SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
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 0-24794
NATIONAL LODGING CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-3326054
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
605 Third Avenue
23rd Floor
New York, New York 10158
(Address of principal executive offices, including zip code)
(212) 692-1400
(Telephone number, including area code)
Securities registered pursuant to Section
12(b) of the Act:
None
Securities registered pursuant to Section
12(g) of the Act:
Title of Class
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /x/ No
As of March 31, 1996, there were 5,432,320 shares of the Registrant's Common
Stock issued and outstanding.
<PAGE>
NATIONAL LODGING CORP.
This Quarterly Report on Form 10-Q contains historical information and
forward-looking statements. Statements looking forward in time are included in
this Form 10-Q pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. They involve known and unknown risks
and uncertainties that may cause the Company's actual results in future periods
to be materially different from any future performance suggested herein. In the
context of forward-looking information provided in this Form 10-Q and in other
reports, please refer to the discussion of risk factors detailed in, as well as
the other information contained in, the Company's filings with the Securities
and Exchange Commission during the past 12 months.
INDEX PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Securityholders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
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<TABLE>
NATIONAL LODGING CORP. AND SUBSIDIARIES
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(In Thousands - Unaudited)
<S> <C> <C>
March 31, December 31,
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 19,212 $ 51,470
Accounts receivable - net 4,906 -
Loans receivable, current 10,036 10,481
Receivable from joint ventures 3,011 -
Prepaid and other current assets 2,346 837
------ ------
Total current assets 39,511 62,788
INVESTMENTS 16,301 16,700
LOANS RECEIVABLE 13,074 7,166
JOINT VENTURE INTERESTS 15,705 -
PROPERTY AND EQUIPMENT - Net 77,911 -
OTHER ASSETS 9,609 420
DEFERRED LOAN COSTS 2,293 -
------ ---
TOTAL ASSETS $174,404 $ 87,074
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 9,872 $ 552
Current portion of long-term debt 1,017 -
----- ----
Total current liabilities 10,889 552
------ ------
LONG-TERM DEBT 75,533 -
OTHER LIABILITIES 102 -
MINORITY INTEREST 3,348 -
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock 55 55
Paid-in capital 106,617 106,697
Accumulated deficit (22,210) (20,280)
Foreign currency translation adjustment 70 -
Unrealized gain on securities available for sale - 50
------ -------
Total stockholders' equity 84,532 86,522
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $174,404 $ 87,074
======= ======
See notes to condensed consolidated financial statements.
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NATIONAL LODGING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In Thousands, Except Share Amounts - Unaudited)
1996 1995
REVENUE:
Hotel and motel revenue $12,468 $ -
Management fee and other income 583 -
------ ----
Total revenue 13,051 -
------ ----
OPERATING EXPENSES:
Hotel and motel operating expense 5,391 -
Selling, general and administrative 4,339 794
Depreciation and amortization 1,783 -
Development 378 1,397
Other 2,698 -
General and administrative related party 397 783
------ -----
Total operating expenses 14,986 2,974
------ -----
OPERATING LOSS (1,935) (2,974)
INTEREST INCOME 788 1,140
INTEREST EXPENSE (1,502) -
EQUITY IN EARNINGS OF JOINT VENTURES 814 -
MINORITY INTEREST (95) -
---- ---
LOSS BEFORE INCOME TAX BENEFIT (1,930) (1,834)
INCOME TAX BENEFIT - (752)
------- -------
NET LOSS $(1,930) $(1,082)
======= =======
PER SHARE INFORMATION:
Net loss $ (0.33) $ (0.21)
======= =======
Weighted average common shares outstanding 5,868 5,117
======= =======
See notes to condensed consolidated financial statements.
