipment, net of accumulated depreciation of
$68 and $5 290 241
Intangible assets, net of accumulated amortization of $1,015 and $93 33,253 34,088
Deferred franchise costs, net of accumulated amortization of $72 and $7 536 601
Restricted cash 204 --
------- -------
$45,335 $42,155
======= =======
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Accounts payable $ 1,606 $ 1,459
Accrued expenses 3,390 2,920
Percentage lease payable to Winston Hotels, Inc. 7,601 5,682
Advance deposits 183 135
------- -------
Total current liabilities 12,780 10,196
------- -------
Commitments (Note 6)
Members' capital 32,555 31,959
------- -------
$45,335 $42,155
======= =======
</TABLE>
See accompanying notes to financial statements.
57
<PAGE> 58
CAPSTAR WINSTON COMPANY, L.L.C.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 AND
THE PERIOD FROM OCTOBER 15, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revenue:
Rooms $113,451 $ 8,197
Food and beverage 6,793 462
Telephone and other operating departments 5,389 384
-------- -------
Total revenue 125,633 9,043
-------- -------
Operating costs and expenses:
Rooms 25,664 2,158
Food and beverage 5,027 308
Telephone and other operating departments 2,636 211
Undistributed expenses:
Lease expense 52,720 3,242
Administrative and general 12,020 1,069
Sales and marketing 4,859 415
Franchise fees 8,311 595
Repairs and maintenance 6,051 515
Energy 5,069 431
Other 1,630 55
Depreciation and amortization 1,050 105
-------- -------
Total expenses 125,037 9,104
-------- -------
Net income (loss) $ 596 $ (61)
======== =======
</TABLE>
See accompanying notes to financial statements.
58
<PAGE> 59
CAPSTAR WINSTON COMPANY, L.L.C.
STATEMENTS OF MEMBERS' CAPITAL (DEFICIT)
YEAR ENDED DECEMBER 31, 1998 AND
THE PERIOD FROM OCTOBER 15, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
CapStar EquiStar MeriStar H&R MeriStar
Management Acquisition Operating Hotels and
Company, L.P. Corporation Company, L.P. Resorts, Inc. Total
------------- ----------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C>
Member contributions made since
October 15, 1997 (date of inception) $ 32,020 $ -- $ -- $ -- $ 32,020
Net loss (60) (1) -- -- (61)
-------- -------- -------- -------- --------
Balance, December 31, 1997 $ 31,960 $ (1) -- -- 31,959
Net income through August 2, 1998 696 7 -- -- 703
Transfer of members' capital (32,656) (6) 32,656 6 --
Net loss from August 3, 1998 through
December 31, 1998 -- -- (106) (1) (107)
-------- -------- -------- -------- --------
Balance, December 31, 1998 $ -- $ -- $ 32,550 $ 5 $ 32,555
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
59
<PAGE> 60
CAPSTAR WINSTON COMPANY, L.L.C.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 AND
THE PERIOD FROM OCTOBER 15, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 596 $ (61)
Adjustments to reconcile net income (loss) to net cash (used in) provided
by operating activities:
Depreciation and amortization 1,050 105
Loss on sale of fixed assets 3 --
Change in operating assets and liabilities:
Accounts receivable, net (1,616) 235
Due from Winston Hospitality, Inc. 1,636 (1,636)
Due from affiliates (5,007) (635)
Deposits and other assets (158) (135)
Restricted cash (204) --
Accounts payable and accrued expenses 617 4,063
Percentage lease payable to Winston Hotels, Inc. 1,919 1,463
Advance deposits 48 26
------- --------
Net cash (used in) provided by operating activities (1,116) 3,425
------- --------
Cash flows from investing activities:
Additions of furniture, fixtures and equipment (131) (3)
Proceeds from sale of fixed assets 16 --
Additions to intangible assets (87) (100)
------- --------
Net cash used in investing activities (202) (103)
------- --------
Cash flows from financing activities - contributions by members -- 71
------- --------
Net change in cash and cash equivalents (1,318) 3,393
Cash and cash equivalents at beginning of period 3,393 --
------- --------
Cash and cash equivalents at end of period $ 2,075 $ 3,393
======= ========
Supplemental Disclosure of Cash Flow Information:
Assets contributed (liabilities assigned) to the Company by CapStar
Management Company, L.P.:
Accounts receivable $ -- $ 1,849
Deposits and other assets -- 62
Furniture, fixtures and equipment -- 243
Intangible assets -- 34,081
Deferred franchise costs -- 608
Accounts payable and accrued expenses -- (316)
Percentage lease payable to Winston Hotels, Inc. -- (4,219)
Advance deposits -- (109)
Due to CapStar Management Company, L.P. -- (250)
------- --------
Non-cash financing activity - contribution by member -- 31,949
======= ========
</TABLE>
See accompanying notes to financial statements.
60
<PAGE> 61
CAPSTAR WINSTON COMPANY, L.L.C.
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. ORGANIZATION:
CapStar Winston Company, L.L.C. (the "Company") was formed on October 15,
1997, pursuant to a limited liability company agreement ("Agreement"), subject
to the Limited Liability Act of the State of Delaware, between CapStar
Management Company, L.P. ("CMC") and EquiStar Acquisition Corporation
("EquiStar"), both wholly-owned subsidiaries of CapStar Hotel Company
("CapStar"), to lease and operate certain hotels owned by WINN Limited
Partnership and Winston Hotels, Inc. (collectively, "Winston"). Generally,
members of a limited liability company are not personally responsible for debts,
obligations and other liabilities of the Company. The Agreement defines the
termination of the Company as upon the consent of the members.
During November 1997, CMC purchased substantially all of the assets and
assumed certain liabilities of Winston Hospitality, Inc. ("WHI"), including 38
hotel leases, certain operating assets and liabilities, and goodwill and other
intangible assets. Concurrent with the purchase, CMC contributed/assigned the
assets purchased and liabilities assumed in the transaction to the Company.
On August 3, 1998, MeriStar Hotels & Resorts, Inc. ("MeriStar") was spun off
(the "Spin-Off") by CapStar to become the lessee, manager and operator of
various hotel assets, including those of which were previously owned, leased and
managed by CapStar and certain of its affiliates. Pursuant to the Spin-Off, CMC
and Equistar transferred their capital and interests in the Company to MeriStar
H&R Operating Company, L.P. ("MHOC") and MeriStar, respectively. The transfer is
recorded at its net book value.
Currently, the Company leases 49 hotels, 28 of which are limited-service
hotels, 11 of which are extended-stay hotels and ten of which are full-service
hotels. The hotels, which contain 6,636 rooms, are operated under various
franchise agreements, and are located in Arizona, Florida, Georgia, Kentucky,
Massachusetts, Michigan, North Carolina, New Jersey, South Carolina, Texas, New
York and Virginia.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Members' Capital and Allocation of Profits and Losses. As defined in the
Agreement, until the Spin-Off, CMC had a 99% ownership interest and EquiStar had
a 1% interest in the Company. In general, the allocation of income and losses
and contributions and distributions were made to the members in proportion to
their respective ownership interest. Subsequent to the Spin-Off, MHOC has a 99%
ownership interest and MeriStar has a 1% ownership interest in the Company.
Cash Equivalents. The Company considers all highly liquid instruments with
original maturities of three months or less to be cash equivalents.
Restricted Cash. Restricted cash represents amounts required to be
maintained in escrow to comply with terms of certain state beverage license
agreements.
Furniture, Fixtures and Equipment. Furniture, fixtures and equipment are
recorded at cost or fair market value in the case of assets contributed and are
depreciated using the straight-line method over estimated useful lives of five
to seven years.
Intangible Assets. Lease contracts represent the estimated present value of
net cash flows expected to be received from the leases originally acquired by
CMC and contributed to the Company. Lease contracts are amortized on a
straight-line basis over 30 years.
Goodwill represents the excess of the cost over the net tangible and
identifiable intangible assets originally acquired by CMC and contributed to the
Company. Goodwill is amortized on a straight-line basis over 40 years.
Licensing costs represent the cost of beverage licenses mandated by state
statutes. Licensing costs are amortized on a straight-line basis over five
years.
The Company reviews intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. Recoverability is measured by comparing the carrying amount of the
intangible assets to the projected future cash flows of the Company. If such
assets are considered to be impaired, the impairment to be recognized is the
61
<PAGE> 62
amount by which the carrying amounts of the intangible assets exceed the
Company's net discounted cash flows. No impairment loss was recorded in 1998 or
1997.
Deferred Franchise Costs. Franchise costs are deferred and are amortized on
a straight-line basis over the terms of the franchise agreements, which range
from 18 months to 20 years.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes. No provision has been made for income taxes since any such
liability is the liability of the individual members.
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Lease contracts $ 6,576 $ 6,576
Goodwill 27,605 27,605
Organization costs 87 --
-------- -------
34,268 34,181
Less: accumulated amortization (1,015) (93)
-------- -------
$ 33,253 $34,088
======== =======
</TABLE>
4. MANAGEMENT AGREEMENTS:
The Company manages 39 of the 49 leased hotels and has entered into separate
contracts with third parties to manage 10 of the hotels. The terms of these
third-party management agreements provide for management fees to be paid on a
monthly basis based on budgeted gross operating profit, as defined in the
agreements, with year-end adjustments, for actual operating results. The term of
nine of the management agreements extends to 2006 and one extends to 2012. The
agreements are cancelable before expiration under certain circumstances.
Management fees incurred during 1998 and 1997 were $1,001 and $17, respectively
and are included in other expenses.
5. TRANSACTIONS WITH RELATED PARTIES:
Prior to the Spin-Off, the Company advanced amounts to CMC and received
amounts from CMC in the normal course of business. At December 31, 1997, CMC
owed the Company a net amount of $385. Subsequent to the Spin-Off, the Company
and MHOC advanced amounts to each other in the normal course of business. At
December 31, 1998, MHOC owed the Company a net amount of $5,392.
6. COMMITMENTS:
Each of the Company's hotels is leased under a separate lease agreement.
These leases in existence at the date CMC purchased the initial 38 hotel leases
were collectively amended on November 17, 1997 and November 24, 1997 and extend
through November 30, 2012; subsequent leases extend through 2013. The leases
require monthly minimum base rental payments to Winston and additional
quarterly payments of percentage rent, based on revenues generated by the hotel
properties in excess of varying amounts. The leases are non-cancelable except
upon the sale of a hotel. Winston is required to make a termination payment to
the Company, as defined in the lease agreements, upon cancellation of a lease.
MeriStar Hospitality Corporation, an affiliate of the Company, has guaranteed
amounts due and payable by the Company under the leases up to $20,000. Minimum
future base rental payments under these non-cancelable operating leases are as
follows:
62
<PAGE> 63
Year ended December 31:
1999 $ 30,479
2000 30,479
2001 30,479
2002 30,479
2003 30,479
2004 and thereafter 277,627
--------
Total $430,022
========
The Company incurred minimum base rents of $26,378 and $2,731, and
percentage rents of $26,342 and $511 during 1998 and 1997, respectively.
7. DUE FROM WHI:
Due from WHI represents amounts received by WHI on behalf of the Company and
amounts paid by the Company on behalf of WHI. These amounts due from WHI were
collected in March and April 1998.
8. BUSINESS CONCENTRATION:
Winston owns all of the Company's leased hotels. Therefore, the Company's
financial position and results of operations would be adversely and materially
impacted if Winston sells the hotels and terminates the leases. Management
believes that Winston has no intention of or cause for terminating the hotel
leases.
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<PAGE> 64
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
3.1(12) Restated Articles of Incorporation
3.2(1) Amended and Restated Bylaws
4.1(1) Specimen certificate for Common Stock, $0.01 par value per share
4.2(8) Form of Stock Certificate for 9.25% Series A Cumulative Preferred Stock
4.3(10) Restated Articles of Incorporation as amended (see Exhibits 3.1 and 3.2)
4.4(10) Amended and Restated Bylaws (see Exhibit 3.2)
10.1(6) Second Amended and Restated Agreement of Limited Partnership of WINN Limited Partnership
10.2(8) Amendment No. 1 dated September 11, 1997 to Second Amended and Restated Agreement of
Limited Partnership of WINN Limited Partnership
10.3(10) Amendment No. 2 dated December 31, 1997 to Second Amended and Restated Agreement of
Limited Partnership of WINN Limited Partnership
10.4(2) Form of Percentage Leases
10.5(9) First Amendment to Lease dated November 17, 1997 between WINN Limited Partnership and
CapStar Winston Company, L.L.C.
10.6(9) First Amendment to Lease dated November 24, 1997 between WINN Limited Partnership and
CapStar Winston Company, L.L.C.
10.7(1) Winston Hotels, Inc. Directors' Stock Incentive Plan
10.8(2) Limitation of Future Hotel Ownership and Development Agreement
10.9(3) Memorandum of Understanding, dated March 15, 1996, among Winston Hotels, Inc., Winston
Hospitality, Inc. and Promus Hotels, Inc.
10.10(3) Stock Purchase Agreement, dated April 24, 1996, between Promus Hotels, Inc. and Winston
Hotels, Inc.
10.11(3) Agreement of Purchase and Sale, dated April 24, 1996, between WINN Limited Partnership
and Promus Hotels, Inc. relating to three hotel properties being developed by
Promus Hotels, Inc.
10.12(3) Option to Purchase Additional Hotels, dated April 24, 1996, between WINN Limited
Partnership and Promus Hotels, Inc.
10.13(4) Amendment No. 1 to Stock Purchase Agreement, dated as of August 7, 1996, by and between
Promus Hotels, Inc. and Winston Hotels, Inc. amending the Stock Purchase Agreement,
dated April 24, 1996, by and between Promus Hotels, Inc. and Winston Hotels, Inc.
10.14(4) Amendment to Agreement of Purchase and Sale, dated as of August 7, 1996, by and between
WINN Limited Partnership and Promus Hotels, Inc., amending the Agreement of Purchase
and Sale, dated April 24, 1996, by and between WINN Limited Partnership and Promus Hotels,
Inc. relating to three hotel properties being developed by Promus Hotels, Inc.
</TABLE>
64
<PAGE> 65
<TABLE>
<S> <C>
10.15(4) First Amendment to Option to Purchase Additional Hotels, dated as of August 7, 1996, by
and between Promus Hotels, Inc. and WINN Limited Partnership, amending the Option to
Purchase Additional Hotels, dated April 24, 1996, by and between WINN Limited Partnership
and Promus Hotels, Inc.
10.16(5) Credit Agreement, dated as of October 29, 1996, among Winston Hotels, Inc., WINN Limited
Partnership, the banks listed therein, Wachovia Bank of North Carolina, N.A., as
Collateral Agent and Wachovia Bank of Georgia, N.A., as Administrative Agent (the "1996
Credit Agreement")
10.17(5) Promissory Note, dated October 29, 1996, from Winston Hotels, Inc. and WINN Limited
Partnership to Branch Banking and Trust Company for the principal sum of
$35,000,000 pursuant to the 1996 Credit Agreement
10.18(5) Promissory Note, dated October 29, 1996, from Winston Hotels, Inc. and WINN Limited
Partnership to Nationsbank, N.A. for the principal sum of $20,000,000 pursuant to
the 1996 Credit Agreement
10.19(5) Promissory Note, dated October 29, 1996, from Winston Hotels, Inc. and WINN Limited
Partnership to Southtrust Bank of Alabama, N.A. for the principal sum of
$20,000,000 pursuant to the 1996 Credit Agreement
10.20(5) Promissory Note, dated October 29, 1996, from Winston Hotels, Inc. and WINN Limited
Partnership to Wachovia Bank of North Carolina, N.A. for the principal sum of
$50,000,000 pursuant to the 1996 Credit Agreement
10.21(5) Form of Deed of Trust, Assignment of Rents, Security Agreement and Financing Statement
used to secure certain obligations under the 1996 Credit Agreement (not including
certain variations existing in the different states where the properties are located)
10.22(7) Redemption and Registration Rights Agreement, dated as of July 14, 1997 by and among
WINN Limited Partnership, Winston Hotels, Inc., certain partnerships listed and
certain partners or designees thereof listed therein
10.23(9) Guaranty dated November 17, 1997 between CapStar Hotel Company, WINN Limited Partnership
and Winston Hotels, Inc.
10.24(9) Investment Agreement dated November 17, 1997 between Winston Hotels, Inc., Robert W.
Winston, III and John B. Harris, Jr.
10.25(9) First Amendment to Credit Agreement dated November 17, 1997 between Winston Hotels, Inc.,
WINN Limited Partnership, Wachovia Bank, N.A., Branch Banking and Trust Company,
NationsBank, N.A., and SouthTrust Bank, N.A.
10.26(10) Employment Agreement, dated July 31, 1997, by and between Kenneth R. Crockett and Winston
Hotels, Inc.
10.27(11) Winston Hotels, Inc. Stock Incentive Plan as amended May 1998
10.28(12) Loan Agreement by and between Winston SPE LLC and CMF Capital Company LLC dated
November 3, 1998
10.29(12) Promissory note dated November 3, 1998 by and between Winston SPE LLC and CMF Capital
Company, LLC
</TABLE>
65
<PAGE> 66
<TABLE>
<S> <C>
10.30 Winston Hotels, Inc. Executive Deferred Compensation Plan
10.31 Credit Agreement, dated as of January 15, 1999, among Wachovia Bank, N.A., Branch Banking
and Trust Company, SouthTrust Bank, N.A., Centura Bank, Winston Hotels, Inc.,
WINN Limited Partnership and Wachovia Bank, N.A. as Agent (the "Credit Agreement")
10.32 Promissory Note, dated as of January 15, 1999, from Winston Hotels, Inc. and WINN Limited
Partnership to Wachovia Bank, N.A. for the principal sum of $60,000,000 pursuant to
the Credit Agreement
10.33 Promissory Note, dated as of January 15, 1999, from Winston Hotels, Inc. and WINN Limited
Partnership to Branch Banking and Trust Company for the principal sum of $40,000,000
pursuant to the Credit Agreement
10.34 Promissory Note, dated as of January 15, 1999, from Winston Hotels, Inc. and WINN Limited
Partnership to SouthTrust Bank, N.A. for the principal sum of $25,000,000 pursuant to
the Credit Agreement
10.35 Promissory Note, dated as of January 15, 1999, from Winston Hotels, Inc. and WINN Limited
Partnership to Centura Bank for the principal sum of $15,000,000 pursuant to the
Credit Agreement
10.36 Form of Deed of Trust, Assignment of Rents, Security Agreement and Financing Statement
used to secure certain obligations under the Credit Agreement (not including certain
variations existing in the different states where the properties are located)
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants (PricewaterhouseCoopers LLP)
23.2 Accountants' Consent (KPMG LLP)
24 Powers of Attorney
27.1 Financial Data Schedule to the Company's Form 10-K for the year ended December 31, 1998
</TABLE>
(1) Exhibits to the Company's Registration Statement on Form S-11 as filed
with the Securities and Exchange Commission (Registration No. 33-76602)
effective May 25, 1994 and incorporated herein by reference.
(2) Exhibits to the Company's Registration Statement on Form S-11 as filed
with the Securities and Exchange Commission (Registration No. 33-91230)
effective May 11, 1995 and incorporated herein by reference.
(3) Exhibits to the Company's Quarterly Report on Form 10-Q as filed with the
Securities and Exchange Commission on May 14, 1996 and incorporated herein
by reference.
(4) Exhibits to the Company's Quarterly Report on Form 10-Q as filed with the
Securities and Exchange Commission on August 14, 1996 and incorporated
herein by reference.
(5) Exhibits to the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on March 27, 1997 and incorporated
herein by reference.
66
<PAGE> 67
(6) Exhibit to the Company's report on Form 8-K as filed with the Securities
and Exchange Commission on July 24, 1997 and incorporated herein by
reference.
(7) Exhibit to the Company's Quarterly Report on Form 10-Q as filed with the
Securities and Exchange Commission on August 8, 1997 and incorporated
herein by reference.
(8) Exhibits to the Company's report on Form 8-K as filed with the Securities
and Exchange Commission on September 15, 1997 and incorporated herein by
reference.
(9) Exhibits to the Company's report on Form 8-K as filed with the Securities
and Exchange Commission on December 10, 1997 and incorporated herein by
reference.
(10) Exhibits to the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on March 27, 1998 and as amended by Form
10-K/A filed with the Securities and Exchange Commission on April 1, 1998.
(11) Exhibit to the Company's Registration Statement on Form S-8 as filed with
the Securities and Exchange Commission (Registration No. 333-60079) and
incorporated herein by reference.
(12) Exhibits to the Company's Quarterly Report on Form 10-Q as filed with the
Securities and Exchange Commission on November 16, 1998 and as amended on
Form 10-Q/A filed with the Securities and Exchange Commission on February
23, 1999 and incorporated herein by reference.
67
<PAGE> 1
EXHIBIT 10.30
WINSTON HOTELS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
EFFECTIVE AS OF OCTOBER 16, 1998
<PAGE> 2
ARTICLE I
PURPOSE
1.1 General. The purpose of the Plan is to attract, motivate, and retain top
management employees of the Company by providing an opportunity and an
incentive for each individual to defer the receipt of compensation
otherwise payable currently and to accumulate earnings thereon on a
tax-deferred basis.
1.2 Unfunded Plan. The Plan is intended to be an unfunded plan for purposes of
the Employee Retirement Income Security Act of 1974, as amended, and
maintained primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees.
ARTICLE II
DEFINITIONS
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1 Board. "Board" means the Board of Directors of the Company.
2.2 Bonus Deferral Election. "Bonus Deferral Election" means an election to
defer payment of an annual bonus, if any, in the form(s) provided by the
Committee subject to the requirements and terms of Article IV hereof.
2.3 Committee. "Committee" means the individuals appointed by the Board to
administer the Plan and to perform the functions set forth herein.
2.4 Company. "Company" means Winston Hotels, Inc., a North Carolina
corporation, or any successor entity thereto, including without limitation,
the transferee of all or substantially all of the stock or assets of the
Company.
2.5 Deferral Account. "Deferral Account" means the notional account established
and maintained for each Participant in accordance with Article VI hereof,
for bookkeeping purposes only, to measure the value of elective deferrals
made under the Plan and the earnings thereon. Amounts credited to the
Deferral Account shall be expressed in dollars and cents.
2.6 Deferral Election. "Deferral Election" means a Salary Deferral Election or
a Bonus Deferral Election as defined under this Article II.
2.7 Disability. "Disability" means the suffering from a physical or mental
condition which, in the opinion of the Committee based upon appropriate
medical advice and examination and in accordance with rules applied
uniformly to all Participants, totally and permanently prevents the
Participant, as the case may be, from performing the customary duties of
his/her regular job with the Company.
2.8 Participant. "Participant" means any individual who is eligible to
participate in the Plan as provided in Section 4.1 hereof.
<PAGE> 3
2.9 Plan. "Plan" means the Winston Hotels, Inc. Executive Deferred Compensation
Plan, as from time to time amended.
2.10 Plan Year. "Plan Year" means the period beginning on the effective date of
the Plan and ending on December 31 and thereafter any calendar year.
2.11 Salary Deferral Election. "Salary Deferral Election" means an election to
defer payment of base salary in the form(s) provided by the Committee
subject to the requirements and terms of Article IV hereof.
2.12 Unforeseeable Emergency. "Unforeseeable Emergency" means an immediate
financial need of the Participant resulting from extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Participant as determined by the Committee.
ARTICLE III
ADMINISTRATION
3.1 Committee. The Plan shall be administered by the Committee, which shall
hold meetings at such times as may be necessary for the proper
administration of the Plan. Except as otherwise provided in the Plan, the
Committee shall have full power to construe and interpret the Plan,
establish and amend rules and regulations for its administration, and
perform all other acts relating to the Plan, including the delegation of
administrative responsibilities that it believes reasonable and proper.
3.2 Duties. The Committee, or any person or entity designated by the Committee,
shall be responsible for the administration of the Plan including but not
limited to determination of eligibility, receiving deferral elections,
provision of investment choices, distribution of benefits hereunder,
maintenance of account balances, calculation of hypothetical investment
returns and any other duties concerning the day-to-day operation of the
Plan.
3.3 Adjudication. Any decision made, or action taken, by the Committee or the
Board arising out of, or in connection with, the interpretation and
administration of the Plan, including but not limited to the adjudication
of claims and payment of benefits hereunder, shall be final and conclusive.
3.4 Indemnification. No member of the Committee or its delegate shall be liable
for any action, failure to act, determination or interpretation made in
good faith with respect to this Plan or any transaction hereunder, except
for liability arising from his/her own willful misfeasance, gross
negligence or reckless disregard of his/her duties. The Company hereby
agrees to indemnify each member of the Committee for all costs and expenses
and, to the extent permitted by applicable law, any liability incurred in
connection with defending against, responding to, negotiation for the
settlement of or otherwise dealing with any claim, cause of action or
dispute of any kind arising in connection with any actions in administering
this Plan or in authorizing, denying authorization to, or failing to
authorize any transaction hereunder.
2
<PAGE> 4
ARTICLE IV
PARTICIPATION
4.1 Eligibility. Participation in the Plan shall be limited to any employee of
the Company and its subsidiaries who is selected by the Board, in its sole
discretion, to participate in the Plan.
4.2 Filing an Election.
(a) A Salary Deferral Election shall be effective for a Plan Year if the
Participant files an executed Salary Deferral Election with the
Committee by December 15th of the Plan Year immediately preceding such
Plan Year, provided however, for the initial Plan Year, a Participant
may file an executed Salary Deferral Election with the Committee by
October 15, 1998 which shall solely cover salary paid on or after
October 16 of such Plan Year.
(b) A Bonus Deferral Election shall be effective for the Plan Year for
which the bonus, if any, is earned if the Participant files an
executed Bonus Deferral Election with the Committee by December 15th
of such Plan Year.
(c) Notwithstanding the foregoing, if (during any Plan Year) any employee
of the Company or its subsidiaries is hired or promoted into the
classification of employees eligible to participate in the Plan
described in Section 4.1, then such employee shall become a
Participant in the Plan on the first day of the second month following
such employee's date of hire or date of promotion ("Initial
Eligibility Date") and he/she may file a Deferral Election for the
Plan Year including his/her Initial Eligibility Date subject to the
following:
(1) Salary Deferral Election. The Participant must file the Salary
Deferral Election no later than 10 days prior to his/her Initial
Eligibility Date and the Salary Deferral Election shall solely
cover salary paid on or after his/her Initial Eligibility Date
through the last day of such Plan Year.
(2) Bonus Deferral Election. The Participant may file a Bonus
Deferral Election subject to the terms and conditions otherwise
described in this Section 4.2 and the Plan.
4.3 Irrevocable. A Deferral Election shall be irrevocable once filed with the
Committee except as provided in Articles VII and X hereof; provided however
that a Participant may change his/her Salary Deferral Election with respect
to any payroll period beginning on or after the date the Participant files
a new Salary Deferral Election with the Committee.
ARTICLE V
COMPENSATION SUBJECT TO DEFERRAL
5.1 Base Salary. With respect to the base salary otherwise payable to a
Participant during the Plan Year for which a Salary Deferral Election is in
effect, the dollar amount or percentage of salary specified on such Salary
Deferral Election shall be deferred in accordance with the
3
<PAGE> 5
terms prescribed therein; provided however that such Salary Deferral Election
shall be for no more than 80% of the Participant's salary, unless otherwise
permitted by the Committee.
5.2 Annual Bonus. With respect to the annual bonus, if any, that is earned by a
Participant during the Plan Year for which a Bonus Deferral Election is in
effect, the dollar amount or percentage of annual bonus specified on such
Bonus Deferral Election shall be deferred in accordance with the terms
prescribed therein; provided however that such Bonus Deferral Election
shall be for no more than 80% of the Participant's bonus, unless otherwise
permitted by the Committee.
ARTICLE VI
ELECTIVE DEFERRALS
6.1 Elective Deferral. Amounts deferred under Article V hereof with respect to
each Plan Year of participation in the Plan shall be credited to the
Participant's Deferral Account if, as, and when such amounts would
otherwise have been paid to the Participant.
6.2 Vesting. Except as provided in Section 7.6 hereof, each Participant shall
have a nonforfeitable and fully vested right to the amounts credited in
such Participant's Deferral Account.
6.3 Investment Choices. Each Participant shall be entitled to direct the deemed
investment of the amounts credited to such Participant's Deferral Account
in any of the investment choices or combination of investment choices as
may be offered by the Committee from time to time in accordance with the
rules, regulations and procedures established by the Committee. The
Committee may add or remove investment choices at its sole discretion;
provided, however, no amount shall be subject to forfeiture solely by
reason of a removal of an investment choice in accordance with Section 6.3
hereof.
6.4 Investment Earnings. Each Participant's Deferral Account shall be credited
with earnings and losses in accordance with such Participant's investment
choice(s). Earnings and losses shall begin to accrue with respect to
amounts credited to a Participant's Deferral Account under Section 6.1 in
accordance with the procedures established by the Committee.
ARTICLE VII
DISTRIBUTIONS
7.1 Timing of Payment. Except as provided in Section 7.4, Section 7.5, and
Section 7.6, a Participant shall receive a distribution of the balance in
his/her Deferral Account in the calendar month (the "Distribution Calendar
Month") following the calendar month (the "Pre-Distribution Calendar
Month") in which occurs the earlier of (a) his/her termination of
employment or (b) the date on which the sum of his/her age and years of
service equals 55; provided however, that at any time prior to the
Pre-Distribution Calendar Month, the Participant may irrevocably elect to
receive a single sum distribution in any calendar month subsequent to
his/her Distribution Calendar Month.
4
<PAGE> 6
7.2 Form of Payment. Any payment from a Participant's Deferral Account shall be
made in cash in a single sum.
7.3 Account Balance. Upon payment to a Participant under this Article VII, such
Participant's Deferral Account shall be reduced by the cash distributed (or
forfeited under Section 7.6).
7.4 Death or Disability.
(a) In the event of the Participant's death, the balance of such
Participant's Deferral Account shall be paid to the Participant's
designated beneficiary or, if no beneficiary has been designated, to
the Participant's estate in the manner prescribed by the Committee at
its sole discretion.
(b) In the event of the Participant's Disability, the balance of such
Participant's Deferral Account shall be paid to the Participant (or
the Participant's legal representative) in the manner prescribed by
the Committee at its sole discretion.
7.5 Distribution for Unforeseeable Emergency. Notwithstanding any provision to
the contrary, in the event of an Unforeseeable Emergency a Participant
shall be entitled to early payment of all or part of the balance of such
Participant's Deferral Account to the extent reasonably needed to satisfy
the Unforeseeable Emergency need. An application for an early payment under
this Section 7.5 shall be made in accordance with the procedures and
requirements adopted by the Committee.
7.6 Early Distribution. Notwithstanding any provision to the contrary, a
Participant shall be entitled to payment of all or part of the balance of
such Participant's Deferral Account prior to the date of distribution
determined under Section 7.1 in accordance with the procedures and
requirements adopted by the Committee; provided, however, ten percent of
the early payment amount otherwise payable from the Deferral Account shall
be forfeited and the Participant shall have no right or entitlement
whatsoever with respect to such forfeited amount.
7.7 Valuation of Distributions. Any distribution to be made under this Plan
shall be based on the value of the Participant's Deferral Account as of the
valuation date (described below).
(a) Valuation Date for Distributions for Unforeseeable Emergency, Early
Distribution, Death, and Disability. If the Participant (or his/her
beneficiary) is entitled to a distribution under Section 7.4, Section
7.5, or Section 7.6, then the Committee shall choose for such
Participant the valuation date (or dates) for such distribution (or
distributions) and such distribution (or distributions) shall occur as
soon as administratively feasible after such valuation date (or
dates).
(b) Valuation Date for All Other Distributions. The valuation date for all
other distributions shall be the last business day of the
Pre-Distribution Calendar Month.
7.8 162(m) Deduction Limitation. In the event the Company would be denied a
deduction for amounts otherwise payable in any Plan Year to a Participant
under this Article VII by reason of the application of section 162(m) of
the Internal Revenue Code of 1986, as amended, the Committee, in its sole
discretion, may reduce any payment otherwise due to such Participant (but
not below zero) to the extent necessary to avoid such application of
section 162(m) and
5
<PAGE> 7
such amount not paid and the net earnings thereon shall be paid to the
Participant in the earliest Plan Year(s) in which payment may be made
without application of section 162(m).
ARTICLE VIII
STATEMENT OF ACCOUNTS
Statements shall be sent no less frequently than annually to each Participant
(or such Participant's estate, beneficiary or legal representative).
ARTICLE IX
BENEFICIARY DESIGNATION
Each Participant shall have the right, at any time, to designate any single
person or entity as such Participant's designated beneficiary. A beneficiary
designation shall be made, and may only be amended or revoked, by the
Participant by filing a written designation with the Committee or its designee
in accordance with the procedures adopted by the Committee. Any such beneficiary
designation shall apply to all benefits under this Plan.
ARTICLE X
AMENDMENT OR TERMINATION
The Board or the Committee may (in its sole discretion) amend, modify or
terminate the Plan at any time for any or no reason; provided, however, no
amendment, modification or termination shall, without the consent of the
Participant, adversely affect such Participant's right to payment from the
Participant's vested balance under the Deferral Account as of the date of such
amendment, modification or termination.
ARTICLE XI
MISCELLANEOUS
11.1 Unsecured Right. Any right to receive a payment under the Plan shall be no
greater than that of an unsecured general creditor of the Company. No
amount payable under the Plan may be assigned, transferred, encumbered or
subject to any legal process for the payment of any claim against a
Participant. The Committee may, but need not, establish a grantor trust
(commonly referred to as a "rabbi trust") to hold assets of the Company
that may, but need not, be used to pay benefits hereunder.
11.2 No Right to Continued Employment. Participation in the Plan shall not give
any employee any right to remain in the employ of the Company or any
subsidiary or affiliate thereof.
11.3 Withholding. The Company shall withhold to the extent required by law all
applicable income and other taxes from amounts deferred or paid under the
Plan.
6
<PAGE> 8
11.4 Governing Law. The Plan shall be construed, governed and enforced in
accordance with the laws of the State of North Carolina, without reference
to rules relating to conflicts of law, except to the extent preempted by
federal law.
11.5 Compliance with Other Laws. The Committee may, from time to time, impose
additional restrictions upon Participants as it deems necessary, advisable
or appropriate in order to comply with applicable federal and state
securities laws, or other federal laws.
7
<PAGE> 1
EXHIBIT 10.31
$140,000,000.00
SYNDICATED CREDIT AGREEMENT
dated as of
January 15, 1999,
among
WINSTON HOTELS, INC., WINN LIMITED PARTNERSHIP,
THE BANKS LISTED HEREIN,
and
WACHOVIA BANK, N.A.,
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SYNDICATED CREDIT AGREEMENT..........................................................................1
ARTICLE I
DEFINITIONS.....................................................................................1
SECTION 1.01. Definitions......................................................................1
SECTION 1.02. Accounting Terms and Determinations.............................................22
SECTION 1.03. Use of Defined Terms............................................................22
SECTION 1.04. Terminology.....................................................................22
SECTION 1.05. References......................................................................22
SECTION 1.06. "Borrower" References; Joint and Several Obligations; Notice....................23
ARTICLE II
REVOLVING CREDIT FACILITY......................................................................23
SECTION 2.01. Commitments to Make Loans; Maximum Advance;
Borrowing Base Value........................................................23
SECTION 2.02. Method of Borrowing.............................................................26
SECTION 2.03. Restrictions on Use of Loan Proceeds Generally..................................28
SECTION 2.04. Notes...........................................................................30
SECTION 2.05. Termination Date, Repayment of Loans, Extension of Term.........................30
SECTION 2.06. Interest Rates..................................................................31
SECTION 2.07. Fees............................................................................33
SECTION 2.08. Mandatory Termination of Commitments............................................34
SECTION 2.09. Optional and Mandatory Prepayments..............................................34
SECTION 2.10. Mandatory Prepayments...........................................................35
SECTION 2.11. General Provisions as to Payments...............................................35
SECTION 2.12. Computation of Interest and Fees................................................36
SECTION 2.13. Facility Limit Reduction or Termination by Borrower.............................36
SECTION 2.14. Term Loans Secured by Hotels in Specific States.................................37
ARTICLE III
SECURITY AND COLLATERAL FOR THE LOANS;
CONDITIONS TO BORROWINGS.......................................................................38
SECTION 3.01. Typology of Hotels..............................................................38
SECTION 3.02. Collateral Release Provisions...................................................40
SECTION 3.03. Conditions of Closing and to First Borrowing....................................42
SECTION 3.04. Conditions to All Borrowings....................................................44
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.................................................................45
SECTION 4.01. Existence and Power.............................................................45
SECTION 4.02. Corporate, Partnership and Governmental Authorization;
No Contravention.............................................................45
SECTION 4.03. Binding Effect..................................................................45
SECTION 4.04. Financial Information...........................................................45
SECTION 4.05. Litigation......................................................................46
SECTION 4.06. Compliance with ERISA...........................................................46
SECTION 4.07. Taxes...........................................................................46
SECTION 4.08. Subsidiaries....................................................................46
SECTION 4.09. Not an Investment Company.......................................................47
SECTION 4.10 Public Utility Holding Company Act..............................................47
SECTION 4.11. Ownership of Property; Liens....................................................47
SECTION 4.12. No Default......................................................................47
SECTION 4.13. Full Disclosure.................................................................47
SECTION 4.14. Environmental Matters..........................................................47
SECTION 4.15. Compliance with Laws............................................................48
SECTION 4.16. Capital Stock...................................................................48
SECTION 4.17. Margin Stock....................................................................48
SECTION 4.18. Insolvency......................................................................48
SECTION 4.19. Americans with Disabilities Act.................................................49
SECTION 4.20. Compliance with Certain Lease Provisions........................................49
SECTION 4.21. Condemnation Awards.............................................................49
ARTICLE V
AFFIRMATIVE COVENANTS..........................................................................49
SECTION 5.01. Information.....................................................................49
SECTION 5.02. Inspection of Property, Books and Records.......................................51
SECTION 5.03. Required Room Reserves..........................................................52
SECTION 5.04. Maintenance of Property.........................................................52
SECTION 5.05. Maintenance of Existence........................................................52
SECTION 5.06. Sole General Partner............................................................52
SECTION 5.07. Compliance with Laws; Payment of Taxes..........................................52
SECTION 5.08. Insurance.......................................................................53
SECTION 5.09. Environmental Notices...........................................................53
SECTION 5.10. Environmental Reports; Environmental Release....................................53
SECTION 5.11. Upstream of Cash Flow from Special Purpose Entity...............................54
</TABLE>
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<TABLE>
<S> <C>
SECTION 5.12. Special Purpose Entity to Remain a Subsidiary Consolidated with the Borrower....54
SECTION 5.13. Intercompany Transactions.......................................................54
SECTION 5.14. Notice of Exercise of Remedies Under Deeds of Trust.............................54
SECTION 5.15. Notice of Default of any Lease..................................................54
SECTION 5.16. Guaranty by Subsidiaries........................................................54
ARTICLE VI
NEGATIVE COVENANTS.............................................................................54
SECTION 6.01. Base Rent and Percentage Rent of Hotel Leases...................................55
SECTION 6.02. Prohibition of Secured Debt on Borrowing Base Hotels............................55
SECTION 6.03. Contingent Liabilities..........................................................55
SECTION 6.04. Limitation on Hotels under Development..........................................55
SECTION 6.05. No Material Modifications to Permitted Operating Leases;
Percentage of Rooms Leased Under Permitted Operating Leases................55
SECTION 6.06. Limitations on Foreign Investments and Investments in Ventures..................55
SECTION 6.07. Major Ground Lease Limitations..................................................56
SECTION 6.08. Limitation on Dividends and Distributions.......................................56
SECTION 6.09. Limitation on Floating Rate Debt................................................56
SECTION 6.10. Dissolution.....................................................................56
SECTION 6.11. Consolidations, Mergers and Sales of Assets.....................................56
SECTION 6.12. Use of Proceeds.................................................................56
SECTION 6.13. Change in Fiscal Year or Fiscal Quarters........................................56
SECTION 6.14. Environmental Matters...........................................................56
SECTION 6.15. Operations......................................................................57
SECTION 6.16. No Modifications to Organizational Documents....................................57
ARTICLE VII
FINANCIAL COVENANTS............................................................................57
SECTION 7.01. Maximum Leverage Ratio..........................................................57
SECTION 7.02. Maximum Unsecured Debt..........................................................57
SECTION 7.03. Maximum Secured Debt............................................................57
SECTION 7.04. Minimum Interest Coverage.......................................................57
SECTION 7.05. Minimum Fixed Charge Coverage...................................................58
SECTION 7.06. Minimum Consolidated Tangible Net Worth.........................................58
ARTICLE VIII
DEFAULTS; REMEDIES.............................................................................58
SECTION 8.01. Events of Default...............................................................58
SECTION 8.02. Notice of Default...............................................................61
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IX
THE AGENT......................................................................................61
SECTION 9.01. Appointment, Powers and Immunities..............................................61
SECTION 9.02. Reliance by the Agent...........................................................62
SECTION 9.03. Defaults........................................................................62
SECTION 9.04. Rights of Agent as a Bank; Rights of Agent to Lend..............................62
SECTION 9.05. Indemnification.................................................................62
SECTION 9.06. Consequential Damages...........................................................63
SECTION 9.07. Payee of Note Treated as Owner..................................................63
SECTION 9.08. Non-Reliance on Agent and Other Banks...........................................63
SECTION 9.09. Failure to Act..................................................................64
SECTION 9.10. Resignation or Removal of the Agent.............................................64
SECTION 9.11. Intercreditor Agreement.........................................................64
ARTICLE X
CHANGE IN CIRCUMSTANCES; COMPENSATION..........................................................64
SECTION 10.01. Basis for Determining Interest Rate Inadequate or Unfair.......................64
SECTION 10.02. Illegality.....................................................................65
SECTION 10.03. Increased Cost and Reduced Return..............................................65
SECTION 10.04. Base Rate Loans Substituted for Affected Euro-Dollar Loans.....................67
SECTION 10.05. Compensation...................................................................67
ARTICLE XI
MISCELLANEOUS..................................................................................68
SECTION 11.01. Notices........................................................................68
SECTION 11.02. No Waivers.....................................................................68
SECTION 11.03. Expenses; Documentary Taxes; Indemnification...................................69
SECTION 11.04. Setoffs; Sharing of Set-Offs...................................................69
SECTION 11.05. Amendments and Waivers.........................................................70
SECTION 11.06. Margin Stock Collateral........................................................71
SECTION 11.07. Successors and Assigns.........................................................71
SECTION 11.08. Confidentiality................................................................73
SECTION 11.09. Swap Obligations...............................................................73
SECTION 11.10. Representation by Banks........................................................73
SECTION 11.11. Obligations Several............................................................74
SECTION 11.12. Survival of Certain Obligations................................................74
SECTION 11.13. North Carolina Law.............................................................74
SECTION 11.14. Severability...................................................................74
SECTION 11.15. Interest.......................................................................74
</TABLE>
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<TABLE>
<S> <C>
SECTION 11.16. Interpretation.................................................................74
SECTION 11.17. Defaulting Bank................................................................74
SECTION 11.18. Consent to Jurisdiction........................................................75
SECTION 11.19. Counterparts...................................................................75
EXHIBIT A-1 Form of Bank Notes
EXHIBIT A-2 Form of Term Notes
EXHIBIT B Form of Opinion of Counsel for the Borrower
EXHIBIT C Form of Opinion of Special Counsel for the Agent
EXHIBIT D Form of Closing Certificate
EXHIBIT E Form of Assistant Secretary's Certificate
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Assignment and Acceptance
EXHIBIT H Form of Notice of Borrowing
EXHIBIT I Form of Borrowing Base Values Certificate
EXHIBIT J Conduit Debt Hotels
EXHIBIT K Initial Hotels
EXHIBIT L Form of Permitted Operating Lease
EXHIBIT M Allocated Loan Amount
</TABLE>
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<PAGE> 7
SYNDICATED CREDIT AGREEMENT
THIS SYNDICATED CREDIT AGREEMENT dated as of January 15, 1999, among
WINSTON HOTELS, INC., a North Carolina corporation (the "Company"), WINN LIMITED
PARTNERSHIP, a North Carolina limited partnership (the "Partnership"), the BANKS
listed on the signature pages hereof, and WACHOVIA BANK, N.A., as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this Section 1.01
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein:
"Accessibility Laws" means all laws and regulations governing
accessibility of public facilities to the handicapped, specifically including,
but not limited to the physical accessibility requirements of Title III of the
Americans with Disabilities Act of 1990, and the implementing regulations
promulgated thereunder by the Department of Justice and the Americans with
Disabilities Act Accessibility Guidelines (ADAAG) associated therewith.
