-----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, SrvD4FSPmKFFJZDuqYibKhv4Ru5Vd+hdDcCJzqdn7hX9n6APQEsoU5nRiQxIrCeY OxSQu1UcxdVYRpr/2xMWXw== 0000950134-98-006501.txt : 19980812 0000950134-98-006501.hdr.sgml : 19980812 ACCESSION NUMBER: 0000950134-98-006501 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980727 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980810 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR LODGING TRUST INC CENTRAL INDEX KEY: 0000923603 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752541756 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-14236 FILM NUMBER: 98680193 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 FORMER COMPANY: FORMER CONFORMED NAME: FELCOR SUITE HOTELS INC DATE OF NAME CHANGE: 19940523 8-K 1 FORM 8-K 1 UNITED STATES 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 (Date of earliest event reported): July 27, 1998 FELCOR LODGING TRUST INCORPORATED (Exact name of registrant as specified in its charter) MARYLAND 1-14236 72-2541756 (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) 545 E. JOHN CARPENTER FREEWAY, SUITE 1300, IRVING, TEXAS 75062 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 444-4900 FELCOR SUITE HOTELS, INC. (Former name or former address, if changed since last report) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On July 28, 1998, pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated as of March 23, 1998 by and between FelCor Lodging Trust Incorporated (formerly FelCor Suite Hotels, Inc.), a Maryland corporation ("FelCor"), and Bristol Hotel Company, a Delaware corporation ("Bristol"), Bristol was merged with and into FelCor (the "Merger"). In connection with the Merger, FelCor changed its name to "FelCor Lodging Trust Incorporated." Annual meetings of the stockholders of FelCor and Bristol were held on July 27, 1998 at which the stockholders were asked, pursuant to a Joint Proxy Statement/Prospectus dated June 19, 1998 (the "Proxy Statement/Prospectus") contained within FelCor's Form S-4 Registration Statement (No. 333-50509), to consider and vote upon, among other things, the Merger Agreement. The stockholders of each of FelCor and Bristol approved and adopted the Merger Agreement at their respective meetings. Following receipt of these approvals, Articles of Merger and a Certificate of Merger relating to the Merger were filed with the appropriate state authorities of the States of Maryland and Delaware. The Merger became effective at 9:00 a.m., Eastern time, on July 28, 1998. Prior to the effectiveness of the Merger, Bristol completed the distribution to its stockholders ("Spin-Off") of all of the outstanding stock of Bristol Hotels & Resorts ("BHR"), which became effective on July 27, 1998. Stockholders of Bristol as of the close of business on July 27, 1998 received one share of common stock, par value $.01 per share, of BHR for every two shares of common stock of Bristol owned by them. BHR succeeded to the hotel operating business of Bristol and in connection therewith, assumed most of Bristol's former employees. The completion of the Spin-Off was a condition to the consummation of the Merger. BHR and its subsidiaries operate the hotels acquired by FelCor in the Merger pursuant to percentage leases. Upon consummation of the Merger, each outstanding share of Bristol common stock was converted into the right to receive 0.685 of a share of the common stock of FelCor, par value $.01 per share ("Common Stock"). Fractional shares of Common Stock, if any, were not issued in connection with the Merger. Holders of fractional shares are entitled to receive an amount in cash equal to the product of such fractional share multiplied by $29.0625, the closing price per share of Common Stock as reported in the New York Stock Exchange, Inc. Composite Tape on July 28, 1998. The exchange ratio was determined through arm's-length negotiation between FelCor and Bristol. The Common Stock continues to be listed and traded on the New York Stock Exchange, Inc. under the symbol "FCH". Following the effectiveness of the Merger, FelCor contributed substantially all of the assets acquired by it pursuant to the Merger to FelCor Lodging Limited Partnership (formerly FelCor Suites Limited Partnership) (the "Partnership") in exchange for additional units of general partner interest in the Partnership. As a result of such contribution, FelCor owns a 95.7% general partner interest in the Partnership. In connection with this contribution, the Partnership changed its name to "FelCor Lodging Limited Partnership." 2 3 The other information required by this item has been previously reported by FelCor and is included or incorporated by reference in the Joint Proxy Statement/Prospectus. ITEM 5. OTHER EVENTS FelCor held its 1998 Annual Meeting of Stockholders of FelCor on July 27, 1998 (the "Annual Meeting"). At the Annual Meeting, the stockholders of FelCor (i) approved and adopted the Merger Agreement, (ii) approved an amendment to FelCor's Charter to change the name of FelCor from FelCor Suite Hotels, Inc. to FelCor Lodging Trust Incorporated, (iii) approved an amendment to FelCor's Charter to increase the authorized number of shares of capital stock of FelCor to 220,000,000 shares, consisting of 200,000,000 shares of Common Stock and 20,000,000 of preferred stock, par value $.01 per share, (iv) elected Michael D. Rose and Charles N. Matthewson as Class I directors of FelCor, to serve until the Annual Meeting of Stockholders to be held in 2001, and (v) approved FelCor's 1998 Restricted Stock and Stock Option Plan ("1998 Plan"). The amendments to FelCor's Charter became effective July 28, 1998. The total number of shares entitled to vote at the Annual Meeting was 36,591,080 shares of Common Stock. The following table sets forth, with respect to each matter voted upon at the Annual Meeting, the number of votes cast for, the number of votes cast against, the number of votes abstaining (or, with respect to the election of directors, the number of votes withheld), and the number of broker non-votes, with respect to such matter:
Votes Votes Abstained/ Broker Votes For Against Withheld Non-Votes --------- ------- ---------- --------- Adoption of Merger Agreement 27,405,828 125,738 74,437 4,732,847 Approval of Charter Amendment to 27,454,446 87,290 64,268 4,732,846 Change Name Approval of Charter Amendment to 24,150,101 3,388,206 67,696 4,732,847 Increase Authorized Shares Election of Directors: Michael D. Rose 32,276,002 --- 62,848 --- Charles N. Matthewson 32,274,794 --- 64,056 --- Approval of the 1998 Plan 25,140,222 7,089,800 108,828 ---
In addition, upon the effectiveness of the Merger, the Board of Directors of FelCor was increased to ten directors and Donald J. McNamara, Richard C. North and Robert H. Lutz, Jr. were added as directors of FelCor. 3 4 ITEM 7. FINANCIAL STATEMENT AND EXHIBITS (a) Financial statements of businesses acquired. The audited financial statements of Bristol for the three previous calendar years, and the accountants' report related thereto, are set forth in FelCor's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 23, 1998 and are incorporated herein by reference. The unaudited financial statements of Bristol for the period ended March 31, 1998 set forth in Bristol's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, are filed as an exhibit to this report and are incorporated herein by reference. (b) Pro forma financial information. The pro forma financial information required by this item is set forth under the caption "Pro Forma Financial Information" on pages 72 through 89 of the Joint Proxy Statement/Prospectus and is incorporated herein by reference. (c) Exhibits. The following exhibits are furnished in accordance with Item 601 of Regulation S-K: EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 2.1 Agreement and Plan of Merger by and between FelCor Suite Hotels, Inc. and Bristol Hotel Company dated as of March 23, 1998 (filed as Exhibit 99 to FelCor's Current Report on Form 8-K dated March 24, 1998 and filed April 23, 1998 and incorporated herein by reference) 3.1 Articles of Amendment and Restatement dated June 22, 1995, amending and restating the Charter of FelCor, as amended or supplemented by Articles of Merger dated June 23, 1995, Articles Supplementary dated April 30, 1996, Articles of Amendment dated August 8, 1996, Articles of Amendment dated June 16, 1997, Articles of Amendment dated October 30, 1997, Articles Supplementary dated May 6, 1998, Articles of Merger and attached Articles of Amendment dated July 27, 1998 4 5 10.14 Fourth Amended and Restated Revolving Credit Agreement dated as of July 1, 1997 among FelCor and the Partnership, as Borrower, the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent, Chase Securities, Inc. as Arranger, and Bankers Trust Company, NationsBank, N.A. and Wells Fargo Bank, National Association as Co-Arrangers and Documentation Agents 10.17 Amended and Restated Master Hotel Agreement dated as of July 27, 1998 among FelCor, the Partnership, BHR and the lessors and lessees named therein 10.18 Stockholders' and Registration Rights Agreement dated as of July 27, 1998, by and among FelCor, Bass America, Inc., Holiday Corporation, Bass plc, United/Harvey Investors I, L.P., United/Harvey Investors II, L.P. , United/Harvey Investors III, L.P., United/Harvey Investors IV, L.P. and United/Harvey Investors V, L.P. 99.1 Financial Statements of Bristol Hotel Company excerpted from the Quarterly Report on Form 10-Q of Bristol Hotel Company for the quarter ended March 30, 1998 99.2 Press Release dated July 27, 1998 99.3 Press Release dated July 28, 1998 5 6 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. FELCOR LODGING TRUST INCORPORATED Date: August __, 1998 By: /s/ Lawrence D. Robinson --------------------------------- Lawrence D. Robinson Senior Vice President, General Counsel and Secretary 6 7 INDEX TO EXHIBITS
EXHIBIT SEQUENTIALLY NUMBER DESCRIPTION OF EXHIBIT NUMBERED PAGE ------ ---------------------- ------------- 2.1 Agreement and Plan of Merger by and between FelCor Suite Hotels, Inc. and Bristol Hotel Company dated as of March 23, 1998 (filed as Exhibit 99 to FelCor's Current Report on Form 8-K dated March 24, 1998 and filed April 23, 1998 and incorporated herein by reference) 3.1 Articles of Amendment and Restatement dated June 22, 1995, amending and restating the Charter of FelCor, as amended or supplemented by Articles of Merger dated June 23, 1995, Articles Supplementary dated April 30, 1996, Articles of Amendment dated August 8, 1996, Articles of Amendment dated June 16, 1997, Articles of Amendment dated October 30, 1997, Articles Supplementary dated May 6, 1998, Articles of Merger and attached Articles of Amendment dated July 27, 1998 10.14 Fourth Amended and Restated Revolving Credit Agreement dated as of July 1, 1997 among FelCor and the Partnership, as Borrower, the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent, Chase Securities, Inc. as Arranger, and Bankers Trust Company, NationsBank, N.A. and Wells Fargo Bank, National Association as Co- Arrangers and Documentation Agents 10.17 Amended and Restated Master Hotel Agreement dated as of July 27, 1998 among FelCor, the Partnership, BHR and the lessors and lessees named therein 10.18 Stockholders' and Registration Rights Agreement dated as of July 27, 1998, by and among FelCor, Bass America, Inc., Holiday Corporation, Bass plc, United/Harvey Investors I, L.P., United/Harvey Investors II, L.P. , United/Harvey Investors III, L.P., United/Harvey Investors IV, L.P. and United/Harvey Investors V, L.P. 99.1 Financial Statements of Bristol Hotel Company excerpted from the Quarterly Report on Form 10-Q of Bristol Hotel Company for the quarter ended March 30, 1998 99.2 Press Release dated July 27, 1998 99.3 Press Release dated July 28, 1998
EX-3.1 2 ARTICLES OF AMENDMENT & RESTATEMENT DATED 6/22/95 1 EXHIBIT 3.1 STATE OF MARYLAND 370884 DEPARTMENT OF ASSESSMENTS AND TAXATION 301 West Preston Street Baltimore, Maryland 21201 DATE: JUNE 22, 1995 THIS IS TO ADVISE YOU THAT THE ARTICLES OF AMENDMENT AND RESTATEMENT FOR FELCOR SUITE HOTELS, INC. WERE RECEIVED AND APPROVED FOR RECORD ON JUNE 22, 1995 AT 11:22 AM. FEE PAID: 50.00 [SEAL] HARRY J. NOONAN CHARTER SPECIALIST 2 ARTICLES OF AMENDMENT AND RESTATEMENT OF FELCOR SUITE HOTELS, INC. Felcor Suite Hotels, Inc., a Maryland corporation (the "Corporation"), certifies as follows: FIRST: The Corporation desires to amend and restate its Charter as currently in effect, and, upon acceptance for record of these Articles of Amendment and Restatement by the State Department of Assessments and Taxation of the State of Maryland, the provisions set forth in these Articles of Amendment and Restatement will be all of the provisions of the Charter of the Corporation as currently in effect. SECOND: The Charter of the Corporation is hereby amended and restated in its entirety to read as set forth in Exhibit A attached hereto. THIRD: The amendment and restatement of the charter of the Corporation set forth in these Articles of Amendment and Restatement was advised by the Board of Directors of the Corporation and was approved by the sole stockholder of the Corporation. FOURTH: The current address of the principal office of the Corporation is 11 East Chase Street, Baltimore, Maryland 21202. FIFTH: The name and address of the current resident agent of the Corporation is CSC-Lawyers Incorporating Service Company, 11 East Chase Street, Baltimore, Maryland 21202. SIXTH: The current number of directors of the Corporation is one (1), which number may be increased or decreased from time to 3 time pursuant to the Charter and the Bylaws of the Corporation. The name of the current sole director of the Corporation is Thomas J. Corcoran, Jr. SEVENTH: The amendment set forth in these Articles of Amendment and Restatement does not increase the authorized capital stock of the Corporation. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to be executed in its name and on its behalf as of the 22nd day of June 1995, by its President, who acknowledges that these Articles of Amendment and Restatement are the act of the Corporation and certifies that, to the best of his knowledge, information and belief and under penalties for perjury, all matters and facts contained in these Articles of Amendment and Restatement are true in all material respects. ATTEST: FELCOR SUITE HOTELS, INC. /s/ NICHOLAS R. PETERSON By: /s/ THOMAS J. CORCORAN, JR. [SEAL] ------------------------ --------------------------- Nicholas R. Peterson Thomas J. Corcoran, Jr. Assistant Secretary President - 2 - 4 EXHIBIT A ARTICLE I. I, David A. Gibbons, whose post office address is 10 Light Street, Baltimore, Maryland 21202, being at least 18 years of age, hereby form a corporation under the Maryland General Corporation Law. ARTICLE II. NAME The name of the Corporation is: FelCor Suite Hotels, Inc. ARTICLE III. NATURE OF BUSINESS OR PURPOSES The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Maryland General Corporation Law. In addition to the powers and privileges conferred upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers and privileges which are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation. Without limiting the generality of the foregoing purpose, at such time or times as the Board of Directors determines that it is in the interest of the Corporation and its stockholders that the Corporation engage in the business of, and conduct its business and affairs so as to qualify as, a real estate investment trust (as that phrase is defined in the Internal Revenue Code of 1986, as amended (the "Code")), the purpose of the Corporation shall include engaging in the business of a real estate investment trust ("REIT"). This reference to such purpose shall not make unlawful or unauthorized any otherwise lawful act or activity that the Corporation may take that is inconsistent with such purpose. ARTICLE IV. PRINCIPAL OFFICE AND RESIDENT AGENT The address of the Corporation's principal office in the State of Maryland is 11 East Chase Street, Baltimore, Maryland 21202. The name and address of its resident agent is CSC-Lawyers Incorporating Service Company, 11 East Chase Street, Baltimore, Maryland 21202. 5 ARTICLE V. CAPITAL STOCK A. Authorized Shares. The total number of shares of capital stock that the Corporation shall have authority to issue is Sixty Million (60,000,000) shares, consisting of Fifty Million (50,000,000) shares of Common Stock, of the par value of One Cent ($0.01) each, and Ten Million (10,000,000) shares of Preferred Stock, of the par value of One Cent ($0.01) each, amounting in aggregate par value of $600,000. B. The following is a description of each class of the capital stock that the Corporation shall have authority to issue, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption thereof to the extent applicable thereto: Common Stock. (1) Dividend Rights. Subject to the rights of any series of Preferred Stock created pursuant to the further provisions of this Section B of this Article and subject to the terms of Article V hereto, the holders of shares of Common Stock shall be entitled to receive such dividends as may be declared thereon by the Board of Directors out of funds legally available therefor. (2) Voting Rights. Subject to the rights of the holders of any series of Preferred Stock created pursuant to the further provisions of this Section B of this Article, the holders of shares of the Common Stock shall possess all of the voting power of the capital stock of the Corporation and shall have the exclusive right to vote upon, authorize and approve any and all matters which may properly come before the stockholders of the Corporation. Each holder of shares of Common Stock shall be entitled to one vote for each share of Common Stock held by such stockholder. (3) Rights Upon Liquidation. Subject to the rights of any series of Preferred Stock created pursuant to the further provisions of this Section B of this Article and subject to the terms of Article V hereto, in the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Corporation, each holder of shares of Common Stock shall be entitled to receive, ratably with each other holder of shares of Common Stock, that portion of the assets of the Corporation available for distribution to the holders of its Common Stock. Preferred Stock. Subject to the provisions of sections D. and E. of this Article V, the Board of Directors of the Corporation is hereby authorized and empowered to classify or reclassify, in one or more series, any of the unissued shares of the Preferred Stock of the Corporation by establishing the number of shares of such series and by setting, changing or eliminating any of the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms and condition of redemption of such shares, all of which shall be set forth in articles supplementary to this Charter executed, acknowledged, filed and -2- 6 recorded in the manner required by the Maryland General Corporation Law ("Articles Supplementary"), and as may be permitted by the Maryland General Corporation Law. C. Issuance of Stock. The Board of Directors is hereby authorized and empowered to authorize the issuance by the Corporation from time to time of shares of any class of capital stock of the Corporation, whether now or hereafter authorized, or securities convertible into shares of capital stock of any class or classes, whether now or hereafter authorized, for such consideration and on such terms and conditions as may be deemed advisable by the Board of Directors and without any action by the stockholders. D. Restrictions on Transfer; Designation of Shares-in-Trust. (1) Definitions. For purposes of this Section D, the following terms shall have the following meanings: "Beneficial Ownership" shall mean ownership of Equity Stock by a Person who would be treated as an owner of such shares of Equity Stock either directly or indirectly through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall have correlative meanings. "Beneficiary" shall mean, with respect to any Trust, one or more organizations described in each of Section 170(b)(1)(A) and Section 170(c) of the Code which are named by the Corporation as the beneficiary or beneficiaries of such Trust, in accordance with the provisions of subsection E.(1) of this Article V. "Board of Directors" shall mean the Board of Directors of the Corporation. "Bylaws" shall mean the Bylaws of the Corporation, as amended. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Constructive Ownership" shall mean ownership of Equity Stock by a Person who would be treated as an owner of such shares of Equity Stock either directly or indirectly through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive Owner," "Constructively Owns" and "Constructively Owned" shall have correlative meanings. "Equity Stock" shall mean authorized capital stock of the Corporation that is either Preferred Stock or Common Stock and shall include all shares of Preferred Stock or Common Stock that are held as Shares-in-Trust in accordance with the provisions of section E. of this Article V. "Market Price" shall mean, on any date and with respect to any Equity Stock, the average of the Closing Price for the five consecutive Trading Days ending on such -3- 7 date. The "Closing Price" shall mean, on any date and with respect to any Equity Stock, the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, of such Equity Stock, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if such Equity Stock is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Equity Stock is listed or admitted to trading or, if such Equity Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if such Equity Stock is not quoted by any such organization, the average of the closing bid and asked prices of such Equity Stock as furnished by a professional market maker, selected by the Board of Directors of the Company, then making a market in such Equity Stock. "Trading Day" shall mean a day on which the principal national securities exchange on which such Equity Stock is listed or admitted to trading is open for the transaction of business or, if such Equity Stock is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Merger" shall mean the merger of FelCor Suite Hotels, Inc., a Delaware corporation, with and into the Corporation. "Ownership Limit" shall mean, with respect to each class of Equity Stock of the Corporation outstanding as of any particular time, 9.9% of the total number of such shares of such class of Equity Stock outstanding as of such time. "Non-Transfer Event" shall mean an event other than a purported Transfer that would cause any Person to Beneficially Own or Constructively Own shares of Equity Stock in excess of the Ownership Limit, including, but not limited to, the granting of any option or entering into any agreement for the sale, transfer or other disposition of Equity Stock or the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Equity Stock. "Permitted Transferee" shall mean any Person designated as a Permitted Transferee in accordance with the provisions of subsection E.(5) of this Article V. "Person" shall mean an individual, corporation, partnership, limited liability company, estate, trust, association, joint stock company, government or agency or subdivision thereof, charitable organization, or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. -4- 8 "Prohibited Owner" shall mean, with respect to any purported Transfer or Non-Transfer Event, any Person who, but for the provisions of subsection D.(3) of this Article V, would own record title to shares of Equity Stock. "REIT" shall mean a Real Estate Investment Trust under Section 856 of the Code. "Restriction Termination Date" shall mean the first day after the date of the Merger on which the Board of Directors and the stockholders of the Corporation determine, in accordance with the provisions of Article VII hereof, that it is no longer in the best interests of the Corporation to attempt to, or continue to, qualify as a REIT. "Transfer" shall mean any sale, transfer, gift, assignment, devise or other disposition of Equity Stock, whether voluntary or involuntary, whether of record, constructively or beneficially and whether by operation of law or otherwise. "Trust" shall mean any separate trust created pursuant to subsection D.(3) of this Article V and administered in accordance with the terms of section E. of this Article V, for the exclusive benefit of any Beneficiary. "Trustee" shall mean any person or entity unaffiliated with both the Corporation and any Prohibited Owner, such Trustee to be designated by the Corporation to act as trustee of any Trust, or any successor trustee thereof. (2) Restriction on Transfers. (a) Except as provided in subsection D.(9) of this Article V, from the date of the Merger and prior to the Restriction Termination Date, no Person shall Beneficially Own or Constructively Own shares of the outstanding Equity Stock in excess of the Ownership Limit. (b) Except as provided in subsection D.(9) of this Article V, from the date of the Merger and prior to the Restriction Termination date, any Transfer that, if effective, would result in any Person Beneficially Owning or Constructively Owning Equity Stock in excess of the Ownership Limit shall be void ab initio as to the Transfer of that number of shares of Equity Stock which would be otherwise Beneficially Owned or Constructively Owned by such Person in excess of the Ownership Limit; and the intended transferee shall acquire no rights in such excess shares of Equity Stock. (c) Notwithstanding any other provision herein, from the date of the Merger and prior to the Restriction Termination Date, any Transfer that, if effective, would result in the Equity Stock being directly or indirectly owned by fewer than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio in its entirety; and the intended transferee shall acquire no rights in such shares of Equity Stock. -5- 9 (d) Notwithstanding any other provision herein, from the date of the Merger and prior to the Restriction Termination Date, any Transfer of shares of Equity Stock that, if effective, would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer of that number of shares of Equity Stock which would cause the Corporation to be "closely held" within the meaning of Section 856(h) of the Code; and the intended transferee shall acquire no rights in such excess shares of Equity Stock. (e) Notwithstanding any other provision herein, from the date of the Merger and prior to the Restriction Termination Date, any Transfer of shares of Equity Stock that, if effective, would result in the Corporation Constructively Owning 10% or more of the ownership interests in any tenant or subtenant of the Corporation's real property (including the real property held by FelCor Suites Limited Partnership and any other partnership in which the Corporation owns an interest subsequent to the Merger), within the meaning of Section 856(d)(2)(B) of the Code, shall be void ab initio as to the Transfer of that number of shares of Equity Stock in excess of the number that could have been Transferred without such result; and the intended transferee shall acquire no rights in such excess shares of Equity Stock. (f) Notwithstanding any other provision herein, from the date of the Merger and prior to the Restriction Termination Date, any Transfer of shares of Equity Stock that, if effective, would cause the Corporation to fail to qualify as a REIT shall be void ab initio as to the Transfer of that number of shares of Equity Stock in excess of the number that could have been Transferred without such result; and the intended transferee shall acquire no rights in such excess shares of Equity Stock. (3) Transfer in Trust. (a) If, notwithstanding the other provisions contained in this Article V, at any time after the date of the Merger and prior to the Restriction Termination Date, there is a purported Transfer or Non-Transfer Event such that any Person would either Beneficially Own or Constructively Own Equity Stock in excess of the Ownership Limit, then, (i) except as otherwise provided in subsection D.(9) of this Article V, the purported transferee shall acquire no right or interest (or, in the case of a Non-Transfer Event, the person holding record title to the Equity Stock Beneficially Owned or Constructively Owned by such Beneficial Owner or Constructive Owner, shall cease to own any right or interest) in such number of shares of Equity Stock which would cause such Beneficial Owner or Constructive Owner to Beneficially Own or Constructively Own shares of Equity Stock in excess of the Ownership Limit; and (ii) such number of shares of Equity Stock in excess of the Ownership Limit (rounded up to the nearest whole share) shall be designated Shares-in-Trust and, in accordance with the provisions of section E. of this Article V, transferred automatically and by operation of law to and held in a Trust. Such transfer to a Trust and the designation of the shares as Shares-in-Trust shall be effective as of the close of business on the business day next preceding the date of the purported Transfer or Non-Transfer Event, as the case may be. -6- 10 (b) If, notwithstanding the other provisions contained in this Article V, at any time after the date of the Merger and prior to the Restriction Termination Date, there is a purported Transfer or Non-Transfer Event that, if effective, would cause the Corporation either to become "closely held" within the meaning of Section 856(h) of the Code, to Constructively Own 10% or more of the ownership interests in any tenant or subtenant of the Corporation's real property (including the real property held by FelCor Suites Limited Partnership and any other partnership in which the Corporation owns an interest subsequent to the Merger) within the meaning of Section 856(d)(2)(B) of the Code, or otherwise to fail to qualify as a REIT (other than as a result of a violation of the requirement, contained in Section 856 (a)(5) of the Code, that a REIT have at least 100 shareholders), then (i) the purported transferee shall acquire no right or interest (or, in the case of a Non-Transfer Event, the person holding record title to the Equity Stock with respect to which such Non-Transfer Event occurred, shall cease to own any right or interest) in such number of shares of Equity Stock, the ownership of which by such purported transferee or record holder would cause the Corporation either to be "closely held" within the meaning of Section 856(h) of the Code, to violate the 10% limitation of Section 856(d)(2)(B) of the Code or otherwise to fail to qualify as a REIT (other than as a result of a violation of the 100 shareholder requirement of Section 865(a)(5) of the Code; and (ii) such number of shares of Equity Stock (rounded up to the nearest whole share) shall be designated Shares-in-Trust and, in accordance with the provisions of section E. of this Article V, transferred automatically and by operation of law to a Trust to be held therein in accordance with that section E. Such transfer to a Trust and the designation of shares as Shares-in-Trust shall be effective as of the close of business on the business day next preceding the date of the Transfer or Non-Transfer Event, as the case may be. (4) Remedies For Breach. If the Corporation or its designees at any time shall determine in good faith that a Transfer has taken place in violation of subsection D.(2) of this Article V or that a Person intends to acquire or has attempted to acquire Beneficial Ownership or Constructive Ownership of any shares of Equity Stock in violation of subsection D.(2) of this Article V, the Board of Directors shall be authorized and empowered to take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or acquisition, including, but not limited to, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer or acquisition. (5) Notice of Restricted Transfer. Any Person who attempts to acquire or acquires shares of Equity Stock in violation of subsection D.(2) of this Article V, or any Person who holds record title to any shares of Equity Stock that were transferred to a Trust pursuant to the provisions of subsection D.(3) of this Article V, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such purported Transfer or the Non-Transfer Event, as the case may be, on the Corporation's status as a REIT. -7- 11 (6) Owners Required To Provide Information. From the date of the Merger and prior to the Restriction Termination Date: (a) Each person who is a Beneficial Owner or Constructive Owner of more than 5% (or such lower percentage as may be required pursuant to the Code or regulations issued under the Code) of the outstanding Equity Stock of the Corporation shall, no later than January 30 of each year, give written notice to the Corporation stating the name and address of such Beneficial Owner or Constructive Owner, the number of shares of Equity Stock Beneficially Owned or Constructively Owned, and a description of how such shares are held. Each such Beneficial Owner or Constructive Owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporation's status as a REIT and to ensure compliance with the Ownership Limit. (b) Each Person who is a Beneficial Owner or Constructive Owner of Equity Stock and each Person (including a stockholder of record) who is holding Equity Stock for a Beneficial Owner or Constructive Owner shall provide to the Corporation, promptly following any request therefor, such information as the Corporation may deem necessary in order to determine the Corporation's status as a REIT and to ensure compliance with the Ownership Limit. (7) Remedies Not Limited. Nothing contained in this Article V shall limit the authority of the Board of Directors to take any and all lawful actions, whether or not specifically set forth herein, as it deems necessary or advisable to protect the Corporation and the interests of its stockholders by preserving the Corporation's status as a REIT and by ensuring compliance with the Ownership Limit. (8) Ambiguity. In the case of an ambiguity in the application of any of the provisions of sections D. or E., including but not limited to any definition contained in subsection D.(1), of this Article V, the Board of Directors shall have the power to finally resolve such ambiguity and interpret the provisions hereof with respect to any situation, based on the facts known to it. (9) Exception. The ownership limitations set forth in subsections D.(2) and/or D.(3) of this Article V shall not apply to the acquisition of shares of Equity Stock of the Corporation by an underwriter in a public offering of those shares or in any transaction involving the issuance of shares of Equity Stock by the Corporation in which the Board of Directors determines that the underwriter or other person or party initially acquiring those shares will timely distribute those shares to or among others so that, following such distribution, the ownership of those shares will not be in violation of subsections D.(2) and/or D.(3) of this Article V. The Board of Directors, in the exercise of its sole and absolute discretion, may exempt from the operation of subsections D.(2) and/or D.(3) of this Article V certain specified shares of Equity Stock of the Corporation proposed to be transferred to, and/or owned by, a person who has provided the Board of Directors with such evidence, undertakings and assurances as the Board of Directors may require that such transfer to, and/or ownership by, such person of the specified shares will not prevent the continued qualification of the Corporation as a REIT under the Code and the regulations issued under the Code. The Board -8- 12 of Directors may, but shall not be required, to condition the grant of any such exemption upon the obtaining of an opinion of counsel, a ruling from the Internal Revenue Service or such other assurances as the Board of Directors shall deem to be satisfactory. (10) Legend. Each certificate for Equity Stock, in addition to any other legend that may be placed thereon, shall bear the following legend: "The shares of Equity Stock represented by this certificate are subject to restrictions on transfer for the purpose of maintaining the Corporation's status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the "Code"). No Person may at any time (1) Beneficially Own or Constructively Own shares of any class of Equity Stock in excess of 9.9% (or such other percentage as may be determined by the Board of Directors of the Corporation) of the total number of shares of such class of Equity Stock outstanding as of such time; (2) Beneficially Own Equity Stock which would result in the Corporation being "closely held" under Section 856(h) of the Code; or (3) Constructively Own Equity Stock which would result in the Corporation Constructively Owning 10% or more of the ownership interests in any tenant or subtenant of the Corporation's real property (including the real property held by FelCor Suites Limited Partnership and any other partnership in which the Corporation owns an interest), within the meaning of Section 856(d)(2)(B) of the Code. Any Person who attempts to Beneficially Own or Constructively Own shares of Equity Stock in excess of the above limitations must immediately notify the Corporation in writing. If the restrictions above are violated, the shares of Equity Stock represented hereby will be transferred automatically and by operation of law to a Trust and shall be designated Shares-in-Trust. All capitalized terms in this legend have the meanings assigned to them in the Corporation's Charter, as the same may be further amended from time to time. The shares of Equity Stock represented by this certificate are subject to all of the provisions of the Charter and Bylaws of the Corporation, each as amended from time to time, to all of which the holder, by acceptance hereof, assents. The Corporation will furnish to any stockholder, upon request and without charge, a copy of its Charter and Bylaws, and all amendments thereto, setting forth the restrictions on transfer and a statement of (i) the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the stock of each class which the Corporation is authorized to issue, (ii) the differences in the relative rights and preferences between the shares of each series of each class of the stock which the Corporation is authorized to issue to the extent they have been set by the Board of Directors and (iii) the authority of the Board of Directors to set the relative rights and preferences of subsequent series of stock of the Corporation." (11) Severability. If any provision of this Article V or any application of any such provision is determined to be invalid by any Federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications -9- 13 of such provision shall be affected only to the extent necessary to comply with the determination of such court. E. Shares-in-Trust. (1) Trust. Any shares of Equity Stock transferred to a Trust and designated Shares-in-Trust pursuant to subsection D.(3) of this Article V shall be held by the Trustee for the exclusive benefit of the Beneficiary. The Corporation shall name a beneficiary or beneficiaries of each Trust within five (5) business days after receipt of written notice of the existence thereof. Any transfer to a Trust and designation of shares of Equity Stock as Shares-in-Trust, pursuant to subsection D.(3) of this Article V, shall be effective as of the close of business on the business day next preceding the date of the purported Transfer or Non-Transfer Event that results in the transfer to such Trust. Shares-in-Trust shall remain issued and outstanding shares of Equity Stock of the Corporation and shall be entitled to the same rights and privileges on identical terms and conditions as are all other issued and outstanding shares of Equity Stock of the same class and series. When transferred to a Permitted Transferee, in accordance with the provisions of subsection E.(5) of this Article V, such Shares-in-Trust shall be released from the Trust and cease to be designated as Shares-in-Trust. (2) Dividend Rights. The Trustee, as the record holder of Shares-in-Trust, shall be entitled to receive all dividends and distributions as may be declared by the Board of Directors of the Corporation on such shares of Equity Stock and shall hold such dividends or distributions in trust for the benefit of the Beneficiary. The Prohibited Owner with respect to Shares-in-Trust shall repay to the Trustee the amount of any dividends or distributions received by it that (i) are attributable to any shares of Equity Stock designated Shares-in-Trust and (ii) the record date of which was on or after the date that such shares became Shares-in-Trust. The Corporation shall take all lawful measures that the Board of Directors determines to be reasonably necessary to recover the amount of any such dividend or distribution paid to a Prohibited Owner, including, if necessary, withholding any portion of future dividends or distributions payable on shares of Equity Stock Beneficially Owned or Constructively Owned by the Person who, but for the provisions of subsection D.(3) of this Article V, would Constructively Own or Beneficially Own the Shares-in-Trust; and, as soon as reasonably practicable following the Corporation's receipt or withholding thereof, shall pay over to the Trustee for the benefit of the Beneficiary the dividends so received or withheld, as the case may be. (3) Rights Upon Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Corporation, each Trustee of Shares-in-Trust shall be entitled to receive, ratably with each other holder of Equity Stock of the same class or series, that portion of the assets of the Corporation which is available for distribution to the holders of such class and series of Equity Stock. The Trustee shall distribute to the Prohibited Owner the amounts received upon such liquidation, dissolution, or winding up, or distribution; provided, however, that the Prohibited Owner shall not be entitled to receive amounts pursuant to this subsection E.