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<TABLE>
NATIONAL LODGING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In Thousands-Unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES $ (472) $(1,767)
------- -------
INVESTING ACTIVITIES:
Loans to casino projects - (471)
Joint venture interests and investments in casino projects - (1,885)
Principal payments received on loans 3,630 331
Travelodge acquisition (98,400) -
Acquisition costs (4,822) -
Capital expenditures (1,034) -
Issuance of notes receivable (133) -
Capital distributions from joint ventures 1,423 -
Capital distributions from joint venture minority int (312) -
----- ----
Net cash used in investing activities (99,648) (2,025)
------- ------
FINANCING ACTIVITIES:
Proceeds on borrowings 70,000 -
Loan closing costs (1,750) -
Repayment on borrowings (388) -
----- ---
Net cash provided by financing activities 67,862 -
------ ---
NET DECREASE IN CASH AND CASH EQUIVALENTS (32,258) (3,792)
------- ------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 51,470 44,233
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $19,212 $40,441
======= =======
See notes to condensed consolidated financial statements.
</TABLE>
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NATIONAL LODGING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet of National Lodging Corp. and
subsidiaries (the "Company") as of March 31, 1996, and the related
condensed consolidated statements of operations and cash flows for the
three month periods ended March 31, 1996 and 1995 are unaudited. In the
opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included. Such
adjustments consisted only of normal recurring items. Interim results
are not necessarily indicative of results for a full year.
The condensed consolidated financial statements and notes are presented
as required by Form 10-Q and do not contain certain information
included in the Company's annual consolidated financial statements. The
year-end condensed consolidated balance sheet was derived from the
Company's audited financial statements. This Form 10-Q should be read
in conjunction with the Company's consolidated financial statements and
notes included in the Company's 1995 Annual Report on Form 10-K.
2. TRAVELODGE ACQUISITION
On January 23, 1996, the Company acquired the outstanding common stock of
Forte Hotels, Inc. ("FHI") for $98.4 million less certain working capital
adjustments totaling approximately $3.1 million. In related transactions
on January 23, 1996, prior to consummation of the FHI Acquisition, HFS
Incorporated ("HFS") and Motels of America, Inc. acquired from FHI the
Travelodge franchise system and 19 motel properties, respectively, for an
aggregate purchase price of $71.6 million. The principal assets of FHI
acquired by the Company include 17 wholly-owned hotels and motels and a
joint venture interest in 97 other lodging facilities. The Company
financed $60 million of the purchase price with proceeds from a bank
revolving credit facility ("Credit Facility") and $38.4 million with
existing cash. HFS provided advisory services in connection with the
acquisition for which the Company paid a $1,968,000 fee.
The Credit Facility provides up to $125 million of unsecured borrowings
through January 23, 2002. Revolving loans under the Credit Facility may be
borrowed, at the Company's option, as Base Rate Loans or Eurodollar Loans.
Interest on the outstanding principal amount of each Base Rate Loan is
payable at an annual rate equal to the highest of i) the administrative
agent's Prime Lending Rate, ii) the Adjusted Certificate of Deposit Rate
plus 0.50%, or iii) the Federal Funds Rate plus 0.50%. The interest on the
outstanding principal amount of each Eurodollar Loan is payable at an
annual rate of the Eurodollar Rate plus a margin not to exceed 0.75%. The
Company incurred $1.7 million of costs related to execution of the Credit
Facility and is required to pay an annual administration fee of $150,000.
The Company is obligated to pay a commitment fee at an annual rate equal
to 0.2% of the amount of the Unutilized Revolving Loan Commitment. Total
borrowings and Letters of Credit outstanding as of March 31, 1996 under
the agreement were $70 million and $15.6 million, respectively. The
Company is also obligated to pay a fee in respect of each outstanding
letter of credit equal to the Applicable Margin on the stated amount of
the letter of credit, plus an additional fee equal to the higher of $500
per year
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or an amount of 0.5% of the stated amount of the letter of credit. The
Credit Facility also contains covenants including restrictions on
indebtedness, maintenance of net worth, minimum interest coverage, minimum
fixed charge, maximum leverage coverages and others. The Company was not
in compliance with certain covenants as of March 31, 1996. However, this
will not materially impact the Company's ability to draw down on
this loan.
The acquisition described above was accounted for by the purchase method.
The operating results of the acquired company are included in the
consolidated statements of operations from its acquisition date, January
23, 1996.