"Accumulated Depreciation" means the cumulative sum of all Depreciation
Expense recognized on the financial statements of the Borrower and Subsidiaries
in accordance with GAAP.
"Additional Hotels" means all Hotels now owned or hereafter owned by
the Borrower and any Subsidiary, with the exclusion of (i) the Initial Hotels;
(ii) the Conduit Debt Hotels owned by the Special Purpose Entity; and (iii) any
hotel acquired by a partnership or joint venture in which the Borrower or any
Subsidiary is a partner or joint venturer.
"Adjusted London Interbank Offered Rate" means a rate per annum equal
to the quotient obtained (rounded upward or downward, if necessary, to the
closest 1/10,000th of 1%, with 5,000/10,000th being rounded upward) by dividing
(i) the applicable London Interbank Offered Rate for such Interest Period by
(ii) 1.00 minus the Euro-Dollar Reserve Percentage.
"Adjusted EBITDA" means EBITDA for such period, less (a) Required Room
Reserves, and adjusted to exclude (b) all extraordinary items and (c) all gains
or losses from the sale of assets.
<PAGE> 8
"Affiliate" of any Person means (i) any other Person which directly, or
indirectly through one or more intermediaries, controls such Person, (ii) any
other Person which directly, or indirectly through one or more intermediaries,
is controlled by or is under common control with such Person, or (iii) any other
Person of which such Person owns, directly or indirectly, 20% or more of the
common stock or equivalent equity interests. As used herein, the term "control"
means possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means Wachovia Bank, N.A., a national banking association
organized under the laws of the United States of America, in its capacity as
agent for the Banks hereunder, and its successors and permitted assigns in such
capacity.
"Agent's Letter Agreement" means that certain letter agreement, dated
as of October 2, 1998, between the Borrower and the Agent relating to the
structure of the Loans, and certain fees from time to time payable by the
Borrower to the Agent, together with all amendments and modifications thereto.
"Agreement" means this Syndicated Credit Agreement, together with all
amendments and supplements hereto.
"Allocated Loan Amount" means the portion of the Loans allocated to
each Borrowing Base Hotel for title insurance purposes and for other purposes,
as set out in Exhibit M attached hereto and incorporated herein by reference.
"Applicable Margin" means for any Euro-Dollar Loan the following
interest spread corresponding to the Performance Pricing Level set forth below
for which Borrower qualifies, such spread being expressed as a percentage, that
shall be added to the Adjusted London Interbank Offered Rate for an Interest
Period:
<TABLE>
<CAPTION>
Performance The Ratio of Consolidated
Pricing Total Indebtedness to
Level Total Value shall be Applicable Margin
- ----------- ------------------------- -----------------
<S> <C> <C>
I Less than 45% 1.45%
II Equal to or Greater than 45%
but Less than 50% 1.60%
III Equal to or Greater than 50%
but Equal to or Less than 55% 1.70%
IV Greater than 55% Euro-Dollar Rates not available.
The Default Rate shall govern.
</TABLE>
2
<PAGE> 9
"Approved Franchisor" means any franchisor approved by all of the Banks
from time to time. The following franchisors have been preapproved by the Banks
as "Pre-Approved Franchisors": Hampton Inn; Hampton Inn & Suites; Embassy
Suites; Homewood Suites; Staybridge Suites; Holiday Inn; Holiday Inn Select;
Holiday Inn Express; Marriott Courtyard; Residence Inn; Fairfield Inn; Hilton
Garden Inn; Comfort Inn; Comfort Suites; and Quality Suites.
"Assignee" has the meaning set forth in Section 11.07(c).
"Assignment and Acceptance" means an Assignment and Acceptance executed
in accordance with Section 11.07(c) in the form attached hereto as Exhibit G.
"Assignments of Rents" means any assignments of rents, leases and
profits now or hereafter executed by the Borrower for the benefit of the Agent,
specifically including (but not limited to) any assignments of rents
incorporated within any Deed of Trust and given with respect to the Initial
Hotels, and any and all amendments and modifications thereof.
"Authority" has the meaning set forth in Section 10.02.
"Bank" means each bank listed on the signature pages hereof as having a
Commitment, and its successors and assigns. "Banks" means more than one Bank.
Where approval of any matter is required to be obtained from the "Banks,"
approval must be obtained from all of the Banks.
"Bank Notes" means the promissory notes of the Borrower payable to the
Banks, substantially in the form of Exhibit A-1 attached hereto, evidencing the
obligation of the Borrower to repay the Loans, together with all amendments,
consolidations, modifications, replacements, renewals and supplements thereto.
"Bank Note" means any one of such Bank Notes.
"Base Rate" means for any Base Rate Loan for any day, the rate per
annum equal to the higher as of such day of (i) the Prime Rate, or (ii) one-half
of one percent above the Federal Funds Rate for such day. For purposes of
determining the Base Rate for any day, changes in the Prime Rate and the Federal
Funds Rate shall be effective on the date of each such change.
"Base Rate Loan" means a Loan which bears or is to bear interest at a
rate based upon the Base Rate.
"Borrower" means one or more of the Partnership and the Company, and
their successors and permitted assigns.
3
<PAGE> 10
"Borrowing" means a borrowing hereunder consisting of Loans made to the
Borrower at the same time by the Banks pursuant to Article II or, in the case of
a Swing Line Borrowing, by the Swing Line Bank only. A Borrowing is a "Base Rate
Borrowing" if such Loans are Base Rate Loans or a "Euro-Dollar Borrowing" if
such Loans are Euro-Dollar Loans.
"Borrowing Base Value" means the sum of the following:
(a) For all Non-Stabilized Borrowing Base Hotels, the
undepreciated book value (as determined in accordance with
GAAP) for all such Hotels; and
(b) For all Stabilized Borrowing Base Hotels, the Capitalized
Value for all such Hotels.
"Borrowing Base Value Certificate" has the meaning set forth in Section
2.01(b)(1).
"Borrowing Base Hotel" is a Hotel as described and meeting the criteria
specified in Section 3.01(c) hereof.
"Borrowing Base Hotel Release Entitlement Event" has the meaning given
in Section 3.02.
"Capital Stock" means any nonredeemable capital stock of the Borrower
or any Subsidiary (to the extent issued to a Person other than the Borrower),
whether common or preferred.
"Capitalized Lease Obligation" means that portion of any obligation of
a Person, as a lessee under a lease, which at the time would be required to be
capitalized on the balance sheet of such Person in accordance with GAAP.
"Capitalized Value" means (A) the aggregate Property Operating Income
for Stabilized Borrowing Base Hotels during the most recent Four Fiscal Quarters
for which financial results have then been reported less the Required Room
Reserves (hereinafter defined) applicable thereto for such four Fiscal Quarters,
divided by (b) 11.5%.
"Cash Equivalents" means cash on hand, deposits in financial
institutions, and the market value of readily marketable securities, provided
that any such amounts that are restricted in any way shall be excluded.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. ss. 9601 et seq. and its implementing regulations
and amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.
4
<PAGE> 11
"Change of Law" shall have the meaning set forth in Section 10.02.
"Closing Certificate" has the meaning set forth in Section 3.03(e).
"Closing Date" means February 1, 1999.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code. Any reference to any provision of the Code shall
also be deemed to be a reference to any successor provision or provisions
thereof.
"Collateral Assignments of Franchise Agreements" means all collateral
assignments of franchise agreements, if any, now or hereafter executed by a
Lessee, and any and all amendments and modifications thereof.
"Collateral Assignments of Management Agreements" means all collateral
assignments of all or any portion of a Lessee's rights in and under any one or
more Management Agreements, and any and all amendments and modifications
thereof.
"Collateral Documents" means all Deeds of Trust, all Assignments of
Rents, all Security Agreements, all Collateral Assignments of Franchise
Agreements, all Collateral Assignments of Management Agreements, all UCC-1
Financing Statements and any other loan documentation executed by the Borrower
or any Subsidiary establishing the Agent's collateral rights in one or more
Properties.
"Commitment" means, with respect to each Bank, (i) the amount set forth
opposite the name of such Bank on the signature pages hereof, or (ii) as to any
Bank which enters into an Assignment and Acceptance (whether as transferor Bank
or as Assignee thereunder), the amount of such Bank's Commitment after giving
effect to such Assignment and Acceptance, in each case as such amount may be
reduced from time to time pursuant to Sections 2.08 and 2.09.
"Company" means Winston Hotels, Inc., and its successors and permitted
assigns.
"Completion Requirements" means (i) delivery of a Certificate of
Substantial Completion signed by the general contractor, the owner, and the
project architect indicating that such Hotel is substantially complete, (ii)
issuance by appropriate governmental authorities of a permanent, unqualified
certificate of occupancy, (iii) issuance of an endorsement to the title policy
for such Hotel deleting any general lien exception and all specific liens as
exceptions from the title policy, and (iv) receipt by the Agent of documentation
satisfactory to the Agent as to matters of zoning.
"Compliance Certificate" has the meaning set forth in Section 5.01(c).
5
<PAGE> 12
"Conduit Debt" means that certain non-recourse loan from the Conduit
Lender to the Special Purpose Entity in the original principal amount of
$71,000,000, evidenced by a promissory note executed by the Special Purpose
Entity, dated November 3, 1998, and payable to the Conduit Lender.
"Conduit Lender" means CMF Capital Company LLC, its successors and
assigns.
"Conduit Debt Hotels" means all those Hotels owned by the Special
Purpose Entity and serving as collateral security for the Conduit Debt. The
Hotels initially pledged as collateral for the Conduit Debt are listed in
Exhibit J.
"Consolidated Liabilities" means the sum of (i) all liabilities that,
in accordance with GAAP, should be classified as liabilities on a consolidated
balance sheet of Borrower and its Consolidated Subsidiaries, and (ii) to the
extent not included in clause (i) of this definition, the Borrower's redemption
obligations with respect to all Redeemable Preferred Stock.
"Consolidated Secured Debt" means the aggregate principal amount of all
Debt of the Borrower or any Consolidated Subsidiary, outstanding as of such
date, which is secured by a Lien on any asset or Capital Stock of the Borrower
or any Consolidated Subsidiary, including without limitation loans secured by
mortgages, stock, or partnership interests.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with GAAP, would be consolidated
with those of the Borrower in its consolidated financial statements as of such
date (specifically including the Special Purpose Entity).
"Consolidated Tangible Net Worth" means, at any time, Stockholders'
Equity, less the sum of the value, as set forth or reflected on the most recent
consolidated balance sheet of the Borrower, prepared in accordance with GAAP, of
(A) Any surplus resulting from any write-up of assets
subsequent to June 30, 1998;
(B) All assets which would be treated as intangible assets for
balance sheet presentation purposes under GAAP, including without
limitation goodwill (whether representing the excess of cost over book
value of assets acquired, or otherwise), trademarks, tradenames,
copyrights, patents and technologies, and unamortized debt discount and
expense;
6
<PAGE> 13
(C) To the extent not included in (B) of this definition, any,
amount at which shares of capital stock of the Borrower appear as an
asset on the consolidated balance sheet of the Borrower;
(D) Loans or advances to stockholders, directors, officers or
employees; and
(E) To the extent not included in (B) of this definition,
deferred expenses.
"Consolidated Total Indebtedness" means at any date all of the Debt of
the Borrower and its Consolidated Subsidiaries (excluding however, without
duplication, Intercompany Debt), determined on a consolidated basis as of such
date.
"Contested/Not Completed Hotels" means the following four Hotels:
Homewood Suites, Alpharetta, Georgia (Hotel #24); Homewood Suites, Raleigh,
North Carolina (Hotel #6); Homewood Suites, Durham, North Carolina (Hotel #8);
and Marriott Courtyard, Winston-Salem, North Carolina (Hotel #14).
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Debt" of any Person means at any date, without duplication, (i) all
obligations (whether recourse or non-recourse) of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all obligations of such Person
as lessee under capital leases, (v) all obligations of such Person to reimburse
any bank or other Person in respect of amounts payable under a banker's
acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event
such Person is a corporation), (vii) all obligations (absolute or contingent) of
such Person to reimburse any bank or other Person in respect of amounts paid
under a letter of credit or similar instrument, (viii) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person, and (ix) all Debt of others Guaranteed by such Person.
"Debt Service" means all interest due and payable by the Borrower or
its Subsidiaries on its Debt, all dividends due and payable on Redeemable
Preferred Stock, all sinking fund payments or similar payments required to be
paid in connection with Redeemable Preferred Stock, and all regularly scheduled
principal payments required to be paid on any Debt other than the final
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<PAGE> 14
payment due on such Debt if such final payment is substantially greater than the
periodic payments required in connection with such Debt. For purposes of
calculating Debt Service, one shall exclude (without duplication) Intercompany
distributions or dividends and Debt Service payable in connection with
Intercompany Debt.
"Deeds of Trust" means all deeds of trust, deeds to secure debt,
mortgages or similar instruments now or hereafter executed by the Borrower to or
for the benefit of the Agent in its capacity as agent to secure the indebtedness
evidenced by the Notes, specifically including (but not limited to) those deeds
of trust, mortgages, and deeds to secure debt given with respect to the Initial
Hotels, and any and all amendments and modifications thereof.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived in writing, become an Event of Default.
"Defaulting Bank" means, at any time, any Bank that (a) has failed to
make a Loan or failed to purchase a participation interest in a Swing-Line Loan
as so required pursuant to the terms of this Agreement, or (b) has failed to pay
to the Agent or to any other Bank an amount owed by such Bank pursuant to the
terms of this Agreement (but only for so long as such amount has not been paid).
"Default Rate" means, with respect to any Loan, a rate per annum equal
to 150% of the Prime Rate.
"Deferred Revenue" means accrued revenue of the Borrower or any
Subsidiary under hotel operating leases which was recognized as Income under
GAAP prior to the implementation of EITF 98-9 but is no longer recognized as
such pursuant to EITF 98-9 issued by Financial Accounting Standards Board's
Emerging Issues Task Force.
"Depreciation Expense" means for any period the sum of all depreciation
expenses of the Borrower and its Subsidiaries for such period, as determined in
accordance with GAAP.
"Dividends" means for any period the sum of all dividends paid or
declared by the Company during such period and applicable thereto in respect of
any Capital Stock and Preferred Stock (other than dividends paid or payable in
the form of additional Capital Stock or Preferred Stock) and, with respect to
interests in the Partnership held by partners other than the Company, all
distributions paid or declared during such period and applicable thereto in
respect to partnership interests (other than distributions paid or payable in
the form of additional partnership interests).
"Dollars" or "$" means dollars in lawful currency of the United States
of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Atlanta, Georgia are authorized or
required by law to close.
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"EBITDA" means, with respect to the accounts of Borrower and
Subsidiaries, consolidated income in accordance with GAAP (before Minority
Interests) of the Borrower and its Subsidiaries, before extraordinary items plus
Deferred Revenue plus Interest Expense, Depreciation Expense, amortization
expense and provisions for income tax.
"Effective Date" with respect to the Borrowing Base Value has the
meaning given such term in Section 2.01(c)(iv).
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or
orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental Authority
or by any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any violation of any
Environmental Requirement or any investigations concerning any violation of any
Environmental Requirement.
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<PAGE> 16
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.
"Environmental Reports" means those environmental reports which were
rendered with respect to the Initial Hotels and copies of which were delivered
to the Banks in connection with the Loans and any environmental reports
hereafter delivered to the Banks with respect to Additional Hotels. These
reports include, but are not limited to, reports concerning asbestos located in
and about one or more of the Properties.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or the Properties, including but not limited to any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Euro-Dollar Loan" means a Loan which bears or is to bear interest at a
rate based upon the London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered Rate
shall be adjusted automatically on and as of the effective date of any change in
the Euro-Dollar Reserve Percentage.
"Event of Default" has the meaning set forth in Section 8.01.
"Extension of Term" means any one year extension of the term hereof
from the Termination Date or any Extended Termination Date, as provided in
Section 2.05(c).
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<PAGE> 17
"Extended Termination Date" means the date on which the Banks'
Commitments terminate following one or more Extensions of Term.
"Facility Limit" shall mean $140,000,000 or such lesser sum as shall be
available upon reduction in the Facility Limit, as provided in Section 2.05(c)
and Section 2.13 herein.
"FF&E" means furniture, fixtures and equipment now or hereafter located
on one or more of the Properties of the Borrower and Subsidiaries and required
for the operation of such Properties as hotels.
"FF&E Deficiency" means the amount, if any, as of each Measurement
Date, by which the cumulative amount of Required Room Reserves accrued
commencing January 1, 1999, and continuing during the term of the Loan, exceeds
the accrued cumulative expenditures by the Borrower for the replacement and
enhancement of FF&E located within the Borrowing Base Hotels.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Domestic Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to Wachovia on such day on such
transactions as determined by the Agent.
"Fiscal Quarter" means any fiscal quarter of the Borrower. As of the
Closing Date the Fiscal Quarters end on March 31, June 30, September 30, and
December 31.
"Fiscal Year" means any fiscal year of the Borrower. As of the Closing
Date, the Fiscal Year ends on December 31.
"Fixed Charges" means the sum of (a) Debt Service for such period plus
(b) Ground Lease Expenses for such period.
"Floating Rate Debt" means any Debt which bears interest at an interest
rate that is subject to change more frequently than once per calendar year.
"Franchisor" means any franchisor of a Hotel, specifically including
any Pre-Approved Franchisor.
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<PAGE> 18
"Franchise Agreement" means the written agreement between a Lessee and
the Franchisor pursuant to which such Lessee is granted a franchise to operate a
Hotel, and any and all amendments and modifications thereof.
"Funds from Operations" means for any period net income (loss) of the
Borrower and Subsidiaries, determined on a consolidated basis in accordance with
GAAP plus Deferred Revenue, before Preferred Dividends and before deducting the
portion of such net income (loss) allocable to Minority Interests, gains (or
losses) from debt restructuring and sales of income producing Property,
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures will be calculated to reflect "Funds from Operations" consistent
with the basis as presented by Borrower. It is acknowledged that the computation
of "Funds from Operations" may be adjusted from time to time to be consistent
with the conventions adopted by the National Association of Real Estate
Investment Trusts.
"GAAP" means generally accepted accounting principles applied on a
basis consistent with those which, in accordance with Section 1.02, are to be
used in making the calculations for purposes of determining compliance with the
terms of this Agreement.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to provide collateral security, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. ss.6901 et seq. and its implementing regulations and amendments,
or in any applicable state or local law or regulation, (b) any "hazardous
substance", "pollutant" or "contaminant", as defined in CERCLA, or in any
applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including crude oil or any fraction thereof,
(d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or
in any applicable state or local law or regulation and (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.
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<PAGE> 19
"Hotels" means a hotel (specifically including land, building,
improvements, FF&E and all related personal property used or useful in
connection with such hotel operations) owned by the Partnership, the Company, or
the Special Purpose Entity. "Hotels" collectively refers to the Initial Hotels,
all Additional Hotels, and all Conduit Debt Hotels.
"Hotel Cost" means for any Non-Stabilized Hotel the total investment at
cost of the land, buildings, improvements and the FF&E located therein according
to GAAP before Accumulated Depreciation.
"Initial Hotels" mean those Hotels owned by the Partnership and pledged
to secure the Loans, as generally described in Exhibit K attached hereto and
incorporated herein by reference.
"Intercompany Debt" means Debt owing by the Company or the Partnership
or any Subsidiary, on the one hand, to the Company or the Partnership or any
Subsidiary, on the other hand.
"Interest Expense" means during any period interest or similar fees and
charges accrued by the Borrower and its Consolidated Subsidiaries in accordance
with GAAP on all Debt constituting Consolidated Total Indebtedness other than
Intercompany Debt (including the portion of any Capitalized Lease Obligation
treated under GAAP as an interest component), but specifically excluding
therefrom interest that is capitalized in accordance with GAAP.
"Interest Period" means:
(1) with respect to each Euro-Dollar Borrowing other than a Swing Line
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the first, second, third or sixth month
thereafter, as the Borrower may elect in the applicable Notice of Borrowing;
provided that:
(a) any Interest Period (subject to clause (c) below) which
would otherwise end on a day which is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the appropriate subsequent calendar
month) shall, subject to clause (c) below, end on the last Euro-Dollar
Business Day of the appropriate subsequent calendar month; and
(c) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
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<PAGE> 20
(2) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending one day thereafter; provided that any Interest
Period which would otherwise end on a day which is not a Domestic Business Day
shall be extended to the next succeeding Domestic Business Day.
(3) with respect to each Swing Line Borrowing, the period commencing on the date
of such Borrowing and (i), in the case of a Swing Line Borrowing that is a
Euro-Dollar Borrowing, ending 7 days thereafter, or (ii) in the case of a Base
Rate Borrowing, ending one day thereafter, provided that:
(a) in the case of a Swing Line Borrowing that is a Base Rate
Borrowing, any Interest Period (subject to clause (c) below) which
would otherwise end on a day which is not a Domestic Business Day shall
be extended to the next succeeding Domestic Business Day;
(b) in the case of a Swing Line Borrowing that is a
Euro-Dollar Loan, any Interest Period (subject to clause (c) below)
which would otherwise end on a day which is not a Euro-Dollar Business
Day shall be extended to the next succeeding Euro-Dollar Business Day;
and
(c) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
"Investment" means any investment in any Person, whether by means of
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, making of a time
deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise (in either case, whether direct or indirect).
"Lease" or "Leases" means any and all lease agreements now or hereafter
executed between the Borrower or a Subsidiary and any Lessee and any and all
amendments and modifications thereof, pursuant to which such Lessee operates one
or more of the Hotels.
"Lending Office" means, as to each Bank, its office located at its
address set forth on the signature pages hereof (or identified on the signature
pages hereof as its Lending Office) or such other office as such Bank may
hereafter designate as its Lending Office by notice to the Borrower and the
Agent.
"Lessee" means any party operating a Hotel pursuant to a Lease.
"Lien" means, with respect to any asset, any mortgage, deed to secure
debt, deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, servitude or encumbrance of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by
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<PAGE> 21
consensual agreement or by operation of statute or other law, or by any
agreement, contingent or otherwise, to provide any of the foregoing. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, ground
lease, capital lease or other title retention agreement relating to such asset.
"Loan" means any loan made by any Bank to the Borrower pursuant to the
provisions hereof, and "Loans" means any of all such loans, as the context shall
require.
"Loan Documents" means this Agreement, the Notes, all Deeds of Trust,
all Assignments of Rents, all Security Agreements, all Collateral Assignments of
Franchise Agreements, all Collateral Assignments of Management Agreements, any
other document evidencing, relating to or securing the Loans, and any other
document or instrument delivered from time to time in connection with this
Agreement, the Notes or the Loans, as such documents and instruments may be
amended or supplemented from time to time.
"London Interbank Offered Rate" applicable to any Euro-Dollar Loan
means for the Interest Period of such Euro-Dollar Loan the rate per annum
determined on the basis of the offered rate for deposits in Dollars of amounts
equal or comparable to the principal amount of such Euro-Dollar Loan offered for
a term comparable to such Interest Period, which rate appears on the display
designated as Page "3750" of the Telerate Service in the case of the One-Month
LIBOR Option, the Two-Month LIBOR Option, the Three-Month LIBOR Option or the
Six-Month LIBOR Option and "Page 3875" of the Telerate Service in the case of
the Seven-Day LIBOR Option or, in the case of any LIBOR Option, such other page
as may replace such page of that service or such other service or services as
may be designated by the British Bankers' Association for the purpose of
displaying the London Interbank Offered Rates for United States dollar deposits
(the "Telerate Service") determined as of 11:00 a.m. London time, as that rate
is set two (2) Euro-Dollar Business Days prior to the first day of the Interest
Period, provided that (i) if more than one such offered rate appears on the
applicable Telerate Service, the "London Interbank Offered Rate" will be the
arithmetic average (rounded upward or downward, if necessary, to the closest
1/10,000th of 1%, with 5,000/10,000th being rounded upward) of such offered
rates; and (ii) if no such offered rates appear on such page, or if there is no
such service designated by the British Bankers' Association, the "London
Interbank Offered Rate" for such Interest Period will be the arithmetic average
(rounded upward or downward, if necessary, to the closest 1/10,000th of 1%, with
5,000/10,000th being rounded upward) of rates quoted by not less than 2 major
banks in New York City, selected by the Agent, at approximately 10:00 a.m., New
York City time, 2 Euro-Dollar Business Days prior to the first day of such
Interest Period, for deposits in Dollars offered to leading European banks for a
period comparable to such Interest Period in an amount comparable to the
principal amount of such Euro-Dollar Loan.
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<PAGE> 22
"Major Ground Lease" means a ground lease demising to the Borrower or
any Subsidiary all of the land on which a Hotel is situated or any portion of
such land which the Agent, in its reasonable judgment, deems necessary for the
operation of the Hotel, or which, without the benefit of such ground lease,
would materially impair the marketability of the Hotel in the reasonable
judgment of the Agent.
"Manager" means any manager of a Hotel.
"Management Agreement" means the written agreement between a Lessee and
a Manager pursuant to which a Manager undertakes the management of a Hotel, and
any and all amendments and modifications thereof.
"Margin Stock" means "margin stock" as defined in Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System, as in effect from
time to time, together with all official rulings and interpretations issued
thereunder.
"Material Adverse Effect" means, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (a) the
financial condition, operations, business or properties of the Borrower and its
Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the
Agent or the Banks under the Loan Documents, or the ability of the Borrower to
perform its obligations under the Loan Documents to which it is a party, as
applicable, or (c) the legality, validity or enforceability of any Loan
Document.
"Maximum Advance" has the meaning set forth in Section 2.01(b).
"Measurement Date" shall mean December 31, 1998, and each March 31,
June 30, September 30 and December 31 thereafter.
"Minority Interests" shall mean the partnership interests in the
Partnership held by limited partners other than the Company.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Net Income" means, as applied to any Person for any period, the
aggregate amount of net income of such Person, after taxes, for such period, as
determined in accordance with GAAP.
"Non-Stabilized Borrowing Base Hotel" means a Borrowing Base Hotel that
does not constitute a Stabilized Borrowing Base Hotel.
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<PAGE> 23
"Non-Stabilized Hotel" means a Hotel that does not constitute a
Stabilized Hotel.
"Notes" means collectively the Term Notes and the Bank Notes. "Note"
means any one of such Notes.
"Notice of Borrowing" has the meaning set forth in Section 2.02(a).
"Officer's Certificate" has the meaning set forth in Section 3.03(f).
"Participant" has the meaning set forth in Section 11.07(b).
"Partnership" means WINN Limited Partnership, a North Carolina limited
partnership, its successors and permitted assigns.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Performance Pricing Determination Date" means January 1, 1999, and the
first day of each calendar quarter (April 1, July 1, October 1, and January 1)
thereafter.
"Permitted Operating Lease" means any Lease with respect to a Hotel
owned by Borrower or a Subsidiary, such Lease being between such Borrower or
Subsidiary, as lessor, and either of Capstar Winston Company, L.L.C., Capstar
Management Company, L.P., Capstar Hotel Company or another entity directly or
indirectly owned wholly by MeriStar Hospitality Corporation (herein a "Capstar
Entity"), as lessee, or such other entity approved by the Required Banks and
provided further that the obligations of any Capstar Entity are guaranteed by
MeriStar Hospitality Corporation and further provided that each such Lease shall
conform to any one or more of the following requirements:
(a) Such Lease is a lease with respect an Initial Hotel;
(b) Such Lease is with respect to a Conduit Debt Hotel;
(c) If such Lease is a lease with respect to any Additional Hotel
that is or becomes a Borrowing Base Hotel, such Lease shall be
in substantially the same form as evidenced by the Form of
Permitted Operating Lease shown in Exhibit L, provided,
however, that the terms affecting the payments thereunder
shall be acceptable to all of the Banks;
(d) If such Lease is with respect to any Hotel that is not a
Borrowing Base Hotel or a Conduit Debt Hotel, such lease shall
be in substantially the form shown in Exhibit L;
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<PAGE> 24
(e) If such Lease described in paragraph (d) above is not with a
Capstar Entity, such lease shall be in substantially the form
shown in Exhibit L or shall be approved by the Required Banks.
The Banks have approved the existing lease with Secaucus Holding Corp.
with respect to Hotel #19 located in Secaucus, New Jersey, and have also
approved the existing lease with Bristol Hotel Tenant Company for Hotel #27
located in Las Vegas, Nevada. Such approval for these particular hotels does not
constitute approval of the forms of lease applicable to these Hotels for other
hotel properties.
"Person" means an individual, a corporation, a partnership (including
without limitation, a joint venture), a limited liability company, an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding 5 plan years made contributions.
"Prior Indebtedness" means indebtedness evidenced by that certain
revolving demand promissory note executed by the Borrower and payable to
Wachovia, dated as of October 30, 1998, and in the principal amount of
$45,000,000 and indebtedness evidenced by that certain credit agreement dated
October 29, 1996, in the principal amount of $125,000,000 among the Borrower,
Wachovia, as agent, and the banks listed therein.
"Prime Rate" refers to that interest rate so denominated and set by the
Agent from time to time as an interest rate basis for borrowings. The Prime Rate
is but one of several interest rate bases used by the Agent. The Agent lends at
interest rates above and below the Prime Rate.
"Property" or "Properties" means any and all real property owned,
leased or otherwise used or occupied by the Borrower or any Subsidiary, wherever
located.
"Property Operating Income" means with respect to any Hotel, for any
period, Borrower's rental revenue derived under a Lease and accrued according to
GAAP plus Deferred Revenue for such Hotel for such period, (i) less all expenses
incurred by the Borrower and not reimbursed by tenants that are directly related
to such Hotel, including real estate taxes, common area maintenance charges,
casualty insurance, liability insurance, and ground lease payments (where
applicable), (ii) less actual general and administrative expenses for the
Borrower and its Subsidiaries allocated for all Hotels owned by the Borrower and
its Subsidiaries, and (iii) plus, to the extent
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<PAGE> 25
included in (i) above, Depreciation Expense, and amortization expense and
Interest Expense with respect to such Hotel for such period. If such period is
less than a year, such expenses shall be adjusted by straight lining various
expenses which are payable less frequently than monthly during every such period
(e.g. real estate taxes, ground lease payments and insurance premiums). General
and administrative expenses for the Borrower and its Subsidiaries shall be
allocated by dividing all such actual expenses by the number of Hotels then
owned by the Borrower and its Subsidiaries, and an equal amount of such general
and administrative expenses shall be allocated to each such Hotel.
"Redeemable Preferred Stock" of any Person means any preferred stock
issued by such Person which is at any time prior to the Termination Date either
(i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or
(ii) redeemable at the option of the holder thereof.
"Related Parties" shall mean, collectively, (a) the Company, (b) the
Partnership, (c) all Subsidiaries of the Borrower, (d) all non-consolidated
ventures in which the Borrower and/or any Consolidated Subsidiaries own at least
20% of the equity interests and over which the Borrower and/or any Consolidated
Subsidiaries have control, and (e) all non-consolidated ventures in which the
Borrower and/or any Consolidated Subsidiaries own at least 50% of the equity
interests.
"Rents" means, for any period, the revenue accrued according to GAAP
pursuant to the "annual base rent" and the Deferred Revenue to be received
according to the "annual percentage rent formula" schedule of the Lease for any
Hotel.
"Required Banks" means at any time Banks (exclusive of Defaulting
Banks) having at least 66 2/3% of the aggregate amount of the Commitments
(exclusive of Commitments of Defaulting Banks) or, if the Commitments are no
longer in effect, Banks (exclusive of Defaulting Banks) holding at least 66 2/3%
of the aggregate outstanding principal amount of the Notes (exclusive of Notes
payable to Defaulting Banks).
"Required Room Reserves" means, for any period, a sum equal to the
greater of (a) 5% of gross room revenues of the Hotels or (b) the amount
required to be "set aside" for replacement of FF&E for Hotels under the Leases
for such Hotels.
"Security Agreements" mean all security agreements now or hereafter
executed by the Borrower, specifically including but not limited to those
security agreements given incorporated within the Deed of Trust which have been
given with respect to the Initial Hotels, and any and all amendments and
modifications thereof.
"Senior Revolving Debt" means the principal amount outstanding under
the Loans.
"Special Purpose Entity" means Winston SPE, LLC, a Virginia limited
liability company, a wholly owned subsidiary of the Borrower.
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"Stabilized Borrowing Base Hotel" means, as of each Measurement Date, a
Borrowing Base Hotel that has been owned by the Borrower and continuously
operated by the Borrower or its Lessee for six or more full Fiscal Quarters.
"Stabilized Hotel" means, as of each Measurement Date, a Hotel that has
been owned by the Borrower and continuously operated by the Borrower or its
Lessee for six or more full Fiscal Quarters.
"Stockholders' Equity" means, at any time, the shareholders' equity of
the Borrower and its Consolidated Subsidiaries, as set forth or reflected on the
most recent consolidated balance sheet of the Borrower prepared in accordance
with GAAP, but excluding any Redeemable Preferred Stock of the Borrower or any
of its Consolidated Subsidiaries. Shareholders' equity generally would include,
but not be limited to (i) the par or stated value of all outstanding Capital
Stock, (ii) capital surplus, (iii) retained earnings, and (iv) various
deductions such as (A) purchases of treasury stock, (B) valuation allowances,
(C) receivables due from an employee stock ownership plan, (D) employee stock
ownership plan debt guarantees, and (E) translation adjustments for foreign
currency transactions.
"Subordination Agreements" mean collectively those agreements pursuant
to which a Lease is subordinated to the lien of a Deed of Trust given with
respect to such Hotel.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Substitute Hotels" has the meaning given such term in Section
3.02(a)(i).
"Supermajority of Banks" means at any time Banks (exclusive of
Defaulting Banks) having at least 80% of the aggregate amount of the Commitments
(exclusive of the Commitments of Defaulting Banks) or, if the Commitments are no
longer in effect, Banks (exclusive of Defaulting Banks) holding at least 80% of
the aggregate outstanding principal amount of the Notes (exclusive of Notes
payable to Defaulting Banks).
"Swing Line Bank" shall mean Wachovia, in its capacity as one of the
Banks providing a Commitment hereunder.
"Swing Line Borrowing" is a borrowing pursuant to the Swing Line
established under Section 2.03(a).
"Swing Line Loan" means a loan constituting a borrowing under the Swing
Line established under Section 2.03(a).
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"Syndicated Borrowing" means a Borrowing with respect to a Loan or
Loans (as the case may be) other than Swing Line Loans made pursuant to this
Credit Agreement.
"Taxes" has the meaning set forth in Section 2.11(c).
"Term Notes" mean the promissory notes of the Borrower payable to the
Agent for the benefit of the Banks, substantially in the form of Exhibit A-2
attached hereto, evidencing the obligation of the Borrower to repay a designated
portion of the Loans, together with all amendments, consolidations,
modifications, replacements, renewals and supplements thereto. "Term Note" means
any one of such Term Notes.
"Termination Date" means the later of January 14, 2002, or any Extended
Termination Date if any Extension of Term is granted pursuant to Section
2.05(c).
"Third Parties" means all lessees, sublessees, licensees and other
users of the Properties, excluding those users of the Properties in the ordinary
course of the Borrower's business and on a temporary basis.
"Total Cost" means as of each Measurement Date, the sum of (a) the book
value according to GAAP of all Hotels then owned by the Borrower and its
Subsidiaries (including the Capitalized Value of any Major Ground Lease of such
Properties) plus (b) all Accumulated Depreciation on such Hotels reflected on
the Borrower's financial statements.
"Total Value" means as of each Measurement Date, the sum of (a) all
Cash Equivalents then held by the Borrower and its Consolidated Subsidiaries
plus (b) for Stabilized Hotels, their aggregate Capitalized Value, plus (c) for
Non-Stabilized Hotels, their aggregate Hotel Cost, plus (d) the aggregate amount
of investments in and advances of the Borrower and its Consolidated Subsidiaries
in and to joint ventures or partnerships as reflected on the balance sheet of
the Borrower and its Consolidated Subsidiaries, according to GAAP.
"Transferee" has the meaning set forth in Section 11.07(d).
"Unused Commitment" means at any date, with respect to any Bank, an
amount equal to its Commitment less the aggregate outstanding principal amount
of its Loans.
"Unutilized Commitment Fee Payment Date" means each January 10, April
10, July 10, and October 10.
"Unutilized Commitment Fees" shall have the meaning set forth in
Section 2.07(b).
"Wachovia" means Wachovia Bank, N.A., a national banking association,
and its successors.
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"Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Borrower delivered to the Banks, unless with respect
to any such change concurred in by the Borrower's independent public accountants
or required by GAAP, in determining compliance with any of the provisions of
this Agreement or any of the other Loan Documents: (i) the Borrower shall have
objected to determining such compliance on such basis at the time of delivery of
such financial statements, or (ii) the Required Banks shall so object in writing
within 30 days after the delivery of such financial statements, in either of
which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made (which, if objection is made in respect of
the first financial statements delivered under Section 5.01 hereof, shall mean
the financial statements referred to in Section 4.04).
Notwithstanding the foregoing, all accounting determinations
(specifically including the Financial Covenants in Article VIII) and all
financial statements required to be delivered with respect to the "Borrower and
its Consolidated Subsidiaries" or with respect to the "Company and its
Consolidated Subsidiaries" shall include the operations of the Company, the
Partnership, the Special Purpose Entity and any Consolidated Subsidiary of any
of the foregoing.
SECTION 1.03. Use of Defined Terms. All terms defined in this Agreement
shall have the same meanings when used in any of the other Loan Documents,
unless otherwise defined therein or unless the context shall otherwise require.
SECTION 1.04. Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural and the plural
shall include the singular. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of this
Agreement.
