-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O0eHDwbQdNnP4P5g+55i7JVLWA4KQPvAUeBiq3xiTzk81FIOPf1hHrBGFazwSYGP 0sRwVXWs3l7yNh/26uly1w== 0000927356-97-000992.txt : 19970815 0000927356-97-000992.hdr.sgml : 19970815 ACCESSION NUMBER: 0000927356-97-000992 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09563 FILM NUMBER: 97663234 BUSINESS ADDRESS: STREET 1: 5775 DTC BLVD STREET 2: STE 300 CITY: ENGLEWOOD STATE: CO ZIP: 80111-3202 BUSINESS PHONE: 3032202000 10-Q 1 2ND QUARTER FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ______ Commission File Number 1-9563 AIRCOA HOTEL PARTNERS, L.P. (Exact name of registrant as specified in its charter) Delaware 84-1042607 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 5775 DTC Boulevard Suite 300 Englewood, Colorado 80111 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 220-2000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ ----- There were 5,340,214 Units outstanding of the Registrant's Class A Units, as of August 1, 1997. AIRCOA HOTEL PARTNERS, L.P. INDEX
Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Balance Sheets (Unaudited) June 30, 1997 and December 31, 1996 2 - 3 Consolidated Statements of Operations (Unaudited) Three Months and Six Months Ended June 30, 1997 and 1996 4 Consolidated Statement of Partners' Capital (Unaudited) Six Months Ended June 30, 1997 5 Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 1997 and 1996 6 Notes to Consolidated Financial Statements (Unaudited) 7 - 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 - 14
PART II. OTHER INFORMATION AND SIGNATURES 14 1 PART I. FINANCIAL INFORMATION - ------- --------------------- Item 1. Financial Statements - ------- --------------------- AIRCOA HOTEL PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands)
Assets June 30, 1997 December 31, 1996 - ------ ------------- ----------------- Current assets: Cash and cash equivalents $ 489 $ 2,350 Accounts receivable: Trade 3,331 3,305 Affiliates 343 --- Inventory 397 373 Prepaid expenses 422 516 -------- --------- Total current assets 4,982 6,544 -------- -------- Property and equipment, at cost: Land and leasehold improvements 9,461 9,427 Buildings and leasehold improvements 68,872 68,499 Furniture, fixtures and equipment 22,925 20,251 -------- -------- 101,258 98,177 Less accumulated depreciation and amortization (37,610) (35,501) -------- -------- Net property and equipment 63,648 62,676 -------- -------- Other assets, including debt issue costs, net of accumulated amortization of $311 in 1997 and $337 in 1996 934 911 ------- ------ $69,564 $70,131 ======= =======
(continued) 2 AIRCOA HOTEL PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS (Continued) (Unaudited) (In Thousands)
Liabilities and Partners' Capital June 30, 1997 December 31, 1996 --------------------------------- ------------- ----------------- Current liabilities: Current installments of long-term debt $ 1,126 $ 1,122 Trade accounts payable 832 1,284 Payables to affiliates 421 444 Accrued liabilities: Payroll 795 832 Taxes, other than income taxes 1,114 513 Other 1,726 2,223 Deferred revenue and advance deposits 1,135 1,842 ------- ------- Total current liabilities 7,149 8,260 Long-term debt, excluding current installments 42,091 42,504 Notes payable to affiliates 8,100 8,100 Accrued administration, management fees and interest payable to affiliate 632 506 ------- ------- Total liabilities 57,972 59,370 ------- ------- Partners' capital: General Partner 256 245 Limited Partners: Class A Unitholders 13,778 13,517 Class B Unitholders (deficit) (2,442) (3,001) ------- ------- Total Partners' capital 11,592 10,761 ------- ------- $69,564 $70,131 ======= =======
See accompanying notes to consolidated financial statements. 3 AIRCOA HOTEL PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (Unaudited) (In Thousands, Except Unit Data)
Three Months Ended Six Months Ended June 30, June 30, ------------------------ --------------------- 1997 1996 1997 1996 ----------- ----------- ------- -------- Revenue: Rooms $ 7,861 $ 7,739 $ 15,294 $ 15,056 Food and beverage 3,223 3,436 6,100 6,453 Other property operations 1,732 1,878 3,691 3,912 -------- ---------- --------- -------- 12,816 13,053 25,085 25,421 -------- ----------- ---------- -------- Costs and operating expenses: Rooms 2,143 2,056 4,089 3,942 Food and beverage 2,277 2,373 4,296 4,560 Other property operations 716 760 1,636 1,721 Administrative and general 1,235 1,343 2,754 2,558 Marketing 1,066 1,050 2,113 2,184 Energy 571 599 1,169 1,216 Property maintenance 665 633 1,273 1,206 Rent, taxes and insurance 803 654 1,497 1,337 Management fees 511 518 999 1,010 Depreciation and amortization 1,021 1,053 2,109 2,106 -------- ---------- --------- --------- 11,008 11,039 21,935 21,840 -------- ----------- ---------- ----------- Operating income 1,808 2,014 3,150 3,581 Interest expense, including amortization of debt costs 1,165 1,164 2,319 2,359 -------- ---------- --------- ---------- Net income $ 643 $ 850 $ 831 $ 1,222 ========= ========== ========= ========== Class A Unitholders: Income per limited partnership unit -primary $ .07 $ .10 $ .05 $ .12 ======== =========== ========== =========== Income per limited partnership unit -fully diluted $ --- $ .07 $ --- $ .10 ======== =========== ========== ========== Weighted average number of units outstanding - primary 5,340,214 5,340,214 5,340,214 5,340,214 Weighted average number of units outstanding - fully diluted ---- 15,775,810 --- 16,043,220 Class B Unitholders: Income per limited partnership unit $ .31 $ .32 $ .59 $ .61 ======== ============ ========= =========== Weighted average number of units outstanding 950,000 950,000 950,000 950,000
See accompanying notes to consolidated financial statements. 4 AIRCOA HOTEL PARTNERS, L.P. CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL SIX MONTHS ENDED JUNE 30, 1997 (Unaudited) (In Thousands, Except Unit Data)
Limited Partners' Capital (Deficit) ----------------------------------- Class A Unitholders Class B Unitholders Total General ------------------- ------------------- Partners' Partner Units Capital Units Deficit Capital -------- ------- --------- ------- --------- ------- Balances at December 31, 1996 $245 5,340,214 $13,517 950,000 $(3,001) $10,761 Net income 11 ---- 261 --- 559 831 ------ --------- -------- -------- -------- ------- Balances at June 30, 1997 $256 5,340,214 $13,778 950,000 $(2,442) $11,592 ====== ========= ======= ======= ========= =======
See accompanying notes to consolidated financial statements. 5 AIRCOA HOTEL PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (Unaudited) (In Thousands)
1997 1996 -------- -------- Cash flows from operating activities: Cash received from customers $ 23,184 $ 23,948 Cash paid to suppliers and vendors (13,418) (13,626) Cash paid to employees (6,831) (6,513) Interest paid (2,014) (1,441) Other cash receipts, net 927 863 ---------- -------- Net cash provided by operating activities 1,848 3,231 ---------- -------- Cash flows from investing activities - capital expenditures (3,081) (878) ---------- -------- Cash flows from financing activities: Principal payments on long-term debt, net (409) (540) Payment for debt issue costs (219) --- ---------- -------- Net cash used in financing activities (628) (540) ---------- -------- (Decrease) increase in cash and cash equivalents (1,861) 1,813 Cash and cash equivalents at beginning of period 2,350 2,116 ---------- -------- Cash and cash equivalents at end of period $ 489 $ 3,929 ========== ========
See accompanying notes to consolidated financial statements. 6 AIRCOA PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) (1) BASIS OF PRESENTATION AIRCOA Hotel Partners, L.P., a Delaware limited partnership (the "Partnership") was organized in December 1986 to acquire, own and operate hotel and resort properties. The Partnership owns and operates six hotel and resort properties (the "Properties") through operating partnerships (the "Operating Partnerships") which were acquired in 1986. The Partnership holds a 99% limited partner interest in each of the six Operating Partnerships which hold title to the Properties and through which the Partnership conducts all of its operations. AHS, a wholly owned subsidiary of Richfield Hospitality Services, Inc. ("Richfield"), is also the 1% General Partner of each of the Operating Partnerships. Richfield operates the Properties for the Partnership under certain management agreements. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and disclosures necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, these financial statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the results of operations and financial position for the interim periods presented. These interim financial statements should be read in conjunction with the Annual Report on Form 10-K for the period ended December 31, 1996. Operating results for the six months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. (2) MERGER WITH AFFILIATE The Partnership received in December 1996, a written proposal from an affiliate, Regal Hotel Management, Inc. ("RHM"), to commence discussions with respect to the possible purchase of all of the Class A and Class B units not currently owned by RHM or its affiliates (the "Public Units") for $2.35 per Class A Unit and $16.80 per Class B Unit. The General Partner of the Partnership referred consideration of RHM's proposal to a Special Committee (the "Special Committee") comprised of the independent members of the Partnership's Advisory Committee. After negotiations with the Special Committee, RHM agreed to increase the merger consideration to $3.10 per Class A Unit and $20.00 per Class B Unit. The Special Committee determined that such increased merger consideration was fair to, and in the best interests of, unaffiliated unitholders of the Partnership and recommended approval of the merger transaction by the Board of Directors of the Partnership's General Partner. The General Partner's Board of Directors approved RHM's revised proposal on May 2, 1997. RHM's proposed acquisition of the Public Units would be made by means of a merger of a subsidiary limited partnership owned by RHM into the Partnership. The completion of the merger and the resulting acquisition of the Public Units is subject to the approval of the merger by unitholders owning a majority interest of the Partnership's units at a special meeting. Presently, RHM and its affiliates own 71% of the Class A Units and 93.6% of the Class B Units. RHM and its affiliates have agreed to vote in favor of the merger thus assuring its approval. Although no date has been set for the special meeting, it is presently expected that the meeting will be held, and the merger will be consummated, during the third quarter of 1997. In conjunction with approval of the merger transaction, the General Partner has amended the Partnership Agreement in order to defer the mandatory conversion of Class B Units into Class A Units. 