The following presents the unaudited pro forma consolidated results of
operations for the three months ended March 31, 1996 and 1995 as if the
transactions described above occurred on January 1, 1995:
(In Thousands
Except
per Share
Amounts)
(Unaudited)
1996 1995
Revenue $16,864 $15,613
Net loss $(2,935) $(5,240)
Net loss per share $ (.50) $ (1.02)
The pro forma results are not necessarily indicative of the actual results
of operations that would have occurred had the transactions been
consummated as indicated nor are they intended to indicate results that
may occur in the future.
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<PAGE>
3. SALE OF STOCK
On February 14, 1996, the Company entered into an agreement with Chartwell
Leisure Associates L.P. II ("Chartwell") and FSNL LLC ("FSNL") to sell 4
million newly issued shares of unregistered common Company stock to
Chartwell and FSNL for $57 million. Upon shareholder approval and
completion of such sale, Chartwell and FSNL will own approximately 52% of
the outstanding common stock of the Company. The Company's chairman and
chief executive officer, who holds similar positions at HFS, resigned on
January 24, 1996 and was replaced by a principal of Chartwell. HFS
provided advisory services in connection with the transaction for which
the Company will pay a $1.14 million fee upon completion of the sale.
4. PENDING CANADIAN ACQUISITION
The Company is currently negotiating to acquire from Capital Properties
Limited Partnership ("CPLP") 20 hotels and a one-half interest in an
additional hotel, which are limited service hotels located throughout
Canada and franchised under the "Travelodge" brand name. The acquisition
will be accomplished by the Company paying approximately C$92 million in
order to purchase substantially all of CPLP's existing bank debt and pay
certain specified closing costs (including real estate taxes), as well as
its assumption of liability for identified trade payables and property
specific bank debt, aggregating approximately another C$12 million. In
addition, the Company will be obligated to make certain contingent
payments to CPLP's constituent partners following a preferred return to
the Company.
5. RELATED PARTY TRANSACTION
During March 1996, the Company entered into a lease with an affiliate of
Chartwell and an unaffiliated third party, as landlords, pursuant to which
the Company has leased approximately 18,700 square feet of office space
for a period of 10 years. Under this lease, the Company is obligated to
pay approximately $542,000 per year for each of the first five years, and
approximately $600,000 per year for each of the last five years of the
term of the lease for the use of such office space. The terms of this
lease are, in the opinion of the Company, substantially similar to the
market terms that would be available from a third party for similar
property.
6. STOCK OPTIONS
Options for 310,000 shares of common stock were granted on January 24,
1996 at an exercise price of $10.625, representing fair market value on
the date of grant. Additional options for 900,000 shares of common stock
were granted on March 4, 1996 at an exercise price of $13.25, representing
fair market value on the date of grant.
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7. INCOME TAXES
Deferred tax assets of $7,623 at December 31, 1995 increased by
approximately $791 during the three months ended March 31, 1996. Such
deferred tax assets are offset by a 100% valuation allowance. The Company
has net tax operating loss carryforwards of approximately $13.7 million
available for federal income tax purposes, expiring through 2010.
******
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<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
GENERAL OVERVIEW
The Company was engaged in the development of prospective casino gaming
facilities until the third quarter of 1995, when the Company announced a
decision by its Board of Directors to curtail future gaming investments and
focus on investments and acquisitions in non-gaming industries. The decision
reflected the Board's conclusion that the gaming industry offered limited
opportunities for future growth of the Company and was based on the difficulties
that the Company had experienced in attempting to consummate its casino projects
and its belief that the Company would face difficulty in obtaining regulatory
approvals required to pursue its strategy of making highly leveraged
acquisitions of gaming facilities. In December 1995, the Company's Board of
Directors decided that the Company should pursue a new strategic direction with
a focus on becoming a hotel and motel owner and operator.
On January 23, 1996, the Company entered the lodging industry with its
acquisition of Forte Hotels, Inc. ("Forte Hotels"), which owns or has
significant joint venture interests in 114 hotels, for a purchase price of $98.4
million plus expenses. Subsequently, on March 12, 1996, the Company signed a
letter of intent with Capital Properties Limited Partnership ("CPLP") and is
currently in negotiation to acquire 20 hotels and a one-half interest in an
additional hotel from CPLP, all of which are located throughout Canada. These
hotels operate under the Travelodge brand. The acquisition will be accomplished
by the Company paying approximately C$92 million in order to purchase
substantially all of CPLP's existing bank debt and pay certain specified closing
costs (including real estate taxes), as well as its assumption of liability for
identified trade payables and property specific bank debt, aggregating
approximately another C$12 million. In addition, the Company will be obligated
to make certain contingent payments to CPLP's constituent partners.