SECTION 1.05. References. Unless otherwise indicated, references in
this Agreement to "Articles," "Exhibits," "Schedules," and "Sections" are
references to articles, exhibits, schedules and sections hereof.
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SECTION 1.06. "Borrower" References; Joint and Several Obligations;
Notice. Where this Agreement imposes obligations upon the "Borrower," such
reference shall mean that both the Partnership and the Company shall be jointly
and severally obligated for the payment and performance of the obligations.
Where any notice is required hereunder to be given to or by the "Borrower," any
notice given by the Company (and any signature of a Company representative on
behalf of the Company) shall be deemed to have been given on the Company's own
behalf and as general partner of the Partnership, even though not specifically
delineated in such notice.
ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.01. Commitments to Make Loans; Maximum Advance; Borrowing
Base Value.
(a) Generally. Upon the satisfaction of each of the conditions of
Article III, the Banks shall extend a line of credit to the Borrower under which
the Banks will, ratably in accordance with their respective Commitments, subject
to the conditions of Article III and all other terms and conditions of this
Agreement, from time to time at the Borrower's request, make Loans to the
Borrower in amounts not to exceed either the Facility Limit or the Maximum
Advance, which may be borrowed, repaid (subject to the provisions of Section
2.09) and reborrowed (subject to the limitations set out herein, specifically
including, but not limited to, Section 2.14 hereof), from time to time, in
minimum principal amounts as set forth herein, in one or more borrowings prior
to the Termination Date.
Each Syndicated Borrowing shall be in an aggregate principal amount of
$1,000,000 or any larger multiple of $100,000 (except that any such Borrowing
may be in the aggregate amount of the Unused Commitments) and shall be made from
the several Banks ratably in proportion to their respective Commitments. Each
Swing Line Borrowing, however, shall be in an aggregate principal amount of
$100,000 or any larger multiple of $100,000, except that any such Swing Line
Borrowing may be in the aggregate amount of the unused portion of the Swing
Line.
(b) Maximum Advance. The maximum amount of credit available to be drawn
upon from time to time under this Agreement, determined as of each Measurement
Date and being effective as set out in Section 2.01(c), but in no event to
exceed the Facility Limit (the "Maximum Advance"), is the product of (a) 58%
from the date hereof through June 30, 2000, and 55% thereafter, and (b) the sum
of (i) Total Cost of each Non-Stabilized Borrowing Base Hotel, and (ii) the
Capitalized Value of each Stabilized Borrowing Base Hotel less (iii) the FF&E
Deficiency. On July 1, 2000, Borrower shall provide a Borrowing Base Certificate
recalculating the Maximum Advance available hereunder based on the product of
55% of the sums described in (b) above, as shown on the then-effective Borrowing
Base Value Certificate, and, if the Maximum Advance is thus reduced, such
reduction shall become effective on such date.
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Notwithstanding the foregoing, the Maximum Advance otherwise available
hereunder shall be reduced by the sum of: (x) an amount equal to 1.25 times the
amount of all liens now or hereafter filed with respect to the Contested/Not
Completed Hotels (the "Contested/Not Completed Hotel Liens"), and (y) the
aggregate amount of any remaining sums unpaid under construction contracts for
the Contested/Not Completed Hotels but only to the extent (if any) that such
remaining sums are included in the computation of the book value for such
Contested/Not Completed Hotel [excluding sums captured in (x) above]. In
determining the amount of the deduction for Contested/Not Completed Hotel Liens,
the Agent shall exclude such portion of a Contested/Not Completed Hotel Lien
that is reflected in an existing Contested/Not Completed Hotel Lien already
included in the deduction, so as to eliminate the duplication of a deduction
with respect to multiple lien claimants (e.g., claims by subcontractors as well
as contractors for the same sum owed). Such reduction in the Maximum Advance
shall be removed as and when the Agent determines that such Contested/Not
Completed Hotel Liens have been cancelled or bonded off and the title company
has deleted any exception for such specific Contested/Not Completed Hotel Liens
in the case of (x) and any generic lien exception in the case of (y) in its
title policy issued for the benefit of the Agent. Other covenants and agreements
with respect to Contested/Not Completed Hotels are provided in Section 3.01(d)
hereof. The foregoing deduction for Contested/Not Completed Hotel Liens is made
pursuant to a requirement of the Banks, and the Borrower's consenting to such
deduction does not constitute an admission of liability for any sums claimed by
any contractors.
(c) Borrowing Base Value. The Borrowing Base Value shall be calculated
from time to time in accordance with the following procedure:
(i) Borrowing Base Value Certificate. Simultaneously with
the submission of the financial statements required
in Section 5.01 of this Agreement, the Borrower shall
provide to the Agent and to each Bank a
certification, signed by the chief financial officer
of the Borrower, providing its calculation of the
Borrowing Base Value, such certification to be in a
form set out in Exhibit I and otherwise in form
satisfactory to the Agent and the Required Banks (the
"Borrowing Base Value Certificate"). The Borrower in
the Borrowing Base Value Certificate shall certify as
to which Borrowing Base Hotels constitute
Non-Stabilized Borrowing Base Hotels and which
Borrowing Base Hotels constitute Stabilized Borrowing
Base Hotels and shall certify as to the amount of the
FF&E Deficiency for all such Borrowing Base Hotels in
the aggregate.
(ii) Property-Level Information. The Borrower shall
provide to the Agent and to each Bank, together with
the quarterly financial statements required by
Section 5.01 of this Agreement, a financial statement
with respect to the operations of the Borrowing Base
Hotels during the preceding four Fiscal Quarters
ending as of the Measurement Date. Such financial
statements shall
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be delivered no later than 55 days after each
Measurement Date. Such financial statements shall be
in form and detail satisfactory to the Required Banks
with respect to each Borrowing Base Hotel
individually and with respect to all Borrowing Base
Hotels in the aggregate for each Lessee.
(iii) Review; Agent's Determination. The Agent shall be
entitled to review such information and to request
such additional information as it or any of the Banks
deems necessary to verify and assess such
calculations. Within twenty-five (25) days of receipt
of the certified Borrowing Base Value Certificate,
the Agent shall notify the Borrower (x) whether it
has not accepted the Borrower's Borrowing Base Value
Certificate determinations, and (y) if not, the
Agent's computation of the Borrowing Base Value. The
Agent's determination of the Borrowing Base Value
shall be conclusive, absent manifest error.
(iv) Effective Date. Except in the case of a release of or
revocation of status of a Borrowing Base Hotel or
Borrowing Base Hotels, such Borrowing Base Value and
the Maximum Advance determined thereby shall be
effective as of the first day of the next Fiscal
Quarter commencing after such determination (the
"Effective Date"). [For example, for the Fiscal
Quarter ending March 31, the Borrower would supply
financial statements and the Borrowing Base Value
Certificate on or before May 25; the Agent would
review and respond to the Borrowing Base Value
Certificate (and establish the Borrowing Base) on or
before June 20, with such computations to be
effective on July 1, the first day of the next Fiscal
Quarter.]
(v) Releases; Additions. Prior to the time that a
Borrowing Base Hotel is released or added, the
Borrower shall supply to the Agent and each of the
Banks a pro forma Borrowing Base Value Certificate
giving effect to the release or addition of any
Borrowing Base Hotel. In the case of a reduction in
the Maximum Advance, such reduction shall be
effective immediately subject to review and
adjustment by the Agent as described in (iii) above.
In the case of an increase in the Maximum Advance,
such an increase shall be effective only following
review and approval of the Borrowing Base Value
Certificate by the Agent as set out above.
(d) Required Paydown Due to a Reduction in the Maximum Advance. If,
upon a reduction in the Maximum Advance as a result of a reduction in the
Borrowing Base Value, the outstanding principal balance of the Loans exceeds the
permitted Maximum Advance available as of the first day of the next Fiscal
Quarter, then on or before such date the Borrower shall pay down the principal
balance to that amount available under the new Maximum Advance. In addition, the
Borrower at any time (but subject to the limitations for approval set out in
Section 3.01(c) entitled Borrowing Base Hotels) may request the Banks to approve
one or more additional hotels as
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Borrowing Base Hotels. If, after reviewing the information to which they are
entitled to review in connection with their determination of Borrowing Base
Hotels, all of the Banks consent to such addition or additions, the Borrower
shall provide a replacement Borrowing Base Value Certificate that includes such
additional Borrowing Base Hotels. The recomputed Maximum Advance shall be
effective as of the date on which the Agent establishes the recomputed Maximum
Advance.
(e) Title Insurance Amounts Subject to Increases Upon Increases in
Maximum Advance. As of the Closing Date, the Borrower has obtained title
insurance policies aggregating $140,000,000.00. The Borrower shall obtain
additional title coverage such that, at all times, the amount of title coverage,
if requested by the Required Banks, shall be at least $5 million greater than
the Maximum Advance (the "Title Coverage Spread"). Amounts of title insurance
coverage provided for Additional Hotels that become Borrowing Base Hotels shall
be included for purposes of determining whether this requirement has been
satisfied. The Required Banks may require a greater Title Coverage Spread if a
"Tie In Endorsement" cannot be issued in any jurisdiction other than Texas and
Florida.
SECTION 2.02. Method of Borrowing.
(a) The Borrower shall give the Agent notice in the form attached
hereto as Exhibit H (a "Notice of Borrowing") prior to 11:00 A.M. (Atlanta,
Georgia time) on the date of each Base Rate Borrowing, and at least three
Euro-Dollar Business Days before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be
Base Rate Loans, or Euro-Dollar Loans, and whether any portion of such
Loans comprising such Borrowing are to be Swing Line Loans,
(iv) in the case of a Euro-Dollar Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period, and
(v) such other information as is required to be provided in
the Notice of Borrowing.
(b) Upon receipt of a Notice of Borrowing for a Syndicated Borrowing,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share of such Syndicated Borrowing and such Notice of Borrowing
shall not thereafter be revocable by the Borrower.
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(c) Not later than 11:00 A.M. (Atlanta, Georgia time) on the date of
each Syndicated Borrowing, each Bank shall (except as provided in subsection (d)
of this Section) make available its ratable share of such Syndicated Borrowing,
in Federal or other funds immediately available in Atlanta, Georgia, to the
Agent at its address referred to in or specified pursuant to Section 11.01.
Unless the Agent determines that any applicable condition specified in Article
III has not been satisfied, the Agent will make the funds that the Agent has so
received from the Banks available to the Borrower.
Unless the Agent receives notice from a Bank, at the Agent's address
referred to in Section 11.01, no later than 4:00 P.M. (local time at such
address) on the Domestic Business Day before the date of a Syndicated Borrowing
stating that such Bank will not make a Loan in connection with such Syndicated
Borrowing, the Agent shall be entitled to assume that such Bank will make a Loan
in connection with such Syndicated Borrowing and, in reliance on such
assumption, the Agent may (but shall not be obligated to) make available such
Bank's ratable share of such Syndicated Borrowing to the Borrower which provided
the Notice of Borrowing for the account of such Bank. If the Agent makes such
Bank's ratable share available to the Borrower which provided the Notice of
Borrowing and such Bank does not in fact make its ratable share of such
Syndicated Borrowing available on such date, the Agent shall be entitled to
recover such Bank's ratable share from such Bank or the Borrower (and for such
purpose shall be entitled to charge such amount to any account of the Borrower
maintained with the Agent), together with interest thereon for each day during
the period from the date of such Syndicated Borrowing until such sum shall be
paid in full at a rate per annum equal to the rate at which the Agent determines
that it obtained (or could have obtained) overnight Federal funds to cover such
amount for each such day during such period, provided that (i) any such payment
by the Borrower of such Bank's ratable share and interest thereon shall be
without prejudice to any rights that the Borrower may have against such Bank,
and (ii) until such Bank has paid its ratable share of such Loan, together with
interest pursuant to the foregoing, it shall have no interest in or rights with
respect to such Loan for any purpose hereunder.
(d) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank, such
Bank shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the Agent as
provided in subsection (c) of this Section, or remitted by the Borrower to the
Agent as provided in Section 2.11, as the case may be.
(e) Notwithstanding anything to the contrary contained in this
Agreement, no Euro-Dollar Borrowing may be made if there shall have occurred a
Default or an Event of Default, which Default or Event of Default shall not have
been cured or waived in writing.
(f) In the event that a Notice of Borrowing fails to specify whether
the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar
Loans, such Loans shall be made as Base Rate Loans.
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If the Borrower is otherwise entitled under this Agreement to repay any
Loans maturing at the end of an Interest Period applicable thereto with the
proceeds of a new Syndicated Borrowing, and the Borrower does not repay such
Loans using its own moneys and fails to give a Notice of Borrowing in connection
with such new Syndicated Borrowing, a new Borrowing shall be deemed to be made
on the date such Loans mature in an amount equal to the principal amount of the
Loans so maturing, and the Loans comprising such Syndicated Borrowing shall be
Base Rate Loans.
(g) Notwithstanding anything to the contrary contained herein, (i)
there shall not be more than ten different Euro-Dollar Borrowings (each request
for a Borrowing being treated as a single Borrowing, even though more than one
Bank may provide funds for such Borrowing) outstanding at the same time and (ii)
the proceeds of any Base Rate Borrowing shall be applied first to repay the
unpaid principal amount of all Base Rate Loans (if any) outstanding immediately
before such Base Rate Borrowing.
SECTION 2.03. Restrictions on Use of Loan Proceeds Generally.
(a) Swing Line. The Commitment of Wachovia, as a Bank, includes a Swing
Line available to the Borrower. Swing Line Loans may be used for any of the
purposes for which the Loans may be utilized.
(i) The Borrower may prior to the Termination Date, borrow
Swing Line Loans from the Swing Line Bank and may repay and reborrow
such Swing Line Loans, in an aggregate principal amount at any one time
outstanding not exceeding $15,000,000, provided that:
(y) the aggregate principal amount of all Loans
(including Swing Line Loans) at any one time outstanding shall
not exceed the lesser of (i) the aggregate amount of the
Commitments of all of the Banks at such time; or (ii) the
Maximum Advance; and
(z) the aggregate principal amount of all Swing Line
Loans, together with all other outstanding Loans made by the
Swing Line Bank, at any one time outstanding shall not exceed
the Commitment of the Swing Line Bank.
(ii) When the Borrower wishes to request a Swing Line Loan, it
shall give the Agent notice of such a borrowing (a "Swing Line Loan
Request") on the Notice of Borrowing hereunder described, so as to be
received by 11:00 A.M. on the day of the Borrowing.
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(iii) The Swing Line Bank shall make the amount of such Swing
Line Loan available to the Borrower on such date by depositing the
proceeds of such Swing Line Loan in immediately available funds in an
account of such Borrower maintained with the Swing Line Bank.
(iv) Swing Line Loans shall be considered a utilization of the
Commitment of the Swing Line Bank under this Agreement for purposes of
calculating the Unutilized Commitment Fee.
(v) At any time, upon the request of the Swing Line Bank, each
Bank other than the Swing Line Bank shall, on the third Domestic
Business Day after such request is made, purchase a participating
interest in Swing Line Loans in an amount equal to its ratable share
(based upon its respective Commitment) of such Swing Line Loans. On
such third Domestic Business Day, each Bank will immediately transfer
to the Swing Line Bank, in immediately available funds, the amount of
its participation. Whenever, at any time after the Swing Line Bank has
received from any such Bank its participating interest in a Swing Line
Loan, the Agent receives any payment on account thereof, the Agent will
distribute to such Bank its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect
the period of time during which such Bank's participating interest was
outstanding and funded); provided, however, that in the event that such
payment received by the Agent is required to be returned, such Bank
will return to the Agent any portion thereof previously distributed by
the Agent to it. Each Bank's obligation to purchase such participating
interests shall be absolute and unconditional and shall not be affected
by any circumstance, including, without limitation: (v) any set-off,
counterclaim, recoupment, defense, or other right which such Bank or
any other Person may have against the Swing Line Bank requesting such
purchase or any other Person for any reason whatsoever; (w) the
occurrence or continuance of a Default or an Event of Default or the
termination of the Commitments; (x) any adverse change in the condition
(financial or otherwise) of the Borrower or any other Person; (y) any
breach of this Agreement by the Borrower or any other Bank; or (z) any
other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
(b) Use Restrictions for Loans Generally. Proceeds of the Loans may be
used only for the following purposes: (i) development or acquisition by the
Borrower or Subsidiaries (specifically including investments by the Borrower and
its Subsidiaries in joint ventures or partnerships, subject to the limitations
in Section 6.06) of premium "limited service" hotels, premium "extended stay"
hotels, premium "all-suite" hotels, and premium "full service" hotels; (ii)
development, expansion and renovation of any of the Properties then owned by the
Borrower; and (iii) other general corporate and working capital needs of the
Borrower and its Subsidiaries, specifically including day-to-day operations,
payment of debt, payment of dividends and distributions, and repayment of the
Swing Line.
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SECTION 2.04. Notes.
(a) The Loans of each Bank shall be evidenced by a single Note payable
to the order of such Bank for the account of its Lending Office in an amount
equal to the original principal amount of such Bank's Commitment. A portion of
the Loans shall also be evidenced by Term Notes payable to the Agent for the pro
rata benefit of the Banks.
(b) Upon receipt of each Bank's Note pursuant to Section 3.03, the
Agent shall deliver such Note to such Bank. Each Bank shall record, and prior to
any transfer of its Notes shall endorse on the schedule forming a part thereof
appropriate notations to evidence, the date, amount and maturity of, and
effective interest rate for, each Loan made by it, the date and amount of each
payment of principal made by the Borrower with respect thereto and whether, in
the case of such Bank's Note, such Loan is a Base Rate Loan or Euro Dollar Loan,
and such schedule shall constitute rebuttable presumptive evidence of the
principal amount owing and unpaid on such Bank's Note; provided that the failure
of any Bank to make, or any error in making, any such recordation or endorsement
shall not affect the obligation of the Borrower hereunder or under its Note or
the ability of any Bank to assign its Note. Each Bank is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
SECTION 2.05. Termination Date, Repayment of Loans, Extension of Term.
(a) As provided in Section 2.01(a) of this Agreement, but subject to
the limitations of Section 2.14 hereof, the Borrower is entitled to borrow,
repay and reborrow Loans at any time before the Termination Date.
(b) Each Loan included in any Borrowing other than a Loan evidenced by
a Term Note shall mature and the principal amount thereof shall be due and
payable on the first to occur of (1) the Termination Date, or (2), except where
principal is repaid through a rollover borrowing as described in Section 2.02(d)
of this Agreement, the last day of the Interest Period applicable to such
Borrowing. As provided in Section 2.02(d) in this Agreement, a new Borrowing
sufficient to repay the principal of such Loans shall be deemed to have been
made where the Borrower does not repay such otherwise maturing Loans.
Notwithstanding anything herein to the contrary, each Loan evidenced by a Term
Note shall mature and the principal amount thereof shall be due and payable on
the Termination Date (and not the last day of the Interest Period for such
Loan). As provided in Section 8.01, the Banks may accelerate the maturity date
of each Loan prior to the Termination Date upon the occurrence of an Event of
Default.
(c) The Borrower may request a maximum of two one-year annual
Extensions of the Term no sooner than 90 days and no later than 30 days prior to
(x) January 14, 2002, in the case of the first extension, in which case the
Termination Date shall extend to January 14, 2003, or (y) January 14, 2003 (in
the case of the second extension), in which case the Termination Date shall
extend to January 14, 2004. The Borrower may request the second extension only
if one or more
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of the Banks have previously granted a prior Extension of the Term. Each Bank
may, in its sole discretion and without any obligation, determine whether to
grant such an extension and shall be entitled to receive whatever information
such Bank deems necessary for the consideration of such request. Each Bank, in
its sole discretion, may condition its decision to grant an extension upon a
modification of the terms of this Agreement or the Notes, an adjustment in the
interest rate payable under the Notes, or the payment of a fee, including the
Extension Fee described in Section 2.07(c) in the amount stated herein or such
higher amount required by such Bank, or any other condition precedent specified
by such Bank. The fact that the Borrower may request one year annual extensions
of the Term as described herein is not an option of the Borrower to renew or
extend the Term, but merely evidences the fact that the Borrower may request an
Extension of the Term, and none of the Banks is under any obligation whatsoever
to grant such a request. Any such decision to extend the Termination Date for
all of the Commitments shall require unanimous approval by the Banks, but any
Bank may elect to extend the Termination Date of its own Commitment without an
Extension of the Term by one or more other Banks. A Bank which has not elected
to grant such an extension (a "Non-Extending Bank") shall offer to assign, at
par, its Note and its interests hereunder to those remaining Banks which have
elected to grant such extensions. No Bank, however, shall be obligated to
purchase all or any portion of the interests of a Non-Extending Bank. If the
Banks electing to extend the Term do not purchase the Note of any Non-Extending
Bank, the interests of a Non-Extending Bank may be assigned by such
Non-Extending Bank to a bank or other financial institution pursuant to the
assignment provisions of Section 11.07(c) of this Agreement. If one or more of
the Banks do not grant such an extension and the interests of such Non-Extending
Banks are not assigned to other Banks or to banks or other financial
institutions as described herein, (i) the Facility Limit shall be automatically
reduced on the date such Banks' Commitments expire by the amount of such
Non-Extending Banks' Commitments and (ii) the extension shall be applicable only
with respect to those Banks which have elected to grant such an extension. In
particular (without limiting the foregoing), any extension is subject to the
Banks' prior review and execution of such documents as required by the Agent and
Banks. In order for the Banks to complete their financial review and as a
condition for any Extension of Term, Borrower must have delivered to the Banks
the financial information required in Section 5.01 to be supplied on a quarterly
and/or annual basis and such additional information requested by the Banks.
SECTION 2.06. Interest Rates.
(a) Interest Rate Options Generally. Subject to the provisions hereof,
the Borrower may elect one or more of the following Interest Rate Options:
(i) One-Month LIBOR Option.
(ii) Two-Month LIBOR Option.
(iii) Three-Month LIBOR Option.
(iv) Six-Month LIBOR Option.
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(v) Base Rate Option.
(vi) Seven-Day LIBOR Option [available for Swing Line
Borrowings only].
Of the foregoing, the Borrower may select (i) through (v) for
Syndicated Borrowings, and the Borrower may select either (v) or (vi) for Swing
Line Borrowings. All Swing Line Borrowings outstanding at any one time must be
in the same interest rate option.
(b) Base Rate Loan Interest Rate. Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it is repaid, at a rate per annum equal to the Base Rate
for each day. Such interest shall be payable on the last day of each calendar
month. Any overdue principal of and, to the extent permitted by applicable law,
overdue interest on any Base Rate Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the Default Rate.
(c) Euro-Dollar Loan Interest Rate. Each Euro-Dollar Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the Applicable
Margin plus the applicable Adjusted London Interbank Offered Rate for such
Interest Period. Interest on each Euro-Dollar Loan shall be payable for each
Interest Period on the last day thereof, but in no event greater than three
months. Any overdue principal of and, to the extent permitted by applicable law,
overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the Default Rate.
(d) Agent's Determination of Applicable Margin. The Applicable Margin
shall be determined by the Agent as of each Performance Pricing Determination
Date and shall remain effective until the next Performance Pricing Determination
Date. On the date that the Borrower provides to the Agent and each Bank the
Borrowing Base Value Certificate and the financial statements required by
Section 5.01 of this Agreement, the Borrower shall also provide to the Agent and
to each Bank as a part of the Compliance Certificate a certification, signed by
the chief financial officer of the Borrower, providing its calculation of the
ratio of Consolidated Total Indebtedness to Total Value (the "Leverage Ratio"),
upon which the Performance Pricing Level is determined. Within twenty-five days
of receipt, the Agent shall notify the Borrower (x) whether it has not accepted
the Borrower's computation of the Leverage Ratio and (y) if not, the Agent's
computation of the Leverage Ratio. The Agent's determination of the Leverage
Ratio and the Applicable Margin shall be conclusive, absent manifest error.
(e) Agent Calculation of Rates and Notice of Rates. The Agent, using
the formulas set out herein for the various options hereunder, shall calculate
(for selection by the Borrower pursuant to Section 2.02 hereof) each interest
rate applicable to the Loans hereunder. The Agent shall give prompt notice to
the Borrower and the Banks by telecopy of each rate of interest so calculated,
and the Agent's calculation thereof shall be conclusive in the absence of
manifest error.
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(f) Default Rate. Any overdue principal of and, to the extent permitted
by law, overdue interest on any Euro-Dollar Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the Default Rate.
After the occurrence and during the continuance of a Default, the principal
amount of the Loans (and, to the extent permitted by applicable law, all accrued
interest thereon) may, at the election of the Required Banks, bear interest at
the Default Rate.
SECTION 2.07. Fees.
(a) Up-Front Commitment Fee. The Borrower shall pay to the Agent, for
the pro rata benefit of the Banks, at Closing a non-refundable, fully earned
commitment fee of $350,000.00 (the "Up Front Fee").
(b) Unutilized Commitment Fee for Unused Commitment. The Borrower shall
pay to the Agent for the ratable account of each Bank a commitment fee
calculated at the rate of one-fifth of one percent (.20%) per annum on the daily
average amount of such Bank's Unused Commitment during each Fiscal Quarter
(collectively, the "Unutilized Commitment Fees"). Such Unutilized Commitment
Fees shall accrue from and including the Closing Date to but excluding the
Termination Date and shall be payable quarterly on each Unutilized Commitment
Fee Payment Date and on the Termination Date; provided, that should the
Commitments be terminated at any time prior to the Termination Date for any
reason, the entire accrued and unpaid Unutilized Commitment Fee shall be paid on
the date of such termination. The Unutilized Commitment Fee for each Bank shall
be computed by (a) multiplying the percentage determined as set forth above by
the average daily Unused Commitment for such Bank in effect on the due date
thereof, (b) dividing the product so obtained by 360, and (c) multiplying the
quotient so obtained, in the case of the Unutilized Commitment Fee due and
payable on the effective date of this Agreement, by the actual number of days in
the period commencing on such effective date and ending on March 31, 1999, and
in the case of each subsequent Unutilized Commitment Fee, the actual number of
days in the calendar quarter for which the Unutilized Commitment Fee is due. The
Unutilized Commitment Fees shall be based upon the Facility Limit available
(without deduction for the Swing Line), even though the Maximum Advance may be a
lesser sum. In the case of any period not constituting a full Fiscal Quarter
(specifically including both the initial and final Fiscal Quarters within which
the Commitment is available), the amount of the Unutilized Commitment Fees shall
be prorated and shall be payable only for the period in which the Commitment is
available.
(c) Extension Fees. Upon the request by the Borrower that the
Commitments be further extended in accordance with the terms and conditions
contained in Section 2.01(c), within 10 days of the written approval of such
request by one or more Banks, the Borrower shall pay to the Agent, for the pro
rata benefit of the Banks approving such Extension request, a non-refundable
Extension Fee of 1/8th of one percent (.125%) of the Facility Limit available
during the Extension of Term for each one-year Extension, irrespective of any
limitations concerning the Maximum Advance then
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applicable. This Extension Fee shall be due and payable with each annual
extension requested by the Borrower and approved by one or more Banks. Nothing
herein shall obligate any Bank to agree to such an extension, and each Bank may
condition its granting of an Extension of Term as described in Section 2.05(c).
(d) Agent's Fees Due Under Letter Agreement. The Borrower shall pay to
the Agent, for the account and sole benefit of the Agent, such fees and other
amounts at such times as set forth in the Agent's Letter Agreement.
(e) Additional Fees; Reimbursement of Expenses.
(i) The Agent shall be entitled to the reimbursement of its
expenses that it shall incur and to the payment of fees that it shall
determine to be reasonable in connection with (x) the administration of
the Borrowing Base Hotel documentation (including, without limitation,
the cost of appraisals, inspections, flood certifications,
environmental reports and other such costs with respect to the
Borrowing Base Hotels), (y) any additions to or deletions from the
Borrowing Base Hotels, and (z) the administration of any documentation
as to the Borrowing Base Hotels that was not delivered on or before the
Closing Date.
(ii) The Borrower shall also pay to the Agent, for the account
of the Banks, a fee equal to the greater of $20,000 or such higher
amount assessed by the Agent with respect to the administration or any
amendment of this Agreement, or with respect to obtaining any waiver or
consent. The first 25% of such fee shall be paid to the Agent, with the
balance distributed to the Banks pro rata based upon their Commitments.
SECTION 2.08. Mandatory Termination of Commitments. The Commitments
shall terminate on the Termination Date, and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such date.
SECTION 2.09. Optional and Mandatory Prepayments.
(a) The Borrower may repay any Base Rate Borrowing in whole or in part
at any time, or from time to time, by paying the principal amount to be repaid
together with accrued interest thereon to the date of repayment. Each such
repayment shall be applied to repay ratably the Base Rate Loans of the several
Banks included in such Base Rate Borrowing.
(b) Except as provided in Section 10.02 and except for prepayment
arising out of a reduction in the Maximum Advance, the Borrower may not prepay
all or any portion of the principal amount of any Euro-Dollar Loan prior to the
maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share of such prepayment and such notice shall not thereafter be
revocable by the Borrower.
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(d) At no time shall the principal balance of all Loans outstanding
exceed the Maximum Advance, as calculated from time to time as provided herein.
In the event the outstanding principal balance exceeds such amount, the Borrower
shall immediately repay such excess to the Agent.
SECTION 2.10. Mandatory Prepayments. On each date on which the
Commitments are terminated pursuant to Section 2.08, or on each date a
prepayment is required in order to achieve compliance with the Maximum Advance
permitted hereunder, the Borrower shall repay or prepay such principal amount of
the outstanding Loans, if any together with interest accrued thereon and any
amounts due under Section 10.05(a).
SECTION 2.11. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of, and interest
on, the Loans and of Unutilized Commitment Fees and other fees due hereunder,
not later than 11:00 A.M. (Atlanta, Georgia time) on the date when due, in
Federal or other funds immediately available in Atlanta, Georgia, to the Agent
at its address referred to in Section 11.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks.
(b) Whenever any payment of principal of, or interest on, the Base Rate
Loans or of fees shall be due on a day which is not a Domestic Business Day, the
date for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day,
the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable for
such extended time.
(c) All payments of principal, interest and fees and all other amounts
to be made by the Borrower pursuant to this Agreement with respect to any Loan
or fee relating thereto shall be paid without deduction for, and free from, any
tax, imposts, levies, duties, deductions, or withholdings of any nature now or
at anytime hereafter imposed by any governmental authority or by any taxing
authority thereof or therein excluding in the case of each Bank, taxes imposed
on or measured by its net income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank is organized or any political
subdivision thereof and, in the case of each Bank, taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction of such Bank's applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, imposts, levies, duties, deductions or withholdings of any nature being
"Taxes"). In the event that the Borrower is required by applicable law to make
any such withholding or deduction of Taxes with respect to any Loan or fee or
other amount, the Borrower shall pay such deduction or withholding to the
applicable taxing authority, shall promptly furnish to any Bank in respect of
which such deduction or withholding is made all receipts and other documents
evidencing such payment and shall pay to such
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Bank additional amounts as may be necessary in order that the amount received by
such Bank after the required withholding or other payment shall equal the amount
such Bank would have received had no such withholding or other payment been
made. If no withholding or deduction of Taxes are payable in respect of any Loan
or fee relating thereto, the Borrower shall furnish any Bank, at such Bank's
request, a certificate from each applicable taxing authority or an opinion of
counsel acceptable to such Bank, in either case stating that such payments are
exempt from or not subject to withholding or deduction of Taxes. If the Borrower
fails to provide such original or certified copy of a receipt evidencing payment
of Taxes or certificate(s) or opinion of counsel of exemption, the Borrower
hereby agrees to compensate such Bank for, and indemnify them with respect to,
the tax consequences of the Borrower's failure to provide evidence of tax
payments or tax exemption.
In the event any Bank receives a refund of any Taxes paid by the
Borrower pursuant to this Section 2.11, it will pay to the Borrower the amount
of such refund promptly upon receipt thereof; provided, however, if at any time
thereafter it is required to return such refund, the Borrower shall promptly
repay to it the amount of such refund.
Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.11 shall be applicable with respect to any Participant, Assignee
or other Transferee, and any calculations required by such provisions (i) shall
be made based upon the circumstances of such Participant, Assignee or other
Transferee, and (ii) constitute a continuing agreement and shall survive the
termination of this Agreement and the payment in full or cancellation of the
Notes.
SECTION 2.12. Computation of Interest and Fees. Interest on the Base
Rate Loans shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day). Interest on Euro-Dollar Loans shall be computed on the basis of a year of
360 days and paid for the actual number of days elapsed, calculated as to each
Interest Period from and including the first day thereof to but excluding the
last day thereof. Unutilized Commitment Fees and any other fees payable
hereunder shall be computed on the basis of a year of 360 days an d paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.13. Facility Limit Reduction or Termination by Borrower. The
Borrower shall have the option, from time to time, to reduce the Facility Limit
by $5,000,000 or any greater integral multiple of $1,000,000, by (a) giving
written notice of its election to exercise such option to the Agent no later
than five (5) Domestic Business Days before the date the reduction is to be
effective, and (b) giving such notice of, and making such, prepayment, if any,
as is required by the provisions of Section 2.10 on account of such reduction of
the Facility Limit. In no event shall the Borrower, as a result of any such
election, be entitled to a refund of any fees paid to the Agent or any Bank
hereunder or be entitled thereafter, without the written consent of the Agent
and all Banks, to a restoration of the amount, or any part thereof, by which the
Facility Limit shall have been reduced. Upon receipt of any such written notice,
the Agent shall deliver a copy of the same to each Bank.
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SECTION 2.14. Term Loans Secured by Hotels in Specific States.
(a) Generally. Certain states in which some of the Borrowing Base
Hotels are located impose a mortgage tax upon each borrowing and reborrowing. In
light of the foregoing, the Borrower has elected to borrow (and the Banks have
agreed to permit the Borrower to do so upon the terms and conditions herein set
out) a portion of the Loans as term loans under Term Notes. The original
principal amount of the term loans evidenced by any outstanding Term Notes (not
merely the then-outstanding principal balance of such Term Notes) shall reduce
the amount otherwise available on a revolving basis to the Borrower under
Section 2.01(a). hereof. Any Term Notes shall be payable to the Agent, as agent
for the Banks, and the Agent shall be responsible for paying to each Bank the
pro rata portion of payments made by the Borrower under the Term Notes. The
indebtedness evidenced by the Term Notes shall constitute a portion of the
overall indebtedness evidenced by the Bank Notes and represents funds made
available by the Banks to the Borrower, rather than additional funds advanced by
the Agent to the Borrower.
(b) Collateral for Term Notes. The Term Note reflecting the Allocated
Loan Amount for Hotels in a particular state for which a Term Note is executed
(a "Term Note State") shall be secured by the hotels within such Term Note
State, as well as all other Borrowing Base Hotels. The Deeds of Trust and other
Collateral Documents for each Term Note State, however, secure only the Term
Note for that Term Note State and shall not secure other indebtedness evidenced
by the Notes or the Credit Agreement.
(c) New York Term Note; Florida Term Note; Future Term Notes. As of the
Closing Date, the Borrower has requested that the Allocated Loan Amounts for
Borrowing Base Hotels in Florida and New York be evidenced by two separate Term
Notes: (i) a Term Promissory Note, executed by the Borrower and payable to the
Agent, for the benefit of the Banks, in the amount of $7,700,000 (such note
being referred to as the "New York Term Promissory Note"), with respect to Hotel
#28, Albany, New York (the "New York Hotel"), and (ii) a Term Promissory Note,
executed by the Borrower and payable to the Agent, for the benefit of the Banks,
in the amount of $12,970,000 (such note being referred to as the "Florida Term
Promissory Note"), with respect to Hotel #16, 755 Currency Circle, Orlando-Lake
Mary, Florida; Hotel #17, 13625 Icot Blvd., Clearwater, Florida; and Hotel #18,
3580 Ulmerton Road, Clearwater, Florida (collectively, the "Florida Hotels"). If
future Borrowing Base Hotels would be subject to recurring mortgage taxes, the
Borrower may request that the Banks permit additional Term Notes. The Banks,
however, in their sole and absolute discretion shall be entitled to not permit
such additional Term Notes.
(d) Principal Reduction of Term Notes; No Reborrowings Except in
Specified Circumstances. To the extent that the principal amount of the Loans
evidenced by the Bank Notes shall be reduced through repayment of principal,
such reductions shall be applied (x) first to all indebtedness evidenced by the
Notes other than the indebtedness evidenced by the Term Notes and, (y) second,
after all other such indebtedness has been repaid, then to indebtedness
evidenced by the Term Notes in such order as the Banks may elect. Any principal
repaid on any Term Note may not
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be reborrowed unless the full amount of such Term Note has been repaid in full,
and all the Borrowing Base Hotels in the Term Note State securing such Term Note
have been released and excluded from the Borrowing Base Value, in which event
the Borrower may borrow, repay and reborrow such sums subject to the terms and
conditions of this Credit Agreement.
ARTICLE III
SECURITY AND COLLATERAL FOR THE LOANS;
CONDITIONS TO BORROWINGS
SECTION 3.01. Typology of Hotels.
(a) Initial Hotels. As of the Closing Date, the Borrower has granted to
the Agent, for the ratable benefit of the Banks, a first lien on the twenty-nine
Initial Hotels.
(b) Additional Hotels. The Borrower owns hotels not securing repayment
of the Loans. In addition, subsequent to the date hereof, the Borrower may
acquire additional hotel properties. Such hotels now owned by the Borrower (but
not constituting Initial Hotels) and such other hotels hereafter acquired are
included within the definition of "Additional Hotels."
The Borrower shall be entitled to utilize Loan proceeds at the time of
acquisition of an Additional Hotel, without contemporaneously granting a first
lien to the Agent on such Additional Hotel and without providing to the Agent or
the Banks any information with respect to such Additional Hotel except as
otherwise required hereby. If the Borrower elects to submit such Additional
Hotel for consideration as a Borrowing Base Hotel, however, the Borrower shall
provide to the Agent the information and documentation (e.g., cost breakdown,
operating statements, budgets, survey, title insurance commitment, environmental
report, appraisals, etc.), in form and scope meeting the requirements for
Borrowing Base Hotels and as may be requested by the Banks at the time of such
request by the Borrower.
If all of Banks agree that such Additional Hotel is to be accepted as a
Borrowing Base Hotel, the Borrower shall execute and cause to be recorded
Collateral Documents (as the Agent deems necessary) with respect to such
Additional Hotel, and shall thereafter promptly provide such related
documentation (for example, the title policy) that can be obtained only after
recordation of a Deed of Trust.
(c) Borrowing Base Hotels. The Banks' right to review and approve
certain matters set out herein differentiate between those hotels that are
"Borrowing Base Hotels" and other hotels. "Borrowing Base Hotels," as defined in
this Agreement, are (i) all Initial Hotels, and (ii) such Additional Hotels, if
any, that all of the Banks, in their sole discretion, have accepted as a
Borrowing Base Hotel. In order for a Hotel to be eligible for approval and
qualification and in order to remain eligible for continued approval and
qualification as a Borrowing Base Hotel, the Hotel (i) must be open and fully
operational and must be owned in its entirety by the Borrower (rather than a
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Subsidiary of the Borrower), (ii) must be subject to a first-priority Lien in
favor of the Agent, (iii) must be free and clear of all Liens and other
encumbrances of any nature whatsoever, except for the first-priority Lien in
favor of the Agent and except for encumbrances acceptable to all of the Banks;
(iv) must be in substantial compliance with all applicable law and regulations
including zoning, Accessibility Laws, and building codes, (v) must have access
to public roadways and all required utilities, (vi) must not be subject to any
environmental contamination that, in the reasonable opinion of Agent, materially
adversely affects the leasing, operation, marketability or value of such Hotel,
(vii) must be subject to a Permitted Operating Lease, under which neither the
Borrower (as lessor) nor the Lessee shall be in default after the expiration of
any applicable cure period set out in such Permitted Operating Lease; (viii)
must be subject to a franchise agreement with an Approved Franchisor, (ix) at
least 90% of all rooms in such Hotel must be in service other than rooms
temporarily unavailable due to renovation, and (x) with the exception of Hotel
#19 located in Secaucus, New Jersey, must not be subject to a Major Ground
Lease. [Items (i) through (ix) are herein referred to as the "Qualifying
Criteria."] The Banks shall have sole and absolute discretion in determining
whether to accept the offered hotel as a "Borrowing Base Hotel" and, in their
sole discretion, may reject a Hotel meeting the foregoing criteria. In that
regard, the Banks can take into consideration any additional factors the Banks
deem pertinent, in their sole and absolute discretion. Prior to determining
whether to accept a hotel as a Borrowing Base Hotel, the Banks (i) shall be
provided all underwriting documentation for each such hotel received in
connection with an Initial Hotel (appraisal, environmental reports, title
policy, "as-built" survey, etc.), (ii) shall have the right to review and
approve the lessee, the Rent schedule, and Lease associated with such hotel, and
(iii) shall have a right of review/approval over all other matters for which the
Banks may deem pertinent, in their sole discretion. The Borrower is not
obligated to offer any Additional Hotel to the Banks for consideration as a
Borrowing Base Hotel. If the Borrower has requested that the Banks accept an
Additional Hotel as a Borrowing Base Hotel and has submitted all documentation
required hereby for such consideration, the Agent shall within 30 days of its
receipt of such request and required supporting information inform the Borrower
whether all of the Banks have accepted such hotel as a Borrowing Base Hotel.