7 AIRCOA PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) The amendment provides that the 250,000 Class B Units scheduled to convert into additional Class A Units during 1997 will convert on the earliest to occur of (i) any termination of the definitive merger agreement; (ii) the record date for any vote of the Class A Unitholders, (other than the vote on merger), (iii) the record date for any distribution by the Partnership to holders of Class A Units or (iv) September 30, 1997. In 1997, in accordance with the Partnership Agreement, the number of Class A Units to be received upon conversion of a Class B Unit will be determined by dividing $20.00 by the average of the closing prices of Class A Units for the five trading days ending on May 30, 1997, or $2.75. In light of the likelihood of completion of the merger, the General Partner adopted this amendment in order to avoid administrative and other issues arising from the issuance of additional Class A Units pursuant to the conversion. (3) LONG-TERM DEBT The Partnership has a first mortgage loan and a $1,000,000 revolving credit line. The first mortgage loan bears interest at the Eurodollar rate plus 2% (7.85% at June 30, 1997). Re-payment of the first mortgage loan is based on a twenty-year amortization with a maturity date in June 2000. Payments under this loan consist of monthly installments of $90,000 plus interest on the unpaid balance. The revolving credit line is renewable annually at the option of the lender. No amounts have been drawn on the line at June 30, 1997. Long-term debt is summarized as follows (in thousands):
June 30, December 31, 1997 1996 --------- ------------- Mortgage loan $42,840 $43,380 Capital lease obligation 377 246 ------- ------- 43,217 43,626 Less current installments (1,126) (1,122) ------- ------- Long-term debt, excluding current installments $42,091 $42,504 ======= =======
The first mortgage loan and revolving credit line contain various covenants including: minimum debt service ratios, restrictions on additional indebtedness, limitations on annual cash distributions to Class A Unitholders, limitations on the payment of principal on the affiliate notes payable, prepayment premium during the first two years, deferral of management fees payable to Richfield if minimum debt service ratios are not achieved, maintenance of a capital expenditure reserve account equal to 5% of gross revenue and a maximum loan-to-value ratio of 65% based on the aggregate appraised values of the Properties. The first mortgage loan and revolving credit line are subject to certain limited guarantees of an affiliate of the General Partner. The first mortgage loan also requires the Bank's approval of any dilution in the present ownership interests of affiliates of the General Partner in the Partnership. The Partnership pays an annual guarantee fee calculated at .5% of the outstanding loan balance at June 8th of each year to an affiliate of the General Partner for the limited guarantee of the first mortgage loan and the revolving credit line. (4) NOTES PAYABLE TO AFFILIATES The Partnership has notes payable of $8,100,000 to AHS that are subordinate to the first mortgage 8 AIRCOA HOTEL PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) loan. Notes payable to AHS consist of notes payable of $6,000,000 and a note payable of $2,100,000. The notes payable totaling $6,000,000 accrue interest at 12% per annum, payable monthly, and mature on June 8, 2000. The note payable for $2,100,000 accrues interest at 12% per annum, with interest and principal due on June 8, 2000. The notes payable to AHS are convertible into Class A Units of the Partnership at $16.60 per unit. In addition, these notes stipulate that 25% of any excess cash flow, as defined in the first mortgage loan, will be applied against the principal of the notes outstanding. (5) PARTNERSHIP UNITS AND ALLOCATIONS LIMITED PARTNERSHIP UNITS The Class A Units entitle each Unitholder to a limited partnership interest in a percentage of the profits and losses, tax allocations and distributions of the Partnership. The Class B Units entitle each Unitholder to a limited partnership interest which is subordinate to the Class A Units, in certain circumstances. The Class B Units are redeemable by the Partnership or convertible into Class A Units, in certain circumstances. The Class B Units do not receive distributions until the Class A Unitholders receive defined Minimum Annual Distributions. Beginning in 1997, in accordance with the terms of the Partnership Agreement, and each year thereafter through 2001, a minimum of 250,000 Class B Units are required to be converted into Class A Units annually through 2001 at a redemption value of $20.00 per Class B Unit, by issuing Class A Units valued at the then current market price of the Class A Units. As discussed above in Note 2, the Partnership Agreement was amended to defer the 1997 conversion of Class B Units. CASH DISTRIBUTIONS The Partnership Agreement provides for periodic distribution of distributable cash flow, as defined, to the partners at the discretion of the General Partner. Distributable cash flow is generally defined as cash flow from operations of the hotel properties. Such cash is allocated and distributed (net of AHS' 1% general partnership interest in the Operating Partnerships) 99% to the Class A Unitholders and 1% to the General Partner until the Class A Unitholders have received defined Minimum Annual Distributions. At June 30, 1997, the cumulative unpaid Minimum Annual Distribution per Class A Unit significantly exceeds the Partnerships' net asset value per unit based on the December 31, 1996 appraised values of the hotel properties. According to the first mortgage loan, the maximum annual amount that the Partnership may distribute to the Class A Unitholders is equal to 50% of excess cash flow as defined in the mortgage loan agreement. However, if the debt service coverage ratio, as defined in the mortgage loan agreement, is greater than 1.50, then the Partnership may distribute up to 75% of such excess cash flow. In addition, the Partnership may not make any distributions to the Class A Unitholders if there are any amounts which are due and payable under the mortgage loan agreement which are unpaid. 9 AIRCOA HOTEL PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) (6) RELATED PARTY TRANSACTIONS The following amounts resulting from transactions with affiliates are included in the accompanying consolidated statements of operations (in thousands):
For the six months ended June 30, --------------------- 1997 1996 ---- ---- Partnership administration fees $ 120 $ 95 ===== ====== Management fees $ 999 $1,010 ===== ====== Allocated data processing cost $ 23 $ 44 ===== ====== Allocated insurance expenses $ 671 $ 692 ===== ====== Interest expense $ 486 $ 486 ===== ====== Lease income $ 149 $ 115 ===== ====== License fees $ 261 $ 149 ===== ====== Guarantee and financing fee (included in interest expense) $ 112 $ 112 ===== ======
The properties are obligated to reimburse an affiliate for payroll, professional fees, and certain out-of-pocket expenses incurred by the affiliate on their behalf. Affiliates are also paid purchasing and design fees in connection with renovations of the hotels and purchases of furnishings, equipment and supplies. (7) INCOME TAXES No current provision or benefit for income taxes is included in the accompanying consolidated financial statements since the taxable income or loss of the Partnership is included in the tax returns of the individual partners of the Partnership. The Partnership's only significant temporary difference is an excess of the tax basis over the book basis of the Partnership's hotels of approximately $5,000,000 which gives rise to a net deferred tax asset of approximately $2,000,000. The Partnership has established a 100% valuation allowance on these net deferred tax assets. Current federal income tax regulations will subject the Partnership to corporate taxation beginning in 1998. Following the enactment of the Revenue Provisions of the Taxpayer Relief Act of 1997 (HR2014) issued August 1, 1997, Title IX, Miscellaneous Provisions, the Partnership may make an election to be subject to an excise tax of 3.5% on its gross receipts in lieu of being taxed as a corporation. Further, upon the consummation of the merger discussed above in Note 2, the Partnership would no longer be a publicly traded partnership and would continue to be taxed as a partnership. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results - ------ ----------------------------------------------------------------------- of Operations ------------- RESULTS OF OPERATIONS Partnership revenue for the three months ended June 30, 1997 decreased $237,000 or 1.8% compared to the three months ended June 30, 1996. Revenue for the first six months of 1997 decreased $336,000 or 1.3% compared to the first six months of 1996. Average occupancy and daily room rates for the portfolio of 1,586 rooms are summarized as follows:
Three months Six months ended June 30, ended June 30, ---------------- ---------------- 1997 1996 1997 1996 ------- ------- ------- ------- Average occupancy 82.0% 83.7% 77.4% 79.9% Average daily room rates $66.51 $63.90 $69.08 $65.11