(3) in excess of, in the case of a purported Transfer in which the Prohibited Owner gave value for shares of Equity Stock and which Transfer resulted in the transfer of the shares to the Trust, the price per share, if any, such Prohibited Owner paid for the Equity Stock and, in the case of a Non-Transfer Event or -10- 14 Transfer in which the Prohibited Owner did not give value for such shares (e.g., if the shares were received through a gift or devise) and which Non-Transfer Event or Transfer, as the case may be, resulted in the transfer of shares to the Trust, the price per share equal to the Market Price on the date of such Non-Transfer Event or purported Transfer. Any remaining amount in such Trust shall be distributed to the Beneficiary. (4) Voting Rights. The Trustee shall be entitled to vote all Shares-in-Trust. Any vote by a Prohibited Owner as a holder of shares of Equity Stock prior to the discovery by the Corporation that the shares of Equity Stock are Shares-in-Trust shall, subject to applicable law, be rescinded and shall be void ab initio with respect to such Shares-in-Trust and the Prohibited Owner shall be deemed to have given, as of the close of business on the business day prior to the date of the purported Transfer or Non-Transfer Event that results in the transfer to the Trust of the shares of Equity Stock under subsection E.(3) of this Article V, an irrevocable proxy to the Trustee to vote the Shares-in-Trust in the manner in which the Trustee, in its sole and absolute discretion, desires. (5) Designation of Permitted Transferee. The Trustee shall have the exclusive and absolute right to designate a Permitted Transferee of any and all Shares-in-Trust. As soon as reasonably practicable, but in an orderly fashion so as not to materially adversely affect the Market Price of the Shares-in-Trust, the Trustee shall designate one or more Persons as Permitted Transferees, provided, however, that (i) each such Permitted Transferee so designated shall purchase for valuable consideration (whether in a public or private sale) the Shares-in-Trust and (ii) each such Permitted Transferee so designated may acquire such Shares-in-Trust without such acquisition resulting in a transfer to a Trust and the redesignation of such shares of the Equity Stock so acquired as Shares-in-Trust pursuant to the provisions of subsection D.(3) of this Article V. Upon the designation by the Trustee of a Permitted Transferee in accordance with the provisions of this subsection E.(5), the Trustee of a Trust shall (i) cause to be transferred to the Permitted Transferee that number of Shares-in-Trust acquired by the permitted Transferee; (ii) cause to be recorded on the books of the Corporation that the Permitted Transferee is the holder of record of such number of shares of Equity Stock; and (iii) distribute to the Beneficiary any and all amounts held with respect to the Shares-in-Trust after making payment to the Prohibited Owner of the amount determined pursuant to subsection E.(6) of this Article V. (6) Compensation to Record Holder of Shares of Equity Stock that Become Shares-In-Trust. Any Prohibited Owner shall be entitled (after giving written notice to the Corporation of the existence of Shares-in-Trust and following the designation of the Permitted Transferee in accordance with subsection D.(5) of this Article V) to receive from the Trustee, in respect of such Shares-in-Trust, the lesser of (i) in the case of (a) a purported Transfer in which the Prohibited Owner gave value for shares of Equity Stock and which Transfer resulted in the transfer of the shares to a Trust, the price per share, if any, such Prohibited Owner paid for the Equity Stock, or (b) a Non-Transfer Event or purported Transfer in which the Prohibited Owner did not give value for such shares (e.g., if the shares were received through a gift or devise) and which Non-Transfer Event or purported Transfer, as the case may be, resulted in the transfer of shares to the Trust, the price per share equal to the Market Price on the date of such Non-Transfer Event or purported Transfer or (ii) the price per share received by the Trustee of the Trust from the sale or other disposition of such Shares-in-Trust in accordance with subsection E.(5) of this Article V. Any amounts received by the Trustee in respect of such -11- 15 Shares-in-Trust and in excess of such amounts to be paid to the Prohibited Owner pursuant to this subsection E.(6) shall be distributed to the Beneficiary in accordance with the provisions of subsection E.(5) of this Article V. Each Beneficiary and Prohibited Owner waive any and all claims that it may have against the Trustee and the Corporation arising out of the transfer of any Equity Stock to a Trust, the designation of any Equity Stock as Shares-in-Trust and the disposition of any Shares-in-Trust, except for claims arising out of the gross negligence or willful misconduct of, or any failure to make payments in accordance with section E. of this Article V by, such Trustee or the Corporation. (7) Purchase Right in Shares-in-Trust. Shares-in-Trust shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such shares being designated as Shares-in-Trust (or, in the case of devise, gift or Non- Transfer Event, the Market Price at the time of such devise, gift or Non-Transfer Event) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of ninety days after the later of (A) the date of the Non-Transfer Event or purported Transfer which resulted in such Shares-in-Trust and (B) the date the Corporation determines in good faith that a purported Transfer or Non-Transfer Event resulting in the designation of any Equity Stock as Shares-in-Trust has occurred, if the Corporation does not receive a written notice of such purported Transfer or Non-Transfer Event pursuant to subsection D.(5) of this Article V. F. Preemptive Rights. No holder of any stock or any other securities of the Corporation, whether now or hereafter authorized, shall have any preemptive right to subscribe for or purchase any stock or any other securities of the Corporation other than such, if any, as the Board of Directors, in its sole discretion, may determine and at such price or prices and upon such other terms as the Board of Directors, in its sole discretion, may fix; and any stock or other securities which the Board of Directors may determine to offer for subscription may, as the Board of Directors in its sole discretion shall determine, be offered to the holders of any class or series of stock or other securities at the time outstanding to the exclusion of the holders of any or all other classes or series of stock or other securities at the time outstanding. G. Amendment of this Article. Notwithstanding any other provisions of this Charter or the Bylaws of the Corporation (and notwithstanding that some lesser percentage may be permitted by law, this Charter or the Bylaws of the Corporation), no provision of sections D., E. or G. of this Article V shall be amended, altered, changed or repealed unless such amendment, alteration, change, or repeal shall have been advised and approved by the affirmative vote of a majority of the members of the Board of Directors and adopted by the affirmative vote of the holders of not less than 66 2/3% of the outstanding shares of capital stock of the Corporation entitled to vote on such matter, voting together as a single class. ARTICLE VI. DIRECTORS A. Number. The business and affairs of the Corporation shall be managed under the direction of a Board of Directors consisting of not less than three (3) nor more than nine (9) -12- 16 directors, unless otherwise determined from time to time by resolution adopted by the affirmative vote of at least 80% of the members of the Board of Directors; provided, however, that in no event shall the number of directors be less than the minimum number required by the Maryland General Corporation Law and provided further that so long as the number of stockholders of the Corporation shall be less than three, the number of directors may be less than three but not less than the number of stockholders. The name of the person who will serve as the sole director of the Corporation until the first annual meeting of the stockholders of the Corporation and until his successor is elected and qualifies is Thomas J. Corcoran, Jr. B. Classification of Directors. At the first annual meeting of the stockholders of the Corporation, the directors of the Corporation shall be divided into three classes: Class I; Class II; and Class III; and the number of such directors in each class shall be as nearly equal as the number of such directors will permit. Each such director shall serve for a three-year term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided, however, that each initial director elected to Class I at the first annual meeting of stockholders shall serve for a term ending on the date of the annual meeting of stockholders to be held in 1998, each initial director elected to Class II at the first annual meeting of stockholders shall serve for a term ending on the date of the annual meeting of stockholders to be held in 1996, and each initial director elected to Class III at the first annual meeting of stockholders shall serve for a term ending on the date of the annual meeting of stockholders held in 1997. C. Removal. Any director or the entire Board of Directors may be removed by the holders of a majority of the shares entitled to vote at an election of directors; provided, however, any such removal shall be for cause; and provided, further, that if stockholders of any class of the capital stock of the Corporation are entitled separately to elect one or more directors, such directors may not be removed except by the affirmative vote of a majority of all of the shares of such class or series entitled to vote for such directors. D. Vacancies. Except with respect to any directors who have been or may be elected separately by the holders of Preferred Stock as provided for in any Articles Supplementary, should a vacancy in the Board of Directors occur or be created (whether as a result of the death, retirement, resignation or removal from office of one or more directors or an increase in the number of authorized directors), such vacancy shall be filled by the affirmative vote of a majority of the remaining directors, even though less than a quorum of the Board of Directors, and each director so elected shall serve for the unexpired term of the Class to which he is elected. Any director so elected by the remaining directors to fill a vacancy may qualify as an Independent Director (as hereinafter defined) only if such director has received the affirmative vote of at least a majority of the remaining Independent Directors, if any. E. Independent Directors. Notwithstanding anything herein to the contrary, at all times (except during a period not to exceed sixty (60) days following the death, retirement, resignation or removal from office of a director prior to the expiration of the director's term of office), a majority of the Board of Directors shall be comprised of "Independent Directors," being persons who are not officers or employees of the Corporation or "Affiliates" of (1) any advisor to the Corporation under an advisory agreement, (2) any lessee or contract manager of -13- 17 any property of the Corporation, any subsidiary of the Corporation or any partnership which is an Affiliate of the Corporation. For purposes of this subsection E., an "Affiliate" of a person shall mean (1) any person that, directly or indirectly, controls or is controlled by or is under common control with such person, (2) any other person that beneficially owns, directly or indirectly, five percent (5%) or more of the outstanding capital stock, shares or equity interests of such person, or (3) any officer, director, employee, partner or trustee of such person or any person controlling, controlled by or under common control with such person (excluding trustees and persons serving in similar capacities who are not otherwise an Affiliate of such person). For purposes of the definition of Affiliate herein, (a) the term "person" shall mean and include individuals, corporations, limited liability companies, general and limited partnerships, stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, or other entities and governments and agencies and political subdivisions thereof and (b) the term "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, through the ownership of voting securities, partnership interests or other equity interests. F. Ballots not Required. Elections of directors need not be by ballot unless the Bylaws of the Corporation shall so provide. G. Amendment of this Article. Notwithstanding any other provisions of this Charter or the Bylaws of the Corporation (and notwithstanding that some lesser percentage may be permitted by law, this Charter or the Bylaws of the Corporation), the provisions of this Article VI shall not be amended, altered, changed or repealed unless such amendment, alteration, change, or repeal shall have been advised and approved by the affirmative vote of at least 80% of the members of the Board of Directors and approved by the affirmative vote of the holders of not less than 75% of the outstanding shares of capital stock of the Corporation entitled to vote on such matter, voting together as a single class. ARTICLE VII. REIT STATUS The Corporation shall seek to elect and maintain its status as a REIT under the Code. It shall be the duty of the Board of Directors to take such actions as are permitted by law and as it may deem necessary or advisable to cause the Corporation to satisfy the requirements for qualification as a REIT under the Code, including, but not limited to, the requirements relating to the ownership of its outstanding capital stock, the nature of its assets, the sources of its income, and the amount and timing of its distributions to its stockholders. The Board of Directors shall take no affirmative action to cause the Corporation not to qualify as a REIT or to otherwise revoke the Corporation's election to be taxed as a REIT without the affirmative vote of the holders of 66 2/3% of the outstanding shares of capital stock of the Corporation entitled to vote on such matter. -14- 18 ARTICLE VIII. REGISTERED HOLDERS OF SHARES Except as may be otherwise provided by applicable law, the Corporation shall be entitled to treat the registered holder of any shares of capital stock of the Corporation as the owner of such shares and of all rights derived from or relating to such shares for all purposes, and the Corporation shall not be obligated to recognize any equitable or other claim to or interest in such shares or rights on the part of any other person, including, but without limiting the generality of the term "person", a purchaser, pledgee, assignee or transferee of such shares or rights, unless and until such person becomes the registered holder of such shares. The foregoing shall apply whether or not the Corporation shall have either actual or constructive notice of the interest of such person. ARTICLE IX. LIMITATION ON INDEBTEDNESS The Corporation may not incur or suffer to exist as of the end of any month Indebtedness (as defined below) in an amount in excess of 40% of the Corporation's investment in hotel properties, at its cost, after giving effect to the Corporation's use of proceeds from any Indebtedness. The Corporation's investment in hotel properties shall include all investments by the Corporation constituting, evidencing or secured by an interest in property, whether tangible or intangible and whether real, personal or mixed, that is used or intended for use in, or in any manner connected with or relating to, the ownership or leasing of hotels. In determining its cost of such investments, there shall be included (1) the amount of all cash paid and the value (as determined by the Board of Directors for purposes of such investment) of any other property transferred therefor by the Corporation, (2) the amount of all Indebtedness and other obligations assumed or incurred by the Corporation or to which the Corporation takes subject, and (3) the value (as determined by the Board of Directors for the purposes of such investment) of all equity securities of which the issuer is an entity that is, or upon such investment will be, included within the Corporation and which are issued (otherwise than for cash) to, or retained by, any person other than the Corporation in connection with such investment. For purposes of the foregoing restrictions, (A) "Indebtedness" of the Corporation shall mean the consolidated liabilities of the Corporation for borrowed money (including all notes payable and drafts accepted representing extensions of credit) and all obligations evidenced by bonds, debentures, notes or other similar instruments on which interest charges are customarily paid, including obligations under capital leases, and (B) "Corporation" shall mean this Corporation and any subsidiary entity consolidated therewith, under generally accepted accounting principals. ARTICLE X. POWERS OF DIRECTORS; BYLAWS A. Powers Vested in the Board of Directors. All of the powers of the Corporation, insofar as the same may be lawfully vested by this Charter in the Board of Directors, are hereby conferred upon the Board of Directors. In furtherance and not in -15- 19 limitation of that power, the Board of Directors shall, in addition to those powers specifically conferred upon the Board of Directors as set forth herein, possess the following powers: (1) The Board of Directors shall, in connection with the exercise of its business judgment involving a Business Combination (as defined in Section 3-601 of Title 3 of the Corporations and Associations Article of the Annotated Code of Maryland) or any actual or proposed transaction which would or may involve a change in control of the Corporation (whether by purchases of shares of stock or any other securities of the Corporation in the open market, or otherwise, tender offer, merger, consolidation, dissolution, liquidation, sale of all or substantially all of the assets of the Corporation, proxy solicitation or otherwise), in determining what is in the best interests of the Corporation and its stockholders and in making any recommendation to its stockholders, give due consideration to all relevant factors, including, but not limited to (A) the economic effect, both immediate and long-term, upon the Corporation's stockholders, including stockholders, if any, who do not participate in the transaction; (B) the social and economic effect on the employees, customers of, and other dealing with, the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located; (C) whether the proposal is acceptable based on the historical and current operating results or financial condition of the Corporation; (D) whether a more favorable price could be obtained for the Corporation's stock or other securities in the future; (E) the reputation and business practices of the offeror and its management and affiliates as they would affect the employees of the Corporation and its subsidiaries; (F) the future value of the stock or any other securities of the Corporation; (G) any antitrust or other legal and regulatory issues that are raised by the proposal; and (H) the business and financial condition and earnings prospects of the acquiring person or entity, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the acquisition, and other likely financial obligations of the acquiring person or entity. If the Board of Directors determines that any proposed Business Combination (as defined in Section 3-601 of Title 3 of the Corporations and Associations Article of the Annotated Code of Maryland) or actual or proposed transaction which would or may involve a change in control of the Corporation should be rejected, it may take any lawful action to defeat such transaction, including, but not limited to, any or all of the following: advising stockholders not to accept the proposal; instituting litigation against the party making the proposal; filing complaints with governmental and regulatory authorities; acquiring the stock or any of the securities of the Corporation; selling or otherwise issuing authorized but unissued stock, other securities or granting options or rights with respect thereto; acquiring a company to create an antitrust or other regulatory problem for the party making the proposal; and obtaining a more favorable offer from another individual or entity. (2) The Board of Directors shall have the sole and exclusive power and authority to make, alter or repeal the Bylaws of the Corporation. The enumeration and definition of particular powers of the Board of Directors included in the foregoing shall in no way be limited to restricted by reference to or inference from the terms of any other clause of this or any other Article of the Charter of the Corporation, or construed as or deemed by inference or otherwise in any manner to exclude or limit any powers conferred -16- 