Failure of the Agent to inform the Borrower in writing that a Hotel has been
accepted as a Borrowing Base Hotel shall constitute a rejection by the Banks of
such Hotel as a Borrowing Base Hotel.
(i) The Required Banks shall have the right, in their reasonable
discretion, to revoke their prior approval of any property as a Borrowing Base
Hotel which the Required Banks determine no longer meets the Qualifying Criteria
described in 3.01(c) above. The Agent shall provide the Borrower with written
notice of any such revocation.
(ii) The Borrower shall have the right, within thirty (30) days after
notice of the Banks' revocation of approval of Borrowing Base Hotel, to
designate substitute property or additional property for the Banks'
consideration for approval as Borrowing Base Hotel.
COVENANTS PROVIDED FOR HEREIN WITH RESPECT TO THE INITIAL HOTELS SHALL
BE AUTOMATICALLY APPLICABLE TO ANY ADDITIONAL HOTEL THAT BECOMES A BORROWING
BASE HOTEL.
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(d) Contested/Not Completed Hotels. Four of the Initial Hotels being
developed by the Borrower (those constituting the Contested/Not Completed
Hotels) either (i) have liens relative thereto filed against such Hotel by one
or more contractors, the amounts of which are being contested by the Borrower,
or (ii) are recently completed and are Hotels for which the contractors have not
been fully paid pending completion of punchlist matters and other work. The
Banks have elected to treat such Contested/Not Completed Hotels as Borrowing
Base Hotels even though title coverage is not available as to matters of liens
generally (in certain cases) and as to specific liens (in other cases), provided
the Borrower agrees as follows:
(i) Except with respect to Hotel #24 (Homewood Suites,
Alpharetta, Georgia), in each loan title policy issued with respect to
any Contested/Not Completed Hotel, any exception for liens generally
and as to each specific lien and civil action constituting an exception
to title shall be deleted on or before December 31, 1999. Except with
respect to Hotel #24, any liens remaining of record on such date shall
be bonded off by the Borrower pursuant to indemnity bonds discharging
such liens and allowing the title company to provide such title
coverage. Simultaneously with the submission of each Compliance
Certificate each Fiscal Quarter, the Borrower shall provide to each
Bank a status report as to liens and pending claims by contractors with
respect to Hotel #24. Such report shall provide detailed information as
to the status of any pending claims and liens, including litigation or
arbitration proceedings with respect to such claims and liens, as well
as the Borrower's projected timetable for the resolution of such claims
and liens. The Borrower agrees to use reasonable, diligent efforts to
resolve the claims of contractors upon terms acceptable to the
Borrower. Provided the Banks are satisfied with the scope and detail of
such reports, on December 31, 1999, the Banks shall extend the period
for resolution of such claims and liens with respect to Hotel #24 to
December 31, 2000. If the Banks are not so satisfied by the information
tendered by the Borrower, or if the claims and liens are not resolved
on or before December 31, 2000, the Banks may elect to exclude such
hotel from the Borrowing Base Value computation. Failure to satisfy the
Completion Requirements as to Hotel #24, however, shall not be an Event
of Default hereunder.
(ii) Any Completion Requirements as to such Contested/Not
Completed Hotels (other than with respect to liens as described in (i)
or with respect to the Certificate of Substantial Completion for Hotel
#24) shall be satisfied on or before March 31, 1999.
(iii) Any Contested/Not Completed Hotel shall be treated as a
Non-Stabilized Borrowing Base Hotel and shall not qualify as a
Stabilized Borrowing Base Hotel until the Completion Requirements for
such Hotel are satisfied.
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SECTION 3.02. Collateral Release Provisions. If the Borrower seeks to
obtain the release of a Borrowing Base Hotel, the Borrower shall provide to the
Agent and the Banks a replacement Borrowing Base Value Certificate reflecting
the deletion of such hotel from the calculations of the Borrowing Base Value, as
previously described in Section 2.01(b). The Agent shall not release such hotel
until the Agent (i) has reviewed and approved such Borrowing Base Value
Certificate and (ii) has determined that the principal balance outstanding under
the Loans shall not exceed the Maximum Advance after giving effect to the
release. The Borrower may obtain a release of any Borrowing Base Hotel or
Borrowing Base Hotels, provided (x) a Borrowing Base Hotel Release Entitlement
Event has occurred, (y) provided there is no existing Default hereunder and the
release of such Hotel would not cause a Default or an Event of Default to occur;
and also (z) provided that one of the following conditions, as selected by the
Borrower, in its sole discretion, is satisfied:
(i) Substitute Hotel. If the Borrower selects this option, the
Borrower shall deliver to the Banks another hotel or hotels
acceptable to all of the Banks to serve as a "Borrowing Base
Hotel" (a "Substitute Hotel"), in which case the pro forma
Borrowing Base Value Certificate shall reflect the inclusion
of such hotel in the calculations of the Maximum Advance, and
the Borrower shall provide the documentation necessary for the
Banks to consider such hotel as a Borrowing Base Hotel.
(ii) Alternative Collateral. If the Borrower selects this option,
the Banks shall receive alternative collateral for release of
a Borrowing Base Hotel, such alternative collateral to be
satisfactory to all of the Banks in their sole and absolute
discretion.
(iii) Reduction of Maximum Advance. If the Borrower selects this
option, the Borrower shall be entitled to a release of any
Borrowing Base Hotel upon a reduction in the Maximum Advance
as reflected in the revised Borrowing Base Value Certificate
submitted by the Borrower calculating the Borrowing Base Value
and the Maximum Advance. Should the Loans then outstanding
exceed the Maximum Advance as evidenced by the approved
replacement Borrowing Base Value Certificate, the Borrower
shall immediately repay the outstanding principal balance by
such excess
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on or before the release of such Hotel. The reduction in the
Maximum Advance shall be effective upon the release of such
Hotel. The Agent shall not be obligated to release such a
Hotel until any repayment required hereunder has occurred.
"Borrowing Base Hotel Release Entitlement Event" as to any Borrower
Base Hotel means any one or more of the following events: (i) such Borrowing
Base Hotel is being sold by the Borrower in a commercially reasonable
transaction to a third party that is unrelated to the Borrower, any Subsidiary,
or any of the principal shareholders of the Company (or partners in the case of
the Partnership) or its Subsidiaries; (ii) such Borrowing Base Hotel is being
contributed to or transferred to a partnership or a joint venture in which the
Partnership or the Company is a partner or a joint venturer in a commercially
reasonable transaction with a third party that is unrelated to the Borrower, any
Subsidiary, or any of the principal shareholders of the Company (or partners in
the case of a Partnership) or its Subsidiaries; or (iii) such Borrowing Base
Hotel is being refinanced through a loan to be secured by a deed of trust
encumbering such Borrowing Base Hotel in a commercially reasonable transaction
with a third party institutional lender that is unrelated to the Borrower, any
Subsidiary, or any of the principal shareholders of the Company (or partners in
the case of a Partnership) or its Subsidiaries.
If a Borrowing Base Hotel located in a Term Note State is released
pursuant to the foregoing provisions, the Allocated Loan Amount for such
Borrowing Base Hotel shall be deemed to have been deducted from the principal
amount of the Term Note secured by such Borrowing Base Hotel, and the Borrower
shall be entitled to thereafter borrow, repay, and reborrow such Allocated Loan
Amount from the Banks, subject to the satisfaction of the other terms and
conditions of this Credit Agreement.
SECTION 3.03. Conditions of Closing and to First Borrowing. The
obligation of each Bank to make a Loan on the occasion of the closing of this
credit facility and the first Borrowing hereunder is subject to the satisfaction
of the conditions set forth in Section 3.04 and the following additional
conditions:
(a) receipt by the Agent from each of the parties hereto of
either (i) a duly executed counterpart of this Agreement signed by such
party or (ii) a facsimile transmission of the executed signature page
accompanied by a statement that such party has duly executed a
counterpart of this Agreement and sent such counterpart to the Agent;
(b) receipt by the Agent of a duly executed Note for the
account of each Bank complying with the provisions of Section 2.04;
(c) receipt by the Agent of (i) an opinion (together with any
opinions of local counsel relied on therein) of Brown and Bunch,
counsel for the Borrower, dated as of the Closing Date, substantially
in the form of Exhibit C hereto and covering such additional matters
relating to the transactions contemplated hereby as the Agent or any
Bank may reasonably request and (ii) opinions as to enforceability and
related matters of the Deeds of Trust and
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other documents with respect to the Agent's security interest in and
lien upon the Borrowing Base Hotels;
(d) receipt by the Agent of an opinion of Womble Carlyle
Sandridge & Rice, PLLC, special counsel for the Agent, dated as of the
Closing Date, substantially in the form of Exhibit D hereto and
covering such additional matters relating to the transactions
contemplated hereby as the Agent may reasonably request;
(e) receipt by the Agent of a certificate (the "Closing
Certificate"), dated the date of the first Borrowing, substantially in
the form of Exhibit D hereto, signed by the principal financial officer
of the Borrower, to the effect that (i) no Default has occurred and is
continuing on the date of the first Borrowing and (ii) the
representations and warranties of the Borrower contained in Article IV
are true on and as of the date of the first Borrowing hereunder, and
including (x) Certificate of Borrowing Base Values in the form attached
hereto as Exhibit I, (y) a calculation of the Leverage Ratio as of the
Closing Date, and (z) a Certificate of Compliance as of the Fiscal
Quarter ended prior to the date hereof;
(f) receipt by the Agent of all documents which the Agent or
any Bank may reasonably request relating to the existence of the
Borrower, the corporate authority for and the validity of this
Agreement and the Notes, and any other matters relevant hereto, all in
form and substance satisfactory to the Agent, including without
limitation a certificate of incumbency of the Borrower (the "Officer's
Certificate"), signed by the Secretary or an Assistant Secretary of the
Company, substantially in the form of Exhibit E hereto, certifying as
to the names, true signatures and incumbency of the officer or officers
of the Company authorized to execute and deliver the Loan Documents on
behalf of the Company and the Partnership, and certified copies of the
following items: (i) the Company's Articles of Incorporation, (ii) the
Company's Bylaws, (iii) a certificate of the Secretary of State of the
State of North Carolina as to the good standing of the Company as a
North Carolina corporation, (iv) a Certificate of Limited Partnership
for the Partnership issued by the Secretary of State for North
Carolina, and (v) the action taken by the Board of Directors of the
Company authorizing on behalf of the Company and on behalf of the
Partnership the Borrower's execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents to which the Company
and the Partnership are a party;
(g) receipt by the Agent of a Notice of Borrowing;
(h) receipt and recordation of the Deeds of Trust and receipt
and recordation or filing (as the Agent deems appropriate) of other
Collateral Documents required by the Agent with respect to each of the
Initial Hotels;
(i) receipt of certified copies of the executed Leases, any
Management Agreements, Franchise Agreements, and other documentation
required hereunder for the Initial Hotels. The form and substance of
such Leases (including the base rents and percentage rents due
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thereunder) and other documents affecting the operation of the hotels
described herein are subject to the Banks' acceptance;
(j) receipt by the Agent of the Up Front Fee required by
Section 2.07(a) hereunder; and
(k) receipt of such other documents, instruments, opinions,
and agreements as the Agent or the Banks may require in their
discretion, specifically including (but not limited to) all those items
required hereunder.
The initial Borrowing shall be sufficient to pay the principal
amount of all Prior Indebtedness in full, and Borrower and the Agent
shall have made arrangements satisfactory to the Agent (a) for the
proceeds of such Loan to be applied, to the extent required, to pay
such principal amount of the Prior Indebtedness, and (b) for Borrower
to pay immediately all accrued and unpaid interest and unused
commitment fees owing on account of the Prior Indebtedness.
SECTION 3.04. Conditions to All Borrowings. The obligation of each Bank
to make a Loan on the occasion of each Borrowing is subject to the satisfaction
of the following conditions:
(a) receipt by the Agent of Notice of Borrowing as required by
Section 2.02 unless the Borrowing is a "rollover borrowing" described
in Section 2.02(f);
(b) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the
Borrower contained in Article IV of this Agreement shall be true on and
as of the date of such Borrowing; and
(d) the fact that, immediately after such Borrowing (i) the
aggregate outstanding principal amount of the Loans of each Bank will
not exceed the amount of its Commitment and (ii) the aggregate
outstanding principal amount of the Loans will not exceed the Maximum
Advance or the Facility Limit for all of the Banks as of such date.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the truth and accuracy of the
facts specified in clauses (b), (c) and (d) of this Section; provided that such
Borrowing shall not be deemed to be such a representation and warranty to the
effect set forth in Section 4.04(b) as to any event, act or condition having a
Material Adverse Effect which has theretofore been disclosed in writing by the
Borrower to the Banks if the aggregate outstanding principal amount of the Loans
immediately after such Borrowing will not exceed the aggregate outstanding
principal amount thereof immediately before such Borrowing.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Existence and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified to transact business in
every jurisdiction where, by the nature of its business, such qualification is
necessary, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
The Partnership is a limited partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation, is duly qualified to transact business in every jurisdiction where,
by the nature of its business, such qualification is necessary, and has all
partnership powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
SECTION 4.02. Corporate, Partnership and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Notes and the other Loan Documents (i) are within the Company's
corporate powers and the Partnership's partnership powers, (ii) have been duly
authorized by all necessary corporate and partnership action, (iii) require no
action by or in respect of, or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default under, any provision
of applicable law or regulation or of the certificate of incorporation or
by-laws of the Company or the partnership agreement for the Partnership or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon the Borrower or any of its Subsidiaries, and (v) do not result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries other than the Liens securing the Loans.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower enforceable in accordance with its terms, and
the Notes and the other Loan Documents, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Borrower enforceable in accordance with their respective terms, provided
that the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower as of December 31,
1997, and the related consolidated statements of income, shareholders' equity
and cash flows for the Fiscal Year then ended, audited by PriceWaterhouse
Coopers LLP, copies of which have been delivered to each
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of the Banks, and the unaudited consolidated financial statements of the
Borrower for the interim period ended September 30, 1998, copies of which have
been delivered to each of the Banks, fairly present, in conformity with GAAP,
the consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such dates and their consolidated results of operations and
cash flows for such periods stated.
(b) Since September 30, 1998, there has been no event, act, condition
or occurrence having a Material Adverse Effect other than has been disclosed in
writing to each Bank prior to the Closing Date, such notices set out in Schedule
4.04 attached hereto.
SECTION 4.05. Litigation. There is no action, suit or proceeding
pending, or to the knowledge of the Borrower threatened, against or affecting
the Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which could have a Material Adverse Effect
or which in any manner draws into question the validity or enforceability of, or
could impair the ability of the Borrower to perform its obligations under, this
Agreement, the Notes or any of the other Loan Documents. There is no litigation
pending against the Borrower or any of its Subsidiaries or with respect to any
Borrowing Base Hotel (specifically including, but not limited to, liens filed)
or Lease with respect thereto, except as described in Schedule 4.05 attached
hereto.
SECTION 4.06. Compliance with ERISA.
(a) The Borrower and each member of the Controlled Group have fulfilled
their obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and are in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and have not incurred any
liability to the PBGC or a Plan under Title IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled Group is or
ever has been obligated to contribute to any Multiemployer Plan.
SECTION 4.07. Taxes. There have been filed on behalf of the Borrower
and its Subsidiaries all Federal, state and local income, excise, property and
other tax returns which are required to be filed by them and all taxes due
pursuant to such returns or pursuant to any assessment received by or on behalf
of the Borrower or any Subsidiary have been paid. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
or other governmental charges are, in the opinion of the Borrower, adequate.
SECTION 4.08. Subsidiaries. Each of the Borrower's Subsidiaries is a
corporation or partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, is duly qualified to
transact business in every jurisdiction where, by the nature of its business,
such qualification is necessary, and has all powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. The
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Borrower has no Subsidiaries except those Subsidiaries listed on Schedule 4.08
attached hereto, which accurately sets forth each such Subsidiary's complete
name and jurisdiction of incorporation.
SECTION 4.09. Not an Investment Company. Neither the Borrower nor any
of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 4.10 Public Utility Holding Company Act. Neither the Borrower
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
SECTION 4.11. Ownership of Property; Liens. Each of the Borrower and
its Subsidiaries has title to its properties sufficient for the conduct of its
business, and none of its hotels is subject to any Lien except as permitted in
this Agreement and as described in Schedule 4.11 attached hereto and
incorporated herein by reference. Except for certain telephone equipment and
vehicles used in the operation of the Secaucus New Jersey Holiday Inn (Hotel
#19), each of the Borrower and its Subsidiaries has title to all personal
property required for the operation of its Hotels, free and clear of any
security interests of third parties other than the Agent and (in the case of
property owned by the Special Purpose Entity) the Conduit Lender.
SECTION 4.12. No Default. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any agreement, instrument or
undertaking to which it is a party or by which it or any of its property is
bound which could have or cause a Material Adverse Effect. No Default or Event
of Default has occurred and is continuing.
SECTION 4.13. Full Disclosure. All information heretofore furnished by
the Borrower to the Agent or any Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such information
hereafter furnished by the Borrower to the Agent or any Bank will be, true,
accurate and complete in every material respect or based on reasonable estimates
on the date as of which such information is stated or certified. The Borrower
has disclosed to the Banks in writing any and all facts which could have or
cause a Material Adverse Effect.
SECTION 4.14. Environmental Matters.
(a) Except as disclosed in the Environmental Reports, neither the
Borrower nor any Subsidiary is subject to any Environmental Liability which
could have or cause a Material Adverse Effect and neither the Borrower nor any
Subsidiary has been designated as a potentially responsible party under CERCLA
or under any state statute similar to CERCLA. None of the Properties has been
identified on any current or proposed (i) National Priorities List under 40
C.F.R. ss. 300, (ii) CERCLIS list or (iii) any list arising from a state statute
similar to CERCLA.
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(b) Except as disclosed in the Environmental Reports, no Hazardous
Materials have been or are being used, produced, manufactured, processed,
treated, recycled, generated, stored, disposed of, managed or otherwise handled
at, or shipped or transported to or from the Properties or are otherwise present
at, on, in or under the Properties, or, to the best of the knowledge of the
Borrower, at or from any adjacent site or facility, except for Hazardous
Materials, such as cleaning solvents, pesticides and other materials used,
produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, and managed or otherwise handled in minimal amounts in the ordinary
course of business in compliance with all applicable Environmental Requirements.
(c) The Borrower, and each of its Subsidiaries and Affiliates, has
procured all Environmental Authorizations necessary for the conduct of its
business, and is in compliance with all Environmental Requirements in connection
with the operation of the Properties and the Borrower's, and each of its
Subsidiary's and Affiliate's, respective businesses.
SECTION 4.15. Compliance with Laws. The Borrower and each Subsidiary is
in compliance with all applicable laws, including, without limitation, all
Environmental Laws, except where any failure to comply with any such laws would
not, alone or in the aggregate, have a Material Adverse Effect.
SECTION 4.16. Capital Stock. All Capital Stock, debentures, bonds,
notes and all other securities of the Borrower and its Subsidiaries presently
issued and outstanding are validly and properly issued in accordance with all
applicable laws, including, but not limited to, the "Blue Sky" laws of all
applicable states and the federal securities laws. The issued shares of Capital
Stock of the Borrower's Wholly Owned Subsidiaries are owned by the Borrower free
and clear of any Lien or adverse claim. At least a majority of the issued shares
of Capital Stock of each of the Borrower's other Subsidiaries (other than Wholly
Owned Subsidiaries) is owned by the Borrower free and clear of any Lien or
adverse claim.
SECTION 4.17. Margin Stock. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Loan will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock, or be used for any purpose which violates, or which is inconsistent with,
the provisions of Regulation X.
SECTION 4.18. Insolvency. After giving effect to the execution and
delivery of the Loan Documents and the making of the Loans under this Agreement,
the Borrower will not be "insolvent," as defined in ss. 101 of Title 11 of the
United States Code or Section 2 of the Uniform Fraudulent Transfer Act, or any
other applicable state law pertaining to fraudulent transfers, as each may be
amended from time to time, or be unable to pay its debts generally as such debts
become due, or have an unreasonably small capital to engage in any business or
transaction, whether current or contemplated.
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SECTION 4.19. Americans with Disabilities Act. The Borrower, to the
best of its knowledge, (but without any claim of expert knowledge as to
Accessibility Laws and without engaging consultants having such knowledge), is
in compliance with the Accessibility Laws, except as disclosed to the Banks in
writing. The Borrower agrees to notify the Agent of any grievance, complaint or
governmental investigation into whether the Borrower is in compliance with the
Accessibility Laws. The Borrower agrees to indemnify and hold the Banks harmless
from any loss, cost or expense in fact incurred by the Banks as a result of such
a violation of the Accessibility Laws.
SECTION 4.20. Compliance with Certain Lease Provisions. The Borrower
has spent or set aside all sums required to be spent or set aside under the
Leases and has paid to the Lessee all sums required to be paid to the Lessee as
room reserves under the Leases.
SECTION 4.21. Condemnation Awards. Subject to the terms and conditions
of each Lease, the Borrower agrees to pay to the Agent for the pro rata benefit
of the Banks sums equal to 125% of the Allocated Loan Amount for any Borrowing
Base Hotel subject to a taking or condemnation or deed in lieu of condemnation.
The terms and conditions of paragraph 6 of each Nondisturbance, Subordination
and `Attornment Agreement between the Partnership, a lessee, and the Agent with
respect to a Borrowing Base Hotel are incorporated herein by reference as if
fully set forth herein.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Company will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after
the end of each Fiscal Year, a consolidated balance sheet of the
Company as of the end of such Fiscal Year and the related statements of
income, shareholders' equity and cash flows for such Fiscal Year,
setting forth in each case in comparative form the figures for the
previous Fiscal Year, all audited by PriceWaterhouse Coopers LLP or
other independent public accountants of nationally recognized standing,
and whose opinion shall be to the effect that such financial statements
have been prepared in accordance with GAAP (except for changes with
which such accountants concur) and shall not be limited as to the scope
of the audit or qualified in any manner, except as acceptable to the
Required Banks. In addition, the Company shall concurrently provide
such annual information as to the Special Purpose Entity separate and
apart from other entities consolidated in the financial statements
provided.
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(b) as soon as available and in any event within 55 days after
the end of each of the first 3 Fiscal Quarters of each Fiscal Year, a
consolidated balance sheet of the Company as of the end of such Fiscal
Quarter and the related statement of income for such Fiscal Quarter and
for the portion of the Fiscal Year ended at the end of such Fiscal
Quarter setting forth in each case in comparative form the figures for
the corresponding Fiscal Quarter and the corresponding portion of the
previous Fiscal Year. In addition, the Company shall concurrently
provide such quarterly information as to the Special Purpose Entity
separate and apart from other entities consolidated in the financial
statements provided.
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate,
substantially in the form of Exhibit F (a "Compliance Certificate"), of
the chief financial officer or the chief accounting officer of the
Company (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of Article VII and such other requirements of the
Agreement as may be requested by the Agent or the Banks on the date of
such financial statements and (ii) stating whether any Default exists
on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto. In addition,
simultaneously with the delivery of the Compliance Certificate, such
officer shall deliver a Borrowing Base Value Certificate substantially
in the form of Exhibit I.
In addition, simultaneously with the financial statements
referred to in Section 5.01 (a) and (b) above, the Company shall
provide (i) a report listing and describing all newly acquired
properties of the Borrower and its Subsidiaries, including their cash
flow, cost and Debt (if any) secured by such properties, and the record
owner for such properties, (ii) a report listing all capital
expenditures of the Borrower and its Subsidiaries, and (iii) a summary
of property information for all properties of the Borrower and its
Subsidiaries and such other information as may be requested by the
Agent to evaluate any certificates delivered hereunder.
(d) simultaneously with the delivery of each set of annual
financial statements referred to in Section 5.01 (a) above, a statement
of the firm of independent public accountants which reported on such
statements to the effect that nothing has come to its attention to
cause it to believe that any Default existed on the date of such
financial statements.
(e) As to any Borrowing Base Hotel, the Company shall promptly
provide to the Agent and the Banks such information as to the Lessee
and any guarantor of the Leases with respect to Borrowing Base Hotels
(collectively, the "Borrowing Base Lessee Parties"), as is provided by
the Borrowing Base Lessee Parties under the Permitted Operating Leases
for such Borrowing Base Hotel.
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(f) within 5 Domestic Business Days after receipt by the
Company or any Subsidiary, a copy of any correspondence from the
independent certified public accountants preparing the certificate
referenced in Section 5.01(a) or (d) constituting a criticism of, or a
notice of deficiency in, the internal accounting practices or
procedures of the Company or its Subsidiaries.
(g) within 5 Domestic Business Days after the Company becomes
aware of the occurrence of any Default, a certificate of the chief
financial officer or the chief accounting officer of the Company
setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto.
(h) promptly upon the mailing thereof to the shareholders of
the Company generally, copies of all financial statements, reports and
proxy statements so mailed.
(i) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and annual,
quarterly or monthly reports which the Company shall have filed with
the Securities and Exchange Commission.
(j) if and when the Borrower or any member of the Controlled
Group (i) gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with respect
to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable
event, a copy of the notice of such reportable event given or required
to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA, a copy of such notice; or
(iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate or appoint a trustee to administer any Plan, a copy
of such notice.
(k) promptly after the Borrower knows of the commencement
thereof, notice of any litigation, dispute or proceeding or the filing
of a Lien, involving a claim against the Borrower and/or any Subsidiary
for $250,000 or more. In addition, the Borrower shall provide periodic
update reports as to any such matters previously reported by the
Borrower.
(l) from time to time such additional information regarding
the financial position, business plans, budget forecasts or business of
the Borrower and its Subsidiaries as the Agent, at the request of any
Bank, may reasonably request.
SECTION 5.02. Inspection of Property, Books and Records. The Borrower
will (i) keep, and will cause each Subsidiary to keep, proper books of record
and account in which full, true and correct entries in conformity with GAAP
shall be made of all dealings and transactions in relation to its business and
activities; and (ii) permit, and will cause each Subsidiary to permit,
representatives of any Bank at such Bank's expense prior to the occurrence of an
Event of Default
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and at the Borrower's expense after the occurrence of an Event of Default to
visit and inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants. The Borrower agrees to cooperate
and assist in such visits and inspections, in each case at such reasonable times
and as often as may reasonably be desired.
SECTION 5.03. Required Room Reserves. The Borrower shall establish, and
shall make available to each Lessee on each of its leased Hotels or shall set
aside for each such leased Hotel Required Room Reserves to be expended by the
Lessee or the Borrower for the restoration and refurbishment of the Hotel for
which the Required Room Reserve was established pursuant to the terms of the
Lease with respect to each such Hotel.
SECTION 5.04. Maintenance of Property. The Borrower shall, and shall
cause each Subsidiary to, maintain each of its Properties and assets in good
condition, repair and working order, ordinary wear and tear excepted and
specifically shall (and cause each Subsidiary to) ensure that each Property is
renovated periodically in the manner appropriate for the industry and maintain
each of its Properties in a fully competitive position. Except for telephone
equipment and vehicles leased in connection with the Secaucus New Jersey Holiday
Inn (Hotel #19), the Borrower shall, and shall cause each Subsidiary to, own all
personal property required for operation of its Hotels free and clear of the
security interests of third parties other than the Agent and, in the case of the
Conduit Debt Hotels, the Conduit Lender.
SECTION 5.05. Maintenance of Existence. The Borrower shall, and shall
cause each Subsidiary to, maintain its existence as a corporation (in the case
of the Company) and as a partnership (in the case of the Partnership) and carry
on its business in substantially the same manner and in substantially the same
fields as such business is now carried on and maintained. The Company shall
maintain its status as a Real Estate Investment Trust and shall be in compliance
with all applicable laws with respect to Real Estate Investment Trusts as well
as other applicable laws. The Borrower shall not make any material modifications
to its partnership agreement (in the case of the Partnership) or to its articles
of incorporation or by-laws (in the case of the Company) without the prior
written consent of the Required Banks. The issuance of limited partnership
interests in the Partnership shall not constitute a "material modification" to
the Partnership's partnership agreement.
SECTION 5.06. Sole General Partner. The Company shall at all times be
the sole general partner of the Partnership.
SECTION 5.07. Compliance with Laws; Payment of Taxes. The Borrower
will, and will cause each of its Subsidiaries and each member of the Controlled
Group to, comply with applicable laws (including but not limited to the
Accessibility Laws and ERISA), regulations and similar requirements of
governmental authorities (including but not limited to PBGC), except where the
necessity of such compliance is being contested in good faith through
appropriate proceedings diligently pursued. The Borrower will, and will cause
each of its Subsidiaries to, pay promptly when
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due all taxes, assessments, governmental charges, claims for labor, supplies,
rent and other obligations which, if unpaid, might become a lien against the
property of the Borrower or any Subsidiary, except liabilities being contested
in good faith by appropriate proceedings diligently pursued and against which,
if requested by the Agent, the Borrower shall have set up reserves in accordance
with GAAP.
SECTION 5.08. Insurance. The Borrower will maintain, and will cause
each of its Subsidiaries and Lessees to maintain (either in the name of the
Borrower or in such Subsidiary's own name), with financially sound and reputable
insurance companies, insurance on all its Property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies of established repute engaged in the same or similar business.
In addition, the Borrower shall satisfy all requirements for insurance set out
in each Deed of Trust with respect to each Borrowing Base Hotel.
SECTION 5.09. Environmental Notices. The Borrower shall furnish to the
Banks and the Agent prompt written notice of all Environmental Liabilities,
pending, threatened or anticipated Environmental Proceedings, Environmental
Notices, Environmental Judgments and Orders, and Environmental Releases at, on,
in, under or in any way affecting the Properties or any adjacent property, and
all facts, events, or conditions that could lead to any of the foregoing. The
provisions of this Section, and Section 6.14 and 5.10, are applicable to all
Properties owned by the Borrower and any Subsidiary, and are not restricted to
Borrowing Base Hotels. Additional requirements with respect to environmental
matters are set out in each Deed of Trust encumbering a Borrowing Base Hotel.
SECTION 5.10. Environmental Reports; Environmental Release.
(a) The Borrower shall prepare or cause to be prepared, prior
to the acquisition of each Hotel by the Borrower or any Subsidiary, an
environmental report by an environmental firm approved by the Agent.
Each environmental report must be in scope and detail comparable to
that required by the Agent for each Initial Hotel. The foregoing
covenant applies to all Hotels acquired by the Borrower and each
Subsidiary, and is not limited to Borrowing Base Hotels.
(b) The Borrower agrees that upon the occurrence of an
Environmental Release at or on any of the Properties it will act
immediately to investigate the extent of, and to take appropriate
remedial action to eliminate, such Environmental Release, whether or
not ordered or otherwise directed to do so by any Environmental
Authority.
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SECTION 5.11. Upstream of Cash Flow from Special Purpose Entity. The
Borrower shall cause the Special Purpose Entity to remit to the Partnership at
least once each calendar month, to the extent available and to the extent
permitted by the loan documents executed by the Special Purpose Entity cash
receipts from the leases of its hotels received during the month after deducting
therefrom the following: principal and interest payments made on the Conduit
Debt, all expenses incurred by the SPE for the operation of its Hotels including
the payment of property taxes and insurance premiums, sums required to maintain
reserves required under the Conduit Debt loan documents and any other reserves,
including working capital reserves (such other reserves, exclusive of the
reserves required to be established under the Conduit Debt loan documents, not
to exceed $500,000 in the aggregate).
SECTION 5.12. Special Purpose Entity to Remain a Subsidiary
Consolidated with the Borrower. The Borrower shall cause the Special Purpose
Entity to remain a Subsidiary whose operations are Consolidated with the
Borrower under GAAP.
SECTION 5.13. Intercompany Transactions. Any and all transactions,
agreements or undertakings of any nature whatsoever between Borrower or any
Related Party, on the one hand, and any Affiliate of such Person, on the other
hand, shall be arms-length and upon terms and conditions at least as favorable
to Borrower or such Related Party, as the case may be, as could reasonably be
obtained in a similar transaction with a party that is not an Affiliate of such
Person.
SECTION 5.14. Notice of Exercise of Remedies Under Deeds of Trust.
Borrower shall give prompt written notice to the Agent and the Banks of the
giving of a notice of any event of default under any deed of trust or loan
agreement to which the Borrower or any Subsidiary is a party by the holder
thereof, or upon the holder of any such indebtedness or deed of trust taking any
action to enforce its rights and remedies thereunder, including, without
limitation, any self-help or judicial remedies with respect to collateral or any
legal action to collect any indebtedness.
SECTION 5.15. Notice of Default of any Lease. The Borrower shall
provide to the Agent and to the Banks (i) any notice of any default received by
the Borrower from a Lessee claiming that the lessor is in default under a Lease,
and (ii) any notice of any default sent by the Borrower to a Lessee claiming
that the Lessee is in default under a Lease.
SECTION 5.16. Guaranty by Subsidiaries. The Borrower shall cause any
Subsidiary of the Borrower other than the Special Purpose Entity to execute a
guaranty agreement (in form and substance approved by the Agent) guaranteeing
the repayment of all principal, interest, fees and other sums due under this
Agreement and the Notes.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
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SECTION 6.01. Base Rent and Percentage Rent of Hotel Leases. The
Borrower shall not reduce the Base Rents or Percentage Rents as to any of the
Leases with respect to the Borrowing Base Hotels without the prior written
consent of a Supermajority of Banks.
SECTION 6.02. Prohibition of Secured Debt on Borrowing Base Hotels. The
Borrower may not incur Debt secured by a Lien on the Borrowing Base Hotels other
than the Liens in favor of the Banks.
SECTION 6.03. Contingent Liabilities. The Borrower and any Subsidiaries
or corporate or partnership entities constituting Related Parties of the
Borrower may not guaranty the obligations of any party, become obligated for the
obligations of any other party as a result of becoming a partner or a joint
venturer or incur contingent liabilities or contingent debt other than (i)
contingent liability with respect to performance obligations, as distinct from
Debt, arising under franchise agreements for its Hotels, (ii) potential
contingent liabilities incurred by the Borrower pursuant to the Joinder
Agreement to be executed in connection with the Conduit Debt, (iii)
indemnification obligations of the Borrower to the title company insuring the
properties securing the Conduit Debt, and (iv) indemnification obligations of
the Borrower under this Credit Agreement and other documents now or hereafter
executed in connection with the Loans.
SECTION 6.04. Limitation on Hotels under Development. The sum of (i)
the aggregate cost (including construction in progress and estimated remaining
costs to complete) of all hotels under construction which are owned by the
Borrower and its Subsidiaries and (ii) the aggregate obligations of the Borrower
and its Subsidiaries to purchase hotels under construction (including
construction in progress and estimated remaining costs to complete) shall not
exceed 25% of Total Value. Notwithstanding the foregoing, at all times the
funding available under the Loans pursuant to the terms hereof and such other
sources available to the Borrower must be sufficient to pay for the Hotels under
development or under contract for purchase.
SECTION 6.05. No Material Modifications to Permitted Operating Leases;
Percentage of Rooms Leased Under Permitted Operating Leases.
(a) The Borrower shall not make significant or material modifications
or amendments to any Permitted Operating Lease.
(b) The percentage of the total rooms in all hotels of the Borrower and
its Subsidiaries that are leased under Permitted Operating Leases shall not be
less than 85% of all rooms in hotels of the Borrower and its Subsidiaries.
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SECTION 6.06. Limitations on Foreign Investments and Investments in
Ventures. Investments in, advances to, and loans to any joint venture or entity
other than a Wholly Owned Subsidiary, plus the investment in hotels located
outside of the continental United States, shall not exceed 10% of Total Value.
SECTION 6.07. Major Ground Lease Limitations. No more than 10% of Total
Value shall consist of hotels subject to a Major Ground Lease.
SECTION 6.08. Limitation on Dividends and Distributions. The Borrower
shall not permit the aggregate amount of dividends and distributions paid for
any of the most recent four Fiscal Quarters to exceed 90% of the Funds From
Operations for such Fiscal Quarters, provided that Borrower may, so long as a
Default does not exist, pay the minimum amount of dividends required to maintain
its status as a real estate investment trust under the Code.
SECTION 6.09. Limitation on Floating Rate Debt. The Borrower shall not
permit the principal amount of Floating Rate Debt of the Borrower and any
Subsidiary that is not subject to an interest rate cap, a swap or other interest
rate protection that shall have the economic effect of insulating the Borrower
from increases in interest rates to exceed 50% of the Consolidated Total
Indebtedness.
SECTION 6.10. Dissolution. Neither the Borrower nor any of its
Subsidiaries shall undertake or commence a plan of dissolution or suffer or
permit dissolution or liquidation either in whole or in part or redeem or retire
any shares of its own stock or that of any Subsidiary, except through corporate
reorganization to the extent permitted by Section 5.05.
SECTION 6.11. Consolidations, Mergers and Sales of Assets. The Borrower
will not, nor will it permit any Subsidiary to, consolidate or merge with or
into, or sell, lease or otherwise transfer all or any substantial part of its
assets to, any other Person, unless (i) the Company or Partnership is the
surviving entity under any such transaction, (ii) such transaction does not
create a Default or Event of Default hereunder, and (iii) to the extent that
such transaction is a merger that is otherwise prohibited hereby, the
Supermajority of Banks shall consent to such transaction.
SECTION 6.12. Use of Proceeds. No portion of the proceeds of the Loans
will be used by the Borrower or any Subsidiary (i) in connection with, either
directly or indirectly, any tender offer for, or other acquisition of, stock of
any corporation with a view towards obtaining control of such other corporation,
(ii) directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock, or (iii) for any purpose
in violation of any applicable law or regulation.
SECTION 6.13. Change in Fiscal Year or Fiscal Quarters. The Borrower
will not change its Fiscal Year or Fiscal Quarters without the consent of the
Required Banks.
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SECTION 6.14. Environmental Matters. The Borrower and its Subsidiaries
will not, and will not permit any Third Party to, use, produce, manufacture,
process, treat, recycle, generate, store, dispose of, manage at, or otherwise
handle or ship or transport to or from the Properties any Hazardous Materials
except for Hazardous Materials such as cleaning solvents, pesticides and other
similar materials used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed, managed or otherwise handled in minimal amounts in
the ordinary course of business in compliance with all applicable Environmental
Requirements.
With respect to any Hotels that Environmental Reports disclose as
having asbestos or asbestos-containing material within the Property, the
Borrower agrees to establish an operations and maintenance plan satisfactory to
the Required Banks (the "O&M Plans") so as to minimize the risks associated with
such asbestos. The Banks may require periodic inspection of such Hotels in order
to assess such condition and to assess compliance with such O&M Plans and may
require modifications to the O&M Plans as necessary to minimize or eliminate
such risks.
SECTION 6.15. Operations. The Borrower and its Subsidiaries shall not
undertake any business other than the acquisition, development, ownership,
management and operation of hotels (specifically excluding from its business
undertaking the acquisition, development, ownership, management and operation of
"economy" hotels and "budget" hotels).
SECTION 6.16. No Modifications to Organizational Documents. The
Partnership shall not materially modify its Partnership Agreement. The Company
shall not materially modify its Articles of Incorporation or its Bylaws.
ARTICLE VII
FINANCIAL COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid, the Borrower and
its Subsidiaries shall satisfy the following financial covenants, each of which
is to be calculated on a Consolidated basis:
SECTION 7.01. Maximum Leverage Ratio. The Consolidated Total
Indebtedness of the Company and its Consolidated Subsidiaries shall not exceed
55% of Total Value as of each Measurement Date.
SECTION 7.02. Maximum Unsecured Debt. The aggregate amount of
Consolidated Total Indebtedness of the Company and its Consolidated Subsidiaries
(exclusive of Consolidated Secured Debt and trade accounts payable and accruals
arising in the ordinary course of business) shall not exceed $500,000 at any
time.
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SECTION 7.03. Maximum Secured Debt. Consolidated Secured Debt of the
Company and its Consolidated Subsidiaries, excluding Senior Revolving Debt,
shall not exceed twenty-five percent (25%) of the Total Value as of each
Measurement Date.
SECTION 7.04. Minimum Interest Coverage. As of each Measurement Date,
the ratio of Adjusted EBITDA to Interest Expense for the preceding four Fiscal
Quarters shall not be less than 2.50 to 1.
SECTION 7.05. Minimum Fixed Charge Coverage. As of each Measurement
Date, for the four preceding Fiscal Quarters, the ratio of (a) the sum of (i)
Adjusted EBITDA plus (ii) all Ground Lease Expenses to (b) Fixed Charges shall
not be less than 2.00 to 1.
SECTION 7.06. Minimum Consolidated Tangible Net Worth. The Company and
its Consolidated Subsidiaries shall maintain at all times a minimum Consolidated
Tangible Net Worth of at least $170,000,000. In addition, such amount shall be
increased by eighty-five percent of the net proceeds of any offerings of the
Company's capital stock or partnership units as valued in accordance with such
offering.