The decrease in revenue at the Partnership's properties for the three months ended June 30, 1997 when compared to the three months ended June 30, 1996 was primarily a result of a decrease in food and beverage revenue of $213,000 offset, in part, by an increase in rooms revenue of $122,000. The decrease in revenue for the six months ended June 30, 1997 when compared to the six months ended June 30, 1996 was primarily a result of a decrease in food and beverage revenue of $353,000 offset, in part by an increase in rooms revenue of $238,000. Food and beverage revenue is influenced, in part, by occupancy levels at each of the properties. For the three months and six months ended June 30, 1997, occupancy levels at the Partnership's properties decreased by 2.0% and 3.1%, respectively, as compared to the same periods in 1996. These decreases in occupancy levels contributed, in part, to decreases in food and beverage revenue of 6.2% and 5.5% for the three months and six months ended June 30, 1997, respectively, when compared with the same periods in 1996. Rooms revenue is a function of occupancy levels as well as average daily room rates. For both the three months and six months ended June 30, 1997, rooms revenue increased by 1.6% over the same periods in 1996, as a result of increases in average daily rates that more than offset decreases in occupancy levels for these periods. Increased average daily rates and decreased occupancy levels during these periods resulted from efforts by the Partnership to increase revenue per available room at certain of its properties through increased average daily rates. This resulted in an overall small decrease in occupancy levels. Net rooms margin (rooms revenue less rooms expenses) increased $35,000 or 0.6% for the three months ended June 30, 1997 as compared to the three months ended June 30, 1996, as rooms revenue increased by $122,000 or 1.6%, while rooms expenses increased by $87,000 or 4.2%. Net rooms margin increased $91,000 or 0.8% for the six months ended June 30, 1997 as compared to the six months ended June 30, 1996, as revenue increased by $238,000 or 1.6%, while expenses increased by $147,000 or 3.7%. The increases in net rooms margins for the three months and six months ended June 30, 1997 as compared to the same periods in 1996 were primarily due to increases at Lakeside offset, in part, by decreases at Fourwinds. The increases in net rooms margins at Lakeside were the result of increased average daily room rates, primarily in the wholesale market segment. The decreases at Fourwinds are primarily due to decreased occupancy levels, resulting from rooms taken out of service for renovation during March, April, and May of 1997. Net food and beverage margin (food and beverage revenue less food and beverage expenses) decreased $117,000 or 11.0% for the three months ended June 30, 1997 as compared to the three months ended June 30, 1996, as revenue decreased $213,000 or 6.2%, while expenses decreased $96,000 or 4.0%. Net food and beverage margin decreased $89,000 or 4.7% for the first six months of 1997 as compared to the same period in 1996, as revenue decreased $353,000 or 5.5% while expenses decreased $264,000 or 5.8%. The decreases in net food and beverage margins during these periods were primarily due to decreases at Buffalo and University that were offset, in part, by increases at McCormick. The decreases in net food and beverage margins at Buffalo were primarily due to changes in the segment mix of the hotel's guests to include more contract business, which typically does not use the hotel's food and beverage outlets as much as other segments. Additionally, Buffalo experienced increased payroll costs. University experienced a 11 drop in occupancy levels, which contributed to decreased net food and beverage margins. The increases in net food and beverage margins at McCormick were primarily due to the addition of a catering pavilion at the property during 1996, which increased banquet revenue; reductions in payroll cost also occurred. Revenue from other property operations decreased $146,000 or 7.8% and $221,000 or 5.6% for the three months and six months ended June 30, 1997, respectively, as compared to the three months and six months ended June 30, 1996. These decreases are primarily a result of lower revenue generated by Fourwinds' marina operations during the second quarter of 1997 due to poor weather in Bloomington, Indiana. Operating income for the three months ended June 30, 1997 decreased $206,000 or 10.2% as compared to the three months ended June 30, 1996 as revenue decreased $237,000 or 1.8% and operating costs decreased $31,000 or 0.3%. Operating income decreased $431,000 or 12.0% for the six months ended June 30, 1997 as compared to the first six months of 1996, as revenue decreased $336,000 or 1.3% and operating costs increased $95,000 or .4%. Operating costs include a provision of approximately $200,000 for an occupancy tax assessment at McCormick recorded during the second quarter of 1997. Interest expense during the three months and six months ended June 30, 1997 was comparable to the same periods in 1996. The average interest rate (inclusive of amortization of debt issue costs) was 9.00% for the first six months of 1997 as compared to 9.04% for the first six months of 1996. Cash flow from operations differs from net income of the Partnership due to the effects of depreciation, amortization and accruals as reflected in the consolidated statements of cash flows. Net income/(loss) per Class A Unit and the net income per Class B Unit reflect allocations of the net income as required by the Partnership Agreement. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities for the first six months of 1997 was $1,848,000, a decrease of $1,383,000 as compared with the same period in 1996. The decrease is primarily attributable to the decrease in cash received from customers of $573,000 and an increase in interest paid of $792,000. Cash used in investing activities increased $2,203,000 in the first six months of 1997 compared to the first six months of 1996. The increase primarily reflects capital expenditures at McCormick for rooms renovation and at Fourwinds for dock and rooms renovation. Cash used in financing activities in the first six months of 1997 increased $88,000 as compared to the first six months of 1996. The Partnership had indebtedness at June 30, 1997 of $51,317,000 as compared to $51,726,000 at December 31, 1996. At June 30, 1997, the Partnership had a working capital deficit of $2,167,000 compared to a working capital deficit of $1,716,000 at December 31, 1996. The Partnership's 1997 working capital requirements, debt service obligations and capital expenditures are expected to be satisfied through a combination of operating cash flows and draws on its revolving line of credit. The Partnership has capital improvements of approximately $4,600,000 planned in 1997 (approximately two-thirds of which is for the renovation of guest rooms at certain of the Properties and improvements at Fourwinds' marina dock and the remainder one-third is for other renovations and improvements at the Properties). Approximately $3,100,000 of improvements were made through June 30, 1997. These improvements have been and are expected to be funded from hotel operations. In the longer term, in order to remain competitive, the Partnership may need to make significant capital expenditures in excess of the industry norm, 5% of annual revenue, for renovation and improvements. Such capital expenditures would require the Partnership to obtain financing from external sources. The market value of the Partnership's properties differs significantly from the historical cost of the properties of $63,648,000, as reflected in the Partnership's balance sheet at June 30, 1997. As indicated under Item 2 in the Partnership's 1996 Form 10-K, the aggregate appraised value of the hotel properties at December 31, 1996 was $87,300,000. The appraised value of the hotel properties at December 31, 1996 was revised to $86,760,000 subsequent to the filing of the Partnership's 1996 Form 10-K. The December 1996 appraised value may not be representative of the appraised value which will be obtained as of December 31, 1997 and is not necessarily indicative of the ability of the Partnership to consummate a sale of the properties or the actual sale price to be realized from the sale of the properties. However, the appraised value does represent the appraiser's opinion of the most probable price for which the hotel properties should sell in a competitive market. 12 PARTNERSHIP DISTRIBUTIONS AND UNIT CONVERSIONS The Partnership Agreement provides for periodic distribution of distributable cash flow, as defined, to the partners subject to any applicable restrictions and the discretion of the General Partner. The Partnership has not made any distributions since 1990. Prior to making future distributions, the Partnership will comply will its capital expenditure requirements as specified in its mortgage loan agreement and maintain sufficient working capital balances. The Partnership currently has a Minimum Annual Distribution requirement of $2.16 per Class A Unit. At June 30, 1997, the cumulative unpaid Minimum Annual Distribution per Class A Unit significantly exceeds the Partnership's net asset value per unit based on the December 31, 1996 appraised values of the hotel properties. At this time, it is unlikely that there will be any funds available for distribution to the Class A Unitholders in 1997. Beginning in 1997, in accordance with the terms of the Partnership Agreement, and each year thereafter through 2001, a minimum of 250,000 Class B Units are required to be converted at a redemption value of $20.00 per Class B Unit, by issuing Class A Units valued at the current market price of a Class A Unit. As discussed below in the "Other Matters" section, the Partnership Agreement was amended to defer the 1997 conversion of Class B Units. For purposes of calculating the conversion of 250,000 Class B Units during 1997, the Class A Unit conversion price is $2.75, which was the average closing price for the five trading days ending on May 30, 1997. The conversion of these Class B Units would result in the issuance of approximately 1,818,000 Class A Units and in an approximate 25% dilution to the Class A Unitholders. Pursuant to the Partnership Agreement, the Class A Units to be issued upon conversion of the Class B Units must be identical to the Class A Units existing prior to the conversion date. The General Partner has, on the advice of counsel, determined that Class B Units convert into identical Class A Units because there are elective procedures, which are standard practice for publicly- traded partnerships, that make Class A Units received upon conversion fungible for tax purposes with all pre-existing Class A Units. OTHER MATTERS The Partnership received in December 1996, a written proposal from an affiliate, Regal Hotel Management, Inc. ("RHM"), to commence discussions with respect to the possible purchase of all of the Class A and Class B units not currently owned by RHM or its affiliates (the "Public Units") for $2.35 per Class A Unit and $16.80 per Class B Unit. The General Partner of the Partnership referred consideration of RHM's proposal to a Special Committee (the "Special Committee") comprised of the independent members of the Partnership's Advisory Committee. After negotiations with the Special Committee, RHM agreed to increase the merger consideration to $3.10 per Class A Unit and $20.00 per Class B Unit. The Special Committee determined that such increased merger consideration was fair to, and in the best interests of, unaffiliated unitholders of the Partnership and recommended approval of the merger transaction by the Board of Directors of the Partnership's General Partner. The General Partner's Board of Directors approved RHM's revised proposal on May 2, 1997. RHM's proposed acquisition of the Public Units would be made by means of a merger of a subsidiary limited partnership owned by RHM into the Partnership. The completion of the merger and the resulting acquisition of interests of unaffiliated