<PAGE> 1
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-14236
FELCOR LODGING TRUST INCORPORATED
(Exact name of registrant as specified in its charter)
MARYLAND 72-2541756
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification No.)
organization)
545 E. JOHN CARPENTER FREEWAY, SUITE 1300, IRVING, TEXAS 75062
(Address of principal executive offices) (Zip Code)
(972) 444-4900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all documents
and 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 [ ]
The number of shares of Common Stock, par value $.01 per share, of FelCor
Lodging Trust Incorporated outstanding on November 10, 1999 was 65,941,292.
- --------------------------------------------------------------------------------
<PAGE> 2
FELCOR LODGING TRUST INCORPORATED
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. -- FINANCIAL INFORMATION
Item 1. Financial Statements...................................................................... 3
FELCOR LODGING TRUST INCORPORATED
Consolidated Balance Sheets - September 30, 1999 (Unaudited)
and December 31, 1998............................................................. 3
Consolidated Statements of Operations -- For the Three and Nine Months
Ended September 30, 1999 and 1998 (Unaudited)..................................... 4
Consolidated Statements of Cash Flows -- For the Nine Months
Ended September 30, 1999 and 1998 (Unaudited)..................................... 5
Notes to Consolidated Financial Statements............................................. 6
DJONT OPERATIONS, L.L.C.
Consolidated Balance Sheets - September 30, 1999 (Unaudited)
and December 31, 1998............................................................. 14
Consolidated Statements of Operations -- For the Three and Nine Months
Ended September 30, 1999 and 1998 (Unaudited)..................................... 15
Consolidated Statements of Cash Flows -- For the Nine Months
Ended September 30, 1999 and 1998 (Unaudited)..................................... 16
Notes to Consolidated Financial Statements............................................. 17
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 19
General/Third Quarter Activities....................................................... 19
Results of Operations.................................................................. 19
Liquidity and Capital Resources........................................................ 27
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................ 30
PART II. -- OTHER INFORMATION
Item 5. Other Information......................................................................... 31
Item 6. Exhibits and Reports on Form 8-K.......................................................... 31
SIGNATURE.......................................................................................... 32
</TABLE>
2
<PAGE> 3
PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Investment in hotels, net of accumulated depreciation of $290,495
at September 30, 1999 and $178,072 at December 31, 1998 ................... $ 4,045,358 $ 3,955,582
Investment in unconsolidated entities ........................................ 137,017 148,065
Cash and cash equivalents .................................................... 48,027 34,692
Due from Lessees ............................................................. 19,650 18,968
Deferred expenses, net of accumulated amortization of $3,758
at September 30, 1999 and $2,096 at December 31, 1998 ..................... 13,104 10,041
Other assets ................................................................. 7,930 8,035
------------- -------------
Total assets ...................................................... $ 4,271,086 $ 4,175,383
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt, net of discount of $1,458 at September 30, 1999
and $1,628 at December 31, 1998 ........................................... $ 1,707,981 $ 1,594,734
Distributions payable ........................................................ 42,549 67,262
Accrued expenses and other liabilities ....................................... 87,848 57,312
Minority interest in Operating Partnership, 2,987 and 2,939 units issued and
outstanding at September 30, 1999 and December 31, 1998, respectively ..... 87,625 87,353
Minority interest in other partnerships ...................................... 51,389 51,105
------------- -------------
Total liabilities ................................................. 1,977,392 1,857,766
------------- -------------
Commitments and contingencies (Notes 3 and 5)
Shareholders' equity:
Preferred stock, $.01 par value, 20,000 shares authorized:
Series A Cumulative Preferred Stock, 6,050 shares issued and outstanding .. 151,250 151,250
Series B Redeemable Preferred Stock, 58 shares issued and outstanding ..... 143,750 143,750
Common stock, $.01 par value, 200,000 shares authorized, 69,291 and 69,284
shares issued, including shares in treasury, at September 30, 1999
and December 31, 1998, respectively ....................................... 693 693
Additional paid-in capital ................................................... 2,142,104 2,142,250
Distributions in excess of earnings .......................................... (102,616) (78,839)
Common stock in treasury, at cost, 1,213 shares .............................. (41,487) (41,487)
------------- -------------
Total shareholders' equity ........................................ 2,293,694 2,317,617
------------- -------------
Total liabilities and shareholders' equity ........................ $ 4,271,086 $ 4,175,383
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 4
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED, IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Percentage lease revenue ......................... $ 120,598 $ 104,919 $ 377,480 $ 223,775
Equity in income from unconsolidated entities .... 2,353 2,446 6,190 6,429
Other revenue .................................... 1,131 1,234 2,516 3,326
---------- ---------- ---------- ----------
Total revenues .......................... 124,082 108,599 386,186 233,530
---------- ---------- ---------- ----------
Expenses:
General and administrative ....................... 2,943 1,452 7,696 4,026
Depreciation ..................................... 38,627 27,720 112,789 61,036
Taxes, insurance, and other ...................... 19,529 14,651 60,386 29,490
Interest expense ................................. 31,520 22,960 90,692 46,486
Minority interest in Operating Partnership ....... 1,094 1,639 3,933 5,452
Minority interest in other partnerships .......... 348 323 1,987 805
---------- ---------- ---------- ----------
Total expenses .......................... 94,061 68,745 277,483 147,295
---------- ---------- ---------- ----------
Income before extraordinary charge ................. 30,021 39,854 108,703 86,235
Extraordinary charge from write off of deferred
financing fees .................................. 2,519 1,113 3,075
---------- ---------- ---------- ----------
Net income ......................................... 30,021 37,335 107,590 83,160
Preferred dividends ................................ 6,184 6,184 18,551 13,987
---------- ---------- ---------- ----------
Income applicable to common shareholders ........... $ 23,837 $ 31,151 $ 89,039 $ 69,173
========== ========== ========== ==========
Per common share data:
Basic:
Income applicable to common shareholders before
extraordinary charge ........................ $ 0.35 $ 0.58 $ 1.33 $ 1.64
Extraordinary charge ............................. (0.04) (0.02) (0.07)
---------- ---------- ---------- ----------
Net income applicable to common shareholders ..... $ 0.35 $ 0.54 $ 1.31 $ 1.57
========== ========== ========== ==========
Weighted average common shares outstanding ....... 68,014 58,461 68,012 43,925
Diluted:
Income applicable to common shareholders before
extraordinary charge ........................ $ 0.35 $ 0.57 $ 1.32 $ 1.63
Extraordinary charge ............................. (0.04) (0.02) (0.07)
---------- ---------- ---------- ----------
Net income applicable to common shareholders ..... $ 0.35 $ 0.53 $ 1.30 $ 1.56
========== ========== ========== ==========
Weighted average common shares outstanding ....... 68,221 58,834 68,262 44,294
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income ..................................................................... $ 107,590 $ 83,160
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ......................................................... 112,789 61,036
Amortization of deferred financing fees .............................. 2,035 1,927
Accretion of debt .................................................... (725)
Amortization of unearned officers' and directors' compensation ....... 526 605
Equity in income from unconsolidated entities ........................ (6,190) (6,429)
Extraordinary charge for write off of deferred financing fees ........ 1,113 3,075
Minority interest in Operating Partnership ........................... 3,933 5,452
Minority interest in other partnerships .............................. 1,987 805
Changes in assets and liabilities:
Due from Lessees ..................................................... (682) (19,031)
Deferred financing fees .............................................. (6,211) (4,300)
Other assets ......................................................... (1,755) (4,102)
Accrued expenses and other liabilities ............................... 24,006 28,933
----------- -----------
Net cash flow provided by operating activities ............. 238,416 151,131
----------- -----------
Cash flows used in investing activities:
Improvements and additions to hotels ........................................... (192,847) (44,310)
Acquisition of hotel assets .................................................... (10,802) (354,435)
Acquisition of unconsolidated entities ......................................... (984)
Proceeds from sales of hotels .................................................. 15,091
Net cash received from acquisition of Bristol Hotels ........................... 16,790
Bristol Interim Credit Facility ................................................ (120,000)
Cash distributions from unconsolidated entities ................................ 17,187 18,406
----------- -----------
Net cash flow used in investing activities ................. (171,371) (484,533)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowings ....................................................... 782,000 942,003
Repayment of borrowings ........................................................ (674,200) (640,300)
Proceeds from sale of preferred stock .......................................... 143,750
Costs associated with public offerings ......................................... (4,686)
Proceeds from exercise of stock options ........................................ 8 1,657
Distributions paid to limited partners ......................................... (5,916) (4,807)
Distributions paid to preferred shareholders ................................... (19,804) (13,987)
Distributions paid to common shareholders ...................................... (135,798) (58,403)
----------- -----------
Net cash flow provided by (used in) financing activities ... (53,710) 365,227
----------- -----------
Net change in cash and cash equivalents .................................................. 13,335 31,825
Cash and cash equivalents at beginning of periods ........................................ 34,692 17,543
----------- -----------
Cash and cash equivalents at end of periods .............................................. $ 48,027 $ 49,368
=========== ===========
Supplemental cash flow information --
Interest paid .................................................................. $ 85,606 $ 33,322
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
FelCor Lodging Trust Incorporated ("FelCor") is one of the nation's
largest hotel real estate investment trusts ("REIT") which, at September 30,
1999, owned interests in 187 hotels with nearly 50,000 rooms and suites
(collectively the "Hotels") through its greater than 95% equity interest in
FelCor Lodging Limited Partnership (the "Operating Partnership"). FelCor, the
Operating Partnership, and their subsidiaries are herein referred to,
collectively, as the "Company". At September 30, 1999, the Company owned 100%
interests in 163 hotels, a 90% or greater interest in entities that owned seven
hotels, a 60% interest in an entity that owned two hotels and 50% interests in
separate entities that owned 15 hotels.
FelCor strives to be the premier full-service lodging REIT partnered
with leading brands and management companies to create shareholder value. The
Company is the owner of the largest number of Embassy Suites(R), Crowne
Plaza(R), Holiday Inn(R), and independently owned Doubletree(R) branded hotels
in the world. The following table presents the Hotels, by brand, leased to each
of the Company's Lessees at September 30, 1999:
<TABLE>
<CAPTION>
NOT OPERATED
BRAND DJONT BRISTOL UNDER A LEASE TOTAL
----- ----- ------- ------------- -----
<S> <C> <C> <C> <C>
Embassy Suites 58 58
Holiday Inn 44 1 45
Doubletree and Doubletree Guest Suites(R) 16 16
Crowne Plaza and Crowne Plaza Suites(R) 17 17
Holiday Inn Select(R) 10 10
Sheraton(R)and Sheraton Suites(R) 9 9
Hampton Inn(R) 9 9
Holiday Inn Express(R) 5 5
Fairfield Inn(R) 5 5
Harvey Hotel(R) 4 4
Independent 2 1 3
Courtyard by Marriott(R) 2 2
Four Points by Sheraton(R) 1 1
Hilton Suites(R) 1 1
Homewood Suites(R) 1 1
Westin(R) 1 1
----- ----- ------ ------
Total Hotels 85 100 2 187
===== ===== ====== ======
</TABLE>
The Hotels are located in the United States (34 states) and Canada,
with 79 hotels in California, Florida and Texas. The following table provides
information regarding the net acquisition and disposition of hotels through
September 30, 1999:
<TABLE>
<CAPTION>
NET HOTELS
ACQUIRED/(DISPOSED OF)
----------------------
<S> <C>
1994 7
1995 13
1996 23
1997 30
1998 120
FIRST QUARTER 1999 (4)
SECOND QUARTER 1999 (2)
THIRD QUARTER 1999 --
-----
187
=====
</TABLE>
6
<PAGE> 7
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION (CONTINUED)
At September 30, 1999, the Company leased 85 of the Hotels to DJONT
Operations, L.L.C., a Delaware limited liability company, or a consolidated
subsidiary thereof (collectively "DJONT"), and leased 100 of the Hotels to
Bristol Hotels & Resorts, or a consolidated subsidiary thereof ("Bristol" and,
together with DJONT, the "Lessees"). Two Hotels were not leased.
Thomas J. Corcoran, Jr., the President, Chief Executive Officer, and a
Director of FelCor, and Hervey A. Feldman, Chairman Emeritus of FelCor,
beneficially own a 50% voting common equity interest in DJONT. The remaining 50%
nonvoting common equity interest is beneficially owned by the children of
Charles N. Mathewson, a director of FelCor and major initial investor in the
Company. DJONT has entered into management agreements pursuant to which 72 of
the Hotels leased by it are managed by subsidiaries of Promus Hotel Corporation
("Promus"), ten are managed by subsidiaries of Starwood Hotels & Resorts
Worldwide, Inc. ("Starwood"), and three are managed by two independent
management companies.
Bristol, an independent publicly owned company, leases and manages 100
Hotels and manages one hotel which operates without a lease. Bristol is one of
the largest independent hotel operating companies in North America and operates
the largest number of Bass Hotels & Resorts-branded hotels in the world.
Certain reclassifications have been made to prior period financial
information to conform to the current period's presentation with no effect to
previously reported net income or shareholders' equity.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC") and
should be read in conjunction with the financial statements and notes thereto of
the Company and DJONT included in FelCor's Annual Report on Form 10-K for the
year ended December 31, 1998 (the "10-K"). The notes to the financial statements
included herein highlight significant changes to the notes included in the 10-K
and present interim disclosures required by the SEC. The financial statements
for the three and nine months ended September 30, 1999 and 1998 are unaudited;
however, in the opinion of management, all adjustments (which include only
normal recurring accruals) have been made which are considered necessary to
present fairly the operating results and financial position of the Company for
the unaudited periods.
7
<PAGE> 8
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT IN UNCONSOLIDATED ENTITIES
At September 30, 1999, the Company owned 50% interests in separate
entities owning 15 hotels, a parcel of undeveloped land, and a condominium
management company. The Company also owned a 97% nonvoting interest in an entity
that is developing condominiums for sale and that owns an annex to a hotel owned
by the Company. The Company accounts for its investments in these unconsolidated
entities under the equity method.
Summarized combined financial information for 100% of these
unconsolidated entities is as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Balance sheet information:
Investment in hotels, net of accumulated depreciation... $ 286,379 $ 269,881
Non-recourse mortgage debt.............................. $ 203,444 $ 176,755
Equity.................................................. $ 95,083 $ 105,347
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Statements of Operations Information:
Percentage lease revenue ....................... $ 13,998 $ 13,575 $ 40,968 $ 40,144
Other income ................................... 2,828 2,087 7,155 3,201
----------- ----------- ----------- -----------
Total revenue ......................... 16,826 15,662 48,123 43,345
----------- ----------- ----------- -----------
Expenses:
Depreciation .............................. 4,511 4,261 14,019 12,804
Taxes, insurance, and other ............... 2,805 2,303 7,830 5,462
Interest expense .......................... 3,627 3,373 10,314 9,727
----------- ----------- ----------- -----------
Total expenses ........................ 10,943 9,937 32,163 27,993
----------- ----------- ----------- -----------
Net income ..................................... $ 5,883 $ 5,725 $ 15,960 $ 15,352
=========== =========== =========== ===========
Net income attributable to the Company ......... $ 2,888 $ 2,862 $ 7,796 $ 7,676
Amortization of cost in excess of book value ... (535) (416) (1,606) (1,247)
----------- ----------- ----------- -----------
Equity in income from unconsolidated entities .. $ 2,353 $ 2,446 $ 6,190 $ 6,429
=========== =========== =========== ===========
</TABLE>
8
<PAGE> 9
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. DEBT
Debt at September 30, 1999 and December 31, 1998 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
OUTSTANDING BALANCE
---------------------------------------
INTEREST RATE MATURITY DATE SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
FLOATING RATE DEBT:
Line of Credit LIBOR + 150bps June 2001 $ 345,000 $ 411,000
Term Loan LIBOR + 150bps December 1999 250,000
Senior Term Loan LIBOR + 250bps March 2004 250,000
Mortgage debt LIBOR + 200bps February 2003 62,702
Other Up to LIBOR + 200bps Various 23,150 34,750
----------- ------------
Total floating rate debt 680,852 695,750
----------- ------------
FIXED RATE DEBT:
Line of credit - swapped 7.24% June 2001 200,000 325,000
Publicly-traded term notes 7.38% October 2004 174,345 174,249
Publicly-traded term notes 7.63% October 2007 124,197 124,122
Mortgage debt 7.24% November 2007 143,128 145,062
Senior Term Loan - swapped 8.30% March 2004 125,000
Mortgage debt 6.97% December 2002 43,836
Mortgage debt 7.54% April 2009 99,427
Mortgage debt 7.55% June 2009 74,744
Other 6.96% - 7.23% 2000 - 2005 86,288 86,715
----------- ------------
Total fixed rate debt 1,027,129 898,984
----------- ------------
Total Consolidated Debt $ 1,707,981 $ 1,594,734
=========== ============
</TABLE>
One month LIBOR at September 30, 1999, was 5.4%.
A portion of the Company's Line of Credit and Senior Term Loan is
matched with interest rate swap agreements which effectively convert the
variable rate on the Line of Credit and Senior Term Loan to a fixed rate.
During the third quarter 1999, the Company entered into Forward Rate
Agreements which fix three month LIBOR on $188 million of floating rate debt at
an average rate of 5.93%, effective December 8, 1999.
The Line of Credit and the Senior Term Loan contain various affirmative
and negative covenants including limitations on total indebtedness, total
secured indebtedness, and restricted payments (such as stock repurchases and
cash distributions), as well as the obligation to maintain certain minimum
tangible net worth and certain minimum interest and debt service coverage
ratios. At September 30, 1999, the Company was in compliance with all such
covenants
The Company's other borrowings contain affirmative and negative
covenants that are generally equal to or less restrictive than the Line of
Credit and Senior Term Loan. Most of the mortgage debt is nonrecourse to the
Company (with certain exceptions) and contains provisions allowing for the
substitution of collateral upon satisfaction of certain conditions. Most of the
mortgage debt is prepayable; subject, however, to various prepayment penalties,
yield maintenance, or defeasance obligations.
9
<PAGE> 10
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. TAXES, INSURANCE, AND OTHER
Taxes, insurance, and other is comprised of the following for the three
and nine months ended September 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Real estate and personal property taxes .......... $ 12,851 $ 10,246 $ 41,845 $ 23,269
Property insurance ............................... 868 801 2,596 1,346
Land lease expense ............................... 5,010 2,729 13,124 3,535
State franchise taxes and Canadian income tax .... 800 561 2,821 1,026
Other ............................................ 314 314
--------- --------- --------- ---------
Total taxes, insurance, and other ....... $ 19,529 $ 14,651 $ 60,386 $ 29,490
========= ========= ========= =========
</TABLE>
5. COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Company is to receive rental income from the Lessees under the
Percentage Leases, which expire in 2002 (five hotels), 2003 (three hotels), 2004
(12 hotels), 2005 (19 hotels), 2006 (26 hotels), 2007 (37 hotels), 2008 (54
hotels), and thereafter (15 hotels). The rental income under the Percentage
Leases between 14 of the unconsolidated entities, of which the Company owns 50%,
is payable by the Lessee to the respective entities and is not included in the
schedule of future lease commitments to the Company. Minimum future rental
income (i.e., base rents) payable to the Company under these noncancellable
operating leases at September 30, 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
DJONT BRISTOL TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
Remainder of 1999 .............. $ 34,669 $ 38,894 $ 73,563
2000 ........................... 140,235 180,055 320,290
2001 ........................... 143,609 180,076 323,685
2002 ........................... 143,967 180,049 324,016
2003 ........................... 130,445 177,302 307,747
2004 and thereafter ............ 519,383 820,168 1,339,551
---------- ---------- ----------
$1,112,308 $1,576,544 $2,688,852
========== ========== ==========
</TABLE>
Certain entities owning interests in DJONT and managers for certain
hotels have agreed to make loans to DJONT of up to an aggregate of approximately
$17.3 million to the extent necessary to enable DJONT to pay rent and other
obligations due under the respective Percentage Leases relating to a total of 34
of the Hotels. No loans were outstanding under such agreements at September 30,
1999.
DJONT engages independent third-party managers to operate the Hotels
leased by it and generally pays such managers a base management fee based on a
percentage of room and suite revenue and an incentive management fee based on
DJONT's income before overhead expenses for each hotel. In certain instances,
the hotel managers have subordinated fees and are committed to make subordinated
loans to DJONT, if needed, to meet its rental and other obligations under the
Percentage Leases.
Bristol serves as both the lessee and manager of 100 Hotels leased to
it by the Company at September 30, 1999 and, as such, is compensated for both
roles through the profitability of the Hotels, after meeting their operating
expenses and rental obligations under the Percentage Leases.