20 upon the Board of Directors under the General Laws of the State of Maryland now or hereafter in force. ARTICLE XI. INDEMNIFICATION; LIMITATION OF LIABILITY A. Power to Indemnify. The Corporation may agree to the terms and conditions upon which any director, officer, employee or agent accepts his office or position and in its Bylaws, by contract or in any other manner may agree to indemnify and protect any director, officer, employee or agent of the Corporation, or any person who serves at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the fullest extent permitted from time to time by the Maryland General Corporation Law., as the same exists or may be hereafter amended or reenacted. B. Obligation to Provide Indemnification. The Corporation, to the fullest extent permitted by the Maryland General Corporation Law as the same exists or may hereafter be amended or reenacted, shall indemnify, and advance expenses on behalf of, any and all persons who it shall have the power to indemnify under such law from and against any and all of the expenses, liabilities or other matters referred to in or covered by such law and, in addition thereto, shall indemnify, and advance expenses on behalf of, all such persons to the extent permitted under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action by any such person in his director or officer capacity and as to action in another capacity while holding any such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. C. Limitation of Liability. To the fullest extent permitted by Maryland statutory or decisional law, as amended or interpreted, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders for money damages. No amendment of the Charter of the Corporation or repeal of any of its provisions shall limit or eliminate the benefits provided to directors and officers under this provision with respect to any act or omission which occurred prior to such amendment or repeal. Any repeal or modification of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission occurring prior to such repeal or modification. ARTICLE XII. BUSINESS COMBINATIONS The provisions of Section 3-602 of Title 3 of the Corporations and Associations Article of the Annotated Code of the State of Maryland, as the same may be amended or reenacted, or any successor statute thereto, shall not apply to any Business Combination (as defined in Section 3-601 of Title 3 of the Corporations and Associations Article of the Annotated -17- 21 Code of the State of Maryland) involving the Corporation and FelCor Suite Hotels, Inc., a Delaware corporation, Mr. Hervey A. Feldman or Thomas J. Corcoran, Jr. (or any present or future affiliates or associates of Mr. Feldman or Mr. Corcoran or other person acting in concert or as a group with either or both of them). ARTICLE XIII. CONTROL SHARES The provisions of Title 3, Subtitle 7 of the Maryland General Corporation Law entitled "Voting Rights of Certain Control Shares," as amended or reenacted from time to time, or any successor statute thereto, shall not apply to any existing or future type or class of the capital stock of the Corporation. ARTICLE XIV. REDUCED PERCENTAGE OF VOTES REQUIRED TO APPROVE CERTAIN CORPORATE ACTIONS Except as may be otherwise provided in the Charter of the Corporation, notwithstanding any provision of law which may be applicable to the Corporation which purports to require for any purpose the affirmative vote of a greater proportion than a majority of all other votes entitled to be cast on a particular matter by the holders of capital stock of the Corporation, the affirmative vote of a majority of the votes entitled to be cast on any matter upon which the holders of shares of the capital stock of the Corporation shall be entitled to vote shall be, subject to the due authorization, approval or advice or the Board of Directors, valid, sufficient and effective to approve or authorize any such matter. ARTICLE XV. AMENDMENTS The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Charter, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. -18- 22 STATE OF MARYLAND 370965 DEPARTMENT OF ASSESSMENTS AND TAXATION 301 West Preston Street Baltimore, Maryland 21201 DATE: JUNE 23, 1995 THIS IS TO ADVISE YOU THAT THE ARTICLES OF MERGER FOR FELCOR SUITE HOTELS, INC. (MD)-SURVIVOR AND FELCOR SUITE HOTELS, INC. (DE)-MERGING OUT WERE RECEIVED AND APPROVED FOR RECORD ON JUNE 23, 1995 AT 12:24 PM. FEE PAID: 50.00 [SEAL] IRENE B WOZNY CHARTER SPECIALIST 23 ARTICLES OF MERGER BETWEEN FELCOR SUITE HOTELS, INC., A DELAWARE CORPORATION AND FELCOR SUITE HOTELS, INC., A MARYLAND CORPORATION These ARTICLES OF MERGER are made and entered into as of the 23rd day of June 1995, by and between FelCor Suite Hotels, Inc., a Delaware corporation (the "Merging Corporation"), and FelCor Suite Hotels, Inc., a Maryland corporation (the "Surviving Corporation"), each of which certify as follows: FIRST: The Merging Corporation and the Surviving Corporation agree to merge in accordance with the terms and conditions set forth herein and in the Agreement and Plan of Merger dated as of May 30, 1995 by and between the Surviving Corporation and the Merging Corporation (the "Merger"). SECOND: The Merger shall be effective upon the later of (i) the acceptance of these Articles of Merger by the State Department of Assessments and Taxation of the State of Maryland and (ii) the acceptance of a Certificate of Merger by the Secretary of State of Delaware (the "Effective Date"). THIRD: The name of the Merging Corporation is "Felcor Suite Hotels, Inc." which is incorporated under the laws of the State of Delaware. The name of the Surviving Corporation is "Felcor Suite Hotels, Inc." which is incorporated under the laws of the State of Maryland. 24 FOURTH: The Merging Corporation was incorporated under the general laws of the State of Delaware on May 16, 1994. The Merging Corporation is not registered or qualified to do business in the State of Maryland. FIFTH: The principal office in Maryland of the Surviving Corporation is located in Baltimore City at 11 East Chase Street, Baltimore, Maryland, 21202. The Merging Corporation does not have an office in Maryland. SIXTH: Neither the Merging Corporation nor the Surviving Corporation owns any interest in land in the State of Maryland, the title to which could be affected by recording an instrument in the land records. SEVENTH: The total number of shares of stock that the Merging Corporation has authority to issue is 50,000,000 shares of Common Stock, par value $0.01 per share, and 10,000,000 shares of Preferred Stock, par value $0.01 per share. The total number of shares of stock that the Surviving Corporation has authority to issue is 50,000,000 shares of Common Stock, par value $0.01 per share, and 10,000,000 shares of Preferred Stock, par value $0.01 per share. EIGHTH: The Merging Corporation owns of record and beneficially all of the issued and outstanding capital stock of the Surviving Corporation. NINTH: The manner and basis of converting or exchanging issued stock of the Merging Corporation and the Surviving Corporation into different stock of a corporation or other - 2 - 25 consideration and the treatment of any issued stock not to be converted or exchanged shall be as follows: (a) At the Effective Date, each issued share of the Common Stock of the Merging Corporation shall be converted into and become one share of Common Stock, par value $0.01 per share, of the Surviving Corporation. (b) At the Effective Date, each issued share of the Common Stock of the Surviving Corporation shall be cancelled and cease to exist. TENTH: The other provisions necessary to effect the Merger are as follows: (a) At the Effective Date, each share of the Common Stock of the Merging Corporation issued and outstanding or held as treasury shares on the Effective Date shall, without any action on the part of either the Merging Corporation or the Surviving Corporation or any holder of such stock, be changed and converted into an equal number of fully paid and nonassessable shares of the Common Stock of the Surviving Corporation. (b) Each stock certificate which, prior to the Effective Date, represented issued shares of the Common Stock of the Merging Corporation shall be and become, on the Effective Date, a certificate representing an identical number of shares of Common Stock of the Surviving Corporation automatically by virtue of the Merger and without any action on the part of the holder thereof. (c) Each stock option granted by the Merging Corporation (under or subject to the Restricted Stock and Stock Option Plan of the Merging Corporation (the "1994 Plan")) and outstanding - 3 - 26 immediately prior to the Effective Date shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and become a stock option to purchase, upon the same terms and conditions, the number of shares of the Surviving Corporation's Common Stock (subject to further adjustment as may be provided in the 1994 Plan) which is equal to the number of shares of the Merging Corporation's Common Stock which the holder thereof would have received had such holder exercised the option in full immediately prior to the Effective Date (whether or not such option was then exercisable). The price per share payable upon exercise under each of said options shall (subject to future adjustments as provided in the 1994 Plan) be equal to the exercise price per share thereunder immediately prior to the Effective Date. A number of shares of the Surviving Corporation's Common Stock shall be reserved for issuance upon the exercise of options equal to the number of shares of the Merging Corporation's Common Stock so reserved immediately prior to the Effective Date. (d) The 1994 Plan, and all outstanding stock options thereunder, shall, immediately prior to the Effective Date of the Merger, be amended to the extent necessary to permit continuance of the 1994 Plan and continuance and convergence of said stock options into those of the Surviving Corporation following the Merger, nothwithstanding any provisions heretofore contained in such 1994 Plan. (e) On the Effective Date, all of the shares of stock of the Surviving Corporation issued and outstanding on the Effective - 4 - 27 Date of the Merger shall be cancelled and returned to the status of authorized but unissued shares. (f) On the Effective Date, each employee benefit plan and incentive compensation plan to which the Merging Corporation is then a party shall be assumed by, and continue to be the plan of, the Surviving Corporation. To the extent any employee benefit plan or incentive compensation plan of the Merging Corporation or any of its subsidiaries provides for the issuance or purchase of, or otherwise relates to, the Merging Corporation's Common Stock, after the Effective Date such plan shall be deemed to provide for the issuance or purchase of, or otherwise relate to, the Surviving Corporation's Common Stock upon the same terms and conditions. (g) The officers and directors of the Surviving Corporation on the Effective Date shall be and continue to be the officers and directors of the Surviving Corporation thereafter, until their successors are duly appointed or elected and qualify. (h) The Charter and Bylaws of the Surviving Corporation, as they exist immediately prior to the Effective Date, shall remain in effect as the Charter and Bylaws of the Surviving Corporation thereafter, unaffected by the Merger. (i) On the Effective Date, the Merging Corporation shall be merged with and into the Surviving Corporation, which shall continue its corporate existence under the laws of the State of Maryland. The separate existence and corporate organization of the Merging Corporation shall cease upon the Effective Date, and the Surviving Corporation shall possess all of the rights, privileges, immunities and franchises, as well as those of a public or of a - 5 - 28 private nature, of each of the Merging Corporation and the Surviving Corporation; and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all other choses in action, and all and every other interest, of or belonging to or due to each of the Merging Corporation or the Surviving Corporation, shall be taken and deemed to be transferred to and vested in the Surviving Corporation without further act or deed; and the title to any real estate or any interest therein, vested in either of the Merging Corporation or the Surviving Corporation shall not revert or be in any way impaired by reason of such Merger. The Surviving Corporation shall thenceforth be responsible and liable for all the liabilities and obligations of each of the Merging Corporation and the Surviving Corporation, and any claims existing or action or proceeding pending by or against the Merging Corporation or the Surviving Corporation may be prosecuted to judgment as if such Merger had not taken place. Neither the rights of creditors nor any liens upon the property of either the Merging Corporation or the Surviving Corporation shall be impaired by the Merger. ELEVENTH: The terms and conditions of the transaction set forth in these Articles of Merger were advised, authorized and approved by the Merging Corporation in the manner and by the vote required by its charter and by-laws and the laws of the State of Delaware. The terms and conditions of the transaction set forth in these Articles of Merger were advised, authorized and approved by the Surviving Corporation in the manner and by the vote required by its charter and by-laws and the laws of the State of Maryland. The - 6 - 29 manner of approval by the Merging Corporation and the Surviving Corporation of the transaction set forth in these Articles of Merger was as follows: (a) The board of directors of the Merging Corporation adopted a resolution by unanimous vote consent on April 10, 1995, which declared that the transaction set forth in these Articles of Merger is advisable and directed that the transaction be submitted for consideration by the stockholders of the Merging Corporation at the annual meeting of the stockholders of the Merging Corporation held on May 30, 1995. Notice which stated that a purpose of the annual meeting was to act on the Merger contemplated by these Articles of Merger was given in the manner required by the applicable provisions of the Delaware General Corporation Law to each stockholder entitled to such notice. The transaction set forth in these Articles of Merger was approved by the stockholders of the Merging Corporation at the annual meeting of the stockholders of the Merging Corporation held on May 30, 1995 by the affirmative vote of a majority of all the votes entitled to be cast on the matter in accordance with the Charter of the Merging Corporation and the Delaware General Corporation,Law. (b) The sole director of the Surviving Corporation adopted a resolution by written consent as of May 2, 1995, which declared that the transaction set forth in these Articles of Merger is advisable and directed that the transaction be submitted for consideration of the sole stockholder of the Surviving Corporation. The transaction set forth in these Articles of Merger was approved - 7 - 30 by the sole stockholder of the Surviving Corporation by written consent dated as of May 2, 1995. TWELFTH: No amendment to the charter of the Surviving Corporation, the survivor in the Merger, will be affected by the Merger. IN WITNESS WHEREOF, the Merging Corporation and the Surviving Corporation have caused these Articles of Merger to be signed in their respective corporate names and on their behalf by their respective Presidents and attested to by their respective corporate Secretaries as of the 23rd day of June, 1995. ATTEST: FELCOR SUITE HOTELS, INC., a Maryland corporation /s/ NICHOLAS R. PETERSON By: THOMAS J. CORCORAN ---------------------------- ---------------------------- Nicholas R. Peterson Thomas J. Corcoran, Jr. Assistant Secretary President FELCOR SUITE HOTELS, INC., a Delaware corporation /s/ NICHOLAS R. PETERSON By: THOMAS J. CORCORAN ---------------------------- ---------------------------- Nicholas R. Peterson Thomas J. Corcoran, Jr. Assistant Secretary President The undersigned, being the duly elected and acting President of Felcor Suite Hotels, Inc., a Maryland corporation, hereby acknowledges that the foregoing Articles of Merger, of which this Certificate is a part, are the act of Felcor Suite Hotels, Inc., a Maryland corporation, and certifies that, to the best of his knowledge, information and belief, and under penalties for perjury, all matters and facts contained in these Articles of Merger relating to Felcor Suite Hotels, Inc., a Maryland corporation, are true in all material respects. /s/ THOMAS J. CORCORAN, JR. ---------------------------- Thomas J. Corcoran, Jr. - 8 - 31 The undersigned, being the duly elected and acting President of Felcor Suite Hotels, Inc., a Delaware corporation, hereby acknowledges that the foregoing Articles of Merger, of which this Certificate is a part, are the act of Felcor Suite Hotels, Inc., a Delaware corporation, and certifies that, to the best of his knowledge, information and belief, and under penalties for perjury, all matters and facts contained in these Articles of Merger relating to Felcor Suits Hotels, Inc., a Delaware corporation, are true in all material respects. /s/ THOMAS J. CORCORAN, JR. ---------------------------- Thomas J. Corcoran, Jr. - 9 - 32 STATE OF MARYLAND 441055 STATE DEPARTMENT OF ASSESSMENTS AND TAXATION 301 West Preston Street Baltimore, Maryland 21201 DATE: MAY 02, 1996 THIS IS TO ADVISE YOU THAT THE ARTICLES SUPPLEMENTARY FOR FELCOR SUITE HOTELS, INC. WERE RECEIVED AND APPROVED FOR RECORD ON MAY 2, 1996 AT 11:40 AM. FEE PAID: 50.00 [SEAL] HARRY J. NOONAN CHARTER SPECIALIST 33 ARTICLES SUPPLEMENTARY OF FELCOR SUITE HOTELS, INC. FELCOR SUITE HOTELS, INC., a Maryland corporation (hereinafter referred to as the "Company"), hereby certifies as follows: FIRST: Under the authority set forth in Article V of the Charter of the Company, the Board of Directors of the Company on April 11, 1996, classified 6,900,000 unissued shares of the "$1.95 Series A Cumulative Convertible Preferred Stock." SECOND: A description of the $1.95 Series A Cumulative Convertible Preferred Stock (the "Series A Preferred Stock"), including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption as set or changed by the Board of Directors of the Company is as follows: Section 1. NUMBER OF SHARES AND DESIGNATION. This series of preferred stock shall be designated as Series A Cumulative Convertible Preferred Stock, and 6,900,000 shall be the number of shares of preferred stock constituting of such series. Section 2. DEFINITIONS. For purposes of the Series A Preferred Stock, the following terms shall have the meanings indicated: "Act" shall have the meaning set forth in paragraph (g) of Section 5 hereof. "Board of Directors" shall mean the Board of Directors of the Company or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Series A Preferred Stock. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in Texas or New York are not required to be open. "Call Date" shall have the meaning set forth in paragraph (c) of Section 5 hereof. "Common Stock" shall mean the common stock of the Company, par value $0.01 per share. "Constituent Person" shall have the meaning set forth in paragraph (e) of Section 7 hereof. "Conversion Price" shall mean the conversion price per share of Common Stock for which the Series A Preferred Stock is convertible, as such Conversion Price may be adjusted pursuant to Section 7. The initial conversion price shall be $32.25 (equivalent to a conversion rate of 0.7752 shares of Common Stock for each share of Series A Preferred Stock). 34 "Current Market Price" of publicly traded shares of Common Stock or any other class of capital stock or other security of the Company or any other issuer for any day shall mean the last reported sales price, regular way on such day, or, if not sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on the New York Stock Exchange ("NYSE") or, if such security is not listed or admitted for trading or, if not listed or admitted for trading on any national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or, if such security is not quoted on such National Market System, the average of the closing bid and asked prices on such day in the over the counter market as reported by NASDAQ or, if bid and asked prices for such security on such day shall not have been reported through NASDAQ, the average of the bid and asked prices on such day as furnished by any NYSE member firm regularly making a market in such security selected for such purpose by the Chief Executive Officer or the Board of Directors. "Dividend Payment Date" shall mean the last calendar day of January, April, July and October in each year, commencing on July 31, 1996; PROVIDED, HOWEVER, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment due on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date. "Dividend Periods" shall mean quarterly dividend periods commencing January 1, March 1, June 1 and September 1 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period (other than the initial Dividend Period, which shall commence on May 6, 1996 and end on and include June 30, 1996). "Fair Market Value" shall mean the average of the daily Current Market Prices of a share of Common Stock during the five (5) consecutive Trading Days selected by the Company commencing not more than 20 Trading Days before, and ending not later than, the earlier of the day in question and the day before the "ex" date with respect to the issuance or distribution requiring such computation. The term "'ex' date," when used with respect to any issuance or distribution, means the first day on which the Common Stock trades regular way, without the right to receive such issuance or distribution, on the exchange or in the market, as the case may be, used to determine that day's current Market Price. "Issue Date" shall mean the date on which the Company first issues a share of Series A Preferred Stock. "Junior Stock" shall mean the Common Stock and any other class or series of shares of the Company over which the Series A Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Company. "Non-Electing Share" shall have the meaning set forth in paragraph (e) of Section 7 hereof. "Parity Stock" shall have the meaning set forth in paragraph (b) of Section 8 hereof. 