Approximately half of the cash portion of the purchase price is expected to be
financed by the Company with bank borrowings and half with proceeds from the
proposed stock sale to Chartwell and FSNL. The closing is subject to financing,
formal approval of the Company's Board of Directors and approval of the limited
partners of CPLP.
The Company believes that comparisons of its results during the period
ended March 31, 1996 to prior periods should take into account these changes in
the Company's primary business.
RESULTS OF OPERATION - FINANCIAL DATA
Pro Forma
The pro forma financial data includes the combined operations of Forte Hotels
for the three months ended March 31, 1996 and 1995 as if the acquisition had
occurred on January 1, 1995, giving effect to depreciation and amortization
associated with the acquired properties and financing costs associated with
acquisitions. The pro forma financial data also includes revenues and expenses
associated with the Company's gaming business which do not reflect net savings
which may be achieved as a result of curtailment of future gaming operations.
Further, the pro forma financial data does not include any potential eventual
cost savings or revenue enhancements that management believes may be realized
following the complete consolidation of the Forte Hotels and operations.
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<PAGE>
Hotel and motel ("Lodging") revenue for the first quarter of 1996 was $16.1
million, an increase of 7.4% over the same period of the previous year, while
lodging losses decreased 37.5% to $1.5 million from $2.4 million in 1995. This
increase primarily resulted from an increase in average daily rates per room
sold from $49.56 in 1995 to $52.98 in 1996. The Company believes that its
ability to increase average daily room rates reflects the stability of the
Company's business in a price sensitive market segment as well as its ability to
continue to attract the value conscious traveler. Occupancy for lodging was
57.5% in the 1996 quarter versus 58.7% in the 1995 quarter.
March 1996 versus March 1995
The Company's operations through November 1995 consisted of the development of
prospective casino game facilities. Accordingly, the Company's operating results
for the first quarter of 1996 from operations other than Lodging activities and
for 1995 (when the Company did not engage in Lodging activities) are very modest
and consist of interest income of $800,000 in 1996 versus $1.1 million
in 1995. In addition, during the first quarter of 1996, the Company's interest
expense was $1.1 million on acquisition debt while the Company had no interest
bearing debt load in 1995, however the Company expended $1.4 million in gaming
development expenditures in 1995 versus $400,00 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Lodging acquisitions
In connection with the acquisition of the Forte Hotels, the Company financed $60
million of the purchase price with proceeds from its $125 million credit
facility with two banks. Immediately after the Forte Hotels acquisition the
Company had $50 million available under that credit facility.
At the closing of the Forte Hotels transaction the Company issued a $15.0
million letter of credit in favor of a third bank securing Forte Hotel's loan
agreement with that bank.
On February 14, 1996, the Company entered into an agreement with Chartwell and
FSNL to sell 4 million newly issued shares of the Company's common stock to
Chartwell and FSNL for $57 million. Upon shareholder approval and completion of
such sale, Chartwell and FSNL will own approximately 52% of the outstanding
stock of the Company. The Company's chairman and chief executive officer, who
holds similar positions at HFS, resigned on January 24, 1996 and was replaced by
a principal of Chartwell. HFS provided advisory services in connection with the
transaction for which the Company will pay a $1.14 million fee upon completion
of the sale.
Gaming Business
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<PAGE>
The Company has agreed in principle with its partners to dissolve its joint
venture to develop a gaming facility in Pittsburgh, Pennsylvania under which it
had loaned the Urban Redevelopment Authority of Pittsburgh ("URA") approximately
$9.5 million in September 1994. In September 1995, the URA exercised its option
to extend the maturity of the loan by one year to September 30, 1996. As a
result of the Pennsylvania legislature's failure to propose a voter referendum
to approve casino gaming facilities in that state, the Company notified the URA
that it will not exercise its option to purchase a portion of the site which is
the collateral for that loan, thus requiring the URA to pay interest currently
at 4% per annum on a monthly basis. The URA made a $3.8 million payment of
principal and interest in January 1996. The Company will seek collection of the
remaining balance of the URA loan in September 1996.
