-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, gVsrgEkFxWkCbIcsA0XCVRuSOxuq3ZK03yckzJRLS0yigYlMlg6PNV0NPaWP/xuX uxykIKqMY1fQQhmhzKLKdA== 0000912057-95-002428.txt : 19950415 0000912057-95-002428.hdr.sgml : 19950414 ACCESSION NUMBER: 0000912057-95-002428 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950413 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRCOA HOTEL PARTNERS L P CENTRAL INDEX KEY: 0000812591 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 841042607 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09563 FILM NUMBER: 95528753 BUSINESS ADDRESS: STREET 1: 5775 DTC BOULEVARD, SUITE 300 CITY: DENVER STATE: CO ZIP: 80111 BUSINESS PHONE: 3032202000 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE - ----- ACT OF 1934 For the fiscal year ended December 31, 1994 ------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------- Commission file number 1-9563 ----------- AIRCOA HOTEL PARTNERS, L.P. ------------------------------------------------------ (Exact name of registrant as specified in its charter) State of Delaware 84-1042607 - ----------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5775 DTC Boulevard, Suite 300 Englewood, Colorado 80111 - ----------------------------------- ------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 220-2000 -------------- Securities registered pursuant to Name of each exchange on which Section 12(b) of the Act: registered: Class A Depository Units American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting units held by non-affiliates of the registrant, computed by reference to the price as of the close of trading on February 13, 1995 was $4,540,106. There were 5,340,214 units outstanding of the registrant's Class A Units as of February 13, 1995. AIRCOA HOTEL PARTNERS, L.P. 1994 FORM 10-K ANNUAL REPORT Table of Contents Page ---- PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . I - 1 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . I - 3 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . I - 4 Item 4. Submission of Matters to a Vote of Security Holders. . . I - 4 PART II Item 5. Market for the Registrant's Partnership Units and Related Unitholder Matters . . . . . . . . . . . . . . II - 1 Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . II - 2 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . II - 3 Item 8. Financial Statements and Supplementary Data . . . . . . II - 8 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . II - 8 PART III Item 10. Directors and Executive Officers of the General Partner. III - 1 Item 11. Payments and Compensation to General Partner and Affiliates . . . . . . . . . . . . III - 2 Item 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . III - 3 Item 13. Certain Relationships and Related Transactions . . . . . III - 4 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . IV - 1 PART I ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS AIRCOA Hotel Partners, L.P., a Delaware limited partnership ("AHP" or the "Partnership") was organized in December 1986, by AIRCOA Hospitality Services, Inc. ("AHS" or the "General Partner") to acquire, own, operate and sell hotels and resort properties. The Partnership owns and operates six hotel and resort properties (the "Properties") through operating partnerships (the "Operating Partnerships") which were acquired in 1986. The Partnership owns a 99% limited partner interest in each of the six Operating Partnerships which hold title to the Properties and through which the Partnership conducts all of its operations. AHS, a wholly owned subsidiary of Richfield Hospitality Services, Inc. ("Richfield"), is also the 1% general partner of each of the Operating Partnerships. Richfield operates the Properties for the Partnership under certain management agreements. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Partnership's operations have been in one industry segment since formation. Revenue has been generated through the ownership and operation of the Properties. The following table reflects the sources of revenue and gross operating profit and total assets for each of the three years ended December 31, 1994, 1993 and 1992.
(In thousands, except percentages) 1994 1993 1992 ------ ------ ------ Revenue Percent Revenue Percent Revenue Percent ------- ------- ------- ------- ------- ------- Rooms $ 26,863 58.2% $ 26,693 59.0% $ 25,584 59.5% Food and Beverage 12,274 26.6% 11,664 25.8% 11,349 26.4% Other Property Operations 7,020 15.2% 6,911 15.2% 6,065 14.1% -------- ------ -------- ------ -------- ------ Total Revenue $ 46,157 100.0% $ 45,268 100.0% $ 42,998 100.0% -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ Gross Operating Profit $ 13,566 29.4% $ 13,739 30.4% $ 11,944 27.8% -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ Total Assets $ 73,542 $ 77,369 $ 78,589 -------- -------- -------- -------- -------- --------
The gross operating profit percentage represents operating income of the Partnership before depreciation and amortization, management fees and fixed charges (rent, taxes and insurance). Gross operating profit is indicative of the profitability from operations of the Properties. Room revenue is significantly impacted by the rates obtained for rooms and the level of occupancy of the Properties. Although not in the same proportion, these factors also impact revenue generated from food and beverage and other property operations. Average daily room rates of the Properties were $59.42, $60.08, and $61.45 in 1994, 1993 and 1992, respectively. Average occupancy levels for the Properties were 77.9%, 76.6% and 72.9% in 1994, 1993 and 1992, respectively. For a discussion of the changes in various operating statistics, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. I-1 NARRATIVE DESCRIPTION OF BUSINESS BUSINESS The principal business of the Partnerships is the ownership and operation of six hotel and resort properties located in geographically diverse areas of the continental United States. The Properties are full service facilities serving the vacation, leisure, meetings, convention and business segments of the hotel market. In addition to lodging, various guest services are offered by the Properties including restaurants, lounges, banquet, room, valet, concierge, parking and shuttle services. Other services available at some of the Properties include a marina, health and fitness facilities, swimming pools, tennis courts, spas and retail facilities. IMPORTANCE OF FRANCHISES AND TRADEMARKS Four of the Properties are affiliated with national franchises and operate under franchise agreements. The benefits of these franchise agreements include national brand name recognition and world wide central reservation systems, as well as operating quality standards and extensive marketing programs. One of the Properties is licensed to use the Regal trademark, which is sub-licensed to the hotel by an affiliate of AHS. The Partnership considers such affiliations and license to be important to the operations and success of the Properties in regard to customer recognition and satisfaction. SEASONALITY OF BUSINESS Because of the Properties' locations, occupancy levels are generally lower in the first and fourth quarters and higher in the second and third quarters of the year. These fluctuations are consistent with the normal recurring seasonal patterns of the industry. INDUSTRY PRACTICES The Properties periodically offer discounts to contract and group customers and room rates generally fluctuate during peak and non-peak times of the year. Deposits are often obtained in advance for facility rentals and rooms. In addition, a certain level of capital expenditures, repair and replacement of hotel property is required under the Partnership's loan agreement. The Properties are managed by Richfield in accordance with certain management contracts. Management services provided under the contracts include operations supervision, strategic business planning, yield management, sales and marketing oversight, personnel management and accounting and technical services. MARKET INFORMATION AND COMPETITIVE CONDITIONS The U.S. hospitality industry had growth in revenue, earnings and occupancy levels in 1994. According to Smith Travel Research, room occupancy exceeded 65% in 1994, a 3% increase over occupancy levels in 1993. This increase in occupancy was the result of an approximate 4.4% increase in demand, offset by a modest 1.4% increase in room supply. Average daily rates for the industry increased almost 4% in 1994 to $63.54 from $61.17 in 1993. Industry trends reflect improvement in U.S. room occupancy and average daily rates since 1991. These positive trends are expected to continue with occupancy levels in the U.S. projected at 67% for 1995. The Partnership's occupancy levels have consistently exceeded the industry averages noted above; however, average daily rates are slightly below the industry levels. The Partnership's operations in certain markets are price sensitive. The Partnership considers its primary points of competition include, but are not limited to, room rates, location, guest services and responsiveness, adequacy and appearance of facilities and overall customer satisfaction. The demand at a particular hotel of the Partnership may be adversely affected by many factors, including changes in travel patterns, local and regional economic conditions and the degree of competition with other hotels in the area. I-2 REGULATION The Operating Partnerships are subject to regulation in connection with their business, including liquor licensing, occupational health and safety regulation, food service regulation and labor laws. The Operating Partnerships have not experienced significant difficulties with regulation in these areas; however, failure to comply with those regulations could result in loss of licenses, permits or other authorizations which could adversely impact the Partnership's operating revenue. EMPLOYEES All hotel personnel are employed by the respective Operating Partnerships. Richfield processes the payroll on behalf of the Operating Partnerships. The number of persons employed by the Operating Partnerships, as of December 31, 1994, was approximately 970. Management considers employee relations to be satisfactory. ITEM 2. PROPERTIES The six hotel and resort properties including the hotel buildings and leasehold improvements are owned by the Operating Partnerships. Three of the hotel properties are located on land owned by the Operating Partnerships, while the other three hotel properties are located on land leased by the Operating Partnerships on a long-term basis. The following table presents certain information for each of the Properties:
NUMBER PROPERTY PRIMARY MARKETS SERVED AREA SERVED OF ROOMS - ------------------------------------------------------------------------------------------------------ Aurora Inn and Pine Lake Vacation, Business Greater Cleveland/Akron, Trout Club ("Aurora") Ohio 69 - ------------------------------------------------------------------------------------------------------ Fourwinds/A Clarion Resort Destination Resort Bloomington/Indianapolis, ("Fourwinds") and Marina Indiana 126 - ------------------------------------------------------------------------------------------------------ Regal at McCormick Ranch Vacation, Meetings Phoenix/Scottsdale, ("McCormick") Arizona 125 - ------------------------------------------------------------------------------------------------------ Sheraton Inn-Buffalo Airport Business, Meetings Buffalo/Niagara Falls, ("Buffalo") and Leisure New York 293 - ------------------------------------------------------------------------------------------------------ Sheraton Lakeside Inn Vacation Orlando/Walt Disney World, ("Lakeside") Florida 651 - ------------------------------------------------------------------------------------------------------ Sheraton University Center Business, Meetings, Raleigh/Durham/ ("University") Medical and Conventions Chapel Hill, North Carolina 322 - ------------------------------------------------------------------------------------------------------ TOTAL 1,586 ----------------------------------------
I-3 The appraised value of the Properties is summarized below:
Appraised Values ------------------------------------------------ December December December 1994 1993 1992 ------------ ------------ ------------ Aurora Inn & Pine Lake Trout Club $ 7,520,000 $ 7,240,000 $ 6,540,000 Fourwinds/A Clarion Resort 10,200,000 10,200,000 9,300,000 Regal at McCormick Ranch 9,015,000 7,900,000 7,400,000 Sheraton Inn-Buffalo Airport 17,730,000 18,140,000 18,800,000 Sheraton Lakeside Inn 34,000,000 39,000,000 42,000,000 Sheraton University Center 8,025,000 7,050,000 6,200,000 ------------ ------------ ------------ Total appraised value $ 86,490,000 $ 89,530,000 $ 90,240,000 ------------ ------------ ------------ ------------ ------------ ------------
The decline in the aggregate appraised value of the portfolio is the result of decreases in the value of the Sheraton Lakeside Inn in 1994 and 1993 and the Sheraton Inn - Buffalo Airport in 1994 and 1993. These declines are primarily attributable to these hotels being located in markets with increases in the supply of available rooms and static demand for hotel rooms. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Partnership or any of the Operating Partnerships is a party, except for ordinary and routine litigation incidental to the business of the Partnership. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of Unitholders during the quarter ended December 31, 1994. I-4 PART II ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED UNITHOLDER MATTERS Class A Units of AIRCOA Hotel Partners, L.P. are traded on the American Stock Exchange under the symbol AHT. There is no established public trading market for the Partnership's Class B Units, the majority of which are held by affiliates of the General Partner. Under certain circumstances (which have not been satisfied at any time since the inception of the Partnership) described in the Partnership's limited Partnership Agreement, the Class B Units may be converted into Class A Units. The following table sets forth the range of high and low closing prices of Class A Units for each full quarterly period for the two most recent years, as reported by the American Stock Exchange. ---------------------------------------------------------------------- For the Quarter Ended High Low ---------------------------------------------------------------------- ---------------------------------------------------------------------- March 31, 1993 1 7/16 1 ---------------------------------------------------------------------- June 30, 1993 1 9/16 1 ---------------------------------------------------------------------- September 30, 1993 4 1/2 1 1/4 ---------------------------------------------------------------------- December 31, 1993 3 15/16 2 7/8 ---------------------------------------------------------------------- ---------------------------------------------------------------------- March 31, 1994 3 11/16 3 ---------------------------------------------------------------------- June 30, 1994 3 5/8 2 1/2 ---------------------------------------------------------------------- September 30, 1994 2 7/8 2 3/8 ---------------------------------------------------------------------- December 31, 1994 3 1/4 2 5/8 ---------------------------------------------------------------------- As of December 31, 1994 the Partnership had approximately 1,871 Class A Unitholders. The Class A Unitholders have not received any distributions since 1990. The Class B Units do not receive distributions until the Class A Unitholders receive Minimum Annual Distributions, as defined in the Partnership Agreement. The existing mortgage loan imposes significant restriction on distributions to partners under the Partnership Agreement, including Minimum Annual Distributions to Class A Unitholders. On April 4, 1995, the Partnership signed a commitment letter with a new bank to refinance the existing mortgage loan. The new mortgage loan allows, under certain conditions, distributions to Class A Unitholders of up to 75% of Annual Excess Cash Flow, as defined under the terms of the commitment letter. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. II-1 ITEM 6. SELECTED FINANCIAL DATA
Years Ended December 31, ---------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (In thousands, except per unit amounts) Consolidated Operations Data - ---------------------------- Revenue $ 46,157 $ 45,268 $ 42,998 $ 42,990 $ 45,425 Operating income 5,122 5,556 4,331 3,848 6,056 Net income (loss) 627 1,120 113 (1,923) (1,656) Income (loss) per unit: Class A: Net loss (.10) (.02) (.22) (.66) (.72) Class B: Net income 1.25 1.27 1.17 1.00 .60 Distributions per Class A Unit - ------------------------------ From operations (includes support contributions)(1) $ -- $ -- $ -- $ -- $ 1.83 Weighted average number of units outstanding Class A 5,340,214 5,340,214 4,490,214 4,297,954 3,021,080 Class B 950,000 950,000 950,000 950,000 950,000 Consolidated Balance Sheet Data - ------------------------------- Working capital (deficit)(2) $ (7,178) $(48,180) $ (48,771) $ (5,963) $ (736) Total assets 73,542 77,369 78,589 79,029 81,811 Long-term debt and affiliate notes payable (2) 46,180 6,000 8,715 53,650 60,550 Partners' capital 15,173 14,546 13,426 12,378 14,123 Appraised values of properties 86,490 89,530 90,240 106,000 122,300 Consolidated Operations Data - ---------------------------- Gross operating profit (3) $ 13,566 $ 13,739 $ 11,944 $ 11,581 $ 13,555 Capital expenditures 2,049 2,353 2,530 1,799 3,376 Net cash provided by operating activities 5,568 5,841 4,080 2,665 3,603 Net cash used in investing activities (1,944) (2,394) (2,433) (1,513) (4,020) Net cash provided (used) by financing activities (5,279) (3,612) (1,391) 449 (139) (1) AHS and an affiliate were required to supplement distributable cash flow to the extent that such amounts were not sufficient to make Minimum Annual Distributions under the Partnership Agreement (support contributions) for a three-year period following the initial offering of Class A units. 1990 distributions include certain support contributions. (2) Certain of the Partnership's indebtedness to unaffiliated financial institutions was classified as current at December 31, 1993 and 1992. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. (3) Gross operating profit represents operating income before rent, taxes, insurance, management fees and depreciation and amortization.
II-2 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table reflects certain historical financial information and operating statistics for the years ended December 31, 1994, 1993 and 1992.
Historical Financial Information -------------------------------- (in thousands, except operating statistics) 1994 1993 1992 -------- -------- -------- Revenue: Rooms $ 26,863 $ 26,693 $ 25,584 Food and beverage 12,274 11,664 11,349 Other property operations 7,020 6,911 6,065 -------- -------- -------- Total revenue 46,157 45,268 42,998 Expenses: Hotel operations 32,591 31,529 31,054 -------- -------- -------- Gross operating profit 13,566 13,739 11,944 Other operating expenses (1) 8,444 8,183 7,613 -------- -------- -------- Operating income 5,122 5,556 4,331 Other income (expense) net (2) (4,495) (4,436) (4,218) -------- -------- -------- Net income $ 627 $ 1,120 $ 113 -------- -------- -------- -------- -------- -------- Operating Statistics -------------------- Average Daily Rate $59.42 $60.08 $61.45 Average occupancy percent 77.9% 76.6% 72.9% Number of available rooms 1,586 1,586 1,586 (1) Includes rent, taxes, insurance, management fees, depreciation and amortization. (2) Principally comprised of interest expense.