10
<PAGE> 11
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. COMMITMENTS AND RELATED PARTY TRANSACTIONS (CONTINUED)
Bristol has entered into an absolute and unconditional guarantee of the
obligations of the Bristol Lessees under the Percentage Leases, and is required
to maintain a minimum liquid net worth. A portion of this liquid net worth is
being satisfied through a letter of credit for the benefit of the Company. This
letter of credit is subject to periodic reductions upon satisfaction of certain
conditions and, at September 30, 1999, was in the amount of $9.1 million.
According to Bristol's financial statements filed with the SEC, for the three
and nine months ended September 30, 1999, Bristol had net income of $1.9 and
$7.5 million, respectively, and at September 30, 1999, had stockholders' equity
of $43.0 million.
Bristol is a public company whose common stock is listed on the New
York Stock Exchange under the symbol BH and that files its financial statements
with the SEC in accordance with the Securities and Exchange Act of 1934.
The Company presently expects to spend approximately $225 million
during 1999 for capital improvements at the Hotels, consisting of both the 1999
renovation and redevelopment program and routine capital replacements and
improvements, which may be funded from cash on hand or borrowings under its Line
of Credit. Through the nine months ending September 30, 1999, the Company had
spent approximately $193 million on such capital improvements.
6. SUPPLEMENTAL CASH FLOW INFORMATION
During the first nine months of 1999, the Company purchased the land
related to three hotels which were previously leased under long term land leases
for an aggregate purchase price of $19.8 million as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired .................................................. $ 19,776
Debt assumed ..................................................... (7,800)
Operating Partnership units issued ............................... (1,174)
-----------
Net cash paid by the Company ................................ $ 10,802
===========
</TABLE>
The debt assumed was paid off immediately after the purchase.
11
<PAGE> 12
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. SEGMENT INFORMATION
The Company has determined that its reportable segments are those that
are consistent with the Company's method of internal reporting, which segments
its business by Lessee. The Company's Lessees at September 30, 1999 were DJONT
and Bristol. Prior to July 28, 1998 (the date of the Bristol Merger) the Company
had only one Lessee, DJONT.
The following tables present information for the reportable segments
for the nine months ended September 30, 1999 and 1998 (in thousands) for both
DJONT and Bristol:
<TABLE>
<CAPTION>
CORPORATE
SEGMENT NOT ALLOCABLE CONSOLIDATED
NINE MONTHS ENDED SEPTEMBER 30, 1999 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL
- ------------------------------------ -------- --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Statements of Operations Information:
Revenues:
Percentage lease revenue..................... $201,712 $175,768 $377,480 $377,480
Equity in income from unconsolidated
entities.................................... 5,595 595 6,190 6,190
Other revenue................................ 234 1,296 1,530 $ 986 2,516
-------- --------- -------- --------- --------
Total revenues..................... 207,541 177,659 385,200 986 386,186
-------- --------- -------- --------- --------
Expenses:
General and administrative................... 7,696 7,696
Depreciation................................. 60,411 52,378 112,789 112,789
Taxes, insurance, and other.................. 25,257 35,129 60,386 60,386
Interest expense............................. 90,692 90,692
Minority interest in Operating
Partnership............................... 3,933 3,933
Minority interest in other partnerships...... 1,987 1,987 1,987
-------- --------- -------- --------- --------
Total expenses..................... 87,655 87,507 175,162 102,321 277,483
-------- --------- -------- --------- --------
Income before extraordinary charge ............. $119,886 $ 90,152 $210,038 $(101,335) $108,703
======== ========= ======== ========= ========
Funds From Operations:
Income before extraordinary charge ............. $119,886 $ 90,152 $210,038 $(101,335) $108,703
Series B preferred dividends.................... (9,703) (9,703)
Depreciation.................................... 60,411 52,378 112,789 112,789
Depreciation for unconsolidated entities........ 6,827 563 7,390 7,390
Minority interest in Operating Partnership...... 3,933 3,933
-------- --------- -------- --------- --------
Funds from operations........................... $187,124 $143,093 $330,217 $(107,105) $223,112
======== ========= ======== ========= ========
Weighted average common shares and
units outstanding (1)........................ 75,928
</TABLE>
12
<PAGE> 13
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
CORPORATE
SEGMENT NOT ALLOCABLE CONSOLIDATED
NINE MONTHS ENDED SEPTEMBER 30, 1998 DJONT BRISTOL(2) TOTAL TO SEGMENTS TOTAL
- ------------------------------------ -------- --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Statements of Operations Information:
Revenues:
Percentage lease revenue..................... $182,341 $41,434 $223,775 $223,775
Equity in income from unconsolidated
entities.................................... 6,305 124 6,429 6,429
Other revenue................................ 215 215 $ 3,111 3,326
-------- --------- -------- --------- --------
Total revenues..................... 188,646 41,773 230,419 3,111 233,530
-------- --------- -------- --------- --------
Expenses:
General and administrative................... 4,026 4,026
Depreciation................................. 51,731 9,305 61,036 61,036
Taxes, insurance, and other.................. 22,164 7,326 29,490 29,490
Interest expense............................. 46,486 46,486
Minority interest in Operating
Partnership............................... 5,452 5,452
Minority interest in other partnerships...... 805 805 805
-------- --------- -------- --------- --------
Total expenses..................... 74,700 16,631 91,331 55,964 147,295
-------- --------- -------- --------- --------
Income before extraordinary charge ............. $113,946 $25,142 $139,088 $ (52,853) $ 86,235
======== ========= ======== ========= ========
Funds From Operations:
Income before extraordinary charge ............. $113,946 $25,142 $139,088 $ (52,853) $ 86,235
Series B preferred dividends.................... (5,139) (5,139)
Depreciation.................................... 51,731 9,305 61,036 61,036
Depreciation for unconsolidated entities........ 7,604 7,604 7,604
Minority interest in Operating Partnership...... 5,452 5,452
-------- --------- -------- --------- --------
Funds from operations........................... $173,281 $34,447 $207,728 $ (52,540) $155,188
======== ========= ======== ========= ========
Weighted average common shares and
units outstanding (1)........................ 52,017
</TABLE>
- ------------------
(1) Weighted average common shares and units outstanding are computed
including dilutive options, unvested stock grants, and assuming
conversion of Series A Preferred Stock to Common Stock.
(2) Bristol information is presented from July 28, 1998, the date of
the Bristol Merger.
8. SUBSEQUENT EVENTS
On October 15, 1999, the Company and Starwood, in a 50/50 joint
venture, acquired the 437-room Sheraton Premier Hotel in Tysons Corner,
Virginia, a suburb of Washington, DC, for a purchase price of $52.9 million. The
purchase price consisted of approximately $52.8 million in cash and 3,571
Operating Partnership Units valued at $28 per unit. A subsidiary of Starwood
will manage the hotel under a 20-year management agreement.
Beginning in October of 1999 through November 10, 1999, FelCor had
repurchased approximately 2.1 million shares of its outstanding common stock on
the open market pursuant to its previously announced $100 million stock buyback
program.
13
<PAGE> 14
DJONT OPERATIONS, L.L.C.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents ................................................... $ 27,174 $ 28,538
Accounts receivable, net .................................................... 33,742 27,561
Inventories ................................................................. 4,222 4,381
Prepaid expenses ............................................................ 2,067 471
Other assets ................................................................ 5,630 3,021
Investment in real estate, net of accumulated depreciation of $409 in 1999 .. 11,557
------------- -------------
Total assets ...................................................... $ 84,392 $ 63,972
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade ..................................................... $ 4,684 $ 6,514
Accounts payable, other ..................................................... 15,564 6,994
Due to FelCor Lodging Trust Incorporated .................................... 29,431 16,875
Accrued expenses and other liabilities ...................................... 35,685 41,820
Minority interest ........................................................... 6,270
Debt ........................................................................ 7,766
------------- -------------
Total liabilities ................................................. 99,400 72,203
------------- -------------
Commitments and contingencies (Note 2)
Shareholders' equity (deficit):
Capital ..................................................................... 1 1
Accumulated deficit ......................................................... (15,009) (8,232)
------------- -------------
Total shareholders' deficit ....................................... (15,008) (8,231)
------------- -------------
Total liabilities and shareholders' equity ........................ $ 84,392 $ 63,972
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
14
<PAGE> 15
DJONT OPERATIONS, L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Room and suite revenue .............. $ 160,594 $ 158,681 $ 495,434 $ 462,959
Food and beverage revenue ........... 20,039 18,567 63,506 53,678
Food and beverage rent .............. 1,233 1,122 3,847 3,592
Other revenue ....................... 12,654 11,780 41,284 36,171
----------- ----------- ----------- -----------
Total revenues ................. 194,520 190,150 604,071 556,400
----------- ----------- ----------- -----------
Expenses:
Property operating costs ............ 47,490 43,796 142,828 125,550
General and administrative .......... 14,744 15,116 45,474 41,597
Advertising and promotion ........... 14,048 13,289 41,778 37,751
Repair and maintenance .............. 9,609 9,660 28,715 26,590
Utilities ........................... 8,392 8,303 22,514 21,458
Management and incentive fees ....... 5,804 4,390 17,770 16,169
Franchise fees ...................... 4,856 4,705 14,703 13,626
Food and beverage expenses .......... 16,349 16,617 48,474 46,952
Percentage lease expenses ........... 71,042 75,935 240,600 221,393
Lessee overhead expenses ............ 247 468 814 1,309
Liability insurance ................. 784 354 1,938 923
Interest expense .................... 155 527
Depreciation ........................ 120 409
Minority interests in partnership ... (124) 33
Other ............................... 1,519 1,380 4,271 4,018
----------- ----------- ----------- -----------
Total expenses ................. 195,035 194,013 610,848 557,336
----------- ----------- ----------- -----------
Net loss ................................. $ (515) $ (3,863) $ (6,777) $ (936)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
15
<PAGE> 16
DJONT OPERATIONS, L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ....................................................... $ (6,777) $ (936)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization ................................ 409
Minority interest in partnership income ...................... 33
Changes in assets and liabilities:
Accounts receivable .......................................... (6,181) (12,178)
Inventories .................................................. 159 (686)
Prepaid expenses ............................................. (1,596) 1,259
Other assets ................................................. (2,609) 3,300
Due to FelCor Lodging Trust Incorporated ..................... 12,556 2,007
Accounts payable, accrued expenses and other liabilities ..... 2,642 17,610
---------- ----------
Net cash flow provided by (used in) operating activities .. (1,364) 10,376
---------- ----------
Net change in cash and cash equivalents ......................... (1,364) 10,376
Cash and cash equivalents at beginning of periods ............... 28,538 25,684
---------- ----------
Cash and cash equivalents at end of periods ..................... $ 27,174 $ 36,060
========== ==========
</TABLE>
The accompany notes are an integral part of these
consolidated financial statements.
16
<PAGE> 17
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Thomas J. Corcoran, Jr, the President, Chief Executive Officer and a
Director of FelCor Lodging Trust Incorporated ("FelCor"), and Hervey A. Feldman,
Chairman Emeritus of FelCor, beneficially own a 50% voting common equity
interest in DJONT Operations, L.L.C., a Delaware limited liability company. The
remaining 50% nonvoting common equity interest is beneficially owned by the
children of Charles N. Mathewson, a Director of FelCor.
Eighty-five of the hotels in which FelCor Lodging Limited Partnership
(the "Operating Partnership") had an ownership interest at September 30, 1999
(the "DJONT Hotels"), are leased to DJONT Operations L.L.C. or a consolidated
subsidiary thereof ("DJONT") pursuant to percentage leases ("Percentage
Leases"). Certain entities owning interests in DJONT and the managers of certain
DJONT Hotels have agreed to make loans to DJONT of up to an aggregate of
approximately $17.3 million to the extent necessary to enable DJONT to pay rent
and other obligations due under the respective Percentage Leases relating to a
total of 34 of the DJONT Hotels. No loans were outstanding under such agreements
at September 30, 1999.
Fifty-eight of the DJONT Hotels are operated as Embassy Suites(R)
hotels, 16 are operated as Doubletree(R) or Doubletree Guest Suites(R) hotels, 9
are operated as Sheraton(R) or Sheraton Suites(R) hotels, one is operated as a
Westin(R) hotel, and one is operated as a Hilton Suites(R) hotel. Seventy-two of
the DJONT Hotels are managed by subsidiaries of Promus Hotel Corporation
("Promus"). Promus is the largest operator of all-suite, full-service hotels in
the United States. Of the remaining DJONT Hotels, 10 are managed by a subsidiary
of Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") and three are managed
by two independent management companies.
2. COMMITMENTS AND RELATED PARTY TRANSACTIONS
DJONT has future lease commitments under the Percentage Leases which
expire in 2002 (five hotels), 2004 (seven hotels), 2005 (12 hotels) 2006 (18
hotels), 2007 (23 hotels), 2008 (12 hotels) and 2012 (eight hotels). Minimum
future rental payments (i.e., base rents) under these noncancellable operating
leases at September 30, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ----------
<S> <C>
Remainder of 1999 ............................................. $ 41,469
2000 .......................................................... 167,436
2001 .......................................................... 170,810
2002 .......................................................... 171,167
2003 .......................................................... 157,646
2004 and thereafter ........................................... 599,173
----------
$1,307,701
==========
</TABLE>
3. INVESTMENT IN REAL ESTATE
At September 30, 1999, DJONT owned thirty shares of the Class A Voting
Common Stock, $0.01 par value per share of Kingston Plantation Development
Corporation ("KPDC") which represents 3% of the equity and 100% of the voting
interest in that entity. The investment is recorded on a consolidated basis in
DJONT's financial statements.
17
<PAGE> 18
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENT IN REAL ESTATE - (CONTINUED)
KPDC owns 100% of an entity owning the New Orleans Embassy Suites Hotel
Annex, subject to a mortgage note, and a 50% interest in an entity that is
developing condominiums for sale.
The 50% owned entity is accounted for under the equity method of
accounting and DJONT's equity investment of $2.1 million in KPDC is reflected in
other assets on DJONT's balance sheet. This unconsolidated entity had no
operating income or expense for the nine months ended September 30, 1999. The
unconsolidated entity's balance sheet consists of land, construction in progress
and $13.9 million of construction loans at September 30, 1999.
4. DEBT
DJONT has reflected as a liability, a mortgage note from a wholly-owned
subsidiary of KPDC to FelCor Lodging Limited Partnership. The note bears a fixed
interest rate of 8.0% per annum with a 30 year amortization and matures on
December 31, 2004. This indebtedness is collateralized by a Mortgage and
Assignment of Leases and Rents with respect to the New Orleans Embassy Suites
Hotel Annex.
18
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
For background information relating to the Company and the definitions
of certain capitalized terms used herein, reference is made to Note 1 of Notes
to Consolidated Financial Statements of FelCor Lodging Trust Incorporated
appearing elsewhere herein.
THIRD QUARTER ACTIVITIES:
FINANCIAL PERFORMANCE (AS COMPARED TO THIRD QUARTER 1998):
o Revenues increased 14.3% to $124 million
o Net income applicable to common shareholders decreased 23%
to $24 million
o EBITDA increased 9.4% to $106 million
o Funds From Operations ("FFO") increased 1% to $69 million
o Comparable hotels (150 hotels) RevPAR increased 1.8%
o Non-comparable hotels (33 hotels) RevPAR increased 21.4%
o Total hotel portfolio (183 hotels) RevPAR increased 4.4%
HOTEL RENOVATION, REDEVELOPMENT AND REBRANDING:
o Completed $11.7 million in renovations at three hotels
including our 18th Crowne Plaza hotel, at Old Mill, Omaha,
Nebraska
o Fifteen additional hotels were undergoing renovation
o Capital expenditures to the hotel portfolio totaled $13
million
o Approximately 1% of room nights were out-of-service
CAPITALIZATION:
o Declared dividends of $0.55 per share on its Common Stock
(current annualized dividend yield of 13.1%), $0.4875 per
share on its $1.95 Series A Cumulative Convertible Preferred
Stock and $0.5625 per depositary share evidencing its 9%
Series B Cumulative Redeemable Preferred Stock.
RESULTS OF OPERATIONS
The Company
Nine Months Ended September 30, 1999 and 1998
For the nine months ended September 30, 1999 and 1998, the Company had
revenues of $386.2 million and $233.5 million, respectively, consisting
primarily of Percentage Lease revenues of $377.5 million and $223.8 million,
respectively. The increase in total revenue is primarily attributable to the
Company's acquisition and subsequent leasing, pursuant to Percentage Leases, of
interests in more than 100 additional hotels since June 30, 1998, including 101
hotels (net of hotels subsequently sold) that were acquired through the Bristol
Merger on July 28, 1998. Those hotels owned for all of the nine months ended
September 30, 1999 and 1998 recorded an increase in Percentage Lease revenues of
$6 million or 3.5%.
19
<PAGE> 20
The Company generally seeks to improve those of its hotels that
management believes can achieve increases in room and suite revenue and RevPAR
as a result of renovation, redevelopment and rebranding. However, during the
course of such improvements hotel revenue performance is often adversely
affected by such temporary factors as rooms and suites out of service and
disruptions of hotel operations. (A more detailed discussion of hotel room and
suite revenue is contained in "The Hotels" section of this Management's
Discussion and Analysis of Financial Condition and Results of Operations.)
Total expenses increased $130.2 million in the nine months ended
September 30, 1999, from $147.3 million to $277.5 million, compared to the same
period in 1998. This increase resulted primarily from the additional hotels
acquired in 1998 through the Bristol Merger. Total expenses as a percentage of
total revenue increased to 71.9% for the nine months ended September 30, 1999,
from 63.1% in the same period of 1998.
The major components of the increase in expenses, as a percentage of
total revenue, are depreciation; taxes, insurance, and other; and interest
expense.
Depreciation increased as a percentage of total revenue to 29.2% in the
nine months ended September 30, 1999, from 26.1% in the nine months ended
September 30, 1998. The relative increase in depreciation expense is primarily
attributed to depreciation on $230 million in capital expenditures made over the
past twelve months. A large percentage of these improvements are short-lived
assets.
Taxes, insurance, and other, as a percentage of total revenue,
increased from 12.6% to 15.6%. The majority of the increase, as a percentage of
total revenue, is attributed to land lease expenses, which represent 3.5% of
total revenue in 1999 but only 1.5% in 1998. Land lease expenses, as a
percentage of total revenue, increased principally because of the larger number
of hotels subject to land leases acquired through the Bristol Merger. The
remaining increase in taxes, insurance, and other, as a percentage of total
revenue, is related primarily to increased property taxes resulting from
property tax reassessments.
Interest expense increased, as a percentage of total revenue, to 23.5%
in the nine months ended September 30, 1999, from 19.9% in the nine months ended
September 30, 1998. This increase in interest expense is attributed to the
increased debt used to finance renovations, refinancing of debt at higher rates
which served to extend maturities and convert such debt from variable to fixed
rates, and the assumption of debt related to the more highly leveraged Bristol
assets.
Three Months Ended September 30, 1999 and 1998
For the three months ended September 30, 1999 and 1998, the Company had
revenues of $124.1 million and $108.6 million, respectively, consisting
primarily of Percentage Lease revenues of $120.6 million and $104.9 million,
respectively. The increase in total revenue is primarily attributed to the
Company's acquisition and subsequent leasing, pursuant to Percentage Leases, of
interests in more than 100 additional hotels since June 30, 1998, including 101
hotels (net of hotels subsequently sold) that were acquired through the Bristol
Merger on July 28, 1998. Those hotels owned for all of both quarters ended
September 30, 1999 and 1998, recorded a small decrease in Percentage Lease
revenues of $1.8 million for the three months ended September 30, 1999 versus
1998.
Total expenses increased $25.4 million in the three months ended
September 30, 1999, from $68.7 million to $94.1 million, compared to the same
period in 1998. This increase resulted primarily from the additional hotels
acquired on July 28, 1998 through the Bristol Merger. Total expenses as a
percentage of total revenue increased to 75.8% for the three months ended
September 30, 1999, from 63.3% in the same period of 1998.
The major components of the increase in expenses, as a percentage of
total revenue are general and administrative expenses; depreciation; taxes,
insurance, and other; and interest expense.
20
<PAGE> 21
General and administrative expenses increased as a percentage of total
revenue from 1.3% in the quarter ended September 30, 1998 to 2.4% for the
quarter ended September 30, 1999. Included in the 1999 quarter was approximately
$600,000 (0.5% of total revenues) of one time costs primarily associated with
the write-off of costs of a public debt offering which was abandoned when
interest rates became unattractive.