ARTICLE VIII
DEFAULTS; REMEDIES
SECTION 8.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of
any Loan or shall fail to pay any interest on any Loan within five
Domestic Business Days after such interest shall become due, or shall
fail to pay any fee or other amount payable hereunder within five
Domestic Business Days after such fee or other amount becomes due; or
(b) the Borrower shall fail to observe or perform any
affirmative covenant contained in Article V, any negative covenant in
Article VI, or any financial covenant in Article VII; or
(c) the Borrower shall fail to observe or perform any covenant
or agreement contained or incorporated by reference in this Agreement
(other than those covered by clause (a) or (b) above) or under any of
the other Loan Documents for thirty days after the earlier of (i) the
first day on which the Borrower has knowledge of such failure or (ii)
written notice thereof has been given to the Borrower by the Agent; or
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(d) any representation, warranty, certification or statement
made or deemed made by the Borrower in Article IV of this Agreement or
in any certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been incorrect or
misleading in any material respect when made (or deemed made); or
(e) the Borrower or any Subsidiary (specifically including the
Special Purpose Entity) shall fail to make any payment in respect of
Debt outstanding (other than the Notes but specifically including the
Conduit Debt) when due or within any applicable grace period set out in
the loan documents evidencing or securing such Debt; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Debt outstanding of the Borrower or any
Subsidiary (i) that individually is in excess of $5,000,000, or (ii)
that in the aggregate is in excess of $10,000,000 (specifically
including the Conduit Debt) (such Debt being hereinafter referred to as
the "Cross-Default Debt") or the mandatory prepayment or purchase of
such Cross-Default Debt (specifically including the Conduit Debt) by
the Borrower (or its designee) or such Subsidiary (or its designee)
prior to the scheduled maturity thereof, or which enables (or, with the
giving of notice or lapse of time or both, would enable) the holders of
such Cross-Default Debt or any Person acting on such holders' behalf to
accelerate the maturity thereof or require the mandatory prepayment or
purchase thereof prior to the scheduled maturity thereof, without
regard to whether such holders or other Person shall have exercised or
waived their right to do so; or
(g) the Borrower or any Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally, or shall admit in
writing its inability, to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing, or
suspends business, or generally fails to pay its debts as such debts
become due, or becomes insolvent, however evidenced; or
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, provided, however, such involuntary case or proceeding
shall not constitute an Event of Default unless such involuntary case
or proceeding remains undismissed or unstayed for a period of 60 days
or
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an order for relief shall be entered against the Borrower or any
Subsidiary under the federal bankruptcy laws as now or hereafter in
effect; or
(i) the Borrower or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans shall be filed under
Title IV of ERISA by the Borrower, any member of the Controlled Group,
any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any such Plan or Plans or
a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding
shall not have been dismissed within 30 days thereafter; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any such Plan or Plans must be terminated; or
the Borrower or any other member of the Controlled Group shall enter
into, contribute or be obligated to contribute to, terminate or incur
any withdrawal liability with respect to, a Multiemployer Plan; or
(j) one or more judgments or orders for the payment of money
in an amount in excess of $100,000 shall be rendered against the
Borrower or any Subsidiary and such judgment or order shall continue
unsatisfied and unstayed for a period of 30 days; or
(k) a federal tax lien shall be filed against the Borrower or
any Subsidiary under Section 6323 of the Code or a lien of the PBGC
shall be filed against the Borrower or any Subsidiary under Section
4068 of ERISA and in either case such lien shall remain undischarged
for a period of 25 days after the date of filing; or
(l) the Company shall cease to be the sole general partner of
the Partnership or any amendment to the partnership agreement of the
Partnership shall be executed whereby the consent of limited partners
is required for any action to be taken by the Partnership except as
provided in the existing partnership agreement of the Partnership.
(m) the occurrence of any event, condition or act having a
Material Adverse Effect.
(n) a termination of Franchise Agreements involving seven
percent (7%) or more of the aggregate number of rooms in hotels of the
Borrower and its Subsidiaries, excluding, however, from such seven
percent threshold the following: (i) two Holiday Corporation franchises
(for Hotels #20 (Tinton Falls, New Jersey) and #17 (Clearwater,
Florida) as identified in Exhibit K) with less than 12 month remaining
on their terms and (ii) termination of Franchise Agreements voluntarily
by the lessee of the Borrower or its Subsidiary (as the case may be)
where a substitute franchise agreement by a Pre-Approved Franchisor or
by a Franchisor approved by all of the Banks is in effect.
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then, and in every such event, the Agent shall (i) if requested by the Required
Banks, by notice to the Borrower terminate the Commitments (specifically
including, but not limited to, the Swing Line) and they shall thereupon
terminate, (ii) if requested by the Required Banks, by notice to the Borrower,
declare the Notes (together with accrued interest thereon) and all other amounts
payable hereunder and under the other Loan Documents to be, and the Notes
(together with all accrued interest thereon) and all other amounts payable
hereunder and under the other Loan Documents shall thereupon become, immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower; provided that if any Event
of Default specified in clause (g) or (h) above occurs with respect to the
Borrower, without any notice to the Borrower or any other act by the Agent or
the Banks, the Commitments (specifically including, but not limited to, the
Swing Line) shall thereupon automatically terminate and the Notes (together with
accrued interest thereon) and all other amounts payable hereunder and under the
other Loan Documents shall automatically become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower, and (iii) exercise any rights, powers and
remedies under any of the Loan Documents. Notwithstanding the foregoing, the
Agent shall have available to it all rights and remedies provided under the Loan
Documents and in addition thereto, all other remedies at law or equity, and
shall exercise any one or all of them at the request of the Required Banks.
SECTION 8.02. Notice of Default. The Agent shall give notice to the
Borrower of any Default under Section 8.01(c) promptly upon being requested to
do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE IX
THE AGENT
SECTION 9.01. Appointment, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated to
the Agent by the terms hereof and thereof, together with such other powers as
are reasonably incidental thereto. The Agent: (a) shall have no duties or
responsibilities except as expressly set forth in this Agreement and the other
Loan Documents, and shall not by reason of this Agreement or any other Loan
Document be a trustee for any Bank; (b) shall not be responsible to the Banks
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any Bank under, this Agreement or
any other Loan Document, or for the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
any other document referred to or provided for herein or therein or for any
failure by the Borrower to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan Document except to the
extent requested by the Required Banks, and then only on terms and conditions
satisfactory to the Agent, and (d) shall not be responsible for any action taken
or omitted to be taken by it hereunder or under any other Loan Document or any
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other document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or willful
misconduct. The Agent may employ agent and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agent or
attorneys-in-fact selected by it with reasonable care. The provisions of this
Article IX are solely for the benefit of the Agent and the Banks, and the
Borrower shall not have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement
and under the other Loan Documents, the Agent shall act solely as agent of the
Banks and does not assume and shall not be deemed to have assumed any obligation
towards or relationship of agency or trust with or for the Borrower. The duties
of the Agent shall be ministerial and administrative in nature, and the Agent
shall not have by reason of this Agreement or any other Loan Document a
fiduciary relationship in respect of any Bank.
SECTION 9.02. Reliance by the Agent. The Agent shall be entitled to
rely upon any certification, notice or other communication (including any
thereof by telephone, telefax, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants or other experts selected by the Agent. As to any matters not
expressly provided for by this Agreement or any other Loan Document, the Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions signed by the Required
Banks, and such instructions of the Required Banks in any action taken or
failure to act pursuant thereto shall be binding on all of the Banks.
SECTION 9.03. Defaults. The Agent shall not be deemed to have knowledge
of the occurrence of a Default or an Event of Default (other than the
non-payment of principal of or interest on the Loans) unless the Agent has
received notice from a Bank or the Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". The Agent shall
give each Bank prompt notice of each non-payment of principal of or interest on
the Loans, whether or not it has received any notice of the occurrence of such
non-payment. The Agent shall (subject to Section 11.05) take such action with
respect to such Default or Event of Default as shall be directed by the Required
Banks, provided that, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Banks.
SECTION 9.04. Rights of Agent as a Bank; Rights of Agent to Lend. With
respect to the Loans made by it, Wachovia in its capacity as a Bank hereunder
shall have the same rights and powers hereunder as any other Bank and may
exercise the same as though Wachovia were not acting as the Agent, and the term
"Bank" or "Banks" shall, unless the context otherwise indicates, include
Wachovia in its individual capacity. The Agent may (without having to account
therefor to any Bank) accept deposits from, lend money to, issue letters of
credit on behalf of, engage in interest rate swap or derivative transactions
with, and generally engage in any kind of banking, trust or other business with
the Borrower (and any of its Affiliates) as if it were not acting as the Agent,
and the Agent may accept fees and other consideration from the Borrower (in
addition to any agency fees
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and arrangement fees heretofore agreed to between the Borrower and Agent) for
services in connection with this Agreement or any other Loan Document or
otherwise without having to account for the same to the Banks.
SECTION 9.05. Indemnification. Each Bank severally agrees to indemnify
the Agent, to the extent the Agent shall not have been reimbursed by the
Borrower, ratably in accordance with its Commitment, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees and disbursements)
or disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement or any other Loan Document or any other documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby (excluding, unless an Event of Default has occurred and is continuing,
the normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or any such other documents; provided, however, that no Bank shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Agent. If any indemnity furnished to the
Agent for any purpose shall, in the opinion of the Agent, be insufficient or
become impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.
SECTION 9.06. Consequential Damages. THE AGENT SHALL NOT BE RESPONSIBLE
OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.07. Payee of Note Treated as Owner. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof shall have been
filed with the Agent and the provisions of Section 11.07(c) have been satisfied.
Any requests, authority or consent of any Person who at the time of making such
request or giving such authority or consent is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of that
Note or of any Note or Notes issued in exchange therefor or replacement thereof.
SECTION 9.08. Non-Reliance on Agent and Other Banks. Each Bank agrees
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Borrower and decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. The Agent shall not be required to keep itself (or any Bank) informed
as to the performance or observance by the Borrower of this
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Agreement or any of the other Loan Documents or any other document referred to
or provided for herein or therein or to inspect the properties or books of the
Borrower or any other Person. Except for notices, reports and other documents
and information expressly required to be furnished to the Banks by the Agent
hereunder or under the other Loan Documents, the Agent shall not have any duty
or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrower or any
other Person (or any of their Affiliates) which may come into the possession of
the Agent.
SECTION 9.09. Failure to Act. Except for action expressly required of
the Agent hereunder or under the other Loan Documents, the Agent shall in all
cases be fully justified in failing or refusing to act hereunder and thereunder
unless it shall receive further assurances to its satisfaction by the Banks of
their indemnification obligations under Section 9.05 against any and all
liability and expense which may be incurred by the Agent by reason of taking,
continuing to take, or failing to take any such action.
SECTION 9.10. Resignation or Removal of the Agent. Subject to the
appointment and acceptance of a successor Agent as provided in this Section
9.10, the Agent may resign at any time by giving notice thereof to the Banks and
the Borrower and the Agent may be removed at any time with or without cause by
the Required Banks. Upon any such resignation or removal, the Required Banks
shall have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Required Banks and shall have accepted such
appointment within 30 days after the retiring Agent's notice of resignation or
the Required Banks' removal of the retiring Agent, then the retiring Agent may,
on behalf of the Banks, appoint a successor Agent. Any successor Agent shall be
a bank which has a combined capital and surplus of at least $500,000,000. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article IX shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent
hereunder.
SECTION 9.11. Intercreditor Agreement. The Banks have entered into an
Intercreditor Agreement dated of even date herewith governing rights and
responsibilities of the Agent to the Banks and certain obligations of the Agent.
The Borrower acknowledges and agrees that it is not a third-party beneficiary of
any provisions of the Intercreditor Agreement and is not entitled to rely
thereon or enforce any provisions thereof. The Borrower also acknowledges that
the Intercreditor Agreement may be amended by the Banks without prior notice to
or approval by the Borrower. The Intercreditor Agreement and any such amendment,
however, shall not waive or amend any provision of this Agreement to the
contrary. The Agent shall provide the Borrower with a photocopy of the
Intercreditor Agreement and any amendment thereto within 10 days after execution
by all parties to such document.
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ARTICLE X
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 10.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period:
(a) the Agent determines that deposits in Dollars (in the
applicable amounts) are not being offered in the relevant market for
such Interest Period, or
(b) the Required Banks advise the Agent that the London
Interbank Offered Rate, as determined by the Agent will not adequately
and fairly reflect the cost to such Banks of funding the Euro-Dollar
Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
Euro-Dollar Loans shall be suspended. Unless the Borrower notifies the Agent at
least 1 Domestic Business Day before the date of any Borrowing of Euro-Dollar
Loans for which a Notice of Borrowing has previously been given that it elects
not to borrow on such date, such Borrowing shall instead be made as a Base Rate
Loan.
SECTION 10.02. Illegality. If, after the date hereof, the adoption of
any applicable law, rule or regulation, or any change in any existing or future
law, rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof (any such authority, bank or
agency being referred to as an "Authority" and any such event being referred to
as a "Change of Law"), or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority shall make it unlawful or impossible for any Bank (or its Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so
notify the Agent, the Agent shall forthwith give notice thereof to the other
Banks and the Borrower, whereupon until such Bank notifies the Borrower and the
Agent that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before
giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that it may not
lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans
to maturity and shall so specify in such notice, the Borrower shall immediately
prepay in full the then outstanding principal amount of each Euro-Dollar Loan of
such Bank, together with accrued interest thereon and any amount due such Bank
pursuant to Section 10.05(a). Concurrently with prepaying each such Euro-Dollar
Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks), and
such Bank shall make such a Base Rate Loan.
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SECTION 10.03. Increased Cost and Reduced Return.
(a) If after the date hereof, a Change of Law or compliance by any Bank
(or its Lending Office) with any request or directive (whether or not having the
force of law) of any Authority:
(i) shall subject any Bank (or its Lending Office) to any tax,
duty or other charge with respect to its Euro-Dollar Loans, its Notes
or its obligation to make Euro-Dollar Loans, or shall change the basis
of taxation of payments to any Bank (or its Lending Office) of the
principal of or interest on its Euro-Dollar Loans or any other amounts
due under this Agreement in respect of its Euro-Dollar Loans or its
obligation to make Euro-Dollar Loans (except for changes in the rate of
tax on the overall net income of such Bank or its Lending Office
imposed by the jurisdiction in which such Bank's principal executive
office or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding with respect to any Euro-Dollar Loan any
such requirement included in an applicable Euro-Dollar Reserve
Percentage) against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Lending Office); or
(iii) shall impose on any Bank (or its Lending Office) or on
the London interbank market any other condition affecting its
Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar
Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction.
(b) If any Bank shall have determined that after the date hereof the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any existing or future law, rule or regulation, or any change
in the interpretation or administration thereof, or compliance by any Bank (or
its Lending Office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any Authority, has or would have the
effect of reducing the rate of return on such Bank's capital as a consequence of
its obligations hereunder to a level below that which such Bank could have
achieved but for such adoption, change or compliance (taking into consideration
such Bank's policies with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time, within 15 days after demand by
such Bank, the Borrower shall pay to such Bank such additional amount or amounts
as will compensate such Bank for such reduction.
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(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
(d) The provisions of this Section 10.03 shall be applicable with
respect to any Participant, Assignee or other Transferee, and any calculations
required by such provisions shall be made based upon the circumstances of such
Participant, Assignee or other Transferee.
SECTION 10.04. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans
has been suspended pursuant to Section 10.02 or (ii) any Bank has demanded
compensation under Section 10.03, and the Borrower shall, by at least 5
Euro-Dollar Business Days' prior notice to such Bank through the Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans, shall be made instead as Base Rate Loans, as the
Borrower may elect in the notice to such Bank through the Agent
referred to herein above (in all cases interest and principal on such
Loans shall be payable contemporaneously with the related Euro-Dollar
Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such
Euro-Dollar Loans shall be applied to repay its Base Rate Loans and its
Base Rate Loans instead.
In the event that the Borrower shall elect that the provisions of this Section
shall apply to any Bank, the Borrower shall remain liable for, and shall pay to
such Bank as provided herein, all amounts due such Bank under Section 10.03 in
respect of the period preceding the date of conversion of such Bank's Loans
resulting from the Borrower's election.
SECTION 10.05. Compensation. Upon the request of any Bank, delivered to
the Borrower and the Agent, the Borrower shall pay to such Bank such amount or
amounts as shall compensate such Bank for any loss, cost or expense incurred by
such Bank as a result of:
(a) any payment or prepayment (pursuant to Section 2.09,
Section 2.10, Section 10.02 or otherwise) of a Euro-Dollar Loan on a
date other than the last day of an Interest Period for such Euro-Dollar
Loan;
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(b) any failure by the Borrower to prepay a Euro-Dollar Loan
on the date for such prepayment specified in the relevant notice of
prepayment hereunder; or
(c) any failure by the Borrower to borrow a Euro-Dollar Loan
on the date for the Borrowing of which such Euro-Dollar Loan is a part
specified in the applicable Notice of Borrowing delivered pursuant to
Section 2.02.
Such compensation shall include, without limitation, an amount equal to the
excess, if any, of (x) the amount of interest which would have accrued on the
amount so paid or prepaid or not prepaid or borrowed for the period from the
date of such payment, prepayment or failure to prepay or borrow to the last day
of the then current Interest Period for such Euro-Dollar Loan (or, in the case
of a failure to prepay or borrow, the Interest Period for such Euro-Dollar Loan
which would have commenced on the date of such failure to prepay or borrow) at
the applicable rate of interest for such Euro-Dollar Loan provided for herein
over (y) the amount of interest (as reasonably determined by such Bank) such
Bank would have paid on deposits in Dollars of comparable amounts having terms
comparable to such period placed with it by leading banks in the London
interbank market.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission or
similar writing) and shall be given to such party at its address or telecopy
number set forth on the signature pages hereof or such other address or telecopy
number as such party may hereafter specify for the purpose by notice to each
other party. Each such notice, request or other communication shall be effective
(i) if given by telecopier, when such telecopy is transmitted to the telecopy
number specified in this Section and the telecopy machine used by the sender
provides a written confirmation that such telecopy has been so transmitted or
receipt of such telecopy transmission is otherwise confirmed, provided any
notice (other than a Notice of Borrowing) is also given by an alternative method
set out herein, (ii) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid,
(iii) if given by reputable commercial courier for next day delivery, one day
following the date such communication is deposited with such reputable courier,
and (iv) if given by any other means, when delivered at the address specified in
this Section; provided that notices to the Agent under Article II or Article X
shall not be effective until received.
SECTION 11.02. No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note or other
Loan Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
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SECTION 11.03. Expenses; Documentary Taxes; Indemnification.
(a) The Borrower shall pay (i) all out-of-pocket expenses of the Agent,
including fees and disbursements of special counsel for the Banks and the Agent,
in connection with the preparation of this Agreement and the other Loan
Documents, any waiver or consent hereunder or thereunder or any amendment hereof
or thereof or any Default or alleged Default or alleged hereunder or thereunder
and (ii) if a Default occurs, all out-of-pocket expenses incurred by the Agent
or any Bank, including fees and disbursements of counsel, in connection with
such Default and collection and other enforcement proceedings resulting
therefrom, including out-of-pocket expenses incurred in enforcing this Agreement
and the other Loan Documents.
(b) The Borrower shall indemnify the Agent and each Bank against any
transfer taxes, documentary taxes, assessments or charges made by any Authority
by reason of the execution and delivery of this Agreement or the other Loan
Documents.
(c) The Borrower shall indemnify the Agent, the Banks and each
Affiliate thereof and their respective directors, officers, employees and agent
from, and hold each of them harmless against, any and all losses, liabilities,
claims or damages to which any of them may become subject, insofar as such
losses, liabilities, claims or damages arise out of or result from any actual or
proposed use by the Borrower of the proceeds of any extension of credit by any
Bank hereunder or breach by the Borrower of this Agreement or any other Loan
Document or from investigation, litigation (including, without limitation, any
actions taken by the Agent or any of the Banks to enforce this Agreement or any
of the other Loan Documents) or other proceeding (including, without limitation,
any threatened investigation or proceeding) relating to the foregoing, and the
Borrower shall reimburse the Agent and each Bank, and each Affiliate thereof and
their respective directors, officers, employees and agent, upon demand for any
expenses (including, without limitation, legal fees) incurred in connection with
any such investigation or proceeding; but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified.
SECTION 11.04. Setoffs; Sharing of Set-Offs.
(a) The Borrower hereby grants to each Bank, as security for the full
and punctual payment and performance of the obligations of the Borrower under
this Agreement, a continuing lien on and security interest in all deposits and
other sums credited by or due from such Bank to the Borrower or subject to
withdrawal by the Borrower; and regardless of the adequacy of any collateral or
other means of obtaining repayment of such obligations, each Bank may at any
time upon or after the occurrence of any Event of Default, and without notice to
the Borrower, set off the whole or any portion or portions of any or all such
deposits and other sums against such obligations, whether or not any other
Person or Persons could also withdraw money therefrom.
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(b) Each Bank agrees that if it shall, by exercising any right of
set-off or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest owing with respect to the Note held
by it which is greater than the proportion received by any other Bank in respect
of the aggregate amount of all principal and interest owing with respect to the
Note held by such other Bank, the Bank receiving such proportionately greater
payment shall purchase such participations in the Note held by the other Banks,
and/or such other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to a Note shall be shared by the
Banks pro rata; provided that (i) nothing in this Section shall impair the right
of any Bank to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of the
Borrower other than its indebtedness under a Note, and (ii) if all or any
portion of such payment received by the purchasing Bank is thereafter recovered
from such purchasing Bank, such purchase from each other Bank shall be rescinded
and such other Bank shall repay to the purchasing Bank the purchase price of
such participation to the extent of such recovery together with an amount equal
to such other Bank's ratable share (according to the proportion of (x) the
amount of such other Bank's required repayment to (y) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in a Note, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of the Borrower in the
amount of such participation.
SECTION 11.05. Amendments and Waivers.
(a) Any provision of this Agreement, the Notes or any other Loan
Documents may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); provided that
no such amendment or waiver shall, unless signed by the Borrower and by each of
the Banks, (i) change the Commitment of any Bank or subject any Bank to any
additional obligation, (ii) change the principal of or rate of interest on any
Loan or any fees payable to the Banks hereunder, (iii) change the date fixed for
any payment of principal of or interest on any Loan or any fees hereunder
specifically including any Extension of Term, subject to the provisions of
Section 2.01(c), (iv) change the amount of principal, interest or fees due on
any date fixed for the payment thereof, (v) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes, or the
percentage of Banks, which shall be required for the Banks or any of them to
take any action under this Section or any other provision of this Agreement,
(vi) change the manner of application of any payments made under this Agreement,
the Notes, or any other Loan Document, (vii) release or substitute all or any
substantial part of the collateral (if any) held as security for the Loans
except where this Agreement or other Loan Documents explicitly entitle the
Borrower to such a release, or (viii) release any guaranty given to support
payment of the Loans.
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(b) The Borrower will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement unless each Bank shall be informed thereof by the Borrower and shall
be afforded an opportunity of considering the same and shall be supplied by the
Borrower with sufficient information to enable it to make an informed decision
with respect thereto. Executed or true and correct copies of any waiver or
consent effected pursuant to the provisions of this Agreement shall be delivered
by the Borrower to each Bank forthwith following the date on which the same
shall have been executed and delivered by the requisite percentage of Banks. The
Borrower will not, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any Bank (in its capacity as such) as consideration for or as an
inducement to the entering into by such Bank of any waiver or amendment of any
of the terms and provisions of this Agreement unless such remuneration is
concurrently paid, on the same terms, ratably to all such Banks.
SECTION 11.06. Margin Stock Collateral. Each of the Banks represents to
the Agent and each of the other Banks that it in good faith is not, directly or
indirectly (by negative pledge or otherwise), relying upon any Margin Stock as
collateral in the extension or maintenance of the credit provided for in this
Agreement.
SECTION 11.07. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns;
provided that the Borrower may not assign or otherwise transfer any of its
rights under this Agreement.
(b) Any Bank may at any time sell to one or more Persons (each a
"Participant") participating interests in any Loan owing to such Bank, any Note
held by such Bank, any Commitment hereunder or any other interest of such Bank
hereunder. In the event of any such sale by a Bank of a participating interest
to a Participant, such Bank's obligations under this Agreement shall remain
unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Note for all purposes
under this Agreement, and the Borrower and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. In no event shall a Bank that sells a
participation be obligated to the Participant to take or refrain from taking any
action hereunder except that such Bank may agree that it will not (except as
provided below), without the consent of the Participant, agree to (i) the change
of any date fixed for the payment of principal of or interest on the related
Loan or Loans, (ii) the change of the amount of any principal, interest or fees
due on any date fixed for the payment thereof with respect to the related Loan
or Loans, (iii) the change of the principal of the related Loan or Loans, (iv)
any change in the rate at which either interest is payable thereon or (if the
Participant is entitled to any part thereof) commitment fee is payable hereunder
from the rate at which the Participant is entitled to receive interest or
commitment fee (as the case may be) in respect of such participation, (v) the
release or substitution of all or any substantial part of the collateral (if
any) held as security for the Loans, or (vi) the release of any guaranty given
to support payment of the Loans. Each Bank selling a participating interest in
any
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Loan, Note, Commitment or other interest under this Agreement shall, within 10
Domestic Business Days of such sale, provide the Borrower and the Agent with
written notification stating that such sale has occurred and identifying the
Participant and the interest purchased by such Participant. The Borrower agrees
that each Participant shall be entitled to the benefits of Article X with
respect to its participation in Loans outstanding from time to time.
(c) Any Bank may at any time assign to one or more banks or financial
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement, the Notes and the other Loan
Documents, and such Assignee shall assume all such rights and obligations,
pursuant to an Assignment and Acceptance in the form attached hereto as Exhibit
G, executed by such Assignee, such transferor Bank and the Agent (and, in the
case of an Assignee that is not then a Bank or an Affiliate of a Bank, by the
Borrower); provided that (i) no interest may be sold by a Bank pursuant to this
paragraph (c) unless the Assignee shall agree to assume ratably equivalent
portions of the transferor Bank's Commitment, (ii) the amount of the Commitment
of the assigning Bank subject to such assignment (determined as of the effective
date of the assignment) shall be equal to $5,000,000 (or any larger multiple of
$1,000,000), (iii) no interest may be sold by a Bank pursuant to this paragraph
(c) to any Assignee that is not then a Bank or an Affiliate of a Bank without
the consent of the Borrower, which consent is within the sole and absolute
discretion of the Borrower, provided, however, that upon the occurrence and
continuation of an Event of Default, the consent of the Borrower shall not be
required as to such an assignment, and (iv) a Bank may not have more than two
Assignees that are not then Banks at any one time. Upon (A) execution of the
Assignment and Acceptance by such transferor Bank, such Assignee, the Agent and
(if applicable) the Borrower, (B) delivery of an executed copy of the Assignment
and Acceptance to the Borrower and the Agent, (C) payment by such Assignee to
such transferor Bank of an amount equal to the purchase price agreed between
such transferor Bank and such Assignee, and (D) payment of a processing and
recordation fee of $2,000 to the Agent, such Assignee shall for all purposes be
a Bank party to this Agreement and shall have all the rights and obligations of
a Bank under this Agreement (including, without limitation, the rights of a Bank
under Section 2.03) to the same extent as if it were an original party hereto
with a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by the Borrower, the
Banks or the Agent shall be required. Upon the consummation of any transfer to
an Assignee pursuant to this paragraph (c), the transferor Bank, the Agent and
the Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to each of such Assignee and such transferor Bank.
(d) Subject to the provisions of Section 11.08, the Borrower authorizes
each Bank to disclose to any Participant, Assignee or other transferee (each a
"Transferee") and any prospective Transferee any and all financial and other
information in such Bank's possession concerning the Borrower which has been
delivered to such Bank by the Borrower pursuant to this Agreement or which has
been delivered to such Bank by the Borrower in connection with such Bank's
credit evaluation prior to entering into this Agreement.
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(e) No Transferee shall be entitled to receive any greater payment
under Section 10.03 than the transferor Bank would have been entitled to receive
with respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the provisions of Section 10.02
or 10.03 requiring such Bank to designate a different Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
(f) Anything in this Section 11.07 to the contrary notwithstanding, any
Bank may assign and pledge all or any portion of the Loans and/or obligations
owing to it to any Federal Reserve Bank or the United States Treasury as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and Operating Circular issued by such Federal Reserve
Bank, provided that any payment in respect of such assigned Loans and/or
obligations made by the Borrower to the assigning and/or pledging Bank in
accordance with the terms of this Agreement shall satisfy the Borrower's
obligations hereunder in respect of such assigned Loans and/or obligations to
the extent of such payment. No such assignment shall release the assigning
and/or pledging Bank from its obligations hereunder.
SECTION 11.08. Confidentiality. Each Bank agrees to exercise its best
efforts to keep any information delivered or made available by the Borrower to
it which is clearly indicated to be confidential information, confidential from
anyone other than persons employed or retained by such Bank who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided, however, that nothing herein shall prevent
any Bank from disclosing such information (i) to any other Bank, (ii) upon the
order of any court or administrative agency, (iii) upon the request or demand of
any regulatory agency or authority having jurisdiction over such Bank, (iv)
which has been publicly disclosed, (v) to the extent reasonably required in
connection with any litigation to which the Agent, any Bank or their respective
Affiliates may be a party, (vi) to the extent reasonably required in connection
with the exercise of any remedy hereunder, (vii) to such Bank's legal counsel
and independent auditors and (viii) to any actual or proposed Participant,
Assignee or other Transferee of all or part of its rights hereunder which has
agreed in writing to be bound by the provisions of this Section 11.08.
SECTION 11.09. Swap Obligations. Any Bank being a party to this Credit
Agreement may engage in derivative transactions or interest rate swap
transactions with respect to the Notes (the "Swap Obligations") with the
Borrower or any Subsidiary. Any such Swap Obligations shall be secured by the
Collateral; provided, however, in the absence of any agreement by the Banks to
the contrary, such Swap Obligations may be satisfied from the Collateral only
after all other obligations secured thereby have been satisfied.
SECTION 11.10. Representation by Banks. Each Bank hereby represents
that it is a commercial lender or financial institution which makes loans in the
ordinary course of its business and that it will make its Loans hereunder for
its own account in the ordinary course of such business; provided, however,
that, subject to Section 11.07, the disposition of the Note held by that Bank
shall at all times be within its exclusive control.
73
<PAGE> 80
SECTION 11.11. Obligations Several. The obligations of each Bank
hereunder are several, and no Bank shall be responsible for the obligations or
commitment of any other Bank hereunder. Nothing contained in this Agreement and
no action taken by the Banks pursuant hereto shall be deemed to constitute the
Banks to be a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Bank shall be a
separate and independent debt, and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement or any other Loan Document. It
shall not be necessary for any other Bank to be joined as an additional party in
any proceeding for such purpose.
SECTION 11.12. Survival of Certain Obligations. Sections 10.03(a),
10.03(b), 10.05 and 11.03, and the obligations of the Borrower thereunder, shall
survive, and shall continue to be enforceable notwithstanding, the termination
of this Agreement and the Commitments and the payment in full of the principal
of and interest on all Loans.
SECTION 11.13. North Carolina Law. This Agreement and each Note shall
be construed in accordance with and governed by the law of the State of North
Carolina.
SECTION 11.14. Severability. In case any one or more of the provisions
contained in this Agreement, the Notes or any of the other Loan Documents should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby and shall be enforced to the
greatest extent permitted by law.
SECTION 11.15. Interest. In no event shall the amount of interest due
or payable hereunder or under the Notes exceed the maximum rate of interest
allowed by applicable law, and in the event any such payment is inadvertently
made to any Bank by the Borrower or inadvertently received by any Bank, then
such excess sum shall be credited as a payment of principal, unless the Borrower
shall notify such Bank in writing that it elects to have such excess sum
returned forthwith. It is the express intent hereof that the Borrower not pay
and the Banks not receive, directly or indirectly in any manner whatsoever,
interest in excess of that which may legally be paid by the Borrower under
applicable law.
SECTION 11.16. Interpretation. No provision of this Agreement or any of
the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
SECTION 11.17. Defaulting Bank. Each Bank understands and agrees that
if such Bank is a Defaulting Bank, then notwithstanding any provisions of this
Agreement to the contrary, it shall not be entitled to vote on any matter
requiring the consent of the Banks or to object to any matter requiring the
consent of the Banks; provided, however, that all other benefits and obligations
under the Loan Documents shall apply to such Defaulting Bank.
74
<PAGE> 81
SECTION 11.18. Consent to Jurisdiction. The Borrower (a) submits to
personal jurisdiction in the State of North Carolina, the courts thereof and the
United States District Courts sitting therein, for the enforcement of this
Agreement, the Notes and the other Loan Documents, (b) waives any and all
personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of North Carolina for the purpose of litigation to enforce this
Agreement, the Notes or the other Loan Documents, and (c) agrees that service of
process may be made upon it in the manner prescribed in Section 11.01 for the
giving of notice to the Borrower. Nothing herein contained, however, shall
prevent the Agent from bringing any action or exercising any rights against any
security and against the Borrower personally, and against any assets of the
Borrower, within any other state or jurisdiction.
SECTION 11.19. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
75
<PAGE> 82
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, under seal, by their respective authorized officers as of the day
and year first above written.
WINSTON HOTELS, INC., a North Carolina
corporation
[Corporate Seal] By: /s/ Joseph V. Green
----------------------------------
Senior Vice President
Attest:
/s/ Brenda G. Burns
- ----------------------
Assistant Secretary
Address:
2209 Century Drive, Suite 300
Raleigh, North Carolina 27612
Attention: Robert W. Winston III
Telecopy number: (919) 510-6832
Telephone number: (919) 510-6010
WINN LIMITED PARTNERSHIP, a North Carolina
limited partnership (SEAL)
By: WINSTON HOTELS, INC., a North Carolina
corporation, its general partner
[Corporate Seal] By: /s/ Joseph V. Green
-------------------------------------
Senior Vice President
Attest:
/s/ Brenda G. Burns
- ---------------------
Assistant Secretary
Address:
--------
2209 Century Drive, Suite 300
Raleigh, North Carolina 27612
Attention: Robert W. Winston III
Telecopy number: (919) 510-6832
Telephone number: (919) 510-6010
76
<PAGE> 83
WACHOVIA BANK, N.A., as Agent
By: /s/ Steven B. Wood
--------------------------------------
Title: Senior Vice President
[CORPORATE SEAL]
For Routine Loan Transactions
-----------------------------
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Syndicate Services
Telecopy number: (404) 332-5019
Telephone number: (404) 332-4008
For All Other Matters
---------------------
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Steven B. Wood, Senior
Vice President
Telecopy number: (404) 332-4066
Telephone number: (404) 332-5671
77
<PAGE> 84
$60,000,000.00 WACHOVIA BANK, N.A.
By: /s/ Steven B. Wood
------------------------
Title: Senior Vice President
[CORPORATE SEAL]
Lending Office
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Steven B. Wood, Senior
Vice President
Telecopy number: (404) 332-4066
Telephone number: (404) 332-5671
$40,000,000.00 BRANCH BANKING AND TRUST COMPANY
By: /s/ Richard E. Fowler
----------------------------
Title: Senior Vice President
[CORPORATE SEAL]
Lending Office
--------------
Branch Banking and Trust Company
434 Fayetteville Street Mall, Fifth Floor
Raleigh, North Carolina 27601
Attention: Richard E. Fowler
Telecopy number: (919) 831-4067
Telephone number: (919) 831-4012
78
<PAGE> 85
$25,000,000.00 SOUTHTRUST BANK, N.A.
By: /s/ R. Bryan Moore
------------------------
Title: Vice President
[CORPORATE SEAL]
Lending Office
--------------
SouthTrust Bank, N.A.
6525 Morrison Boulevard, Suite 351
Charlotte, North Carolina 28211
Attention: R. Bryan Moore
Telecopy number: (704) 367-1907
Telephone number: (704) 367-8506
$15,000,000.00 CENTURA BANK
By: /s/ Robert E. Hammersley, Jr.
-----------------------------
Title: Bank Officer
[CORPORATE SEAL]
Lending Office
--------------
Centura Bank
4700 Homewood Court, Suite 220
Raleigh, North Carolina 27609
Attention: Robert E. Hammersley, Jr.
Corporate Banking Officer
Telecopy number: (919) 571-5435
Telephone number: (919) 571-2436
- ------------
TOTAL COMMITMENTS:
$140,000,000.00
79
<PAGE> 86
SCHEDULE 4.04
EVENTS HAVING A MATERIAL ADVERSE EFFECT
None.
<PAGE> 87
SCHEDULE 4.05
LITIGATION AND LIENS
The properties are subject to no liens other than those disclosed
in the title insurance policies insuring the interests of the Agent, and other
than those described in Schedule 4.11 hereof.
There is no litigation pending other than litigation with respect
to Hotels 6 and 24, arising in connection with liens affecting such properties.
<PAGE> 88
SCHEDULE 4.08
EXISTING SUBSIDIARIES
Name of Subsidiary Jurisdiction of Formation
- ------------------ -------------------------
Winston Manager Corporation Virginia
Winston SPE, LLC Virginia
<PAGE> 89
SCHEDULE 4.11
LIENS AND UNPAID CONSTRUCTION COSTS ON CONTESTED/NOT COMPLETED HOTELS
To be provided upon request.
<PAGE> 90
EXHIBIT A-1
FORM OF BANK NOTE
NOTE
$__________ [SPECIFY AMOUNT] Raleigh, North Carolina
as of January 15, 1999
For value received, the undersigned, WINSTON HOTELS, INC., a North
Carolina corporation (the "Company"), and WINN LIMITED PARTNERSHIP, a North
Carolina limited partnership (the "Partnership") (the Company and the
Partnership shall hereinafter be referred to, jointly and severally, as the
"Borrower"), jointly and severally promise to pay to the order of
____________________________ [SPECIFY NAME OF BANK], A ___________________
[SPECIFY WHETHER A STATE BANK OR NATIONAL BANKING ASSOCIATION] (the "Bank"), for
the account of its Lending Office, the principal sum of
_________________________________ DOLLARS ($__________ ) [SPECIFY AMOUNT], or
such lesser amount as shall equal the unpaid principal amount of each Loan made
by the Bank to the Borrower pursuant to the Credit Agreement referred to below,
on the dates and in the amounts provided in the Credit Agreement. The Borrower
promises to pay interest on the unpaid principal amount of this Note on the
dates and at the rate or rates provided for in the Credit Agreement. Interest on
any overdue principal and, to the extent permitted by law, overdue interest on
the principal amount hereof shall bear interest at the Default Rate, as provided
for in the Credit Agreement. All such payments of principal and interest shall
be made in lawful money of the United States in Federal or other immediately
available funds at the office of Wachovia Bank, N.A., 191 Peachtree Street,
N.E., Atlanta, Georgia 30303, or such other address as may be specified from
time to time pursuant to the Credit Agreement.
All Loans made by the Bank, the respective maturities thereof, the
interest rates from time to time applicable thereto and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make, or any error of the Bank in making, any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Bank Notes referred to in the Syndicated Credit
Agreement dated as of January 15, 1999, among the Borrower, the banks listed on
the signature pages thereof and their successors and assigns, Wachovia Bank,
N.A., as Agent (as the same may be amended or modified from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein with
the same meanings. Reference is made to the Credit Agreement for provisions for
the prepayment and the repayment hereof and the acceleration of the maturity
hereof.
Time is of the essence of this Note. In the event all or any part of
any installment due under the terms of this Note is delinquent for more than
fifteen (15) days (excluding the final payment of principal and interest due on
the Maturity Date), there shall be due to the Bank, in addition to the
delinquent installment or part thereof and in order to compensate the Bank for
extra costs and expenses caused by such late payment, a sum equal to four
percent (4%) of the amount so delinquent.
<PAGE> 91
THIS NOTE MAY NOT BE CHANGED ORALLY AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
The Borrower agrees, in the event that this Note or any portion hereof
is collected by law or through an attorney at law, to pay all reasonable costs
of collection, including, without limitation, reasonable attorneys' fees.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed under seal, by its duly authorized officers as of the day and year
first above written.
BORROWER:
WINSTON HOTELS, INC., a North Carolina corporation
By: _____________________________
Senior Vice President
ATTEST:
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
<PAGE> 92
WINN LIMITED PARTNERSHIP, a North Carolina
limited partnership (SEAL)
By: WINSTON HOTELS, INC., its sole general partner
By: _____________________________
Senior Vice President
ATTEST:
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
<PAGE> 93
Note
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Type Interest Rate Amount Amount Amount of
of of Principal Principal Maturity Notation
Date Loan(1) Loan Borrowed Repaid Date Made By
- ---- ---- ------- -------- --------- -------- --------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------
(1) i.e., a Base Rate or Euro-Dollar Loan.