II-3 REVENUE Total revenue increased $889,000 or 2.0% in 1994, compared to an increase of $2,270,000 or 5.3% in 1993. Of the total revenue in 1994, 1993 and 1992, rooms comprised 58.2%, 59.0% and 59.5%, respectively; food and beverage comprised 26.6%, 25.8% and 26.4%, respectively, and other property operations comprised 15.2%, 15.2% and 14.1%, respectively. Rooms revenue is primarily a function of the Properties' occupancy levels and room rates. Rooms revenue increased $170,000 in 1994 due to an increase in occupancy from 76.6% to 77.9% offset by a decrease in average room rates of $0.66. Rooms revenue increased $1,109,000 in 1993 due to an increase in occupancy from 72.9% to 76.6% offset in part by a decrease in average room rates of $1.37. Rooms revenue increases in 1994 and 1993 are attributable to increased sales to group and contract customers at the Regal McCormick Ranch, Sheraton University Center and Sheraton Inn Buffalo Airport. These rooms revenue increases were offset in part by decreases in rooms revenue at the Sheraton Lakeside which continues to be impacted by significant competitive pressures in the leisure market. These competitive pressures combined with discounts offered to attract more group and contract business resulted in the decreases in average room rates in 1994 and 1993. Food and beverage revenue increased $610,000 or 5.2% in 1994 and $315,000 or 2.8% in 1993. Food and beverage revenue is impacted by room occupancy and the mix of room sales between leisure, group, contract and business customers. The primary increases in occupancy in 1994 and 1993 were from group and contract customers which typically have a favorable impact on food and beverage revenue. Other property operations consist of marina sales and rentals (at Fourwinds), gift shops, food marts, lease income, phone charges and other miscellaneous guest services. Other property operations increased $109,000 or 1.6% in 1994 and $846,000 or 13.9% in 1993. The 1994 increase in other property operations was primarily due to the overall increase in occupancy. The 1993 increase in other property operations was primarily due to the increases in overall room occupancy, villa rentals at Regal McCormick Ranch and marina sales and rentals at Fourwinds. The portion of the increase in other revenue primarily attributable to increased occupancy in 1993 was approximately $357,000 or 5.9%. Regal McCormick Ranch's increase in villa rentals was similar to its increase in rooms revenue. The increase in marina sales and rentals was the result of new product lines, improved facilities and excellent summer weather. While the hotel industry continues to be very competitive, the Properties have outperformed the industry when measuring revenue per available room (occupancy percent times average room rate). The Properties revenue per available room was $46.29, $46.02 and $44.80 in 1994, 1993 and 1992, respectively. Revenue per available room for the United States hotel industry, accumulated by Smith Travel Research, was $41.49, $38.85 and $36.29 in 1994, 1993 and 1992, respectively. II-4 COSTS AND OPERATING EXPENSES Total operating expenses increased $1,323,000 or 3.3% in 1994. This increase is attributable to an increase in hotel operating expenses of $1,062,000 and an increase in other operating expenses of $261,000. Hotel operating expenses increased in 1994 primarily as a result of the overall increases in occupancy and revenue, food and beverage costs and marketing expenses. As a result of increased food costs, food and beverage costs as a percent of food and beverage revenue increased to 71.4% in 1994 from 70.2% in 1993. Marketing expenses increased 6.9% in 1994 primarily as a result of increases in franchise fee rates at two of the three Sheraton properties. The increase in other operating expenses in 1994 is due to a 6.0% increase in depreciation and amortization from renovations completed in June 1993 on the Sheraton Inn - Buffalo Airport and other capital additions. Total operating expenses increased $1,045,000 or 2.7% in 1993. This increase is attributable to an increase in hotel operating expenses of $475,000 and an increase in other operating expenses of $570,000. Hotel operating expenses increased in 1993 primarily as a result of overall increases in occupancy and revenue. The increase in other operating expenses in 1993 is due to an increase of 15.1% in rent, taxes and insurance from increases in property taxes and an increase of 3.8% in depreciation and amortization from capital additions. Other income and expense remained relatively consistent in 1994 as compared to 1993. Interest expense increased 3.7% in 1994 primarily as a result of increases in the interest rate offset by decreases in the total indebtedness level. The increase in interest expense in 1994 was offset in part by a gain of $105,000 recognized in 1994 on an insurance settlement. Other income and expense increased $218,000 or 5.2% in 1993. The components of this increase include a decrease of $351,000 in interest expense in 1993 primarily due to a decrease in interest rates offset by a $569,000 gain on an insurance settlement recognized in 1992. In the fourth quarter of 1994, the Partnership recorded an adjustment for accrued vacation in the amount of $150,000. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS Net cash provided by operating activities was $5,568,000 in 1994, a decrease of $273,000 from 1993. This decrease is the result of an increase in cash paid to suppliers and vendors for increased costs and expenses of $2,096,000, offset in part by increases in cash received from customers for increased hotel revenue of $1,403,000, increased other cash receipts of $145,000 and decreases in cash paid to employees of $186,000 and interest paid of $89,000. Net cash provided by operating activities was $5,841,000 in 1993, an increase of $1,761,000 from 1992. This increase is the result of increases in cash received from customers from increased hotel revenue of $2,200,000, increased other cash receipts of $98,000 and decreased interest paid of $637,000 from the non-payment of interest on notes payable to an affiliate, offset in part by an increase in cash paid to suppliers and vendors for increased costs and expenses of $942,000, increase in cash paid to employees of $207,000 and a decrease in insurance proceeds of $25,000. Net cash used in investing activities decreased $450,000 in 1994 due to decreases in capital expenditures and cash paid for other assets. Net cash used in investing activities decreased II-5 $39,000 in 1993 due to decreases in capital expenditures and cash received from insurance proceeds. Net cash used in financing activities increased $1,667,000 in 1994 primarily due to increases in principal payments on the Partnership's indebtedness. Net cash used in financing activities increased $2,221,000 in 1993, primarily due to increases in principal payments on the Partnership's indebtedness, increases in refinancing costs paid and decreases in cash received from partner contributions and the sale of Class A Units to affiliates. The proceeds from the Class A Units sold in 1992 were used to pay indebtedness. INDEBTEDNESS On April 4, 1995 the Partnership signed a commitment letter with a new lender to provide a $45,000,000 first mortgage loan and a $1,000,000 revolving credit line. The proceeds of the $45,000,000 first mortgage loan will be used to pay off the existing mortgage loan and the note payable to bank as well as provide funds for certain property renovations and the payment of a facility fee and closing costs. The Partnership expects to complete the refinancing by June 1995. The new financing provides long-term financing, more favorable interest rates and less restrictive loan covenants as compared to the existing mortgage loan. The new financing was obtained by the General Partner and an affiliate, Regal Hotels International Holdings Limited ("RHL"). RHL has agreed to provide a limited guarantee for the new first mortgage loan. The Partnership expects to pay a fee to RHL for the limited guarantee. While the amount of the fee has not been determined, in no event will the amount exceed what an unaffiliated guarantor would be paid. The refinancing includes a variety of interest rate options, the most favorable of which is LIBOR plus 2% (7.85% at December 31, 1994). This compares to the existing mortgage loan rate of 9% at December 31, 1994. Repayment of the new first mortgage loan is based on a twenty-year amortization with a balloon payment at the end of the fifth year while the revolving credit line is renewable annually at the option of the lender. The commitment letter contains a number of conditions which are different than those contained in the Partnership's existing mortgage loan. Some of the more significant differences include a new maturity date in 2000, a change in the maximum loan to value ratio based on the appraised value of the Properties from 60% to 65%, the allowance of distributions to Class A Unitholders in certain circumstances, the removal of the restriction on payments to AHS on the Partnership's affiliated notes payable by allowing principal and interest payments in certain circumstances, the removal of the requirement to offer any of the Properties for sale and the added requirement that affiliates of the General Partner maintain their present level of ownership in the Partnership. The commitment letter also requires the maintenance of a capital reserve account equal to 4% of gross revenue in 1995 and 5% of gross revenue thereafter. Based on this requirement and with the loan proceeds, the Partnership expects to expend approximately $7,300,000 for capital expenditures over the next two years. The commitment letter contains certain conditions precedent that the Partnership considers normal due diligence procedures typically conducted in connection with making such a loan. The Partnership believes that none of these conditions are significant contingencies for making the loan. As a result of the lender's firm commitment, the Partnership has classified the indebtedness currently outstanding under the mortgage loan payable and note payable to bank as long- term. II-6 The Partnership had indebtedness at December 31, 1994 in the amount of $48,365,000. Such indebtedness includes a mortgage loan payable of $40,450,000 due July 31, 1995, a note payable to bank of $1,915,000 due October 31, 1995 and affiliate notes payable of $6,000,000 which were due January 1995. During 1994, the Partnership extended the mortgage loan payable and the note payable to bank to July 31, 1995 and October 31, 1995, respectively. These extensions required principal reductions of $2,000,000 and the payment of $311,000 in fees. The existing mortgage loan contains numerous covenants requiring, among other matters, the maintenance of specified cash flow levels for the Partnership and at each hotel property, a maximum loan to value ratio of 60% based on the Partnership's secured debt to aggregate appraised values of the Properties, limitations on additional borrowings, restrictions on payments to AHS on the Partnership's affiliated notes payable, restrictions on distributions to partners under the Partnership Agreement, including Minimum Annual Distributions to Class A Unitholders, the expenditure or reserve (limited to $2,000,000) for the purchase, repair and replacement of hotel property, furniture, fixtures and equipment and cross covenant defaults with the Partnership's note payable to bank and certain indebtedness of the General Partner and other affiliates. In addition to the various loan covenants above, the mortgage loan requires the Partnership to offer the Sheraton Lakeside Inn and Sheraton Inn - Buffalo Airport for sale at a sales price not less than the current appraised values. The Partnership selected a broker to market the two hotel properties in accordance with the mortgage loan. The mortgage loan also requires all proceeds from such sales to be applied to the outstanding balance of the mortgage loan. No acceptable offers have been received. The Partnership's affiliate notes payable of $6,000,000 were due January 1995. These affiliate notes payable have been subordinated to the existing mortgage loan and note payable to bank. A condition of the commitment letter signed by the Partnership for the new first mortgage loan and revolving credit line also requires the subordination of the principal balance of the affiliate notes payable. The affiliate has agreed to the subordination to the existing mortgage loan and the new first mortgage loan and revolving credit line under the commitment letter. Accordingly, the affiliate notes payable principal balance is classified as long-term at December 31, 1994. PARTNERSHIP DISTRIBUTIONS AND UNIT CONVERSIONS The Partnership Agreement provides for periodic distribution of distributable cash flow, as defined, to the partners subject to any applicable restrictions and the discretion of the General Partner. Distributable cash flow is generally defined as cash flow from operations of the hotel properties. Such cash is allocated and distributed (net of AHS's 1% general partnership interest in the Operating Partnerships) 99% to the Class A Unitholders and 1% to the General Partner until the Class A Unitholders have received defined Minimum Annual Distributions. The Minimum Annual Distribution is $2.16 per Class A Unit. The Partnership expects an amount less than the Minimum Annual Distribution per Class A Unit will be available for distribution from future operating cash flow. Any portion of the Minimum Annual Distribution that is not paid by the Partnership in any year is added to the cumulative unpaid Minimum Annual Distribution. Based on the appraised value of the Properties at December 31, 1994, the cumulative unpaid Minimum Annual Distribution per Class A Unit exceeds the Partnership's net assets per Unit of approximately $6.00 by approximately 50%. The Class B Units entitle each Unitholder to a limited partnership interest which is subordinated to the Class A Units. The Class B Units are redeemable or convertible in certain circumstances. The Class B Units do not receive distributions until the Class A Unitholders receive Minimum Annual Distributions which have not been made since 1990. Through 1996, the Class B Units II-7 are convertible into Class A Units only to the extent that distributable cash flow of the Partnership in the previous year would have been sufficient to pay Minimum Annual Distributions for the Class A Units, including the Class B Units to be converted. After 1996, a minimum of 250,000 Class B Units are required to be converted into Class A Units annually through 2001 at a redemption value of $20.00 per Class B Unit, by issuing Class A Units valued at the then current market price of the Class A Units. Such required conversion may result in dilution to the Class A Unitholders prior to conversion. For example, based on the average market price of Class A Units during 1994 of approximately $3.00, the conversion of 250,000 Class B Units in 1997 would result in an approximate 24% dilution to the Class A Unitholders upon conversion. The conversion of all 950,000 Class B Units would result in an approximate 54% dilution to the preconversion Class A Unitholders at the $3.00 per unit market price. PROPERTY VALUES The appraised value of the Properties is $86,490,000 at December 31, 1994, which exceeds their carrying values of $68,353,000. However, the appraised value on two of the hotel properties is approximately $5,000,000 less in the aggregate than their carrying values at December 31, 1994. In accordance with a proposed Statement on Financial Accounting Standards on Accounting for the Impairment of Long-Lived Assets, which is expected to be issued in 1995, the Partnership has not recognized an impairment on these two hotel properties as the undiscounted cash flow on these properties exceeds their carrying values. Currently the Partnership has no plans to sell these properties at less than their carrying values. INCOME TAXES As a result of the Revenue Act of 1987, the Partnership will become a taxable entity in 1998. As a result, the income of the Partnership will be taxable as a corporation and distributions from the Partnership will continue to be taxable to the individual partners. The Partnership is evaluating various alternatives to minimize any adverse impact on the Partnership as a result of these changes in the tax laws. INFLATION The rate of inflation as measured by changes in the average consumer price index has not had a material impact on the revenue or net income of the Partnership in the three most recent years. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of AHP are filed under this Item, beginning on Page II-9. The financial statement schedules required under Regulation S-X are filed pursuant to Item 14 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. II-8 INDEPENDENT AUDITORS' REPORT The Partners AIRCOA Hotel Partners, L.P. We have audited the accompanying consolidated balance sheets of AIRCOA Hotel Partners, L.P. and subsidiary operating partnerships as of December 31, 1994 and 1993, and the related consolidated statements of operations, partners' capital and cash flows for each of the years in the three year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AIRCOA Hotel Partners, L.P. and subsidiary operating partnerships as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 1994, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Denver, Colorado February 27, 1995, except as to notes 3 and 4 which are as of April 4, 1995 II-9 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1993 (In thousands)
Assets 1994 1993 - ------ -------- -------- Current assets: Cash and cash equivalents $ 1,261 $ 2,916 Accounts receivable: Trade 2,555 2,675 Affiliates 43 207 Inventory 401 376 Prepaid expenses 498 374 -------- -------- Total current assets 4,758 6,548 -------- -------- Property and equipment, at cost: Land and leasehold improvements 8,767 8,693 Buildings and leasehold improvements 70,109 69,518 Furniture, fixtures and equipment 16,304 15,240 Construction in progress 407 87 -------- -------- 95,587 93,538 Less accumulated depreciation and amortization (27,234) (23,311) -------- -------- Net property and equipment 68,353 70,227 Other assets, including debt issue costs, net of accumulated amortization of $212 in 1994 and $330 in 1993 431 594 -------- -------- $ 73,542 $ 77,369 -------- -------- -------- --------
(Continued) II-10 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS CONSOLIDATED BALANCE SHEETS (Continued) December 31, 1994 and 1993 (In thousands)
Liabilities and Partners' Capital 1994 1993 - --------------------------------- -------- -------- Current liabilities: Current installments of long-term debt $ 2,185 $ 47,315 Trade accounts payable 1,634 1,689 Payables to affiliates: Trade accounts 444 469 Interest 2,100 -- Accrued liabilities: Payroll 327 363 Taxes, other than income taxes 982 934 Other 2,450 2,350 Deferred revenue and advance deposits 1,814 1,608 -------- -------- Total current liabilities 11,936 54,728 Long term debt, excluding current installments 40,180 -- Notes payable to affiliates, including accrued interest of $1,380 in 1993 6,000 7,380 Deferred franchise fees -- 462 Accrued administration and management fees payable to affiliate 253 253 -------- -------- Total liabilities 58,369 62,823 -------- -------- Commitments and contingencies. Partners' capital: General partner 376 375 Limited partners: Class A Unitholders 21,605 22,157 Class B Unitholders (deficit) (6,808) (7,986) -------- -------- Total partners' capital 15,173 14,546 -------- -------- $ 73,542 $ 77,369 -------- -------- -------- --------
See accompanying notes to consolidated financial statements. II-11 AIRCOA HOTEL PARTNERS, L.P AND SUBSIDIARY OPERATING PARTNERSHIPS CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1994, 1993 and 1992 (In thousands, except unit data)
1994 1993 1992 -------- -------- -------- Revenue: Rooms $ 26,863 $ 26,693 $ 25,584 Food and beverage 12,274 11,664 11,349 Other property operations 7,020 6,911 6,065 --------- --------- --------- 46,157 45,268 42,998 --------- --------- --------- Costs and operating expenses: Rooms 7,242 7,189 7,132 Food and beverage 8,769 8,186 8,167 Other property operations 3,325 3,206 2,976 Administrative and general 4,793 4,823 4,748 Marketing 4,025 3,764 3,742 Energy 2,307 2,234 2,015 Property maintenance 2,130 2,127 2,274 Rent, taxes and insurance 2,665 2,674 2,323 Management fees 1,835 1,788 1,705 Depreciation and amortization 3,944 3,721 3,585 --------- --------- --------- 41,035 39,712 38,667 --------- --------- --------- Operating income 5,122 5,556 4,331 --------- --------- --------- Other income (expenses): Interest expense, including amortization of debt issue costs of $471 in 1994, $458 in 1993, and $380 in 1992 (4,600) (4,436) (4,787) Gain on insurance settlements 105 - 569 --------- --------- --------- (4,495) (4,436) (4,218) --------- --------- --------- Net income $ 627 $ 1,120 $ 113 --------- --------- --------- --------- --------- --------- Income (loss) per limited partnership unit: Class A Unitholders $ (.10) $ (.02) $ (.22) --------- --------- --------- --------- --------- --------- Weighted average number of units outstanding 5,340,214 5,340,214 4,490,214 --------- --------- --------- --------- --------- --------- Class B Unitholders $ 1.25 $ 1.27 $ 1.17 --------- --------- --------- --------- --------- --------- Weighted average number of units outstanding 950,000 950,000 950,000 --------- --------- --------- --------- --------- ---------
See accompanying notes to consolidated financial statements. II-12 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL YEARS ENDED DECEMBER 31, 1994, 1993 and 1992 (In thousands, except unit data)
Limited Partners' Capital (Deficit) --------------------------------------- Class A Unitholders Class B Unitholders Unallocated Total General ------------------- ------------------- capital partners' partner Units Capital Units Capital contributions capital ------- ----- ------- ----- ------- ------------- ------- BALANCES AT DECEMBER 31, 1991 $ 375 4,490,214 $ 22,308 950,000 $(10,588) $ 283 $ 12,378 Issuance of Class A Units pursuant to general partners' purchase obligation -- 850,000 935 -- -- -- 935 Capital contributions pursuant to contractual arrangements -- -- -- -- 283 (283) -- Net income (loss) (10) -- (994) -- 1,117 -- 113 ------ --------- ------- ------- -------- ------ -------- BALANCES AT DECEMBER 31, 1992 365 5,340,214 22,249 950,000 (9,188) -- 13,426 Net income (loss) 10 -- (92) -- 1,202 -- 1,120 ------ --------- ------- ------- -------- ------ -------- BALANCES AT DECEMBER 31, 1993 375 5,340,214 22,157 950,000 (7,986) -- 14,546 Net income (loss) 1 -- (552) -- 1,178 -- 627 ------ --------- ------- ------- -------- ------ -------- BALANCES AT DECEMBER 31, 1994 $ 376 5,340,214 $ 21,605 950,000 $ (6,808) $ -- $ 15,173 ------ --------- ------- ------- -------- ------ -------- ------ --------- ------- ------- -------- ------ --------
See accompanying notes to consolidated financial statements. II-13 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (In thousands)
1994 1993 1992 ------ ------ ------ Cash flows from operating activities: Cash received from customers $ 44,592 $ 43,189 $ 40,989 Cash paid to suppliers and vendors (25,226) (23,130) (22,188) Cash paid to employees (12,423) (12,609) (12,402) Interest paid (3,430) (3,519) (4,156) Other cash receipts 2,055 1,910 1,837 --------- --------- --------- Net cash provided by operating activities 5,568 5,841 4,080 --------- --------- --------- Cash flows from investing activities: Capital expenditures (2,049) (2,353) (2,530) Proceeds from insurance for damaged property and equipment 105 236 380 Payments for other assets -- (277) (283) --------- --------- --------- Net cash used in investing activities (1,944) (2,394) (2,433) --------- --------- --------- Cash flows from financing activities: Principal payments on long-term debt (4,950) (3,325) (2,310) Refinancing costs and other (329) (342) (244) Proceeds from partner contributions and sale of Class A Units -- 55 1,163 --------- --------- --------- Net cash used in financing activities (5,279) (3,612) (1,391) --------- --------- --------- Increase (decrease) in cash and cash equivalents (1,655) (165) 256 Cash and cash equivalents at beginning of period 2,916 3,081 2,825 --------- --------- --------- Cash and cash equivalents at end of period $ 1,261 $ 2,916 $ 3,081 --------- --------- --------- --------- --------- ---------
(Continued) See accompanying notes to consolidated financial statements. II-14 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (In thousands)
1994 1993 1992 ------ ------ ------ Reconciliation of net income to net cash provided by operating activities: Net income $ 627 $ 1,120 $ 113 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,944 3,721 3,585 Amortization of debt issue costs 471 458 380 Gain on insurance settlements (105) -- (569) Decrease (increase) in accounts receivable relating to operations 284 (328) (251) Decrease (increase) in inventory (25) (74) 20 Increase in prepaid expenses (124) (41) (20) Increase in trade accounts payable, payables to affiliates, accrued liabilities, accrued administration and management fees payable to affiliate relating to operations and deferred franchise fees 290 826 768 Increase in deferred revenue and advance deposits 206 159 54 -------- -------- -------- Net cash provided by operating activities $ 5,568 $ 5,841 $ 4,080 -------- -------- -------- -------- -------- --------