In March 1995, the Company agreed to loan up to an additional $2.0 million to
the partnership that owns the Rainbow Casino in Vicksburg, Mississippi. The
proceeds of such loan, together with additional capital to be contributed by the
general partner of such partnership, are being used to finance certain
improvements to the casino project, to complete related facilities and to
provide additional working capital. The loan is unsecured, bears interests at
10% per annum and will be repaid in equal monthly installments of principal and
interest over its seven year term. In 1994, the Company loaned Rainbow Casino
Corporation ("Rainbow") $10 million to finance the licensing, construction and
start-up costs associated with the Rainbow Casino, a dockside casino located in
Vicksburg, Mississippi, which commenced operations on July 12, 1994. In 1994,
the Company entered into an agreement with Chartwell Leisure Associates L.P., an
affiliate of Chartwell ("Chartwell Leisure"), to induce Chartwell Leisure to
finance a family entertainment center, which opened in May 1995. In connection
with the agreement, the Company agreed to pay Chartwell Leisure, upon opening of
the entertainment center, a percentage of principal and interest payment
collected on the $10 million loan to Rainbow, ranging from 14% to 27% of such
payouts adjusted annually in accordance with a schedule to the agreement. The
company commenced payments to Chartwell Leisure in July 1995 and made payments
of approximately $200,000 in 1995 and $91,000 in the first quarter of 1996. HFS
will also share marketing fees from the Rainbow Casino with Chartwell Leisure
based on the same scheduled percentages. Chartwell Leisure has agreed to share
50% of the net cash flow payable to Chartwell Leisure with respect to the family
entertainment center with HFS and HFS has agreed to share such amounts pro rata
with the Company based on relative amounts paid by HFS and the Company,
respectively.
Credit Facilities
General - The Company is a party to a credit facility (the "Credit Facility"),
dated as of January 23, 1996, which provides that the Company may borrow up to
$125,000,000 under a revolving credit commitment. HFS has guaranteed $75,000,000
of the Company's obligations under the Credit Facility.
Revolving credit loans may be used by the Company to finance permitted hotel
acquisitions and for general corporate purposes, including to finance working
capital needs. As of March 31, 1996, approximately $85.6 million aggregate
principal amount was utilized under the Credit Facility, of which approximately
$70 million constituted Revolving Loans and approximately $15.6 million
constituted outstanding letters of credit. All outstanding borrowing under the
Credit Facility mature on January 23, 2002.
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The total revolving credit commitment amount will be reduced and, to the extent
outstanding borrowings would exceed the resulting commitment amount, principal
will be repaid, semi-annually commencing March 31, 1997. The commitment
reductions will be in the amount of $7.5 million per year, except that the
commitment will reduce by $50 million to zero in 2002.
Covenants - The Credit Facility contains covenants restricting the Company and
its Subsidiaries and Joint Ventures from, among other things, incurring
additional indebtedness and from paying dividends on its common stock. The
Company was not in compliance with certain covenants as of March 31, 1996.
However, the Company does not believe that this will materially impact its
ability to draw down on this loan.
In addition, the Credit Facility requires that the Company satisfy certain
financial ratio coverage tests, including maintenance of net worth, minimum
interest coverage, and minimum fixed charge and maximum leverage coverages.
National Lodging Loan Agreement - National Lodging has a loan agreement with
Bank of America National Trust and Savings Association ("B of A") which permits
Forte Hotels and certain of the joint ventures through which it owns hotels to
make revolving credit borrowings in an aggregate amount of up to $10 million and
provides for an uncommitted credit facility, which is available at the sole
discretion of B of A, in an aggregate amount of up to $5 million. Borrowings
under the National Lodging Agreement may be made until December 31, 1996. The
borrowings under the National Lodging Agreement are secured by a $15.0 million
standby letter of credit issued under the Credit Facility. National Lodging is
obligated to pay a commitment fee at an annual rate of 0.1875% on the unutilized
portion of the National Lodging Agreement. Borrowings under the National Lodging
Agreement were approximately $7.2 million at March 31, 1996.