unitholders is subject to the approval of the merger by unitholders owning a majority interest of the Partnership's units at a special meeting. RHM and its affiliates own 71% of the Class A Units and 93.6% of the Class B Units. RHM and its affiliates have agreed to vote in favor of the merger thus assuring its approval. Although no date has been set for the special meeting, it is presently expected that the meeting will be held, and the merger will be consummated, during the third quarter of 1997. In conjunction with approval of the merger transaction, the General Partner has amended the Partnership Agreement in order to defer the mandatory conversion of Class B Units into Class A Units. The amendment provides that the 250,000 Class B Units scheduled to convert into additional Class A Units during 1997 will convert on the earliest to occur of (i) any termination of the definitive merger agreement; (ii) the record date for any vote of the Class A Unitholders, (other than the vote on merger), (iii) the record date for any distribution by the Partnership to holders of Class A Units or (iv) September 30, 1997. In 1997, in accordance with the Partnership Agreement, the number of Class A Units to be received upon conversion of a Class B Unit will be determined by dividing $20.00 by the average of the closing prices of Class A Units 13 for the five trading days ending on May 30, 1997, or $2.75. In light of the likelihood of completion of the merger, the General Partner adopted this amendment in order to avoid administrative and other issues arising from the issuance of additional Class A Units pursuant to the conversion. RHM has agreed to reimburse the Partnership for costs associated with merger, upon its consummation. In light of the likely completion of the merger, the Partnership has recorded a receivable of $343,000 for costs incurred through June 30, 1997. RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS No. 128). SFAS No. 128 establishes standards for computing and presenting earnings per share. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997 and earlier application is not permitted. Had the Partnership implemented the requirements of SFAS No. 128, basic EPS for the three months and six months ended June 30, 1997 would have been $0.07 and $0.05, respectively and diluted EPS for both the three months and six months ended June 30, 1997 would have been $0.05. PART II. OTHER INFORMATION - -------- ----------------- Item 6. Exhibits and Reports on Form 8-K - ------- -------------------------------- a) Exhibits (2.1) Agreement and Plan of Merger dated May 2, 1997 between and among the Registrant, AIRCOA Hospitality Services, Inc., and Regal Merger Limited Partnership. b) Reports on Form 8-K Form 8-K dated May 8, 1997 - Item 5. Other Events. SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AIRCOA HOTEL PARTNERS, L.P. By: AIRCOA Hospitality Services, Inc., General Partner Date: August 14, 1997 By: /s/ Douglas M. Pasquale -------------------- ------------------------------- Douglas M. Pasquale President and Director (Principal Executive and Financial Officer) By: /s/ David C. Ridgley ------------------------------- David C. Ridgley Senior Vice President and Chief Accounting Officer (Duly Authorized Officer) 14 EX-2.1 2 AGREEMENT AND PLAN OF MERGER DATED MAY 2, 1997 EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER BY AND AMONG AIRCOA HOTEL PARTNERS, L.P., AIRCOA HOSPITALITY SERVICES, INC., REGAL HOTEL MANAGEMENT, INC. AND REGAL MERGER LIMITED PARTNERSHIP May 2, 1997 TABLE OF CONTENTS Page RECITALS..........................................................1 ARTICLE I -- The Merger...........................................2 1.1 The Merger.............................................2 1.2 Effective Time of the Merger...........................2 1.3 Closing................................................2 1.4 Effects of the Merger; General Partner.................3 1.5 Governing Documents....................................3 1.6 Conversion of Securities...............................3 1.7 Payment................................................4 1.8 Delisting of Class A Units and Depositary Receipts.....5 1.9 Appraisal Rights.......................................5 ARTICLE II -- Approval of the Merger..............................5 2.1 Actions of the Partnership and the General Partner.....5 2.2 Proxy Statement........................................5 ARTICLE III -- Representations and Warranties of the Parent and Regal..........................................6 3.1 Organization and Qualification.........................6 3.2 Authority Relative to this Agreement...................6 3.3 Compliance.............................................6 3.4 Documents and Information..............................7 3.5 Financing..............................................7 3.6 Solvency...............................................7 ARTICLE IV -- Representations and Warranties of the Partnership...8 4.1 Organization and Qualification.........................8 4.2 Capitalization.........................................8 4.3 Fees...................................................8 4.4 Documents and Information..............................8 4.5 Opinion of Financial Advisor...........................9 ARTICLE V -- Covenants............................................9 5.1 Legal Conditions to the Merger.........................9 5.2 State Statutes.........................................9 5.3 Special Committee......................................9 ARTICLE VI -- Additional Agreements...............................9 6.1 Public Announcements...................................9 6.2 Expenses..............................................10 ARTICLE VII -- Conditions Precedent..............................10 7.1 Certain Conditions on the Obligation of Regal to Consummate the Merger.................................10 7.2 Obligation of Each Party to Effect the Merger.........11 ARTICLE VIII -- Termination......................................12 8.1 Termination...........................................12 8.2 Effect of Termination.................................12 ARTICLE IX -- General Provisions.................................13 9.1 Amendment.............................................13 9.2 Extension; Waiver.....................................13 9.3 Nonsurvival of Representations, Warranties and Agreements............................................13 9.4 Entire Agreement; Counterparts........................13 9.5 Severability..........................................13 9.6 Notices...............................................14 9.7 Interpretation........................................15 9.8 Headings..............................................15 9.9 Assignment............................................15 9.10 Governing Law........................................16 9.11 Consent to Jurisdiction; Service of Process..........16 9.12 Limitation of Liability..............................16 9.13 Limitation of Remedies...............................16 AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of May 2, 1997, among AIRCOA HOTEL PARTNERS, L.P., a Delaware limited partnership (the "Partnership"), AIRCOA HOSPITALITY SERVICES, INC., a Delaware corporation (the "General Partner"), REGAL HOTEL MANAGEMENT, INC., a Delaware corporation (the "Parent"), and REGAL MERGER LIMITED PARTNERSHIP, a Delaware limited partnership and a direct, wholly owned subsidiary of the Parent ("Regal"). RECITALS WHEREAS, the Partnership has heretofore issued Class A limited partnership units (the "Class A Units") and Class B limited partnership units (the "Class B Units" and, together with the Class A Units, the "Units"), each representing limited partner interests in the Partnership; WHEREAS, all outstanding Class A Units have been deposited with a depository (the "Depositary") designated by the General Partner, pursuant to the terms of a Deposit Agreement (the "Deposit Agreement") among the General Partner (both individually and as attorney-in-fact for the holders of Class A Units), the Depositary, the Partnership and all holders from time to time of Class A Units represented by depositary receipts ("Depositary Receipts") or certificates (together with the Class B Units represented by certificates, "Certificates"); WHEREAS, the General Partner is the sole general partner of the Partnership; WHEREAS, each of the Parent and Regal is an affiliate (as used herein, such term shall have the meaning set forth in the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange Act")) of the General Partner; WHEREAS, the Parent wishes to merge Regal with and into the Partnership (the "Merger") pursuant and subject to the terms and conditions of this Agreement, whereby each issued and outstanding Unit not owned directly or indirectly by Regal, the Parent or their affiliates will be converted into the right to receive $3.10 per Class A Unit and $20.00 per Class B Unit (the "Merger Consideration"); WHEREAS, the Board of Directors of the General Partner has established a special committee consisting of persons not otherwise affiliated with the General Partner (the "Special Committee"), and has charged the Special Committee to negotiate and determine the fairness of this Agreement and to, among other things, approve any amendment of or waiver pursuant to this Agreement on behalf of the Partnership; WHEREAS, the Special Committee has considered the fairness of this Agreement and the Merger to the holders of Units ("Unitholders"), other than the Parent and its affiliates (the "Unaffiliated Unitholders"), and, subject to the terms and conditions of this Agreement, (i) determined that the Merger is fair to and in the best interests of the Unaffiliated Unitholders, (ii) recommended that the General Partner approve this Agreement and (iii) recommended that the Merger be approved by the Unitholders; WHEREAS, the General Partner, on its own behalf and on behalf of the Partnership, and the Parent, on its own behalf and on behalf of Regal, have duly approved this Agreement and the Merger pursuant hereto, and the General Partner has determined, upon the recommendation of the Special Committee, that the Merger is fair to and in the best interests of the Unitholders and, subject to the terms and conditions of this Agreement, has recommended that the Merger be accepted by the Unitholders; and WHEREAS, the Parent and affiliates of the Parent holding, in the aggregate, approximately 71.0% of the outstanding Class A Units and approximately 93.6% of the outstanding Class B Units have agreed to submit this Agreement and the Merger to the Unitholders for approval and adoption at a meeting of Unitholders called for such purpose (the "Merger Meeting") pursuant to Section 17.4 of the Agreement of Limited Partnership of AIRCOA Hotel Partners, L.P., dated July 30, 1987 (as amended, the "Partnership Agreement"). NOW THEREFORE, in consideration of the mutual benefits to be derived from this Agreement and of the representations, warranties, agreements and conditions contained in this Agreement, the parties agree as follows: ARTICLE I The Merger 1.1 The Merger. In accordance with and subject to (a) the provisions of this Agreement, (b) the Certificate of Merger (as hereinafter defined), and (c) the Delaware Revised Uniform Limited Partnership Act (the "Delaware Partnership Act"), at the Effective Time (as hereinafter defined), Regal shall be merged with and into the Partnership in the Merger. As a result of the Merger, the separate existence of Regal shall cease, and the Partnership shall continue as the surviving partnership. The Partnership is hereinafter sometimes referred to as the "Surviving Partnership." 