See accompanying notes to consolidated financial statements. II-15 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 and 1993 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AIRCOA Hotel Partners, L.P. (the "Partnership") is a publicly traded limited partnership formed to acquire, own and operate hotel properties. The Partnership holds a 99% limited partner interest in limited partnerships (the "Operating Partnerships"). Each of the Operating Partnerships owns and operates one of the six hotel and resort properties (the "Properties"). AIRCOA Hospitality Services, Inc. ("AHS"), a wholly- owned subsidiary of Richfield Hospitality Services, Inc. ("Richfield") holds a 1% General Partner interest in the Partnership and in each of the Operating Partnerships. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Partnership and the accounts of each of the Operating Partnerships. All significant interpartnership accounts and transactions have been eliminated. CASH AND CASH EQUIVALENTS Cash equivalents, representing overnight Eurodollar deposits and repurchase agreements, were $739,000 and $1,941,000 at December 31, 1994 and 1993, respectively. For purposes of the consolidated statements of cash flows, the Partnership considers all highly liquid investments with original maturities of three months or less to be cash equivalents. OPERATING ASSETS The Partnership uses an inventory method of accounting for china, glassware, silver, linen, and uniforms. Under the inventory method, operating assets are stated at amounts based upon the physical quantity of such assets on hand using average costs, less a valuation allowance to reflect deterioration from use. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Hotel property renovations and improvements are capitalized. Repairs, maintenance, and minor refurbishments are charged to expense as incurred. Interest incurred during construction of facilities or major renovations is capitalized and amortized over the life of the related assets. Interest of $43,000 was capitalized in 1993. No interest was capitalized in 1994 or 1992. Upon the retirement or sale of property and equipment, the cost and related accumulated depreciation are removed from the respective accounts, and the resulting gain or loss, if any, is included in operations. Property and equipment held under leaseholds is amortized over the shorter of the lease term or the estimated useful life of the asset. II-16 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 and 1993 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT (CONTINUED) Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets, generally as follows: Land improvements and leasehold improvements 15 years Buildings and leasehold improvements 30 years Furniture, fixtures and equipment 10 years The appraised value on two of the hotel properties is approximately $5,000,000 less than their carrying values in the aggregate at December 31, 1994. However, the Partnership believes that expected future cash flows from operation of these properties will be sufficient to recover their carrying values. The Partnership has no current plans to sell the properties at less than their carrying values. OTHER ASSETS Other assets consist principally of debt issue costs, franchise license costs, and liquor license costs. Debt issue and franchise license costs are amortized using the straight-line method over the term of the respective debt or license agreement. DEFERRED REVENUE AND ADVANCE DEPOSITS Deferred revenue for facility rentals and advance room deposits is recognized as revenue when services are provided. INCOME TAXES No current provision or benefit for income taxes is included in the accompanying consolidated financial statements since the taxable income or loss of the Partnership is included in the tax returns of the individual partners of the Partnership. Current federal income tax regulations will subject the Partnership to corporate taxation beginning in 1998. Accordingly, the Partnership utilizes an asset and liability method of accounting for deferred income taxes. Under the asset and liability method, deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis expected to be recovered or settled subsequent to 1997. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years such temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates will be recognized in operations in the period of the enactment date. II-17 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 and 1993 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NET INCOME (LOSS) PER UNIT Net income (loss) per limited partnership unit is computed by dividing the net income (loss) attributable to each class of units by the weighted average number of units outstanding in each class during the period. Because of the loss attributable to A Unitholders in 1994, 1993 and 1992, Class A Units issuable upon conversion of notes payable (see Note 3) and upon conversion of the Class B Units (see Note 2) were not considered in the computation, as such conversions would be anti-dilutive. RECLASSIFICATIONS Certain amounts in the 1993 and 1992 financial statements have been reclassified to conform to the 1994 presentation. (2) PARTNERSHIP UNITS AND ALLOCATIONS LIMITED PARTNERSHIP UNITS The Class A Units entitle each Unitholder to a limited partnership interest in a percentage of the profits and losses, tax allocations, and distributions of the Partnership, as described below. The Class B Units entitle each Unitholder to a limited partnership interest which is subordinated to the Class A Units. The Class B Units are redeemable by the Partnership or convertible into Class A Units, in certain circumstances. The Class B Units do not receive distributions until the Class A Unitholders receive defined Minimum Annual Distributions. Through 1996 the Class B Units are convertible into Class A Units to the extent that distributable cash flow of the Partnership in the previous year would have been sufficient to pay Minimum Annual Distributions for the Class A Units, including the Class B Units to be converted. After 1996, a minimum of 250,000 Class B Units are required to be converted into Class A Units annually through 2001 at a redemption value of $20.00 per Class B Unit, by issuing class A units valued at the then current market price of the Class A Units. CASH DISTRIBUTIONS The Partnership agreement provides for periodic distribution of distributable cash flow, as defined, to the partners at the discretion of the General Partner. Distributable cash flow is generally defined as cash flow from operations of the hotel properties. Such cash is allocated and distributed (net of AHS' 1% general partnership interest in the Operating Partnerships) 99% to the Class A Unitholders and 1% to the General Partner until the Class A Unitholders have received defined Minimum Annual Distributions. The Minimum Annual Distribution is presently $2.16 per Class A Unit. After payment of the Minimum Annual Distribution, additional cash distributions, if any, will be allocated 49.5% to the Class A Unitholders, 49.5% to the Class B Unitholders and 1% to the General Partner. II-18 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 and 1993 (2) PARTNERSHIP UNITS AND ALLOCATIONS (CONTINUED) CASH DISTRIBUTIONS (CONTINUED) Capital transaction proceeds generally consist of net proceeds from sales and refinancing of the Partnership's hotel properties. Cash from capital transaction proceeds is allocated and distributed 99% to the Class A Unitholders and 1% to the General Partner until the Class A Unitholders have received any previously unpaid Minimum Annual Distributions, and the unrecovered capital preference amount, as defined. Capital transaction proceeds are then allocated and distributed 99% to the Class B Unitholders and 1% to the General Partner until all the Class B Units have been redeemed. Subsequent to the redemption of the Class B Units, capital transaction proceeds are allocated and distributed 75% to the Class A Unitholders and 25% to the General Partner. The unrecovered capital preference amount of a Class A and a Class B Unit at December 31, 1994 is $16.60 and $20.00, respectively. The Minimum Annual Distribution amount attributable to Class A Unitholders and the Class B Unitholders sharing percentage in distributable cash flow are reduced proportionately based upon distributions of capital transaction proceeds. Based on the appraised value of the Properties at December 31, 1994, the cumulative unpaid Minimum Annual Distribution per Class A Unit exceeds the Partnership's net assets per Unit of approximately $6.00 by approximately 50%. The Partnership did not declare distributions in 1994, 1993 and 1992. ALLOCATION OF INCOME AND LOSSES Partnership income and losses are allocated among the partners in accordance with federal income tax provisions based upon the partners ownership interests, adjusted to reflect original contribution values agreed upon by the partners and other basis differences at the inception of the partnership. Income and losses are allocated among individual Units on a pro rata basis within each class of units. For financial reporting purposes, the net income or loss of the Partnership is generally allocated in accordance with the income tax allocation provisions described above. (3) LONG-TERM DEBT On April 4, 1995, the Partnership signed a commitment letter with a new lender to provide a $45,000,000 first mortgage loan and a $1,000,000 revolving credit line. The proceeds of the $45,000,000 first mortgage loan will be used to refinance, on a long-term basis, the Partnership's existing mortgage loan in the amount of $40,450,000 at December 31, 1994 and note payable to bank of $1,915,000 at December 31, 1994 which are due July 31, 1995 and October 31, 1995, respectively, as well as provide funds for certain property renovations and the payment of a facility fee and closing costs. The commitment letter contains certain conditions precedent that the Partnership considers normal due diligence procedures typically conducted in connection with II-19 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 and 1993 (3) LONG-TERM DEBT (CONTINUED) making such a loan. The Partnership believes that none of these conditions are significant contingencies in making the loans. As a result of this commitment, the Partnership's existing mortgage loan and note payable to bank have been classified as long-term at December 31, 1994. The Partnership expects the refinancing to be completed by June 1995. The refinancing terms outlined in the commitment letter include a variety of interest rate options for the loans. In addition, repayment of the first mortgage loan is based on a twenty year amortization with a balloon payment at the end of the fifth year. The revolving credit line will be renewable annually at the option of the lender. Based on the terms of the refinancing outlined in the commitment letter, the indebtedness pursuant to the Partnership's existing mortgage loan and note payable to bank are summarized as follows:
December 31 ------------------ 1994 1993 -------- -------- Mortgage loan $ 40,450 $ 44,600 Note payable to bank 1,915 2,715 -------- -------- 42,365 47,315 Less current installments 2,185 47,315 -------- -------- Long-term debt, excluding current installments $ 40,180 $ -- -------- -------- -------- --------
As outlined in the commitment letter, the new first mortgage loan and revolving credit line contain various covenants including minimum debt service ratios, restrictions on additional indebtedness, limitations on annual cash distributions to Class A Unitholders, limitations on the payment of principal and interest on the affiliate notes payable, deferral of management fees payable to Richfield if minimum debt service ratios are not achieved, maintenance of a capital expenditure reserve account equal to 4% of gross revenue in 1995 and 5% thereafter, and a maximum loan-to-value ratio of 65% based on the aggregate appraised values of the Properties. The new first mortgage loan and revolving credit line are subject to certain limited guarantees of an affiliate of the Partnership. The new first mortgage loan also requires the Bank's approval of any dilution or change in the present ownership interests of affiliates of the General Partner in the Partnership. Maturities of long-term debt (based on the terms of the commitment letter) are summarized as follows (in thousands):
Year ending December 31, ------------------------ 1995 $ 2,185 1996 1,080 1997 1,080 1998 1,080 1999 1,080 2000 35,860 -------- $ 42,365 -------- --------
II-20 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 and 1993 (3) LONG-TERM DEBT (CONTINUED) The existing mortgage loan's interest rate is 3% above a specific Eurodollar rate or 1% above the bank's prime if the Eurodollar rate is unavailable. The rate at December 31, 1994 was 9.0%. The Mortgage Loan requires monthly installments of $250,000 plus interest and is secured by separate first mortgages on the hotel properties and a security interest in all assets related to the operation of the hotel properties. The existing mortgage loan contains numerous covenants requiring, among other matters, the maintenance of specified cash flow levels for the Partnership and at each hotel property, a maximum loan to value ratio of 60% based on the Partnership's secured debt to aggregate appraised values of the Properties, limitations on additional borrowings, restrictions on payments to AHS on the Partnership's affiliated notes payable, restrictions on distributions to partners under the Partnership Agreement including Minimum Annual Distributions to Class A Unitholders, restrictions as to cash balances and cross default provisions with the bank note payable and specified indebtedness of the General Partner and certain affiliates and the expenditure or reserve (limited to $2,000,000) for the purchase, repair, and replacement of hotel property, furniture, fixtures and equipment. The existing mortgage loan requires the Partnership to offer the Sheraton Lakeside Inn and Sheraton Inn - Buffalo Airport for sale at a price not less than their current appraised values. The Partnership selected a broker to market the two hotel properties on terms consistent with the mortgage loan. The existing mortgage loan also requires all proceeds from such sales to be applied to the outstanding balance of the mortgage loan. In connection with the refinancing terms outlined in the commitment letter, the Partnership will no longer be required to offer any of the Properties for sale. The amended note payable to bank has an interest rate of 1.5% above the bank's prime rate. In the event that the effective interest rate exceeds 9% per annum, the excess interest is deferred. The effective rate at December 31, 1994 was 10.0%. The note is payable in monthly installments of $25,000 plus interest, and is convertible into Class A Units of the Partnership at $16.60 per unit. The note is secured by a pledge from an affiliate of AHS of management fees payable to the affiliate by the Partnership's hotel properties; the pledge of 718,000 Class A Units of the Partnership held by certain affiliates, and the personal guarantees of two former officers of AHS. The note contains covenant provisions which are similar to those contained in the existing mortgage loan. In accordance with the Partnership Agreement, the General Partner is entitled to receive a 1% financing fee in exchange for arranging the refinancing of the Partnership's indebtedness. Such fee is required to be reduced by the amount of the financing fee paid to the lender. In addition the Partnership expects to pay a fee to an affiliate for the limited guarantee of the new first mortgage loan and the revolving credit line. II-21 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 and 1993 (4) NOTES PAYABLE TO AFFILIATES The Partnership's affiliate notes payable of $6,000,000 were due January 1995. These affiliate notes payable have been subordinated to the existing mortgage loan and note payable to bank. A condition of the commitment letter signed by the Partnership for the first mortgage loan and revolving credit line also require the subordination of the affiliate notes payable principal balance. The affiliate has agreed to the subordination to the existing mortgage loan and the new first mortgage loan and revolving credit line under the commitment letter. Accordingly, the affiliate notes payable principal balance is classified as long-term at December 31, 1994. (5) INCOME TAXES The Partnership's only significant temporary difference (which will result in tax deductions in 1998 and later years) is an excess of the tax basis over the book basis of the Properties of approximately $2,350,000 and $3,200,000 at December 31, 1994 and 1993, respectively. The Partnership's net deferred tax asset was approximately $940,000 and $1,200,000 at December 31, 1994 and 1993, respectively. The Partnership has established a 100% valuation allowance on these net deferred tax assets. The change in the valuation allowance in 1994 was a decrease of approximately $260,000. (6) RELATED PARTY TRANSACTIONS AND COMMITMENTS PARTNERSHIP ADMINISTRATION AHS, as General Partner, is responsible for managing the business and affairs of the Partnership and the Operating Partnerships. The General Partner is reimbursed monthly for all direct operating expenses incurred on behalf of the Partnership and Operating Partnerships. In addition, the General Partner receives an annual partnership administration fee equal to 0.25% of the independently appraised value of the hotel properties of the Partnership. MANAGEMENT AGREEMENTS Richfield operates the hotel properties for the Partnership in exchange for a management fee equal to 4% of annual gross revenue from the hotel properties. In addition, the hotel properties are obligated to reimburse Richfield for payroll, professional fees, and certain out-of-pocket expenses incurred by Richfield on their behalf. The management agreements expire in 2012 and can be terminated by the Partnership prior to expiration, in certain circumstances, through the payment of a fee equal to three times the management fee paid for the preceding 12 months. Richfield also provides data processing services and obtains various types of insurance coverage, on an aggregate basis, for the hotel properties which it owns or manages. Such data processing and insurance costs are allocated to the hotel properties. II-22 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 and 1993 (6) RELATED PARTY TRANSACTIONS AND COMMITMENTS (CONTINUED) LICENSE AGREEMENTS One of the hotel properties has a license agreement with an affiliate to operate as a Regal Hotel. The license agreement provides for a fee of 1.5% of total revenue, as defined, and is renewed automatically for one year periods. The agreement can be terminated by the Partnership prior to expiration in certain circumstances, through payment of a termination fee. HOTEL PROPERTY ACQUISITIONS AND DISPOSITIONS AND PARTNERSHIP FINANCING The General Partner receives an acquisition fee equal to 1% of the purchase price of any hotel property acquired by the Partnership. Upon the sale of a hotel property, the General Partner receives either a disposition fee equal to 1% of the sales price of the hotel property, or a reasonable brokerage fee, based upon fees for comparable properties in the area, less the amount of any such brokerage fees paid to third parties. The General Partner receives a financing fee equal to 1% of the principal amount of any new Partnership loan, or refinancing of Partnership debt if the refinancing is completed with a lender other than the lender whose loan is being refinanced. Such fee is required to be reduced by the amount of the financing fee paid to the lender. OTHER ARRANGEMENTS The General Partner and its affiliates are paid development, purchasing, and design fees for services performed in connection with the renovation or expansion of the Partnership's hotel properties. In addition, an affiliate of AHS receives fees in connection with the bulk purchase of hotel furnishings, equipment, and supplies. The Partnership leases a private club and recreational facility from an affiliate of AHS, under an operating lease. The Partnership receives 90% to 100% of available cash flow from operation of the private club and recreational facility as lease income and management fees. The lease expires in 2052 and may be terminated by the Partnership earlier with the consent of the existing mortgage lender. The Partnership received lease income and management fees of $330,000, $328,000, and $338,000 pursuant to these arrangements in 1994, 1993, and 1992, respectively. Subject to the terms of the lease agreement, an affiliate of the Partnership has an option to purchase 50 undeveloped acres from the private club for $10. The option is only exercisable if all the permits and consents from state and local authorities permit continued operation of the club after conveyance of the 50 acres to the affiliate. The affiliate pays a pro-rata share of the property taxes on the private club. The private club is located on a tract of land consisting of approximately 80 acres. II-23 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 and 1993 (6) RELATED PARTY TRANSACTIONS AND COMMITMENTS (CONTINUED) The following amounts resulting from transactions with affiliates are included in the accompanying consolidated balance sheets (in thousands):
December 31 -------------------- 1994 1993 ------- ------- Fees and costs, included in property and equipment, net $ 1,028 $ 1,088 ------- ------- ------- -------
The following amounts resulting from transactions with affiliates are included in the accompanying consolidated statements of operations (in thousands):
1994 1993 1992 ------ ------ ------ Partnership administration fees $ 222 $ 186 $ 224 ------ ------ ------ ------ ------ ------ Management fees $1,835 $1,788 $1,705 ------ ------ ------ ------ ------ ------ Allocated insurance expense $1,505 $1,502 $1,388 ------ ------ ------ ------ ------ ------ Allocated data processing costs $ 45 $ 45 $ 43 ------ ------ ------ ------ ------ ------ Interest expense $ 720 $ 720 $ 720 ------ ------ ------ ------ ------ ------ License fees $ 132 $ 114 $ 9 ------ ------ ------ ------ ------ ------
In December 1992, the Partnership issued 850,000 Class A Units to affiliates of AHS for cash proceeds of $935,000 of which $55,000 was collected in January 1993. (7) COMMITMENTS AND CONTINGENCIES Under terms of the Clarion and ITT Sheraton franchises and the Regal Hotel license agreements, the Partnership is committed to make annual payments for franchise and licensing fees and reservation services. The Clarion and ITT Sheraton license agreements expire 2012. The Regal license agreement renews automatically for one-year periods. The amounts due under the agreements were $1,809,000, $1,497,000 and $1,321,000 for 1994, 1993 and 1992, respectively. In accordance with an agreement with ITT Sheraton, franchise fees for Sheraton Inn - Buffalo Airport and Sheraton Lakeside Inn were deferred through December 31, 1993. The deferred franchise fees are payable in monthly installments of approximately $74,000, beginning in January 1994. Deferred franchise fees were $438,000 and $1,326,000 at December 31, 1994 and 1993, respectively. Three of the hotel properties are subject to noncancelable operating land leases which expire between 2000 and 2033. The leases generally require annual rental payments of a fixed amount, ranging from $10,000 to $90,000, plus a contingent amount based upon a percentage of specified room revenue, food and beverage revenue, or gross revenue, as defined, ranging from 1% to 8%. The accompanying consolidated statements of operations include land rent expense of $803,000, $762,000, and $687,000 for 1994, 1993, and 1992, respectively. II-24 AIRCOA HOTEL PARTNERS, L.P. AND SUBSIDIARY OPERATING PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 and 1993 (7) COMMITMENTS AND CONTINGENCIES (CONTINUED) The Class A Units issuable upon conversion of notes payable and upon conversion of the Class B Units, and the Class A Units issued or issuable pursuant to the general partner's obligations regarding cash distributions have certain demand registration rights. The Partnership is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on the consolidated financial statements of the Partnership. (8) FOURTH QUARTER ADJUSTMENTS In the fourth quarter of 1994, the Partnership recorded an adjustment for accrued vacation in the amount of $150,000. II-25 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER THE GENERAL PARTNER AHS is the General Partner of the Partnership and of each of the Operating Partnerships. From its formation in 1968 until November 1993, AHS was engaged in the management of hotel and resort properties. Richfield assumed the management contracts for the properties effective November 1993 as a part of the integration by Richfield of its hotel management subsidiaries, including AHS. DIRECTORS AND EXECUTIVE OFFICERS OF AHS The directors and executive officers of AHS are listed below. The Advisory Committee of AHP consists of one member of the AHS Board of Directors, Anthony Williams, a member of the Advisory Board of Richfield Holdings, Inc. ("Holdings"), William Arthur and a new member, Frank Hughes, who does not serve in any other capacity with Richfield or its affiliates. Mr. Hughes replaces one of the Advisory Committee members, John Armstrong, who resigned his position on the committee on October 11, 1994 for health reasons. The functions of the AHP Advisory Committee include, among other things, review of the policies and practices of the Partnership and AHS regarding various matters as to which potential conflicts of interest may arise and review of certain acquisitions and dispositions of hotel properties by AHP. The officers of AHS devote such time and effort as is necessary for AHS to perform its duties as General Partner of the Partnership. Each of the directors of AHS are elected to a one-year term at the annual meeting of the shareholder of AHS. IDENTIFICATION OF DIRECTORS Name and Year First Principal Occupation Became a Director Age During the Past Five Years ----------------- --- -------------------------- Peter T.K. Yu, 1989 46 Peter T.K. Yu has served as Chairman of AHS since May 1991 and as President/CEO from May 1991 to April 1994. He also served as Senior Executive Vice President of Holdings from February 1989 to January 1991 and served as President/CEO of Holdings from January 1991 to February 1995. He serves as a Director for Regal Hotels International Holdings Limited, a Bermuda corporation listed in Hong Kong engaged in property development, and hotel ownership and management. Carol K. Werner, 1989 40 Carol K. Werner has been General Counsel and Secretary of AHS since February 1989 and served as Executive Vice President since August 1989. She also served as Executive Vice President and Secretary of Holdings and certain affiliates since 1989. Ms. Werner was formerly an associate with Coudert Brothers, an international law firm, posted in Hong Kong, Tokyo and New York. Ms. Werner has resigned as General Counsel, Executive Vice President and Secretary effective March 31, 1995. She will continue to serve as a Director. Anthony Williams, 1989 49 Anthony Williams is the Chairman of the executive committee of Coudert Brothers, an international law firm, and has been a partner since 1981. III-1 Paul J. Sistare, 1994 40 Paul J. Sistare has served as a Director since October 1994 and as President/CEO since April 1994. He previously served as Executive Vice President from September 1992. Mr. Sistare served as Executive Vice President of Holdings from September 1992 to February 1995 when he was elected President/CEO. He was elected Director of Holdings in February 1993. Mr. Sistare joined Forte Hotels International in 1983 and served as Senior Vice President from 1989 to 1992. IDENTIFICATION OF EXECUTIVE OFFICERS The following is a list of executive officers of AHS not including those officers already listed above as directors. All officers are elected for an indefinite term, serving at the discretion of the Board of Directors. Positions Held Name Age During the Past Five Years ---- --- -------------------------- Douglas M. Pasquale 40 Douglas M. Pasquale has served as Executive Vice President since August 1992 and was appointed Chief Financial Officer in August 1994. Mr. Pasquale joined AHS in 1986 as Vice President of Investor Services. Mr. Pasquale did not serve as an officer of AHS from August 1989 to August 1992, but continued to serve as Vice President of Holdings during this time period. Mr. Pasquale became a Director of Holdings in February 1993. There are no family relationships between any of the directors or the executive officers of AHS. Coudert Brothers, an international law firm of which Anthony Williams is a partner, has provided legal services for the Partnership and affiliates since the beginning of 1989. ITEM 11. PAYMENTS AND COMPENSATION TO GENERAL PARTNER AND AFFILIATES As set out in the Partnership's agreement of limited partnership, various fees are payable to AHS, as General Partner, for services rendered to the Partnership. These fees include Partnership administration fees equal to .25% of the appraised value of the Properties determined as of December 31st of each year; acquisition fees equal to 1% of the purchase price of any additional hotel property purchased by the Partnership; mortgage or refinancing fees equal to 1% of the loan amount; and reasonable brokerage fees with respect to the sale of a Partnership property to a third party. Affiliates of AHS receive property management service fees, data processing and risk management fees pursuant to the hotel management agreements with the Operating Partnerships. The Properties may also reimburse AHS and its affiliates for certain costs paid by AHS and its affiliates on behalf of the Operating Partnerships including payroll, professional fees and certain out-of-pocket expenses. For a detailed description of amounts paid or owed to AHS and its affiliates by the Partnership or the Operating Partnerships for various services performed by AHS and its affiliates during 1994, see Item 8, Financial Statements and Supplementary Data. The McCormick Ranch property has also entered into a license agreement with Holdings for use of the Regal name. For a detailed description of amounts paid or owed to Holdings, see Item 8, Financial Statements and Supplementary Data. III-2 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) The following table sets forth information as of March 6, 1995 with respect to persons who are known to the Partnership (based on statements filed with the Securities and Exchange Commission pursuant to section 13(d) or 13(g) of the Securities Act of 1934) to be the beneficial owner of more than five percent of any class of the Partnership's voting securities.