Cash Flows
Cash used in operating activities was $500,000 in the first quarter of 1996
compared to $1.8 million in the first quarter of 1995.
Cash used in investing activities totaled $99.6 million in the first quarter of
1996 compared to $2.0 million in the first quarter of 1995. This change related
primarily to the Travelodge acquisition and related costs offset by the receipt
of principal payments on loans.
Cash provided by financing activities was $67.9 million in the first quarter of
1996 due to borrowings under the Credit Facility.
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Part II. Other Information
Item 1. Legal Proceedings
The Company is not party to any litigation which it believes will
have a material impact on the financial condition of the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
10.1 Employment Letter Agreement, dated as of January 23, 1996,
by and between Carl Winston and the Company.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated January
12, 1996, reporting that the Company had changed its name from
"National Gaming Corp." to "National Lodging Corp." The
Company filed a Current Report on Form 8-K dated January 23,
1996, as amended by a Current Report on Form 8-K/A dated
January 23, 1996, reporting that the Company had completed the
acquisition of all of the outstanding shares of common stock
of Forte Hotels, Inc. for approximately $98.4 million.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL LODGING CORP.
Date: May 15, 1996 Kenneth J. Weber
---------------------- ----------------
Kenneth J. Weber
Chief Financial Officer
(Duly Authorized Officer of
the Registrant)
(Principal Financial Officer and
Principal Accounting Officer)
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
10.1 Employment Letter Agreement, dated as of January 23, 1996, by and
between Carl Winston and the Company.
27.1 Financial Data Schedule.
NATIONAL LODGING CORP.
605 Third Avenue
New York, New York 10158
January 23, 1996
Mr. Carl Winston
Forte Hotels, Inc.
1973 Friendship Drive
El Cajon, CA 92020
Dear Carl:
We are delighted that you have accepted our offer of employment.
This letter will confirm our agreement with respect to your employment by
National Lodging Corp. (the "Company").
1. Duties. Commencing as of January 23, 1996 (the "Effective Date"), you shall
serve as Executive Vice President of Operations of the Company. In such
capacity, you shall have such authority and perform such duties in relation to
the business and affairs of the Company as are customarily associated with that
position and as may from time to time be given to you by the Company's Board of
Directors.
2. Term. Unless earlier terminated for cause as provided in section 4 hereof,
the term of your employment shall be approximately one (1) year commencing on
the Effective Date and ending February 28, 1997. Your employment with the
Company shall continue thereafter on a year-to-year basis unless either party
gives to the other written notice of its intent to end the employment. For the
first two years of employment, such notice shall be given not later than ninety
(90) days prior to the scheduled commencement of the next one year term, and for
all subsequent years, such notice shall be given not later than sixty (60) days
prior to the scheduled commencement of the next one year term.
3. Compensation. In consideration of your employment hereunder, during the
period of your employment, the Company shall pay you the following compensation,
including the following annual salary, bonus and other fringe benefits:
(a) Salary. The Company shall pay you a base salary of $180,000
per annum, payable in conformity with the Company's customary practices for
executive compensation and subject to all applicable federal and state
withholding, payroll and other taxes. Annual increases are at the sole
discretion of the Compensation Committee of the Board of Directors of the
Company (the "Compensation Committee").
08743.0313 342165.1
<PAGE>
(b) Bonus. You shall be eligible for an annual bonus equal to up
to 25% of your base salary. Such annual bonuses shall be paid to you at the sole
discretion of the Compensation Committee.
(c) Employee Benefits. You shall be entitled to participate, in
accordance with the provision thereof, in any health, disability and life
insurance and other employee benefit plans and programs (including paid
vacations) made available by the Company to its executive management employees
generally. The Company shall implement and utilize a relocation and travel
policy for its executive management employees similar to the relocation and
travel policy of HFS Incorporated as of the date of this Agreement.
(d) Stock Option Grants. As of the Effective Date, you shall
receive from the Company an option (the "Options") to purchase 85,000 shares of
the Company's common stock at an exercise price equal to the current market
price on the Effective Date, in accordance with the terms of the Company's 1994
Stock Option Plan. In accordance with such plan, the option agreement governing
this grant shall provide that one-third of the Options shall vest each of the
first, second and third anniversaries of the Effective Date.