1.2 Effective Time of the Merger. Subject to the provisions of this Agreement, an appropriate form of certificate of merger (the "Certificate of Merger") shall be duly executed and filed by the Partnership and Regal on the Closing Date (as hereinafter defined) in the manner provided in Section 17-211 of the Delaware Partnership Act. The Merger shall become effective at such time on the Closing Date as the Certificate of Merger is filed with the Secretary of State of the State of Delaware (or such later time as may be specified in the Certificate of Merger) (the "Effective Time"). 1.3 Closing. Unless this Agreement shall have been terminated and the transactions contemplated by this Agreement shall have been abandoned pursuant to the provisions of Article VIII, and subject to the provisions of Sections 7.1 and 7.2 hereof, the closing of the Merger (the "Closing") will take place at 10:00 a.m., Denver time, on the first Business Day (as hereinafter defined) occurring after the Merger Meeting (which shall occur after the passage of 20 business days from and after the mailing of the Proxy Statement (as defined below) to Unitholders) or, if later, the date which is the first Business Day after all of the conditions set forth in Sections 7.1 and 7.2 hereof shall have been satisfied (or waived in accordance with 2 Section 9.2 hereof), or such other date and time which is agreed to in writing by the parties (the "Closing Date"). The Closing shall take place at the offices of the Partnership at 5775 DTC Boulevard, Englewood, Colorado 80111, unless another place is agreed to by the parties. For purposes of this Agreement, "Business Day" shall mean any day except Saturday, Sunday or any day on which banks are generally not open for business in Denver, Colorado. 1.4 Effects of the Merger; General Partner. The Merger shall, from and after the Effective Time, have the effects provided for in the Delaware Partnership Act. The General Partner shall be the general partner of the Surviving Partnership until its resignation or removal or until its successor is duly qualified. 1.5 Governing Documents. Following the Effective Time, the Partnership Agreement of the Partnership shall be the partnership agreement of the Surviving Partnership, until amended in accordance with the provisions thereof and applicable law. 1.6 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Regal, the Partnership, the Surviving Partnership or any holder of any of the following securities: (a) Each Class A Unit which is issued and outstanding immediately prior to the Effective Time (other than Class A Units owned by Regal Hotels International Holdings Limited, a Bermuda company and an indirect parent of each of the General Partner, the Parent and Regal ("Regal Holdings"), or any direct or indirect subsidiary of Regal Holdings) shall be canceled, extinguished and retired, and be converted into and become a right to receive $3.10 in cash, without interest (the "Class A Merger Consideration"); (b) Each Class B Unit which is issued and outstanding immediately prior to the Effective Time (other than Class B Units owned by Regal Holdings or any direct or indirect subsidiary of Regal Holdings) shall be canceled, extinguished and retired, and be converted into and become a right to receive $20.00 in cash, without interest (the "Class B Merger Consideration" and, together with the Class A Merger Consideration, the "Merger Consideration"); (c) Each Unit which is issued and outstanding immediately prior to the Effective Time and owned by Regal Holdings or any direct or indirect subsidiary of Regal Holdings shall be and remain a unit of limited partnership interest in the Surviving Partnership; (d) Each partnership interest, general or limited, of Regal issued and outstanding immediately prior to the Effective Time shall be canceled, extinguished and retired, and no payment shall be made thereon; and (e) The General Partner's general partnership interest in the Partnership shall be and remain a general partnership interest in the Surviving Partnership. 1.7 Payment. (a) From and after the Effective Time, a bank or trust company organized under the laws of the United States or any state thereof with capital, surplus and 3 undivided profits of at least $100,000,000 that is designated by the Parent (the "Payment Agent") shall act as payment agent in effecting the payment of the Merger Consideration for Units pursuant to Sections 1.6(a) and 1.6(b) hereof. At or before the Effective Time, the Parent or Regal shall deposit with the Payment Agent the aggregate Merger Consideration in trust for the benefit of the Unaffiliated Units. Promptly after the Effective Time, the Payment Agent shall mail to each record holder of Depository Receipts or Certificates a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to such Depositary Receipts or Certificates shall pass, only upon delivery of such Depositary Receipts or Certificates to the Payment Agent) and instructions for use in surrendering such Depositary Receipts or Certificates and receiving the Merger Consideration for each Unit previously represented thereby. Upon the surrender of each such Depositary Receipt or Certificate and the payment by the Payment Agent of the Merger Consideration in exchange therefor, such Depositary Receipts and Certificates shall forthwith be canceled. Until so surrendered and exchanged, each such Depositary Receipt or Certificate (other than Depositary Receipts or Certificates representing Units held by Regal Holdings or any direct or indirect subsidiary of Regal Holdings) shall represent solely the right to receive the Class A Merger Consideration or the Class B Merger Consideration, as applicable, multiplied by the number of Class A Units or Class B Units, respectively, represented by such Depositary Receipt or Certificate, and the holder thereof shall have no rights whatsoever as a Unitholder of the Partnership or the Surviving Partnership. Upon the surrender of such outstanding Depositary Receipt or Certificate, the holder shall receive such Merger Consideration, without any interest thereon. If any cash is to be paid to a name other than the name in which the Depositary Receipt or Certificate surrendered in exchange therefor is registered, it shall be a condition to such payment that the person requesting such payment shall pay to the Payment Agent any transfer or other taxes required by reason of the payment of such cash to a name other than that of the registered holder of the Depositary Receipt or Certificate surrendered, or such person shall establish to the satisfaction of the Payment Agent that such tax has been paid or is not applicable. Notwithstanding the foregoing, neither the Payment Agent nor any party hereto shall be liable to a holder of Depositary Receipts or Certificates for any Merger Consideration or other payments made to a public official pursuant to applicable abandoned property laws. The Surviving Partnership and the Payment Agent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable to a holder of Units pursuant to the Merger any taxes or other amounts as are required by applicable law, including without limitation Sections 3406 and 1445 of the Internal Revenue Code of 1986. To the extent that amounts are so withheld by the Surviving Partnership or the Payment Agent, they shall be treated for all purposes of this Agreement as having been paid to the holder of the Units in respect of which such deduction and withholding was made. (b) Six (6) months after the Closing Date, the Surviving Partnership shall be entitled to the return of all amounts then held by the Payment Agent pursuant to Section 1.7(a) (including earnings thereon), and the Payment Agent's duties shall terminate. Thereafter, any holder of a Depositary Receipt or Certificate shall look only to the Surviving Partnership (subject to applicable abandoned property, escheat and similar laws) as a general creditor to receive in exchange therefor the Merger Consideration, without any interest thereon. (c) At and after the Effective Time, there shall be no transfers on the books of the Surviving Partnership of any Unit other than Units which remain outstanding pursuant to Section 4 1.6(b) hereof. As of the Effective Time, each holder of a Unit which was converted into the right to receive cash pursuant to Section 1.6(a) hereof shall be deemed to have withdrawn as a limited partner and shall have no further interest in the Partnership or the Surviving Partnership or any allocations or distributions of income, property or otherwise, other than the right to receive the Merger Consideration as provided in this Article I. 1.8 Delisting of Class A Units and Depositary Receipts. Following the Effective Time, the General Partner, on behalf of the Partnership, shall take all actions necessary to effect the delisting of the Class A Units and the Depositary Receipts from the American Stock Exchange and the deregistration of the Class A Units and the Depositary Receipts with the Securities and Exchange Commission (the "Commission"). 