Name and address of Amount and nature of Percent Title of Class beneficial owner beneficial ownership of Class Class A Units Century City International 3,794,646 (1) 71.0% Holdings Limited Indirect Paliburg Plaza Ownership 68 Ye Woo Street Hong Kong Class A Units Regal Hotel Management, Inc. 1,825,065 (1) 34.2% 5775 DTC Boulevard Direct Suite 300 Ownership Englewood, Colorado 80111 Class A Units Gateway Hotel Holdings, Inc. 769,041 (1) 14.4% 5775 DTC Boulevard Direct Suite 300 Ownership Englewood, Colorado 80111 Class A Units AIRCOA Equity Interests, Inc. 650,000 (1) 12.2% 5775 DTC Boulevard Direct Suite 300 Ownership Englewood, Colorado 80111 Class A Units Richfield Holdings, Inc. 546,740 (1)(2) 10.2% 5775 DTC Boulevard Direct Suite 300 Ownership Englewood, Colorado 80111 Class A Units Investing Group: 276,000 (3) 5.18% Direct Ownership Hatfield Family Trust, UA RR1, Box 162 Ridgeland, South Carolina 29936 (101,000 shares 1.89%) J. Mark Grosvenor 3145 Sports Arena Boulevard San Diego, California 92110 (79,400 shares 1.49%) Gardner-Smith Living Trust, UA 7825 Fay Avenue, Suite 250 La Jolla, California 92037 (43,200 shares 0.81%) Highmark International 1700 Lincoln Street, Suite 1725 Denver, Colorado 80203 (32,200 shares 0.60%) III-3 Don W. Cockroft P. O. Box 770577 Memphis, Tennessee 38177 (10,500 shares 0.20%) Michael McNulty 8235 Douglas Avenue, Suite 1300 Dallas, Texas 75225 (10,000 shares 0.19%) Class B Units Century City International 950,000 (4)(5) 100.0% Holdings Limited Indirect Ownership (1) Each of Richfield Holdings, Inc. ("Holdings"), AIRCOA Equity Interests, Inc. ("AEI"), Regal Hotel Management, Inc. ("RHM") and Gateway Hotel Holdings, Inc. ("Gateway") share voting and investment power with Century City International Holdings Limited ("Century City"). (2) Holdings has direct ownership of 546,740 Class A Units, an indirect ownership of 650,000 Class A Units through AEI, an indirect ownership of 3,800 Class A Units through Richfield Hospitality Services, Inc. , for a total indirect ownership of 1,200,540, which represent 22.5% of the Class A Units. (3) Individuals or trusts listed have jointly filed a Schedule 13-D indicating that they are acting as a group. Ownership information is based on Amendment No. 1 to the Schedule 13-D filed February 6, 1995. (4) Class B Units are not tradeable securities however, they are convertible into Class A Units under certain conditions as set forth in the limited partnership agreement of the Partnership. No conversion rights have been exercisable since the Partnership's inception through the date hereof. (5) Holdings directly owns 200,000 Class B Units. RHM directly owns 688,746 Class B Units of the Partnership. Buffalo Hotel Investors, Ltd., an affiliate, directly owns 61,254 Class B Units.
In addition to its direct interest in the Partnership's voting securities, Holdings indirectly owns 100% of the outstanding common shares of AHS. In February, 1989 Novolane, B.V., a Netherlands company ("Novolane") and Kingsfield Investment B.V., a Netherlands company ("Kingsfield") together acquired 51% of the voting securities of Holdings. Kingsfield sold the 5% interest it held in Holdings to an unaffiliated party during 1990. Novolane currently owns 49.77% of Holdings outstanding voting securities and 100% of the voting securities of RHM. In December 1994, Regal International Limited purchased 45.58% of Holdings outstanding voting securities from an unaffiliated entity. Century City, a Bermuda company, indirectly controls Novolane, Gateway and Regal International Limited. More than 60% of the voting stock of Century City is beneficially owned by Mr. Lo Yuk Sui, a citizen of Hong Kong. (b) Security Ownership of Management As of March 6, 1995, no officers or directors of AHS have beneficial ownership of the equity securities of the Partnership or AHS. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (a) Transaction with Management and Others - See (b) (b) Certain Business Relationships The Partnership is provided services by, and engages in certain other transactions with AHS, its general partner, and other affiliates. See Item 11, Payments and Compensation to the General Partner and Affiliates and Item 8, Financial Statements and Supplementary Data. (c) Indebtedness of management - (see (b)). III-4 PART IV Page ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K Number ------ (a) (1) Financial Statements - Included in Part II of this Report: Independent Auditors' Report II-9 Consolidated Balance Sheets, December 31, 1994 and 1993 II-10 Consolidated Statements of Operations II-12 Years Ended December 31, 1994, 1993, and 1992 Consolidated Statements of Partners' Capital II-13 Years Ended December 31, 1994, 1993, and 1992 Consolidated Statements of Cash Flows II-14 Years Ended December 31, 1994, 1993, and 1992 Notes to Consolidated Financial Statements, December 31, 1994 and 1993 II-16 (a) (2) Financial Statement Schedules The financial statement schedules are omitted as they are either not required or are not applicable or the required information is included in the financial statements or notes thereto. (a) (3) Exhibits 3.1 Agreement of Limited Partnership of the Partnership, as amended and restated, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 3.1, declared effective by the Securities and Exchange Commission on July 23, 1987. 3.3 Certificate of Limited Partnership for the Partnership, as amended, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 3.3, declared effective by the Securities and Exchange Commission on July 23, 1987. 3.4 Agreement of Limited Partnership for the Operating Partnerships, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 3.4, declared effective by the Securities and Exchange Commission on July 23, 1987. 3.5 Certificate of Limited Partnership for the Operating Partnerships, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 3.5, declared effective by the Securities and Exchange Commission on July 23, 1987. 4.1 Form of Deposit Agreement, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 4.1, declared effective by the Securities and Exchange Commission on July 23, 1987. 4.2 Form of Depositary Receipt, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 4.2, declared effective by the Securities and Exchange Commission on July 23, 1987. IV-1 4.3 The form of Transfer Application, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 4.3, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.1 Hotel Contribution Agreement for Sheraton Buffalo, dated December 30, 1986, between the Partnership, Buffalo Inn Associates, a Colorado general partnership, Newpart, and ABI, Ltd., a Colorado limited partnership ("ABI"), as amended, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.1, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.2 Assignment, Assumption and Indemnification Agreement for Sheraton Buffalo, dated December 31, 1986, between Buffalo Inn Associates, Newpart, ABI and the Partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.2, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.3 Assignment and Assumption Agreement between Sheraton Buffalo, dated February 20, 1987, between the Partnership and Buffalo Operating Partnership, L.P., a Delaware limited partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.3, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.4 Hotel Contribution Agreement for Sheraton University Center ("Sheraton University"), dated December 30, 1986, between the Partnership, Durham Joint Venture, a Florida joint venture ("Durham JV"), and Newpart, as amended, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.4, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.5 Assignment, Assumption and Indemnification Agreement for Sheraton University, dated December 31, 1986, between Durham JV and the Partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.5, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.6 Assignment and Assumption Agreement for Sheraton University, dated February 20, 1987, between the Partnership and Durham Operating Partnership, L.P., a Delaware limited partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.6, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.7 Hotel Contribution Agreement for Fourwinds, Aurora Inn, Clarion McCormick, Sheraton Lakeside, dated December 30, 1986, between the Partnership and Newpart and Amendment thereto dated effective December 30, 1986, between the same parties relating to The Pine Lake Trout Club ("Pine Lake"), as amended, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.7, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.8 Assignment, Assumption and Indemnification Agreement for Fourwinds, dated December 31, 1986, between Newpart and the Partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.8, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.9 Assignment and Assumption Agreement for Fourwinds, dated February 20, 1987, between the Partnership and Fourwinds Operating Partnership, L.P., a Delaware limited partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.9, declared effective by the Securities and Exchange Commission on July 23, 1987. IV-2 10.10 Assignment, Assumption and Indemnification Agreement for Aurora Inn, dated December 31, 1986, between Newpart and the Partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.10, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.11 Assignment and Assumption Agreement for Aurora Inn, dated February 20, 1987, between the Partnership and Aurora Inn Operating Partnership, L.P., a Delaware limited partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.11, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.12 Assignment, Assumption and Indemnification Agreement for Clarion McCormick, dated December 31, 1986, between Newpart and the Partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.12, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.13 Assignment and Assumption Agreement for Clarion McCormick, dated February 20, 1987, between the Partnership and McCormick Ranch Operating Partnership, L.P., a Delaware limited partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.13, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.14 Assignment, Assumption and Indemnification Agreement for Sheraton Lakeside, dated December 31, 1986, between Newpart and the Partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.14, declared effective by the Securities and Exchange commission on July 23, 1987. 10.15 Agreement for the Purchase and Sale of Partnership Interest for Sheraton Lakeside, dated as of January 1, 1987, between Lakeside Inns Limited, a British Virgin Islands corporation, and Newpart; as amended, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.15, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.16 Partnership Interest Purchase Agreement and Consent and Waiver for Sheraton Lakeside, dated December 30, 1986, between Newpart and the Orlando S.L. Ltd., an Ohio limited partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.16, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.17 Confirmatory Assignment of Agreement for the Purchase and Sale of Partnership Interest for Sheraton Lakeside, dated as of February 20, 1987, between Newpart and the Partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.17, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.18 Assignment for Sheraton Lakeside, dated February 20, 1987, by Orlando Lakeside Associates Limited, a Florida limited partnership, to the Partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.18, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.19 Assignment and Assumption Agreement for Sheraton Lakeside, dated February 20, 1987, between the Partnership and Lakeside Operating Partnership, L.P., a Delaware limited partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.19, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.20 Assignment, Assumption and Indemnification Agreement for Pine Lake, executed on January 31, 1987, to be effective as of December 31, 1986, between Newpart and the Partnership, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.20, declared effective by the Securities and Exchange Commission on July 23, 1987. IV-3 10.21 Assignment and Assumption Agreement for Pine Lake, dated February 20, 1987, between the Partnership and Aurora Inn Operating Partnership, L.P., incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.21, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.22 Option to Purchase, dated as of February 20, 1987, between the Partnership and Newpart, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.22a, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.22a Lease, dated as of February 20, 1987, between the Partnership and MHM, Inc., a Delaware corporation d/b/a Motor Hotel Management, Inc., incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.22b, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.22b Agency Agreement, dated as of February 20, 1987, between the Partnership and MHM, Inc., incorporated herein by reference to Exhibit 10.22b filed with the Registrant's annual report on Form 10-K filed with the Commission on March 31, 1989. 10.23 Form of Management Agreement between the Partnership and the General Partner, as assigned to the Operating Partnerships, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.26, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.23a Assignment and Assumption of Management Agreement for Aurora Inn Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated November 5, 1993, incorporated herein by reference to Exhibit 10.23a filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.23b Assignment and Assumption of Management Agreement for Buffalo Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated November 5, 1993, incorporated herein by reference to Exhibit 10.23b filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.23c Assignment and Assumption of Management Agreement for Durham Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated November 5, 1993, incorporated herein by reference to Exhibit 10.23c filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.23d Assignment and Assumption of Management Agreement for Fourwinds Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated November 5, 1993, incorporated herein by reference to Exhibit 10.23d filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.23e Assignment and Assumption of Management Agreement for Lakeside Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated November 5, 1993, incorporated herein by reference to Exhibit 10.23e filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.23f Assignment and Assumption of Management Agreement for McCormick Ranch Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated November 5, 1993, incorporated herein by reference to Exhibit 10.23f filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. IV-4 10.24 Clarion License Agreement between the Clarion Hotel Corporation, a Colorado corporation, and the Partnership, as assigned to the Clarion Operating Partnerships, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.27, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.24a Assignment and Consent to Assignment dated as of February 28, 1987, between The Clarion Hotel Corporation, a Colorado corporation, the Partnership, and Clarion Hotels and Resorts, a Maryland joint venture, assigning the Clarion License Agreement previously filed as Exhibit 10.27, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.27a, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.24b Amendment between Clarion Hotels and Resorts, a Maryland joint venture and Fourwinds Operating Partnership L.P., a Delaware limited partnership dated August 3, 1989 amending certain provisions of the License Agreement incorporated herein by reference to Exhibit 10.24b filed with the Registrant's Annual Report on Form 10-K filed with the Commission on March 31, 1990. 10.25 Sheraton Lakeside License Agreement dated May 14, 1992, incorporated herein by reference to Exhibit 10.25 filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.25a Sheraton Lakeside Amendment of License Agreement and License Fee Deferral Agreement dated November 5, 1993, incorporated herein by reference to Exhibit 10.25a filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.25b Sheraton Buffalo License Agreement dated November 2, 1991, incorporated herein by reference to Exhibit 10.25b filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.25c Sheraton Buffalo Amendment of License Agreement and License Fee Deferral Agreement dated November 5, 1993, incorporated herein by reference to Exhibit 10.25c filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.25d Sheraton University License Agreement, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.28c, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.25e Regal McCormick License Agreement dated December 16, 1991, incorporated herein by reference to Exhibit 10.25c filed with the Registrant's Annual Report on Form 10-K filed with the Commission on April 14, 1992. 10.29 Loan Agreement, dated February 20, 1987, between Bankers Trust Company, a New York banking corporation ("Bankers"), Cassa D. Risparmio Di Torino, New York Branch, a federally licensed branch of a Republic of Italy bank ("Cassa"), as Lenders, Bankers, as Agent, and the Partnership, as Borrower, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.29, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.29a First Amendment dated July 21, 1987, between the Partnership, as Borrower, Bankers and Cassa, as Lenders, and the Operating Partnerships named therein, amending certain provisions of the Loan Agreement previously filed as Exhibit 10.29, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.29a, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.29b Second Amendment between the Partnership, Bankers and Cassa amending certain provisions of the Loan Agreement, incorporated herein by reference to Exhibit 10.29b filed with the Registrant's Annual Report on Form 10-K filed with the Commission on March 29, 1988. IV-5 10.29c Third Amendment between the Partnership, Bankers and Cassa amending certain provisions of the Loan Agreement incorporated herein by reference to Exhibit 10.29b filed with the Registrant's Annual Report on Form 10-K filed with the Commission on March 31, 1989. 10.29d Fourth Amendment dated September 22, 1989, between the Partnership, Bankers and Cassa amending certain provisions of the Loan Agreement incorporated herein by reference to Exhibit 10.24b filed with the Registrant's Annual Report on Form 10-K filed with the Commission on March 31, 1990. 10.29e Fifth Amendment dated January 31, 1992, between the Partnership, Bankers and Cassa amending certain provisions of the Loan Agreement, incorporated herein by reference to Exhibit 10.25c filed with the Registrant's Annual Report on Form 10-K filed with the Commission on April 14, 1992. 10.29f Sixth Amendment dated July 31, 1993, between the Partnership, Bankers and Cassa amending certain provisions of the Loan Agreement, incorporated herein by reference to Exhibit 10.29f filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.29g Seventh Amendment dated July 30, 1994, between the Partnership, Bankers and Cassa amending certain provisions of the Loan Agreement. (1) 10.30 Additional Mortgage Loan Documents, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.30, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.30a Promissory Note, dated February 20, 1987, by the Partnership as Maker, to Bankers as Payee, in the principal amount of $90,000,000 incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.30A, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.30b Security Agreement, dated February 20, 1987, between the Partnership and Bankers, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.30B, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.30c Mortgages, Deeds of Trust and Security Agreements for the Properties, each dated February 20, 1987, from the Partnership to or for the benefit of Bankers, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.30C, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.30d Collateral Assignments of Leases, Rents and Other Income from the Properties, each dated February 20, 1987, by the Partnership, as Borrower, to Bankers, as agent for itself and other lenders and as Lender, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.30D, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.31 Amended and Restated Loan Agreement between the Partnership and National City Bank, Indiana ("National City"), dated December 31, 1992, for $2,990,000 incorporated herein by reference to Exhibit 10.31 filed with the Registrant's Annual Report on Form 10-K filed with the Commission on April 15, 1993. 10.31a Waiver and First Amendment to Amended and Restated Loan Agreement between the Partnership and National City dated November 9, 1993, incorporated herein by reference to Exhibit 10.31a filed with the Registrant's Annual Report on Form 10-K filed with the commission on April 8, 1994. 10.31b Second Amendment to Amended and Restated Loan Agreement dated July 30, 1994. (1) IV-6 10.31c Renewal Promissory Note dated December 31, 1992, by AHP as Maker, to National City as Payee, in the principal amount of $2,990,000 incorporated herein by reference to Exhibit 10.31a filed with the Registrant's Annual Report on Form 10-K filed with the Commission on April 15, 1993. 10.31d Second renewal Promissory Note dated July 30, 1994, by AHP as Maker, to National City as Payee, in principal amount of $2,065,000. (1) 10.32 Fourwinds Ground Lease, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.36a, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.32a Clarion McCormick Ground Lease, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.36b, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.32b Sheraton Buffalo Ground Lease, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.36d, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.34c Amendment No. 4 to Sheraton Buffalo Ground Lease dated June 28, 1988 incorporated herein by reference to Exhibit 10.34d filed with the Registrant's Annual Report on Form 10-K filed with the Commission on March 31, 1989. 10.34d Fourwinds Amended and Restated Indenture of Ground Lease dated May 20, 1991, incorporated herein by reference to Exhibit 10.25c filed with the Registrant's Annual Report on Form 10-K filed with the Commission on April 14, 1992. 10.33 Other material contracts, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.37, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.34 Management Contract for Clarion McCormick, dated as of October 23, 1982, between ARI, Inc., an Ohio corporation and the Board of Directors of the Council of Co-owners of the Shores, as amended, incorporated herein by reference to the Partnership's Registration Statement No. 33- 13418, Exhibit 10.37h, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.35 Letter Agreement for Aurora Inn, dated December 23, 1986, between Aurora Inn Co., an Ohio limited partnership and Aurora Inn Operating Partnership, L.P., incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.37l, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.35a Sublease and License Agreement for Sheraton Buffalo, dated as of December 31, 1986 between the Partnership, Buffalo Inn Associates, a Colorado general partnership ("BIA"), and AEI, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.37m, declared effective by the Securities and Exchange Commission on January 23, 1987. 10.35b Sublease and License Agreement for Sheraton Buffalo, dated February 20, 1987, between Buffalo Operating Partnership, L.P., BIA and AEI, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 10.37n, declared effective by the Securities and Exchange Commission on July 23, 1987. 