Depreciation increased as a percentage of total revenue to 31.1% in the
three months ended September 30, 1999, from 25.5% in the three months ended
September 30, 1998. The relative increase in depreciation expense is primarily
related to depreciation on $230 million in capital expenditures made over the
past twelve months. A large percentage of these improvements are short-lived
assets.
Taxes, insurance and other, as a percentage of total revenue increased
from 13.5% to 15.7% for the three months ended September 30, 1999, as compared
to the same quarterly period in 1998. This increase is principally related to
increased assessments for property taxes. The property tax increases resulted
primarily from increases in property valuations on reappraisals, which typically
follow a change in ownership, as with the hotels acquired in the Bristol Merger,
and the redevelopment and rebranding of hotels.
Interest expense increased as a percentage of total revenue, to 25.4%
in the three months ended September 30, 1999, from 21.1% in the three months
ended September 30, 1998. The increase is related to approximately $200 million
additional debt outstanding at September 30, 1999, as compared to September 30,
1998, used principally for funding capital improvements and to the refinancing
of approximately $635 million of debt at higher interest rates in 1999 to extend
maturities and convert such debt from variable to fixed rates.
Funds From Operations
The Company considers Funds From Operations to be a key measure of a
REIT's performance and should be considered along with, but not as an
alternative to, net income and cash flow as a measure of the Company's operating
performance and liquidity.
The White Paper on Funds From Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") defines Funds From Operations as net income or loss (computed in
accordance with GAAP), excluding gains or losses from debt restructuring and
sales of properties, plus real estate related depreciation and amortization,
after comparable adjustments for the Company's portion of these items related to
unconsolidated entities and joint ventures. The Company believes that Funds From
Operations is helpful to investors as a measure of the performance of an equity
REIT because, along with cash flow from operating activities, financing
activities and investing activities, it provides investors with an indication of
the ability of the Company to incur and service debt, to make capital
expenditures, to pay dividends and to fund other cash needs. The Company
computes Funds From Operations in accordance with standards established by
NAREIT which may not be comparable to Funds From Operations reported by other
REITs that do not define the term in accordance with the current NAREIT
definition or that interpret the current NAREIT definition differently than the
Company. Funds From Operations does not represent cash generated from operating
activities as determined by GAAP, and should not be considered as an alternative
to net income (determined in accordance with GAAP) as an indication of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company 's liquidity,
nor does it necessarily reflect the funds available to fund the Company's cash
needs, including its ability to make cash distributions. Funds From Operations
may include funds that may not be available for management's discretionary use
due to functional requirements to conserve funds for capital expenditures and
property acquisitions, and other commitments and uncertainties.
21
<PAGE> 22
The following table details the computation of Funds From Operations
(in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FUNDS FROM OPERATIONS (FFO):
Net income ...................................... $ 30,021 $ 37,335 $ 107,590 $ 83,160
Series B preferred dividends ................. (3,234) (3,234) (9,703) (5,139)
Extraordinary charge from write off
of deferred financing fees ................. 2,519 1,113 3,075
Depreciation ................................. 38,627 27,720 112,789 61,036
Depreciation for unconsolidated entities ..... 2,372 2,501 7,390 7,604
Minority interest in Operating Partnership ... 1,094 1,639 3,933 5,452
----------- ----------- ----------- -----------
FFO ............................................. $ 68,880 $ 68,480 $ 223,112 $ 155,188
=========== =========== =========== ===========
Weighted average common shares and units
outstanding ............................. 75,898 66,603 75,928 52,017
</TABLE>
Included in the FFO computed above is the Company's share of FFO from
its interests in separate entities owning 15 hotels, a condominium management
company and an entity that is developing condominiums for sale and owns a hotel
annex. The FFO contribution from these unconsolidated entities is derived as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS INFORMATION:
Percentage lease revenue ............................. $ 13,998 $ 13,575 $ 40,968 $ 40,144
Other income ......................................... 2,828 2,087 7,155 3,201
---------- ---------- ---------- ----------
Total revenue ................................ 16,826 15,662 48,123 43,345
---------- ---------- ---------- ----------
Expenses:
Depreciation .................................... 4,511 4,261 14,019 12,804
Taxes, insurance, and other ..................... 2,805 2,303 7,830 5,462
Interest expense ................................ 3,627 3,373 10,314 9,727
---------- ---------- ---------- ----------
Total expenses ............................... 10,943 9,937 32,163 27,993
---------- ---------- ---------- ----------
Net income ........................................... $ 5,883 $ 5,725 $ 15,960 $ 15,352
========== ========== ========== ==========
Percentage of net income attributable to the Company . $ 2,888 $ 2,862 $ 7,796 $ 7,676
Amortization of cost in excess of book value ......... (535) (416) (1,606) (1,247)
---------- ---------- ---------- ----------
Equity in income from unconsolidated entities ........ 2,353 2,446 6,190 6,429
Depreciation ......................................... 2,312 2,085 7,202 6,357
Amortization of cost in excess of book value ......... 535 416 1,606 1,247
---------- ---------- ---------- ----------
FFO from unconsolidated entities ..................... $ 5,200 $ 4,947 $ 14,998 $ 14,033
========== ========== ========== ==========
</TABLE>
22
<PAGE> 23
The Hotels
Upscale and full service hotels, like Embassy Suites, Crowne Plaza,
Holiday Inn and Holiday Inn Select, Doubletree and Doubletree Guest Suites,
Sheraton and Sheraton Suites, and Westin, are expected to account for
approximately 97% of Percentage Lease revenue in 1999. The following tables set
forth historical occupancy, average daily rate ("ADR") and RevPAR at September
30, 1999 and 1998, and the percentage changes therein between the years
presented for the Hotels in which the Company had an ownership interest at
September 30, 1999. This information is presented regardless of the date of
acquisition.
COMPARABLE HOTELS (A)
<TABLE>
<CAPTION>
THIRD QUARTER 1999 YEAR TO DATE 1999
----------------------------------------- -----------------------------------------
OCCUPANCY ADR RevPAR OCCUPANCY ADR RevPAR
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Original 75.1% $ 110.91 $ 83.26 73.7% $ 115.15 $ 84.90
CSS Hotels 75.6 121.01 91.43 75.5 126.65 95.68
1996 Acquisitions 75.6 127.93 96.73 74.4 129.73 96.48
1997 Acquisitions 72.2 113.32 81.84 72.9 116.24 84.77
1998 Acquisitions 70.4 97.41 68.58
Total DJONT Comparable Hotels 73.9 115.93 85.63 74.2 122.05 90.54
Total Bristol Comparable Hotels 71.6 84.83 60.75 70.4 79.90 56.25
Total Comparable Hotels 72.7% $ 99.72 $ 72.47 72.5% $ 103.53 $ 75.03
</TABLE>
<TABLE>
<CAPTION>
THIRD QUARTER 1998 YEAR TO DATE 1998
----------------------------------------- -----------------------------------------
OCCUPANCY ADR RevPAR OCCUPANCY ADR RevPAR
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Original Hotels 74.6% $ 109.05 $ 81.30 74.9% $ 113.56 $ 85.02
CSS Hotels 73.5 121.98 89.65 74.6 126.19 94.16
1996 Acquisitions 77.2 126.26 97.51 75.6 127.34 96.23
1997 Acquisitions 73.1 110.66 80.93 73.5 113.70 83.53
1998 Acquisitions 73.8 97.36 71.81
Total DJONT Comparable Hotels 74.1 114.63 84.97 74.5 120.39 89.68
Total Bristol Comparable Hotels 71.8 82.21 59.01 70.4 79.75 56.11
Total Comparable Hotels 72.9% $ 97.70 $ 71.20 72.6% $ 102.52 $ 74.44
</TABLE>
<TABLE>
<CAPTION>
CHANGE FROM PRIOR PERIOD CHANGE FROM PRIOR PERIOD
3RD QTR. 1999 VS. 3RD QTR. 1998 1999 vs. 1998 Year to Date
----------------------------------------- -----------------------------------------
OCCUPANCY ADR RevPAR OCCUPANCY ADR RevPAR
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Original Hotels 0.5 pts 1.7% 2.4% (1.2) pts 1.4% (0.1)%
CSS Hotels 2.1 (0.8) 2.0 0.9 0.4 1.6
1996 Acquisitions (1.6) 1.3 (0.8) (1.2) 1.9 0.3
1997 Acquisitions (0.9) 2.4 1.1 (0.6) 2.2 1.5
1998 Acquisitions (3.4) 0.1 (4.5)
Total DJONT Comparable Hotels (0.2) 1.1 0.8 (0.3) 1.4 1.0
Total Bristol Comparable Hotels (0.2) 3.2 2.9 0.0 0.2 0.2
Total Comparable Hotels (0.2) pts 2.1% 1.8% (0.1) pts 1.0% 0.8%
</TABLE>
(A) DJONT Comparable Hotels includes 74 and 60 hotels, and Bristol Comparable
Hotels includes 76 and 49 hotels, in the third quarter and year to date,
respectively, which were not undergoing redevelopment in either the 1999 or
1998 periods reported.
23
<PAGE> 24
NON-COMPARABLE HOTELS (B)
<TABLE>
<CAPTION>
THIRD QUARTER 1999 YEAR TO DATE 1999
----------------------------------------- -----------------------------------------
OCCUPANCY ADR RevPAR OCCUPANCY ADR RevPAR
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
DJONT Non-comparable Hotels 64.4% $ 92.37 $ 59.51 68.5% $ 107.16 $ 73.41
Bristol Non-comparable Hotels 67.1% $ 92.38 $ 62.02 67.8% $ 89.26 $ 60.55
Total Non-comparable Hotels 66.2% $ 92.38 $ 61.16 68.1% $ 95.08 $ 64.71
</TABLE>
<TABLE>
<CAPTION>
THIRD QUARTER 1998 YEAR TO DATE 1998
----------------------------------------- -----------------------------------------
OCCUPANCY ADR RevPAR OCCUPANCY ADR RevPAR
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
DJONT Non-comparable Hotels 61.6% $ 89.74 $ 55.32 70.9% $ 104.91 $ 74.44
Bristol Non-comparable Hotels 59.1% $ 80.78 $ 47.72 67.4% $ 83.75 $ 56.42
Total Non-comparable Hotels 60.0% $ 84.01 $ 50.38 68.5% $ 90.91 $ 62.31
</TABLE>
<TABLE>
<CAPTION>
CHANGE FROM PRIOR PERIOD CHANGE FROM PRIOR PERIOD
3RD QTR. 1999 VS. 3RD QTR. 1998 1999 VS. 1998 YEAR TO DATE
----------------------------------------- ----------------------------------------
OCCUPANCY ADR RevPAR OCCUPANCY ADR RevPAR
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
DJONT Non-comparable Hotels 2.8pts 2.9% 7.6% (2.4) pts 2.1% (1.4)%
Bristol Non-comparable Hotels 8.0pts 14.4% 30.0% 0.4 pts 6.6% 7.3%
Total Non-comparable Hotels 6.2pts 10.0% 21.4% (0.4) pts 4.6% 3.8%
</TABLE>
(B) DJONT Non-comparable Hotels includes 12 and 26 hotels and Bristol
Non-comparable Hotels includes 21 and 48 hotels, in the third quarter
and year to date, respectively, undergoing redevelopment in either the
1999 or 1998 periods reported. The Bristol Non-comparable Hotels
excludes four hotels targeted for sale.
ALL HOTELS (C)
<TABLE>
<CAPTION>
THIRD QUARTER 1999 YEAR TO DATE 1999
----------------------------------------- ------------------------------------------
OCCUPANCY ADR RevPAR OCCUPANCY ADR RevPAR
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Comparable Hotels 72.7% $ 99.72 $ 72.47 72.5% $ 103.53 $ 75.03
Non-comparable Hotels 66.2% $ 92.38 $ 61.16 68.1% $ 95.08 $ 64.71
Total Hotels 71.5% $ 98.47 $ 70.40 70.5% $ 99.89 $ 70.42
</TABLE>
<TABLE>
<CAPTION>
THIRD QUARTER 1998 YEAR TO DATE 1998
----------------------------------------- ------------------------------------------
OCCUPANCY ADR RevPAR OCCUPANCY ADR RevPAR
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Comparable Hotels 72.9% $ 97.70 $ 71.20 72.6% $ 102.52 $ 74.44
Non-comparable Hotels 60.0% $ 84.01 $ 50.38 68.5% $ 90.91 $ 62.31
Total Hotels 70.5% $ 95.60 $ 67.44 70.8% $ 97.53 $ 69.06
</TABLE>
<TABLE>
<CAPTION>
CHANGE FROM PRIOR PERIOD CHANGE FROM PRIOR PERIOD
3RD QTR. 1999 VS. 3RD QTR. 1998 1999 VS. 1998 YEAR TO DATE
----------------------------------------- ------------------------------------------
OCCUPANCY ADR RevPAR OCCUPANCY ADR RevPAR
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Comparable Hotels (0.2)pts 2.1% 1.8% (0.1) pts 1.0% 0.8%
Non-comparable Hotels 6.2pts 10.0% 21.4% (0.5) pts 4.6% 3.8%
Total Hotels 1.0pts 3.0% 4.4% (0.3) pts 2.4% 2.0%
</TABLE>
(C) Excludes four hotels targeted for sale.
24
<PAGE> 25
Comparison of The Hotels' Operating Statistics for the Three and Nine Months
Ended September 30, 1999 and 1998
The Company measures hotel operating statistics by looking at hotels
that were not undergoing major renovation during either the current year period
or the prior year period ("Comparable Hotels"). Major renovations generally
adversely affect the earnings of the hotel by taking rooms out of service and
disrupting hotel operations.
For the three and nine months ended September 30, 1999 the Company's
Comparable Hotels had increases in RevPAR, compared to the same period in 1998,
of 1.8% and 0.8%, respectively. In both the quarter and nine months ended
September 30, 1999 the Comparable Hotels had higher ADR than in the prior year,
increasing 2.1% and 1.0%, respectively, but occupied rooms ("Occupancy") fell
0.2 percentage points and 0.1 percentage points, respectively. In general, the
Company is encouraged by the relative firming of rates compared to the prior
year. This appears to be indicative of the absorption of the new rooms
introduced in certain markets during the past year.
The strongest improvements in the quarter ended September 30, 1999,
compared to the same period of 1998, came in the Comparable DJONT Original
Hotels, DJONT CSS Hotels and the Comparable Bristol Hotels.
Much of the strength from the Comparable DJONT Original Hotels and CSS
Hotels came from those parts of Florida that were not directly threatened by
hurricanes in the quarter. Additionally, California and New Orleans continue to
generate strong demand and room rates. These hotels recorded increased Occupancy
over the same quarter last year and ADR was either up or essentially flat to the
prior year. For the nine months ended September 30, 1999, these hotels had
improvements in ADR compared to the same period in 1998 and the CSS Hotels also
had an increase in Occupancy of 0.9 percentage points for the nine months ended
September 30, 1999 over 1998. The Original Hotels, however, had a 1.2 percentage
point decline in Occupancy for the nine months ended September 30, 1999,
compared to 1998.
The DJONT Comparable Hotels that did not trend upward in the third
quarter of 1999 were from the 1996 Acquisitions and 1998 Acquisitions. RevPAR
performance at these hotels was adversely affected by over building in certain
markets, such as Atlanta, Dallas and Phoenix. The Company anticipates that as
the excess supply from recent building is absorbed in these markets, RevPAR
performance will strengthen. However, the 1996 Acquisitions continued to show an
increase in ADR for the nine months ended September 30, 1999 compared to the
same period in 1998.
The Bristol Comparable Hotels continue to have strong showings from the
Holiday Inn-branded hotels which make up approximately 70% of the quarterly
Bristol Comparable room revenues. These Comparable Hotels had a 4.7% RevPAR
growth over the same quarterly period in 1998, which brought up the increase in
RevPAR for the nine months ended September 30, 1999 to 1.5%. The Company
attributes the strong performance at the Holiday Inn-branded hotels to recently
completed renovation programs and the strong RevPAR increases being recognized
at Bass Hotels & Resorts-branded hotels from an overall repositioning of the
brands. The Company anticipates that these favorable trends for the Bristol
Comparable Hotels will continue at least through the end of the year.
The Non-comparable Hotel performance for the quarter was most
profoundly affected by the Allerton Crowne Plaza, which was closed in the third
quarter 1998 for renovation. This hotel reopened in the second quarter of 1999
and generated a nearly 380% increase in its RevPAR for the third quarter 1999,
as compared to the same period in 1998. The remainder of the Bristol
Non-comparable Hotels also showed strong improvements in RevPAR during the
quarter which are attributed to the completion of the renovation at many of
these hotels. The DJONT Non-comparable Hotels are also generally showed strong
RevPAR increases for the third quarter, compared to the same period last year,
in spite of being partially offset by decreases in ADR at six hotels that were
undergoing renovations during the third quarter of 1999.
25
<PAGE> 26
DJONT
The Nine Months Ended September 30, 1999 and 1998
Total revenues increased to $604.1 million in the first nine months of
1999, from $556.4 million in the first nine months of 1998, an increase of 8.6%.
Total revenues consisted primarily of room and suite revenue of $495.4 million
and $463.0 million in the first nine months of 1999 and 1998, respectively.
The increase in total revenues is primarily a result of the addition
of 90 new rooms at one hotel and the acquisition of an additional hotel in the
fourth quarter of 1998. Room and suite revenues from the 59 DJONT Comparable
Hotels, for the nine months ended September 30, 1999 over 1998, increased 1.6%
or $5.5 million. The increase in revenues at these hotels is due primarily to an
improvement in ADR to $121.68 for the nine months ended September 30, 1999, from
$120.02 for the nine months ended September 30, 1998. The 26 DJONT
Non-comparable Hotels were undergoing renovation or rebranding during at least a
portion of the last nine months, which resulted in a decrease in their combined
occupancy and RevPAR to 68.5% and $73.41, respectively, for the nine months
ended September 30, 1999, as compared to 70.9% and $74.44, respectively, for the
nine months ended September 30, 1998.
DJONT's income before Percentage Lease rent decreased as a percentage
of total revenues from 39.6% in the nine months ended September 30, 1998 to
38.7% in the nine months ended September 30, 1999. This is largely due to
increased property operating costs resulting from higher labor costs and related
payroll benefits.
For the first nine months of 1999, DJONT incurred losses of $6.7
million, however, management currently expects DJONT to recover a significant
portion of this loss in the fourth quarter.
The Three Months Ended September 30, 1999 and 1998
Total revenues increased to $194.5 million in the third quarter of 1999
from $190.1 million in the third quarter of 1998, an increase of 2.3%. Total
revenues consisted primarily of room and suite revenue of $160.6 million and
$158.7 million in the third quarter of 1999 and 1998, respectively.
The increase in total revenues is primarily a result of the addition of
90 new rooms at one hotel and the acquisition of an additional hotel in the
fourth quarter of 1998. Room and suite revenues from the 73 DJONT Comparable
Hotels for the three months ended September 30, 1999 over 1998 increased 1.3% or
$1.8 million. The increase in revenues at these hotels is due primarily to the
improvement in ADR to $115.86 for the three months ended September 30, 1999, as
compared to $114.52 for the three months ended September 30, 1998. Six of the 12
DJONT Non-comparable Hotels had undergone renovation or rebranding during 1998
third quarter, which resulted in this group's increase in RevPAR to $59.51 for
the three months ended September 30, 1999, from $55.32 for the three months
ended September 30, 1998.
DJONT's income before Percentage Lease rent decreased as a percentage
of total revenues from 37.9% in the quarter ended September 30, 1998 to 36.3% in
the quarter ended September 30, 1999. This is largely due to higher labor costs
and related payroll benefits.
For the three months ended September 30, 1999, DJONT incurred a loss of
$515,000; however, management currently expects DJONT to recover a significant
portion of its year-to-date 1999 losses in the fourth quarter.
Bristol
Bristol is a public company whose common stock is listed on the New
York Stock Exchange under the symbol BH. Bristol files financial statements in
accordance with the Securities and Exchange Act of 1934.
26
<PAGE> 27
RENOVATION, REDEVELOPMENT, REBRANDING, AND OTHER CAPITAL EXPENDITURES
Through September 30, 1999, FelCor had spent $193 million (of a planned
$225 million) on its 1999 program for the renovation, redevelopment, or
rebranding of over 60 hotels, and capital expenditures to maintain the remaining
hotels in a competitive condition. In the third quarter of 1999, approximately
$13.1 million was spent on the 1999 renovation program and $11 million was spent
on other routine capital improvements. The renovation and redevelopment program
for 1999 was approximately 90% complete as of the end of the third quarter.