1.9 Appraisal Rights. Unitholders shall not have any appraisal or dissenters' rights in connection with the Merger. ARTICLE II Approval of the Merger 2.1 Actions of the Partnership and the General Partner. (a) The General Partner hereby consents to the Merger, agrees in all respects with the terms of this Agreement and, subject to the terms and conditions of this Agreement, the consummation of the transactions contemplated hereby. In connection therewith, pursuant to the Delaware Partnership Act and Article VIII of the Partnership Agreement, by executing this Agreement, the General Partner, as the sole general partner of the Partnership, consents to and approves in all respects this Agreement and the transactions contemplated hereby (including, without limitation, the Merger) on behalf of the Partnership. The General Partner hereby represents that, at a meeting of its Board of Directors duly called and held on May 2, 1997, (i) such Board approved, upon the recommendation of the Special Committee, this Agreement and the Merger and has determined that the Merger, considered as a whole, is fair to and in the best interests of the Unaffiliated Unitholders and (ii) such Board recommended that the Unitholders of the Partnership approve and adopt this Agreement and the Merger. (b) Each of the General Partner, the Parent and affiliates of the Parent holding, in the aggregate, approximately 71.0% of the outstanding Class A Units and approximately 93.6% of the outstanding Class B Units, shall approve and consent to this Agreement and the Merger by a vote in person or by proxy at the Merger Meeting to be held twenty (20) calendar days from and after the mailing of the Proxy Statement to the Unitholders. 2.2 Proxy Statement. Promptly following the execution of this Agreement, the Partnership shall prepare (and Regal shall cooperate in preparing) and as soon as reasonably practicable thereafter shall file with the Commission a preliminary Proxy Statement with respect to the Merger. Subject to compliance with the rules and regulations of the Commission, the Partnership shall thereafter file with the Commission and mail to Unitholders a definitive Proxy Statement with respect to the Merger (the "Proxy Statement"). The term "Proxy Statement" shall mean such Proxy Statement at the time it initially is mailed to the Unitholders and all amendments 5 or supplements thereto, if any, similarly filed and mailed. Regal and the Partnership each agree to correct any information provided by it for use in the Proxy Statement which shall have become false or misleading in any material respect. ARTICLE III Representations and Warranties of the Parent and Regal The Parent and Regal, jointly and severally, represent and warrant at the date hereof to the Partnership as follows: 3.1 Organization and Qualification. Regal is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware, with the requisite power and authority to carry on its respective business as now conducted. The Parent is the sole general partner of Regal. The Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to carry on its respective business as now conducted. Each of the Parent and Regal is duly qualified to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, except where the failure to be so qualified or in good standing would not, in the aggregate, have a material adverse effect on the Parent and its subsidiaries, taken as a whole. Copies of the charter and bylaws of the Parent and the Certificate of Limited Partnership and the Limited Partnership Agreement of Regal (such documents, the "Organizational Documents") previously delivered to the Partnership are accurate and complete as of the date hereof. 3.2 Authority Relative to this Agreement. Each of the Parent and Regal has the requisite power and authority to enter into this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by the Parent and Regal and the consummation by the Parent and Regal of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Parent, including in the Parent's capacity as general partner of Regal, and no other action or proceeding on the part of the Parent or Regal is necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Parent and Regal and constitutes a valid and binding obligation of each of them, enforceable in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. 3.3 Compliance. (a) Neither the execution and delivery of this Agreement by the Parent and Regal nor the consummation of the transactions contemplated hereby nor compliance by the Parent and Regal with any of the provisions hereof will (i) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Parent or Regal or any other direct or indirect subsidiary of the Parent 6 under, any of the terms, conditions or provisions of (x) the respective Organizational Documents of the Parent or Regal or any partnership agreement or charter or bylaws of any other direct or indirect subsidiary of the Parent or (y) any material note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Parent or Regal or any other direct or indirect subsidiary of the Parent is a party, or to which any of them, or any of their respective properties or assets, may be subject, or (ii) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to the Parent or Regal or any other direct or indirect subsidiary of the Parent or any of their respective properties or assets, except, in the case of each of clauses (i) and (ii) above, for such violations, conflicts, breaches, defaults, terminations, accelerations or creations of liens, security interests, charges or encumbrances, which, in the aggregate, would not have a material adverse effect on the transactions contemplated hereby or on the condition (financial or other), business or operations of the Parent and its subsidiaries taken as a whole (a "Material Adverse Effect on the Parent"). (b) Other than in connection with or in compliance with the provisions of the Delaware Partnership Act, the Exchange Act, any state "anti-takeover" ("State Takeover Laws") or "blue sky" laws ("Blue Sky Laws") or other similar statutes and regulations, no notice to, filing with, or authorization, consent or approval of, any domestic or foreign public body or authority is necessary for the consummation by the Parent or Regal of the transactions contemplated by this Agreement, except where failure to give such notice, make such filings, or obtain authorizations, consents or approvals would not, in the aggregate, have a Material Adverse Effect on the Parent. 3.4 Documents and Information. The information supplied by the Partnership, Parent or Regal expressly for inclusion in the Proxy Statement shall not, (i) at the time of the mailing thereof and (ii) at the Closing Date, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.5 Financing. The Parent has sufficient available funds to consummate the Merger, and shall make such funds available to Regal for such purposes. 3.6 Solvency. At the Effective Time and after giving effect to any changes in the Parent's, Regal's or the Surviving Partnership's assets and liabilities as a result of the Merger, none of the Parent, Regal or the Surviving Partnership will (i) be insolvent (either because its financial condition is such that the sum of its debts is greater than the fair value of its assets or because the present fair salable value of its assets will be less than the amount required to pay its probable liability on its debts as they become absolute and matured); (ii) have unreasonably small capital with which to engage in its business; or (iii) have incurred or plan to incur debts beyond its ability to pay as they become absolute and matured. 7 ARTICLE IV Representations and Warranties of the Partnership The Partnership represents and warrants to each of the Parent and Regal at the date hereof as follows: 4.1 Organization and Qualification. The Partnership is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware and has the requisite power and authority to carry on its business as it is now being conducted. The Partnership is duly qualified to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, except where the failure to be so qualified or in good standing would not, in the aggregate, have a material adverse effect on the Partnership and its subsidiaries, taken as a whole. Copies of the Partnership Agreement and the Certificate of Limited Partnership of the Partnership which have heretofore been delivered to the Parent are accurate and complete as of the date hereof. 4.2 Capitalization. As of the date hereof, there are 5,340,214 Class A Units and 950,000 Class B Units issued and outstanding. All such Units have been validly issued. Other than such Class A Units and Class B Units and the General Partner's general partnership interest, there are no equity securities of the Partnership authorized or outstanding, and, other than (a) the Class B Units which are convertible into Class A Units and (b) two promissory notes of the Partnership dated June 8, 1995, payable to the General Partner, in the principal amounts of $2.1 million and $6 million, which are convertible into Class A Units, there are no outstanding options, warrants, rights to subscribe to (including any preemptive rights), calls or commitments of any character whatsoever to which the Partnership or any subsidiary of the Partnership is a party or may be bound, requiring the issuance or sale of any Units or other equity securities of the Partnership or securities or rights convertible into or exchangeable for such Units or other equity securities, and there are no contracts, commitments, understandings or arrangements by which the Partnership is or may become bound to issue additional Units or other equity securities or options, warrants or rights to purchase or acquire any additional Units or other equity securities or securities convertible into or exchangeable for such Units or other equity securities. None of the Units are held by the Partnership in treasury. 4.3 Fees. The Special Committee has not paid or agreed to pay any fee or commission to any broker, finder or intermediary in connection with the transactions contemplated hereby. 4.4 Documents and Information . The information supplied by the Partnership expressly for inclusion in the Proxy Statement shall not, (i) at the time of the mailing thereof and (ii) at the Closing Date, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 8 4.5 Opinion of Financial Advisor. Houlihan Lokey, the financial advisor to the Special Committee (the "Financial Advisor"), has delivered to the Special Committee its written opinion, dated May 2, 1997, that the Merger Consideration to be received by the Unitholders pursuant to the Merger, taken as a whole, is fair, from a financial point of view, to the Unaffiliated Unitholders. ARTICLE V Covenants 5.1 Legal Conditions to the Merger. The General Partner (on behalf of itself and the Partnership), Regal and the Parent shall take all reasonable actions necessary to comply promptly with all legal requirements with respect to the Merger and shall take all reasonable action necessary to cooperate promptly with and furnish information to the other parties in connection with any such requirements. The General Partner (on behalf of itself and the Partnership), Regal and the Parent shall take all reasonable actions necessary (i) to obtain (and will take all reasonable actions necessary to promptly cooperate with the other parties in obtaining) any consent, authorization, order or approval of, or any exemption by, any administrative agency or commission or other governmental authority or instrumentality (a "Governmental Entity"), or other third party, required to be obtained or made (or cooperate in the obtaining of any thereof required to be obtained) in connection with the Merger or the taking of any action contemplated by this Agreement; (ii) to lift, rescind or mitigate the effect of any injunction or restraining order or other order adversely affecting the consummation of the transactions contemplated hereby; (iii) to fulfill all conditions pursuant to this Agreement; and (iv) to prevent, with respect to a threatened or pending temporary, preliminary or permanent injunction or other order, decree or ruling, the entry thereof. 