10.36 Promissory Note, dated January 25, 1990, by AHP, as Maker, to RAC as Payee, in the principal amount of $550,000 incorporated herein by reference to Exhibit 10.40 filed with the Registrant's Annual Report on Form 10-K filed with the Commission on April 26, 1991. IV-7 10.37 Subscription Agreement dated November 19, 1990 incorporated herein by reference to Exhibit 10.41 filed with the Registrant's Annual Report on Form 10-K filed with the Commission on April 26, 1991. 10.38 Subscription Agreement dated December 11, 1992 incorporated herein by reference to Exhibit 10.38 filed with the Registrant's Annual Report on Form 10-K filed with the Commission on April 15, 1993. 10.39 Commitment Letter dated April 3, 1995 from The Hongkong and Shanghai Banking Corporation Limited for first mortgage loan and revolving credit line for AHP. (1) 22. The Partnership holds a 99% limited partner interest in each of the following Delaware limited partnerships: Aurora Inn Operating Partnership, L.P.; Buffalo Operating Limited Partnership, L.P.; Durham Operating Partnership, L.P.; Fourwinds Operating Partnership, L.P.; Lakeside Operating Partnership, L.P.; and McCormick Ranch Operating Partnership, L.P. 27. Financial Data Schedule (1) 28.1 Certificate of Incorporation of AIRCOA Hospitality Services, Inc. (formerly Associated Inns & Restaurants Company of America), as amended, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 28.1, declared effective by the Securities and Exchange Commission on July 23, 1987. 28.2 By-laws of AIRCOA Hospitality Services, Inc. (formerly Associated Inns & Restaurants Company of America), as amended, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 28.2, declared effective by the Securities and Exchange Commission on July 23, 1987. 28.3 Appraisal of Fourwinds, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 28.3, declared effective by the Securities and Exchange Commission on July 23, 1987. 28.4 Appraisal of Sheraton University, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 28.4, declared effective by the Securities and Exchange Commission on July 23, 1987. 28.6 Appraisal of Sheraton Lakeside, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 28.6, declared effective by the Securities and Exchange Commission on July 23, 1987. 28.7 Appraisal for Sheraton Buffalo, incorporated herein by reference to the Partnership's Registration Statement No. 33-13418, Exhibit 28.7, declared effective by the Securities and Exchange Commission on July 23, 1987. (1) Filed herewith IV-8 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized. By: AIRCOA HOTEL PARTNERS, L.P. a Delaware limited partnership By: AIRCOA HOSPITALITY SERVICES, INC. its General Partner By: /s/ Paul J. Sistare -------------------------------------------- Paul J. Sistare Chief Executive Officer, President and Director Dated: April 13, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title Date - ---------------------- --------------------- -------------- /s/ Paul J. Sistare - ----------------------- Paul J. Sistare Chief Executive Officer, April 13, 1995 President and Director (Principal Executive Officer) of AIRCOA Hospitality Services, Inc. /s/ Douglas M. Pasquale - ----------------------- Douglas M. Pasquale Executive Vice President April 13, 1995 and Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer) of AIRCOA Hospitality Services, Inc. /s/ Carol K. Werner - ----------------------- Carol K. Werner Director April 13, 1995 of AIRCOA Hospitality Services, Inc. /s/ Anthony Williams - ----------------------- Anthony Williams Director April 13, 1995 of AIRCOA Hospitality Services, Inc. IV-9 EX-10.29G 2 EXHIBIT 10.29G SEVENTH AMENDMENT ----------------- SEVENTH AMENDMENT dated as of July 30, 1994 (as the same may be amended or otherwise modified from time to time, this "AMENDMENT") by and among (a) (i) BANKERS TRUST COMPANY, a New York banking corporation, and (ii) BANCA CASSA DI RISPARMIO DI TORINO, S.p.A., NEW YORK BRANCH (formerly known as Cassa di Risparmio di Torino), a federally licensed branch of a bank incorporated under the law of the Republic of Italy, as Lenders; (b) AIRCOA HOTEL PARTNERS, L.P., a Delaware limited partnership, as Borrower; (c) BANKERS TRUST COMPANY, a New York banking corporation, as Agent; and (d) (i) MCCORMICK RANCH OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, (ii) LAKESIDE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, (iii) FOURWINDS OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, (iv) BUFFALO OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, (v) DURHAM OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, and (vi) AURORA INN OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (each an "OPERATING PARTNERSHIP", and collectively, the "OPERATING PARTNERSHIPS"). W I T N E S S E T H: -------------------- WHEREAS, the Borrower, the Lenders and the Agent entered into a Loan Agreement dated as of February 20, 1987 EXHIBIT 10.29g (as amended by a First Amendment dated as of July 21, 1987, a Second Amendment dated as of July 30, 1987, a Third Amendment dated as of March 31, 1988, a Fourth Amendment dated as of September 22, 1989, by letters dated November 13, 1990, as of December 23, 1990 and as of January 24, 1991, a Fifth Amendment dated as of January 31, 1992 and a Sixth Amendment dated as of July 31, 1993 and as the same may further be amended or otherwise modified from time to time, the "AGREEMENT") pursuant to which, among other things, the Lenders extended financial accommodations to the Borrower upon the terms and conditions contained therein; and WHEREAS, the Borrower and the Operating Partnerships have requested, and the Lenders and all of the Voting Participants have agreed, subject to the terms and conditions set forth herein, to amend certain of the terms and conditions of the Agreement. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment agree as follows: 1. DEFINITIONS. Unless the context otherwise requires, for all purposes of this Amendment all capitalized terms used herein without definition and which are defined -2- in the Agreement are used herein with the respective meanings ascribed to such terms in the Agreement. 2. Amendments to and Other Provisions Affecting THE AGREEMENT AND THE OTHER LOAN AND SECURITY DOCUMENTS. (a) If the Maturity Date is extended from the Maturity Date to the Extended Maturity Date, then, on the Maturity Date Merchants may be paid an additional $500,000 on account of the Merchants portion of the Junior Unsecured Note and the Required Lenders hereby consent to such payment to Merchants. If the Maturity Date is not, for any reason, extended then such payment to Merchants shall not be made. For the purposes of making the calculations described in SECTION 2.06 (d)(ii)(2), $1,000,000 of the principal payment to be made to Lender pursuant to SECTION 2.18 (g) such $500,000 principal payment on the Merchants portion of the Junior Unsecured Note shall, whether or not such payments are funded with monies of the Borrower or any of the Operating Partnerships, be added to audited net income for the year in question. Such payments to Lender pursuant to SECTION 2.18(g) shall be applied to principal in the inverse order of maturity. (b) SECTION 2.18 (c) and (d) are hereby amended to read, in their entirety, as follows: "(c) on or before the Maturity Date, the Agent has received from the Borrower written notice of Borrower's election to extend the Maturity Date as hereinafter provided, (d) such notice to Agent is accompanied by fully executed documents extending the maturity of the Merchants Debt portion of the Junior Unsecured Note to a date not earlier than ninety (90) days after the Extended Maturity Date, but allowing the Merchants Debt portion of the Junior Unsecured Note to become a demand obligation if the Loans and all other sums due and owing under the Loan and Security Documents have been paid in full" (c) SECTION 2.18 (g) is hereby amended to read, in its entirety, as follows: "(g) an additional mandatory prepayment of the principal amount of the Loan shall have been made -3- in the amount of $1,000,000 PLUS the following additional amount: (x) if the outstanding principal amount of the Loan at the close of business on the Maturity Date (after giving effect to such $1,000,000 payment) is greater than $36,600,000, then the required additional mandatory prepayment shall be $500,000, (y) if the outstanding principal amount of the Loan at the close of business on the Maturity Date (after giving effect to such $1,000,000 payment) is less than $36,600,000 but greater than $26,600,000, then the required additional mandatory prepayment shall be $200,000 and (y) in all other cases there shall be no additional mandatory prepayment (other than said $1,000,000 amount) of the Loans required under this SECTION." (d) PARAGRAPH 6(a) of the Sixth Amendment to the Loan Agreement is hereby amended to delete the reference to June 30, 1994 and to substitute therefore a reference to July 31, 1994. 3. CLOSING CONDITIONS; CONDITIONS TO EFFECTIVENESS. This Amendment shall not be binding and shall not become effective unless and until each of the following conditions precedent shall have been satisfied: (a) AMENDMENT. This Amendment shall have been signed by each of the parties hereto and consented to by each of the Voting Participants, and the Agent shall have received a counterpart hereof signed by the Borrower and each Operating Partnership. (b) MERCHANTS. The Agent shall have received a fully executed original, in form and substance satisfactory to the Agent, of the consent of the holder of -4- the Merchants portion of the Junior Unsecured Note to the transactions contemplated hereby. (c) AUTHORIZATIONS. The Agent shall have received, with a copy for each Lender and Voting Participant: (1) A certificate of the secretary or an assistant secretary of the General Partner, dated as of the date this Amendment is to become effective, (A) certifying as to resolutions of the Board of Directors of the General Partner authorizing the execution, deliver and performance by the General Partner, as general partner of the Borrower and of each Operating Partnership, of this Amendment and of the other amendments, agreements, documents and instruments described herein, (B) stating that such resolutions have not been modified or rescinded and remain in full force and effect, (C) certifying as to the names, incumbency and signatures of the officers of the General Partner authorized to sign this Amendment and all such other amendments, agreements, documents and instruments and (D) certifying as to all amendments and other modifications to the Bylaws of the General Partner since the Closing Date; (2) A copy of all amendments to the Certificate of Incorporation of the General Partner since July 31, 1993, certified by the Secretary of State of the State of Delaware or by an officer of the General Partner as being true, correct and complete; (3) A copy of all amendments, since July 31, 1993, to the partnership agreement and/or to any certificate of limited partnership and/or to any documents relating to authority to do business in any state, other than its state of formation, of the Borrower and/or any Operating Partnership; and (4) A certificate of the chief financial or executive officer of the General Partner, dated as of the date this Amendment is to become effective, to the effect that (A) after giving effect to this Amendment and to the transactions contemplated hereby and as of the date of such certificate, there exists no Default or Event of Default and (B) all of the representations and warranties contained in the Loan and Security Documents are true and correct as of such date, except as may be set forth in such certificate with respect to litigation commenced after the Closing Date. -5- (d) OTHER DOCUMENTS. The Agent shall have received such other documents as the Agent may have requested, including opinions of counsel and title endorsements, and all other documents and legal matters in connection with the transactions contemplated by this Amendment shall be satisfactory in form and substance to the Agent and its counsel. 4. REPRESENTATIONS AND WARRANTIES. The Borrower and each Operating Partnership jointly and severally represents and warrants to the Lenders (such representations and warranties also being deemed to be made pursuant to the Agreement, such that if any thereof proves to have been untrue or misleading in any material respect at the time when made or deemed to be made, then an Event of Default shall be deemed to have occurred under SECTION 7.01(b) of the Agreement) that: (a) As of July 28, 1994 the principal and interest owing on the Loans to the Lenders is as follows:
Interest (through Principal July 28, 1994) --------- -------------- $43,200,000 $252,000
The Borrower and each Operating Partnership hereby confirms that there are no defenses or off-sets, and it has no counterclaims or causes of action with respect, to its obli- -6- gations under the Loan and Security Documents and/or any of the other documents to which it is a party and to the extent that any such defense or offset or counterclaims or cause of action exists without its knowledge, the same is hereby waived and released to the fullest extent permitted by law. (b) All representations and warranties contained in the Loan and Security Documents continue to be true and correct, with the same force and effect as if made on and as of the date this Amendment becomes effective (and are repeated as of such date), and in addition the representations and warranties of the Borrower contained in SECTION 4.10 of the Agreement are also made in respect of the most recent financial statements of the Borrower furnished to the Lenders. (c) The Borrower and each Operating Partnership has full power, authority and legal right to execute, deliver and perform this Amendment. This Amendment has been duly executed and delivered on behalf of the Borrower and each Operating Partnership and constitutes a legal, valid and binding obligation of the Borrower and each Operating Partnership, enforceable against the Borrower and each Operating Partnership in accordance with its terms. Except for the consent of Merchants delivered to the Lender concurrently herewith, no consent of any other Person and no consent, license, approval or authorization of, or -7- registration or declaration with or notice to, any governmental authority, bureau or agency is required in connection with the execution, delivery or performance by the Borrower or any Operating Partnership, or the validity or enforceability against the Borrower or any Operating Partnership, of this Amendment. (d) The execution, delivery and performance by the Borrower and each Operating Partnership of this Amendment does not and will not violate any provision of any existing law, rule or regulation or of any order, judgment, award or decree of any court, arbitrator or governmental authority, bureau or agency, or of the partnership agreement, charter or Bylaws of, or any security issued by, the Borrower, any Operating Partnership or the General Partner, or of any mortgage, indenture, lease, contract or other agreement or undertaking to which the Borrower, any Operating Partnership or the General Partner is a party or by which any of their respective properties or assets may be bound, and will not result in the creation or imposition of any Lien on any of their respective properties or assets pursuant to the provisions of any such mortgage, indenture, lease, contract or other agreement or undertaking. 5. CHANGES. This Amendment may not be amended, waived or otherwise modified, except in accordance with the provisions of SECTION 9.02 of the Agreement. -8- 6. CAPTIONS. Section captions are for convenience only and shall not affect the interpretation or construction of this Amendment. 7. COUNTERPARTS. This Amendment may be signed in any number of separate counterparts, each of which shall constitute an original instrument and all of which taken together shall constitute one and the same instrument, with the same force and effect as if the signatures of all the parties hereto were on a single instrument. 8. GOVERNING LAW. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts made and to be performed wholly within such State. 9. MERGER. This Amendment sets forth the entire understanding of the parties hereto with respect to the subject matter hereof, and supersedes any prior or contemporaneous understandings with respect to the subject matter hereof. 10. CONTINUING FORCE AND EFFECT. As modified by this Amendment, the Agreement and each of the other Loan and Security Documents, including, without limitation, PARAGRAPH 7 (OPERATING ACCOUNTS) to the Fifth Amendment to the Loan Agreement, shall continue in full force and effect in -9- accordance with their respective terms. This Amendment is a Loan and Security Document. Accordingly, any Default or Event of Default hereunder shall constitute a Default and/or Event of Default under the Agreement. 11. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respect successors and assigns, provided that neither the Borrower nor any Operating Partnership may assign or transfer any of its interest hereunder without the prior written consent of the Required Lenders. IN WITNESS WHEREOF, the Borrower, the Operating Partnerships, the Lenders and the Agent have caused this Amendment to be duly executed and delivered, all as of the day and year first above written. AIRCOA HOTEL PARTNERS, L.P. By: AIRCOA Hospitality Services, Inc., general partner By: /s/ Douglas M. Pasquale ------------------------- Title: Douglas M. Pasquale Executive Vice President By: /s/ Carol K. Werner ------------------------- Title: Carol K. Werner Executive Vice President BANKERS TRUST COMPANY, as a Lender and as Agent By: /s/ Laura J. Buswick ------------------------------ Title: Vice President -10- BANCA CASSA DI RISPARMIO DI TORINO, S.p.A., New York Branch, as Lender By: /s/ Giorgio Cuccolo ------------------------------ Title: Giorgio Cuccolo Manager and Senior V.P. By: /s/ C. Vincent Calvo ------------------------------ Title: C. Vincent Calvo Vice President MCCORMICK RANCH OPERATING PARTNERSHIP, L.P. BY: AIRCOA Hospitality Services, Inc., general partner By: /s/ Douglas M. Pasquale ------------------------------ Title: Douglas M. Pasquale Executive Vice President By: /s/ Carol K. Werner ------------------------------ Title: Carol K. Werner Executive Vice President LAKESIDE OPERATING PARTNERSHIP, L.P. BY: AIRCOA Hospitality Services, Inc., general partner By: /s/ Douglas M. Pasquale ------------------------------ Title: Douglas M. Pasquale Executive Vice President By: /s/ Carol K. Werner ------------------------------ Title: Carol K. Werner Executive Vice President -11- FOURWINDS OPERATING PARTNERSHIP, L.P. BY: AIRCOA Hospitality Services, Inc., general partner By: /s/ Douglas M. Pasquale ------------------------------ Title: Douglas M. Pasquale Executive Vice President By: /s/ Carol K. Werner ------------------------------ Title: Carol K. Werner Executive Vice President BUFFALO OPERATING PARTNERSHIP, L.P. BY: AIRCOA Hospitality Services, Inc., general partner By: /s/ Douglas M. Pasquale ------------------------------ Title: Douglas M. Pasquale Executive Vice President By: /s/ Carol K. Werner ------------------------------ Title: Carol K. Werner Executive Vice President DURHAM OPERATING PARTNERSHIP, L.P. BY: AIRCOA Hospitality Services, Inc., general partner By: /s/ Douglas M. Pasquale ------------------------------ Title: Douglas M. Pasquale Executive Vice President By: /s/ Carol K. Werner ------------------------------ Title: Carol K. Werner Executive Vice President -12- AURORA INN OPERATING PARTNERSHIP, L.P. BY: AIRCOA Hospitality Services, Inc., general partner By: /s/ Douglas M. Pasquale ------------------------------ Title: By: /s/ Carol K. Werner ------------------------------ Title: EVP CONSENTED TO: THE BANK OF NEW YORK By: /s/ Frederick L. Sasq ------------------------- Title: Vice President BANK OF THE WEST By: /s/ Tom K. Matson ------------------------- Title: Vice President ROYAL BANK OF CANADA, GRAND CAYMAN (NORTH AMERICA NO. ONE BRANCH) By: /s/ D. S. Berg ------------------------- Title: Manager THE SAKURA BANK, LIMITED, NEW YORK BRANCH By: /s/ T. Tashajima ------------------------- Title: Senior Vice President Assistant General Manager BANKERS TRUST DELAWARE By: /s/ Dean Mitchell ------------------------- Title: Vice President -13- EX-10.31B 3 EXHIBIT 10.31B SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT ----------------------------------- THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this "Second Amendment"), executed to be effective as of the 30th day of July, 1994, by and between AIRCOA HOTEL PARTNERS, L.P., a Delaware limited partnership having its principal office at 5775 DTC Boulevard, Suite 300, Denver, Colorado 80111 (hereinafter referred to as "Borrower"), and NATIONAL CITY BANK, INDIANA, a national banking association having its principal banking offices at 101 West Washington Street, Indianapolis, Indiana 46255 (hereinafter referred to as "National City"), WITNESSES THAT: WHEREAS, Borrower and National City entered into a certain Loan Agreement dated September 19, 1988 pursuant to which National City made two (2) loans to Borrower, each in the original principal amount of Four Million and no/100 Dollars ($4,000,000.00); WHEREAS, such Loan Agreement was amended by a certain Amendment of Loan Agreement, executed by Borrower and National City to be effective March 15, 1990 (the "First Amendment"), and was further amended by a certain Second Amendment of Loan Agreement, executed by Borrower and National City to be effective April 8, 1991 (the "Second Amendment") (such Loan Agreement, as twice amended, hereinafter referred to as the "Original Loan Agreement"); WHEREAS, the Capital Fund Loan (as such term was defined in the Original Loan Agreement) was satisfied; however, the Junior Loan (as such term is defined in the Original Loan Agreement), EXHIBIT 10.31b which was evidenced by a certain promissory note in the original principal amount of Four Million and no/100 Dollars ($4,000,000.00) executed by Borrower to National City to be effective September 15, 1988 (the "Junior Note"), remained unpaid; WHEREAS, the Original Loan Agreement was amended by a certain Amended and Restated Loan Agreement, executed by Borrower and National City to be effective December 31, 1992 (the "Amended and Restated Loan Agreement"), which Amended and Restated Loan Agreement modified and extended the Junior Loan (the "Extended Junior Loan"); WHEREAS, the Junior Note was replaced by a certain Renewal Promissory Note in the principal amount of Two Million Nine Hundred Ninety Thousand and no/100 Dollars ($2,990,000.00) executed by Borrower to National City to be effective December 31, 1992 (the "Extended Junior Note"), which Extended Junior Note is due and payable on or before July 30, 1994; WHEREAS, Borrower applied to National City for a waiver of what would have been an Event of Default under the Amended and Restated Loan Agreement arising from a proposed increase in rate and acceleration of amortization of the indebtedness of Borrower under the Bankers Trust Loan Agreement and the related promissory note(s) and for an amendment of the minimum net worth covenant and the definitions of "Available Cash Flow" and "Adjusted Page 2 Cumulative Cash Flow" set forth in the Amended and Restated Loan Agreement; WHEREAS, National City granted such requested waiver and made such requested amendment pursuant to the terms of a certain Waiver and First Amendment to Amended and Restated Loan Agreement, executed by Borrower and National City to be effective November 9, 1993 (the "First Amendment"); and WHEREAS, the Extended Junior Note matures on July 30, 1994, Borrower has requested that the due date of the Extended Junior Note be extended, and National City has agreed to such extension upon the condition that (a) Borrower executes a certain Second Renewal Promissory Note in the principal amount of Two Million Sixty-Five Thousand and no/100 Dollars ($2,065,000.00), which is due and payable on or before October 31, 1995 (the "Second Extended Junior Note"); (b) Borrower executes this Second Amendment; (c) Borrower makes a principal reduction in the amount of Five Hundred Thousand and no/100 Dollars ($500,000.00) on the principal amount outstanding under the Extended Junior Note on or before the date of execution hereof; (d) Borrower obtains all necessary consents, confirmations and approvals as shall be deemed satisfactory to National City, including the consent of Bankers Trust Company, to the transactions contemplated herein; and (e) Borrower shall undertake to register certain restricted Class A Depository Units issued by it to Regal Hotel Management, Page 3 Inc., which Units are pledged to National City, in accordance with the time frame set forth in this Second Amendment; NOW, THEREFORE, in consideration of these premises and the agreements and undertakings set forth herein, Borrower and National City agree as follows: 1. AMENDMENT OF SECTION 1. Section 1. of the Amended and Restated Loan Agreement shall be amended in its entirety to read as follows: 1. EXTENDED JUNIOR LOAN AND SECURITY. National City shall, subject to the terms and conditions of this Second Amendment, extend and amend the Extended Junior Loan in the principal amount of Two Million Sixty-Five Thousand and no/100 Dollars ($2,065,000.00) (hereinafter referred to as the "Second Extended Junior Loan"). The Second Extended Junior Loan shall bear interest as specified in, shall be evidenced by and shall be payable at the times and in the amounts specified in the promissory note of Borrower to be executed to National City effective as of July 30, 1994 in the principal amount of Two Million Sixty-Five Thousand and no/100 Dollars ($2,065,000.00) (hereinafter referred to as the "Second Extended Junior Note"). The Second Extended Junior Loan shall be entitled to the benefit and security of the following: (a) The pledge to National City (i) by REGAL HOTEL MANAGEMENT, INC., a Delaware Page 4 corporation (hereinafter referred to as "Management"), of three hundred seventy-two thousand (372,000) issued and outstanding Class A Depository Units of limited partner interest in Borrower, and (ii) by RICHFIELD HOLDINGS, INC., formerly known as REGAL- AIRCOA COMPANIES, INC., a Delaware corporation (hereinafter referred to as "Companies"), of one hundred seventy-seven thousand one hundred twenty-six (177,126) issued and outstanding Class A Depository Units of limited partner interest in Borrower, all pursuant to a pledge agreement executed by each of Management and Companies to National City as of December 31, 1992, to be confirmed and amended by the Third Consent (hereinafter defined) (hereinafter referred to collectively as the "Additional Units Pledge Agreements"); (b) The pledge to National City of two hundred thousand two hundred ninety-eight (200,298) issued and outstanding Class A Depository Units of limited partner interest in Borrower, pursuant to seven (7) separate pledge agreements executed to National City, each dated to be effective September 15, 1988, with the pledge agreement executed by Companies, to National City having been amended by a certain Amendment and Waiver Concerning Units Pledge Agreement dated to be effective March 15, 1990, and with six (6) of the pledge agreements having been replaced in connection with the transfer of the units covered thereby (including the transfer by Joseph A. Frates to Companies), all to be confirmed and amended by the Third Consent (such agreements, as confirmed and amended hereinafter referred to collectively as the "Units Pledge Agreements"); (c) The guaranty by WILLIS M. McFARLANE and ROBERT E. MERRICK (hereinafter sometimes referred to collectively as the Page 5 "Guarantors") of any and all indebtedness and obligations of Borrower to National City hereunder or in connection herewith, pursuant to guaranties executed to National City by such guarantors dated to be effective September 15, 1988, to be confirmed and amended by the Guarantor's Third Approval (hereinafter defined) (hereinafter referred to collectively as "the Guaranties"); (d) The pledge of all rights of AIRCOA HOSPITALITY SERVICES, INC., a Delaware corporation (hereinafter referred to as "Hospitality"), to any and all present and future management fees and related compensation payable Hospitality by Borrower or any Operating Partnership (hereinafter defined), pursuant to a security agreement executed by Hospitality to National City dated effective September 15, 1988 (hereinafter referred to as the "Fee Security Agreement"), which Fee Security Agreement was assigned to and assumed by RICHFIELD HOTEL MANAGEMENT, INC. (hereinafter referred to as "Richfield") pursuant to the terms of a certain Assignment and Assumption of Security Agreement dated effective March 2, 1994, to be confirmed and amended by the Third Consent. (e) The agreement by Companies and AIRCOA Credit Company, a Delaware corporation (hereinafter referred to as "AIRCOA Credit"), to purchase the Second Extended Junior Loan upon the occurrence of certain circumstances, pursuant to a certain loan purchase agreement executed to National City by Companies and AIRCOA Credit, dated to be effective September 15, 1988, as amended by a certain Amendment to Loan Purchase Agreement executed to National City by Companies and AIRCOA Credit, dated effective March 15, 1990, a certain Second Amendment to Loan Purchase Agreement executed to National City by Companies and AIRCOA Page 6 Credit, dated effective April 8, 1991, a certain Third Amendment to Loan Purchase Agreement executed to National City by Companies and AIRCOA Credit dated effective December 31, 1992, and a certain Fourth Amendment to Loan Purchase Agreement dated effective July 30, 1994 (hereinafter referred to as the "Loan Purchase Agreement"). 2. CONSENT AND CONFIRMATION. Companies, AIRCOA Credit, Hospitality, Richfield and each Operating Partnership shall execute a certain Third Consent, Confirmation and Approval contemporaneously with the execution of this Second Amendment in the form attached hereto as Exhibit A (herein referred to as the "Third Consent"), which Third Consent shall set forth each such party's consent to and approval of this Second Amendment and shall confirm that the Units Pledge Agreements and Fee Security Agreement continue to secure, extend to, include and be effective with respect to the Second Extended Junior Note. In addition, Guarantors shall execute a certain Guarantors Third Consent, Confirmation and Approval contemporaneously with the execution of this Second Amendment in the form attached hereto as Exhibit B (herein referred to as the "Guarantors Third Approval"), which Guarantors Third Approval shall set forth each Guarantor's consent to and approval of this Second Amendment and shall confirm that the Guaranties continue to secure, extend to, include and be effective with respect to the Second Extended Junior Loan and Second Extended Junior Note. Page 7 3. PRINCIPAL REDUCTION. On or prior to the date of execution hereof, Borrower shall make a Five Hundred Thousand and no/100 Dollars ($500,000.00) principal reduction to National City in the amount of principal balance outstanding on the Extended Junior Note and, after giving effect to this principal payment, the outstanding principal balance of the Second Extended Junior Note will be Two Million Sixty-Five Thousand and no/100 Dollars ($2,065,000.00). Borrower shall obtain the consent of Bankers Trust Company to this principal reduction, which consent shall in form and substance be acceptable to National City. Borrower shall also provide National City with a Certificate of Solvency, in form and substance acceptable to National City, dated effective as of even date herewith. Such principal reduction shall be accepted by National City in reliance on the consent of Bankers Trust Company and on the Certificate of Solvency provided by Borrower to National City. 4. REFERENCES. All references in the loan documents to the Junior Loan or the Extended Junior Loan shall be amended to refer to the Second Extended Junior Loan. All references in the loan documents to the Junior Note or the Extended Junior Note shall be amended to refer to the Second Extended Junior Note. 5. COMMITMENT FEE AND EXPENSES. Borrower agrees to pay National City prior to or concurrent with the execution hereof a non-refundable commitment fee of Seven Thousand Five Hundred and no/100 Dollars ($7,500.00) in connection with the processing of Page 8 this extension. Borrower agrees to pay all reasonable out of pocket expenses incurred by National City with respect to this extension, including, but not limited to, filing, audit and legal fees. 6. CERTIFICATION. Borrower hereby certifies to National City that the representations and warranties set forth in the Amended and Restated Loan Agreement are true as of the effective date hereof, that there is full compliance with all of the covenants set forth in the Amended and Restated Loan Agreement and that as of the effective date hereof there exists no default or any condition that, with the giving of notice or lapse of time or both, would constitute a default under the Amended and Restated Loan Agreement. 7. WAIVER OF JURY TRIAL. Borrower and National City hereby waive trial by jury in any action, proceeding, claim or counterclaim, whether in contract or tort, at law or in equity, arising out of or in any way related to the Amended and Restated Loan Agreement, as amended by the First Amendment, this Second Amendment and any subsequent amendments. This provision may not be waived, conditioned or modified, except in writing signed by the duly authorized officers of Borrower and National City. 8. ANTI-TYING. National City and Borrower severally, each for itself, acknowledges and agrees that, except as expressly provided in the Amended and Restated Loan Agreement, as amended, with respect to Borrower's obligation to maintain depository Page 9 account(s) (if any) with National City, the extension of credit provided for herein is neither conditioned upon nor has the interest rate and fees therefore been set based upon Borrower's agreement to purchase any other product or service from National City. Further, National City and Borrower severally, each for itself, acknowledges and agrees that National City has not offered this extension of credit or offered to reduce the interest rate or fees therefore except as provided herein. 9. SECURITIES REGISTRATION. In consideration of the extension provided for herein, on or before February 25, 1995, Borrower shall take such action as is necessary to register, under the Securities Act of 1933, the restricted 160,000 Class A Depository Units, represented by Certificate No. R 20449, issued by Borrower to Regal Hotel Management, Inc., which Units are pledged to National City. Borrower shall use all reasonable efforts to ensure that such registration shall be effective within ninety (90) days of February 25, 1995. Borrower shall pay all costs and expenses of such registration. 10. FORCE AND EFFECT. Except as amended by the preceding paragraphs, the Amended and Restated Loan Agreement, as amended by the First Amendment, and all other documents executed in connection therewith shall remain in full force and effect in accordance with their respective terms. All capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Amended and Restated Loan Agreement. Page 10 This Second Amendment shall be binding upon Borrower and its successors, assigns and legal representatives and shall inure to the benefit of National City and its successors, assigns and legal representatives. 11. Borrower represents to National City that Borrower has no defenses, setoffs, claims or counterclaims of any kind or nature whatsoever against National City in connection with this Second Amendment, any related agreements or documents prior thereto or any action taken or not taken by National City with respect to any of the above agreements or with respect to any collateral securing such agreements. Without limiting the generality of the foregoing, Borrower hereby releases, acquits and forever discharges National City, its affiliates and each of their officers, directors, agents, employees, attorneys, insurers, successors and assigns and anyone claiming through or under them (collectively the "Released Parties"), from and against any liabilities, rights, claims, losses, expenses or causes of action, known or unknown, arising out of any action or inaction by any of the Released Parties to the date of this Second Amendment with respect to any of the above agreements or documents executed by Borrower. Borrower also waives, releases and forever discharges the Released Parties and each of them from and against any and all known or unknown rights to setoff, defenses, claims, counterclaims, causes of action and any other bar to the enforcement of the Second Amendment executed by Page 11 Borrower, existing as of this date. Borrower expressly disclaims any reliance on any oral representation made by the Released Parties or any of them with respect to the subject matter of this Second Amendment. Borrower hereby agrees to indemnify and hold harmless the Released Parties from and against any and all claims, losses, damages, causes of action, liabilities, attorneys' fees or expenses arising out of any action or inaction by any of the Released Parties to the date of this Second Amendment with respect to the Second Amendment or arising out of or in connection with this Second Amendment. Borrower acknowledges and agrees that National City is specifically relying on the representations, warranties, releases and agreements contained in this Second Amendment, and that this Second Amendment is being executed by Borrower in good faith and delivered to National City as an inducement to National City to consummate the transactions contemplated by this Second Amendment. Page 12 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Amended and Restated Loan Agreement to be executed and effective as of the day and year first above written. AIRCOA HOTEL PARTNERS, L.P. NATIONAL CITY BANK, INDIANA BY: AIRCOA HOSPITALITY SERVICES, INC., By: /s/ Jeffrey C. Geeding GENERAL PARTNER ------------------------- Jeffrey C. Geeding Vice President By: /s/ Douglas M. Pasquale "National City" -------------------------- Printed: Douglas M. Pasquale ----------------------- Title: Executive Vice President ------------------------ By: /s/ Carol K. Werner -------------------------- Printed: Carol K. Werner --------------------- Title: Executive Vice President ------------------------ "Borrower" Page 13 STATE OF Colorado ) ----------------- ) SS: COUNTY OF Arapahoe ) ---------------- BEFORE ME, a Notary Public in and for such County and State, personally appeared Douglas Pasquale and Carol Werner, the EVP and EVP, respectively, of AIRCOA Hospitality Services, Inc., general partner of AIRCOA Hotel Partners, L.P., who, after being duly sworn, acknowledged the execution of the foregoing Second Amendment to Amended and Restated Loan Agreement for and on behalf of such corporation as general partner of such limited partnership. WITNESS my hand and Notarial Seal this 2nd day of August, 1994. /s/ Nancy T. Walton -------------------------- Nancy T. Walton, Notary Public [NOTARY SEAL] My Commission Expires: My County of Residence: October 6, 1996 Arapahoe - ------------------------- ------------------------------- STATE OF INDIANA ) ) SS: COUNTY OF MARION ) BEFORE ME, a Notary Public in and for such County and State, personally appeared Jeffrey C. Geeding, Vice President of National City Bank, Indiana, who, after being duly sworn, acknowledged the execution of the foregoing Second Amendment to Amended and Restated Loan Agreement for and on behalf of such Bank. WITNESS my hand and Notarial Seal this 4th day of August, 1994. /s/ Mary Anne Walcott ------------------------- Mary Anne Walcott, Notary Public My Commission Expires: My County of Residence: October 4, 1997 Marion - ------------------------- ------------------------- Page 14 EX-10.31D 4 EXHIBIT 10.31D AIRCOA HOTEL PARTNERS, L.P. SECOND RENEWAL PROMISSORY NOTE $2,065,000.00 Executed to be effective July 30, 1994 Indianapolis, Indiana FOR VALUE RECEIVED, AIRCOA HOTEL PARTNERS, L.P., a Delaware limited partnership ("Maker" or the "Partnership"), hereby promises to pay to the order of NATIONAL CITY BANK, INDIANA, a national banking association, or its assigns (the "Holder" or "Payee"), the principal sum of Two Million Sixty-Five Thousand and No/100 Dollars ($2,065,000.00), on or before October 31, 1995, in the manner and at the times hereinafter specified, with interest (computed on the basis of a 360-day year, but applied to the actual number of days in each interest payment period) on the unpaid balance of such principal sum, at the interest rate per annum equal to the sum of one and one-half percent (1-1/2%) plus the rate from time to time posted by Bank as its per annum interest "Base Rate," with each change in the rate of interest to take effect on the date of change of the Base Rate, unless the conditions set forth below are not satisfied, payable as follows: (a) Commencing on August 1, 1994, and continuing on the first day of each of the following calendar months through October 1, 1995, installments of accrued and unpaid interest shall be due and payable; (b) Commencing on September 1, 1994, and continuing on the first day of each of the following calendar months through October 1, 1995, installments of principal, each in the amount of Twenty-Five Thousand and No/100 Dollars ($25,000.00), shall be due and payable; (c) on or before May 30, 1995, an installment of principal, in an amount equal to twenty-five percent (25%) of Maker's "Excess Cash Flow" (hereinafter defined) for Maker's fiscal year ending December 31, 1994, shall be due and payable; (d) The entire unpaid principal balance and all unpaid and accrued interest shall be due and payable on October 31, 1995. (e) In the event that the effective interest rate on this Note increases to an amount greater than nine percent (9%) per annum during the term of this Note, the amount of interest due as a result of the difference between the effective interest rate and nine percent (9%) per annum shall be deferred and shall be due and payable on October 31, 1995. Any such deferred interest shall not bear interest. EXHIBIT 10.31d For purposes of this Note, "Excess Cash Flow" shall mean and refer to "Available Cash Flow", as such term is defined in that certain Amended and Restated Loan Agreement executed by Maker and Payee effective December 31, 1992, as amended by a certain Waiver and First Amendment to Amended and Restated Loan Agreement effective November 9, 1994, as amended by a certain Second Amendment to Amended and Restated Loan Agreement of even date herewith, and as amended from time to time hereafter (hereinafter collectively referred to as the "Loan Agreement"). 1. All amounts payable under or with respect to this Note shall be payable without relief from valuation and appraisement laws. Payments of principal and interest shall be made in lawful money of the United States of America at the principal office of the Holder in Indianapolis, Indiana, or at such other place as the Holder shall have designated for such purpose to the Partnership in writing. 2. No payment on account of principal of this Note shall be made if a Default or an Event of Default [as such terms are defined in the Loan Agreement by and among Bankers Trust Company and Banca Cassa Di Risparmio Di Torino, S.p.A., New York Branch, as lenders (collectively, the "Senior Lenders"), Bankers Trust Company, as agent and the Partnership dated as of February 20, 1987 (as the same has been amended seven (7) times prior to the date hereof, the "Bankers Trust Loan Agreement") relating to the Senior Secured Note of the Partnership (the "Senior Secured Note")] shall have occurred and shall then be continuing or would occur as a result thereof. The foregoing shall not prohibit or otherwise limit the payment of accrued interest on this Note on any scheduled interest payment date or at any other time contemplated by this Note or otherwise. 3. Maker may prepay all or any portion of the principal amount outstanding under this Note at any time and from time to time without penalty or premium by a payment to Holder in immediately available Dollars by Maker. No payment or prepayment of this Note shall be readvanced. This Note shall be immediately due and payable in full in the event that the Senior Secured Note is paid in full. 4. Maker shall pay a "late charge" for the purpose of defraying expense incident to handling with respect to any monthly installment of interest and principal, or portion thereof, payable hereunder not paid within ten (10) days after the date when first due, at the rate of five cents (5 cents) for each One and no/100 Dollar ($1.00) so overdue, with a minimum charge of Twenty and no/100 Dollars ($20.00). Provided, however, nothing herein contained shall be construed as a waiver by the Holder of this Note of its option to declare a default if any Page 2 payment of any installment of interest or principal, or portion thereof, is not made when due. 5. Upon any payment or distribution of assets of or in respect of the Partnership of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of the Partnership, either voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon the Senior Secured Note shall first be paid in full, or payment thereof fully provided for, before the Holder shall be entitled to receive or retain any assets so paid or distributed in respect hereof and/or thereof; and upon any such dissolution or winding up or liquidation or reorganization, any payment or distribution of assets of or in respect of the Partnership of any kind or character, whether in cash, property or securities, to which the Holder would be entitled, except for these provisions, shall be paid by the Partnership or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the Holder if received by it, directly to the holder(s) of the Senior Secured Note (PRO RATA to each of such holders on the basis of the respective amounts of the Senior Secured Note held by such holders or their representatives), to the extent necessary to pay the Senior Secured Note in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holder(s) of the Senior Secured Note, before any payment or distribution is made to the Holder. Notwithstanding the foregoing, the Senior Lenders have consented to a Five Hundred Thousand Dollars ($500,000.00) principal reduction made at the time of execution and delivery hereof and the stated amount of this Note reflects the payment thereof. Such principal reduction has been accepted by the Holder hereof in reliance on such consent and on a Certificate of Solvency provided by the Maker to Holder of even date herewith. 6. By your acceptance of this Note, the Holder shall be deemed to acknowledge and agree that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration of each holder of the Senior Secured Note, and such holder(s) of the Senior Secured Note shall be deemed conclusively to have relied on such subordination provisions in acquiring and holding, or in continuing to hold, the Senior Secured Note. 7. Notwithstanding anything herein to the contrary, this Note may not be amended (or any provision hereof waived) without the prior written consent of the Required Lenders (as defined in the Bankers Trust Loan Agreement). This Note shall be governed by the terms, provisions and conditions of the Loan Agreement, and shall be entitled to the benefits and security of all Page 3 agreements and documents executed to National City Bank, Indiana, in connection with the Loan Agreement. 8. No provision hereof shall alter or impair the obligation of the Partnership, which is absolute and unconditional, to pay the principal hereof and interest hereon at the times and places herein specified. The Partnership and endorsers herein waive demand, protest and notice of dishonor and all defenses on ground of any extension of the time of payment of this Note that may be given by the Holder hereof. 