Renovations were completed at the Allerton Crowne Plaza hotel in Chicago,
Illinois, which was closed during most of the first half of 1999. The Company
presently expects to spend approximately an additional $30 million to complete
the 15 projects in process at the end of the third quarter, to complete 2
additional smaller renovation projects and for other capital improvements in
1999. In 2000, FelCor currently expects to spend approximately $40 million on
the renovation, redevelopment and rebranding of its existing hotels.
Eighteen hotels (8 of which are Bristol-operated hotels) were
undergoing renovation, redevelopment, or rebranding during the quarter, which
resulted in approximately 40,000 room nights out-of-service, or approximately
1.0% of available room nights. Approximately 2.3% of available rooms were
out-of-service during the first nine months of 1999. Many of these projects also
include renovations to the hotel's exterior, public areas, meeting spaces and
restaurants, which typically have a negative impact on hotel revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash to meet its cash requirements,
including distributions to shareholders and repayments of indebtedness, is its
share of the Operating Partnership's cash flow from the Percentage Leases. For
the nine months ended September 30, 1999, net cash flow provided by operating
activities, consisting primarily of Percentage Lease revenue, was $238 million
and Funds From Operations was $223 million.
The Lessees' obligations under the Percentage Leases are largely
unsecured. The Lessees have limited capital resources, and, accordingly, their
ability to make lease payments under the Percentage Leases is substantially
dependent on the ability of the Lessees to generate sufficient cash flow from
the operation of the Hotels.
At September 30, 1999, DJONT had a cumulative shareholders' deficit of
$15 million. The shareholders' deficit results primarily from losses incurred as
a consequence of the one-time costs of the renovation, redevelopment and
rebranding programs at the Hotels and the substantial number of room and suite
nights lost due to renovation. Currently, management expects DJONT to be
profitable in the fourth quarter and to recognize only a small loss for the
year. It is anticipated that a substantial portion of any future profits of
DJONT will be retained until a positive shareholders' equity is restored. It is
anticipated that DJONT's future earnings will be sufficient to enable it to
continue to make its lease payments under the Percentage Leases.
Certain entities owning interests in DJONT and the managers of certain
hotels have agreed to make loans to DJONT of up to an aggregate of approximately
$17.3 million to the extent necessary to enable DJONT to pay rent and other
obligations when due under the respective Percentage Leases relating to a total
of 34 of the Hotels. No loans were outstanding under such agreements at
September 30, 1999.
Bristol has entered into an absolute and unconditional guarantee of the
obligations of the Bristol Lessees under the Percentage Leases, and is required
to maintain a minimum liquid net worth. A portion of this liquid net worth is
being satisfied through a letter of credit for the benefit of the Company. This
letter of credit is subject to periodic reductions upon satisfaction of certain
conditions and, at September 30, 1999, was in the amount of $9.1 million.
According to Bristol's financial statements filed with the SEC, for the three
and nine months ended September 30, 1999, Bristol had net income of $1.9 and
$7.5 million, respectively, and at September 30, 1999, had stockholders' equity
of $43.0 million.
27
<PAGE> 28
The Company may incur indebtedness to make property acquisitions, to
purchase shares of its capital stock, or to meet distribution requirements
imposed on a REIT under the Internal Revenue Code, to the extent that working
capital and cash flow from the Company's investments are insufficient for such
purposes.
The board of directors has authorized FelCor to repurchase up to $100
million of its outstanding common shares and the stock repurchases may, at the
discretion of the Company's management, be made from time to time at prevailing
prices in the open market or through privately negotiated transactions. FelCor
expects to fund the repurchase program through the use of cash, existing credit
facilities, proceeds from the sale of assets and debt refinancings. Beginning in
October of 1999 through November 10, 1999 FelCor repurchased approximately 2.1
million shares of its outstanding common stock on the open market pursuant to
its previously announced $100 million stock buyback program.
The Line of Credit and the Senior Term Loan contain various affirmative
and negative covenants, including limitations on total indebtedness, total
secured indebtedness, restricted payments (such as stock repurchases and cash
distributions), as well as the obligation to maintain certain minimum tangible
net worth and certain minimum interest and debt service coverage ratios. At
September 30, 1999, the Company was in compliance with all such covenants.
The Company's other borrowings contain affirmative and negative
covenants that are generally equal to or less restrictive than the Line of
Credit and Senior Term Loan. Most of the mortgage debt is nonrecourse to the
Company (with certain exceptions) and contains provisions allowing for the
substitution of collateral upon satisfaction of certain conditions. Most of the
mortgage debt is prepayable; subject, however, to various prepayment penalties,
yield maintenance, or defeasance obligations.
At September 30, 1999, the Company had $48.0 million of cash and cash
equivalents and had utilized $545 million of the $850 million available under
the Line of Credit. Certain significant credit and debt statistics at September
30, 1999 are as follows:
o Interest coverage ratio of 3.4x
o Total debt to annualized EBITDA of 4.1x
o Borrowing capacity of $305 million under the Line of Credit
o Consolidated debt equal to 39.4% of investment in hotels, at cost
o Fixed interest rate debt equal to 60% of total debt
o Weighted average maturity of fixed interest rate debt of
approximately six years
o Mortgage debt to total assets of 11%
o Debt of less than $5 million and $32 million maturing in the
remainder of 1999 and 2000, respectively.
To manage the relative mix of its debt between fixed and variable rate
instruments, the Company has entered into interest rate swap agreements with six
financial institutions. These interest rate swap agreements modify a portion of
the interest characteristics of the Company's outstanding debt under its Line of
Credit and Senior Term Loan without an exchange of the underlying principal
amount, and effectively convert variable rate debt to a fixed rate. The fixed
rates to be paid, the effective fixed rate, and the variable rate to be received
by the Company at September 30, 1999, are summarized in the following table:
<TABLE>
<CAPTION>
SWAP RATE
RECEIVED
SWAP RATE EFFECTIVE (VARIABLE) AT SWAP
NOTIONAL AMOUNT PAID (FIXED) FIXED RATE 9/30/99 MATURITY
--------------- ------------ ---------- ------------- --------------
<S> <C> <C> <C> <C>
$ 50 million 6.111% 7.736% 5.309% October 1999
$ 25 million 5.955% 7.580% 5.373% November 1999
$ 25 million 5.558% 7.183% 5.371% July 2001
$ 25 million 5.548% 7.173% 5.371% July 2001
$ 75 million 5.555% 7.180% 5.371% July 2003
$100 million 5.796% 8.296% 5.371% July 2003
$ 25 million 5.826% 8.326% 5.371% July 2003
------------
$325 million
============
</TABLE>
28
<PAGE> 29
The differences to be paid or received by the Company under the terms
of the interest rate swap agreements are accrued as interest rates change and
recognized as an adjustment to interest expense by the Company pursuant to the
terms of its interest rate agreement and will have a corresponding effect on its
future cash flows. Agreements such as these contain a credit risk that the
counterparties may be unable to meet the terms of the agreement. The Company
minimizes that risk by evaluating the creditworthiness of its counterparties,
which are limited to major banks and financial institutions, and it does not
anticipate nonperformance by the counterparties.
During the third quarter 1999, the Company entered into Forward Rate
Agreements which fix three month LIBOR on $188 million of floating rate debt at
an average rate of 5.93%, effective December 8, 1999.
To provide for additional financing flexibility, the Company has
approximately $946 million of common stock, preferred stock, debt securities,
and/or common stock warrants available for offerings under shelf registration
statements previously declared effective.
INFLATION
Operators of hotels, in general, possess the ability to adjust room
rates daily to reflect the effects of inflation. Competitive pressures may,
however, limit the Lessees' ability to raise room rates.
SEASONALITY
The Hotels' operations historically have been seasonal in nature,
reflecting higher occupancy rates primarily during the first three quarters of
each year. This seasonality can be expected to cause fluctuations in the
Company's quarterly lease revenue, particularly during the fourth quarter, to
the extent that it receives Percentage Rent. To the extent that cash flow from
operations is insufficient during any quarter, due to temporary or seasonal
fluctuations in lease revenue, the Company expects to utilize cash on hand or
borrowings under the Line of Credit to make distributions to its equity holders.
YEAR 2000
The Year 2000 issue relates to computer programs that were written
using two digits, rather than four, to define the applicable year. In those
programs the year 2000 may be incorrectly identified as the year 1900, which
could result in a system failure or miscalculation causing a disruption of
operations, including a temporary inability to process transactions, prepare
financial statements, or engage in other normal business activities.
The Company believes that its efforts to identify and resolve the Year
2000 issues will avoid a major disruption of its business. The Company has
assessed its internal computer systems and believe that they will properly
utilize dates beyond December 31, 1999.
The Company and its managers have completed the assessment of both
computer and noninformation technology systems to determine if the Hotels are
Year 2000 compliant. This assessment included embedded systems that operate
elevators, phone systems, energy maintenance systems, security systems, and
other systems. Most of the upgrades to make a hotel Year 2000 compliant had been
anticipated as part of the renovation, redevelopment, and rebranding program
that the Company generally undertakes upon acquisition of a hotel.
The Company has spent approximately $8 million through the third
quarter of 1999 to remediate Year 2000 issues and anticipates spending an
additional $1 million to remediate all Year 2000 issues, which amount is
included in the Company's 1999 capital plans. The majority of the unspent funds
relate to the acquisition and systematic implementation of Year 2000 compliant
computer hardware and software for the Hotels. The Company and the managers of
the Hotels are confident this phase of the project will be completed by December
15, 1999.
29
<PAGE> 30
Concurrent with the assessment of the Year 2000 issue, the Company and
its hotel managers and Lessees are developing contingency plans intended to
mitigate and respond to disruptions in business operations that may result from
Year 2000 issues, and are developing cost estimates for such plans. This phase
of the Year 2000 project will extend into 2000.
The Company and the operators of the Hotels rely upon operational and
financial systems provided by independent, external providers of products and
services. These businesses include suppliers of electricity, natural gas,
telephone service and other public utilities, financial institutions, and
airlines. Since the Company does not control these external businesses, it
cannot ensure they will be ready for Year 2000, which in turn could disrupt the
operations of the Hotels or cause potential hotel guests to postpone or cancel
their travel plans. The Company has received assurances from the managers of the
Hotels, the franchisors of the Hotels and the Lessees, that they have
implemented appropriate steps to assure that the Year 2000 readiness of these
external businesses. However, if these external businesses were to experience a
Year 2000 problem, the resulting business disruption could have a material
adverse effect on our results of operations and financial condition.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Portions of this Quarterly Report on Form 10-Q include forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Although the Company believes that the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. Important factors that could
cause actual results to differ materially from the Company's current
expectations are disclosed herein and in the Company's other filings under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, (collectively, "Cautionary Disclosures"). The forward looking
statements included herein, and all subsequent written and oral forward looking
statements attributable to the Company or persons acting on its behalf, are
expressly qualified in their entirety by the Cautionary Statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information and disclosures regarding market risks applicable to FelCor
is incorporated herein by reference to the discussion under "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources" contained elsewhere in this
Quarterly Report on Form 10-Q for the three and nine months ended September 30,
1999.
30
<PAGE> 31
PART II. -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
For information relating to asset acquisitions and certain other
transactions by the Company through September 30, 1999, see Note 1 of Notes to
Consolidated Financial Statements of FelCor Lodging Trust Incorporated contained
in Item 1 of Part I of this Quarterly Report on Form 10-Q. Such information is
incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit
Number Description
------ -----------
3.1.1 Certificate of Correction to the Articles of Merger
between FelCor Lodging Trust Incorporated and Bristol
Hotel Company, dated August 31, 1999.
10.9 Non-Qualified Deferred Compensation Plan, as amended
and restated July 1999.
10.19.1 Second Amendment to Credit Agreement dated as of
August 20, 1999, among FelCor Lodging Trust
Incorporated and FelCor Lodging Limited Partnership,
as Borrower, the financial institutions party
thereto, and The Chase Manhattan Bank, as
administrative agent.
10.22.4 Second Amendment to Loan Agreement dated as of August
20, 1999, among FelCor Lodging Trust Incorporated and
FelCor Lodging Limited Partnership, as Borrower, the
financial institutions party thereto, and The Chase
Manhattan Bank, as administrative agent.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
Registrant did not file any reports on Form 8-K during the third
quarter of 1999.
31
<PAGE> 32
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 15, 1999
FELCOR LODGING TRUST INCORPORATED
By: /s/ Lester C. Johnson
---------------------------------
Lester C. Johnson
Vice President and Controller
(Chief Accounting Officer)
32
<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1.1 Certificate of Correction to the Articles of Merger
between FelCor Lodging Trust Incorporated and Bristol
Hotel Company, dated August 31, 1999.
10.9 Non-Qualified Deferred Compensation Plan, as amended
and restated July 1999.
10.19.1 Second Amendment to Credit Agreement dated as of
August 20, 1999, among FelCor Lodging Trust
Incorporated and FelCor Lodging Limited Partnership,
as Borrower, the financial institutions party
thereto, and The Chase Manhattan Bank, as
administrative agent.
10.22.4 Second Amendment to Loan Agreement dated as of August
20, 1999, among FelCor Lodging Trust Incorporated and
FelCor Lodging Limited Partnership, as Borrower, the
financial institutions party thereto, and The Chase
Manhattan Bank, as administrative agent.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
CERTIFICATE OF CORRECTION
FELCOR LODGING TRUST INCORPORATED, a Maryland corporation (hereinafter
referred to as the "Company"), hereby certifies to the State Department of
Assessments and Taxation of the State of Maryland (the "Department") as follows:
FIRST: The title of the document being corrected by this Certificate of
Correction is the Articles of Merger (the "Articles of Merger") between FelCor
Lodging Trust Incorporated (formerly, FelCor Suite Hotels, Inc.) and Bristol
Hotel Company ("Bristol").
SECOND: The names of the parties to the Articles of Merger are FelCor
Lodging Trust Incorporated (formerly, FelCor Suite Hotels, Inc.) and Bristol
Hotel Company, a Delaware corporation.
THIRD: The Articles of Merger being corrected by this Certificate of
Correction were filed with, and accepted for record by, the Department on July
27, 1998 at 11:22 a.m.
FOURTH: Article SEVENTH of the Articles of Merger, which is the
provision of the Articles of Merger being corrected by this Certificate of
Correction, as previously filed read as follows:
"SEVENTH: (a) The total number of shares of stock of all classes that
the Merging Corporation has authority to issue is (i) 150,000,000
shares of common stock, par value $0.01 per share (each a "Merging
Corporation Common Share"), and (ii) 50,000,000 shares of preferred
stock, par value of $0.01 per share (each a "Merging Corporation
Preferred Share"). The aggregate par value of all shares of all classes
of stock of the Merging Corporation is $2,000,000. The total number of
shares of stock of all classes that the Successor Corporation has
authority to issue is (i) 100,000,000 shares of common stock, par value
of $0.01 per share (each, a "Successor Corporation Common Share"), and
(ii) 10,000,000 shares of preferred stock, par value of $0.01 per share
(each, a "Successor Corporation Preferred Share"), 6,050,000 of which
have been designated as "$1.95 Series A Cumulative Convertible
Preferred Stock," par value of $0.01 per share (each, a "Successor
Corporation Series A Preferred Share") and 57,000 of which have been
designated as "9% Series B Cumulative Redeemable Preferred Stock," par
value of $0.01 per share (each, a "Successor Corporation Series B
Preferred Share"). The aggregate par value of all shares of all classes
of the Successor Corporation is $1,100,000.
(b) At the Effective Time, the charter of the Successor Corporation
will be amended such that the total number of shares of all classes
that the Successor Corporation will have authority to issue will be (i)
200,000,000 Successor Corporation Common Shares, and (ii) 20,000,000
Successor Corporation Preferred Shares, 6,050,000 of which will have
been designated as Successor Corporation Series A Preferred Shares and
57,000 of which will have been designated as
<PAGE> 2
Successor Corporation Series B Preferred Shares. The aggregate par
value of all shares of all classes of the Successor Corporation will be
$2,200,000."
FIFTH: Article SEVENTH of the Articles of Merger is hereby corrected by
deleting Article SEVENTH of the Articles of Merger as previously filed and
replacing it in its entirety with the following:
"SEVENTH: (a) The total number of shares of stock of all classes that
the Merging Corporation has authority to issue is (i) 150,000,000
shares of common stock, par value $0.01 per share (each a "Merging
Corporation Common Share"), and (ii) 50,000,000 shares of preferred
stock, par value of $0.01 per share (each a "Merging Corporation
Preferred Share"). The aggregate par value of all shares of all classes
of stock of the Merging Corporation is $2,000,000. The total number of
shares of stock of all classes that the Successor Corporation has
authority to issue is (i) 100,000,000 shares of common stock, par value
of $0.01 per share (each, a "Successor Corporation Common Share"), and
(ii) 10,000,000 shares of preferred stock, par value of $0.01 per share
(each, a "Successor Corporation Preferred Share"), 6,050,000 of which
have been designated as "$1.95 Series A Cumulative Convertible
Preferred Stock," par value of $0.01 per share (each, a "Successor
Corporation Series A Preferred Share") and 57,500 of which have been
designated as "9% Series B Cumulative Redeemable Preferred Stock," par
value of $0.01 per share (each, a "Successor Corporation Series B
Preferred Share"). The aggregate par value of all shares of all classes
of the Successor Corporation is $1,100,000.
(b) At the Effective Time, the charter of the Successor Corporation
will be amended such that the total number of shares of all classes
that the Successor Corporation will have authority to issue will be (i)
200,000,000 Successor Corporation Common Shares, and (ii) 20,000,000
Successor Corporation Preferred Shares, 6,050,000 of which will have
been designated as Successor Corporation Series A Preferred Shares and
57,500 of which will have been designated as Successor Corporation
Series B Preferred Shares. The aggregate par value of all shares of all
classes of the Successor Corporation will be $2,200,000."
SIXTH: This Certificate of Correction does not (i) alter the wording of
any resolution which was adopted by the Board of Directors or the stockholders
of the Company or Bristol or (ii) make any change or amendment which would not
have complied in all respects with the requirements of the Maryland General
Corporation Law.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Certificate of
Correction to be signed in its name and on its behalf on this 30th day of
August, 1999, by its Senior Vice President who acknowledges that this
Certificate of Correction is the act of the Company and that to the best of his
knowledge, information and belief and under penalties for perjury all matters
and facts contained in this Certificate of Correction are true and correct in
all respects.