<PAGE> 94
EXHIBIT A-2
FORM OF TERM NOTE
TERM PROMISSORY NOTE
$__________ [SPECIFY AMOUNT] Raleigh, North Carolina
as of January 15, 1999
For value received, the undersigned, WINSTON HOTELS, INC., a North
Carolina corporation (the "Company"), and WINN LIMITED PARTNERSHIP, a North
Carolina limited partnership (the "Partnership") (the Company and the
Partnership shall hereinafter be referred to, jointly and severally, as the
"Borrower"), jointly and severally promise to pay to the order of WACHOVIA BANK,
N.A., as Agent for the Banks being parties to the Credit Agreement (hereinafter
defined) (the "Agent"), for the account and pro rata benefit of the Banks being
parties to the Credit Agreement, the principal sum of
_________________________________ DOLLARS ($__________ ) [SPECIFY AMOUNT], on
the dates provided in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of this Note on the dates and at the
rate or rates provided for in the Credit Agreement. Interest on any overdue
principal and, to the extent permitted by law, overdue interest on the principal
amount hereof shall bear interest at the Default Rate, as provided for in the
Credit Agreement. All such payments of principal and interest shall be made in
lawful money of the United States in Federal or other immediately available
funds at the office of Wachovia Bank, N.A., 191 Peachtree Street, N.E., Atlanta,
Georgia 30303, or such other address as may be specified from time to time
pursuant to the Credit Agreement.
This note is one of the Term Notes referred to in the Syndicated Credit
Agreement dated as of January 15, 1999, among the Borrower, the banks listed on
the signature pages thereof and their successors and assigns, Wachovia Bank,
N.A., as Agent (as the same may be amended or modified from time to time, the
"Credit Agreement"). This Term Note evidences indebtedness also evidenced by
those certain Bank Notes described in the Credit Agreement. Terms defined in the
Credit Agreement are used herein with the same meanings. Reference is made to
the Credit Agreement for provisions for the prepayment and the repayment hereof
and the acceleration of the maturity hereof.
Time is of the essence of this Note. In the event all or any part of
any installment due under the terms of this Note is delinquent for more than
fifteen (15) days (excluding the final payment of principal and interest due on
the Maturity Date), there shall be due to the Agent, for the pro rata benefit of
the Banks, in addition to the delinquent installment or part thereof and in
order to compensate the Agent for extra costs and expenses caused by such late
payment, a sum equal to four percent (4%) of the amount so delinquent.
THIS NOTE MAY NOT BE CHANGED ORALLY AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
<PAGE> 95
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
The Borrower agrees, in the event that this Note or any portion hereof
is collected by law or through an attorney at law, to pay all reasonable costs
of collection, including, without limitation, reasonable attorneys' fees.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed under seal, by its duly authorized officers as of the day and year
first above written.
BORROWER:
WINSTON HOTELS, INC., a North Carolina corporation
By: _____________________________
Senior Vice President
ATTEST:
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
<PAGE> 96
WINN LIMITED PARTNERSHIP, a North Carolina
limited partnership (SEAL)
By: WINSTON HOTELS, INC., its sole general partner
By: _____________________________
Senior Vice President
ATTEST:
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
<PAGE> 97
EXHIBIT B
[BROWN & BUNCH Letterhead]
February 1, 1999
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank, N.A.
as Administrative Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Ladies/Gentlemen:
We have acted as counsel for Winston Hotels, Inc., a North Carolina
corporation ("the Company") and WINN Limited Partnership, a North Carolina
limited partnership ("the Partnership") (the Company and the Partnership being
collectively referred to as the "Borrower") in connection with the Syndicated
Credit Agreement ("the Credit Agreement") dated as of January 15, 1999 among the
Borrower, the banks listed on the signature page thereof and Wachovia Bank,
N.A., as Agent. Terms defined in the Credit Agreement are used herein as therein
defined.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion. We have assumed for purposes of our opinions set forth
below that the execution and delivery of the Credit Agreement by each Bank and
by the Agent have been duly authorized by each Bank and by the Agent. As to
questions of fact relating to the Borrower material to such opinions, we have
relied upon representations of appropriate officers of the Borrower.
Upon the basis of the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of North Carolina and has all corporate powers
required to carry on
<PAGE> 98
February 1, 1999
its business as now conducted.
The Partnership is a limited partnership duly organized, validly
existing and in good standing under the laws of North Carolina and has all
partnership powers required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement, the Notes and the Loan Documents to which the Partnership or
the Company is a party, which Loan Documents, inclusive of the Credit Agreement
and the Notes, are specifically listed on the attached Schedule A which is
incorporated herein by this reference (i) are within the Company's corporate
powers and the Partnership's partnership powers, (ii) have been duly authorized
by all necessary corporate and partnership action, as the case may be, (iii) to
the best of our knowledge, require no action by or in respect of or filing with,
any governmental body, agency or official, (iv) to the best of our knowledge, do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Company
or partnership agreement of the Partnership or of any agreement, judgment,
injunction, order, decree or other instrument which to our knowledge is binding
upon the Borrower and (v) to the best of our knowledge, except as provided in
the Credit Agreement, do not result in the creation or imposition of any Lien on
any asset of the Borrower or any of its Subsidiaries.
3. The Credit Agreement, the Notes and the Loan Documents (to the
extent governed by North Carolina law) constitute valid and binding agreements
of the Borrower, enforceable against the Borrower in accordance with their
terms, except as such enforceability may be limited by: (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity.
4. To the best of our knowledge, there is no action, suit or proceeding
pending, or threatened, against or affecting the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
could materially adversely affect the business, consolidated financial position
or consolidated results of operations of the Borrower and its Consolidated
Subsidiaries, considered as a whole, or which in any manner questions the
validity or enforceability of the Credit Agreement or any Note.
5. The Borrower is not an "investment company" within the meaning of
The Investment Company Act of 1940, as amended.
<PAGE> 99
February 1, 1999
6. The Borrower is not a "holding company" or a "subsidiary company" of
a "holding company", or an "affiliate" or a "holding company" or of a "holding
company" or of a "subsidiary company" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
The opinions expressed in this opinion are subject to the following
qualifications:
(a) Any opinions herein as to the enforceability of the Credit
Agreement, the Notes and the Loan Documents are further subject to the
qualification that the enforceability of certain of the remedial, waiver and
other provisions of such instruments are further limited by applicable
constitutional, legislative, judicial and administrative provisions, statutes,
regulations, decisions, rulings and other laws in addition to those described in
paragraph 3 above; however, such additional laws do not, in our opinion,
substantially interfere with the practical realization of the benefits expressed
in the Credit Agreement, the Notes and the Loan Documents except for the
economic consequences of any procedural delay which may result from such laws.
(b) A creditor is permitted under North Carolina law in the enforcement
or collection of a debt instrument providing for "reasonable attorneys fees" in
the collection or enforcement thereof to collect, after written notice to the
debtor, attorney's fees up to but not exceeding 15% of the amount of the debt
outstanding.
(c) Certain remedies, waivers and other provisions of the Credit
Agreement, the Notes and the Loan Documents may not be enforceable, but such
unenforceability will not render such instruments invalid as a whole or preclude
the judicial enforcement of the obligation of the Borrower to repay the
principal, together with interest thereon, as provided in the Notes. Provisions
that may be unenforceable due to public policy concerns may include, but are not
limited to, issues relative to the waiver of procedural, substantive or
constitutional rights or other legal or equitable rights, including, without
limitation, the right of statutory or equitable redemption; the confession or
consent to any judgment; the consent by Borrower to the jurisdiction of any
court or to service or process in any particular manner; disclaimers or
limitations of liabilities; discharges of defenses; the exercise of self-help or
other remedies without judicial process; and the waiver of accounts for rent or
sale proceeds.
(d) We express no opinion as to the enforceability of any provisions of
the Credit Agreement and the Loan Documents which impose liquidated damages,
penalties, forfeitures or an increase in interest rate upon default; or that
appoint the Agent or others as the agent or attorney-in-fact for Borrower.
<PAGE> 100
February 1, 1999
(e) We express no opinion with respect to the effect of the failure of
the Agent or Banks to enforce its rights under any of the Loan Documents in good
faith and in a commercially reasonable manner.
(f) The opinions herein are limited to the specific document and matter
expressly addressed herein and no inference is to be drawn or implied herefrom
relative to any of the Loan Documents or the contents thereof, unless expressly
addressed and opined to herein.
(g) With respect to matters of title to lands comprising part of the
property securing the Notes, we are advised that you are relying upon policies
of title insurance, and with respect to the location of such land, we are
advised that you are relying upon surveys previously submitted to you. We are
not expressing herein any opinion with respect to the title or location of such
lands.
(h) Any opinion herein as to the enforceability of the North Carolina
Deed of Trust is subject to the provisions of N.C. Gen. Stat. 40A-68, which
provides that lienholder may share in the amount of condemnation compensation
awarded for a partial taking only to the extent determined necessary to prevent
an impairment of the lienholder's security.
(i) Some provisions of the Loan Documents may purport to relieve the
Agent and Banks of some responsibilities in the operation of the property
located in North Carolina after the lenders have exercised their right to enter
and take possession of the property after default. A mortgagee in possession is
chargeable in an accounting for rents received. Additionally, although no cases
have been discovered on this point, some commentators believe that a mortgagee
in possession is chargeable for rents which, in the exercise of reasonable
diligence, the real property in question could produce. Therefore, we express no
opinion as to the enforceability of any provision purporting to relieve the
Agent and Banks from the exercise of reasonable diligence in operating the
property located in North Carolina as a mortgagee in possession or as assignee
of rental agreements.
(j) We express no opinion as to the effectiveness of any provisions of
the Loan Documents that provide for the assignment or transfer of any permits,
licenses or similar rights of the Borrower.
(k) We express no opinion as to the right to obtain a receiver, which
determination is subject to equitable principles.
<PAGE> 101
February 1, 1999
(l) Whenever any opinion herein with respect to the existence or
absence of facts is qualified by the phrase "to the best of our knowledge", such
phrase indicates only that during the course of our representation of the
Borrower, no information has come to our attention which would give us actual
knowledge of the existence or absence of such facts. Except to the extent
expressly stated herein, we have not undertaken any independent investigation to
determine the existence or absence of any such facts, and no inference as to our
knowledge of the existence of such facts should be drawn from the fact of our
representation of the Borrower.
(m) We have no obligation to update our opinions for events occurring
after the date of this letter.
We are licensed to practice only in the State of North Carolina and do
not purport to express an opinion on any laws other than the laws of the United
States and the State of North Carolina, and this opinion is rendered only with
respect to such laws. We are advised that with respect to certain of the Loan
Documents and their provisions which are governed by the laws of the States of
South Carolina, Georgia, Virginia, Texas, Michigan, New Jersey, Florida, Nevada,
New York or Arizona, you have obtained and are relying on the opinions of
counsel licensed in such states. We have made no independent investigation of
the laws of such jurisdictions.
We express no opinion as to the laws of any jurisdiction wherein any
Bank may be located which limits rates of interest which may be charged or
collected by such Bank other than in paragraph 3 with respect to the State of
North Carolina.
Sincerely,
BROWN & BUNCH
/s/ William W. Bunch, III
William W. Bunch, III
WWB/jbd
Opinion.333
<PAGE> 102
EXHIBIT C
OPINION OF
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC, SPECIAL COUNSEL
FOR THE AGENT
[Date as provided in Section 3.04 of the Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank, N.A., as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Dear Ladies/Gentlemen:
We have participated in the preparation of the Syndicated Credit
Agreement (the "Credit Agreement") dated as of January 15, 1999, among Winston
Hotels, Inc., a North Carolina corporation (the "Company"), and WINN Limited
Partnership, a North Carolina limited partnership (the "Partnership"), the banks
listed on the signature pages thereof (the "Banks") and Wachovia Bank, N.A., as
Agent (the "Agent"), and have acted as special counsel for the Agent for the
purpose of rendering this opinion pursuant to Section 3.04(d) of the Credit
Agreement. Terms defined in the Credit Agreement are used herein as therein
defined.
This opinion letter is limited by, and is in accordance with, the
January 1, 1992 edition of the Interpretive Standards applicable to Legal
Opinions to Third Parties in Corporate Transactions, which Interpretive
Standards are incorporated herein by this reference.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, and assuming the due authorization,
execution and delivery of the Credit Agreement and each of the Notes by or on
behalf of the Borrower, we are of the opinion that the Credit Agreement
constitutes a valid and binding agreement of the Borrower and each Note
constitutes valid and binding obligations of the Borrower, in each case
enforceable in accordance with its terms except as: (i) the enforceability
thereof may be affected by bankruptcy, insolvency, reorganization, fraudulent
conveyance, voidable preference, moratorium or similar laws applicable to
creditors' rights or the collection of debtors' obligations generally; (ii)
rights of acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability; and (iii) the enforceability
of certain of the remedial, waiver and other provisions of the Credit Agreement
and the Notes may be further limited by the laws of the State of North Carolina;
provided, however, such
1
<PAGE> 103
additional laws do not, in our opinion, substantially interfere with the
practical realization of the benefits expressed in the Credit Agreement and the
Notes, except for the economic consequences of any procedural delay which may
result from such laws.
In giving the foregoing opinion, we express no opinion as to the effect
(if any) of any law of any jurisdiction except the State of North Carolina. We
express no opinion as to the effect of the compliance or noncompliance of the
Agent or any of the Banks with any state or federal laws or regulations
applicable to the Agent or any of the Banks by reason of the legal or regulatory
status or the nature of the business of the Agent or any of the Banks.
This opinion is delivered to you in connection with the transaction
referenced above and may only be relied upon by you and any Assignee,
Participant or other Transferee under the Credit Agreement without our prior
written consent.
Very truly yours,
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC
By:____________________________
Member
2
<PAGE> 104
EXHIBIT D
CLOSING CERTIFICATE
OF
WINN LIMITED PARTNERSHIP AND
WINSTON HOTELS, INC.
Reference is made to the Syndicated Credit Agreement (the "Credit
Agreement") dated as of January 15, 1999, among WINN Limited Partnership, a
North Carolina limited partnership (the "Partnership"), Winston Hotels, Inc., a
North Carolina corporation (the "Company") (the Company and the Partnership
being collectively referred to as the "Borrower"), Wachovia Bank, N.A., as Agent
and as a Bank, and the other Banks listed on the signature pages thereof.
Capitalized terms used herein have the meanings ascribed thereto in the Credit
Agreement.
Pursuant to Section 3.03(e) of the Credit Agreement, _____________, the
duly authorized _________ Vice President of the Company, on its own behalf and
as the general partner of the Partnership, hereby certifies to the Agent and the
Banks that: (i) no Default has occurred and is continuing on the date hereof;
(ii) the representations and warranties of the Borrower contained in Article IV
of the Credit Agreement are true on and as of the date hereof; and (iii) that
the Exhibits attached hereto are true and correct and fully represent the
condition of the Borrower and the matters described therein.
Certified as of the ___ day of January, 1999.
WINN LIMITED PARTNERSHIP, a North Carolina
limited partnership (SEAL)
By: WINSTON HOTELS, INC., a North Carolina
corporation, its general partner
By: _________________________________
Senior Vice President
WINSTON HOTELS, INC., a North Carolina
corporation
By: ______________________________________
Senior Vice President
<PAGE> 105
Exhibits to Closing Certificate
D-1. Borrowing Base Values Certificate as of Closing Date
D-2. Certificate of Compliance; Calculation of Pricing Level; Determination of
Leverage Ratio as of December 31, 1998.
<PAGE> 106
EXHIBIT E
WINSTON HOTELS, INC.
ASSISTANT SECRETARY'S CERTIFICATE
The undersigned, Brenda G. Burns, Assistant Secretary of Winston
Hotels, Inc., a North Carolina corporation (the "Company"), on behalf of the
Company and on behalf of WINN Limited Partnership, a North Carolina limited
partnership in which the Company is the general partner (the "Partnership"),
(the Company and the Partnership being collectively referred to as the
"Borrower") hereby certifies that she has been duly elected, qualified and is
acting in such capacity as Assistant Secretary of the Company and that, as such,
she is familiar with the facts herein certified and is duly authorized to
certify the same, and hereby further certifies, in connection with the
Syndicated Credit Agreement dated as of January 15, 1999, among the Borrower,
Wachovia Bank, N.A., as Agent, as Agent, and the Banks listed on the signature
pages thereof that:
1. Attached hereto as Exhibit E-1 is a complete and correct copy of the
Articles of Incorporation of the Company as in full force and effect on the date
hereof as certified by the Secretary of State of the State of North Carolina,
the Company's state of incorporation.
2. Attached hereto as Exhibit E-2 is a complete and correct copy of the
Bylaws of the Company as in full force and effect on the date hereof.
3. Attached hereto as Exhibit E-3 is a complete and correct copy of the
limited partnership agreement of the Partnership as in full force and effect on
the date hereof.
4. Attached hereto as Exhibit E-4 is a complete and correct copy of the
resolutions duly adopted by the Board of Directors of the Company on January __,
1999, approving, and authorizing, on behalf of the Company and the Partnership,
the execution and delivery of the Credit Agreement, the Notes (as such term is
defined in the Credit Agreement) and the other Loan Documents (as such term is
defined in the Credit Agreement) to which the Borrower is a party. Such
resolutions have not been repealed or amended and are in full force and effect,
and no other resolutions or consents have been adopted by the Board of Directors
of the Company in connection therewith.
5. ______________, who as Senior Vice President of the Company signed
the Credit Agreement, the Notes and the other Loan Documents to which the
Borrower is a party, was duly elected, qualified and acting as such at the time
he signed the Credit Agreement, the Notes and other Loan Documents to which the
Borrower is a party, and his signature appearing on the Credit Agreement, the
Notes and the other Loan Documents to which the Borrower is a party is his
genuine signature.
<PAGE> 107
IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the
____ day of January, 1999.
--------------------------------
Name: Brenda G. Burns
Title: Assistant Secretary,
Winston Hotels, Inc.
<PAGE> 108
EXHIBIT F
FORM OF COMPLIANCE CERTIFICATE
To be provided upon request.
<PAGE> 109
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Dated ________________ __, 199_
Reference is made to the Syndicated Credit Agreement dated as of
January 15, 1999 (together with all amendments and modifications thereto, the
"Credit Agreement") among Winston Hotels, Inc., a North Carolina corporation
(the "Company") and WINN Limited Partnership, a North Carolina limited
partnership (the "Partnership") (the Company and the Partnership being
collectively referred to as the "Borrower"), the Banks (as defined in the Credit
Agreement), Wachovia Bank, N.A., as Agent (the "Agent"). Terms defined in the
Credit Agreement are used herein with the same meaning.
_____________________________________________________ (the "Assignor")
and _____________________________________________ (the "Assignee") agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without recourse to
the Assignor, and the Assignee hereby purchases and assumes from the Assignor, a
______% interest in and to all of the Assignor's rights and obligations under
the Credit Agreement as of the Effective Date (as defined below) (including,
without limitation, a ______% interest (which on the Effective Date hereof is
$_______________) in the Assignor's Commitment and a ______% interest (which on
the Effective Date hereof is $_______________) in the Loans owing to the
Assignor a ______% interest in the Note held by the Assignor (which on the
Effective Date hereof is $__________________).
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, any other instrument or
document furnished pursuant thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, any
other Loan Document or any other instrument or document furnished pursuant
thereto, other than that it is the legal and beneficial owner of the interest
being assigned by it hereunder, that such interest is free and clear of any
adverse claim and that as of the date hereof its Commitment (without giving
effect to assignments thereof which have not yet become effective) is
$_________________ and the aggregate outstanding principal amount of Loans owing
to it (without giving effect to assignments thereof which have not yet become
effective) is $_________________; (ii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement, any other Loan Document or any other
instrument or document furnished pursuant thereto; and (iii) attaches the
Note[s] referred to in paragraph 1 above and requests that the Agent exchange
such Note[s] as follows: [a new Note dated _______________, ____ in the
principal amount of _________________ payable to the order of the Assignee in
the principal amount of $_______________ payable to the order of the Assignor
and a Note dated ______________, ____ in the principal amount of $______________
payable to the order of the Assignee].
<PAGE> 110
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.04(a) thereof (or any more recent financial statements of the Borrower
delivered pursuant to Section 5.01 thereof) and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iii) confirms that it is a bank or financial
institution; (iv) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Bank; (vi) specifies as its
Lending Office (and address for notices) the office set forth beneath its name
on the signature pages hereof, (vii) represents and warrants that the execution,
delivery and performance of this Assignment and Acceptance are within its
corporate powers and have been duly authorized by all necessary corporate
action[, and (viii) attaches the forms prescribed by the Internal Revenue
Service of the United States certifying as to the Assignee's status for purposes
of determining exemption from United States withholding taxes with respect to
all payments to be made to the Assignee under the Credit Agreement and the Notes
or such other documents as are necessary to indicate that all such payments are
subject to such taxes at a rate reduced by an applicable tax treaty].(2)
4. The Effective Date for this Assignment and Acceptance shall be
_______________ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for execution and
acceptance by the Agent [and to the Borrower for execution by the Borrower](3).
5. Upon such execution and acceptance by the Agent [and execution by
the Borrower](2), from and after the Effective Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent rights and obligations have
been transferred to it by this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and (ii) the Assignor shall, to the extent its
rights and obligations have been transferred to the Assignee by this Assignment
and Acceptance, relinquish its rights (other than under Section 10.03 and
Section 11.03 of the Credit Agreement) and be released from its obligations
under the Credit Agreement.
6. Upon such execution and acceptance by the Agent [and execution by
the Borrower], from and after the Effective Date, the Agent shall make all
payments in respect of the interest assigned hereby to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in payments for
periods prior to such acceptance by the Agent directly between themselves.
- ---------------
(2) If the Assignee is organized under the laws of a jurisdiction outside
the United States.
(3) If the Assignee is not a Bank or an Affiliate of a Bank prior to the
Effective Date.
2
<PAGE> 111
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of North Carolina.
[NAME OF ASSIGNOR]
By:____________________________________
Title:
[NAME OF ASSIGNEE]
By:____________________________________
Title:
Lending Office:
__________________________________
__________________________________
Telecopy number:__________________
Telephone number:_________________
WACHOVIA BANK, N.A., as Agent
By:____________________________________
Title:
BORROWER:*
WINSTON HOTELS, INC., a North Carolina
corporation
By: _____________________________
Senior Vice President
- ---------------
* If the Assignee is not a Bank or an Affiliate of a Bank prior to the
Effective Date.
3
<PAGE> 112
WINN LIMITED PARTNERSHIP, a North Carolina
limited partnership (SEAL)
By: WINSTON HOTELS, INC., its sole general
partner
By: _____________________________
Senior Vice President
4
<PAGE> 113
EXHIBIT H
NOTICE OF BORROWING
WINSTON HOTELS, INC.
______________ __, 1999
FAX (404) 332-5019 (Original Request) FAX (404) 332-4066 (Copy)
- ------------------------------------- -------------------------
Mr. David Morley Mr. Steven B. Wood
Wachovia Bank, N.A. Wachovia Bank, N.A.
191 Peachtree Street, N.E. 191 Peachtree Street, N.E.
Mail Code GA-382, 27th Floor Mail Code GA-1810, 30th Floor
Atlanta, Georgia 30303-1757 Atlanta, Georgia 30303-1757
Re: Syndicated Credit Agreement Dated as of January 15, 1999, in the Amount
of $140,000,000 (The "Credit Agreement") by and Among Winston Hotels,
Inc. and Winn Limited Partnership (The "Borrower"), Wachovia Bank, N.A.
(The "Agent" or "Swing Bank" ) and the Banks Who are Signatories
Thereto (The "Banks").
Ladies and Gentlemen:
This is Our Request to the Agent to Make the Advances or to Effect the
Repayments Under the Credit Agreement as Described in the Following Schedule and
to Select Interest Rates With Respect to This Activity.
<TABLE>
<S> <C>
SYNDICATED LOAN ACTIVITY
1. Syndicated Loan Balance From Prior Day $
----------------
2. Today's Syndicated Loan Advance + $
----------------
3. Today's Syndicated Loan Repayment - $
----------------
4. Syndicated Loan Balance After Today's Activity (1+2-3) = $
----------------
SWING LOAN ACTIVITY
5. Swing Loan Balance From Prior Day $
----------------
6. Today's Swing Loan Advance + $
----------------
7. Today's Swing Loan Repayment - $
----------------
8. Swing Loan Balance After Today's Activity (5+6-7) = $
----------------
SUMMARY OF AGGREGATE LOAN ACTIVITY
9. Aggregate Loan Balance Before Today's Activity (1+5) $
----------------
10. Today's Aggregate Loan Advance (2+6) + $
----------------
11. Today's Aggregate Loan Repayment (3+7) - $
----------------
12. Aggregate Loan Balance After Today's Activity (4+8) = $
----------------
</TABLE>
PLEASE CREDIT IN THE CASE OF ADVANCES OR DEBIT IN THE CASE OF REPAYMENTS THE
ACCOUNT OF _____________________ AT WACHOVIA BANK, N.A., RALEIGH, NC ACCOUNT #
______________.
<PAGE> 114
SYNDICATED LOAN
INTEREST RATE ELECTION FOR LOAN ADVANCES
Borrower hereby elects the following interest rate(s) with respect to the
Syndicated Loan advance requested hereby:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
INTEREST RATE SELECTED AMOUNT OF INTEREST INTEREST RATE INTEREST RATE
FOR ADVANCE LOAN ADVANCE RATE COMMENCES EXPIRES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BASE RATE $
- -------------------------------------------------------------------------------------------------------------
FOR EURO-DOLLAR LOANS:
- -------------------------------------------------------------------------------------------------------------
ONE-MONTH LIBOR $ %
- -------------------------------------------------------------------------------------------------------------
TWO-MONTH LIBOR $ %
- -------------------------------------------------------------------------------------------------------------
THREE-MONTH LIBOR $ %
- -------------------------------------------------------------------------------------------------------------
SIX-MONTH LIBOR $ %
- -------------------------------------------------------------------------------------------------------------
$ %
- -------------------------------------------------------------------------------------------------------------
$ %
- -------------------------------------------------------------------------------------------------------------
</TABLE>
APPLICATION OF LOAN REPAYMENTS
BORROWER HEREBY INSTRUCTS AGENT TO APPLY THE ABOVE REQUESTED SYNDICATED LOAN
REPAYMENT TO THE PORTIONS OF THE SYNDICATED LOAN DESCRIBED BELOW:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
INTEREST RATE SELECTED AMOUNT OF INTEREST INTEREST RATE
FOR REPAYMENT LOAN REPAYMENT RATE EXPIRES
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASE RATE $
- ---------------------------------------------------------------------------------------
EURO-DOLLAR LOAN $ %
- ---------------------------------------------------------------------------------------
EURO-DOLLAR LOAN $ %
- ---------------------------------------------------------------------------------------
EURO-DOLLAR LOAN $ %
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE> 115
SWING LOAN
INTEREST RATE ELECTION
BORROWER HEREBY ELECTS THE FOLLOWING INTEREST RATE WITH RESPECT TO THE SWING
LOAN EFFECTIVE THIS DAY.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
INTEREST RATE MARKED BY "X"
ELECTION
- -----------------------------------------------------------
<S> <C>
7-DAY LIBOR RATE
- -----------------------------------------------------------
BASE RATE
- -----------------------------------------------------------
</TABLE>
(NOTICE TO BE GIVEN ONLY UPON CHANGE OF THE INTEREST RATE ELECTION FOR THE SWING
LOAN. SWING LOAN SHALL CARRY THE BASE RATE UNLESS 7 DAY LIBOR RATE IS SELECTED
BY BORROWER.)
CERTIFICATIONS
WE HEREBY CERTIFY THAT THE LOAN ADVANCE REQUESTED BY THIS NOTICE OF BORROWING
SHALL NOT CAUSE THE LOAN TO EXCEED THE MAXIMUM ADVANCE OR THE FACILITY LIMIT
UNDER THE CREDIT AGREEMENT AS SET FORTH IN THE FOLLOWING SCHEDULE.
<TABLE>
<C> <C>
1. MAXIMUM ADVANCE CURRENTLY PERMITTED UNDER THE CREDIT AGREEMENT $
---------------
2. LESS AGGREGATE LOAN BALANCE AFTER TODAY'S ACTIVITY - $
---------------
3. AVAILABLE CREDIT OR (LOAN BALANCE EXCEEDING MAXIMUM ADVANCE) = $
---------------
</TABLE>
WE FURTHER CERTIFY THAT BORROWER IS IN COMPLIANCE WITH THE CREDIT AGREEMENT AND
THE LOAN DOCUMENTS AND THAT NO DEFAULT, OR EVENT WHICH, WITH NOTICE OR PASSAGE
OF TIME OR BOTH, WOULD CONSTITUTE A DEFAULT UNDER THE CREDIT AGREEMENT OR THE
LOAN DOCUMENTS HAS OCCURRED OR WILL BE IN EXISTENCE AFTER GIVING EFFECT TO ANY
ADVANCE OR OTHER EXTENSION OF CREDIT UNDER THE CREDIT AGREEMENT CONTEMPLATED
HEREBY.
SINCERELY,
WINSTON HOTELS, INC. (AS BORROWER AND ON
BEHALF OF WINN LIMITED PARTNERSHIP AS ITS
SOLE GENERAL PARTNER)
BY:________________________________________
SENIOR VICE PRESIDENT
<PAGE> 116
EXHIBIT I
BORROWING BASE VALUE CERTIFICATE
To be provided upon request.
<PAGE> 117
EXHIBIT J
TO CREDIT AGREEMENT
CONDUIT DEBT HOTELS
1. Comfort Suites, Orlando, Florida
2. Comfort Inn, Charleston, South Carolina
3. Courtyard by Marriott, Ann Arbor, Michigan
4. Courtyard by Marriott, Wilmington, North Carolina
5. Hampton Inn, Elmsford, New York
6. Hampton Inn, Raleigh, North Carolina
7. Hampton Inn, Perimeter, Georgia
8. Hampton Inn, West Springfield, Massachusetts
9. Hampton Inn, Charlotte, North Carolina
10. Hampton Inn & Suites, Duluth, Georgia (Gwinnett)
11. Homewood Suites, Cary, North Carolina
12. Homewood Suites, Clearlake, Texas
13. Quality Suites, North Charleston, South Carolina
14. Residence Inn, Phoenix, Arizona
<PAGE> 118
EXHIBIT K TO CREDIT AGREEMENT
INITIAL HOTELS
HOTEL CHART
WINN LIMITED PARTNERSHIP/WINSTON HOTELS, INC. (1999 SYNDICATED LOAN)
<TABLE>
<CAPTION>
WXH
PROPERTY ROOMS/
CODE ADDRESS METRO CITY- COMMUNITY COUNTY STATE SUITES FRANCHISE OWNER MANAGER
- -------- ------- --------------------- ------ ----- ------ --------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. CA 201 ASHVILLE AVE. RALEIGH - CARY WAKE NC 130 HAMPTON INN PARTNERSHIP N/A
2. RG 1500 RDU CENTER DRIVE RALEIGH - MORRISVILLE WAKE NC 155 HILTON GARDEN INN PARTNERSHIP N/A
3. SP 1675 US HWY-1 SO. PINES MOORE NC 126 HAMPTON INN PARTNERSHIP N/A
4. JV 474 WESTERN BLVD. JACKSONVILLE ONSLOW NC 120 HAMPTON INN PARTNERSHIP N/A
5. BN HWY. 105-208 LINVILLE RD. BOONE WATAUGA NC 95 HAMPTON INN PARTNERSHIP N/A
6. CT 5400 EDWARDS MILL RD. RALEIGH - CRABTREE WAKE NC 137 HOMEWOOD SUITES PARTNERSHIP N/A
7. HI 5107 MARKET STREET WILMINGTON NEW HANOVER NC 118 HAMPTON INN PARTNERSHIP N/A
8. DH 3600 MOUNT MORIAH RD. DURHAM DURHAM NC 96 HOMEWOOD SUITES PARTNERSHIP N/A
9. SL 1533 SOUTHLAKE PARKWAY ATLANTA - MORROW CLAYTON GA 124 HAMPTON INN PARTNERSHIP N/A
10. BR 112 TOURIST DRIVE BRUNSWICK GLYNN GA 127 HAMPTON INN PARTNERSHIP N/A
11. HH ONE AIRPORT ROAD HILTON HEAD BEAUFORT SC 125 HAMPTON INN PARTNERSHIP IMIC
12. CH 12610 CHESTNUT HILL RD CHESTER CHESTERFIELD VA 66 HAMPTON INN PARTNERSHIP IMIC
13. CC 2100 WEST HUNDRED ST CHESTER CHESTERFIELD VA 123 COMFORT INN PARTNERSHIP IMIC
14. WC 1600 WESTBROOK PLAZA DR. WINSTON-SALEM FORSYTH NC 120 MARRIOTT PARTNERSHIP N/A
15. DC 3508 MOUNT MORIAH RD DURHAM - CHAPEL HILL DURHAM NC 138 COMFORT INN PARTNERSHIP IMIC
16. LM 755 CURRENCY CIRCLE ORLANDO - LAKE MARY SEMINOLE FL 112 HOMEWOOD SUITES PARTNERSHIP N/A
17. CE 13625 LOOT BLVD. CLEARWATER PINELLAS FL 127 HOLIDAY INN EXP. PARTNERSHIP N/A
18. CL 3580 ULMERTON RD. CLEARWATER PINELLAS FL 120 COMFORT INN PARTNERSHIP N/A
19. SC 300 PLAZA DRIVE SECAUCUS HUDSON NJ 160 HOLIDAY INN PARTNERSHIP N/A
20. TH 700 HOPE RD. TINTON FALLS MONMOUTH NJ 171 HOLIDAY INN PARTNERSHIP N/A
21. DS 11350 LBJ FREEWAY DALLAS - GARLAND DALLAS TX 244 HOLIDAY INN SELECT PARTNERSHIP N/A
22. HM 2504 N. LOOP WEST HOUSTON HARRIS TX 202 MARRIOTT PARTNERSHIP N/A
23. DV 4154 PREFERRED PLACE DALLAS - DUNCANSVILLE DALLAS TX 119 HAMPTON INN PARTNERSHIP N/A
24. AH 10775 DAVIS DR. ATLANTA - ALPHARETTA FULTON GA 112 HOMEWOOD SUITES PARTNERSHIP N/A
25. WG 4025 WINDWARD PLAZA ATLANTA - ALPHARETTA FULTON GA 164 HILTON GARDEN INN PARTNERSHIP N/A
26. AF 3285 BOARDWALK ANN ARBOR WASHTENAW MI 110 MARRIOTT/FAIRFIELD PARTNERSHIP N/A
27. LV 7100 CASCADE VALLEY CT. LAS VEGAS CLARK NV 118 HAMPTON INN PARTNERSHIP N/A
28. AL 800 ALBANY SHAKER RD. ALBANY ALBANY NY 155 HILTON GARDEN INN PARTNERSHIP N/A
29. HP 2536 W. BERYL AVE. PHOENIX MARICOPA AZ 126 HOMEWOOD SUITES PARTNERSHIP N/A
</TABLE>
<TABLE>
<CAPTION>
WXH
PROPERTY
CODE LESSEE
- -------- ------
<S> <C>
1. CA CAPSTAR WINSTON
2. RG CAPSTAR WINSTON
3. SP CAPSTAR WINSTON
4. JV CAPSTAR WINSTON
5. BN CAPSTAR WINSTON
6. CT CAPSTAR WINSTON
7. HI CAPSTAR WINSTON
8. DH CAPSTAR WINSTON
9. SL CAPSTAR WINSTON
10. BR CAPSTAR WINSTON
11. HH CAPSTAR WINSTON
12. CH CAPSTAR WINSTON
13. CC CAPSTAR WINSTON
14. WC CAPSTAR WINSTON
15. DC CAPSTAR WINSTON
16. LM CAPSTAR WINSTON
17. CE CAPSTAR WINSTON
18. CL CAPSTAR WINSTON
19. SC SECAUCUS HOLDING
CORP.
20. TH CAPSTAR WINSTON
21. DS CAPSTAR WINSTON
22. HM CAPSTAR WINSTON
23. DV CAPSTAR WINSTON
24. AH CAPSTAR WINSTON
25. WG CAPSTAR WINSTON
26. AF CAPSTAR WINSTON
27. LV BRISTOL HOTELS
28. AL CAPSTAR WINSTON
29. HP CAPSTAR WINSTON
</TABLE>
<PAGE> 119
EXHIBIT L
TO CREDIT AGREEMENT
FORM OF PERMITTED OPERATING LEASE
Exhibit to the Company's Registration Statement on Form S-11 as filed with the
Securities and Exchange Commission (Registration No. 33-91230) effective May 11,
1995 and incorporated herein by reference.
<PAGE> 120
EXHIBIT M TO CREDIT AGREEMENT
ALLOCATED LOAN AMOUNTS FOR INITIAL HOTELS
HOTEL CHART
WINN LIMITED PARTNERSHIP/WINSTON HOTELS, INC. (1999 SYNDICATED LOAN)
<TABLE>
<CAPTION>
WXH
PROPERTY ROOMS/
CODE ADDRESS METRO CITY- COMMUNITY COUNTY STATE SUITES ALLOCATED LOAN AMOUNTS
-------- ------- --------------------- ------ ----- ------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
1. CA 201 ASHVILLE AVE. RALEIGH - CARY WAKE NC 130 $ 4,970,000.00
2. RG 1500 RDU CENTER DRIVE RALEIGH - MORRISVILLE WAKE NC 155 $ 7,250,000.00
3. SP 1675 US HWY-1 SO. PINES MOORE NC 126 $ 3,030,000.00
4. JV 474 WESTERN BLVD. JACKSONVILLE ONSLOW NC 120 $ 3,430,000.00
5. BN HWY. 105-208 LINVILLE RD. BOONE WATAUGA NC 95 $ 2,970,000.00
6. CT 5400 EDWARDS MILL RD. RALEIGH - CRABTREE WAKE NC 137 $ 7,710,000.00
7. HI 5107 MARKET STREET WILMINGTON NEW HANOVER NC 118 $ 3,910,000.00
8. DH 3600 MOUNT MORIAH RD. DURHAM DURHAM NC 96 $ 4,040,000.00
9. SL 1533 SOUTHLAKE PARKWAY ATLANTA - MORROW CLAYTON GA 124 $ 3,070,000.00
10. BR 112 TOURIST DRIVE BRUNSWICK GLYNN GA 127 $ 3,720,000.00
11. HH ONE AIRPORT ROAD HILTON HEAD BEAUFORT SC 125 $ 3,300,000.00
12. CH 12610 CHESTNUT HILL RD CHESTER CHESTERFIELD VA 66 $ 2,340,000.00
13. CC 2100 WEST HUNDRED ST CHESTER CHESTERFIELD VA 123 $ 3,590,000.00
14. WC 1600 WESTBROOK PLAZA DR. WINSTON-SALEM FORSYTH NC 120 $ 3,620,000.00
15. DC 3508 MOUNT MORIAH RD DURHAM - CHAPEL HILL DURHAM NC 138 $ 5,810,000.00
16. LM 755 CURRENCY CIRCLE ORLANDO - LAKE MARY SEMINOLE FL 112 $ 6,250,000.00
17. CE 13625 LOOT BLVD. CLEARWATER PINELLAS FL 127 $ 3,920,000.00
18. CL 3580 ULMERTON RD. CLEARWATER PINELLAS FL 120 $ 2,800,000.00
19. SC 300 PLAZA DRIVE SECAUCUS HUDSON NJ 160 $10,350,000.00
20. TH 700 HOPE RD. TINTON FALLS MONMOUTH NJ 171 $ 4,710,000.00
21. DS 11350 LBJ FREEWAY DALLAS - GARLAND DALLAS TX 244 $ 9,210,000.00
22. HM 2504 N. LOOP WEST HOUSTON HARRIS TX 202 $ 5,870,000.00
23. DV 4154 PREFERRED PLACE DALLAS - DUNCANSVILLE DALLAS TX 119 $ 1,690,000.00
24. AH 10775 DAVIS DR. ATLANTA - ALPHARETTA FULTON GA 112 $ 5,520,000.00
25. WG 4025 WINDWARD PLAZA ATLANTA - ALPHARETTA FULTON GA 164 $ 8,150,000.00
26. AF 3285 BOARDWALK ANN ARBOR WASHTENAW MI 110 $ 2,570,000.00
27. LV 7100 CASCADE VALLEY CT. LAS VEGAS CLARK NV 118 $ 5,420,000.00
28. AL 800 ALBANY SHAKER RD. ALBANY ALBANY NY 155 $ 7,700,000.00
29. HP 2536 W. BERYL AVE. PHOENIX MARICOPA AZ 126 $ 6,950,000.00
</TABLE>
<PAGE> 1
EXHIBIT 10.32
NOTE
$60,000,000.00 Raleigh, North Carolina
as of January 15, 1999
For value received, the undersigned, WINSTON HOTELS, INC., a
North Carolina corporation (the "Company"), and WINN LIMITED PARTNERSHIP, a
North Carolina limited partnership (the "Partnership") (the Company and the
Partnership shall hereinafter be referred to, jointly and severally, as the
"Borrower"), jointly and severally promise to pay to the order of WACHOVIA BANK,
N.A., a national banking association (the "Bank"), for the account of its
Lending Office, the principal sum of SIXTY MILLION AND NO/100 DOLLARS
($60,000,000.00), or such lesser amount as shall equal the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below, on the dates and in the amounts provided in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Note on the dates and at the rate or rates provided for in the
Credit Agreement. Interest on any overdue principal and, to the extent permitted
by law, overdue interest on the principal amount hereof shall bear interest at
the Default Rate, as provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of Wachovia Bank,
N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other address
as may be specified from time to time pursuant to the Credit Agreement.