9. This Note may be assigned or otherwise transferred as provided in this Note; provided that (i) the assignment or transfer is made in compliance with applicable laws and (ii) the assignee or transferee acknowledges in writing to the Holder that it takes this Note subject to all of the provisions hereof, including without limitation the subordination provisions. 10. At any time and from time to time, this Note may be assigned or transferred to one or more persons, in whole or in part, in integral multiples of $1,000. Upon surrender of this Note to the Partnership for transfer pursuant to this paragraph, duly endorsed or accompanied by written instruments of transfer satisfactory to the Partnership, the Partnership, at the Holder's expense, shall execute and deliver to the designated transferee(s), in the name of the designated transferee(s), a new note or notes in an authorized designated principal amount, which new note or notes when so issued shall be the valid obligation of the Partnership, evidencing the same debt, and entitled to the same benefits as this Note (or portion thereof) surrendered upon such transfer, and the Partnership, at the Holder's expense, shall execute and deliver to the Holder, in the name of the Holder at the Holder's address, a new note in the aggregate principal amount equal to and in exchange for the untransferred portion of the principal of this Note so surrendered, which new note when so issued shall be the valid obligations of the Partnership, evidencing the same debt, and entitled to the same benefits as this Note (or portion thereof) surrendered upon such exchange. The Partnership shall establish a register for the purpose of registering, and registering the transfer of, this Note and any new notes as permitted hereunder and shall adopt such other reasonable procedures as it may deem necessary or appropriate to effect the registration and transfer of this Note and any new notes, as applicable. Accrued interest on this Note (or portion thereof) at the time of transfer shall be apportioned between the transferor and the transferee. 11. (a) Subject to and upon compliance with the provisions of this paragraph 11, the Holder may convert this Note, or any portion of the principal amount hereof which is at least $1,000 Page 4 and any larger integral multiple of $1,000, at any time before payment or satisfaction of this Note, into Class A Units of limited partner interests in the Partnership ("Class A Units") issued pursuant to Section 4.6 of the Agreement of Limited Partnership (dated July 30, 1987) of the Partnership, as it may be amended (the "Partnership Agreement"), as hereinafter provided. (b) Upon surrender of this Note or an authorized portion of the principal amount hereof to the Partnership at its principal office, accompanied by appropriate endorsements and transfer documents satisfactory to the Partnership, the Partnership at the Holder's expense, shall issue and deliver to such Holder in the name of the Holder at the Holder's address (or such other name and address as the Holder specifies), a certificate or certificates evidencing the whole number of Class A Units obtained by dividing the aggregate principal amount of this Note so surrendered by $18.50 (the "Conversation Price"), subject to adjustment as hereinafter provided. No payment or adjustment shall be made upon any conversion on account of any interest accrued on this Note surrendered for conversion or on account of any dividends on the Class A Units issued upon such conversion. (c) If this Note is converted in part only, upon such conversion the Partnership, at the Holder's expense, shall issue and deliver to or on the order of the Holder hereof, a new note in principal amount equal to the unconverted portion of this Note. (d) Such conversion shall be deemed to have been effected immediately prior to the close of business on the date on which this Note and other documents have been surrendered to and received in proper order for conversion by the Partnership as aforesaid unless such Holder shall have so surrendered this Note and shall have instructed the Partnership to effect the conversion on a particular date following such surrender and such Holder shall be entitled to convert this Note on such date, in which case such conversion shall be deemed to be effected immediately prior to the close of business on such date. At such time the rights of the Holder of this Note as the Holder shall cease and the person or persons in whose name or names the certificate or certificate for Class A Units shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the Class A Units represented thereby. (e) The number of Class A Units issuable upon exercise of the conversion right provided herein shall be adjusted from time to time as follows: (i) In case the Partnership shall have, after September 15, 1988, (A) paid a dividend or made a Page 5 distribution on Class A Units or other of its securities, (B) subdivided or reclassified its outstanding Class A Units into a greater number of Class A Units, or (C) combined or reclassified its outstanding Class A Units into a smaller number of Class A Units, the Conversion Price and the number of Class A Units that the Holder shall be entitled to receive upon conversion in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted so that the Holder of this Note surrendered for conversion after such date shall be entitled to receive, upon payment by surrender of the principal amount or authorized portion thereof of this Note as would have been payable before such date, the number and kind of Class A Units or other securities which, if this Note had been converted immediately prior to such date such Holder would have owned upon such conversion and been entitled to receive by virtue of such dividend, distribution, subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. (f) In case the Partnership shall issue rights or warrants to all holders of Class A Units entitled them (for a period expiring within 45 days after the record date for the determination of holders of Class A Units entitled to receive such rights or warrants) to subscribe for or purchase Class A Units (or securities convertible into Class A Units) at a price per Class A Unit (or having a conversion price per Class A Unit, if a security convertible into Class A Units) less than the current market price per Class A Unit [as defined in subsection (i) of this paragraph 11] on such record date, then the Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to such record date by a fraction, of which the numerator shall be the number of Class A Units outstanding on such record date plus the number of Class A Units which the aggregate offering price of the total number of Class A Units so to be offered (or the aggregate initial Conversion Price of the convertible securities so to be offered) would purchase at such current market price and of which the denominator shall be the number of Class A Units outstanding on such record date plus the number of additional Class A Units to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). Such adjustment shall become effective at the close of business on such record date; however, to the extent that Class A Units (or securities convertible into Class A Units) are not delivered after the expiration of such rights or warrants, the Conversion Price shall be readjusted (but only with respect to notes exercised after such expiration) to the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants Page 6 been made upon the basis of delivery of only the number of Class A Units (or securities convertible into Class A Units) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined by the Advisory Committee (as defined in the Partnership Agreement) of the Partnership. Class A Units owned by or held for the account of the Partnership or any Operating Partnership (as defined in the Partnership Agreement) shall not be deemed outstanding for the purpose of any such computation. (g) In case of any reclassification of or change to the outstanding Class A Units issuable upon conversion (other than a change as a result of a subdivision or combination), or in case of any consolidation of the Partnership with or the merger of the Partnership into any other business organization (other than a consolidation or merger in which the Partnership continues and which does not result in any reclassification of or change to the outstanding Class A Units), or in case of any sale or transfer of all or substantially all of the assets of the Partnership, the Holder shall thereafter (in each case prior to the expiration of the conversion right) receive, upon conversion of this Note in the manner herein provided, the kind and amount of cash, securities or other property properly receivable upon such reclassification, change, consolidation, merger, sale or transfer by a holder of the number of Class A Units then deliverable upon conversion, and the Partnership shall take such steps in connection with such reclassification, change, consolidation, merger, sale or transfer as may be necessary to assure that the provisions hereof shall thereafter be applicable as nearly as reasonably may be, in relation to any cash, securities or other property thereafter deliverable upon conversion of this Note. The above provisions of this paragraph shall apply to successive reclassifications, changes, consolidations, mergers, sales or transfers. (h) In case the Partnership shall distribute to all holders of Class A Units (including any such distribution made in connection with a consolidation in which the Partnership is the continuing entity) evidences of its indebtedness or assets [including distributions of Capital Transaction Proceeds (as defined in the Partnership Agreement) but excluding other cash dividends or distributions and dividends payable in Class A Units] or subscription rights or warrants (excluding those referred to in subsection (f) of this paragraph 11], then the Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to the record date for the determination by a fraction, of which the numerator shall be the current market price per Class A Unit [as defined in subsection (i) of this paragraph 11] on such record date, less the fair Page 7 market value (as determined by the Advisory Committee of the Partnership, whose determination shall be conclusive) of the portion of the evidences of indebtedness or assets so to be distributed or of such subscription rights or warrants applicable to one Class A Unit and of which the denominator shall be such current market price per Class A Unit. (i) For the purpose of any computation under subsection (f) or (h) of this paragraph 11, the current market price per Class A Unit on any record date shall be deemed to be the average of the daily representative closing prices for the 30 consecutive trading days commencing 45 trading days before such date. The closing price for each day shall be the last sale price regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case on the principal national securities exchange on which the Class A Units are listed or admitted to trading, or, if the Class A Units are not listed or admitted to trading on any national securities exchange, the average of the highest reported bid and lowest reported asked prices as furnished by the National Association of Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is no longer reporting such information. If on any such date the Class A Units are not quoted by any such organization, the fair value of Class A Units on such date, as determined by the Advisory Committee of the Partnership, shall be used. (j) No fractional Class A Units shall be issued upon conversion of this Note. Instead, the Partnership will deliver a number of Class A Units that reflects a rounding to the nearest whole number (with .5 rounded up). (k) The Partnership shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Class A Units, the full number of Class A Units then issuable upon conversion of this Note. The Partnership covenants that all Class A Units which may be issued upon conversion of this Note will upon issue be duly and validly issued and fully paid and, except as otherwise provided in the Partnership Agreement and Delaware law, nonassessable. (1) At least 20 days prior to the record date or effective date of the occurrence of any event described in subparagraphs (e) and (f) of this paragraph 11, the Partnership shall give notice thereof to the Holder. Upon any adjustment provided in this paragraph 11, the Partnership may cause a firm of independent public accountants selected by it to calculate the number of Units or securities that the holder shall be entitled to receive upon conversion after giving effect to the event causing such adjustment. The Partnership shall be entitled to Page 8 rely on any certificate provided by such firm as conclusive evidence of the correctness of such a calculation. 12. (a) At any time or from time to time the Holder shall have the right (the "Demand Rights"), upon request, to cause the Partnership to file with the Securities and Exchange Commission as promptly as practicable after receiving such request, and to use its best efforts to cause to become effective as soon as possible, a registration statement under the Securities Act of 1933 (the "Securities Act") on the appropriate form registering the offering and sale of this Note or the number of Class A Units held by the Holder upon conversion of this Note as hereinafter provided. In connection with any such requests, the Partnership promptly shall prepare and file such documents as may be necessary to register or qualify this Note and such Class A Units under the securities laws of such states as the Holder shall reasonably request, and shall do any and all other acts and things that may reasonably be necessary or advisable to enable the Holder to consummate a public sale of this Note or such Class A Units in such states; provided, however, that in no event shall the Partnership be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to the service of process in suits other than those arising out of the offer or sale of the securities covered by such registration statement in any jurisdictions where it is not now so subject or to subject itself to taxation in any such jurisdiction. Notwithstanding the foregoing, in no event shall the Partnership be required to effect a registration relating to this Note or the Class A Units more frequently than once in any 12-month period. The Partnership shall be entitled to postpone, for a reasonable period of time, the filing of any registration pursuant to this paragraph if, at the time it receives a request for registration pursuant to this paragraph, the General Partner (or, if the General Partner is the Holder at the time, the Advisory Committee of the Partnership) determines in its reasonable business judgment that such registration and offering would interfere with any material financing, acquisition, corporate reorganization or other material transaction or development involving the Partnership and promptly gives the Holder written notice of such determination; provided that upon such postponement by the Partnership, the Partnership shall be required to file such registration statement as soon as practicable after the General Partner (or, if the General Partner is the Holder at the time, the Advisory Committee of the Partnership) shall determine, in its reasonable business judgment, that such registration and offering will not interfere with the aforesaid material transaction or development. If this Note has been transferred and new notes issued as provided for herein, the Partnership shall, upon receipt of a request for registration hereunder, Page 9 provide notice of such request to other holders of notes (or holders of Class A Units issued on conversion thereof). Such holders may, by written notice to the Partnership within 15 days of receipt of the notice from the Partnership, request inclusion of their notes (or Class A Units) in such registration. If this Note has been transferred and new notes issued as provided for herein, this paragraph shall apply only if holders of new notes representing at least $500,000 in aggregate principal amount (or, if this Note has been converted, holders of at least 27,000 Class A Units) request registration of their notes or Class A Units. Any registration statement filed pursuant hereto shall be continued in effect for a period of not less than six months following its effective date unless the Holder agrees to a shorter period. (b) If the Partnership shall at any time propose to file a registration statement under the Securities Act for an offering of securities of the Partnership for cash (other than an offering relating solely to an employee benefit plan), the Partnership shall use its best efforts to include this Note and such number or amount of Class A Units held by the Holder pursuant to a conversion of this Note as hereinafter provided in such registration statement, at the Holder's request (the "Request Rights"). If the proposed offering pursuant to this paragraph shall be an underwritten offering, then in the event that the managing underwriter advised the Partnership in writing that in its opinion the inclusion of this Note or of all or some of the Holder's Class A Units would adversely and materially affect the success of the offering, the Partnership shall include in such offering only this Note or that number or amount, if any, of Class A Units held by the Holder which, in the opinion of the managing underwriter will not so adversely affect the offering. (c) Except as expressly prohibited under the blue sky or securities laws of any jurisdiction under which a registration or qualification is being effected, the Partnership shall pay all fees and expenses in connection with the first such registration or qualification effected pursuant to the Demand Rights and any registration or qualification effected under the Request Rights, other than any underwriting discounts, fees, commissions or similar charges relating to this Note or the Class A Units of the person being qualified or registered. The Holder requesting registration shall bear all of the fees and expenses in connection with any subsequent registration or qualification under the Demand Rights. The Partnership shall provide indemnification and other assurances to the underwriters, and the Holder shall provide indemnification and other assurances to the Underwriters and the Partnership, in form and substance reasonably satisfactory to the general partner of the Partnership and the underwriters. Page 10 (d) The foregoing registration rights of the Holder with respect to the Class A Units issued upon conversion of this Note shall survive the payment or other satisfaction of this Note. The registration rights of the Holder hereunder may be assigned by the Holder to any person acquiring from the Holder this Note or Class A Units held by the Holder upon conversion of this Note as herein provided, and any such assignee shall be entitled to the benefits of such registration rights during such period as the assignor is so entitled; provided, that the registration rights shall expire at such time as a registration statement covering this Note or the Class A Units becomes effective and is not subsequently withdrawn. 13. In case one or more of the following events ("Events of Default") (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall have occurred and be continuing: (a) default in the payment of any installment of interest upon this Note as and when the same shall become due and payable and a continuation of such default for at least five (5) banking business days after the due date; or (b) default in the payment of all or any part of the principal on this Note as and when the same shall become due and payable either as scheduled, at maturity, by declaration or otherwise and a continuation of such default for at least five (5) banking business days after the due date; or (c) a court having jurisdiction in the premises shall enter a decree or order for relief in respect to the Partnership in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Partnership or for any substantial part of the property of the Partnership or ordering the winding up or liquidation of the affairs of the' Partnership, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (d) the Partnership shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Partnership or for any substantial part of the property of the Partnership, or the Partnership shall make Page 11 any general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due; or (e) the occurrence of any event of default or condition which results in the acceleration of the maturity of the Senior Secured Note and such acceleration shall not be rescinded or annulled or waived or such indebtedness repaid within 10 days after the holder thereof shall have given notice thereof to the Partnership; PROVIDED that if such event of default shall be remedied or cured by the Partnership or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action by any person; or (f) failure on the part of the Partnership in any material respect to observe or perform its obligations under this Note with respect to registration rights and conversion rights of the Holder for a period of 30 days after written notice, specifying such failure and stating that such notice is a "notice of default" hereunder, shall have been given by registered or certified mail, return receipt requested; to the Partnership by the Holder; or (g) the occurrence of an event of default under the Loan Agreement; then, and in each and every such case, unless the principal of this Note shall have already become due and payable, by notice in writing to the Partnership, the Holder may declare the entire principal of this Note and the interest accrued thereon, to be due and payable immediately, and, subject to the other provisions of this Note, including, without limitation paragraphs 2 and 5, upon any such declaration the same shall become immediately due and payable. No waiver of any default or failure or delay to exercise any right or remedy by the holder of this Note shall operate as a waiver of any other default or of the same default in the future or as a waiver of any right or remedy with respect to the same or any other occurrence. 14. The Partnership will pay any and all taxes that may be payable in respect of the transfer or conversion of this Note or issuance and delivery of Class A Units on conversion of this Note pursuant hereto. The Partnership shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of a new note or certificates evidencing Class A Units in a name other than that of the Holder to be transferred or converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Partnership the amount of any such Page 12 tax, or has established, to the satisfaction of the Partnership, that such tax has been paid. 15. Unless otherwise expressly provided herein, all payments, notices, communications, surrenders for transfer or conversion and consents hereunder, shall be as follows: if to the Partnership, at 5775 DTC Boulevard, Suite 300, Denver Colorado 80111; if to the Holder, at 101 West Washington Street, Indianapolis, Indiana 46255 or at such other address given or changed in writing to the Partnership by the Holder. 16. This Note is delivered in and shall be construed and enforced in accordance with and governed by the laws of the State of Indiana. If any provision, or portion thereof, of this Note or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, then the remainder of this Note, or the application of such provision, or portion thereof, to any other person or circumstances shall be valid and enforceable to the fullest extent permitted by law. 17. This Note renews, amends, restates, supersedes and replaces that certain Renewal Promissory Note, executed to be effective as of December 31, 1992, by Maker to National City Bank, Indiana in the principal amount of Two Million Nine Hundred Ninety Thousand and No/100 ($2,990,000.00) and referred to as the Extended Junior Note in the Loan Agreement. 