5.2 State Statutes. If any State Takeover Law shall become applicable to the transactions contemplated by this Agreement, the parties hereto shall use their reasonable efforts to take such actions as are necessary so that the transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effects of such State Takeover Law on the transactions contemplated by this Agreement. 5.3 Special Committee. Prior to the Effective Time or the earlier termination of this Agreement, the Parent and the General Partner shall take all actions necessary such that the Special Committee shall continue in existence without diminution of any of its powers or duties. ARTICLE VI Additional Agreements 6.1 Public Announcements. The General Partner, on behalf of itself and the Partnership, and the Parent, on behalf of itself and Regal, shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the Merger and shall not issue any such press release or make such public statement 9 prior to such consultation except as may be required by law or the rules of the American Stock Exchange. 6.2 Expenses. Parent shall bear all costs and expenses of each party hereto incurred in connection with the transactions contemplated by this Agreement. ARTICLE VII Conditions Precedent 7.1 Certain Conditions on the Obligation of Regal to Consummate the Merger. (a) The obligations of Regal to effect the Merger shall be subject to the fulfillment of the following conditions, any or all of which may be waived by Regal in its sole discretion: (i) except for changes in the business or conditions of the Partnership, financial or otherwise, or in the results of operations of the Partnership, occurring prior to the date of this Agreement, or expected by the management of the General Partner to occur based on events occurring prior to the date of this Agreement, there shall not have occurred any material adverse change in the business or condition of the Partnership, financial or otherwise, or in the results of operations of the Partnership from that set forth in or contemplated by the financial statements of the Partnership for the year ended December 31, 1996; (ii) there shall not be pending or threatened against the Partnership, or any subsidiary of the Partnership, any action, suit or proceeding involving a claim at law or in equity or before or by any Governmental Entity, domestic or foreign, that would be reasonably likely to have a Material Adverse Effect on the Partnership; and (iii) there shall not be pending or threatened against the Partnership, the General Partner, the Parent, Regal, or any of their respective affiliates or their respective properties or businesses, any other action, suit or proceeding involving a claim at law or in equity or before or by any federal, state, or municipal or other court of competent jurisdiction or other Governmental Entity, relating to the Merger or this Agreement that would be reasonably likely to have a Material Adverse Effect on the Partnership. (b) The parties hereto agree that in exercising its discretion to waive or require the fulfillment of the conditions prescribed in Section 7.1(a) above, Regal shall not be required to consider the interests of any person or entity that may be affected by the Merger other than Regal, and that Regal shall have no obligation, fiduciary or otherwise, to the limited partners of the Partnership or the General Partner in exercising its discretion under Section 7.1(a). 10 7.2 Obligation of Each Party to Effect the Merger. The respective obligations of each party generally to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following conditions: (a) This Agreement and the Merger shall have been approved and adopted by a Majority Interest (as defined in the Partnership Agreement); (b) Neither the execution and delivery of this Agreement by the Partnership nor the consummation of the transactions contemplated hereby nor compliance by the Partnership with any of the provisions hereof shall (i) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Partnership or any direct or indirect subsidiary of the Partnership under any of the terms, conditions or provisions of (x) the Partnership Agreement or any other partnership agreement or charter or bylaws of any direct or indirect subsidiary of the Partnership or (y) any material note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Partnership or any direct or indirect subsidiary of the Partnership is a party, or to which any of them, or any of their respective properties or assets, may be subject, or (ii) violate any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to the Partnership or any direct or indirect subsidiary of the Partnership or any of their respective properties or assets, except, in the case of each of clauses (i) and (ii) above, for such violations, conflicts, breaches, defaults, terminations, accelerations or creations of liens, security interests, charges or encumbrances, which would not, in the aggregate, have a material adverse effect on the transactions contemplated hereby or on the condition (financial or other), business or operations of the Partnership and its subsidiaries, taken as a whole (a "Material Adverse Effect on the Partnership"); (c) The Financial Advisor shall not have withdrawn or modified in any manner materially adverse to the Parent, Regal, the Partnership or any holder of Units its opinion as described in Section 4.5; and (d) No preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a Governmental Entity nor any statute, rule, regulation or executive order promulgated or enacted by any Governmental Entity shall be in effect, which would make the acquisition or holding by the Parent, its subsidiaries or affiliates of the Units of the Surviving Partnership illegal or otherwise prevent the consummation of the Merger or make the consummation of the Merger illegal. 11 ARTICLE VIII Termination 8.1 Termination. This Agreement may be terminated, and the Merger contemplated herein may be abandoned, at any time prior to the Effective Time, whether prior to or after approval of the Merger by the Unitholders: (a) by mutual written consent of the Board of Directors of the Parent, on behalf of the Parent and Regal, and the General Partner of the Partnership, with the concurrence of the members of the Special Committee; or (b) by the Partnership (which shall so act only if requested by the Special Committee) if the Parent or Regal breaches in any material respect any of its representations, warranties, covenants or agreements contained in this Agreement (other than any breach caused by the Partnership) or if the Financial Advisor shall have withdrawn or modified in any manner adverse to the Partnership, the holder of any Units, the Parent or Regal its opinion as described in Section 4.5; or (c) by the Parent, if the Partnership breaches in any material respect any of its representations, warranties, covenants or agreements contained in this Agreement (other than any breach caused by the Parent or any affiliate of the Parent) or if the Special Committee shall have withdrawn or modified in any manner adverse to the Parent or Regal its recommendation of the Merger or this Agreement or if the Financial Advisor shall have withdrawn or modified in any manner adverse to the Partnership, the holder of any Units, the Parent or Regal its opinion as described in Section 4.5; or (d) by either the Parent or the Partnership (with the concurrence of the members of the Special Committee, if terminated by the Partnership): (i) if the Merger has not been consummated prior to September 30, 1997; or (ii) if any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree or ruling, or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and non-appealable. 8.2 Effect of Termination. In the event of the termination of this Agreement as provided in Section 8.1 hereof, this Agreement shall forthwith become void, and there shall be no liability on the part of the Parent, Regal, the General Partner or the Partnership. 12 ARTICLE IX General Provisions 9.1 Amendment. This Agreement may not be amended except by (i) an instrument in writing signed on behalf of each of the parties hereto and (ii) prior approval of such amendment by the members of the Special Committee; provided, however, that after approval of the Merger by the Unitholders, no amendment may be made without the further approval of a Majority Interest (as defined in the Partnership Agreement) which would either (a) alter or change the Merger Consideration or (b) alter or change any other terms and conditions of this Agreement, if any of such alterations or changes, alone or in the aggregate, would materially adversely affect the Unitholders. 9.2 Extension; Waiver. At any time prior to the Effective Time, whether before or after the mailing of the Proxy Statement, any party hereto may (i) extend the time for the performance of any of the obligations or other acts of any other party hereto; (ii) waive any inaccuracies in the representations and warranties contained in this Agreement; and (iii) waive compliance with any of the agreements of the other parties or conditions to its own obligations contained in this Agreement. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party by a duly authorized officer and, if given by the Partnership, approved by the members of the Special Committee. No such consent or waiver of compliance given by any of the parties hereto shall operate as a consent or waiver of compliance in respect of any subsequent default, breach or non-observance, whether of the same or any other nature. 9.3 Nonsurvival of Representations, Warranties and Agreements. The respective representations and warranties of the Partnership, the Parent and Regal contained herein shall expire with, and be terminated and extinguished upon, consummation of the Merger, and thereafter none of the Partnership, the Parent or Regal or any officer, director or principal thereof shall be under any liability whatsoever with respect to any such representation or warranty. This Section 9.3 shall have no effect upon any other obligation of the parties hereto, whether to be performed before or after the consummation of the Merger. 