4. Termination For Cause. The Company may, immediately and unilaterally,
terminate your employment hereunder for "cause" at any time during the term of
this Agreement upon written notice to you. The term for "cause" shall mean (a)
intentional misconduct which might reasonably be expected to have a material
adverse effect on the Company; (b) wrongful misappropriation, conviction of a
felony, repeated drunkenness or drug addiction; (c) intentionally causing the
Company to commit a violation of local, state, or federal laws; (d) gross
negligence in the conduct or management of the Company not remedied within 30
days of receipt of written notice from the Company; (e) willful refusal to
reasonably comply with the policy, directives or decisions of the Chief
Executive Officer or President of the Company or willful refusal to perform the
duties reasonably assigned to you by the Chief Executive Officer or President if
such refusal continues for 30 days after receipt of written notice from the
Company or occurs on a repeated basis; or (f) breach by you of Section 6 of this
Agreement in any material respect. Any notice given by the Company pursuant to
this section shall describe the activities which the Company believes constitute
either gross negligence or willful refusal, as appropriate, and shall include a
statement that the Company believes that such activities constitute "cause"
under this Agreement.
5. Severance. In the event that the Company elects to end the Employee's
employment pursuant to Section 2 hereof, on the last day of the Employee's
employment hereunder, the Employee shall be entitled to (i) a lump sum payment
equal the Employee's then current Base Salary for three months, and (ii) any
benefits through the date of termination. The Company shall thereafter have no
further obligation to the Employee except as required by law. Such severance
payment shall not be paid to the Employee in the event that the Employee's
employment is terminated pursuant to Section 4 hereof.
6. Confidential Information. You hereby agree that you shall not at any time,
whether during or after the termination of your employment, divulge, use,
furnish, disclose or make available to any person, association or company any of
the trade secrets or confidential information concerning the organization,
marketing plans and strategies, pricing policies,
-2-
08743.0313 342165.1
<PAGE>
plans and strategies relating to acquisitions made or to be made by the Company,
business, finances and financial information of the Company so far as they may
come to your knowledge, except as may be required in the ordinary course of
performing your duties as an officer of the Company or as may be in the public
domain through no fault of yours or as may be required by law. You shall keep
secret all matters of such nature entrusted to you and shall not attempt to use
any such information in any manner which may injure or cause loss to the
Company.
7. No Conflict. You represent that you are not a party to any agreement which
would interfere with your employment by the Company or your ability to carry out
you responsibilities and duties as an officer of the Company and that the
execution of this Agreement and the performance of your duties hereunder would
not be deemed a breach of any other agreement to which you are a party.
8. Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to you employment by the Company and supersedes any
previous agreements or understandings between the parties.
9. Modification and Waiver. No modification or waiver of any of the provision
herein contained shall be binding upon either of the parties hereto unless made
in writing and signed by you and countersigned on behalf of the Company by a
duly authorized officer thereof, provided, however, that no waiver or
modification by the Company shall be effective without the consent of at least a
majority of the Board of Directors then in office at the time of such
modification or waiver. This Agreement contains the entire understanding between
the parties hereto, and there are merged herein all prior, contemporaneous and
collateral covenants, representations, undertakings and conditions made in
connection with the subject matter hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
If the foregoing is acceptable to you, please note your agreement in the
space provided below.
Very truly yours,
National Lodging Corp.
By:/s/ Martin L. Edelman
Agreed to:
/s/ Carl Winston
Carl Winston
-3-
08743.0313 342165.1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S CONDENSED FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
IS QUALIFIED INN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 19,212
<SECURITIES> 0
<RECEIVABLES> 17,953
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 39,511
<PP&E> 77,911
<DEPRECIATION> 0
<TOTAL-ASSETS> 174,704
<CURRENT-LIABILITIES> 10,889
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 84,477
<TOTAL-LIABILITY-AND-EQUITY> 174,404
<SALES> 12,468
<TOTAL-REVENUES> 13,051
<CGS> 0
<TOTAL-COSTS> 14,986
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,502
<INCOME-PRETAX> (1,930)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,930)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,930)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