All Loans made by the Bank, the respective maturities thereof,
the interest rates from time to time applicable thereto and all repayments of
the principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make, or any error of the Bank in making, any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Bank Notes referred to in the Syndicated
Credit Agreement dated as of January 15, 1999, among the Borrower, the banks
listed on the signature pages thereof and their successors and assigns, Wachovia
Bank, N.A., as Agent (as the same may be amended or modified from time to time,
the "Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the Credit Agreement for provisions
for the prepayment and the repayment hereof and the acceleration of the maturity
hereof.
Time is of the essence of this Note. In the event all or any part
of any installment due under the terms of this Note is delinquent for more than
fifteen (15) days (excluding the final payment of principal and interest due on
the Maturity Date), there shall be due to the Bank, in addition to the
delinquent installment or part thereof and in order to compensate the Bank for
extra costs and expenses caused by such late payment, a sum equal to four
percent (4%) of the amount so delinquent.
THIS NOTE MAY NOT BE CHANGED ORALLY AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
<PAGE> 2
The Borrower hereby waives presentment, demand, protest, notice
of demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
The Borrower agrees, in the event that this Note or any portion
hereof is collected by law or through an attorney at law, to pay all reasonable
costs of collection, including, without limitation, reasonable attorneys' fees.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed under seal, by its duly authorized officers as of the day and year
first above written.
BORROWER:
WINSTON HOTELS, INC., a North Carolina corporation
By: /s/ Joseph V. Green
-------------------------------
Senior Vice President
ATTEST:
/s/ Brenda G. Burns
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
WINN LIMITED PARTNERSHIP, a North Carolina
limited partnership (SEAL)
By: WINSTON HOTELS, INC., its sole general partner
By: /s/ Joseph V. Green
---------------------------
Senior Vice President
ATTEST:
/s/ Brenda G. Burns
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
2
<PAGE> 3
Note
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Type Interest Rate Amount Amount Amount of
of of Principal Principal Maturity Notation
Date Loan(1) Loan Borrowed Repaid Date Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------
(1) i.e., a Base Rate or Euro-Dollar Loan.
3
<PAGE> 1
EXHIBIT 10.33
NOTE
$40,000,000.00 Raleigh, North Carolina
as of January 15, 1999
For value received, the undersigned, WINSTON HOTELS, INC., a North
Carolina corporation (the "Company"), and WINN LIMITED PARTNERSHIP, a North
Carolina limited partnership (the "Partnership") (the Company and the
Partnership shall hereinafter be referred to, jointly and severally, as the
"Borrower"), jointly and severally promise to pay to the order of BRANCH BANKING
AND TRUST COMPANY, a North Carolina corporation (the "Bank"), for the account of
its Lending Office, the principal sum of FORTY MILLION AND NO/100 DOLLARS
($40,000,000.00), or such lesser amount as shall equal the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below, on the dates and in the amounts provided in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Note on the dates and at the rate or rates provided for in the
Credit Agreement. Interest on any overdue principal and, to the extent permitted
by law, overdue interest on the principal amount hereof shall bear interest at
the Default Rate, as provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of Wachovia Bank,
N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other address
as may be specified from time to time pursuant to the Credit Agreement.
All Loans made by the Bank, the respective maturities thereof, the
interest rates from time to time applicable thereto and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make, or any error of the Bank in making, any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Bank Notes referred to in the Syndicated Credit
Agreement dated as of January 15, 1999, among the Borrower, the banks listed on
the signature pages thereof and their successors and assigns, Wachovia Bank,
N.A., as Agent (as the same may be amended or modified from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein with
the same meanings. Reference is made to the Credit Agreement for provisions for
the prepayment and the repayment hereof and the acceleration of the maturity
hereof.
Time is of the essence of this Note. In the event all or any part of
any installment due under the terms of this Note is delinquent for more than
fifteen (15) days (excluding the final payment of principal and interest due on
the Maturity Date), there shall be due to the Bank, in addition to the
delinquent installment or part thereof and in order to compensate the Bank for
extra costs and expenses caused by such late payment, a sum equal to four
percent (4%) of the amount so delinquent.
THIS NOTE MAY NOT BE CHANGED ORALLY AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
<PAGE> 2
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
The Borrower agrees, in the event that this Note or any portion hereof
is collected by law or through an attorney at law, to pay all reasonable costs
of collection, including, without limitation, reasonable attorneys' fees.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed under seal, by its duly authorized officers as of the day and year
first above written.
BORROWER:
WINSTON HOTELS, INC., a North Carolina corporation
By: /s/ Joseph V. Green
-------------------------------
Senior Vice President
ATTEST:
/s/ Brenda G. Burns
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
WINN LIMITED PARTNERSHIP, a North Carolina
limited partnership (SEAL)
By: WINSTON HOTELS, INC., its sole general partner
By: /s/ Joseph V. Green
Senior Vice President
ATTEST:
/s/ Brenda G. Burns
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
2
<PAGE> 3
Note
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Type Interest Rate Amount Amount Amount of
of of Principal Principal Maturity Notation
Date Loan(1) Loan Borrowed Repaid Date Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------
(1) i.e., a Base Rate or Euro-Dollar Loan.
3
<PAGE> 1
EXHIBIT 10.34
NOTE
$25,000,000.00 Raleigh, North Carolina
as of January 15, 1999
For value received, the undersigned, WINSTON HOTELS, INC., a
North Carolina corporation (the "Company"), and WINN LIMITED PARTNERSHIP, a
North Carolina limited partnership (the "Partnership") (the Company and the
Partnership shall hereinafter be referred to, jointly and severally, as the
"Borrower"), jointly and severally promise to pay to the order of SOUTHTRUST
BANK, N.A., a national banking association (the "Bank"), for the account of its
Lending Office, the principal sum of TWENTY-FIVE MILLION AND NO/100 DOLLARS
($25,000,000.00), or such lesser amount as shall equal the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below, on the dates and in the amounts provided in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Note on the dates and at the rate or rates provided for in the
Credit Agreement. Interest on any overdue principal and, to the extent permitted
by law, overdue interest on the principal amount hereof shall bear interest at
the Default Rate, as provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of Wachovia Bank,
N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other address
as may be specified from time to time pursuant to the Credit Agreement.
All Loans made by the Bank, the respective maturities thereof,
the interest rates from time to time applicable thereto and all repayments of
the principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make, or any error of the Bank in making, any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Bank Notes referred to in the Syndicated
Credit Agreement dated as of January 15, 1999, among the Borrower, the banks
listed on the signature pages thereof and their successors and assigns, Wachovia
Bank, N.A., as Agent (as the same may be amended or modified from time to time,
the "Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the Credit Agreement for provisions
for the prepayment and the repayment hereof and the acceleration of the maturity
hereof.
Time is of the essence of this Note. In the event all or any part
of any installment due under the terms of this Note is delinquent for more than
fifteen (15) days (excluding the final payment of principal and interest due on
the Maturity Date), there shall be due to the Bank, in addition to the
delinquent installment or part thereof and in order to compensate the Bank for
extra costs and expenses caused by such late payment, a sum equal to four
percent (4%) of the amount so delinquent.
THIS NOTE MAY NOT BE CHANGED ORALLY AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
<PAGE> 2
The Borrower hereby waives presentment, demand, protest, notice
of demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
The Borrower agrees, in the event that this Note or any portion
hereof is collected by law or through an attorney at law, to pay all reasonable
costs of collection, including, without limitation, reasonable attorneys' fees.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed under seal, by its duly authorized officers as of the day and year
first above written.
BORROWER:
WINSTON HOTELS, INC., a North Carolina corporation
By: /s/ Joseph V. Green
-------------------------------
Senior Vice President
ATTEST:
/s/ Brenda G. Burns
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
WINN LIMITED PARTNERSHIP, a North Carolina
limited partnership (SEAL)
By: WINSTON HOTELS, INC., its sole general partner
By: /s/ Joseph V. Green
---------------------------
Senior Vice President
ATTEST:
/s/ Brenda G. Burns
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
2
<PAGE> 3
Note
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Type Interest Rate Amount Amount Amount of
of of Principal Principal Maturity Notation
Date Loan(1) Loan Borrowed Repaid Date Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------
(1) i.e., a Base Rate or Euro-Dollar Loan.
3
<PAGE> 1
EXHIBIT 10.35
NOTE
$15,000,000.00 Raleigh, North Carolina
as of January 15, 1999
For value received, the undersigned, WINSTON HOTELS, INC., a North
Carolina corporation (the "Company"), and WINN LIMITED PARTNERSHIP, a North
Carolina limited partnership (the "Partnership") (the Company and the
Partnership shall hereinafter be referred to, jointly and severally, as the
"Borrower"), jointly and severally promise to pay to the order of CENTURA BANK,
a North Carolina corporation (the "Bank"), for the account of its Lending
Office, the principal sum of FIFTEEN MILLION AND NO/100 DOLLARS
($15,000,000.00), or such lesser amount as shall equal the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below, on the dates and in the amounts provided in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Note on the dates and at the rate or rates provided for in the
Credit Agreement. Interest on any overdue principal and, to the extent permitted
by law, overdue interest on the principal amount hereof shall bear interest at
the Default Rate, as provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of Wachovia Bank,
N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other address
as may be specified from time to time pursuant to the Credit Agreement.
All Loans made by the Bank, the respective maturities thereof, the
interest rates from time to time applicable thereto and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make, or any error of the Bank in making, any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Bank Notes referred to in the Syndicated Credit
Agreement dated as of January 15, 1999, among the Borrower, the banks listed on
the signature pages thereof and their successors and assigns, Wachovia Bank,
N.A., as Agent (as the same may be amended or modified from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein with
the same meanings. Reference is made to the Credit Agreement for provisions for
the prepayment and the repayment hereof and the acceleration of the maturity
hereof.
Time is of the essence of this Note. In the event all or any part of
any installment due under the terms of this Note is delinquent for more than
fifteen (15) days (excluding the final payment of principal and interest due on
the Maturity Date), there shall be due to the Bank, in addition to the
delinquent installment or part thereof and in order to compensate the Bank for
extra costs and expenses caused by such late payment, a sum equal to four
percent (4%) of the amount so delinquent.
THIS NOTE MAY NOT BE CHANGED ORALLY AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
<PAGE> 2
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
The Borrower agrees, in the event that this Note or any portion hereof
is collected by law or through an attorney at law, to pay all reasonable costs
of collection, including, without limitation, reasonable attorneys' fees.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed under seal, by its duly authorized officers as of the day and year
first above written.
BORROWER:
WINSTON HOTELS, INC., a North Carolina corporation
By: /s/ Joseph V. Green
-------------------------------
Senior Vice President
ATTEST:
/s/ Brenda G. Burns
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
WINN LIMITED PARTNERSHIP, a North Carolina
limited partnership (SEAL)
By: WINSTON HOTELS, INC., its sole general partner
By: /s/ Joseph V. Green
Senior Vice President
ATTEST:
/s/ Brenda G. Burns
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
2
<PAGE> 3
Note
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Type Interest Rate Amount Amount Amount of
of of Principal Principal Maturity Notation
Date Loan(1) Loan Borrowed Repaid Date Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------
(1) i.e., a Base Rate or Euro-Dollar Loan.
3
<PAGE> 1
EXHIBIT 10.36
<TABLE>
<S> <C> <C>
This instrument was prepared by: William C. Matthews, Jr. North Carolina
whose address is: Womble Carlyle Sandridge & Rice, PLLC Moore County
Post Office Box 831 Onslow County
Raleigh, North Carolina 27602 Watauga County
New Hanover County
Durham County
Wake County
Forsyth County
</TABLE>
NORTH CAROLINA,
VARIOUS COUNTIES
THIS DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT and
FINANCING STATEMENT made and entered into as of the 15th day of January, 1999,
by and among WINN LIMITED PARTNERSHIP, a North Carolina limited partnership,
whose address is c/o Winston Hotels, Inc., 2209 Century Drive, Suite 300,
Raleigh, North Carolina 27612 (referred to hereinafter as the "Partnership" or
the "Grantor"), WINSTON HOTELS, INC., a North Carolina corporation (the
"Corporation"), having the same address as the Partnership, NEW SALEM, INC., a
North Carolina corporation, Trustee (hereinafter called "Trustee"), and WACHOVIA
BANK, N.A., a national banking association, as Agent (the "Agent") on behalf of
the banks referred to in that certain Syndicated Credit Agreement among the
Grantor, the Corporation (as hereinafter defined), the banks referred to therein
and being parties thereto (the "Banks"), and Wachovia Bank, N.A., as Agent (the
"Credit Agreement"), whose address is 191 Peachtree Street, N.E., Real Estate
Finance Group, Atlanta, Georgia, 30303, Attention: Syndicated Services (the
Agent is hereinafter referred to as the "Beneficiary");
RECITALS:
COLLATERAL INCLUDES FIXTURES
The Partnership and the Corporation (the Partnership and the
Corporation are collectively referred to herein as the "Borrower"), have
requested the Beneficiary make available to the Borrower credit, and the Banks
have agreed to extend to the Borrower, subject to the terms and provisions of
the Credit Agreement and any modifications, extensions or replacements thereof
executed by the Borrower, the Banks and the Beneficiary, credit of up to the sum
of ONE HUNDRED FORTY MILLION AND NO/100 DOLLARS ($140,000,000.00) (the "Facility
Limit"), as evidenced by the Borrower's promissory notes, each dated of even
date herewith, in the aggregate principal amount of ONE HUNDRED FORTY MILLION
AND NO/100 DOLLARS ($140,000,000.00) and each payable to a Bank (hereinafter
referred to as the "Bank Notes," which term shall include any and all renewals,
modifications, replacements, and extensions thereof), which sum, subject to the
terms and conditions of the Credit Agreement, may from time to time be borrowed
and repaid or reduced by partial payment and reborrowed, provided the unpaid
balance of the principal amount outstanding and secured hereby shall never
exceed such sum.
-1-
<PAGE> 2
A portion of the funds available under the Credit Agreement, and
evidenced by the Bank Notes, is also evidenced by Notes executed by the Borrower
and payable to the Agent for the benefit of the Banks (the "Term Notes," which
term shall include any and all renewals, modifications, replacements, and
extensions thereof) (the Bank Notes and any Term Notes are hereinafter
collectively referred to as the "Notes").
Borrower is therefore indebted to the Banks in the sum of ONE
HUNDRED FORTY MILLION AND NO/100 DOLLARS ($140,000,000.00), or so much thereof
as shall be advanced from time to time and remain outstanding, as evidenced by
the Borrower's Notes.
The Borrower may also become indebted and obligated to one or
more of the Banks with respect to an interest rate swap transaction, interest
rate cap transaction, interest rate floor transaction, interest rate collar
transaction or other similar transaction pursuant to an International Swap
Dealers Association, Inc. Master Agreement dated as of January 15, 1999, which
has been executed by and between the Borrower and Wachovia Bank, N.A. (the
"Existing Master Agreement") or any other International Swap Dealers
Association, Inc. Master Agreement hereafter executed by and between the
Borrower and one or more of the Banks (the Existing Master Agreement and any
such Agreement, together with all amendments and schedules thereto and
confirmations thereof from time to time, are hereinafter referred to
collectively as the "Master Agreement").
This Deed of Trust is given to secure all present and future
obligations of Borrower to the Banks and to the Beneficiary which may be
incurred from time to time pursuant to the terms of the Credit Agreement,
including but not limited to the obligations evidenced by the Notes, and also to
secure any future obligations of the Borrower to the Banks and the Beneficiary
under any Master Agreement. As provided in the Credit Agreement, the Borrower
may pay such future obligations and then reborrow from time to time under the
line of credit thereby established up to the Facility Limit (as hereinabove
defined), in accordance with the provisions of the Credit Agreement. The period
in which future obligations may be incurred and secured by this Deed of Trust is
the period between the date hereof and that date which is the earlier of (i) the
stated maturity date of the Notes, subject to extensions from time to time as
provided in the Credit Agreement, or (ii) fifteen (15) years from the date
hereof. The amount of present obligations secured by this Deed of Trust is Zero
and No/100 Dollars ($0.00), and the maximum principal amount, including present
and future obligations, which may be secured by this Deed of Trust at any one
time is the sum of (a) One Hundred Forty Million and No/100 Dollars
($140,000,000.00) plus (b) the obligations of the Borrower under any Master
Agreement, the amount of which cannot be determined at the present time but
which, for purposes of this Deed of Trust, shall not exceed Two Hundred Eighty
Million and No/100 Dollars ($280,000,000.00). Any additional amounts advanced by
the Banks or the Beneficiary pursuant to the provisions of this Deed of Trust
shall be deemed necessary expenditures for the protection of the security.
Neither Borrower nor Grantor need sign any instrument or notation evidencing or
stipulating that future advances are secured by this Deed of Trust.
Grantor desires to secure the following described obligations
(the "Obligations") by the collateral hereinafter described: (a) payment of the
Notes with interest and any renewals, modifications, replacements or extensions
thereof, in whole or in part, (b) all present and future obligations of the
Borrower to the Banks and to the Beneficiary which may be incurred from time to
time pursuant to the terms of the Credit Agreement, (c) the additional payments
hereinafter agreed
-2-
<PAGE> 3
to be made, (d) performance of the covenants and agreements of the Grantor set
out herein, and (e) any and all indebtedness, liabilities and obligations of any
and every kind and nature heretofore, now or hereafter owing, due or payable
from the Borrower, arising under, in connection with or evidenced by the Master
Agreement and any renewals, modifications or extensions thereof, in whole or in
part. Notwithstanding anything to the contrary contained herein, the Premises by
reason of the terms of this Deed of Trust shall not secure such other
indebtedness, obligations and liabilities of the Grantor or the Borrower to the
Banks or the Beneficiary that are (a) consumer credit as defined in Federal
Reserve Board Regulation Z, or (b) non-consumer credit if under applicable state
law the maximum interest rate for such credit is reduced when secured (herein
collectively referred to as the "Restricted Debt").
NOW, THEREFORE, in consideration of the premises, and the sum of
One Dollar ($1.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor has given, granted,
bargained, sold and conveyed, and by these presents does give, grant, bargain,
sell and convey unto Trustee the following property consisting of ten distinct
tracts located in various counties of North Carolina (the "Premises"):
(a) Those real properties lying and being in Moore County, Onslow
County, Watauga County, New Hanover County, Durham County, Wake County and
Forsyth County, North Carolina and described in EXHIBIT A ATTACHED HERETO AND
INCORPORATED HEREIN BY REFERENCE (collectively, the "Land"); and
(b) All buildings and other improvements now or hereafter located
in, on or about the Land, and all of Grantor's building materials intended for
incorporation but not incorporated into the improvements to the Land, and all
furnishings, furniture, fixtures, machinery, equipment, tools, and all other
personal property or chattels used in connection with the operation of such
improvements, specifically including, without limitation, appliances, gas and
electric fixtures and systems, radiators, heaters, engines and machinery,
boilers, ranges, elevators and motors, plumbing and heating fixtures and
systems, carpeting and other floor coverings, water heaters, air conditioning
apparatus and systems, window screens, awnings, storm sashes AND THE OTHER
PERSONAL PROPERTY COLLATERAL DESCRIBED IN THE SCHEDULE OF ADDITIONAL PERSONAL
PROPERTY COLLATERAL ATTACHED HERETO, whenever acquired by Grantor and now or
hereafter located in, upon or under the Land, together with all additions and
accessions thereto and replacements and proceeds thereof (the buildings and all
such tangible personal property being collectively referred to as the
"Improvements"); and
(c) (i) All leases, rents, issues, profits, royalties, income and
other benefits derived from the Land and the Improvements (which, together with
the items listed in (j) are collectively referred to as the "Rents"), subject to
the right, power and authority hereinafter given to Grantor to collect and apply
such Rents, (ii) the proceeds from any present or future insurance award
relating to the Land and the Improvements and all rights in and to all present
and future fire and/or hazard insurance
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policies; and (iii) all awards now or hereafter made by any public body or
decreed by any court of competent jurisdiction for a taking or for a degradation
of value with respect to the Land or the Improvements in any eminent domain
proceeding; and
(d) All easements, rights-of-way and rights used in connection
with the Land and the Improvements or as a means of access thereto, and all
tenements, hereditaments and appurtenances thereof and thereto; and
(e) All the rights, interest and privileges which the Grantor as
lessor has or may have in the leases now existing or hereafter made and
affecting the Land or the Improvements or any part thereof, as said leases may
have been or may from time to time be hereafter modified, extended and renewed,
together with any and all guarantees of any leases affecting all or any part of
the Land or the Improvements (collectively, the "Leases"), all security deposits
now or hereafter received in respect of any Lease, and all capital expenditure
reserve funds now or hereafter required to be established by the Grantor
pursuant to any Leases (such security deposits and such capital expenditure
reserve funds are hereinafter referred to as the "Lease Reserves/Deposits"); and
(f) All rights of the Grantor under any contracts in connection
with or relating to the construction, use, operation and/or management of the
Premises, including, without limitation, any construction contracts,
architectural contracts, management contracts, repair contracts, maintenance
contracts and service contracts; and
(g) Any and all licenses, permits and approvals relative to the
use, operation, management, repair, maintenance and/or service of the Premises;
and
(h) Any and all accounts, accounts receivable and contract rights
with respect to the Premises, and rights to money, fees, revenue, rents and
income pursuant thereto, and all records and books of account now or hereafter
maintained by the Grantor in connection with the use, operation, management,
maintenance, repair and service of the Premises; and
(i) All general intangibles, including, without limitation,
trademarks and trade names used in connection with the Premises; and
(j) All of Grantor's right, title and interests in all rents,
issues, profits, royalties, income, room revenues, bed revenues, service
revenues, food service revenues, health service revenues, hotel revenues,
government payments, rights to government payments, accounts, accounts
receivable, contract rights, general intangibles and other benefits now or
hereafter derived from the Premises and/or any operations now or hereafter
conducted thereon; and
(k) All proceeds and products of every kind and description of
the property described in (a) through (j) above.
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The term "Loan Documents" shall mean this Deed of Trust, any and
all Deeds of Trust, Deeds to Secure Debt, and/or Mortgages executed in
connection herewith as security for the Notes, the Notes, the Credit Agreement,
the Master Agreement, any security agreement, any guaranty, and all such other
agreements or documents evidencing or securing the Notes.
TO HAVE AND TO HOLD the Premises unto Trustee in fee simple
forever, upon the trusts and for the uses and purposes hereinafter set out;
And Grantor covenants with Trustee that Grantor is seized of the
Premises in fee and has the right to convey the same in fee simple; that the
same are free and clear of all encumbrances, that Grantor has done no act to
encumber the Premises and that Grantor will warrant and defend the title to the
same against the lawful claims of all persons whomsoever, and that Grantor will
execute such further issuances of said lands as may be required.
THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST, that if either
Borrower or Grantor shall pay the Obligations in accordance with their terms and
all sums owing under the Credit Agreement and shall comply with all the
covenants, terms and conditions of this Deed of Trust, this conveyance shall be
released and cancelled of record. Grantor and Borrower, as applicable, hereby
further covenant and agree with Trustee and Beneficiary as follows:
Section 1. CREDIT AGREEMENT. The terms and provisions of the
Credit Agreement are incorporated herein by reference. A default under the
Credit Agreement shall for all purposes constitute a default hereunder and under
the Obligations.
Section 2. FINANCIAL STATEMENTS. The Grantor shall provide to the
Beneficiary such financial information and financial statements with respect to
the Premises as is required by the Credit Agreement, the terms of which are
incorporated herein by reference as if fully set forth herein.
Section 3. PAYMENT OF OBLIGATIONS; IMPOSITIONS. Borrower will
pay, when due, the Obligations, and Grantor shall pay when due all real and
personal property taxes and assessments, general and special, and all other
taxes and assessments of any kind or nature whatsoever, including without
limitation non-governmental levies or assessments (hereinafter referred to as
Impositions) such as owner association dues or charges or fees and maintenance
charges which are assessed or imposed upon the Premises or the Loan Documents.
If at any time after the date hereof, there shall be assessed or imposed (the
following hereafter referred to as the "Additional Impositions") (a) a tax or
assessment on the Premises in lieu of or in addition to the Impositions payable
by Grantor or (b) a license fee, tax or assessment imposed on Beneficiary or the
Banks and measured by or based in whole or in part upon the amount of the
outstanding obligations secured hereby, Grantor shall pay and discharge all such
taxes, assessments or fees before they become delinquent. Beneficiary may, at
its option, pay any such Impositions or Additional Impositions of which payment,
amount and validity thereof the official receipt shall be conclusive evidence,
and any amounts so expended shall immediately become debts due by the Borrower,
shall bear interest at the rate specified in the Credit Agreement, and such
payment shall be secured by this Deed of Trust.
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Section 4. INSURANCE. Borrower or Grantor will cause the
Improvements to be insured against loss and damage by fire, flood, tornado and
windstorm, vandalism, malicious mischief and builder's risk (if applicable) and
against such other hazards as are customary in the locale for the Improvements
or as Beneficiary may otherwise require, including, if applicable, rent loss as
to base rent due under any Leases or business interruption for periods of no
less than twelve (12) months, in amounts at no time less than the total
replacement cost of such Improvements, plus an amount sufficient to prevent any
co-insurance liability on the part of the owner of the Premises. The Borrower
shall maintain general liability insurance in an amount satisfactory to the
Beneficiary. All insurance shall be with reputable companies with a Best
Insurance Report rating of A or better; and Borrower or Grantor will cause to be
paid all premiums for such insurance when due. Borrower shall cause such
insurance to name Beneficiary as mortgagee or loss payee and deliver such
policies or renewals or evidence of payment of premiums to Beneficiary, and
Grantor or Borrower shall make such adjustments in the coverage of such
insurance as Beneficiary may require. If Grantor fails or refuses to keep the
Premises so insured, Beneficiary may obtain such insurance without prejudice to
its right to foreclose hereunder by reason of such default. In the event of
loss, Grantor or Borrower will give immediate notice by mail to Beneficiary who,
if then named as mortgagee and additional insured, may make proof of loss if not
made promptly by Grantor, and, if the Beneficiary is then named as mortgagee and
additional insured, each insurance company concerned shall hereby be authorized
and directed to make payment for such loss directly to Beneficiary instead of to
Grantor , Borrower and Beneficiary jointly. If the Beneficiary is then named as
mortgagee and additional insured, the proceeds of any insurance, or any part
thereof, may be applied by Beneficiary, at its option, either to the reduction
of the Obligations or to the restoration or repair of the Improvements.
Beneficiary may, at its option, pay any such insurance premiums of which
payment, amount and validity thereof the official receipt shall be conclusive
evidence, and any amounts so expended shall immediately become debts due by
Borrower, shall bear interest at the rate specified in the Credit Agreement, and
such payment shall be secured by this Deed of Trust.
If any portion of the Improvements is located in a special flood
hazard area according to the Federal Emergency Management Agency ("FEMA"), then
the Grantor or Borrower must maintain a flood insurance policy in an amount
equal to the lesser of (x) the Facility Limit plus the outstanding principal
balance of any senior liens on the Premises or (y) the replacement value of the
Improvements located in a special flood hazard area. If at any time during the
term of the Obligations, the Improvements are classified by FEMA as being
located in a special flood hazard area, flood insurance will be mandatory.
Should this occur federal law requires the Beneficiary to notify the Grantor or
Borrower of the reclassification. If, within forty-five (45) days of receipt of
notification from the Beneficiary that any portion of the Improvements has been
reclassified by the FEMA as being located in a special flood hazard area, the
Grantor or Borrower has not provided sufficient evidence of flood insurance, the
Beneficiary is mandated under federal law to purchase flood insurance on behalf
of the Grantor, and any amounts so expended shall immediately become debts of
the Borrower, shall bear interest at the rate specified in the Credit Agreement,
and payment thereof shall be secured by this Deed of Trust.
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Section 5. MAINTENANCE OF PREMISES; COMPLIANCE WITH LAWS. Grantor
will keep the Premises in good order, repair and condition, reasonable wear and
tear excepted and shall not commit or permit any waste. Grantor will also comply
with all applicable laws, statutes, ordinances, codes, and judicial and
administrative decisions (including without limitation and as applicable, all
such laws, statutes, judicial and administrative decisions relating to the
physical accessibility requirements of Title III of the Americans with
Disabilities Act of 1990 (as amended) and the implementing regulations
promulgated thereunder by the Department of Justice and the Americans with
Disabilities Act Accessibility Guidelines (ADAAG) associated therewith and the
applicable ANSI Standards under the Fair Housing Act (as amended) and all
applicable regulations) of all applicable state, federal or local governmental
entities (the "Requirements"). Grantor will not make material changes to the
Premises, change the use of the Premises, or consent to a change in zoning of
the Premises without the Beneficiary's prior written consent. Grantor shall
immediately provide notice of proposed zoning changes to the Beneficiary.
Section 6. CONVEYANCE OF PREMISES. Grantor will not sell, convey,
transfer or encumber the Premises, or any part thereof or interest therein,
legal or equitable, without the prior written consent of Beneficiary; provided,
however, that Grantor may dispose of, free and clear of the security interest
granted herein and the lien hereof, any personal property or fixtures which, in
the reasonable judgment of Grantor, have become obsolete or unfit for use or
which are no longer useful in Grantor's operations, on the condition that
Grantor shall replace such personal property or fixtures by, or substitute for
the same, other personal property or fixtures (not necessarily of the same
character) owned by Grantor, which shall (a) be of at least equal value to the
personal property or fixtures disposed of and (b) perform a function or serve a
purpose the same as, similar to or related to that of the personal property or
fixtures disposed of. Any such replacement personal property or fixtures shall
forthwith, without further action, become subject to the security interest
granted in, and the lien created by, this Deed of Trust, and such security
interest is hereby granted by Grantor. Beneficiary's consent to any conveyance
or encumbrance may be conditioned upon an increase in the interest rate
specified in the Credit Agreement, an extension or curtailment of the maturity
of the Obligations, or other modification of the Notes, the Credit Agreement or
this Deed of Trust. For purposes of this Section 6, a change of ownership of
partnership interests in Grantor shall not be deemed a conveyance or transfer of
the Premises so long as the Corporation shall remain as the sole general partner
of the Grantor.
Section 7. HAZARDOUS MATERIAL.
7.01 REPRESENTATIONS AND WARRANTIES. Grantor and Borrower
represent, warrant and agree that (a) no Hazardous Material (as hereinafter
defined) has been used or placed on the Premises in violation of Environmental
Laws (as hereinafter defined); (b) there are no unregistered underground storage
tanks on the Premises that are subject to any underground storage tank
registration laws or regulations; (c) no notice has been received with regard to
any Hazardous Material on the Premises; (d) the Premises are presently in
compliance with Environmental Laws; (e) no action, investigation or proceeding
is pending or to Grantor's or Borrower's knowledge threatened which seeks to
enforce any right or remedy against Grantor or the Premises under any
Environmental Law; (f) Grantor shall permit no installation or placement of
Hazardous Material on
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the Premises in violation of Environmental Laws; (g) Grantor shall permit no
release of Hazardous Material onto or from the Premises; (h) Grantor shall cause
the Premises to comply with Environmental Laws and be free and clear of any
liens imposed pursuant to Environmental Laws; (i) all licenses, permits and
other governmental or regulatory actions necessary for the Premises to comply
with Environmental Laws (the "Permits") shall be obtained and maintained and
Grantor shall assure compliance therewith; and (j) Grantor shall give
Beneficiary prompt written notice if Grantor receives any notice with regard to
Hazardous Material on, from or affecting the Premises and shall conduct and
complete all investigations and all cleanup actions necessary to remove, in
accordance with Environmental Laws, such Hazardous Material from the Premises.
7.02 INSPECTIONS AND AUDITS. Beneficiary shall have the right at
any time during the term of this Deed of Trust, whether before or after default,
to conduct or cause to be conducted an environmental inspection or audit of the
Premises by itself or by a qualified environmental consultant or engineer
selected by Beneficiary; and Grantor hereby grants to Beneficiary and its
employees, agents, and independent contractors (hereinafter collectively called
"Beneficiary and its Representatives"), the right to enter the Premises upon
reasonable notice for the purpose of conducting, whether before or after
default, any inspection, audit or tests, making soil borings, extracting
samples, installing monitoring wells, and conducting such other procedures as
Beneficiary and its Representatives deem necessary or desirable in connection
with such inspection or audit. At any time during the term of this Deed of
Trust, provided Beneficiary has a reasonable basis for doing so, Beneficiary may
require Grantor or Borrower to cause to be performed, at the expense of Grantor
or Borrower, for the benefit of Grantor, Borrower and Beneficiary, an inspection
or audit of the Premises by an environmental consultant or engineer approved by
Beneficiary, and Grantor shall furnish to Beneficiary, at no cost to
Beneficiary, the written inspection or audit report certifying as to the
presence or absence of Hazardous Material on, at, or under the Premises. All
inspection reports may be submitted to governmental entities or agencies as
requested or as may be required by law or regulations.
7.03 INDEMNIFICATION. Grantor and Borrower, jointly and
severally, shall indemnify and hold harmless Beneficiary from and against all
losses, expenses (including, without limitation, attorneys' fees) and claims of
every kind suffered by or asserted against Beneficiary as a direct or indirect
result of (i) the presence on or release from the Premises of any Hazardous
Material, whether or not caused by Grantor or Borrower, (ii) the violation of
Environmental Laws applicable to the Premises, whether or not caused by Grantor
or Borrower, (iii) the requirement to conduct any remediation of Hazardous
Materials from the Premises, (iv) the failure by Grantor or Borrower to comply
fully with the terms and provisions of this section, or (v) any warranty or
representation made by Grantor or Borrower in this section being false or untrue
in any material respect.
7.04 DEFINITIONS; SURVIVAL OF PROVISIONS. "Hazardous Material"
means polychlorinated biphenyls, petroleum, flammable explosives, radioactive
materials, asbestos, lead and any hazardous, toxic or dangerous waste, substance
or material defined as such in (or for purposes of) Environmental Laws or listed
as such by the Environmental Protection Agency. "Environmental Laws" means any
current or future federal, state or local law, regulation or ruling
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applicable to environmental conditions on, under or about the Premises
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Toxic Substances Control Act and the Clean Water Act. Grantor's and Borrower's
obligations under this section shall survive the repayment of the Notes and
other Obligations, a foreclosure of or exercise of power of sale under this Deed
of Trust, a delivery of a deed in lieu of foreclosure, a cancellation or
termination of record of this Deed of Trust and a transfer of the Premises.
Section 8. MARSHALING; MULTIPLE-TRACT PROVISIONS. It is
specifically covenanted and agreed (i) that the Beneficiary may proceed, at the
same or at different times, to foreclose this Deed of Trust, or any other
mortgage, deed to secure debt or deed of trust with respect to other property
given to further secure the indebtedness also secured hereby (the "Other Deeds
of Trust"), by any proceedings appropriate in the state where any of the
properties now or hereafter encumbered as security for the Notes (the "Tracts")
lies , (ii) that no exercise of remedies granted in this Deed of Trust or the
Other Deeds of Trust taking place in any state [including, without limiting the
generality of the foregoing, any pending foreclosure, judgment or decree of
foreclosure, foreclosure sale, rents received, possession taken, deficiency
judgment or decree, or judgment taken on the indebtedness secured hereby], shall
in any manner stay, preclude or bar enforcement of this Deed of Trust or the
Other Deeds of Trust in any other proceeding, and (iii) that the Beneficiary may
pursue any or all its remedies to the maximum extent permitted by state law
until all the debt now or hereafter secured by any or all of the Loan Documents
has been paid and discharged in full.
Neither the Grantor, nor any person claiming under the Grantor,
either has or enjoys any right to marshaling of assets, all such right being
hereby expressly waived as to the Grantor and all persons claiming under or
through the Grantor. No release of personal liability of any person whatever and
no release of any portion of the property now or hereafter subject to the lien
of any of the loan documents shall have any effect whatever by way of impairment
or disturbance of the lien or priority of this Deed of Trust or any of the Other
Deeds of Trust. Any foreclosure or other appropriate remedy brought with respect
to any Tract may be brought and prosecuted as to any part of the collateral
securing the indebtedness also secured by, wherever located, without regard to
the fact that foreclosure proceedings or other appropriate remedies have or have
not been instituted on any other tract subject to the lien of this Deed of Trust
or the Other Deeds of Trust.
Section 9. ASSIGNMENT OF RENTS, LEASES, AND PROFITS.
9.01 ASSIGNMENT. As further security for the payment of the
Obligations and for the faithful performance of all the covenants, agreements,
terms and provisions of this Deed of Trust, Grantor hereby sells, transfers and
assigns unto Beneficiary all the right, title and interest of Grantor in and to
the Rents, and to that end Grantor hereby assigns and sets over unto Beneficiary
all Leases of the Premises now made, executed or delivered, whether written or
verbal, or hereafter made, whether written or verbal, specifically including,
but not limited to, those certain lease agreements between the Grantor and
CapStar Winston Company, L.L.C., and Grantor does hereby authorize and empower
Beneficiary to collect the Rents when due, and does hereby direct each tenant of
the Premises to pay the Rents to Beneficiary, upon demand for payment thereof by
Beneficiary; it being
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understood and agreed, however, that no such demand shall be made absent the
occurrence of an Event of Default hereunder; and until such demand is made,
Grantor is authorized to collect or continue collecting the Rents; such
privilege to collect or continue collecting the Rents by Grantor shall not
operate, however, to permit the collection of any Rents more than thirty (30)
days in advance of their due date.
It is intended that the assignment set forth above be an
absolute, present assignment from Grantor to the Beneficiary and not merely the
passing of a security interest. The rents, issues, income and profits are hereby
assigned absolutely by Grantor to the Beneficiary contingent only upon the
occurrence of an Event of Default. Immediately upon the occurrence of an Event
of Default, the Grantor's right to collect the rents, income and profits from
the Leases and to retain, use and enjoy the same shall at the Beneficiary's
option immediately cease and terminate, and the Beneficiary's absolute, present
and continuing right to collect the rents, issues, income and profits shall
continue in full force and effect, and the Beneficiary shall be entitled at its
option to collect such rents, issues, income and profits without taking
possession of the Premises, without the appointment of a receiver and without
any further act whatsoever. Notwithstanding anything to the contrary set forth
in this Deed of Trust, or any other document executed in connection herewith,
there shall be no cure or grace period with respect to Grantor's default which
must expire prior to the Beneficiary's right to collect the rents, issues,
income and profits and there shall be no condition precedent other than
Grantor's default to the Beneficiary's right to collect such rents, issues,
income and profits. The Grantor may apply in writing to the Beneficiary for a
reinstatement of the Grantor's right to collect the rents, income and profits
from the Leases and to retain, use and enjoy the same; however, the Beneficiary
shall be under no obligation to do so.
Anything to the contrary notwithstanding, Grantor hereby assigns
to the Beneficiary any award made hereafter to it in any court procedure
involving any of the Leases in any bankruptcy, insolvency, or reorganization
proceedings in any state or Federal court and any and all payments made by
lessees in lieu of rent. Grantor appoints the Beneficiary as its irrevocable
attorney in fact to appear in any action and/or to collect any such award or
payment. Grantor hereby assigns to the Beneficiary all Lease Reserves/Deposits
received by Grantor or any agent in respect of any Leases. Prior to an Event of
Default hereunder or under the Credit Agreement or under any other Obligations
and demand by the Beneficiary for delivery of the Lease Reserves/Deposits to it
or its designee, Grantor shall maintain the Lease Reserves/Deposits in a
separate, identifiable account in a bank acceptable to Beneficiary. After
default and upon demand by the Beneficiary, Grantor shall deliver the Lease
Reserves/Deposits to the Beneficiary or its designee. Upon delivery of the Lease
Reserves/Deposits to Beneficiary, the Beneficiary shall hold such deposits
pursuant to the terms of the Leases in respect of which such deposits were
obtained by Grantor. Provided, however, in no event shall Beneficiary be liable
under any Lease of any part of the Premises for the return of any Lease
Reserves/Deposits in any amount in excess of the amount delivered to the
Beneficiary by Grantor. Any Lease Reserves/Deposits delivered to and held by the
Beneficiary shall not bear interest. The Beneficiary shall be entitled to
exercise its rights under this Section 9, to the fullest extent permitted by
law, without the need for the commencement of foreclosure action hereunder or
the undertaking of any other remedy available at law or equity.
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9.02 LEASES AFFECTING PREMISES. Grantor shall promptly and fully
keep, perform and comply with and observe all the terms and covenants and
obligations imposed upon or assumed by Grantor as landlord under the Leases and
will not do, permit anything to be done, or omit or refrain from doing anything,
the doing or omission of which will entitle any tenant to terminate any of the
Leases. Grantor, if requested by Beneficiary, shall furnish promptly to
Beneficiary executed copies of all such Leases, renewals, or amendments now
existing or hereafter created, all of which shall be subject to the approval of
the Beneficiary.