9.4 Entire Agreement; Counterparts. (a) This Agreement contains the entire agreement among the Partnership, the Parent and Regal with respect to the subject matter hereof and supersedes all prior arrangements and understandings, both written and oral, among such parties with respect thereto. (b) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 9.5 Severability. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any 13 provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, the parties shall adopt an amendment hereto in accordance with the provisions of Section 9.1 hereof in which such provision, as to such jurisdiction, is so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 9.6 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to be sufficient if contained in a written instrument and shall be deemed to have been duly given if delivered personally, telecopied, sent by nationally-recognized overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other addresses as shall be specified by a party by like notice): (a) If to the Parent or Regal: REGAL HOTEL MANAGEMENT, INC. 5775 DTC Boulevard Englewood, Colorado 80111 Attention: Douglas M. Pasquale, President Telecopier: (303) 220-2120 with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attention: Paul J. Shim, Esq. Telecopier: (212) 225-3999 (b) If to the Partnership or the General Partner: AIRCOA HOTEL PARTNERS, L.P. 5775 DTC Boulevard Englewood, Colorado 80111 Attention: Douglas M. Pasquale, President Telecopier: (303) 220-2120 14 with a copy to: Holland & Hart LLP Suite 3200 555 Seventeenth Street Denver, Colorado 80201 Attention: Michael S. Quinn, Esq. Telecopier: (303) 295-8261 and Hire & Associates 1383 Solitude Lane Evergreen, Colorado 80439 Attention: Mr. James W. Hire Telecopier: (303) 670-9967 and Miramar Asset Management, Inc. 617 Veterans Boulevard Suite 212 Redwood City, California 94063 Attention: Mr. Anthony C. Dimond Telecopier: (415) 599-9234 All such notices and other communications shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery if received prior to 5:00 p.m. New York City time on such date, (b) in the case of a telecopy, when the party receiving such telecopy shall have confirmed receipt of the communication, (c) in the case of delivery by nationally recognized overnight courier, on the Business Day following dispatch and (d) in the case of mailing, on the third Business Day following such mailing. 9.7 Interpretation. When a reference is made in this Agreement to subsidiaries of Regal Holdings, the Parent, Regal or the Partnership, the word "subsidiaries" means any corporation more than 50% of whose outstanding voting securities, or any partnership, joint venture or other entity more than 50% of whose total equity interest, is directly or indirectly owned by the Parent, Regal, or the Partnership, as the case may be. For purposes of this Agreement, the Partnership shall not be deemed to be an affiliate or subsidiary of the Parent or Regal. 9.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 9.9 Assignment. This Agreement is not intended to confer upon any person other than the parties any rights or remedies hereunder. This Agreement shall not be assigned by operation of law or otherwise; provided, however, that notwithstanding the foregoing, the parties 15 hereto acknowledge that Regal shall have the unrestricted right to assign all of its respective rights hereunder to a wholly-owned affiliate of the Parent or Regal; provided, further, that notwithstanding such assignment, Regal shall not be released from its obligations hereunder nor shall such assignment prejudice the rights of holders of Units entitled to receive payment pursuant to Section 1.6(a) hereof to receive such payment for Units properly delivered to the Payment Agent and accepted for payment. 9.10 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to the conflicts of laws provisions thereof. 9.11 Consent to Jurisdiction; Service of Process. (a) The parties hereto irrevocably submit to the jurisdiction of the Court of Chancery of the State of Delaware or the U.S. District Court for the District of Delaware over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each party hereby irrevocably agrees that all claims in respect of such dispute or proceeding shall be heard and determined in such court. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding of the nature specified in subsection (a) above by mailing a copy thereof in accordance with the provisions of Section 9.6 hereof. 9.12 Limitation of Liability. In no event shall any partner (other than the General Partner) or representative of the Partnership or any direct or indirect stockholder, officer, director, partner or representative of the General Partner or any other such person, be personally liable for any obligation of the Partnership or the General Partner under this Agreement. In no event shall recourse with respect to the obligations under this Agreement of the Partnership or the General Partner be had to the assets or business of any person other than the Partnership or the General Partner, respectively. 9.13 Limitation of Remedies. The sole remedy of any party hereto for breach by any other party of a covenant, representation or warranty made under this Agreement shall be limited to termination of this Agreement. 16 IN WITNESS WHEREOF, the Partnership, the General Partner, the Parent and Regal have caused this Agreement to be executed as of the date first written above by their respective officers thereunder duly authorized. AIRCOA HOTEL PARTNERS, L.P. By AIRCOA Hospitality Services, Inc., its General Partner By: /s/ ------------------------------------ Name: Title: By: /s/ ------------------------------------ Name: Title: AIRCOA HOSPITALITY SERVICES, INC. By: /s/ ------------------------------------ Name: Title: By: /s/ ------------------------------------ Name: Title: REGAL HOTEL MANAGEMENT, INC. By: /s/ ------------------------------------ Name: Title: By: /s/ ------------------------------------ Name: Title: REGAL MERGER LIMITED PARTNERSHIP By: Regal Hotel Management, Inc., its General Partner By: /s/ ------------------------------------ Name: Title: By: /s/ ------------------------------------ Name: Title: EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 3-MOS DEC-31-1997 DEC-31-1996 APR-01-1997 APR-01-1996 JUN-30-1997 JUN-30-1996 489 2,350 0 0 3,674 3,305 0 0 397 373 4,982 6,544 101,258 98,177 (37,610) (35,501) 69,564 70,131 7,149 8,260 50,191 50,604 0 0 0 0 0 0 11,592 10,761 69,564 70,131 12,816 13,053 12,816 13,053 0 0 (11,008) (11,039) 0 0 0 0 (1,165) (1,164) 643 850 0 0 0 0 0 0 0 0 0 0 643 850 0 0 0 0 Class A Unitholders .07 Class B Unitholders .31 Class A Unitholders .10 Class B Unitholders .32 Class A Unitholders .07
EX-99 4 FORM 8-K DATED MAY 7, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report May 8, 1997 AIRCOA HOTEL PARTNERS, L.P. (Exact name of registrant as specified in its charter) State of Delaware (State or other jurisdiction of incorporation) 1-9563 84-1042607 (Commission File Number) (IRS Employer Identification No.) 5775 DTC Boulevard, Suite 300 Englewood, Colorado 80111 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (303) 220-2000 Item 5. Other Events. The following press release was issued on May 5, 1997. AIRCOA HOTEL PARTNERS, L.P. AGREES TO MERGER TRANSACTION Englewood, Colorado, May 5, 1997 -- AIRCOA Hotel Partners, L.P. (AMEX:AHT), a Denver-based master limited partnership (the "Partnership" or "AHP") engaged in the ownership of hotels, announced today that it has agreed to be merged with a subsidiary of Regal Hotel Management, Inc. ("RHM"). In the merger, all Class A Units and Class B Units in the Partnership not currently held by RHM or its affiliates will be converted into the right to receive $3.10 per Class A Unit and $20.00 per Class B Unit in cash. The acquisition would be made by means of a merger of a subsidiary limited partnership owned by RHM into AHP. The completion of the merger and the resulting acquisition of the interests of unaffiliated unitholders is subject to the approval of the merger by unitholders owning a majority interest of the Partnership's units at a special meeting. Presently, RHM and its affiliates own 71% of the Class A Units and 93.6% of the Class B Units. RHM and its affiliates have agreed to vote in favor of the merger thus assuring its approval. Although no date has been set for the special meeting, it is presently expected that the meeting will be held, and the merger will be consummated, during the third quarter of 1997. RHM had originally proposed to acquire the interests of non-affiliated unitholders in the Partnership in December 1996 for $2.35 per Class A Unit and $16.80 per Class B Unit. AHP referred consideration of RHM's proposal to a special committee comprised of independent members of the Partnership's Advisory Committee. Pursuant to negotiations between the special committee and RHM, RHM agreed to increase the merger consideration to $3.10 per Class A Unit and $20.00 per Class B Unit. The special committee determined that such increased merger consideration is fair to, and in the best interests of, unaffiliated unitholders of the Partnership and recommended approval of the merger transaction by the Board of Directors of the Partnership's General Partner. The Board of Directors approved RHM's revised merger proposal at a meeting held May 2. In conjunction with approval of the merger transaction, the General Partner has amended the AHP Partnership Agreement in order to defer the mandatory conversion of Class B Units into Class A Units. The amendment provides that the 250,000 Class B Units scheduled to convert into additional Class A Units during 1997 will convert on the earliest to occur of (i) any termination of the definitive merger agreement; (ii) the record date for any vote of the Class A Unitholders, (other than the vote on merger), (iii) the record date for any distribution by the Partnership to holders of Class A Units and (iv) September 30, 1997. The number of Class A Units to be received upon conversion of a Class B Unit will be determined by dividing $20.00 by the average of the closing prices of Class A Units for the five trading days ending on May 30, 1997. In light of the likelihood of completion of the merger, the General Partner adopted this amendment in order to avoid administrative and other issues arising from the issuance of additional Class A Units pursuant to the conversion. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AIRCOA HOTEL PARTNERS, L.P. By: AIRCOA Hospitality Services, Inc., General Partner Date: May 8, 1997 By:/s/ Douglas M. Pasquale ---------------- ---------------------------------- Douglas M. Pasquale President and Director (Principal Executive and Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----