FELCOR LODGING TRUST INCORPORATED
By: /s/ WILLIAM P. STADLER
-------------------------------
Name: William P. Stadler
Title: Senior Vice President
Attest:
By: /s/ LAWRENCE D. ROBINSON
-------------------------------
Name: Lawrence D. Robinson
Title: Senior Vice President/
General Counsel
(Corporate Sea])
3
<PAGE> 1
EXHIBIT 10.9
================================================================================
FELCOR LODGING TRUST INCORPORATED
NON-QUALIFIED DEFERRED COMPENSATION PLAN
JULY 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION ONE DEFINITIONS .............................................. 1
SECTION TWO ADMINISTRATION ........................................... 10
(a) Employer Duties .......................................... 10
(b) Board of Directors' Duties ............................... 10
(c) Appointment of Administrator ............................. 10
(d) Duties of Administrator .................................. 10
(e) Authority of Administrator ............................... 10
(f) Powers of Administrator .................................. 11
(g) Bond and Expenses of Administrator ....................... 11
(h) Administrator Records and Reports ........................ 11
(i) Reliance on Tables ....................................... 11
SECTION THREE PARTICIPANTS ............................................. 11
(a) Eligibility .............................................. 11
(b) Participation ............................................ 11
(c) Agreement to Be Bound .................................... 12
SECTION FOUR CONTRIBUTIONS AND ELECTIONS .............................. 12
(a) Deferred Pay ............................................. 12
(b) Deferred Shares .......................................... 12
(c) Company Contributions .................................... 12
(d) Elections ................................................ 12
(e) Furnishing of Elections .................................. 12
(f) Administrator Discretion to Reject or Modify Elections ... 12
SECTION FIVE ACCOUNTS AND INVESTMENT DIRECTIONS ....................... 12
(a) Establishment of Accounts ................................ 12
(b) Amounts Credited to Diversified Account .................. 13
(c) Amounts Credited to the Company Account .................. 13
(d) Earnings Credited to Investment Account .................. 13
(e) Amounts Credited to Deferred Shares Account .............. 13
(f) Investment Direction ..................................... 13
(g) Valuation of Accounts .................................... 13
(h) Statements ............................................... 13
SECTION SIX VESTING .................................................. 13
(a) Vesting .................................................. 13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(b) Separation for Cause .................................... 14
(c) Disposition of Forfeitures .............................. 14
SECTION SEVEN PAYMENT .................................................. 14
(a) Separation Prior to Age 55 .............................. 14
(b) Separation After Age 55 - Deferred Distribution ......... 14
(c) Distribution on Planned Early Withdrawal Date ........... 14
(d) Lump Sum Required For Small Amounts ..................... 14
(e) Form of Payment ......................................... 14
(f) Calculation of Installment Payment ...................... 14
(g) Payments Upon Other Events Determined by the
Administrator .......................................... 15
(h) Elections After Planned Early Withdrawal Date and After
Separation ............................................. 15
SECTION EIGHT SOURCE OF PAYMENT ....................................... 15
SECTION NINE PROVISIONS RELATING TO DEFERRED SHARES CREDITED TO THE
DEFERRED SHARE ACCOUNT .................................. 15
(a) Adjustments Upon Changes in Capitalization .............. 15
(b) Conditions upon Issuance of Shares ...................... 16
(c) Deemed Dividends ........................................ 16
(d) Voting and Registration ................................. 16
(e) Execution of Receipts and Releases ...................... 16
SECTION TEN HARDSHIP WITHDRAWALS .................................... 16
(a) Amount of Hardship Withdrawal ........................... 16
(b) Penalty Limitation on Deferred Pay Contributions ........ 16
SECTION ELEVEN DESIGNATION OF BENEFICIARIES ............................ 17
(a) Designation by Participant .............................. 17
(b) Lack of Designation ..................................... 17
SECTION TWELVE AMENDMENT OR TERMINATION ................................ 17
(a) Amendment or Termination ................................ 17
(b) Substantial Reduction in Benefits ....................... 17
SECTION THIRTEEN GENERAL PROVISIONS ................................... 17
(a) No Assignment ........................................... 17
(b) Incapacity .............................................. 18
(c) No Guarantee of Deferral ................................ 18
(d) Resolution of Disputes Relating to Plan ................. 18
(e) Election by Participant ................................. 19
(f) Notices by Administrator ................................ 19
(g) No Employment Rights .................................... 19
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
(h) Withholding of Taxes 19
(i) Waivers 20
(j) Binding Effect 20
(k) Payment of Expenses 20
(l) Records 20
(m) Interpretations and Adjustments 20
(n) No Rights Implied 20
(o) Information 20
(p) No Liability for Good Faith Determinations 21
(q) Severability 21
(r) Captions and Gender 21
(s) Choice of Law 21
(t) Securities Laws 21
(u) Information Required 21
</TABLE>
iii
<PAGE> 5
List of Definitions
<TABLE>
<CAPTION>
Page
----
<S> <C>
"Act" ................................................................... 1
"Account" ............................................................... 1
"Administrator" ......................................................... 1
"Beneficiary" ........................................................... 1
"Benefit" ............................................................... 1
"Board of Directors" .................................................... 1
"Bonus" ................................................................. 1
"Change in Control" ..................................................... 1
"Code" .................................................................. 2
"Company" ............................................................... 2
"Company Account" ....................................................... 2
"Company Contributions" ................................................. 2
"Compensation" .......................................................... 2
"Contributions" ......................................................... 3
"Declaration of Hardship" ............................................... 3
"Deemed Dividends" ...................................................... 3
"Default Earnings Rate" ................................................. 3
"Deferred Bonus" ........................................................ 3
"Deferred Distribution" ................................................. 3
"Deferred Option Shares" ................................................ 3
"Deferred Pay" .......................................................... 3
"Deferred Regular Pay" .................................................. 3
"Deferred Restricted Shares" ............................................ 3
"Deferred Shares" ....................................................... 3
"Deferred Shares Account" ............................................... 4
"Deferred Unrestricted Shares" .......................................... 4
"Designated Subsidiaries" ............................................... 4
"Directed Investments" .................................................. 4
"Director" .............................................................. 4
"Disability" ............................................................ 4
"Diversified Account" ................................................... 4
"Earnings" .............................................................. 4
"Effective Date" ........................................................ 4
"Election" .............................................................. 4
"Eligible Person" ....................................................... 4
"Employee" .............................................................. 5
"Employer" .............................................................. 5
"Enrollment Form" ....................................................... 5
"Entry Date" ............................................................ 5
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
"ERISA" ................................................................. 5
"Fair Market Value" ..................................................... 5
"Final Filing Date" ..................................................... 6
"For Cause" ............................................................. 6
"Hardship" .............................................................. 7
"Hardship Withdrawal" ................................................... 7
"Installment Payments" .................................................. 7
"Invested" .............................................................. 7
"Investment Account" .................................................... 7
"Investment Direction" .................................................. 7
"Investment Rules" ...................................................... 8
"Investment" ............................................................ 8
"Lapse Date" ............................................................ 8
"Lump Sum" .............................................................. 8
"Normal Retirement Date" ................................................ 8
"Option" ................................................................ 8
"Participant" ........................................................... 8
"Payroll Period" ........................................................ 8
"Plan" .................................................................. 8
"Plan Year" ............................................................. 8
"Planned Early Withdrawal Date" ......................................... 9
"Qualified Person" ...................................................... 9
"Qualifying Investor" ................................................... 9
"Quarter" ............................................................... 9
"Regular Pay" ........................................................... 9
"Rules of General Application" .......................................... 9
"Securities Act" ........................................................ 9
"Separates,""Separated,"or "Separation" ................................. 9
"Shares" ................................................................ 9
"Stock" ................................................................. 9
"Stock Plan" ............................................................ 9
"Trust" ................................................................. 9
"Trustee" ............................................................... 9
"Valuation Date" ........................................................ 9
"Value" ................................................................. 10
"Vested" ................................................................ 10
</TABLE>
v
<PAGE> 7
FELCOR LODGING TRUST INCORPORATED
NON-QUALIFIED DEFERRED COMPENSATION PLAN
This Agreement, entered into effective December 30, 1998, and restated in its
entirety in the form hereof on July 22, 1999, but effective as of December 30,
1998, establishes the FelCor Lodging Trust Incorporated Non-Qualified Deferred
Compensation Plan, an unfunded, non-qualified, deferred compensation plan,
designed primarily to provide additional benefits to a select group of
management personnel and Directors in order to retain and motivate such
individuals whose efforts are critical to the success of the Company.
Because the Plan is unfunded and is maintained by the Company primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees, the Plan is exempt from the participation,
vesting, funding and fiduciary responsibility requirements of parts 2, 3 and 4
of Title I of ERISA.
SECTION ONE DEFINITIONS
"ACT" shall mean the Securities Exchange Act of 1934, as amended or any
similar or superseding statute on statutes.
"ACCOUNT" shall mean, individually and collectively as the context
requires, the Diversified Account, Deferred Shares Account, and Company Account,
which shall be established, as required, for each Participant pursuant to
SECTION FIVE. Without limitation, all Accounts established under this Plan shall
be bookkeeping entries only and shall be utilized solely as a device for the
measurement and determination of Participants' Benefits.
"ADMINISTRATOR" shall mean the person(s) designated to administer the
Plan pursuant to SECTION TWO.
"BENEFICIARY" shall mean the person(s), entity or entities described in
SECTION ELEVEN.
"BENEFIT" shall mean the Value (including, without limitation, the
number of Deferred Shares) of a Participant's Account as of the Valuation Date
of reference.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the Company.
"BONUS" shall mean the portion of Compensation paid to a Participant
which is so designated by the Company, which may be either regular or special,
and which is payable to such Participant in addition to such Participant's
Regular Pay during a Plan Year.
<PAGE> 8
"CHANGE IN CONTROL" shall mean:
(a) a dissolution or liquidation of the Company; or
(b) a merger or consolidation (other than a merger effecting a
re-incorporation of the Company in another state or any other merger or
a consolidation in which the shareholders of the surviving corporation
and their proportionate interests therein immediately after the merger
or consolidation are substantially identical to the shareholders of the
Company and their proportionate interests therein immediately prior to
the merger or consolidation) in which the Company is not the surviving
corporation (or survives only as a subsidiary of another corporation in
a transaction in which the shareholders of the parent of the Company
and their proportionate interests therein immediately after the
transaction are not substantially identical to the shareholders of the
Company and their proportionate interests therein immediately prior to
the transaction; provided, however, that the Board of Directors may at
any time prior to such a merger or consolidation provide by resolution
that there has been no Change in Control and that the foregoing
provisions of this parenthetical shall not apply if a majority of the
Board of Directors of such parent immediately after the transaction
consists of individuals who constituted a majority of the Board of
Directors immediately prior to the transaction);
(c) a transaction in which any person (other than a
shareholder of the Company on the date of the Optionee's Participation
Agreement) becomes the owner of fifty percent (50%) or more of the
total combined voting power of all classes of stock of the Company
(provided, however, that the Board of Directors may at any time prior
to such transaction provide by resolution that there has been no Change
in Control and that this SUBPARAGRAPH of SECTION ONE shall not apply if
such acquiring person is a corporation and a majority of the Board of
Directors of the acquiring corporation immediately after the
transaction consists of individuals who constituted a majority of the
Board of Directors immediately prior to the acquisition of such fifty
percent (50%) or more total combined voting power);
(d) the date on which Thomas J. Corcoran ceases to serve as
President and Chief Executive Officer; or
(e) any other transaction or series of transactions which the
Board of Directors determines has the effect of a Change in Control.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall mean FelCor Lodging Trust Incorporated, a Maryland
corporation.
"COMPANY ACCOUNT" shall mean the Account, established pursuant to
SECTION FIVE, which shall be credited with Company Contributions, and related
Earnings, and debited with distributions, all as provided herein.
2
<PAGE> 9
"COMPANY CONTRIBUTIONS" shall mean the amount, if any, credited each
Plan Year to a Participant by and at the sole discretion of the Board of
Directors, including, without limitation, contributions which match a percentage
of his Deferred Compensation.
"COMPENSATION" shall mean with respect to a Participant, the total
wages, as defined in section 3401(a) of the Code, before any deferrals hereunder
or under any plan of the Employer; provided, however, that no Deferred Pay may
be deferred from car allowances, relocation payments, sign-on bonuses, or from
any other payments which are determined to be special payments by the
Administrator.
"CONTRIBUTIONS" shall mean, collectively, Deferred Pay, Company
Contributions, Deferred Unrestricted Shares, Deferred Option Shares, and
Deferred Restricted Shares.
"DECLARATION OF HARDSHIP" shall mean the written request, and sworn
declaration, filed by a Participant with the Administrator setting forth the
basis for such Participant's requested receipt of a Hardship Distribution.
"DEEMED DIVIDENDS" shall mean, with respect to each Participant's
Deferred Shares Account, the product of (a) each cash dividend declared with
respect to a Share, multiplied by (b) the number of Deferred Shares credited to
such Participant's Deferred Shares Account as of the record date for such
dividends.
"DEFAULT EARNINGS RATE" shall mean, for each day during a Quarter
(which, without limitation, shall be computed without compounding), a percentage
equal to the product of (i), (ii) and (iii), where (i) is the sum of the one (1)
year London Interbank Offered Rate ("LIBOR") as reported in the Wall Street
Journal as of (x) the first business day, plus (y) the last business day, of
such Quarter, (ii) is fifty percent (50%), and (iii) is a quotient of 1 divided
by 360.
"DEFERRED BONUS" shall mean the amounts deferred from a Participant's
Bonus(es) from the Employer as a result of an Election to defer such Bonus.
"DEFERRED DISTRIBUTION" shall mean the distribution of a Participant's
Benefit later than the date of his Separation.
"DEFERRED OPTION SHARES" shall mean the Deferred Shares credited to the
Deferred Shares Account as a result of an Election to defer Shares subject to an
Option.
"DEFERRED PAY" shall mean, collectively, Deferred Regular Pay and
Deferred Bonus.
"DEFERRED REGULAR PAY" shall mean the amounts deferred from a
Participant's Regular Pay as a result of an Election to defer Regular Pay.
3
<PAGE> 10
"DEFERRED RESTRICTED SHARES" shall mean the Deferred Shares credited to
a Participant's Deferred Shares Account as a result of an Election to defer
Shares subject to restrictions which cause them to be subject to a substantial
risk of forfeiture.
"DEFERRED SHARES" shall mean, collectively, the Participant's Deferred
Unrestricted Shares, Deferred Restricted Shares, and Deferred Option Shares;
provided, further, that where a reference to only one of the three classes of
Deferred Shares is intended, reference shall be made expressly to such class of
Deferred Shares.
"DEFERRED SHARES ACCOUNT" shall mean the Account, established pursuant
to SECTION FIVE, to which is credited with Deferred Shares as provided herein.
"DEFERRED UNRESTRICTED SHARES" shall mean the Deferred Shares credited
to a Participant's Deferred Shares Account as a result of an Election to defer
Shares which have not yet been delivered but which will not be subject to a
substantial risk of forfeiture at the time they would have been delivered except
for the Election.
"DESIGNATED SUBSIDIARIES" shall mean entities affiliated with the
Company which have been designated by the Board of Directors from time to time
as eligible to adopt this Plan for the benefit of their Eligible Persons.
"DIRECTED INVESTMENTS" shall mean the notational investments recorded
on the books of the Employer or the Trustee, if any, with respect to the
Diversified Account, and Company Account, respectively, of each Participant.
"DIRECTOR" shall mean a non-Employee member of the Board of Directors.
"DISABILITY" shall mean that an individual is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted,
or can be expected to last, for a continuous period of not less than twelve (12)
months.
"DIVERSIFIED ACCOUNT" shall mean the Account, established pursuant to
SECTION FIVE, which shall be credited with Deferred Pay, and related Earnings,
and debited with corresponding distributions, all as provided herein.
"EARNINGS" shall mean the amount credited or debited to an Investment
Account based upon the Fair Market Value of the Participant's Directed
Investments (including, without limitation, unrealized appreciation or
depreciation) calculated as though the Participant had actually purchased, held,
or sold, as the case may be, the Investment of reference in accordance with his
Investment Direction; and provided, further, that the closing price of each such
Investment, determined in the same manner as the Fair Market Value of Shares,
shall be deemed to be its Value on the date of reference for all purposes of the
Plan.
4
<PAGE> 11
Earnings shall also include any amount credited to the Deferred Shares Account
which is attributable to a Deemed Dividend.
"EFFECTIVE DATE" shall mean December 30, 1998.
"ELECTION" shall mean the filing of the form, prepared and distributed
by the Administrator, in which the Participant directs or elects with respect to
various matters described herein as being subject to his or her election or
direction; and the applicable provisions of each such Election shall remain in
effect until changed by the timely and effective filing of a subsequent
Election.
"ELIGIBLE PERSON" shall mean each Qualified Person selected as eligible
to participate in the Plan by the Administrator, and each Director.
"EMPLOYEE" shall mean a common law employee of the Employer.
"EMPLOYER" shall mean, collectively, the Company and each Designated
Subsidiary.
"ENROLLMENT FORM" shall mean a form prepared by the Administrator in
which the Participant:
(i) agrees to become a Participant and agrees to the terms and
provisions of the Plan;
(ii) waives his or her right to assert, perfect, or secure any lien
pursuant to any Texas statute, including, but not limited to, Ann. Tex. Prop.
Code Section 58.004 or any superseding section of the Ann. Tex. Prop. Code; and
(iii) specifies his Planned Early Withdrawal Date.
"ENTRY DATE" shall mean first day of the Payroll Period designated by
the Participant on a timely filed Election.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"FAIR MARKET VALUE" of a Share on the Valuation Date of reference shall
be the closing price of Stock on such date, which shall mean:
(i) If Shares of the same class are listed or admitted to
unlisted trading privileges on the New York Stock Exchange at the date
of determining the Fair Market Value, the last reported sale price on
such exchange on the last business day prior to the date in question;
or
(ii) If Shares of the same class shall not be listed or
admitted to unlisted trading privileges on the New York Stock Exchange
and sales prices for such shares in the over-the-counter market shall
be reported by the NASDAQ Stock Market ("NASDAQ")
5
<PAGE> 12
National Market System at the date of determining the Fair Market
Value, the last reported sale price so reported on the last business
day prior to the date in question; or
(iii) If Shares of the same class shall not be listed or
admitted to unlisted trading privileges on either the New York Stock
Exchange or the NASDAQ National Market System, and bid and asked prices
therefor in the over-the-counter market shall be reported by NASDAQ
(or, if not so reported, by the National Quotations Bureau Incorporated
or the OTC Bulletin Board) at the date of determining the Fair Market
Value, the average of the closing bid and asked prices on the last
business day prior to the date in question; and
(iv) If Shares of the same class shall not be listed or
admitted to unlisted trading privileges on the New York Stock Exchange
and sales prices or bid and asked prices for such shares shall not be
reported by NASDAQ (or the National Quotations Bureau Incorporated) at
the date of determining the Fair Market Value, the value determined in
good faith by the Administrator in good faith, without limitation,
shall be final, binding and conclusive on all parties.
"FINAL FILING DATE" shall mean, with respect to all Elections, the
later of the 30th day following designation as an Eligible Employee (so long as
it is prior to actual receipt (or Lapse Date) of the Compensation to be
deferred) and, individually and not collectively, the date(s) described below:
(i) DEFERRED REGULAR PAY. With respect to Elections of
Deferred Regular Pay taking effect in the first full Payroll Period in
the succeeding Plan Year, the last day of the current Plan Year; and
with respect to Elections of Deferred Regular Pay taking effect in the
first full Payroll Period of any Quarter (other than the first), the
last day of the second month in the immediately preceding Quarter.
(ii) DEFERRED BONUS(ES). The later of (i) the 60th day prior
to the date on which the Bonus is scheduled to be paid, and (ii) the
receipt of notice of the amount of Bonus scheduled to be paid.
(iii) RESTRICTED SHARES. The 180th day prior to the Lapse Date
with respect to the Restricted Share(s) of reference.
(iv) OPTION SHARES. The 30th day prior to the date on which
the Option is exercised.
(v) UNRESTRICTED SHARES. The later of (x) the thirtieth (30th)
day prior to the date the Administrator determines to be the scheduled
delivery date of the Unrestricted Shares, and (y) the date on which the
Company completes the action which the Administrator determines to have
legally established a Participant's unqualified right to receive the
Unrestricted Shares at some future time.
(vi) CHANGING PLANNED EARLY WITHDRAWAL DATE. The 366th day
prior to the current Planned Early Withdrawal Date.
6
<PAGE> 13
(vii) ELECTING DEFERRED DISTRIBUTION. The 180th day prior to
the date on which the payment of Benefits is made or commenced
(disregarding, for this purpose, any Hardship Withdrawals.)
(viii) REQUESTING SHARE DISTRIBUTIONS. The 5th day prior to
the date on which the payment of Benefits is made or commenced
(disregarding, for this purpose, any Hardship Withdrawals).
"FOR CAUSE" shall mean a Separation which is the result of either (a) a
Participant's material failure or refusal to perform his duties if the
Participant has failed to cure such failure or refusal to perform within thirty
(30) days after the Employer notifies the Participant in writing of such failure
or refusal to perform, or (b) based upon his commission of any of the following:
(i) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with the
Employer;
(ii) intentional wrongful damage to property of the Employer
or any other willful gross misconduct that causes material economic
harm to the Employer or that brings substantial discredit to the
Employer's reputation;
(iii) intentional wrongful disclosure of trade secrets or
confidential information of the Employer;
(iv) willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease and desist
order, including, but not limited to, a final, nonappealable conviction
of a Participant for commission of a felony involving moral turpitude;
or
(v) intentional breach of fiduciary duty owed to the Employer
involving personal profit.
For the purpose of this Plan, no act, or failure to act, on the part of
the Participant shall be deemed "intentional" unless the Board of Directors
finds that the act or failure to act was done, or omitted to be done, by the
Participant in other than good faith and without reasonable belief that his
action or omission was in the best interest of the Employer. Any determination
that a Participant has been terminated For Cause shall be made solely by the
Board of Directors.
"HARDSHIP" shall mean an unforeseeable emergency that would result in
severe financial hardship to the Participant, if a Hardship Withdrawal were not
permitted, and which results from (i) the death of family member, (ii) divorce,
(iii) a sudden or unexpected illness, accident or catastrophe to the Participant
or a dependent of the Participant, (iv) loss of property (including casualty
loss, foreclosure of primary residence, and eviction from primary residence), or
(v) other extraordinary events beyond the Participant's control, all as
determined by the Administrator.
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"HARDSHIP WITHDRAWAL" shall mean the withdrawal made by reason of a
Hardship in accordance with the provisions of SECTION TEN.