9.03 SEPARATE ASSIGNMENT OF LEASES. Grantor will, upon request of
the Beneficiary, execute a separate assignment of any Lease affecting any part
of the Land or Improvements. A default under any separate assignment of
Grantor's interest in leases given as additional security for the Notes and
other Obligations shall constitute an Event of Default hereunder.
9.04 REPRESENTATIONS. The Grantor covenants and represents that:
(a) Grantor has full right and title to assign the
Leases and the rents, issues, income and profits due or to become due
thereunder;
(b) The terms of the Leases have not been changed
from the terms in the copies of the Leases submitted to the Banks for approval;
(c) No other assignment of any interest in the
Leases has been made;
(d) There are no existing defaults under the
provisions of any of the Leases on the part of the Grantor as landlord
thereunder and, to the best of Grantor's knowledge, there are no existing
defaults on the part of the tenants/lessees under the provisions of any of the
Leases;
(e) The Grantor will not without the prior written
consent of the Beneficiary cancel, surrender or terminate any of the Leases, or
exercise any option which might lead to such termination, or change, alter or
modify any of the Leases, or consent to the release of any party liable
thereunder, or consent to the assignment of any lessee's interest therein;
(f) No tenant has been granted a concession in the
form of a waiver, release, reduction, discount or other alteration of rental due
or to become due under any Lease;
(g) No rent for any period subsequent to the date
of this Deed of Trust has been collected more than one month in advance of the
time when the same is due under the terms of the Leases;
(h) To the best of Grantor's knowledge, no lessee
has any defense, setoff or counterclaim against Grantor under any Lease; and
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(i) Grantor shall give prompt written notice to
Beneficiary of any notice of Grantor's default received from any tenant and will
furnish Beneficiary with a complete copy thereof.
Section 10. RIGHT TO CURE; PROTECTION OF SECURITY. If Grantor or
Borrower, as applicable, shall fail in any of the covenants and provisions
contained in this Deed of Trust, Beneficiary may (but shall not be obligated to)
take any action Beneficiary deems necessary or desirable to prevent or cure any
such default or failure. Beneficiary shall have the right to enter upon the
Premises to such extent and as often as Beneficiary, in its sole discretion,
deems necessary or desirable in order to prevent or cure any such default or
failure by Grantor or Borrower, as applicable. In addition, if any legal
proceeding (such as bankruptcy, condemnation, forfeiture or other legal or
regulatory proceeding) that may affect Beneficiary's rights or interests in the
Premises (or any part thereof) is commenced, Beneficiary may act to protect or
preserve such rights or interests (including, without limitation, the employment
of an attorney or other professional(s)). Beneficiary may expend such sums of
money as Beneficiary, in its sole discretion, deems necessary for any such
purpose, and Grantor and Borrower, jointly and severally, hereby agree to pay to
Beneficiary, immediately upon demand, all sums so expended by Beneficiary,
together with interest thereon from the date of each such payment at the rate
provided for in the Credit Agreement. All sums so expended by Beneficiary, and
the interest thereon, shall be added to and secured by the lien of this Deed of
Trust.
Section 11. CONDEMNATION. Upon condemnation of the Premises or
any part thereof, this Deed of Trust shall become a lien, charge and encumbrance
upon the proceeds or award realized as a result of any such proceeding or of any
settlement or payment made in lieu of any such proceeding ("Condemnation
Proceeds"). Grantor hereby grants to Beneficiary a security interest in any
Condemnation Proceeds and hereby agrees to execute such further assignments of
the Condemnation Proceeds as Beneficiary may require. Grantor further covenants
and agrees that Beneficiary may (and is hereby authorized and empowered but not
required to) collect and receive any Condemnation Proceeds and, if received by
Grantor, Grantor shall pay over and deliver immediately to Beneficiary all
Condemnation Proceeds to be held by Beneficiary and applied as follows:
(a) In the event the entire Premises shall be taken by
condemnation or in settlement of any threat of condemnation, then any
Condemnation Proceeds shall be paid to Beneficiary and applied in payment in
whole or in part to the Obligations, whether or not then due and payable, and
any excess shall be delivered to the parties legally entitled thereto. In the
event of a partial taking of the Premises, the portion of the Condemnation
Proceeds necessary to prevent impairment of the security of this Deed of Trust,
as determined by the Beneficiary in the Beneficiary's sole discretion, shall be
set aside, withheld or paid over to the Beneficiary and applied to the
Obligations, whether or not then due and payable, and the excess of such award
or proceeds shall be delivered to Grantor or other parties legally entitled
thereto. Upon any partial taking of the Premises, this Deed of Trust shall
continue in full force as security for the unpaid portion of the Obligations.
Upon any partial taking of the Premises, Grantor covenants with Beneficiary to
restore
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the Premises as nearly as possible to the condition thereof immediately prior to
such taking and to apply Grantor's portion of any Condemnation Proceeds together
with any other necessary funds to complete and pay for the costs of restoration.
(b) Notwithstanding any contrary provision of this Deed of Trust,
(i) upon condemnation of the entire Premises, or (ii) if it shall at any time be
determined that N.C. Gen. Stat. Sec. 40A-68 shall for any reason be
unenforceable or inapplicable to this Deed of Trust, upon partial condemnation
of the Premises, the entire unpaid balance of the Obligations shall, at the
option of Beneficiary, at once become due and payable, whereupon any
Condemnation Proceeds shall be paid over to Beneficiary and applied in
accordance with the first sentence of subparagraph (a) of this Section 11.
Section 12. INSPECTION. Beneficiary may inspect the Premises at
all reasonable times, and access thereto shall be permitted for that purpose to
Beneficiary and its Representatives.
Section 13. EVENTS OF DEFAULT. The following shall constitute
defaults or events of default hereunder ("Events of Default"):
(a) Failure by Borrower to pay when due any payment of interest,
principal, principal and interest, commitment fees, deposits or other payments
which are due and payable under any of the Notes, the Credit Agreement, the
Master Agreement, this Deed of Trust, the other Obligations, any of the Loan
Documents or any documents executed in connection therewith or as security
therefor after the passage of any applicable cure period for such default
specifically set out in the Credit Agreement.
(b) Failure by Grantor or Borrower to keep, perform or observe
any covenant, term or condition required to be kept, performed or observed by
Grantor or Borrower under this Deed of Trust, the Notes, the Credit Agreement,
the Master Agreement, any of the other Loan Documents or any documents executed
in connection therewith or as security therefor after the passage of any
applicable cure period for such default specifically set out in the Credit
Agreement.
(c) The occurrence of any event or condition which would allow
Beneficiary to accelerate the Notes or other Obligations, or would constitute a
default or event of default after the passage of any applicable cure period for
such default specifically set out in the Credit Agreement under the terms of the
Notes, the other Obligations, this Deed of Trust, the Master Agreement, any of
the Loan Documents, any other loan agreement or any documents executed in
connection therewith or as security therefor.
(d) The occurrence of an Event of Default under the Credit
Agreement.
(e) If any representation, warranty or certificate given by
Grantor or Borrower, or at any time hereafter required to be given by Grantor or
Borrower in connection with the Credit Agreement shall be false or erroneous in
any material respect when made.
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(f) A breach of or a failure of performance by Grantor or
Borrower of any provision of or the occurrence of any default under the terms
and provisions of any documents, instruments, security agreements, mortgages or
deeds of trust granting security interests in or liens upon the Premises or any
part thereof, whether prior to or subordinate to the lien of this Deed of Trust
or the lien of any Deed of Trust, Deed to Secure Debt, or Mortgage executed in
connection with the Loan Documents.
(g) Any attempted enforcement of or realization upon any security
interest, lien or judgment affecting the Premises or any part thereof, whether
prior to or subordinate to the lien of this Deed of Trust.
(h) Any actual or threatened demolition or injury or waste to the
Premises which may impair the value of the Premises.
(i) Grantor, Borrower, or any guarantor (if a corporation or a
limited liability company) commences the process of liquidation or dissolution
or its charter expires or is revoked, or Grantor, or Borrower, or any guarantor
(if a partnership or business association) commences the process of dissolution
or partition, or Grantor, Borrower, or any guarantor (if a trust) commences the
process of termination or expires.
(j) The institution of any proceeding seeking the forfeiture of
the Premises or any portion thereof or any interest therein as a result of any
criminal or quasi-criminal activity by Grantor, Borrower (or any person so
related to Grantor, Borrower, or the Premises) that the Premises or any portion
thereof or any interest therein might be forfeited on account of the activity of
such person.
Section 14. ACCELERATION. If an Event of Default shall have
occurred, the Obligations shall, at the option of Beneficiary, immediately
become due and payable without further notice or demand, time being of the
essence of this Deed of Trust; and no omission on the part of Beneficiary to
exercise such option when entitled to do so shall be construed as a waiver of
such right. Upon the occurrence of an Event of Default, the Beneficiary may, at
its option, defer application by it to the Trustee to sell the Premises and may
take action under and invoke such other rights and remedies as may be provided
in the Credit Agreement, this Deed of Trust, or any of the Loan Documents.
Section 15. POWER OF SALE. Upon the occurrence of an Event of
Default, Beneficiary may notify Trustee to exercise the power of sale granted
hereunder and upon such notification it shall be lawful for and the duty of
Trustee, and Trustee is hereby authorized and empowered to expose to sale and to
sell the Premises or any part thereof at public sale to the highest bidder for
cash, in compliance with applicable requirements of North Carolina law governing
the exercise of powers of sale contained in deeds of trust and upon such sale,
Trustee shall collect the purchase proceeds and convey title to the portion of
the Premises so sold to the purchaser in fee simple. In the event of a sale of
the Premises or any part thereof, the proceeds of sale shall be applied in the
following order of priority: (i) to the payment of all costs and expenses for
and in connection with such sale, including a commission for Trustee's services
as hereinafter provided and reasonable attorneys' fees
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incurred by Trustee for legal services actually performed; (ii) to the
reimbursement of Beneficiary for all sums expended or incurred by Beneficiary
under the terms of this Deed of Trust or to establish, preserve or enforce this
Deed of Trust or to collect the Obligations (including, without limitation,
reasonable attorneys' fees); (iii) to the payment of the Obligations and
interest thereon and all other indebtedness hereby secured; and (iv) the
balance, if any, shall be paid to the parties lawfully entitled thereto. In the
event of a sale hereunder, Beneficiary shall have the right to bid at such sale
and shall have the right to credit all or any portion of the indebtedness
secured hereby against the purchase price. Trustee shall have the right to
designate the place of sale in compliance with applicable law and the sale shall
be held at the place designated by the notice of sale. Trustee may require the
successful bidder at any sale to deposit immediately with Trustee cash or
certified check or cashier's check in an amount up to five percent (5%) of the
bid provided notice of such deposit requirement is published as required by law.
The bid may be rejected if the deposit is not immediately made. Such deposit
shall be refunded in case of a sale to another purchaser pursuant to an upset
bid or if Trustee is unable to convey the portion of the Premises so sold to the
bidder because the power of sale has been terminated in accordance with
applicable law. If the purchaser fails to comply with its bid, the deposit may,
at the option of Trustee, be retained and applied to the expenses of the sale
and any resales and to any damages and expenses incurred by reason of such
default (including the amount that such bid exceeds the final sales price), or
may be deposited with the Clerk of Superior Court. In all other cases, the
deposit shall be applied to the purchase price. Pursuant to Section 25-9-501(4)
of the North Carolina General Statutes (or any amendment thereto), Trustee is
expressly authorized and empowered to expose to sale and sell, together with the
real estate, any portion of the Premises which constitutes personal property. If
personal property is sold hereunder, it need not be at the place of sale.
The Premises may be sold in such parcels or lots without regard
to principles of marshalling and may be sold at one sale or in multiple sales,
all as determined by Trustee. A previous exercise of the power of sale hereunder
by Trustee shall not be deemed to extinguish the power of sale which power of
sale shall continue in full force and effect until all the Premises shall have
been finally sold and properly conveyed to the purchasers at the sale. The
Trustee shall be entitled to a reasonable commission for a completed or
uncompleted foreclosure.
Section 16. APPOINTMENT OF RECEIVER. Beneficiary shall have the
right, after the occurrence of an Event of Default, to the appointment of a
receiver to collect the Rents from the Premises and to operate and manage the
Premises without notice to Grantor, Borrower or any other party (Grantor and
Borrower hereby waiving any right to such notice) and without consideration of
the value of the Premises or the solvency of any person liable for the payment
of the amounts then owing, and all amounts collected by the receiver shall,
after expenses of the receivership, be applied to the payment of the
Obligations. The Beneficiary, at its option, in lieu of an appointment of a
receiver, shall also have the right to take all actions set forth in the
previous sentence. If such receiver should be appointed, or if there should be a
sale of the Premises, as provided in Section 15, Grantor, or any person in
possession of the Premises thereunder, as tenant or otherwise, shall become a
tenant at will of the receiver or of the purchaser and may be removed by a writ
of ejectment, summary ejectment or other lawful remedy.
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Section 17. DELAY NOT TO OPERATE AS WAIVER; INDEMNIFICATION OF
TRUSTEE AND BENEFICIARY. No delay or forbearance by Beneficiary in exercising
any rights hereunder or otherwise afforded by law, shall operate as a waiver
thereof or preclude the exercise thereof during the continuance of any default
hereunder, and all such rights shall be cumulative. In case Beneficiary or
Trustee voluntarily or otherwise shall become a party to any suit or legal
proceeding to protect the Premises or the lien of this Deed of Trust, Trustee
and Beneficiary shall be saved harmless and reimbursed by Grantor and Borrower
for any amounts paid, including all reasonable costs, charges and attorneys'
fees incurred in any such suit or proceeding, which obligations shall be secured
by this Deed of Trust. No right, power or remedy conferred upon or reserved to
Beneficiary by this Deed of Trust, or the Notes, the Credit Agreement or any
separate assignment of rents and leases or the other Loan Documents is intended
to be exclusive of any other right, power or remedy, but each and every such
right, power and remedy shall be cumulative and concurrent and shall be in
addition to any other right, power and remedy given hereunder or now or
hereafter existing at law or in equity or by statute. No act of the Beneficiary
shall be construed as a waiver or as an election to proceed under any provision
herein or the other documents evidencing the loan or securing same to the
exclusion of any other provisions, and Beneficiary shall be entitled to enforce
all remedies severally or concurrently as it shall see fit. No release or
subordination by Beneficiary of any part of the Premises or any other property,
collateral, or obligation securing the Notes or any other indebtedness secured
by this Deed of Trust shall release or impair the lien or title of unreleased
property.
Section 18. BENEFICIARY'S POWERS. Without affecting the liability
of any other person liable for the payment of the Obligations, and without
affecting the lien or charge of this Deed of Trust upon any portion of the
Premises not then or theretofore released as security for the Obligations,
Beneficiary may, from time to time and without notice, (i) release any person so
liable, (ii) extend the maturity or alter any of the terms of the Obligations,
(iii) grant other indulgences, (iv) release or reconvey (or cause to be released
or reconveyed at any time at Beneficiary's option) any part or all of the
Premises, (v) take or release any other or additional security for any of the
Obligations, (vi) make compositions or other arrangements with debtors in
relation thereto, or (vii) advance additional funds to protect the security
hereof or pay or discharge the obligations of Grantor or Borrower hereunder, or
under the Obligations or any document executed in connection with or securing
the Obligations, and all amounts so advanced, with interest thereon at the
applicable rate set forth in the Credit Agreement, shall be secured hereby.
Whenever in this Deed of Trust or any other Loan Document the
Grantor is obligated to reimburse the Beneficiary for sums advanced, with
interest at the "applicable rate set forth in the Credit Agreement" (or similar
provision), interest on such sums shall be calculated as a LIBOR Loan (as
defined in the Credit Agreement), unless an Event of Default has occurred. Upon
the occurrence of such an Event of Default, interest shall accrue at the Default
Rate (as defined in the Credit Agreement).
Section 19. WAIVERS. Grantor and Borrower hereby waive any rights
or remedies on account of any extensions of time, releases granted or other
dealings between Beneficiary and any subsequent owner of the Premises as said
activities are contemplated or otherwise addressed in N.C. Gen. Stat. Sec.
45-45.1 or any similar or subsequent law. The foregoing waiver shall not be
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construed as affecting or otherwise amending the covenants of Grantor contained
in Section 6 hereof. Grantor and Borrower waive the benefit of all laws now
existing or that hereafter may be enacted providing for (i) any appraisement
before sale of any portion of the Premises and (ii) in any way extending the
time for the enforcement of the collection of the Notes or the debt evidenced
thereby or any of the other Obligations. To the full extent Grantor and Borrower
may do so, Grantor and Borrower agree that Grantor and Borrower will not at any
time insist upon, plead, claim or seek to take the benefit or advantage of any
law now or hereafter in force providing for any exemption (including homestead
exemption), appraisement, valuation, stay, extension, redemption or extension,
and Grantor, Borrower, Grantor's and Borrower's heirs, devisees,
representatives, successors and assigns, and for any and all persons claiming
any interest in the Premises, to the extent permitted by law, hereby waive and
release all rights of valuation, appraisement, redemption, stay of execution,
notice of election to mature or declared due the whole of the secured
indebtedness and marshalling in the event of foreclosure of the liens hereby
created. Grantor and Borrower further waive any and all notices including,
without limitation, notice of intention to accelerate and of acceleration of the
Notes and other Obligations.
Section 20. INTEREST NOT TO EXCEED MAXIMUM ALLOWED BY LAW. The
parties hereto shall in no event be deemed to have contracted for a greater rate
of interest than the maximum rate permitted by law. Should a greater amount be
collected, it shall be construed as a mutual mistake of the parties and the
excess shall be returned to the party paying same.
Section 21. ESCROW OF TAXES, INSURANCE. The Grantor, in order to
more fully protect the security of this Deed of Trust, agrees that in addition
to the scheduled payments of principal and/or interest, as the case may be,
under the terms of the Credit Agreement or other Obligations, Grantor will, upon
request of Beneficiary, pay on the first day of each month, or on the due date
of scheduled payments of principal and/or interest, to Beneficiary a sum equal
to one-twelfth of the known or estimated (by Beneficiary) yearly taxes,
assessments and insurance premiums on or against the Premises. Beneficiary shall
hold such payments (and Grantor does hereby expressly agree that Beneficiary
shall be under no obligation to pay interest thereon and any interest earned
shall belong to the Beneficiary) and shall apply the same to the payment of
taxes, assessments and insurance premiums as and when due. If the total of such
monthly payments shall exceed the amount needed, the excess shall be held for
future needs; but, should such monthly payments at any time fail to provide
sufficient funds to pay taxes, assessments and insurance premiums when due, then
Grantor shall, upon demand, pay to Beneficiary the amount necessary to cover the
deficiency. When Grantor shall have paid the Obligations, Beneficiary shall
refund to Grantor or other person lawfully entitled thereto any excess funds
accumulated hereunder. In the event of a foreclosure sale of the Premises,
Beneficiary may apply any balance remaining of the funds accumulated for the
above purposes to the payment of the Obligations.
Section 22. SUBSTITUTION OF TRUSTEE. Beneficiary shall at any
time have the irrevocable right to remove Trustee herein named without notice or
cause and to appoint its successor by an instrument in writing, duly
acknowledged and recorded.
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Section 23. RESTORATION TO FORMER POSITIONS. In case Beneficiary
shall have proceeded to enforce any right or remedy under this Deed of Trust by
suit, receiver, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to Beneficiary, then and in every such case, Grantor and Beneficiary shall be
restored to their former positions and rights hereunder, and all rights, powers
and remedies of Beneficiary shall continue as if no such proceeding had been
taken.
Section 24. GREATER ESTATE. In the event that Grantor or Borrower
is the owner of a leasehold estate with respect to any portion of the Premises
and Grantor or Borrower obtains a fee estate in such portions of the Premises,
then, such fee estate shall automatically, and without further action of any
kind on the part of the Grantor or Borrower, be and become subject to the
security title and lien hereof.
Section 25. SECURITY AGREEMENT.
25.01 SECURITY AGREEMENT. This Deed of Trust shall constitute a
security agreement pursuant to the Uniform Commercial Code for any items
constituting a part of the Premises which, under applicable law, may be
subjected to a security interest pursuant to the Uniform Commercial Code, and
Grantor hereby grants Beneficiary a security interest in such items, including
but not limited to those items in granting clauses (b) through (k) of this Deed
of Trust, which constitute a portion of the Premises (the "Collateral"). Without
the prior written consent of Beneficiary, Grantor shall not create or suffer to
be created any other security interest in such items, including replacements and
additions thereto. In exercising such remedies, Beneficiary may proceed against
the real property and personal property described herein separately or together
and in any order whatsoever, without in any way affecting the availability of
Beneficiary's remedies under the Uniform Commercial Code or herein. This Deed of
Trust shall constitute a financing statement filed as a fixture filing in
accordance with N.C. Gen. Stat. ss.25-9-402 (or any amendment thereto). For
purposes of complying with the requirements of N.C. Gen. Stat. ss.25-9-402, the
name of Grantor, as Debtor, and Beneficiary, as Secured Party, and the
respective addresses of Grantor, as Debtor, and Beneficiary, as Secured Party,
are set forth on the first page of this Deed of Trust; the types or items of
Collateral are described in this Section and in the definition of the "Premises"
appearing in the granting clauses of this Deed of Trust; and the description of
the Land is set forth on Exhibit "A" attached hereto. The Collateral is or
includes fixtures.
25.02 REMEDIES. In case any one or more Events of Default under
the Notes, the Credit Agreement, other Obligations and/or this Deed of Trust
shall have occurred and be continuing beyond any applicable cure period
therefor, the Beneficiary shall have, in addition to all other rights and
remedies given to it by this Deed of Trust, those allowed by law, and the rights
and remedies of a secured party under the Uniform Commercial Code as enacted and
in effect in the applicable jurisdiction, and, without limiting the generality
of the foregoing, the Beneficiary may immediately, without demand of performance
and without other notice (except as set forth in the Notes, the Credit
Agreement, the other Obligations, this Deed of Trust or other documents executed
and delivered pursuant thereto or in connection therewith) or demand whatsoever
to Grantor, all of which are hereby expressly waived, and without advertisement,
sell at public or private sale or otherwise
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realize upon in the county where the Premises are located, or elsewhere, the
whole or, from time to time, any part of the Collateral, or any interest which
Grantor may have therein, and, after deducting from the proceeds of sale or
other disposition of the Collateral all expenses (including all reasonable
expenses for legal services), shall apply the residue of such proceeds towards
the satisfaction of the Notes and any other sums secured by this Deed of Trust.
The remainder, if any, of the proceeds after satisfaction in full of the Notes
and any other sums secured by this Deed of Trust shall be paid to Grantor.
Notice of any sale or other disposition shall be given to Grantor at least ten
days before the time of any intended public sale or the time any intended
private sale or other disposition of the Collateral is to be made, which the
Grantor hereby agrees shall be reasonable notice of sale or other disposition.
Grantor agrees to assemble, or cause to be assembled, at its own expense, the
Collateral at such place or places as the Beneficiary shall designate by written
notice. At any such sale or disposition, the Beneficiary may, to the extent
permissible under applicable law, purchase the whole or any part of the
Collateral sold, free from any right of redemption on the part of Grantor, which
right is hereby waived and released. Without limiting the generality of any
rights and remedies conferred upon the Beneficiary under this Paragraph 25.02,
the Beneficiary may, to the full extent permitted by law: (a) Enter upon the
Premises, exclude therefrom Grantor or any affiliate thereof, and take immediate
possession of the Improvements, either personally or by means of a receiver
appointed by a court of competent jurisdiction, using all lawful, necessary
force to do so; (b) Use, operate, manage and control the Improvements in any
lawful manner; (c) Collect and receive all rents, income, revenue, earnings,
issues and profits therefrom; and (d) Maintain, repair, renovate, alter or
remove the Improvements as the Beneficiary may determine in its discretion, and
any monies so collected or received by the Beneficiary shall be applied to, or
may be accumulated for application upon, satisfaction of the Notes or any other
sums secured by this Deed of Trust.
25.03. FILINGS; FURTHER ASSURANCES. Grantor agrees to execute and
deliver to the Beneficiary Uniform Commercial Code financing statements and such
other documents, instruments, supplemental security agreements and chattel
mortgages as the Beneficiary may deem necessary, proper or desirable to obtain
the benefits of this Deed of Trust, and Grantor authorizes the Beneficiary, upon
failure of the Grantor to do so at the request of the Beneficiary, to effect any
filing or recording of any such financing statement or statements relating to
the Improvements or amendments thereto without the signature of Grantor, where
lawful, and hereby appoints the Beneficiary as its attorney in fact (without
requiring the Beneficiary to act as such) to execute any such financing or other
statement or statements in the name of Grantor, and to perform all other acts
which the Beneficiary deems appropriate to perfect and continue the security
interest in, and to protect and preserve, the Improvements. The power herein
conferred upon the Beneficiary is coupled with an interest and is irrevocable.
Grantor further agrees to assign the Beneficiary its rights in or under any
financing statements relating to the Improvements filed in favor of Grantor.
Section 26. NOTICES. All notices and other communications
required under this Deed of Trust shall be in writing and shall be deemed to
have been properly given, when given as provided in the Credit Agreement. Any
notice of the Trustee shall be delivered to New Salem, Inc., 100 North
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Main Street, Winston-Salem, North Carolina 27150, or such other address as the
Trustee may hereafter specify in writing by notice to the other parties hereto.
Any party may designate a change of address by written notice to the other,
given at least ten (10) business days before such change of address is to become
effective.
Section 27. SUCCESSORS AND ASSIGNS. The covenants, terms and
conditions herein contained shall bind, and the benefits and powers shall inure
to the respective heirs, executors, administrators, successors and assigns of
the parties hereto. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the term "Beneficiary" shall include any
payee of the indebtedness hereby secured and any transferee or assignee thereof,
whether by operation of law or otherwise.
Section 28. GOVERNING LAW. This Deed of Trust shall be governed
by and construed in accordance with the laws of the State of North Carolina
without regard to principles of conflict of laws.
Section 29. EXPENSES. Grantor or Borrower shall pay or reimburse
Beneficiary for all costs, charges and expenses, including reasonable attorney's
fees and disbursements, incurred or paid by Beneficiary in documenting or
servicing the Notes or in any pending or threatened action or proceeding in
which Beneficiary is or may become a party and which affects or might affect the
Notes, the Credit Agreement, the other Obligations or the Premises or any part
thereof, or the interests of Grantor, Borrower or Beneficiary therein, including
but not limited to, the foreclosure of this Deed of Trust, condemnation
involving all or part of the Premises or any action to protect the security
hereof. The amounts so incurred or paid by Beneficiary, together with interest
thereon at the rate of interest set forth in the Credit Agreement from the date
incurred until paid by Grantor or Borrower, shall be added to the indebtedness
and secured by the lien of this Deed of Trust.
Section 30. SEVERABILITY. If any provisions of this Deed of Trust
or the application thereof to any person or circumstance shall be invalid or
unenforceable to any extent under applicable law, the remainder of this Deed of
Trust and the application of such provisions to other persons or circumstances
shall not be affected thereby and shall be enforced to the greatest extent
permitted by law.
Section 31. REPLACEMENT OF NOTES. In the event of loss, theft,
destruction, total or partial obliteration, mutilation or inappropriate
cancellation of one or more of the Notes, Borrower will execute and deliver, in
lieu thereof, a replacement for such Note, identical in form and substance to
such Note and dated as of the date of such Note.
Section 32. INDEMNITY. Grantor and Borrower, jointly and
severally, shall protect, defend, indemnify and save harmless Beneficiary from
and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including attorneys'
fees and expenses) imposed upon or incurred by the Beneficiary by reason of (a)
any claim for brokerage fees or other such commissions relating to the Premises
or the Notes, the Credit Agreement, or any other Obligations, or (b) the
condition of the Premises, or (c) failure to pay recording, mortgage,
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<PAGE> 21
intangibles or similar taxes, roll back taxes, fees or charges relating to the
Notes, the Credit Agreement, or any one or more of the Loan Documents, or (d)
the Loan Documents or any claim or demand whatsoever which may be asserted
against the Beneficiary by reason of any alleged action, obligation or
undertaking of the Beneficiary relating in any way to the Notes, the Credit
Agreement, or any matter contemplated by the Loan Documents, or (e) any and all
liability arising from any of the Leases or any negligence in the management,
operation, upkeep, repair or control of the Premises resulting in loss or injury
or death to any tenant, occupant, licensee, employee or stranger. In the event
the Beneficiary incurs any liability, loss or damage arising out of or in any
way relating to the loan transaction contemplated by the Loan Documents
(including any of the matters referred to in this section), the amounts of such
liability, loss or damage shall be added to the Notes, shall bear interest at
the interest rate specified in the Credit Agreement from the date incurred until
paid and shall be payable on demand.
Section 33. HEADINGS. The headings of the sections, paragraphs,
and subparagraphs of this Deed of Trust are for the convenience of reference
only, are not to be considered a part hereof and shall not limit or otherwise
affect any of the terms hereof.
Section 34. COUNTERPARTS. This Deed of Trust is executed in
multiple counterparts, one to be recorded in each county in which the Land is
located. These counterparts together constitute a single instrument as to the
various tracts described herein. The Beneficiary may, however, exercise its
rights hereunder with respect to one tract without being required to exercise
its rights as to the other tracts. Likewise, the Beneficiary may release one
tract described herein without releasing any other tract.
[Remainder of page left intentionally blank]
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IN WITNESS WHEREOF, Grantor and Borrower have caused this Deed of
Trust to be executed under seal the day and year first above written.
WINN LIMITED PARTNERSHIP, a North Carolina
limited partnership (SEAL)
By: WINSTON HOTELS, INC., its sole general partner
By: /s/ Joseph V. Green
----------------------------
Senior Vice President
ATTEST:
/s/ Brenda G. Burns
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
WINSTON HOTELS, INC., a North Carolina corporation
By: /s/ Joseph V. Green
-------------------------------
Senior Vice President
ATTEST:
/s/ Brenda G. Burns
- ------------------------------
Assistant Secretary
[CORPORATE SEAL]
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<PAGE> 23
STATE OF NORTH CAROLINA
COUNTY OF WAKE
I, Sherian A. Liles, a Notary Public, certify that Brenda G.
Burns personally came before me this day and acknowledged that she is Assistant
Secretary of Winston Hotels, Inc., a North Carolina corporation, and that, by
authority duly given and as the act of the corporation, and as the act of WINN
Limited Partnership, a North Carolina limited partnership, in which the
corporation is a general partner, the foregoing instrument was signed in its
name by its Senior Vice President, sealed with its corporate seal, and attested
by herself as its Assistant Secretary.
Witness my hand and notarial stamp or seal, this 6th day of
January, 1999.
My commission expires: /s/ Sherian A. Liles
--------------------------
2-13-2002 Notary Public
- ---------------------
[NOTARY SEAL]
STATE OF NORTH CAROLINA
COUNTY OF WAKE
I, Sherian A. Liles, a Notary Public, certify that Brenda G.
Burns personally came before me this day and acknowledged that she is Assistant
Secretary of Winston Hotels, Inc., a North Carolina corporation, and that, by
authority duly given and as the act of the corporation, the foregoing instrument
was signed in its name by its Senior Vice President, sealed with its corporate
seal, and attested by herself as its Assistant Secretary.
Witness my hand and notarial stamp or seal, this 6th day of
January, 1999.
My commission expires: /s/ Sherian A. Liles
--------------------------
2-13-2002 Notary Public
- ---------------------
[NOTARY SEAL]
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<PAGE> 24
EXHIBIT A
[INSERT LEGAL DESCRIPTION]
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<PAGE> 25
SCHEDULE 1
SCHEDULE OF ADDITIONAL PERSONAL PROPERTY COLLATERAL
All furniture, furnishings, machinery, apparatus, equipment,
fittings, fixtures and articles of every kind and nature including all stored
building materials, any interest in which is now owned or hereafter acquired by
Grantor, and is now or hereafter installed in, affixed to, placed upon or used
in connection with the Premises, or any portion thereof, and all additions
thereto and all replacements thereof, including but not limited to: (i) all
personal property relating to the operation of a hotel or motel (including, but
not limited to, all beds, credenzas, chairs, tables, chests of drawers,
nightstands, linens, towels, television sets, satellite dish equipment, cable
television equipment, telephones and telephone equipment, video equipment, door
locks, and computers); (ii) all personal property relating to any restaurant or
food operations now or hereinafter located on the Premises (including, but not
limited to, all silverware or flatware, all pots, pans and all other cooking
equipment, microwaves, stoves, ovens, linens, tables, chairs, and related
personal property) and (iii) all machinery, engines, furnaces, boilers, stokers,
pumps, heaters, incinerators, power equipment, laundry equipment, tanks,
dynamos, motors, generators, switchboards, conduits, electrical equipment,
heating, cooling, ventilating, air conditioning, lighting, incinerating and
plumbing apparatus, compressors, exhaust fans, elevators, escalators, venetian
blinds, shades, draperies, drapery and curtain rods, brackets, electric signs,
bulbs, fire prevention and extinguishing apparatus, plumbing fixtures, vacuum
cleaners, vacuum cleaning systems, floor cleaning, waxing and polishing
apparatus, call systems, pictures, mirrors, lamps, ornaments, carpeting, rugs,
linoleum and other floor covering, refrigerating and cooling apparatus and
equipment, typewriters, office and accounting equipment and software, safes,
cabinets, lockers, shelving, tools, spotlighting equipment, uniforms, screens,
screen doors, awnings, blinds, refrigerators, ranges, ovens, garbage disposals,
dishwashers, washing machines and clothes dryers, mantels and lobby furnishings,
lawn mowers, landscaping and swimming pool equipment, and any and all such
property which is at any time hereafter installed in, affixed to and to become
fixtures on, placed upon or used in connection with, the Premises, or any
portion thereof.
-2-
<PAGE> 1
EXHIBIT 21.1
WINSTON HOTELS, INC.
List of Subsidiaries
Name Jurisdiction of Incorporation
---- -----------------------------
1. Winston Manager Corporation Virginia
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Winston Hotels, Inc. on Form S-3 (File nos. 33-93516, 333-32713 and 333-60651)
and Form S-8 (File nos. 333-19197, 333-60079 and 333-60619) of our report dated
January 14, 1999, except for the information in the last paragraph of Note 5 for
which the date is February 1, 1999, on our audits of the consolidated financial
statements and the financial statement schedule of Winston Hotels, Inc. as of
December 31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998, and of our report dated February 6, 1998, on our audits of
the financial statements of Winston Hospitality, Inc. as of October 31,1997 and
for the ten months ended October 31, 1997 and the year ended December 31, 1996,
which reports are included in the Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
March 22, 1999
<PAGE> 1
EXHIBIT 23.2
ACCOUNTANTS' CONSENT
The Members
CapStar Winston Company, L.L.C.
We consent to incorporation by reference in the registration statements of
Winston Hotels, Inc. on Form S-3 (File Nos. 33-93516, 333-32713 and 333-60651)
and Form S-8 (File Nos. 333-19197, 333-60619 and 333-60079) of our report dated
February 23, 1999, relating to the balance sheets of CapStar Winston Company,
L.L.C. as of December 31, 1998 and 1997 and the related statements of
operations, members' capital (deficit) and cash flows for the year ended
December 31, 1998 and the period from October 15, 1997 (date of inception)
through December 31, 1997, which report appears in the December 31, 1998 annual
report on Form 10-K of Winston Hotels, Inc.
/s/ KPMG LLP
Washington, D.C.
March 19, 1999
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
I, Thomas F. Darden, II, a resident of Wake County, North Carolina, of
legal age and legally competent for all purposes, do hereby grant this Power of
Attorney to Robert W. Winston, III, Chief Executive Officer and President of
Winston Hotels, Inc. (the "Company") and James D. Rosenberg, Chief Financial
Officer and Chief Operating Officer of the Company, who are of legal age and who
are legally competent for all purposes, and with full power of substitution so
that they, or either of them, may perform any and all acts and things which said
attorneys-in-fact, or any of them, deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934. I expressly
authorize the said attorneys-in-fact, or any of them, to execute and deliver to
the Securities and Exchange Commission or other appropriate entities on my
behalf an Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1998,
including specifically, but not limited to, the power and authority to sign for
me in my name in the capacity indicated on the Annual Report and any and all
amendments thereto.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 19th day of February, 1999.
/s/ Thomas F. Darden [SEAL]
---------------------------------
Thomas F. Darden, II
<PAGE> 2
POWER OF ATTORNEY
I, Charles M. Winston, a resident of Wake County, North Carolina, of
legal age and legally competent for all purposes, do hereby grant this Power of
Attorney to Robert W. Winston, III, Chief Executive Officer and President of
Winston Hotels, Inc. (the "Company") and James D. Rosenberg, Chief Financial
Officer and Chief Operating Officer of the Company, who are of legal age and who
are legally competent for all purposes, and with full power of substitution so
that they, or either of them, may perform any and all acts and things which said
attorneys-in-fact, or any of them, deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934. I expressly
authorize the said attorneys-in-fact, or any of them, to execute and deliver to
the Securities and Exchange Commission or other appropriate entities on my
behalf an Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1998,
including specifically, but not limited to, the power and authority to sign for
me in my name in the capacity indicated on the Annual Report and any and all
amendments thereto.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 19th day of February, 1999.
/s/ Charles M. Winston SEAL]
---------------------------------
Charles M. Winston
<PAGE> 3
POWER OF ATTORNEY
I, David C. Sullivan, a resident of Shelby County, Tennessee, of legal
age and legally competent for all purposes, do hereby grant this Power of
Attorney to Robert W. Winston, III, Chief Executive Officer and President of
Winston Hotels, Inc. (the "Company") and James D. Rosenberg, Chief Financial
Officer and Chief Operating Officer of the Company, who are of legal age and who
are legally competent for all purposes, and with full power of substitution so
that they, or either of them, may perform any and all acts and things which said
attorneys-in-fact, or any of them, deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934. I expressly
authorize the said attorneys-in-fact, or any of them, to execute and deliver to
the Securities and Exchange Commission or other appropriate entities on my
behalf an Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1998,
including specifically, but not limited to, the power and authority to sign for
me in my name in the capacity indicated on the Annual Report and any and all
amendments thereto.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 8th day of February, 1999.
/s/ David C. Sullivan [SEAL]
---------------------------------
David C. Sullivan
<PAGE> 4
POWER OF ATTORNEY
I, Edwin B. Borden, a resident of Wayne County, North Carolina, of
legal age and legally competent for all purposes, do hereby grant this Power of
Attorney to Robert W. Winston, III, Chief Executive Officer and President of
Winston Hotels, Inc. (the "Company") and James D. Rosenberg, Chief Financial
Officer and Chief Operating Officer of the Company, who are of legal age and who
are legally competent for all purposes, and with full power of substitution so
that they, or either of them, may perform any and all acts and things which said
attorneys-in-fact, or any of them, deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934. I expressly
authorize the said attorneys-in-fact, or any of them, to execute and deliver to
the Securities and Exchange Commission or other appropriate entities on my
behalf an Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1998,
including specifically, but not limited to, the power and authority to sign for
me in my name in the capacity indicated on the Annual Report and any and all
amendments thereto.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 19th day of February, 1999.
/s/ Edwin B. Borden [SEAL]
---------------------------------
Edwin B. Borden
<PAGE> 5
POWER OF ATTORNEY
I, James H. Winston, a resident of Duval County, Florida, of legal age
and legally competent for all purposes, do hereby grant this Power of Attorney
to Robert W. Winston, III, Chief Executive Officer and President of Winston
Hotels, Inc. (the "Company") and James D. Rosenberg, Chief Financial Officer and
Chief Operating Officer of the Company, who are of legal age and who are legally
competent for all purposes, and with full power of substitution so that they, or
either of them, may perform any and all acts and things which said
attorneys-in-fact, or any of them, deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934. I expressly
authorize the said attorneys-in-fact, or any of them, to execute and deliver to
the Securities and Exchange Commission or other appropriate entities on my
behalf an Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1998,
including specifically, but not limited to, the power and authority to sign for
me in my name in the capacity indicated on the Annual Report and any and all
amendments thereto.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 19th day of February, 1999.
/s/ James H. Winston [SEAL]
----------------------------------
James H. Winston
<PAGE> 6
POWER OF ATTORNEY
I, Richard L. Daugherty, a resident of Wake County, North Carolina, of
legal age and legally competent for all purposes, do hereby grant this Power of
Attorney to Robert W. Winston, III, Chief Executive Officer and President of
Winston Hotels, Inc. (the "Company") and James D. Rosenberg, Chief Financial
Officer and Chief Operating Officer of the Company, who are of legal age and who
are legally competent for all purposes, and with full power of substitution so
that they, or either of them, may perform any and all acts and things which said
attorneys-in-fact, or any of them, deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934. I expressly
authorize the said attorneys-in-fact, or any of them, to execute and deliver to
the Securities and Exchange Commission or other appropriate entities on my
behalf an Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1998,
including specifically, but not limited to, the power and authority to sign for
me in my name in the capacity indicated on the Annual Report and any and all
amendments thereto.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 8th day of February, 1999.
/s/ Richard L. Daugherty [SEAL]
---------------------------------
Richard L. Daugherty
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<FISCAL-YEAR-END> DEC-31-1998
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