2 35 "Permitted Common Stock Cash Distributions" means cash dividends and distributions paid after December 31, 1995, not in excess of the Company's cumulative undistributed net earnings at December 31, 1995, plus the cumulative amount of funds from operations, as determined by the Board of Directors on a basis consistent with the financial reporting practices of the Company, after December 31, 1995, minus the cumulative amount of dividends accrued or paid on the Series A Preferred Stock or any other class of Preferred Stock after January 1, 1996. "Person" shall mean any individual, partnership, limited liability company, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Press Release" shall have the meaning set forth in paragraph (b) of Section 5 hereof. "Securities" shall have the meaning set forth in paragraph (d) (iii) of Section 7 hereof. "Series A Preferred Stock" shall have the meaning set forth in the Recitals hereof. "set apart for payment" shall be deemed to include, without any action other than the following, the recording by the Company in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Company; PROVIDED, HOWEVER, that if any funds for a class or series of Junior Stock or any class or series of stock ranking on a parity with the Series A Preferred Stock as to the payment of dividends are placed in a separate account of the Company or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Series A Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "Trading Day" shall mean any day on which the securities in question are traded on the NYSE, or if such securities are not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such securities are listed or admitted, or if not listed or admitted for trading of any national securities exchange, on the National Market System of NASDAQ, or if such securities are not quoted on such National Market System, in the applicable securities market in which the securities are traded. "Transaction" shall have the meaning set forth in paragraph (e) of Section 7 hereof. "Transfer Agent" means SunTrust Bank, Atlanta, Georgia, or such other agent or agents of the Company as may be designated by the Board of Directors or their designee as the transfer agent for the Series A Preferred Stock. "Voting Preferred Stock" shall have the meaning set forth in Section 9(a) hereof. 3 36 Section 3. DIVIDENDS. (a) The Holders of shares of the Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for that purpose, dividends payable in cash in an amount per share of Series A Preferred Stock equal to the greater of $1.95 per annum or the cash distributions declared or paid for the corresponding period (determined on each Dividend Payment Date) on the number of shares of Common Stock, or portion thereof, into which a share of Series A Preferred Stock is convertible (under Section 7 hereof). Such dividends shall be cumulative from May 6, 1996, whether or not in any Dividend Period or Periods there shall be funds of the Company legally available for the payment of such dividends, and shall be payable quarterly, when, as and if declared by the Board of Directors, in arrears on Dividend Payment Dates, commencing on the first Dividend Payment Date after the Issue Date. Each such dividend shall be payable in arrears to the holders of record of shares of the Series A Preferred Stock, as they appear on the stock records of the Company at the close of business on such record dates, not more than 60 days preceding such Dividend Payment Dates thereof, as shall be fixed by the Board of Directors. Accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board of Directors. (b) The amount of dividends payable for each full Dividend Period for the Series A Preferred Stock shall be computed by dividing the annual dividend rate by four. The amount of dividends payable for any period shorter or longer than a full Dividend Period, on the Series A Preferred Stock shall be computed on the basis of twelve 30-day months and a 360-day year. Holders of the Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the Series A Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred Stock that may be in arrears. (c) So long as any shares of the Series A Preferred Stock are outstanding, no dividends, except as described in the immediately following sentence, shall be declared or paid or set apart for payment on any class or series of Parity Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series A Preferred Stock for all Dividend Periods terminating on or prior to the Dividend Payment Date on such class or series of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon shares of the Series A Preferred Stock and all dividends declared upon any other class or series of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series A Preferred Stock and accumulated and unpaid on such Parity Stock. (d) So long as any shares of the Series A Preferred Stock are outstanding, no dividends (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock), shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Stock, nor shall Junior Stock be redeemed, purchased or 4 37 otherwise acquired (other than a redemption, purchase or other acquisition of shares of Common Stock made for purposes of an employee incentive or benefit plan of the Company or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Company, directly or indirectly (except by conversion into or exchange for Junior Stock), unless in each case (i) the full cumulative dividends on all outstanding shares of the Series A Preferred Stock and any other Parity Stock of the Company shall have been paid or set apart for payment for all past Dividend Periods with respect to the Series A Preferred Stock and all past dividend periods with respect to such Parity Stock and (ii) sufficient funds shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series A Preferred Stock and the current dividend period with respect to such Parity Stock. Notwithstanding the foregoing limitations, the Company may at any time acquire shares of its capital stock, without regard to rank, for the purpose of preserving its status as a REIT. Section 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of Junior Stock, the holders of the shares of Series A Preferred Stock shall be entitled to receive twenty-five dollars ($25.00) per share of Series A Preferred Stock plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders, but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the shares of Series A Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of Series A Preferred Stock and any such other Parity Stock ratably in accordance with the respective amounts that would be payable on such shares of Series A Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Company with one or more corporations, (ii) a sale or transfer of all or substantially all of the Company's assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company. (b) Subject to the rights of the holders of shares of any series or class or classes of stock ranking on a parity with or prior to the Series A Preferred Stock upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Company, after payment shall have been made in full to the holders of the Series A Preferred Stock, as provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series A Preferred Stock shall not be entitled to share therein. 5 38 Section 5. REDEMPTION AT THE OPTION OF THE COMPANY (a) The Series A Preferred Stock shall not be redeemable by the Company prior to April 30, 2001. On and after April 30, 2001, the Company, at its option, may redeem the shares of Series A Preferred Stock in whole or in part, as set forth herein, subject to the provisions described below. (b) The Series A Preferred Stock may be redeemed, in whole or in part, at the option of the Company, at any time, only if for 20 Trading Days, within any period of 30 consecutive Trading Days, including the last Trading Day of such period, the Current Market Price of the Common Stock on each of such 20 Trading Days equals or exceeds the Conversion Price in effect on such Trading Day. In order to exercise its redemption option, the Company must issue a press release announcing the redemption (the "Press Release") prior to the opening of business on the second Trading Day after the condition in the preceding sentence has, from time to time, been met. The Company may not issue a Press Release prior to April 30, 2001. The Press Release shall announce the redemption and set forth the number of shares of Series A Preferred Stock which the Company intends to redeem. The Call Date shall be selected by the Company, shall be specified in the notice of redemption and shall be not less than 30 days or more than 60 days after the date on which the Corporation issues the Press Release. (c) Upon redemption of Series A Preferred Stock by the Corporation on the date specified in the notice to holders required under subparagraph (e) of this Section 5 (the "Call Date"), each share of Series A Preferred Stock so redeemed shall, at the option of the Company (i) be converted into a number of shares of Common Stock equal to the liquidation preference (excluding any accrued and unpaid dividends) of the shares of Series A Preferred Stock being redeemed divided by the Conversion Price as of the opening of business on the Call Date or (ii) be redeemed in cash at a price per share equal the aggregate market value (determined as of the date of the notice of redemption) of the number of shares of Common Stock into which the Series A Preferred Stock is then convertible divided by the then current Conversion Price. Upon any redemption of Series A Preferred Stock, the Company shall pay any accrued and unpaid dividends in arrears for any full Dividend Period ending on or prior to the Call Date. If the Call Date falls after a dividend payment record date and prior to the corresponding Dividend Payment Date, then each holder of Series A Preferred Stock at the close of business on such dividend payment record date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date. Except as provided above, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on shares of Series A Preferred Stock called for redemption or on the shares of Common Stock issued upon such redemption. (d) If full cumulative dividends on the Series A Preferred Stock and any other class or series of Parity Stock of the Company have not been paid or declared and set apart for payment, the Series A Preferred Stock may not be redeemed in part and the Company may not purchase or acquire shares of Series A Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Series A Preferred Stock. 6 39 (e) If the Company shall redeem shares of Series A Preferred Stock pursuant to paragraph (a) of this Section 5, notice of such redemption shall be given not more than four Business Days after the date on which the Corporation issues the Press Release to each holder of record of the shares to be redeemed. Such notice shall be provided by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Company, or by publication in THE WALL STREET JOURNAL or THE NEW YORK TIMES, or if neither such newspaper is then being published, any other daily newspaper of national circulation. If the Company elects to provide such notice of publication, it shall also promptly mail notice of such redemption to the holders of the Series A Preferred Stock to be redeemed. Neither the failure to mail any notice required by this paragraph (e), nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such mailed or published notice shall state, as appropriate: (1) the Call Date: (2) the number of shares of Series A Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the number of shares of Common Stock to be issued, or the cash redemption price, as the case may be, with respect to each share of Series A Preferred Stock; (4) the place or places at which certificates for such shares are to be surrendered for certificates representing shares of Common Stock; (5) the then-current Conversion Price; and (6) that dividends on the shares to be redeemed shall cease to accrue on such Call Date except as otherwise provided herein. Notice having been published or mailed as aforesaid, from and after the Call Date (unless the Company shall fail to make available a number of shares of Common Stock or amount of cash necessary to effect such redemption), (i) except as otherwise provided herein, dividends on the shares of the Series A Preferred Stock so called for redemption shall cease to accrue, (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Series A Preferred Stock of the Company shall cease (except the rights to receive the shares of Common Stock and cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required to receive any dividends payable thereon). The Company's obligation to provide shares of Common Stock and cash in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Company) that has an office in the Borough of Manhattan, City of New York and that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, shares of Common Stock and/or any cash necessary for such redemption, in trust, with irrevocable instructions that such shares of Common Stock and/or cash be applied to the redemption of the shares of Series A Preferred Stock so called for redemption. At the close of business on the Call Date, each holder of Series A Preferred Stock to be redeemed pursuant to Section 5(c)(i) (unless the Company defaults in the delivery of the shares of Common Stock or cash payable on such Call Date) shall be deemed to be the record holder of the number of shares of Common Stock into which such Series A Preferred Stock is to be redeemed, regardless of whether such holder has surrendered the certificates representing the Series A Preferred Stock. No interest shall accrue for the benefit of the holders of Series A Preferred Stock to be redeemed on any cash so set aside by the Company. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Call Date shall 7 40 revert to the general funds of the Company, after which reversion the holders of such shares so called for redemption shall look only to the general funds of the Company for the payment of such cash. As promptly as practicable after the surrender in accordance with said notice of the certificates for any such shares so redeemed (properly endorsed or assigned for transfer, if the Company shall so require and if the notice shall so state), such shares shall be exchanged for certificates of shares of Common Stock and any cash (without interest thereon) for which such shares have been redeemed. If fewer than all the outstanding shares of Series A Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Company from outstanding shares of Series A Preferred Stock not previously called for redemption by lot or pro rata (as nearly as may be) or by any other method determine by the Company in its sole discretion to be equitable. If fewer than all the shares of Series A Preferred Stock represented by any certificate are redeemed, then new certificates representing the unredeemed shares shall be issued without cost to the holder thereof. (f) No fractional shares or scrip representing fractions of shares of Common Stock shall be issued upon redemption of the Series A Preferred Stock. Instead of any fractional interest in a share of Common Stock that would otherwise be deliverable upon the redemption of a share of Series A Preferred Stock, the Company shall pay to the holder of such share an amount in cash (computed to the nearest cent) based upon the Current Market Price of Common Stock on the Trading Day immediately preceding the Call Date. If more than one share shall be surrendered for redemption at one time by the same holder, the number of full shares of Common Stock issuable, or cash paid, upon redemption thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. (g) The Company covenants that any shares of Common Stock issued upon redemption of the Series A Preferred Stock shall be validly issued, fully paid and non-assessable. The Company shall endeavor to list the shares of Common Stock required to be delivered upon redemption to the Series A Preferred Stock, prior to such redemption, upon each national securities exchange, if any, upon which the outstanding Common Stock is listed at the time of such delivery. The Company shall endeavor to take any action necessary to ensure that any shares of Common Stock issued upon the redemption of Series A Preferred Stock are freely transferable and not subject to any resale restrictions under the Securities Act of 1933, as amended (the "Act"), of any applicable state securities or blue sky laws (other than any shares of Common Stock issued upon redemption of any Series A Preferred Stock which are held by an "affiliate" (as defined in Rule 144 under the Act) of the Company). Notwithstanding the foregoing limitations, the Company may at any time acquire shares of its capital stock, without regard to rank, for the purpose of preserving its status as a REIT. Section 6. SHARES TO BE RETIRED. All shares of Series A Preferred Stock which shall have been issued and reacquired in any manner by the Company shall be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series. The Company may also retire any unissued shares of 8 41 Series A Preferred Stock, and such shares shall then be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series. Section 7. CONVERSION. Holders of shares of Series A Preferred Stock shall have the right to convert all or a portion of such shares in to shares of Common Stock, as follows: (a) Subject to and upon compliance with the provisions of this Section 7, a holder of shares of Series A Preferred Stock shall have the right, at his or her option, at any time to convert such shares into the number of fully paid and non-assessable shares of Common Stock obtained by dividing the aggregate liquidation preference (excluding any accrued and unpaid dividends) of such shares by the Conversion Price (as in effect at the time and on the date provided for in the last paragraph or paragraph (b) of this Section 7) by surrendering such shares to be converted, such surrender to be made in the manner provided in Section 7, paragraph (b); PROVIDED, HOWEVER, that the right to convert shares called for redemption pursuant to Section 5 shall terminate at the close of business on the Call Date fixed for such redemption, unless the Company shall default in making payment of the shares of Common Stock and any cash payable upon such redemption under Section 5 hereof. (b) In order to exercise the conversion right, the holder of each share of Series A Preferred Stock to be converted shall surrender the certificate representing such share, duly endorsed or assigned to the Company or in blank, at the office of the Transfer Agent; accompanied by written notice to the Company that the holder thereof elects to convert such Series A Preferred Stock. Unless the shares issuable on conversion are to be issued in the same name as the name in which such share of Series A Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Company, duly executed by the holder or such holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Company demonstrating that such taxes have been paid). Holders of shares of Series A Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion thereof following such dividend payment record date and prior to such Dividend Payment date. However, shares of Series A Preferred Stock surrendered for conversion during the period between the close of business on any dividend payment record date and the opening of business on the corresponding Dividend Payment Date (except shares converted after the issuance of notice of redemption with respect to a Call Date during such period, such shares of Series A Preferred Stock being entitled to such dividend on the Dividend Payment Date) must be accompanied by a payment of an amount equal to the dividend payable on such shares on such Dividend Payment Date. A holder of shares of Series A Preferred Stock on a dividend payment record date who (or whose transferee) tenders any such shares for conversion into shares of Common Stock on such Dividend Payment Date will receive the dividend payable by the Company on such shares of Series A Preferred Stock on such date, and the converting holder need not include 9 42 payment of the amount of such dividend upon surrender of shares of Series A Preferred Stock for conversion. Except as provided above, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of Common Stock issued upon such conversion. As promptly as practicable after the surrender of certificates for shares of Series A Preferred Stock as aforesaid, the Company shall issue and shall deliver at such office to such holder, or on his or her written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such shares in accordance with provisions of this Section 7, and any factional interest in respect of a share of Common Stock arising upon such conversion shall be settled as provided in paragraph (c) of this Section 7. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which certificates for shares of Series A Preferred Stock shall have been surrendered and such notice (and if applicable, payment of an amount equal to the dividend payable on such shares) received by the Company as aforesaid, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Price in effect at such time on such date unless the stock transfer books of the Company shall be closed on that date, in which event such person or persons shall be deemed to have become holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date on which such shares shall have been surrendered and such notice received by the Company. (c) No fractional shares of scrip representing of shares of Common Stock shall be issued upon conversion of the Shares A Preferred Stock. Instead of any fractional interest in a share of Common Stock that would otherwise be deliverable upon the conversion of a share of Series A Preferred Stock, the Company shall pay to the holder of such share an amount in cash based upon the Current Market Price of Common Stock on the Trading Day immediately preceding the date of conversion. If more than one share shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. (d) The Conversion Price shall be adjusted from time to time as follows: (i) If the Company shall after the Issue Date (A) pay a dividend or make a distribution of its capital stock in shares of its Common Stock, (B) subdivide its outstanding Common Stock into a greater number of shares, (C) combine its outstanding Common Stock into a smaller number of shares or (D) issue any shares of capital stock by reclassification of its Common Stock, the Conversion Price in effect at the opening of business on the following day following the date fixed for the determination of stockholders entitled to receive such dividend or distribution or at the opening of business on the day following the day on which such subdivision, combination or reclassification becomes effective, as the case may be, shall be adjusted so that the holder of any share 10 43 of Series A Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock that such holder would have owned or have been entitled to receive after the happening of any of the events described above had such shares of Series A Preferred Stock been converted immediately prior to the record date in the case of a dividend or distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this subparagraph (i) shall become effective immediately after the opening of business on the day next following the record date (except as provided in paragraph (h) below) in the case of a dividend or distribution and shall become effective immediately after the opening of business on the day next following the effective date in the case of a subdivision, combination or reclassification. (ii) If the Company shall, after the Issue Date, issue rights, options or warrants to all holders of Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase Common Stock at a price per share less than the Fair Market Value per share of Common Stock on the record date for the determination of stockholders entitled to receive such rights or warrants, then the Conversion Price in effect at the opening of business on the day next following such record date shall be adjusted to equal the price determined by multiplying (I) the Conversion Price in effect immediately prior to the opening of business on the day following the date fixed for such determination by (II) a fraction, the numerator of which shall be the sums of (A) the number of shares of Common Stock outstanding on the close of business on the date fixed for such determination and (B) the number of shares that the aggregate proceeds to the Company from the exercise of such rights or warrants for Common Stock would purchase at such Fair Market Value, and the denominator of which shall be the sums of (A) the number of Shares of Common Stock outstanding on the close of business on the date fixed for such determination and (B) on the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants. Such adjustment shall become effective immediately after the opening of business on the day next following such record date (except as provided in paragraph (h) below). In determining whether any rights or warrants entitle the holders of Common Stock to subscribe for or purchase shares of Common Stock at less than such Fair Market Value, there shall be taken into account any consideration received by the Company upon issuance and upon exercise of such rights warrants, the value of such consideration, if other than cash, to be determined by the Chief Executive Officer or the Board of Directors. (iii) If the Company shall distribute to all holders of its Common Stock any shares of capital stock of the Company (other than Common Stock) or evidence of its indebtedness or assets (excluding Permitted Common Stock Cash Distributions) or rights warrants to subscribe for or purchase any of its securities (excluding those rights and warrants issued to all holders of Common Stock entitling them for a period expiring within 45 days after the record date referred to in subparagraph (ii) above to subscribe for or purchase Common Stock, which rights and warrants are referred to in and treated under subparagraph (ii) above) (any of the foregoing being hereinafter in this subparagraph (iii) called the "Securities"), then in each such case the Conversion Price shall be adjusted so that it shall equal the price determined by multiplying (I) the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by (II) a fraction, the numerator of which shall be the Fair Market Value per share of the Common Stock on the record date mentioned below less the then fair market 11 44 value (as determined by the Chief Executive Officer or the Board of Directors, whose determination shall be conclusive), of the portion of the capital stock or assets or evidences of indebtedness so distributed or of such rights or warrants applicable to one share of Common Stock, and the denominator of which shall be the Fair Market Value per share of the Common Stock on the record date mentioned below. Such adjustment shall become effective immediately at the opening of business on the Business Day next following (except as provided in paragraph (h) below) the record date for the determination of shareholders entitled to receive such distribution. For the purposes of this clause (iii), the distribution of a Security, which is distributed not only to the holders of the Common Stock on the date fixed for the determination of stockholders entitled to such distribution of such Security, but also is distributed with each share of Common Stock delivered to a Person converting a share of Series A Preferred Stock after such determination date, shall not require an adjustment of the Conversion Price pursuant to this clause (iii); PROVIDED that on the date, if any, on which a person converting a share of Series A Preferred Stock would no longer be entitled to receive such Security with a share of Common Stock (other than as a result of the termination of all such Securities), a distribution of such Securities shall be deemed to have occurred and the Conversion Price shall be adjusted ass provided in this clause (iii) and such day shall be deemed to be "the date fixed for the determination of the stockholders entitled to receive such distribution" and "the record date" within the meaning of the two preceding sentences. (iv) No adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in such; PROVIDED, HOWEVER, that any adjustments that by reason of this subparagraph (iv) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and PROVIDED, FURTHER, that any adjustment shall be required and made in accordance with the provisions of this Section 7 (other than this subparagraph (iv) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of shares of Common Stock. Notwithstanding any other provisions of this Section 7, the Company shall not be required to make any adjustment of the Conversion Price for the issuance of any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under such plan. All calculations under this Section 7 shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest one-tenth of a share (with .05 of a share being rounded upward), as the case may be. Anything in this paragraph (d) to the contrary notwithstanding, the Company shall be entitled, to the extent permitted by law, to make such reductions in the Conversion Price, in addition to those required by this paragraph (d), as it in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, reclassification or combination of shares, distribution of rights or warrants to purchase stock or securities, or a distribution or other assets (other than cash dividends) hereafter made by the Company to its stockholders shall not be taxable, or if that is not possible, to diminish any income taxes that are otherwise payable because of such event. (e) If the Company shall be a party to any transaction (including without limitation a merger, consolidation, statutory share exchange, self tender offer for all or substantially all shares of Common Stock, sale of all or substantially all of the Company's assets or recapitalization of the 12 45 Common Stock and excluding any transaction as to which subparagraph (d)(i) of this Section 7 applies) (each of the foregoing being referred to herein as a "Transaction"), in each case as a result of which shares of Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), each share of Series A Preferred Stock which is not converted into the right to receive stock, securities or other property in connection with such Transaction shall thereafter be convertible into the kind and amount of shares of stock, securities and other property (including cash or any combination thereof) receivables upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which one share of Series A Preferred Stock was convertible immediately prior to such Transaction, assuming such holder of Common Stock (i) is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale or transfer was made, as the case may be ("Constituent Person"), or an affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind of amount of stock, securities and other property (including cash) receivable upon such Transaction (provided that if the kind or amount of stock, securities and other property (including cash) receivable upon such Transaction is not the same for each share of Common Stock of the Company held immediately prior to such Transaction by other than a Constituent Person or an affiliate thereof and in respect of which such rights of election shall not have been exercised ("Non-Electing Share"), then for the purpose of this paragraph (e) the kind and amount of stock, securities and other property (including cash) receivable upon such Transaction by each Non-electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-election shares). The Company shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (e), and it shall not consent or agree to the occurrence of any Transaction until the Company has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Series A Preferred Stock that will contain provisions enabling the holders of the Series A Preferred Stock that remains outstanding after such Transaction to convert into the consideration received by holders of Common Stock at the Conversion Price in effect immediately prior to such Transaction. The provisions of the paragraph (e) shall similarly apply to successive Transactions. (f) If: (i) the Company shall declare a dividend (or any other distribution) on the Common Stock (other than Permitted Common Stock Cash Distributions); or (ii) the Company shall authorize the granting to the holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of any class or any other rights or warrants; or (iii) there shall be any reclassification of the Common Stock (other than any event to which subparagraph (d)(i) of this Section 7 applies) or any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or a statutory share exchange, or self tender offer by the Company for all or substantially all of its outstanding shares of Common Stock or the sale or transfer of all substantially all of the assets of the Company as an entity; or 13 46 (iv) there shall occur the involuntary liquidation, dissolution or winding up of the Company, then the Company shall cause to be filed with the Transfer Agent and shall cause to be mailed to the holders of shares of the Service A Preferred Stock at their addresses as shown on the stock records of the Company, as promptly as possible, but at least 15 days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights or warrants are to be determined or (B) the date on which such reclassification, consolidation, merger, statutory share exchange, sale, transfer, liquidation, dissolution or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock record shall be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, statutory share exchange, sale, transfer, liquidation, dissolution or winding up. Failure to give or receive such notice of any defect therein shall not affect the legality or validity of the proceedings described in this Section 7. (g) Whenever the Conversion Price is adjusted as herein provided, the Company shall promptly file with the Transfer Agent an officer's certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the effective date of such adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to the holder of each share of Series A Preferred Stock at such holder's last address as shown on the stock records of the Company. (h) In any case in which paragraph (d) of this Section 7 provides that an adjustment shall become effective on the day next following the record date for an event, the Company may defer until the occurrence of such event (A) issuing to the holder of any share of Series A Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount of cash in lieu of any fraction pursuant to paragraph (c) of this Section 7. (i) There shall be no adjustment of the Conversion Price in case of the issuance of any stock of the Company in a reorganization, acquisition or other similar transaction except as specifically set forth in this Section 7. If any action or transaction would require adjustment of the Conversion Price pursuant to more than one paragraph of this Section 7, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value. (j) If the Company shall take any action affecting the Common Stock, other than action described in this Section 7, that in the opinion of the Board of Directors would materially adversely 14 47 affect the conversion rights of the holders of the shares of Series A Preferred Stock, the Conversion Price for the Series A Preferred Stock may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Directors, in its sole discretion, may determine to be equitable in the circumstances. (k) The Company covenants that it will at all times reserve and keep available, free form preemptive rights, out the aggregate of its authorized but unissued shares of Common Stock for the purpose of effecting conversion of the Series A Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Series A Preferred Stock not theretofore converted. For purposes of this paragraph (k), the number of shares of Common Stock shall be deliverable upon the conversion of all outstanding shares of Series A Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single holder. The Company covenants that any shares of Common Stock issued upon the conversion of the Series A Preferred Stock shall be validly issued, fully paid and non-assessable. The Company shall endeavor to list the shares of Common Stock required to be delivered upon conversion of the Series A Preferred Stock, prior to such delivery, upon each national securities exchange, if any, upon which the outstanding Common Stock is listed at the time of such delivery. Prior to the delivery of any securities that the Company shall be obligated to deliver upon conversion of the Series A Preferred Stock, the Company shall endeavor to comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof, by any governmental authority. (l) The Company will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock or other securities or property on conversion of the Series A Preferred Stock pursuant hereto; PROVIDED, HOWEVER, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock or other securities or property in a name other than that of the holder of the Series A Preferred Stock to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Company the amount of any such tax or established, to the reasonable satisfaction of the Company, that such tax has been paid. Section 8. RANKING. Any class or series of stock of the Company shall be deemed to rank: (a) prior to the Series A Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series A Preferred Stock; 15 48 (b) on a parity with the Series A Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Series A Preferred Stock, if the holders of such class of stock or series and the Series A Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other ("Parity Stock"); the Series A Preferred Stock and the Series B Preferred Stock shall be Parity Stock with respect to the Series A Preferred Stock; and (c) junior to the Series A Preferred Stock, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock or series shall be Common Stock or if the holders of Series A Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such stock or series. Section 9. VOTING. (a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Series A Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not earned or declared, the number of directors then constituting the Board of Directors shall be increased by two (if not already increased by reason of a similar arrearage with respect to any Parity Stock) and the holders of shares of Series A Preferred Stock, together with the holders of shares of every other series of Parity Stock (any such other series, the "Voting Preferred Stock"), voting as a single class regardless of series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the Series A Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever all arrears in dividends on the Series A Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, then the right of the holders of the Series A Preferred Stock and the Voting Preferred Stock to elect such additional two directors shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages in six quarterly dividends), and the terms of office of all persons elected as directors by the holders of the Series A Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of shares of Series A Preferred Stock and the Voting Preferred Stock, the secretary of the Company may, and upon the written request of any holder of Series A Preferred Stock (addressed to the secretary at the principal office of the corporation) shall, call a special meeting of the holders of the Series A Preferred Stock and of the Voting Preferred Stock for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Company for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the 16 49 secretary within 20 days after receipt of any such request, then any holder of shares of Series A Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Company. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the Series A Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the then- remaining director elected by the holders of the Series A Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. (b) So long as any shares of Series A Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, as amended, the affirmative vote of at least 66 2/3% of the votes entitled to be cast by the holders of the shares of Series A Preferred Stock and the Voting Preferred Stock, at the time outstanding, acting as a single class regardless of series, at any meeting called for the purpose, shall be necessary for effecting or validation: (i) Any amendment, alteration or repeal of any of the provisions of these Articles Supplementary that materially adversely affects the voting powers, rights or preferences of the holders of the Series A Preferred Stock or the Voting Preferred Stock; PROVIDED, HOWEVER, that the amendment of the provisions of the Charter so as to authorize or create, or to increase the authorized amount, of any Junior Stock or any shares of any class ranking on a parity with the Series A Preferred Stock or the Voting Preferred Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Series A Preferred Stock, and PROVIDED, FURTHER, that if any such amendment, alteration or repeal would materially adversely affect any voting powers, rights of preferences of the Series A Preferred Stock or another series of Voting Preferred Stock that are not enjoyed by some or all of the other series which otherwise would be entitled to vote in accordance herewith, the affirmative vote of least 66 2/3% of the votes entitled to be cast by holders of all series similarly affected, similarly given, shall be required in lieu of the affirmative vote of at least 66 2/3% of the votes entitled to be cast by the holders of the shares of Series A Preferred Stock and the Voting Preferred Stock which otherwise would be entitled to vote in accordance herewith; or (ii) The authorization or creation of, or the increase in the authorized amount of, any shares of any class or any security convertible into shares of any class ranking prior to the Series A Preferred Stock in the distribution of assets on any liquidation, dissolution or winding up of the Company or in the payment of dividends; PROVIDED, HOWEVER, that no such vote of the holders of Series A Preferred Stock shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such prior shares of convertible security is to be made, as the case may be, provision is made for the redemption of all shares of Series A Preferred Stock at the time outstanding. 17 50 For purposes of the foregoing provisions of this Section 9, each share of Series A Preferred Stock shall have one (1) vote per share, except that when any other series of preferred stock shall have the right to vote with the Series A Preferred Stock as a single class on any matter, then the Series A Preferred Stock and such other series shall have with respect to such matters one (1) vote per $25.00 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein, the shares of Series A Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. Section 10. RECORD HOLDERS. The Company and the Transfer Agent may deem and treat the record holder of any shares of Series A Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Company nor the Transfer Agent shall be affected by any notice to the contrary. IN WITNESS WHEREOF, the Company has caused these Articles Supplementary to be signed in its name and on its behalf on this 30th day of April, 1996, by its President who acknowledges that these Articles Supplementary are the act of the Company and that to the best of his knowledge, information and belief and under penalties for perjury all matters and facts contained in these Articles Supplementary are true in all material respects. FELCOR SUITE HOTELS, INC. By: /s/ THOMAS J. CORCORAN, JR. --------------------------------- Name: Thomas J. Corcoran, Jr. ---------------------------- Title: President --------------------------- Attest: /s/ THOMAS L. WIESE ------------------------------------ Name: Thomas L. Wiese ---------------------------- Title: Secretary ---------------------------- (Corporate Seal) 18 51 STATE OF MARYLAND 465025 STATE DEPARTMENT OF ASSESSMENTS AND TAXATION 301 West Preston Street Baltimore, Maryland 21201 DATE: AUGUST 09, 1996 THIS IS TO ADVISE YOU THAT THE ARTICLES OF AMENDMENT FOR FELCOR SUITE HOTELS, INC. WERE RECEIVED AND APPROVED FOR RECORD ON AUGUST 9, 1996 AT 10:10 AM. FEE PAID: 50.00 [SEAL] HARRY J. NOONAN CHARTER SPECIALIST 52 ARTICLES OF AMENDMENT OF FELCOR SUITE HOTELS, INC. FelCor Suite Hotels, Inc., a Maryland corporation (the "Corporation"), certifies as follows: FIRST: The Corporation desires to amend its Charter as currently in effect. SECOND: Article V of the Charter of the Corporation is hereby amended as set forth below: (1) the phrase "Except as provided in subsection D.(9) of this Article V," contained in section D.(2)(b) of Article V shall be amended to read "Except as provided in subsections D.(9) and D.(12) of this Article V,"; (2) the phrase "Notwithstanding any other provisions herein," contained in each of sections D.(2)(c) through D.(2)(f) of Article V shall be amended to read "Notwithstanding any other provisions herein, except for subsection D.(12) of this Article V,"; (3) the phrase "Nothing contained in this Article V" contained in section D.(7) of Article V shall be amended to read "Except for the provisions of subsection D.(12), nothing contained in this Article V"; and (4) a new section D.(12) shall be added to Article V, providing in its entirety as follows: "(12) New York Stock Exchange Transactions. Nothing in this amended and restated Charter shall prohibit the settlement of any transaction entered into through the facilities of the New York Stock Exchange. The immediately preceding sentence shall not limit the authority of the Board of Directors to take any and all actions it deems necessary or advisable to protect the Corporation and the interests of its stockholders in preserving the Corporation's status as a REIT, so long as such actions do not prohibit the settlement of any transactions entered into through the facilities of the New York Stock Exchange." THIRD: The amendment of the Corporation's Charter set forth in these Articles of Amendment was advised by the Board of Directors of the Corporation and was approved by the shareholders of the Corporation. 53 IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed in its name and on its behalf on the 8th day of August, 1996, by its Senior Vice President, who acknowledges that these Articles of Amendment are the act of the Corporation and certifies that, to the best of his knowledge, information and belief and under penalties for perjury, all matters and facts contained in these Articles of Amendment are true in all material respects. ATTEST: FELCOR SUITE HOTELS, INC. /s/ THOMAS L. WIESE By: /s/ LAWRENCE D. ROBINSON (SEAL) - ----------------------------- ----------------------------- Thomas L. Wiese Lawrence D. Robinson Assistant Secretary Senior Vice President -2- 54 STATE OF MARYLAND 544239 STATE DEPARTMENT OF ASSESSMENTS AND TAXATION 301 West Preston Street Baltimore, Maryland 21201 DATE: JUNE 24, 1997 THIS IS TO ADVISE YOU THAT THE ARTICLES OF AMENDMENT FOR FELCOR SUITE HOTELS, INC. WERE RECEIVED AND APPROVED FOR RECORD ON JUNE 24, 1997 AT 10:13 AM. FEE PAID: 50.00 [SEAL] JOSEPH V. STEWART CHARTER SPECIALIST 55 ARTICLES OF AMENDMENT OF JUNE 24, 1997 FELCOR SUITE HOTELS INC. FelCor Suite Hotels, Inc., a Maryland corporation (the "Corporation"), certifies as follows: FIRST: The Corporation desires to amend its Charter as currently in effect. SECOND: Article IX of the Charter of the Corporation is hereby amended as set forth below: The following shall be deleted: ARTICLE IX Limitation on Indebtedness The Corporation may not incur or suffer to exist as of the end of any month Indebtedness (as defined below) in an amount in excess of 40% of the Corporation's investment in hotel properties, at its cost, after giving effect to the Corporation's use of proceeds from any Indebtedness. The Corporation's investment in hotel properties shall include all investments by the Corporation constituting, evidencing or secured by an interest in property, whether tangible or intangible and whether real, personal or mixed, that is used or intended for use in, or in any manner connected with or relating to, the ownership or leasing of hotels. In determining its cost of such investments, there shall be included (1) the amount of all cash paid and the value (as determined by the Board of Directors for purposes of such investment) of any other property transferred therefor by the Corporation, (2) the amount of all Indebtedness and other obligations assumed or incurred by the Corporation or to which the Corporation takes subject, and (3) the value (as determined by the Board of Directors for the purposes of such investment) of all equity securities of which the issuer is an entity that is, or upon such investment will be, included within the Corporation and which are issued (otherwise than for cash) to, or retained by, any person other than the Corporation in connection with such investment. For purposes of the foregoing restriction, (A) "Indebtedness" of the Corporation shall mean the consolidated liabilities of the Corporation for borrowed money (including all notes payable and drafts accepted representing extensions of credit) and all obligations evidenced by bonds, debentures, notes or similar instruments on which interest charges are customarily paid, including obligations under capital leases, and (B) "Corporation" shall mean this Corporation and any subsidiary entity consolidated therewith, under generally accepted accounting principals. 56 THIRD: The amendment of the Corporation's Charter set forth in these Articles of Amendment was advised by the Board of Directors of the Corporation and was approved by the shareholders of the Corporation. -2- 57 IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed in its name and on its behalf on the 16th day of June, 1997, by its Senior Vice President, who acknowledges that these Articles of Amendment are the act of the Corporation and certifies that, to the best of his knowledge, information and belief and under penalties for perjury, all matters and facts contained in these Articles of Amendment are true in all material respects. ATTEST: FELCOR SUITE HOTELS, INC. /s/ THOMAS L. WIESE By: /s/ LAWRENCE D. ROBINSON (SEAL) ---------------------------- ---------------------------- Thomas L. Wiese Lawrence D. Robinson Assistant Secretary Senior Vice President 3 58 STATE OF MARYLAND 581905 STATE DEPARTMENT OF ASSESSMENTS AND TAXATION 301 West Preston Street Baltimore, Maryland 21201 DATE: NOVEMBER 13, 1997 THIS IS TO ADVISE YOU THAT THE ARTICLES OF AMENDMENT FOR FELCOR SUITE HOTELS, INC. WERE RECEIVED AND APPROVED FOR RECORD ON NOVEMBER 10, 1997 AT 7:38 AM. FEE PAID: 140.00 [SEAL] JOSEPH V. STEWART CHARTER SPECIALIST 59 ARTICLES OF AMENDMENT TO ARTICLES OF AMENDMENT AND RESTATEMENT OF FELCOR SUITE HOTELS, INC. The undersigned, on behalf of FelCor Suite Hotels, Inc., a Maryland corporation, (the "Corporation"), hereby certifies as follows: FIRST: The Corporation desires to amend its Charter as currently in effect. SECOND: Paragraph A of Article V of the Charter of the Corporation is hereby amended to read in its entirety as follows: "A. Authorized Shares. The total number of shares of capital stock that the Corporation shall have authority to issue is One Hundred Ten Million (110,000,000) shares, consisting of One Hundred Million (100,000,000) shares of Common Stock, of the par value of One Cent ($0.01) each, and Ten Million (10,000,000) shares of Preferred Stock, of the par value of One Cent ($0.01) each, amounting in aggregate par value to One Million One Hundred Thousand Dollars ($1,100,000.00)." THIRD: The total number of shares of stock that the Corporation had authority to issue immediately prior to this amendment is Sixty Million (60,000,000) shares, consisting of Fifty Million (50,000,000) shares of Common Stock, par value $.01 per share, and Ten Million Shares (10,000,000) shares of Preferred Stock, par value $.01 per share, amounting in aggregate par value to $600,000. The total number of shares of stock that the Corporation has authority to issue immediately following this amendment is One Hundred and Ten Million (110,000,000) shares, consisting of One Hundred Million (100,000,000) shares of Common Stock, par value $.01 per share, and Ten Million Shares (10,000,000) of Preferred Stock, par value $.01 per share, amounting in aggregate par value to $1,100,000. The description of each class, including the preferences, 60 conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption is not changed by this amendment. FOURTH: The amendment of the Corporation's Charter set forth in these Articles of Amendment was advised by the Board of Directors of the Corporation and was approved by the stockholders of the Corporation. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed in its name and on its behalf on the 30th day of October, 1997, by Lawrence D. Robinson, its Senior Vice President, Secretary and General Counsel, who acknowledges that these Articles of Amendment are the act of the Corporation and certifies that, to the best of his knowledge, information and belief and under penalties for perjury, all matters and facts contained in these Articles of Amendment are true in all material respects. ATTEST: FELCOR SUITE HOTELS, INC. /s/ THOMAS L. WIESE By: /s/ LAWRENCE D. ROBINSON - ---------------------------- ------------------------- Thomas L. Wiese Lawrence D. Robinson Assistant Secretary Senior Vice President, Secretary & General Counsel -2- 61 STATE DEPARTMENT OF ASSESSMENTS AND TAXATION APPROVED FOR RECORD 5/6/98 AT 11:36 a.m. ARTICLES SUPPLEMENTARY OF FELCOR SUITE HOTELS, INC. FELCOR SUITE HOTELS, INC., a Maryland corporation (hereinafter referred to as the "Company"), hereby certifies as follows: FIRST: Under the authority set forth in Article V of the Charter of the Company, the Board of Directors of the Company on April 20, 1998, and April 30, 1998, classified 57,500 unissued shares of the Preferred Stock as "9% Series B Cumulative Redeemable Preferred Stock." SECOND: A description of the 9% Series B Cumulative Redeemable Preferred Stock, including the preferences and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption as set or changed by the Board of Directors of the Company is as follows: Section 1. NUMBER OF SHARES AND DESIGNATION. This series of preferred stock shall be designated as 9% Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Stock"), and 57,500 shall be the number of shares of Preferred Stock constituting such series. Section 2. DEFINITIONS. For purposes of the Series B Preferred Stock, the following terms shall have the meanings indicated: "Board of Directors" shall mean the Board of Directors of the Company or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Series B Preferred Stock. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in Texas or New York are not required to be open. "Call Date" shall have the meaning set forth in paragraph (c) of Section 5 hereof. "Common Stock" shall mean the common stock of the Company, par value $0.01 per share. "Dividend Payment Date" shall mean the last calendar day of January, April, July and October in each year, commencing on July 31, 1998; PROVIDED, HOWEVER, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment due on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date. "Dividend Periods" shall mean quarterly dividend periods commencing February 1, May 1, August 1, and November 1 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period (other than the initial Dividend Period, which shall commence on May 7, 1998 and end on and include July 31, 1998). "Issue Date" shall mean the date on which the Company first issues a share of Series B Preferred Stock. [STAMP] 62 "Junior Stock" shall mean the Common Stock and any other class or series of shares of the Company over which the Series B Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Company. "Parity Stock" shall have the meaning set forth in paragraph (b) of Section 8 hereof. "Series A Preferred Stock" shall mean the Company's $1.95 Series A Cumulative Convertible Preferred Stock. "Series B Preferred Stock" shall have the meaning set forth in Section 1 hereof. "set apart for payment" shall be deemed to include, without any action other than the following, the recording by the Company in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Company; PROVIDED, HOWEVER, that if any funds for a class or series of Junior Stock or any class or series of stock ranking on a parity with the Series B Preferred Stock as to the payment of dividends are placed in a separate account of the Company or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Series B Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "Transfer Agent" means SunTrust Bank, Atlanta, Georgia, or such other agent or agents of the Company as may be designated by the Board of Directors or their designee as the transfer agent for the Series B Preferred Stock. "Voting Preferred Stock" shall have the meaning set forth in Section 9(a) hereof. Section 3. DIVIDENDS. (a) The Holders of shares of the Series B Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for that purpose, dividends payable in cash in an amount per share of Series B Preferred Stock equal to $225.00 per annum. Such dividends shall be cumulative from May 7, 1998, whether or not in any Dividend Period or Periods there shall be funds of the Company legally available for the payment of such dividends, and shall be payable quarterly, when, as and if declared by the Board of Directors, in arrears on Dividend Payment Dates, commencing on the first Dividend Payment Date after the Issue Date. Each such dividend shall be payable in arrears to the holders of record of shares of the Series B Preferred Stock, as they appear on the stock records of the Company at the close of business on such record dates, not more than 60 days preceding such Dividend Payment Dates thereof, as shall be fixed by the Board of Directors. Accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board of Directors. (b) The amount of dividends payable for each full Dividend Period for the Series B Preferred Stock shall be computed by dividing the annual dividend rate by four. The amount of - 2 - 63 dividends payable for any period shorter or longer than a full Dividend Period, on the Series B Preferred Stock shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Holders of the Series B Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the Series B Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series B Preferred Stock that may be in arrears. (c) So long as any shares of the Series B Preferred Stock are outstanding, no dividends, except as described in the immediately following sentence, shall be declared or paid or set apart for payment on any class or series of Parity Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof set apart for such payment on the Series B Preferred Stock for all Dividend Periods terminating on or prior to the Dividend Payment Date on such class or series of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon shares of the Series B Preferred Stock and all dividends declared upon any other class or series of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series B Preferred Stock and accumulated and unpaid on such Parity Stock. (d) So long as any shares of the Series B Preferred Stock are outstanding, no dividends (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock), shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Stock, nor shall Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of shares of Common Stock made for purposes of an employee incentive or benefit plan of the Company or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Company, directly or indirectly, unless in each case (i) the full cumulative dividends on all outstanding shares of the Series B Preferred Stock and any other Parity Stock of the Company shall have been paid or set apart for payment for all past Dividend Periods with respect to the Series B Preferred Stock and all past dividend periods with respect to such Parity Stock and (ii) sufficient funds shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series B Preferred Stock and the current dividend period with respect to such Parity Stock. Notwithstanding the foregoing limitations, the Company may at any time acquire shares of its capital stock, without regard to rank, for the purpose of preserving its status as a real estate investment trust ("REIT"). Section 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of Junior Stock, the holders of the shares of Series B Preferred Stock shall be entitled to receive two thousand five hundred dollars ($2,500.00) per share of Series B Preferred Stock plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders, but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the - 3 - 64 holders of the shares of Series B Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of Series B Preferred Stock and any such other Parity Stock ratably in accordance with the respective amounts that would be payable on such shares