"INSTALLMENT PAYMENTS" shall mean payments of a Participant's Vested
Benefit in not less than Quarterly installments over a period not in excess of
ten (10) years.
"INVESTED" and similar terms shall mean, for convenience of reference
herein, the Administrator's notational crediting of amounts to Directed
Investments, but shall not require the Company or the Trust to actually purchase
such assets.
"INVESTMENT ACCOUNT" shall mean, collectively, a Participant's
Diversified Account, and Company Account.
"INVESTMENT DIRECTION" shall mean the direction of the Investment by
the Participant of the amount in his Investment Account. Such direction may, but
need not, result in the notational crediting of funds in the designated
Investment. A Participant shall have no right to be credited with Directed
Investments and shall have no claim against the Administrator, the Trustee or
the Employer for a failure to follow an Investment Direction; provided, however,
that should the Administrator fail or refuse to follow a Participant's
Investment Direction (and so notify Participant) with respect to some or all
funds in such Participant's Investment Account, then such Investment Account
will be credited with Earnings, with respect to funds for which an Investment
Direction is refused, at the Default Earnings Rate, until an Investment
Direction with respect to such funds is accepted by the Administrator.
"INVESTMENT RULES" shall mean, collectively, the procedures regarding
the availability of Investments which are adopted by the Administrator at the
time of reference and which, without limitation, may be changed in any manner by
the Administrator; and provided, further, without limitation, that unless
otherwise expressly provided by the Administrator in promulgating such
procedures, the Administrator, at a minimum, shall have until the 15th day of
the month following the month in which an amount is initially credited to a
Participant's Account, or a change in a prior Investment Direction is requested
by the Participant, to notationally Invest such amount in an Investment; and
provided, further, that prior to the earlier of such actual notational
Investment on the books of the Administrator, or such 15th day, such amount, if
a newly credited amount, shall not be considered Invested, and if previously
Invested, shall be considered Invested in accordance with the prior Investment
Direction.
"INVESTMENT" shall mean, individually and collectively as the context
requires, the investment alternatives available under the Investment Rules at
the time of reference, and Deferred Shares.
"LAPSE DATE" shall mean, with respect to Restricted Shares, the date on
which the restrictions lapse.
"LUMP SUM" shall mean a single payment, in cash, or Shares, or both, of
the Participant's entire Vested Benefit.
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"NORMAL RETIREMENT DATE" shall mean the Participant's 65th birthday.
"OPTION" shall mean, individually and collectively as the context
requires, all of a Participant's Option(s) granted by the Employer to acquire
Shares.
"PARTICIPANT" shall mean each person who has a Benefit at the time of
reference.
"PAYROLL PERIOD" shall mean each of the periods during a Plan Year with
respect to which Participants are paid Compensation.
"PLAN" shall mean this FelCor Lodging Trust Incorporated Non-Qualified
Deferred Compensation Plan, as now or hereafter amended.
"PLAN YEAR" shall mean the calendar year.
"PLANNED EARLY WITHDRAWAL DATE" shall mean the date, if any, selected
by the Participant for receipt of his Vested Benefit prior to his Separation;
provided, however, that if the Participant wishes to file a new Planned Early
Withdrawal Date Election in order to delay distribution to a later date, that
later date must be at least twelve (12) months after than the current Planned
Early Withdrawal Date.
"QUALIFIED PERSON" shall mean (i) an Employee who is a Qualifying
Investor and a member of management of the Employer, a highly compensated
Employee of the Employer, or an officer of the Employer, as determined by the
Administrator, or (ii) a Director.
"QUALIFYING INVESTOR" shall mean an individual who has annual
Compensation of at least $100,000, and who meets other minimum financial
requirements as determined by the Administrator.
"QUARTER" shall mean the calendar quarter.
"REGULAR PAY" shall mean all Compensation which is not a Bonus.
"RULES OF GENERAL APPLICATION" shall mean those rules promulgated by
the Administrator, in its sole discretion, from time to time with respect to the
matter of reference, but which will be applied in a similar manner to
Participants similarly situated.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar or superseding statute or statutes.
"SEPARATES," "SEPARATED," or "SEPARATION" shall mean an Employee's
ceasing to be an Employee by reason of a termination of employment with the
Employer for any reason (including death or Disability), and a Director's
ceasing to serve on the Board.
"SHARES" shall mean shares of Stock.
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"STOCK" shall mean the common stock, $0.01 par value per share, of the
Company.
"STOCK PLAN" shall mean, collectively, all of the FelCor Lodging Trust
Incorporated's stock plans, as adopted or amended from time to time.
"TRUST" shall mean a trust which substantially conforms to the model
rabbi trust provided in section 5 of the Internal Revenue Service's Revenue
Procedure 92-64, 1992-2 C.B. 422, that may be established between the Company
and the trustee(s) named in the Trust.
"TRUSTEE" shall mean the person appointed to serve as Trustee of the
Trust, if any, at the time of reference.
"VALUATION DATE" shall mean each date on which the New York Stock
Exchange is operating.
"VALUE" shall mean the value of Investments, the Fair Market Value of a
Share, or the value of an Account, as the context requires, determined as
provided hereunder.
"VESTED" shall mean that the amount, or property, referred to as
nonforfeitable and, without limitation, "nonVested" shall mean that such amount,
or property, is forfeitable.
SECTION TWO ADMINISTRATION
(a) EMPLOYER DUTIES. The Employer shall, upon request or as may be
specifically required under the Plan, furnish or cause to be furnished all of
the information or documentation in its possession or control which is necessary
or required by the Administrator to perform its duties and functions under the
Plan.
(b) BOARD OF DIRECTORS' DUTIES. The Board of Directors shall, upon
request by the Administrator or as may be specifically required under the Plan,
furnish or cause to be furnished all of the information or documentation in its
possession or control which is necessary or required by the Administrator to
perform its duties and functions under the Plan.
(c) APPOINTMENT OF ADMINISTRATOR. The Compensation Committee of the
Board of Directors shall serve as the Administrator, unless the Board of
Directors appoints one or more other persons in writing to serve as
Administrator. In the event that the Compensation Committee of the Board of
Directors ceases to exist or in the event the Administrator has not been
effectively appointed hereunder at the time of reference, the Company shall be
the administrator.
Any Administrator appointed hereunder who shall be an Employee shall
serve without compensation; and any such person shall automatically cease to be
an Administrator upon his or her termination of employment with the Employer. An
Administrator may resign at any time by giving thirty (30) days prior written
notice to the Board of Directors. The Company may remove an Administrator at any
time by written notice, with or without cause, and may appoint a successor
Administrator.
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If at any time there shall be two (2) or more persons acting as
Administrator, such persons shall conduct the business of the Administrator by
meetings, held from time to time at their discretion, and the actions of the
Administrator shall be determined by majority vote, which may be made by
telephone, wire, cable or letter; and the Administrator may designate, in
writing, one (l) or more of its members who shall have authority to sign or
certify that any action taken by the Administrator represents the will of, and
is binding on, the Administrator.
The Administrator shall acknowledge the assumption of his or her duties
hereunder in writing, or shall endorse a copy of this Plan.
(d) DUTIES OF ADMINISTRATOR. The Administrator shall be responsible for
establishing and carrying out the objectives of the Plan, in accordance with its
terms.
(e) AUTHORITY OF ADMINISTRATOR. The Administrator shall have the sole
authority and responsibility for administering the Plan.
(f) POWERS OF ADMINISTRATOR. The Administrator shall have sole and
exclusive authority and responsibility for administering, construing and
interpreting the Plan, and of appointing the Trustee, and of maintaining a
record of Investments. The Administrator shall have all powers and discretion as
may be necessary to discharge its duties and responsibilities under this Plan,
including, but not by way of limitation, the power, in its sole and absolute
discretion, (i) to interpret or construe any and all provisions of the Plan,
(ii) to make rules and regulations for the administration of the Plan, (iii) to
develop Rules of General Application, (iv) to determine all questions of
eligibility, status and other rights of Participants, Beneficiaries and other
persons, (v) to determine the amount, manner and time of the payment of any
Vested Benefits, and (vi) to resolve any dispute which may arise under this Plan
involving Participants or Beneficiaries. The Administrator may engage agents to
assist it and may engage legal counsel, who may be counsel for the Company. The
Administrator shall not be responsible for any action taken or not taken on the
advice of such counsel.
No member of the Administrator shall vote or act upon any discretionary
matter involving his own Benefits and in such case, the remaining member or
members of the Administrator shall appoint a member pro-tem to act in the place
of the interested member; provided, however, that if all members of the
Administrator shall be disqualified under this PARAGRAPH (f) of SECTION TWO with
regard to one or more matters, the President of the Company shall appoint a
qualifying person(s) to be the Administrator with regard to such matters.
(g) BOND AND EXPENSES OF ADMINISTRATOR. The Administrator shall serve
without bond unless state or federal statutes require otherwise, in which event
the Employer shall pay the premium. The expenses of the Administrator shall be
paid by the Employer. Such expenses shall include all expenses incident to the
functioning of the Administrator, including, but not by way of limitation, fees
of accountants, counsel and other specialists and other costs of administering
the Plan.
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(h) ADMINISTRATOR RECORDS AND REPORTS. The Administrator shall
maintain, or cause to be maintained, adequate records of all of its proceedings
and acts, and all such books of account, records, and other data as may be
necessary for administration of the Plan, including, but not limited, to
administering the Investment Directions as provided herein. The Administrator
shall make available to each Participant upon his request such of the Plan's
records as pertain to him for examination at reasonable times during normal
business hours.
(i) RELIANCE ON TABLES. In administering the Plan, the Administrator
shall be entitled to the extent permitted by law to rely conclusively on all
tables, valuations, certificates, opinions and reports which are furnished by
accountants, legal counsel or other experts employed or engaged by the
Administrator.
SECTION THREE PARTICIPANTS
(a) ELIGIBILITY. Participation in the Plan shall be limited to Eligible
Persons, and the Administrator shall notify each such Eligible Person, in
writing, of their status.
(b) PARTICIPATION. An Eligible Person shall become a Participant by
completing and executing an Enrollment Form, at least one Election, and such
other forms as may be required by the Administrator. At such time, if ever, as a
Participant is determined by the Administrator to no longer be a Qualified
Person, such Participant's Contributions hereunder shall cease effective for all
periods (including without limitations all Payroll Periods) following the date
of such determination.
(c) AGREEMENT TO BE BOUND. By becoming a Participant, each Eligible
Person shall for all purposes be deemed conclusively to have assented to the
provisions of this Plan and to all amendments to this Plan.
SECTION FOUR CONTRIBUTIONS AND ELECTIONS
(a) DEFERRED PAY. A Participant will be credited with his Deferred Pay
in accordance with the provisions of the Plan.
(b) DEFERRED SHARES. A Participant will be credited with Deferred
Shares equal to the sum of his or her Deferred Unrestricted Shares, Deferred
Restricted Shares, and Deferred Option Shares.
(c) COMPANY CONTRIBUTIONS. The Board of Directors may in its sole
discretion (but shall have no obligation to) credit a specific amount of Company
Contributions to any one or more Participant(s), and may make each Company
Contribution with respect to a Participant subject to such Vesting requirements
as, in its sole discretion, are appropriate.
(d) ELECTIONS. Only the last Election delivered to the Administrator on
or before the Final Filing Date of reference will be considered the Election of
the Participant with respect to the matter of reference; provided, however that
Elections with respect to Unrestricted Shares, Restricted Shares, or Option
Shares shall be irrevocable on the date they are filed. Notwithstanding any
provision hereof to the
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contrary, if a Participant is determined to have suffered a Hardship, and
regardless of whether such Participant receives a Hardship Withdrawal, the
Participant will be permitted to file an Election discontinuing Deferred Pay as
of the next Payroll Period.
Once filed, an Election with respect to Deferred Pay shall remain in
effect, including without limitation, with respect to subsequent Plan Years,
until changed by the timely filing of a new Election with respect to Deferred
Pay. A Participant shall be permitted to file no more than three (3) Elections
affecting the rate or amount of Deferred Pay with respect to a Plan Year.
(e) FURNISHING OF ELECTIONS. The Administrator shall provide any one or
more Election form(s) to each Eligible Person and Participant upon request.
(f) ADMINISTRATOR DISCRETION TO REJECT OR MODIFY ELECTIONS.
Notwithstanding anything in this SECTION FOUR to contrary, the Administrator may
refuse to accept, or may require a Participant to modify, any Elections made by
a Participant under this SECTION FOUR.
SECTION FIVE ACCOUNTS AND INVESTMENT DIRECTIONS
(a) ESTABLISHMENT OF ACCOUNTS. The Employer shall establish and
maintain a Diversified Account, a Deferred Shares Account, and a Company Account
in the name of each Participant.
(b) AMOUNTS CREDITED TO DIVERSIFIED ACCOUNT. A Participant's Deferred
Pay shall be credited to the Participant's Diversified Account as of the
Valuation Date next following the date of deferral.
(c) AMOUNTS CREDITED TO THE COMPANY ACCOUNT. Company Contributions, if
any, shall be credited to the Company Account as of the Valuation Date next
following the date designated in writing by the Company as the date of
contribution.
(d) EARNINGS CREDITED TO INVESTMENT ACCOUNT. The Administrator shall
credit each Participant's Diversified Account and Company Account as of each
Valuation Date with its Earnings since the next preceding Valuation Date; except
the Administrator will credit the amount attributable to any Default Earnings
Rate to such Account as of the last Valuation Date of each Quarter.
(e) AMOUNTS CREDITED TO DEFERRED SHARES ACCOUNT. All Deferred Shares of
a Participant shall be credited to his Deferred Shares Account.
(f) INVESTMENT DIRECTION. On such form, in the manner and at such times
as the Administrator prescribes, and subject to the Investment Rules, each
Participant may select among the different Investments with respect to the
Investment of the amounts credited to his Diversified Account and Company
Account. Any direction by the Participant shall be recorded on the books of the
Company in accordance with the Investment Rules; provided however, without
limitation, (i) the Administrator is not required to accept the Investment
Directions given by the Participant, but in order to reject an Investment
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<PAGE> 20
Direction in whole or in part, the Administrator must notify the Participant of
such rejection, in writing, within five days following receipt of the Investment
Direction of reference; provided further that, in the absence of such notice,
such Investment Direction shall be binding on the Administrator and the
Participant; and (ii) the Company and/or the Trustee may, but shall not be
required to, make actual corresponding investments.
(g) VALUATION OF ACCOUNTS. As of each Valuation Date, a Participant's
Account shall consist of the Value of the Participant's Account as of the next
preceding Valuation Date, adjusted by (i) crediting Contributions, (ii)
crediting or debiting Earnings, and (iii) debiting distributions, which have
been credited, made, earned, or distributed since the immediately preceding
Valuation Date.
(h) STATEMENTS. Within sixty (60) days after the end of each Plan Year
and at such other times during the Plan Year as shall be determined by the
Administrator, the Administrator shall furnish each Participant with a statement
showing the Value of such Participant's Benefit as of the last Valuation Date in
the preceding Quarter.
SECTION SIX VESTING
(a) VESTING. A Participant is always 100% Vested in the amount in his
Diversified Account and Deferred Share Account. Except as provided in (b), a
Participant shall be 100% Vested in the amount in his Company Account unless,
prior to the date on which a Company Contribution is credited to a Participant's
Company Account, the Company notifies the Administrator, in writing, that the
Company Contribution of reference will be subject to the Vesting schedule set
forth in such written notice. The Administrator shall establish a one or more
separate sub-account(s) under the Company Account to hold nonVested Company
Contributions, and shall credit each such sub-account only with Company
Contributions which, under every circumstance, Vest on exactly the same date and
in the same percentage. Each such sub-account shall operate in all respects as
if it were a separate Company Account of such Participant, i.e. except for
Vesting, all references hereunder to Company Account shall be deemed a reference
to each sub-account, individually and collectively, as the context requires.
(b) SEPARATION FOR CAUSE. Notwithstanding any provision hereof to the
contrary, including (a) above, if a Participant is Separated For Cause, such
Participant shall permanently forfeit one hundred percent (100%) of the amount
in his Company Account on the date of his Separation for Cause.
(c) DISPOSITION OF FORFEITURES. Forfeitures may be used for any
corporate purpose, including, without limitation, allocation as Company
Contributions.
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SECTION SEVEN PAYMENT
(a) SEPARATION PRIOR TO AGE 55. Notwithstanding any provision hereof to
the contrary, each Participant who Separates prior to age 55 for any reason
shall receive a Lump Sum distribution as soon as administratively practicable
after the date of Separation.
(b) SEPARATION AFTER AGE 55 - DEFERRED DISTRIBUTION. Each Participant
who Separates after age 55 for any reason shall receive a distribution as
provided in (a) unless he has properly elected a Deferred Distribution.
(c) DISTRIBUTION ON PLANNED EARLY WITHDRAWAL DATE. Unless an earlier
distribution has been made in accordance with the provisions of (a), a
Participant may elect to receive distribution(s) commencing on his Planned Early
Withdrawal Date in a Lump Sum or in Installment Payments.
(d) LUMP SUM REQUIRED FOR SMALL AMOUNTS. Notwithstanding any provision
hereof to the contrary, if the Value of a Participant's Account shall be less
than $10,000 on the date of his Separation, such Participant shall receive his
or her distribution in a Lump Sum distribution as provided in (a).
(e) FORM OF PAYMENT. Any payment of Vested Benefits attributable to
amounts in the Participant's Investment Account shall be made in cash or, at the
request of the Participant and subject to approval by the Administrator, in
whole or in part in Shares; and any Benefits attributable to Deferred Shares
credited under the Deferred Shares Account shall be distributed in the form of
an equal number of Shares.
(f) CALCULATION OF INSTALLMENT PAYMENT. If Participant has elected
distribution in the form of Installment Payments, he shall receive on each
payment date an amount equal to the product of (a) his Vested Benefit,
calculated separately with respect to (i) his Investment Account, and (ii) his
Deferred Shares Account, multiplied by (b) a fraction the numerator of which is
one (1), and the denominator of which is the total number of installments
originally elected less the number of installments already paid. A Participant's
Account will continue to be subject to all provisions of the Plan including,
without limitation, the crediting of Earnings, during the period of any
Installment Payment. No distribution of fractional Shares shall be made. Any
fraction shall accumulate until at least a whole Share may be distributed.
(g) PAYMENTS UPON OTHER EVENTS DETERMINED BY THE ADMINISTRATOR. The
Administrator may, subject to Participant approval, accelerate in whole or in
part (but not in an amount less than Five Thousand Dollars ($5,000)) the payment
of Vested Benefits to such Participant to any date selected by the Participant,
subject to a reduction (and permanent forfeiture) of the amount of the
Participant's Vested Benefit at the date of distribution equal to ten percent
(10%) of the amount of the distribution, which amount shall be deducted from the
Participant's undistributed Vested Benefit, or, to the extent it exceeds the
amount of such undistributed Vested Benefit, then from the amount of the
distribution. In addition, and without limitation, the Administrator may
accelerate the distribution of all (but not less than all) of a Participant's
Vested Benefits following the date, prior to his Separation, on which he no
longer is a
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<PAGE> 22
Qualified Person; provided, further, that such acceleration shall not result in
the deduction of any amount from such Participant's Benefit.
(h) ELECTIONS AFTER PLANNED EARLY WITHDRAWAL DATE AND AFTER SEPARATION.
A Participant who receives a distribution on his Planned Early Withdrawal Date
may continue to elect Contributions under the Plan so long as he remains an
Eligible Person.
SECTION EIGHT SOURCE OF PAYMENT
All cash payments will be made from the assets of the Trust, except, if
such assets are exhausted, such payments shall be made from the general assets
of the Employer; provided, without limitation, that the creation and funding of
the Trust does not create a special or separate fund or segregation of either
cash, assets or Shares which will assure such payments in such a way as to make
this Plan a "funded" plan for purposes of ERISA or the Code. Notwithstanding
anything in the Plan to the contrary, upon the occurrence of a Change in
Control, the Employer agrees, and is hereby required, to appoint a bank or
similar professional corporate fiduciary to be the Trustee of the Trust.
Nothing contained in the Plan, nor any action taken pursuant to the
provisions of the Plan, shall create or be construed to create a fiduciary
relationship between the Employer and a Participant, Beneficiary, employee or
other person. To the extent that any person acquires a right to receive payments
from the Employer under the Plan, such right shall be no greater than the right
of any unsecured general creditor of the Employer.
For purposes of the Code, the Employer intends this Plan to be an
unfunded, unsecured promise on the part of the Employer to pay in the future.