18. MAKER, AND HOLDER WITHOUT FURTHER ACCEPTANCE, HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE. THIS PROVISION MAY NOT BE WAIVED, CONDITIONED OR MODIFIED EXCEPT IN WRITING SIGNED BY THE DULY AUTHORIZED OFFICERS OF BORROWER AND BANK. Page 13 IN WITNESS WHEREOF, the Maker has caused this instrument to be dated, executed and delivered on its behalf by its general partner thereunder duly authorized and its corporate seal to be hereunto duly affixed. AIRCOA HOTEL PARTNERS, L.P. BY: AIRCOA HOSPITALITY SERVICES, INC., AS GENERAL PARTNER By: /s/ Douglas M. Pasquale -------------------------------- Printed: Douglas M. Pasquale --------------------------- Title: Executive Vice President ----------------------------- By: /s/ Carol K. Werner -------------------------------- Printed: Carol K. Werner --------------------------- Title: Executive Vice President ----------------------------- Page 14 STATE OF Colorado ) ) SS: COUNTY OF Arapahoe ) Before me, a Notary Public in and for such County and State, personally appeared Douglas Pasquale and Carol Werner, the EVP and EVP, respectively, of AIRCOA Hospitality Services, Inc., a Delaware corporation and general partner of AIRCOA Hotel Partners, L.P., who, after having been duly sworn, acknowledged the execution of the foregoing Second Renewal Promissory Note for and on behalf of such corporation as general partner of such limited partnership. WITNESS, my hand and Notarial Seal this 2nd day of August, 1994. /s/ Nancy T. Walton ------------------------------- (Nancy T. Walton) Notary Public My Commission Expires: My County of Residence My Commission Expires Oct. 6, 1996 Arapahoe - ---------------------------------- -------------------------------- [NOTARY PUBLIC SEAL] Page 15 EX-10.39 5 EXHIBIT 10.39 HSBC CORPORATE BANKING THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED New York Branch: 140 Broadway, New York, NY 10005-1196 April 3, 1995 Mr. Michael Sheh Senior Vice President and Treasurer Richfield Hospitality Services, Inc. 5775 DTC Boulevard Englewood, CO 80111 Dear Michael: BANKING FACILITIES FOR AIRCOA HOTEL PARTNERS, L.P. We are pleased to confirm the willingness of the New York Branch of the Hongkong and Shanghai Banking Corporation Limited to grant the following facilities, subject to the terms and conditions mentioned hereunder: LENDER: The Hongkong and Shanghai Banking Corporation Limited, New York Branch (the "Bank"). BORROWER: Aircoa Hotel Partners, L.P., a Delaware limited partnership (the "Borrower"). GUARANTOR: Regal Hotels International Holdings Limited, a Bermuda registered corporation (the "Guarantor"). AMOUNT: (A) USD45,000,000 first mortgage loan (the "Mortgage Loan"), and (B) USD1,000,000 revolving credit line (the "Revolving Loan"). Maximum aggregate amount of facilities A and B shall not exceed 65% of aggregate appraised value of the Properties (as defined in the Collateral section below) as reviewed and accepted by the Bank. PURPOSE: (A) (1) Refinance USD39,200,000 of first mortgage debt secured by first mortgages on the Properties (as defined below), (2) Refinance USD1,790,000 of junior unsecured debt owed to National City Bank (Indiana), (3) Provide USD3,310,000 to partially fund property renovations at some of the Properties, and (4) Provide approximately USD700,000 to fund the facility fee and estimated closing costs including legal, environmental, and engineering due diligence expenses. (B) Seasonal working capital needs of the properties. Subject to 60 day annual cleanup. INTEREST RATE: At the Borrower's option: (A) (1) Prime plus 1. 25% p.a., payable monthly (the EXHIBIT 10.39 AIRCOA HOTEL PARTNERS, L.P. APRIL 3, 1995 2 OF 11 "Floating Rate Option"). Prime Rate means, for any day, the rate of interest publicly announced from time to time by Marine Midland Bank at the New York City Main Branch as its prime rate, and is a base rate for calculating interest on certain loans. Any change in the interest rate on this facility resulting from a change in Marine Midland Bank's Prime Rate shall be effective on the date of such change. (2) 1, 2, 3, 6, or 12 month Reserve Adjusted LIBOR plus 2.00%, p.a., with payments of interest due at the maturity of the LIBOR period chosen (the "LIBOR Option"). For LIBOR periods longer than 3 months, interest payments shall be due quarterly. Borrower will be required to reimburse the Bank for and indemnify the Bank against all costs incurred by or imposed against the Bank as a result of any change in laws, regulations, rules or directives which impose, modify or deem applicable any reserve or special deposit requirements against all losses, penalties, taxes, expenses, and other charges suffered by the Bank in connection with Borrower's selection of a LIBOR option. (3) For periods longer than one year up to a maximum of three years, fixed rate financing calculated at a rate of the Bank's fixed-rate cost of funds for this period plus a margin of 2.00% p.a., with interest payments due quarterly (the "Fixed Rate Option"). (B) (1) MMB Floating Prime plus 1.25% p.a. (as above), (2) 1, 2, 3, 6, and 12 month Reserve Adjusted LIBOR plus 2.00% p.a. (as above). PENALTY RATE: After maturity and with respect to late payments, the Loan shall bear interest at a rate per annum equal to the interest rate then in effect plus 2.00% p.a. (the "Default Rate"). In the case of funding under the LIBOR option only, the Default Rate shall be 2.00% p.a. above the rate in effect until the maturity of the LIBOR funding period, after which time the Default Rate shall be 2.00% p.a. above the rate applicable under the Floating Rate option. FACILITY FEE: Extension fee of USD300,000 payable at closing. AMORTISATION: (A) Five years from closing. Monthly principal payments of USD90,000 (approximately based on a 20 year amortization schedule), with a balloon repayment of approximately USD39.6M due at maturity. (B) Renewable annually subject to no default. AIRCOA HOTEL PARTNERS, L.P. APRIL 3, 1995 3 OF 11 Subject to repayment on demand in the event of a default. Annual 60 day reduction of outstandings to a maximum of USD500,000 required. PREPAYMENT PROVISIONS: During loan years 1 and 2 a penalty of 1% will be assessed on principal amounts prepaid, and during loan year 3 a penalty of 0.5% will be assessed on principal amounts prepaid, provided however, that the penalty shall not apply to mandatory prepayments or prepayments arising from a sale of the Properties to a third party. No prepayment penalties will be assessed for prepayments occuring in loan years 4 and 5. (1) In the case of LIBOR Option funding the loan may be prepaid in full or in partial increments upon 7 days written notice to the Bank. Should prepayment occur during the LIBOR interest option, an amount equal to the Bank's funding losses will be assessed on the amount prepaid and the remaining days to maturity in the LIBOR period in effect at the time of prepayment based on the difference between the Bank's LIBOR rate for such interest option and the prevailing LIBOR rate offered for comparable amounts and tenures at the time of prepayment. A determination of the funding loss shall be made in accordance with the Bank's funding loss provisions which are customary for loans of this type. (2) In the case of Fixed Rate Option funding the loan may be prepaid in full or in partial increments upon 7 days written notice to the Bank. An amount equal to the Bank's funding losses will be assessed on the amount prepaid and the remaining days to maturity in the fixed rate funding period in effect at the time of prepayment based on the difference between the Bank's fixed rate for such interest option and the prevailing rate offered for comparable amounts and tenures at the time of prepayment. A determination of the funding loss shall be made in accordance with the Bank's funding loss provisions which are customary for loans of this type. (3) In the case of Floating Rate Option funding, any prepayments (subject to 7 days written notice to the Bank) will be permitted without additional breakage costs. COLLATERAL: (A) Registered first mortgages on seven hotel properties owned by the Borrower (each, a "Property" and collectively, the "Properties) : AIRCOA HOTEL PARTNERS L.P. APRIL 3, 1995 4 OF 11 Aurora Inn - Aurora, OH Pine Lake Trout Club - Chagrin Falls, OH Fourwinds/Clarion - Bloomington, IN Regal McCormick Ranch - Scotsdale, AZ Sheraton Inn - Buffalo, NY Sheraton Lakeside Inn - Orlando, FL Sheraton University Center - Durham, NC (B) First lien on all assets relating to the operation of the hotel Properties, including FF&E and inventory, supported by UCC-1 filings. (C) Assignment of accounts receivable, management contracts, and all licenses, patents, and franchises. (D) Assignment of leases and rents of all the Properties. (E) Assignment of proceeds from the sale or refinancing of any of the Properties securing the Mortgage Loan, which shall be used to pay down loan principal and accrued interest in an amount equal to: (i) the pro rata share of the Mortgage Loan amount allocated to the Property (to be set forth in the Credit Agreement); plus (ii) 50% of Excess Proceeds derived from the sale or refinancing of the Property. "Excess Proceeds" shall mean the gross proceeds derived from the sale or refinancing less (a) commissions, broker's fees and closing costs actually incurred by the Borrower, and (b) the pro rata share of Mortgage Loan amount allocated to the Property. (F) A Debt Service Reserve Account to be funded in an amount equal to three months debt service (principal and interest) on the Mortgage Loan and the Revolving Loan. This account will be gradually funded with 25% of Annual Excess Cash Flow from the Properties deposited on an annual basis until the required balance (estimated at USD1.35M) is met. "Annual Excess Cash Flow" shall be defined as aggregate net operating income from the Properties less: (a) debt service (P + I) on the Mortgage Loan and Revolving Loan, (b) required contributions to the capex reserve account, and (c) interest payments on affiliate debt. Once the Debt Service Reserve Account is funded at the required level, the 25% of Annual Excess Cash Flow previously used to fund this account will be available for distribution subject to the restrictions discussed in the Covenant section below. If the Borrower achieves a Debt Service Coverage Ratio (see Covenant section below for AIRCOA HOTEL PARTNERS, L.P. APRIL 3, 1995 5 OF 11 definition and method of calculation) of 1.5OX or greater for two successive years, funds in the Debt Service Reserve Account will be released for distribution. GUARANTEES: (1) Continuing limited guarantee ("Debt Service Guarantee") of the Guarantor for all interest and scheduled principal repayments, excluding the final principal repayment at maturity. (2) Continuing limited guarantee ("Principal Guarantee") of the Guarantor for the amount, if any, by which principal outstandings exceed 65% of the aggregate appraised value of the Properties as reviewed and accepted by the Bank. The amount of such Principal Guarantee shall be fixed as of the closing date and the amount of such Principal Guarantee shall not be reduced due to any principal reduction or increase in the appraised value of the Properties. In the event that the appraised value of the Properties as determined at the closing date should decrease during the term of the facilities, the amount of the Principal Guarantee shall be increased so that the Principal Guarantee will cover any amount by which the loan to value ratio exceeds 65%. COVENANTS: Standard, including: (1) Minimum debt service coverage ratio of 1.25X in loan years 1, 2, and 3 and 1. 3OX in loan years 4 and 5. "Debt Service Coverage Ratio" shall be defined as aggregate net operating income of the Properties, less capex reserves, divided by debt service (P + I) on the Mortgage Loan and the Revolving Loan. Debt Service Coverage Ratio shall be calculated on an annual basis using actual aggregate net operating income and capex reserves for the calendar year just ended and projected debt service for the coming calendar year. (2) No additional debt except unsecured borrowings from affiliates which shall be subordinated to bank debt. (3) Debt owed to affiliate companies to be subordinated to the bank. Subject to the Borrower meeting the required Debt Service Coverage Ratios, up to 25% of Annual Excess Cash Flow may be applied to repayment of affiliate debt. Interest payments allowed only after debt service (P + I) on the Mortgage Loan and Revolving Loan. No principal or interest payments on affiliate debt if Debt Service Coverage Ratios are not met or in an event of default. AIRCOA HOTEL PARTNERS, L.P. APRIL 3, 1995 6 OF 11 (4) Management fees paid to Richfield shall not exceed 4% of gross revenues and shall be subordinated to the bank. Management fees shall not be paid to Richfield if the Borrower fails to meet minimum debt service coverage ratios, or in the event of any monetary default. Provided however, that any unpaid fees will accrue and become payable upon Borrower's curing any such failure or default. (5) Maintenance of a capital expenditure reserve account for each property equal to at least 5% of annual gross revenues. If, for reasons of the timing of capital repairs or upgrades, the full 5% is not expended during the year, or if the Bank and the Borrower mutually agree that capital expenditures in an amount less than 5% of a given Property's annual gross revenues is adequate for a given year, the difference between the amount expended and the 5% requirement will be escrowed for application against the following year's requirement. The funds so escrowed may only be used for capital expenditures. For the balance of calendar year 1995, the reserve requirement will only be 4% in view of the funds being made available for capital improvements. (6) The Regal Group's ownership interest in the Borrower (approximately 71% of the total voting rights of all outstanding Class A limited partnership units) may not be diluted or changed without the Bank's approval. The Bank will not unreasonably withhold such approval as long as the Regal Group's ownership interest does not fall below a controlling 51%. (7) Annual cash distributions to Class A partnership unitholders limited to 50% of Annual Excess Cash Flow (as defined above). Provided however, that if the Borrower achieves a Debt Service Coverage Ratio of 1.50X or greater for any calendar year during the loan term, and the Debt Service Reserve Account is fully funded, then up to 75% of Annual Excess Cash Flow may be distributed. Cash distributions may not be paid if the Borrower fails to meet the minimum debt service coverage ratio or in the event of a monetary default. (8) Annual audited financials and 10K statements within 90 days of fiscal year end, and quarterly management prepared financials and 10Q statements for the Borrower within 60 days of the end of first, second, and third quarters. (9) Annual audited financials of Regal Hotels International Holdings Limited within 180 days of fiscal year end. AIRCOA HOTEL PARTNERS, L.P. APRIL 3, 1995 7 OF 11 (10) Annual audited financial statements and quarterly management prepared financial statements of Richfield Hospitality Services, Inc. within 120 days of fiscal year end and 60 days of quarter end. (11) For Each Property, monthly operating statement within 30 days of month end, and STAR reports as soon as possible after received by the Borrower. (12) New property appraisals every two years at the Borrower's expense. If, upon reappraisal, the aggregate value of the portfolio should yield an LTV in excess of 65%, the Guarantor shall increase its Principal Guarantee by an amount which, when added to aggregate appraised portfolio value, will yield an LTV of 65% or lower. The Bank shall have the right to commission new appraisals or require updates of the current appraisals more frequently than every two years, provided that the expense of these additional appraisals/updates are paid by the Bank. (13) Subordination of ground leases for the Sheraton-Buffalo and Clarion-Fourwinds Properties. On a best efforts basis, the Borrower will try to negotiate the subordination of the ground lease for the Regal McCormick Ranch Property. (14) The Borrower and Richfield must comply with all requirements of the franchise/licensing agreements. (15) Such other covenants as the Bank may require. INSURANCE: The Borrower must provide evidence of public liability and casualty insurance coverage on the Properties (along with flood insurance should the Properties be located in a flood hazard zone) with the Bank's interest noted as mortgagee and loss payee, and such other coverage that the Bank may reasonably deem necessary to protect its interest. INDEMNITIES: Applicable environmental and Americans With Disabilities Act indemnities. EVENTS OF DEFAULT: Standard including: (1) Non payment of principal or interest. (2) Material adverse change in the financial condition of the Borrower, Richfield, or the Guarantor. (3) Failure to meet any covenant requirement. (4) Such other events of default as the Bank may require. CONDITIONS PRECEDENT: (1) Delivery of Phase I environmental surveys of each Property satisfactory to the Bank. AIRCOA HOTEL PARTNERS, L.P. APRIL 3, 1995 8 OF 11 (2) Delivery of property condition surveys of each property satisfactory to the Bank. The Bank shall commission these surveys at the expense of the Borrower. The Borrower will be required to substantially comply with the reasonable recommendations of the property condition surveys as a part of their ongoing plans for capital expenditures and renovations. (3) Delivery of all deeds of trust, mortgages, security agreements, pledge agreements, insurance policies, financing statements, evidence of recordation and all other documentation necessary or requested by the Bank to perfect and maintain the Bank's security interest as described above. (4) Delivery of title insurance policies issued by a company or companies acceptable to the Bank in an amount not less than the total Mortgage Loan amount ensuring that the Bank has valid first mortgage liens on the Properties providing affirmative insurance required by the Bank, and confirming the nonexistence of any liens, mortgages, judgments, taxes or assessments affecting the Properties and an updated survey for each Property certified by a registered surveyor or updated by title company inspection and dated within 60 days prior to the date of closing. (5) At the time of closing, the Bank shall have received evidence satisfactory to it that none of the Properties nor any parts thereof have suffered any casualty or are subject to actual or threatened condemnation or taking by eminent domain or otherwise. (6) Delivery to the Bank of copies of all liquor licenses and other material licenses and permits relating to the operation of the Properties. (7) Delivery to the Bank of copies of the hotel operating agreements between each hotel operator and the Borrower and copies of the franchise and/or license agreements relating to the hotels, with estoppel letters in form satisfactory to the Bank signed by each operator, franchisor, and licensor. (8) Delivery to the Bank of evidence that all taxes with respect to the Properties are current and have been paid. (9) Delivery to the Bank of Certificates of AIRCOA HOTEL PARTNERS, L.P. APRIL 3, 1995 9 OF 11 Occupancy, Fire Underwriter's Certificates and any other licenses or permits relating to the legal use of the Properties, and evidence that no municipal or other violations exist, and that the premises comply with all local, state, and federal laws and regulations. (10) Delivery to the Bank of such corporate documents as the Bank shall require as evidence of the Borrower's existence, power, and authority to enter into the transaction described in this proposal. (11) Satisfactory opinion from counsel to the Borrower and the Guarantor and any other legal opinion relating to the Bank's security interest in the collateral. AVAILABILITY: Upon completion of loan documentation required and compliance with all conditions described above. DOCUMENTATION: All loan documentation will be prepared by the Bank's lawyers and will contain such terms and conditions considered by the bank (and its lawyers) to be reasonable and necessary for a transaction of this nature. All documentation and formalities should be accomplished on or before 30 June 1995. If closing has not occurred by such date for any reason, the Bank reserves the right to terminate this offer. EXPENSES: All transaction costs, including legal, appraisal, environmental, and engineering fees incurred in connection with the negotiation and preparation of documentation and closing of this transaction will be for the account of the Borrower. TAXATION: All payments of principal, interest, fees and other expenses shall be made by the Borrower free and clear of taxes, levies, imposts, duties, charges or withholdings of any nature whatsoever. GOVERNING LAW: This offer letter shall be governed by the laws of the state of New York. The documents evidencing and securing the facilities shall be governed by the laws of the state of New York except that such documents may provide for the law of the states in which any of the Properties is located to be the law governing such documents. ASSIGNMENT: Borrower may not assign or transfer this offer letter. The terms and conditions of this commitment are not limited to the AIRCOA HOTEL PARTNERS, L.P. APRIL 3, 1995 10 OF 11 above terms and conditions. Those matters which are not covered by or made clear in the above outline are subject to mutual agreement of the parties. This commitment is conditional upon the preparation, execution and delivery of legal documentation in form and substance satisfactory to us and to our counsel incorporating substantially the terms and conditions outlined or referred to above. This offer is open for acceptance until 15 April 1995 ("Expiry Date") . Please indicate your understanding and acceptance of the foregoing terms and conditions by signing and returning to us the duplicate copy of this letter on or before the Expiry Date. We are pleased to advise that your Corporate Banking relationship officers are: Josephine Lee (212) 658-2858 A.J. Andreasen (212) 658-2847 While the individuals listed above are the primary contact people between you and the Bank and will always be pleased to assist you, it may sometimes be more effective if you have any matters of an operational nature to transact or discuss, that you contact our Loan Operations area: David Colberg (212) 658-2825 We look forward to being of continued assistance. Yours sincerely, /s/ J N Rider /s/ Josephine Lee - --------------------- -------------------- J N Rider Josephine Lee Senior Vice President Vice President Real Estate Real Estate The undersigned consent and agree in principle to all of the terms of this letter. For: Aircoa Hotel Partners, L.P. By: AIRCOA Hospitality Services, Inc., its general partner By: /s/ Michael Sheh/ David Ridgley ------------------------------- AIRCOA HOTEL PARTNERS, L.P. APRIL 3, 1995 11 OF 11 Authorized Signature(s) Michael Sheh / David Ridgley - ---------------------------------- Print Name Sr. V.P./ Treasurer V.P./Chief Accounting Officer - ---------------------------------- Title Date: April 4, 1995 ----------------------------- EX-27 6 EXHIBIT 27
5 1,000 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 1,261 0 2,598 0 401 4,758 95,587 27,234 73,542 11,936 46,180 0 0 0 15,173 73,542 0 46,157 0 41,035 (105) 0 4,600 627 0 627 0 0 0 627 (.10) 0 APPLIES TO CLASS A UNITHOLDERS ONLY. CLASS B UNITHOLDERS PRIMARY EPS IS 1.25.
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