For purposes of ERISA, the Employer intends the Plan to be an unfunded plan
primarily for the benefit of a select group of management or highly compensated
employees of the Employer for the purpose of qualifying the Plan for the "top
hat" plan exception under sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
SECTION NINE PROVISIONS RELATING TO DEFERRED SHARES CREDITED TO THE DEFERRED
SHARE ACCOUNT
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If a stock dividend,
stock split, spinoff, recapitalization, merger, consolidation, exchange of
shares or the like, occurs, as a result of which shares of any class shall be
issued with respect to Shares, or such Shares shall be changed into a different
number of the same or another class or classes, the number of Deferred Shares
credited to the Deferred Share Accounts or of Participants and the calculation
of the Fair Market Value of such Deferred Shares shall be appropriately adjusted
(effective as of the date of such event) by the Administrator in a manner that
will make the Deferred Shares have a Fair Market Value as of the date of such
event which is equal to the Fair Market Value of the Shares, plus the
consideration received by shareholders with respect to Shares, as a result of
such event.
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(b) CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any provision
hereof to the contrary, Shares shall not be issued unless such issuance and
delivery shall comply with all applicable provisions of law, domestic or
foreign, including, but not limited to the Securities Act, and the requirements
of any stock exchange upon which the Shares may then be listed, including, in
each case the rules and regulations promulgated thereunder, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance, which may include a representation and warranty from the Participant
that the Shares are being acquired only for Investment for his own account and
without any present intention to publicly sell or distribute such Shares without
an exemption from or compliance with applicable securities laws. Any Shares so
issued may bear such restrictive legend as counsel for the Company may deem
necessary or advisable to assure compliance with such laws.
(c) DEEMED DIVIDENDS. The Deemed Dividends shall be credited to a
Participant's Diversified Account.
(d) VOTING AND REGISTRATION. A Participant will have no beneficial or
record interest or voting right in or other privileges relating to Shares as a
result of the crediting of Deferred Shares to his Deferred Shares Account, and
will obtain such rights and privileges only upon the issuance of a certificate
representing the equivalent Shares.
(e) EXECUTION OF RECEIPTS AND RELEASES. Any payment or any issuance or
transfer of Shares to any person shall be in full satisfaction of all claims
hereunder against the Plan, and the Administrator may require such person, as a
condition precedent to receiving delivery of Shares, to execute a receipt and
release therefor in such form as it shall determine.
SECTION TEN HARDSHIP WITHDRAWALS
(a) AMOUNT OF HARDSHIP WITHDRAWAL. A Participant who is determined to
have suffered a Hardship may be paid a Hardship Withdrawal of the amount which
the Administrator determines is necessary to reasonably alleviate such Hardship.
(b) PENALTY LIMITATION ON DEFERRED PAY CONTRIBUTIONS. In the event of a
Hardship Withdrawal, the withdrawing Participant's Election with respect to
Deferred Pay Contributions automatically will be discontinued effective with the
Payroll Period immediately following the filing of the Declaration of Hardship,
and such Participant shall not be entitled to recommence Deferred Pay
Contributions until the first Payroll Period following the first anniversary of
the filing of the Declaration of Hardship.
SECTION ELEVEN DESIGNATION OF BENEFICIARIES
(a) DESIGNATION BY PARTICIPANT. A Participant's written designation of
one or more persons or entities as his Beneficiary shall operate to designate
the Participant's Beneficiary under this Plan. The Participant shall be entitled
to file with the Administrator a copy of his Beneficiary designation under the
Plan on a form supplied to the Participant by the
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<PAGE> 24
Administrator. The last such designation received by the Administrator shall be
controlling, and no designation, or change or revocation of a designation shall
be effective unless received by the Administrator prior to the Participant's
death. If the Participant is married on the date of filing his Beneficiary
Designation, he must obtain the written consent of his spouse unless such spouse
is designated to receive at least fifty percent (50%) of his Benefit.
(b) LACK OF DESIGNATION. If no Beneficiary designation is filed and in
effect at the time of a Participant's death, if no designated Beneficiary
survives the Participant, or if the otherwise applicable Beneficiary designation
conflicts with applicable law, the Participant's estate shall be the
Beneficiary. The Administrator may direct the Employer to retain any unpaid
Vested Benefit, without liability for any interest, until all rights to the
unpaid Vested Benefit are determined. Alternatively, the Administrator may
direct the Employer to pay such Vested Benefit into any court of appropriate
jurisdiction. Any such payment shall completely discharge the Employer of any
liability under the Plan.
SECTION TWELVE AMENDMENT OR TERMINATION
(a) AMENDMENT OR TERMINATION. Except as to the last sentence in the
first paragraph of Section Eight, and this Section Twelve, the Plan may be
amended, suspended or terminated, in whole or in part, by the Board of
Directors, but no such action shall retroactively impair the rights of any
person to payment of such person's Vested Benefit (provided, without limitation,
that the date of payment may be accelerated); provided, further, that the Plan
may be amended by the Administrator with respect to any matters which the
Administrator determines to involve primarily clarification of one or more
provisions the Plan, or relate primarily to Plan administration.
(b) SUBSTANTIAL REDUCTION IN BENEFITS. Without limiting the generality
of any other provision hereof, if the Administrator, in its sole discretion,
determines that a proposed amendment to the Plan would result in a substantial
reduction in either the rights or benefits of Participants under the Plan, the
Administrator must give each Participant notice of the amendment not less than
60 days prior to the earlier of its adoption or its effective date, and must
allow each Participant to waive the right to elect an immediate distribution as
described below. In the absence of such timely waiver, each Participant shall
have the right, for a period of 90 days commencing on the later of the adoption,
or the effective date, of such amendment, to elect, in a writing filed with the
Administrator, to have all (but not less than all) of his Vested Benefit
distributed to him as soon as reasonably possible.
SECTION THIRTEEN GENERAL PROVISIONS
(a) NO ASSIGNMENT. The right of any Participant or other person to the
payment of a Benefit shall not be assigned, transferred, pledged or encumbered,
either voluntarily or by operation of law, except as provided in SECTION ELEVEN
with respect to designations of Beneficiaries. If any person shall attempt to
assign, transfer, pledge or encumber any portion of such Benefit, or if by
reason of bankruptcy or other event happening at any time any such payment would
be made subject to debts or liabilities or would otherwise devolve upon anyone
else and not be enjoyed by such person, the Administrator may terminate such
person's interest in any such payment and direct that the same be held and
applied to or for the benefit
18
<PAGE> 25
of such person, his spouse, children or other dependents, or any other persons
deemed to be the natural objects of his bounty, or any of them, in such manner
as the Administrator may deem proper.
(b) INCAPACITY. If the Administrator shall find that any person is
unable to care for his affairs because of illness or accident or is a minor, any
payment due (unless a prior claim for such payment shall have been made by a
duly appointed guardian, committee or other legal representative) may be paid to
his spouse, a child, a parent, or a brother or sister, or any other person
deemed by the Administrator to have incurred expenses for such person otherwise
entitled to payment, in such manner and proportions as the Administrator may
determine. Any such payment shall be a complete discharge of the liabilities of
the Employer under the Plan as to the amount paid.
(c) NO GUARANTEE OF DEFERRAL. While the Company intends that this Plan
will result in the deferral of the imposition of a federal income tax on the
funds credited hereunder until such time as they actually shall be paid to a
Participant, nothing herein shall be construed as a promise, guarantee or other
representation by the Company of such tax effect nor, without limitation, shall
the Company be liable for any taxes, penalties or other amounts incurred by
Participants in the event it is determined by applicable authorities that such
deferral was not accomplished, and each Eligible Person electing to become a
Participant should consult his or her own tax advisor(s) to determine the tax
consequences in his or her specific case, and their suitability for
participation in this Plan.
(d) RESOLUTION OF DISPUTES RELATING TO PLAN. If you make a written
request for Benefits and your request is partially or wholly denied, the
Administrator will explain, in writing, the basis for the denial. This will
ordinarily be done in 90 days; but, in unusual circumstances, this period may be
extended by up to 90 additional days if you are given notice of the extension
during the additional 90-day period. The written notification from the
Administrator will tell you if any information is needed to complete the
processing of your claim to Benefits and explain why the information is needed.
In addition, the notification will tell you how and when an appeal should be
made.
The appeal process is as follows:
(a) After you receive notice of denial of Benefits, you may appeal
to the Administrator, in writing, within 60 days. If you do
not make your written appeal within 60 days, the original
decision of the Administrator will become final.
(b) You may include in your written appeal any reasons for appeal
and any information to support your rights to benefits. You
may use legal assistance and you may examine any related Plan
documents.
(c) The Administrator will then reexamine all of the facts and
come to a final decision. You will be notified of this
decision within 60 days of the time you submit your written
appeal unless there are special circumstances, such as a
hearing. You will be notified if an extension is required.
However, in no case will you receive the Administrator's
decision later than 120 days after your appeal is received.
The notice of final decision will include
19
<PAGE> 26
specific reasons for the decision and identify the Plan
provisions relied upon in making the decision.
If, after the exhaustion of the claims procedure set forth above, one
or more disputes remain with regard the rights under the Plan of any Employee,
Participant, Beneficiary or person claiming under them, such person(s) and the
Administrator (collectively, "Interested Parties") agree to attempt to resolve
same by telephone conference with an agreed mediator. If the Interested Parties
cannot resolve their differences by such telephone conference, then the
Interested Parties agree to schedule a one day mediation with a mediator who is
mutually agreeable to the Interested Parties, within thirty (30) days to resolve
the disputes and to share equally the costs of such mediation. If one of the
Interested Parties refuses to mediate, then such Interested Party thereby waives
any recovery for attorneys' fees or costs incurred in any arbitration brought to
construe or enforce the provisions of this Plan. If the Interested Parties are
unable to resolve their dispute by mediation, the Interested Parties may
institute an arbitration proceeding under the auspices of the American
Arbitration Association to construe or enforce the provisions of the Plan. THE
INTERESTED PARTIES HEREBY WAIVE THEIR RIGHT TO INSTITUTE LITIGATION IN A COURT
OF LAW TO RESOLVE A DISPUTE CONCERNING THE CONSTRUCTION OR ENFORCEMENT OF THIS
PLAN. The Interested Party prevailing in any such arbitration shall recover from
the adverse party its actual damages and reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees incurred in connection
with such dispute and arbitration.
(e) ELECTION BY PARTICIPANT. All elections, designations, requests,
notices, instructions and other communications from a Participant, Beneficiary
or other person to the Administrator required or permitted under the Plan shall
be in such form as is prescribed from time to time by the Administrator, shall
be mailed by first-class mail or delivered to such location as shall be
specified by the Administrator and shall be deemed to have been given and
delivered only upon actual receipt by the Administrator at such location.
(f) NOTICES BY ADMINISTRATOR. All notices, statements, reports and
other communications from the Administrator to any Employee, Eligible Person,
Participant, Beneficiary or other person required or permitted under the Plan
shall be deemed to have been duly given when delivered to, or when mailed
first-class mail, postage prepaid and addressed to, such Employee, Eligible
Person, Participant, Beneficiary or other person at his address last appearing
on the records of the Employer.
(g) NO EMPLOYMENT RIGHTS. Neither the Plan nor any action taken under
the Plan shall be construed as giving to any person the right to be retained in
the employ of the Employer or as affecting the right of the Employer to dismiss
any person (other than a Director) at any time, with or without cause.
(h) WITHHOLDING OF TAXES. The Employer shall deduct from the
Participant's nondeferred Compensation (or shall make any other arrangement with
Participant which the Employer deems appropriate) any amount required to be paid
by the Participant as a federal or state tax with respect to any Election
hereunder, including, without limitation, Federal employment taxes due at the
date of any deferral or Company Contributions. In addition, the Employer shall
be entitled to deduct from the Participant's
20
<PAGE> 27
Vested Benefit, prior to distribution, any amount required to be withheld for
federal or state tax purposes with respect to any amount credited hereunder
and/or any amount distributed from the Plan.
(i) WAIVERS. Any waiver of any right granted pursuant to this Plan
shall not be valid unless the same is in writing and signed by the party waiving
such right. Any such waiver shall not be deemed to be a waiver of any other
rights.
(j) BINDING EFFECT. This Plan and the rights and obligations under this
Plan shall be binding upon all parties and inure to the benefit of only the
Participants, Beneficiaries and their respective legal representatives.
(k) PAYMENT OF EXPENSES. All expenses incident to the administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Company.
(l) RECORDS. Records of the Company as to any matters relating to this
Plan will be conclusive on all persons.
(m) INTERPRETATIONS AND ADJUSTMENTS. To the extent permitted by law,
each interpretation of the Plan and each decision on any matter relating to the
Plan made by the Board of Directors, the Company, or the Administrator, within
their scope of their authority hereunder, shall be made in their sole discretion
and shall be binding on all persons. A misstatement or other mistake of fact
shall be corrected when it becomes known and the person responsible shall make
such adjustment on account thereof as he considers equitable and practicable.
Notwithstanding any provision of the Plan to the contrary, if the Administrator,
in its sole discretion, determines, in writing filed in the appropriate records
of the Administrator, that compliance with any provision(s) of this Plan would
result in a charge to the earnings of the Employer or any related company in
excess of the charge to earnings which would be incurred in the absence of such
compliance, then the Administrator shall have the right and authority,
exercisable in its sole discretion, to fail or refuse to comply with such
provision(s).
(n) NO RIGHTS IMPLIED. All Contributions may be used by the Employer
for any corporate purpose, and the Employer shall not be obligated to segregate
such amounts. Without limitation, nothing contained in this Plan, nor any
modification or amendment to the Plan, nor the creation of any Account on the
books of the Company, nor the issuance of any Shares under the Plan, shall give
any Employee any legal or equitable right against the Company or any officer,
director, or Employee of the Company, except as expressly provided by the Plan.
(o) INFORMATION. The Company shall, upon request or as may be
specifically required hereunder, furnish or cause to be furnished, all of the
information or documentation which is necessary or required by the Board of
Directors and/or Administrator to perform its duties and functions under the
Plan. The Company's records as to the current information the Company furnishes
to the Board of Directors and/or Administrator shall be conclusive as to all
persons.
21
<PAGE> 28
(p) NO LIABILITY FOR GOOD FAITH DETERMINATIONS. Neither the Company,
the Board of Directors, nor the Administrator (nor their respective delegatee)
shall be liable for any act, omission, or determination taken or made with
respect to the Plan which is not judicially determined to be due to willful
misconduct, and members of the Board of Directors and the Administrator (and
their delegatee) shall be entitled to indemnification and reimbursement by the
Company in respect of any claim, loss, damage, or expense (including attorneys'
fees, the costs of settling any suit, provided such settlement is approved by
independent legal counsel selected by the Company, and amounts paid in
satisfaction of a judgment, except a judgment based on a finding of willful
misconduct) arising therefrom to the full extent permitted by law and under any
directors' and officers' liability or similar insurance coverage that may from
time to time be in effect.
(q) SEVERABILITY. In case any one or more of the provisions contained
in this Plan shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions in this Plan
shall not in any way be affected or impaired.
(r) CAPTIONS AND GENDER. The captions preceding the Sections and
subsections of this Plan have been inserted solely as a matter of convenience
and in no way define or limit the scope or intent of any provisions of this
Plan. Where the context admits or requires, words used in the masculine gender
shall be construed to include the feminine and the neuter also, the plural shall
include the singular, and the singular shall include the plural.
(s) CHOICE OF LAW. The Plan and all rights under this Plan shall be
governed by and construed IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
except to the extent preempted by ERISA.
(t) SECURITIES LAWS. The Plan intends to comply with and be exempt
under the Securities Act. The Participants under the Plan are final purchasers
and not underwriters or conduits to other beneficial owners or subsequent
purchasers.
(u) INFORMATION REQUIRED. Each Participant shall file with the
Administrator such pertinent information concerning himself and his Beneficiary
as the Administrator may specify, and no Participant or Beneficiary or other
person shall have any rights or be entitled to any Benefits under the Plan
unless such information has been filed by, or with respect to, him.
IN WITNESS WHEREOF, the Employer has executed this Restatement of the
Plan on this 22nd day of July, 1999, to be effective as of the Effective Date.
FELCOR LODGING TRUST INCORPORATED
By: /s/ LAWRENCE D. ROBINSON
-------------------------------------
Its: Senior Vice President
---------------------------------
22
<PAGE> 1
EXHIBIT 10.19.1
SECOND AMENDMENT
to
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("Second Amendment"), dated
as of August 20, 1999 among FELCOR LODGING TRUST INCORPORATED, a Maryland
corporation (f/k/a FelCor Suite Hotels, Inc.) ("FelCor") and FELCOR LODGING
LIMITED PARTNERSHIP, a Delaware limited partnership (f/k/a FelCor Suites Limited
Partnership) ("FelCor LP" and collectively with FelCor, the "Borrower"), the
financial institutions listed on the signature pages hereof (each individually a
"Lender" and collectively the "Lenders"), and THE CHASE MANHATTAN BANK, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent").
WITNESSETH:
WHEREAS, that certain Fourth Amended and Restated Credit Agreement,
dated as of July 1, 1998, among Borrower, the financial institutions party
thereto, and the Administrative Agent provides for the making of certain loans
to Borrower up to an aggregate principal amount of $1,100,000,000 (the "Credit
Agreement");
WHEREAS, pursuant to that certain First Amendment to the Credit
Agreement and the Loan Agreement ("First Amendment"), dated as of May 17, 1999
among the parties hereto, the parties modified the defined term "Unencumbered"
in the Credit Agreement;
WHEREAS, the parties hereto desire to cancel the amendments made by the
First Amendment and to modify the Credit Agreement in certain respects;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the Credit Agreement is
amended as follows:
1. The First Amendment is hereby canceled and shall have no force or
effect. All amendments set forth in the First Amendment are hereby declared void
and the terms of the Credit Agreement are hereby restored to the terms in effect
immediately prior to the adoption of the First Amendment, but with such
amendments and modifications thereto as are set forth elsewhere herein.
<PAGE> 2
2. Under Section 1.1 of the Credit Agreement, there is hereby added
thereto (in alphabetical order) a new defined term which shall read as follows:
"`Disqualified Stock' shall mean any class or series of Stock
of any Person that by its terms or otherwise is (i) required to be
redeemed prior to the Final Maturity Date of the Loans, (ii)
redeemable at the option of the holder of such class or series of
Stock at any time prior to the Final Maturity Date of the Loans, or
(iii) convertible into or exchangeable for Stock referred to in
clause (i) or (ii) above or Indebtedness having a scheduled maturity
prior to the Final Maturity Date of the Loans."
3. Under Section 1.1 of the Credit Agreement, there is hereby added
thereto (in alphabetical order) a new defined term which shall read as follows:
"`Indenture' means that certain Indenture dated as of October
1, 1997, as amended to date and as may be amended, modified, or
supplemented from time to time, among FelCor Suites Limited
Partnership (predecessor in interest to FelCor LP) as issuer,
various Borrower affiliates as guarantors, and SunTrust Bank,
Atlanta, as trustee providing for the initial issuance of up to
$175,000,000 aggregate principal amount of 7-3/8% senior notes due
2004 and $125,000,000 aggregate principal amount of 7-5/8% senior
notes due 2007."
4. Under the definition of "Permitted Liens" in Section 1.1 of the
Credit Agreement, the word "and" preceding clause (c) thereof is hereby deleted
and there is hereby added thereto a new clause (d) which shall read as follows:
"and (d) Liens secured by collateral similar in type to the
collateral securing the Pledge Agreement (but not the Collateral, as
defined in and pledged under the Pledge Agreement) and securing on
an equal and ratable basis the Loans and any other Indebtedness."
5. Under Section 1.1 of the Credit Agreement, there is hereby added
thereto (in alphabetical order) a new defined term which shall read as follows:
"'Pledge Agreement' means that certain Pledge and Security
Agreement entered into in connection with the $375,000,000 Loan
Agreement, dated as of April 1, 1999, between Borrower and Chase as
the Administrative Agent (the "Loan Agreement"), under which
ownership interests in certain entities of or affiliated with the
Borrower (as set forth in the Pledge Agreement) are pledged under
certain circumstances as collateral for, inter alia, the Loans, as
such Pledge Agreement may be amended, modified or supplemented from
time to time."
6. Under the definition of the term "Recourse Secured Indebtedness" in
Section 1.1 of the Credit Agreement, the following parenthetical phrase is
hereby added in clause (A)(x) after the word "Lien":
2
<PAGE> 3
"(other than a Permitted Lien or in connection with the Pledge
Agreement)"
7. Under the definition of the term "Stock" in Section 1.1 of the
Credit Agreement, the period at the end of the sentence is hereby deleted and
the following is hereby substituted in place thereof:
"and limited liability company interests."
8. Under the definition of the term "Total Secured Indebtedness" in
Section 1.1 of the Credit Agreement, the following parenthetical phrase is
hereby added after the words "or other encumbrance":
"(other than a Permitted Lien or in connection with the Pledge
Agreement)"
9. Under the definition of the term "Unencumbered" in Section 1.1 of
the Credit Agreement, the last parenthetical phrase in paragraph (c) is hereby
deleted in its entirety and the following is hereby substituted in place
thereof:
"(other than pursuant to an "equal and ratable" clause contained in
any agreement governing Indebtedness)."
10. Under the definition of the term "Unencumbered" in Section 1.1 of
the Credit Agreement, the last paragraph thereof is hereby deleted in its
entirety and the following is hereby substituted in place thereof:
"For the purposes of this Agreement, any Joint Venture Hotel or
Hotel owned by the Borrower, or a Subsidiary of the Borrower shall
not be deemed to be Unencumbered unless both (i) such Hotel and
(ii) all Stock owned directly or indirectly by either FelCor or
FelCor LP in the entity that owns such Hotel is Unencumbered (other
than by a Permitted Lien or in connection with the Pledge
Agreement)."
11. Under Section 1.1 of the Credit Agreement, there is hereby added
thereto (in alphabetical order) a new defined term which shall read as follows:
"`Unsecured Indebtedness' of any Person means any Indebtedness
of such Person not required to be included in the computation of
Total Secured Indebtedness of such Person."
12. Under the definition of the term "Total Value" in Section 1.1 of
the Credit Agreement, paragraph (B) thereof is hereby deleted in its entirety
and the following is hereby substituted in place thereof:
"(B) for Hotels owned or leased pursuant to a Qualified Lease
by Borrower (or any Subsidiary or Unconsolidated Entity of
Borrower) (x) for less than four (4) fiscal Quarters and for which
the Borrower (or
3
<PAGE> 4
any Subsidiary or Unconsolidated Entity of Borrower) does not have,
or is not able to reasonably obtain, trailing four quarter audited
financial information or (y) which the Borrower has designated as a
Refurbishment Hotel, in each such case 95% of the Borrower's
Investment in such Hotels (provided that if the Allerton Hotel is
designated as a Refurbishment Hotel, then such Hotel shall be
valued at 85% of the Borrower's Investment in such Hotel); plus"
13. Under the definition of the term "Unsecured Interest Expense" in
Section 1.1 of the Credit Agreement, the term "unsecured Indebtedness" as used
therein is hereby deleted wherever used and the term "Unsecured Indebtedness" is
hereby substituted in place thereof.
14. Under Section 6.11 of the Credit Agreement, there is hereby added
to the end of subsection (a) of such section a new clause which shall read as
follows:
"provided, however, that for purposes of this subparagraph (a) of
this paragraph 6.11 only, "Reporting Operating Lessees" and
"Requested Operating Lessee" shall not include Bristol."
15. Under Section 6.11 of the Credit Agreement, there is hereby added
to the end of subsection (b) of such section a new clause, which shall read as
follows:
"provided, however, that for purposes of this subparagraph (b) of
this paragraph 6.11 only, "Reporting Operating Lessees" shall not
include Bristol."
16. Under Section 7.2 of the Credit Agreement, there is hereby deleted
from such section the second sentence thereof in its entirety, and there is
hereby added to the end of the first sentence a new clause which shall read as
follows:
"except to the extent that the aggregate value of any Hotels owned
or leased by the Borrower (directly or indirectly) which are not
leased to an Operating Lessee, managed by a Manager, and operated
pursuant to and with the benefit of a License does not exceed 10%
of Total Value."
17. Section 7.4 of the Credit Agreement is hereby deleted in its
entirety and the following is hereby substituted in place thereof:
7.4 "Restricted Payments. The Borrower, unless otherwise required
in order to maintain FelCor's status as a real estate investment
trust in accordance with the written advice of independent counsel
to the Borrower, shall not, and shall not permit its Subsidiaries
to declare or authorize any dividend payment or other distribution
(such dividend or distribution shall be deemed made when so
declared or authorized) of assets, properties, cash, rights,
obligations or securities (other than the Bristol Distribution and
distributions of Stock or Stock Equivalents, exclusive of
Disqualified Stock) on account or in respect of any of its
4
<PAGE> 5
Stock or Stock Equivalents or any payment (whether in Disqualified
Stock, Indebtedness, cash or other assets), including any sinking
fund or similar deposit, on account of the purchase, redemption,
retirement, defeasance, acquisition, cancellation or termination of
any such Stock or Stock Equivalents (collectively, "Restricted
Payments"); provided, that, notwithstanding the foregoing, (i) any
Subsidiary may make Restricted Payments, directly or indirectly, to
the Borrower or any Guarantor; (ii) any non-wholly owned Subsidiary
of the Borrower may make Restricted Payments to the holders of its
Stock or Stock Equivalents generally, so long as the Borrower or
its respective Subsidiary which owns the Stock or Stock Equivalents
in the Subsidiary paying such Restricted Payments receives at least
its proportionate share thereof (based upon its relative economic
holding of equity interest in the Subsidiary paying such Restricted
Payments and taking into account the relative preferences, if any,
of the various classes of equity interests in such Subsidiary or
the terms of any agreements applicable thereto), and (iii) the
Borrower or any Subsidiary may make payments to purchase Stock or
Stock Equivalents of any non-wholly owned Subsidiary. In addition,
in any Fiscal Quarter the Borrower may make Restricted Payments
which, when added to Restricted Payments made during the
immediately preceding three consecutive Fiscal Quarters, do not
exceed an aggregate amount equal to the lesser of 85% of the
consolidated Adjusted Funds From Operations and 100% of the Free
Cash Flow of the Borrower in each case for the immediately
preceding four consecutive Fiscal Quarters; provided further, that,
in addition to the Restricted Payments permitted above, the
Borrower may purchase, redeem or acquire Stock or Stock Equivalents
of the Borrower in an amount of up to $50,000,000.00 plus net
proceeds (including the fair market value of any property received)
of any issuance of Stock or Stock Equivalents (other than
Disqualified Stock) of the Borrower subsequent to June 30, 1999."
18. The Credit Agreement and the other Loan Documents (as defined in
the Credit Agreement) are in full force and effect without default thereunder by
Borrower and all of the representations and warranties contained in the Credit
Agreement and the other Loan Documents are hereby restated as if the same were
made as of the date hereof (it being understood and agreed that any
representation or warranty which by its terms is made on a specified date shall
be required to be true and correct only as of such specified date).
19. If there shall be any inconsistencies between the terms, covenants,
conditions and provisions set forth in the Credit Agreement, and the terms,
covenants, conditions and provisions set forth in this Second Amendment, then,
the terms, covenants, conditions and provisions of this Second Amendment shall
prevail. Whenever possible, the provisions of this Second Amendment shall be
deemed supplemental to and not in derogation of the terms of the Credit
Agreement and any documents relating thereto.
5
<PAGE> 6
20. Each party hereto hereby confirms and ratifies all of the terms and
provisions of the Credit Agreement as amended by this Second Amendment. Except
as expressly amended hereby, all of the terms of the Credit Agreement shall
remain in full force and effect.
21. Each party hereto represents, warrants and covenants that such
party (and the undersigned representative of such party) has full power,
authority and legal right to execute this Second Amendment and to keep and
observe all of the terms of this Second Amendment and the Credit Agreement on
such party's part to be observed and performed.
22. If any term, covenant or condition of this Second Amendment shall
be held to be invalid, illegal or unenforceable in any respect, this Second
Amendment shall be construed without such provision.
23. This Second Amendment shall be binding upon the successors and
assigns of the Borrower and shall inure to the benefit of and be enforceable by
the Administrative Agent under the Credit Agreement and its successors and
assigns; provided that no Borrower may assign any of its rights or obligations
hereunder without the prior written consent of the Administrative Agent. THIS
SECOND AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
BY THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS).
24. This Second Amendment may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
6
<PAGE> 7
IN WITNESS WHEREOF, this instrument has been duly executed by the
undersigned as of the day and year first above written.
FELCOR LODGING TRUST INCORPORATED,
a Maryland corporation
By: /s/ LAWRENCE D. ROBINSON
---------------------------------
Name: Lawrence D. Robinson
Title: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 8
FELCOR LODGING LIMITED PARTNERSHIP, a
Delaware limited partnership
By: FELCOR LODGING TRUST INCORPORATED, a
Maryland corporation, its sole general
partner
By: /s/ LAWRENCE D. ROBINSON
-------------------------------------
Name: Lawrence D. Robinson
Title: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 9
Signature for Credit Agreement
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/ ALAN BREINDEL
--------------------------------
Name: Alan Breindel
Title: Managing Director
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 10
REMAINDER OF SIGNATURE PAGES
INTENTIONALLY OMITTED
<PAGE> 1
EXHIBIT 10.22.4
SECOND AMENDMENT
to
LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT ("Second Amendment"), dated as
of August 20, 1999 among FELCOR LODGING TRUST INCORPORATED, a Maryland
corporation (f/k/a FelCor Suite Hotels, Inc.) ("FelCor") and FELCOR LODGING
LIMITED PARTNERSHIP, a Delaware limited partnership (f/k/a FelCor Suites Limited
Partnership) ("FelCor LP" and collectively with FelCor, the "Borrower"), the
financial institutions listed on the signature pages hereof (each individually a
"Lender" and collectively the "Lenders"), and THE CHASE MANHATTAN BANK, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent").
WITNESSETH:
WHEREAS, that certain Loan Agreement, dated as of April 1, 1999, among
Borrower, the financial institutions party thereto, and the Administrative Agent
provides for the making of a loan to Borrower in the aggregate principal amount
of $375,000,000 (the "Loan Agreement"); and
WHEREAS, pursuant to that certain First Amendment to the Credit
Agreement and the Loan Agreement ("First Amendment"), dated as of May 17, 1999
among the parties hereto, the parties modified the defined term "Unencumbered"
in the Loan Agreement;
WHEREAS, the parties hereto desire to cancel the amendments made by the
First Amendment and to modify the Loan Agreement in certain respects;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the Loan Agreement is amended
as follows:
1. The First Amendment is hereby canceled and shall have no force or effect.
All amendments set forth in the First Amendment are hereby declared void
and the terms of the Loan Agreement are hereby restored to the terms in
effect immediately prior to the adoption of the First Amendment, but with
such amendments and modifications thereto as are set forth elsewhere
herein.
<PAGE> 2
2. Under Section 1.1 of the Loan Agreement, there is hereby added thereto (in
alphabetical order) a new defined term which shall read as follows:
"`Bristol Distribution' shall mean Borrower's
one-time earnings and profits distribution associated with the
merger between Borrower and Bristol Hotel Company, a Delaware
corporation, pursuant to that certain Merger Agreement, dated
as of March 23, 1998 in the amount of $0.345 per common share
and unit, and $0.207 per share of Series A Cumulative
Convertible Preferred Stock, as distributed by Borrower on
January 29, 1999 to holders of record on December 30, 1998."
3. Under Section 1.1 of the Loan Agreement, there is hereby added thereto (in
alphabetical order) a new defined term which shall read as follows:
"`Disqualified Stock' shall mean any class or series
of Stock of any Person that by its terms or otherwise is (i)
required to be redeemed prior to the Maturity Date of the
Loans, (ii) redeemable at the option of the holder of such
class or series of Stock at any time prior to the Maturity
Date of the Loans, or (iii) convertible into or exchangeable
for Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the Maturity
Date of the Loans."
4. Under the definition of the term "Stock" in Section 1.1 of the Loan
Agreement, the period at the end of the sentence is hereby deleted and the
following is hereby substituted in place thereof.
"and limited liability company interests."
5. Under the definition of the term "Total Value" in Section 1.1 of the Loan
Agreement, paragraph (B) thereof is hereby deleted in its entirety and the
following is hereby substituted in place thereof:
"(B) for Hotels owned or leased pursuant to a Qualified Lease
by Borrower (or any Subsidiary or Unconsolidated Entity of
Borrower) (x) for less than four (4) fiscal Quarters and for
which the Borrower (or any Subsidiary or Unconsolidated Entity
of Borrower) does not have, or is not able to reasonably
obtain, trailing four quarter audited financial information or
(y) which the Borrower has designated as a Refurbishment
Hotel, in each such case 95% of the Borrower's Investment in
such Hotels (provided that if the Allerton Hotel is designated
as a Refurbishment Hotel, then such Hotel shall be valued at
85% of the Borrower's Investment in such Hotel); plus"
2
<PAGE> 3
6. Under the definition of the term "Unencumbered" in Section 1.1 of the Loan
Agreement, the last parenthetical phrase in paragraph (c) is hereby deleted
in its entirety and the following is hereby substituted in place thereof:
"(other than pursuant to an "equal and ratable" clause
contained in any agreement governing Indebtedness.)"
7. Under the definition of the term "Unencumbered" in Section 1.1 of the Loan
Agreement, the last paragraph thereof is hereby deleted in its entirety and
the following is hereby substituted in place thereof:
"For the purposes of this Agreement, any Joint Venture Hotel
or Hotel owned by the Borrower, or a Subsidiary of the
Borrower shall not be deemed to be Unencumbered unless both
(i) such Hotel and (ii) all Stock owned directly or indirectly
by either FelCor or FelCor LP in the entity that owns such
Hotel is Unencumbered (other than in connection with the
Pledge Agreement)."
8. Under Section 1.1 of the Loan Agreement, there is hereby added thereto (in
alphabetical order) a new defined term which shall read as follows:
"`Unsecured Indebtedness' of any Person means any
Indebtedness of such Person not required to be included in the
computation of Total Secured Indebtedness of such Person."
9. Under the definition of the term "Unsecured Interest Expense" in Section
1.1 of the Loan Agreement, the term "unsecured Indebtedness" as used
therein is hereby deleted wherever used and the term "Unsecured
Indebtedness" is hereby substituted in place thereof.
10. Under Section 6.11 of the Loan Agreement, there is hereby added to the end
of subsection (a) of such section a new clause which shall read as follows:
"provided, however, that for purposes of this subparagraph (a)
of this paragraph 6.11 only, "Reporting Operating Lessees" and
"Requested Operating Lessee" shall not include Bristol."
11. Section 7.4 of the Loan Agreement is hereby deleted in its entirety and the
following is hereby substituted in place thereof:
7.4 "Restricted Payments. The Borrower, unless otherwise
required in order to maintain FelCor's status as a real estate
investment trust in accordance with the written advice of
independent counsel to the Borrower, shall not, and shall not
permit its Subsidiaries to declare or authorize any dividend
payment or other distribution (such dividend or distribution
shall be deemed made when so declared or authorized) of
assets, properties, cash, rights, obligations or securities
(other than the Bristol Distribution and distributions of
Stock or Stock Equivalents,
3
<PAGE> 4
exclusive of Disqualified Stock) on account or in respect of
any of its Stock or Stock Equivalents or any payment (whether
in Disqualified Stock, Indebtedness, cash or other assets),
including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, defeasance, acquisition,
cancellation or termination of any such Stock or Stock
Equivalents (collectively, "Restricted Payments"); provided,
that, notwithstanding the foregoing, (i) any Subsidiary may
make Restricted Payments, directly or indirectly, to the
Borrower or any Guarantor; (ii) any non-wholly owned
Subsidiary of the Borrower may make Restricted Payments to the
holders of its Stock or Stock Equivalents generally, so long
as the Borrower or its respective Subsidiary which owns the
Stock or Stock Equivalents in the Subsidiary paying such
Restricted Payments receives at least its proportionate share
thereof (based upon its relative economic holding of equity
interest in the Subsidiary paying such Restricted Payments and
taking into account the relative preferences, if any, of the
various classes of equity interests in such Subsidiary or the
terms of any agreements applicable thereto), and (iii) the
Borrower or any Subsidiary may make payments to purchase Stock
or Stock Equivalents of any non-wholly owned Subsidiary. In
addition, in any Fiscal Quarter the Borrower may make
Restricted Payments which, when added to Restricted Payments
made during the immediately preceding three consecutive Fiscal
Quarters, do not exceed an aggregate amount equal to the
lesser of 85% of the consolidated Adjusted Funds From
Operations and 100% of the Free Cash Flow of the Borrower in
each case for the immediately preceding four consecutive
Fiscal Quarters; provided further, that, in addition to the
Restricted Payments permitted above, the Borrower may
purchase, redeem or acquire Stock or Stock Equivalents of the
Borrower in an amount of up to $50,000,000.00 plus net
proceeds (including the fair market value of any property
received) of any issuance of Stock or Stock Equivalents (other
than Disqualified Stock) of the Borrower subsequent to June
30, 1999."
12. The Loan Agreement and the other Loan Documents (as defined in the Loan
Agreement) are in full force and effect without default thereunder by
Borrower and all of the representations and warranties contained in the
Loan Agreement and the other Loan Documents are hereby restated as if the
same were made as of the date hereof (it being understood and agreed that
any representation or warranty which by its terms is made on a specified
date shall be required to be true and correct only as of such specified
date).
13. If there shall be any inconsistencies between the terms, covenants,
conditions and provisions set forth in the Loan Agreement, and the terms,
covenants, conditions and provisions set forth in this Second Amendment,
then, the terms, covenants, conditions and provisions of this Second
Amendment shall prevail. Whenever possible, the provisions of this Second
Amendment shall be deemed supplemental to and not in derogation of the
terms of the Loan Agreement and any documents relating thereto.
4
<PAGE> 5
14. Each party hereto hereby confirms and ratifies all of the terms and
provisions of the Loan Agreement as amended by this Second Amendment.
Except as expressly amended hereby, all of the terms of the Loan Agreement
shall remain in full force and effect.
15. Each party hereto represents, warrants and covenants that such party (and
the undersigned representative of such party) has full power, authority and
legal right to execute this Second Amendment and to keep and observe all of
the terms of this Second Amendment and the Loan Agreement on such party's
part to be observed and performed.
16. If any term, covenant or condition of this Second Amendment shall be held
to be invalid, illegal or unenforceable in any respect, this Second
Amendment shall be construed without such provision.
17. This Second Amendment shall be binding upon the successors and assigns of
the Borrower and shall inure to the benefit of and be enforceable by the
Administrative Agent under the Loan Agreement and its successors and
assigns; provided that no Borrower may assign any of its rights or
obligations hereunder without the prior written consent of the
Administrative Agent. THIS SECOND AMENDMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK
(WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS).
18. This Second Amendment may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute
one agreement.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
5
<PAGE> 6
IN WITNESS WHEREOF, this instrument has been duly executed by the
undersigned as of the day and year first above written.
FELCOR LODGING TRUST INCORPORATED,
a Maryland corporation
By: /s/ LAWRENCE D. ROBINSON
---------------------------------
Name: Lawrence D. Robinson
Title: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 7
FELCOR LODGING LIMITED PARTNERSHIP, a
Delaware limited partnership
By: FELCOR LODGING TRUST INCORPORATED, a
Maryland corporation, its sole general partner
By: /s/ LAWRENCE D. ROBINSON
---------------------------------
Name: Lawrence D. Robinson
Title: Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 8
Signature for Loan Agreement
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/ ALAN BREINDEL
-----------------------------
Name: Alan Breindel
---------------------------
Title: Managing Director
--------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE> 9
REMAINDER OF SIGNATURE PAGES
INTENTIONALLY OMITTED
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1999 CONSOLIDATED BALANCE SHEET AND STATEMENTS OF OPERATIONS OF FELCOR
LODGING TRUST INCORPORATED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
SEPTEMBER 30, 1999 10-Q OF FELCOR LODGING TRUST INCORPORATED.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 48,027
<SECURITIES> 0
<RECEIVABLES> 19,650
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,677
<PP&E> 4,335,853
<DEPRECIATION> 290,495
<TOTAL-ASSETS> 4,271,086
<CURRENT-LIABILITIES> 130,397
<BONDS> 1,707,981
0
295,000
<COMMON> 693
<OTHER-SE> 1,998,001
<TOTAL-LIABILITY-AND-EQUITY> 4,271,086
<SALES> 0
<TOTAL-REVENUES> 386,186
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90,692
<INCOME-PRETAX> 108,703
<INCOME-TAX> 0
<INCOME-CONTINUING> 108,703
<DISCONTINUED> 0
<EXTRAORDINARY> 1,113
<CHANGES> 0
<NET-INCOME> 107,590
<EPS-BASIC> 1.31
<EPS-DILUTED> 1.30
</TABLE>