of Series B Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Company with one or more corporations, (ii) a sale or transfer of all or substantially all of the Company's assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company. (b) Subject to the rights of the holders of shares of any series or class or classes of stock ranking on a parity with or prior to the Series B Preferred Stock upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Company, after payment shall have been made in full to the holders of the Series B Preferred Stock, as provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series B Preferred Stock shall not be entitled to share therein. Section 5. REDEMPTION AT THE OPTION OF THE COMPANY. (a) The Series B Preferred Stock shall not be redeemable by the Company prior to May 7, 2003. On and after May 7, 2003, the Company, at its option, may redeem the shares of Series B Preferred Stock in whole or in part, as set forth herein, subject to the provisions described below. (b) The Series B Preferred Stock may be redeemed, in whole or in part, at the option of the Company, at any time or from time to time, upon not less than 30 nor more than 60 days' prior written notice. In order to exercise its redemption option, the Company must issue a press release announcing the redemption (the "Press Release"). The Company may not issue a Press Release prior to May 7, 2003. The Press Release shall announce the redemption and set forth the number of shares of Series B Preferred Stock which the Company intends to redeem. The Call Date shall be selected by the Company, shall be specified in the notice of redemption and, subject to the provisions of Section 5(e) below, shall be not less than 30 days or more than 60 days after the date on which the Company issues the Press Release. (c) Upon redemption of Series B Preferred Stock by the Company on the date specified in the notice to holders required under subparagraph (e) of this Section 5 (the "Call Date"), each share of Series B Preferred Stock to be redeemed shall be redeemed in cash at a price per share equal to $2,500.00 per share, plus all accrued and unpaid distributions thereon to the Call Date, without interest, to the extent that the Company has funds legally available therefor. The redemption price of the Series B Preferred Stock (other than any portion thereof consisting of accrued and unpaid distributions) must be paid solely from the sale proceeds of other capital stock of the Company and not from any other source. For purposes of the foregoing sentence, "capital stock" means any common stock, preferred stock, depositary shares, interests, participations, or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing. Dividends payable on the shares of Series B Preferred Stock for any period greater or less than a full dividend period - 4 - 65 will be computed on the basis of a 360-day year consisting of twelve 30-day months. Except as provided above, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on shares of Series B Preferred Stock called for redemption or on the shares of capital stock issued upon such redemption. (d) If full cumulative dividends on the Series B Preferred Stock and any other class or series of Parity Stock of the Company have not been paid or declared and set apart for payment, the Series B Preferred Stock may not be redeemed in part and the Company may not purchase or acquire shares of Series B Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Series B Preferred Stock. (e) If the Company shall redeem shares of Series B Preferred Stock pursuant to paragraph (a) of this Section 5, notice of such redemption shall be given to the beneficial holders of the Series B Preferred Stock by the Company not less than thirty Business Days before the Call Date. Such notice shall be provided by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Company, or by publication in THE WALL STREET JOURNAL or THE NEW YORK TIMES, or if neither such newspaper is then being published, any other daily newspaper of national circulation. If the Company elects to provide such notice by publication, it shall also promptly mail notice of such redemption to the holders of the Series B Preferred Stock to be redeemed. Neither the failure to mail any notice required by this paragraph (e), nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such mailed or published notice shall state, as appropriate: (1) the Call Date: (2) the number of shares of Series B Preferred Stock to be redeemed from such holder; (3) the redemption price; (4) the place or places where the Series B Preferred Stock is to be surrendered for payment of the redemption price; and (5) that dividends on the shares to be redeemed shall cease to accrue on such Call Date except as otherwise provided herein. Notice having been published or mailed as aforesaid, from and after the Call Date (unless the Company shall fail to make available the amount of cash necessary to effect such redemption), (i) except as otherwise provided herein, dividends on the shares of the Series B Preferred Stock so called for redemption shall cease to accrue, (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Series B Preferred Stock of the Company shall cease (except the rights to receive the cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates). The Company's obligation to provide cash in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Company shall deposit with a bank or trust company (which may be an affiliate of the Company) that has an office in the Borough of Manhattan, City of New York and that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, any cash necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the shares of Series B Preferred Stock so called for redemption. At the close of business on the Call Date, each share Series B Preferred Stock to be redeemed pursuant to Section 5(c)(i) (unless the Company defaults in the delivery of the cash payable on such Call Date) shall be deemed to be no longer outstanding regardless of whether such holder has surrendered the certificates representing the Series B Preferred Stock. No interest shall accrue for the benefit of the holders of Series B Preferred Stock to be redeemed on any cash so set aside by the Company. Subject to applicable escheat laws, - 5 - 66 any such cash unclaimed at the end of two years from the Call Date (together with any interest or other earnings accrued thereon) shall revert to the general funds of the Company, after which reversion the holders of such shares so called for redemption shall look only to the general funds of the Company for the payment of such cash, and shall have no right to interest from and after the Call Date. As promptly as practicable after the surrender in accordance with said notice of the certificates for any such shares so redeemed (properly endorsed or assigned for transfer, if the Company shall so require and if the notice shall so state), such shares shall be exchanged for cash (without interest thereon) for which such shares have been redeemed. If fewer than all the outstanding shares of Series B Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Company from outstanding shares of Series B Preferred Stock not previously called for redemption by lot or pro rata (as nearly as may be) or by any other method determined by the Company in its sole discretion to be equitable. If fewer than all the shares of Series B Preferred Stock represented by any certificate are redeemed, then new certificates representing the unredeemed shares shall be issued without cost to the holder thereof. (f) Notwithstanding the foregoing, the Company may at any time acquire shares of its capital stock, without regard to rank, for the purpose of preserving its status as a REIT, for purposes of an employee benefit plan of the Company, or in accordance with the conversion or redemption provisions of any class of Preferred Stock ranking on parity with or senior to the Series B Preferred Stock. (g) The procedures for redeeming any depositary receipts evidencing fractional interests in the Series B Preferred Stock shall be the same as the procedures for redeeming the Series B Preferred Stock contained in this Section 5 except that the depositary agent that issued the depositary receipts being redeemed may act on behalf of the Company. Section 6. SHARES TO BE RETIRED. All shares of Series B Preferred Stock which shall have been issued and reacquired in any manner by the Company shall be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series. The Company may also retire any unissued shares of Series B Preferred Stock, and such shares shall then be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series. Section 7. CONVERSION. Holders of shares of Series B Preferred Stock shall have no conversion rights. Section 8. RANKING. Any class or series of stock of the Company shall be deemed to rank: (a) prior to the Series B Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution - 6 - 67 or winding up, as the case may be, in preference or priority to the holders of Series B Preferred Stock; (b) on a parity with the Series B Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Series B Preferred Stock, if the holders of such class of stock or series and the Series B Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other ("Parity Stock"); the Series A Preferred Stock shall be Parity Stock with respect to the Series B Preferred Stock; and (c) junior to the Series B Preferred Stock, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock or series shall be Common Stock or if the holders of Series B Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such stock or series. Section 9. VOTING. (a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Series B Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not earned or declared, the number of directors then constituting the Board of Directors shall be increased by two (if not already increased by reason of a similar arrearage with respect to any Parity Stock) and the holders of shares of Series B Preferred Stock, together with the holders of shares of every other series of Parity Stock (any such other series, the "Voting Preferred Stock"), voting as a single class regardless of series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the Series B Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever all arrearages dividends on the Series B Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, then the right of the holders of the Series B Preferred Stock and the Voting Preferred Stock to elect such additional two directors shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages in six quarterly dividends), and the terms of office of all persons elected as directors by the holders of the Series B Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of the Board of Directors shall be automatically reduced accordingly. At any time after such voting power shall have been so vested in the holders of shares of Series B Preferred Stock and the Voting Preferred Stock, the secretary of the Company may, and upon the written request of any holder of Series B Preferred Stock or any holder of depositary receipts evidencing a fractional interest in the Series B Preferred Stock (addressed to the secretary at the principal office of the Company) shall, call a special meeting of the holders of the Series B Preferred Stock and the Voting Preferred Stock for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that - 7 - 68 provided in the Bylaws of the Company for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the secretary within 20 days after receipt of any such request, then any holder of shares of Series B Preferred Stock (or depositary receipts representing shares of Series B Preferred Stock) may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Company. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the Series B Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the then-remaining director elected by the holders of the Series B Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. (b) So long as any shares of Series B Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, as amended, the affirmative vote of at least 66 2/3% of the votes entitled to be cast by the holders of the shares of Series B Preferred Stock and the Voting Preferred Stock, at the time outstanding, acting as a single class regardless of series, at any meeting called for the purpose, shall be necessary for effecting or validating the following: (i) Any amendment, alteration or repeal of any of the provisions of these Articles Supplementary that materially adversely affects the voting powers, rights or preferences of the holders of the Series B Preferred Stock or the Voting Preferred Stock; PROVIDED, HOWEVER, that the amendment of the provisions of the Charter so as to authorize or create, or to increase the authorized amount, of any Junior Stock or any shares of any class ranking on a parity with the Series B Preferred Stock or the Voting Preferred Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Series B Preferred Stock, and PROVIDED, FURTHER, that if any such amendment, alteration or repeal would materially adversely affect any voting powers, rights of preferences of the Series B Preferred Stock or another series of Voting Preferred Stock that are not enjoyed by some or all of the other series which otherwise would be entitled to vote in accordance herewith, the affirmative vote of least 66 2/3% of the votes entitled to be cast by holders of all series similarly affected, similarly given, shall be required in lieu of the affirmative vote of at least 66 2/3% of the votes entitled to be cast by the holders of the shares of Series B Preferred Stock and the Voting Preferred Stock which otherwise would be entitled to vote in accordance herewith; (ii) Enter into a share exchange that affects the Series B Preferred Stock, consolidate with or merge into another entity, or permit another entity to consolidate with or merge into the Company, unless in each such case, each share of Series B Preferred Stock remains outstanding without a material and adverse change to its terms and rights or is converted into or exchanged for a share of preferred stock of the surviving entity having preferences, rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption identical to those of a share of Series B Preferred Stock (except for changes that do not materially and adversely affect the holders of the Series B Preferred Stock); or - 8 - 69 (iii) The authorization, reclassification, or creation of, or the increase in the authorized amount of, any shares of any class or any security convertible into shares of any class ranking prior to the Series B Preferred Stock in the distribution of assets on any liquidation, dissolution or winding up of the Company or in the payment of dividends. For purposes of the foregoing provisions of this Section 9, each share of Series B Preferred Stock shall have one hundred (100) votes per share, each of which 100 votes may be directed separately by the holder thereof (or by any proxy or proxies of such holder). With respect to each share of the Series B Preferred Stock, the holder thereof may designate up to 100 proxies, with each proxy having the right to vote a whole number of votes (totaling 100 votes per share of Series B Preferred Stock). Except as otherwise required by applicable law or as set forth herein, the shares of Series B Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. Section 10. RECORD HOLDERS. The Company and the Transfer Agent may deem and treat the record holder of any shares of Series B Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Company nor the Transfer Agent shall be affected by any notice to the contrary. [Signatures On Following Page.] - 9 - 70 IN WITNESS WHEREOF, the Company has caused these Articles Supplementary to be signed in its name and on its behalf on this 1st day of May, 1998, by its Senior Vice President who acknowledges that these Articles Supplementary are the act of the Company and that to the best of his knowledge, information and belief and under penalties for perjury all matters and facts contained in these Articles Supplementary are true in all material respects. FELCOR SUITE HOTELS, INC. By: /s/ Randall L. Churchey ---------------------------------- Randall L. Churchey, Senior Vice President Attest: /s/ Lawrence D. Robinson -------------------------------------- Lawrence D. Robinson, Secretary (Corporate Seal) - 10 - 71 STATE OF MARYLAND 652537 STATE DEPARTMENT OF ASSESSMENTS AND TAXATION 301 West Preston Street Baltimore, Maryland 21201 I, RITA WINSTON OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, DO HEREBY CERTIFY THAT SAID DEPARTMENT, BY THE LAWS OF SAID STATE, IS THE CUSTODIAN OF THE RECORDS OF THIS STATE RELATING TO THE FORFEITURE OR SUSPENSION OF CORPORATE CHARTERS, OR OF CORPORATIONS TO TRANSACT BUSINESS IN THIS STATE; AND I AM THE PROPER OFFICER TO EXECUTE THIS CERTIFICATE. I FURTHER CERTIFY THAT FELCOR LODGING TRUST INCORPORATED IS A CORPORATION DULY INCORPORATED AND EXISTING UNDER AND BY VIRTUE OF THE LAWS OF MARYLAND AND SAID CORPORATION HAS FILED ALL ANNUAL REPORTS REQUIRED, HAS NO OUTSTANDING LATE FILING PENALTIES ON THOSE REPORTS, AND HAS A RESIDENT AGENT. THEREFORE, THE CORPORATION IS AT THE TIME OF THIS CERTIFICATE IN GOOD STANDING WITH THIS DEPARTMENT AND DULY AUTHORIZED TO EXERCISE ALL THE POWERS RECITED IN ITS CHARTER OR CERTIFICATE OF INCORPORATION, AND TO TRANSACT BUSINESS IN THE STATE OF MARYLAND. [SEAL] IN WITNESS WHEREOF, I HAVE HEREUNTO SET MY HAND AND AFFIXED THE SEAL OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND AT BALTIMORE THIS 27TH DAY OF JULY, 1998. /s/ RITA WINSTON ------------------------------ RITA WINSTON AT5-031 CHARTER DIVISION 72 STATE OF MARYLAND 657345 STATE DEPARTMENT OF ASSESSMENTS AND TAXATION 301 West Preston Street Baltimore, Maryland 21201 DATE: JULY 27, 1998 THIS IS TO ADVISE YOU THAT THE ARTICLES OF MERGER WITH A NAME CHANGE FOR FELCOR SUITE HOTELS, INC. (MD)-- SURVIVOR AND BRISTOL HOTEL COMPANY (DE)-- MERGING OUT CHANGING TO FELCOR LODGING TRUST INCORPORATED WERE RECEIVED AND APPROVED FOR RECORD ON JULY 27, 1998 AT 11:22 AM. FEE PAID: 101.00 IRENE B WOZNY CHARTER SPECIALIST [SEAL] AT5-031 73 STATE DEPARTMENT OF ASSESSMENTS AND TAXATION APPROVED FOR RECORD 7/27/98 at 11:22 a.m. ------- ---------- RECEIVED '98 JUL 27 11:22 ARTICLES OF MERGER BETWEEN FELCOR SUITE HOTELS, INC., (a Maryland corporation) AND BRISTOL HOTEL COMPANY, (a Delaware corporation) These ARTICLES OF MERGER are made and entered into as of July 27, 1998, by and between FelCor Suite Hotels, Inc., a Maryland corporation, and Bristol Hotel Company, a Delaware corporation, each of which certifies as follows: FIRST: Bristol Hotel Company (the "Merging Corporation") and FelCor Suite Hotels, Inc. (the "Successor Corporation") agree to merge in accordance with the terms and conditions set forth herein and in the Agreement and Plan of Merger, dated March 23, 1998, by and between the Successor Corporation and the Merging Corporation (the "Merger Agreement"). SECOND: The Merger will be effective at 9:00 a.m. Eastern time on July 28, 1998 (the "Effective Time", and the date on which the Effective Time occurs, the "Effective Date"). THIRD: The name of the Merging Corporation is Bristol Hotel Company, which is incorporated under the laws of the State of Delaware. The name of the Successor Corporation is FelCor Suite Hotels, Inc., which is incorporated under the laws of the State of Maryland. At the Effective Time, the name of the Successor Corporation will be FelCor Lodging Trust Incorporated. FOURTH: The Merging Corporation was incorporated under the General Corporation Law of the State of Delaware on November 14, 1994. The Merging Corporation is not registered or qualified to do business in the State of Maryland. FIFTH: The principal office in Maryland of the Successor Corporation is located in Baltimore City at 11 East Chase Street, Baltimore, Maryland 21202. The Merging Corporation does not have an office in the State of Maryland. SIXTH: The Merging Corporation does not own any interest in land in the State of Maryland, the title to which could be affected by recording an instrument in the land records. SEVENTH: (a) The total number of shares of stock of all classes that the Merging Corporation has authority to issue is (i) 150,000,000 shares of common stock, par value of $0.01 per share (each a "Merging Corporation Common Share"), and (ii) 50,000,000 shares of preferred stock, par value of $0.01 per share (each a "Merging Corporation Preferred Share"). The aggregate par value of all shares of all classes of stock of the Merging Corporation is $2,000,000. [STAMP] 74 The total number of shares of stock of all classes that the Successor Corporation has authority to issue is (i) 100,000,000 shares of common stock, par value of $0.01 per share (each, a "Successor Corporation Common Share"), and (ii) 10,000,000 shares of preferred stock, par value of $0.01 per share (each, a "Successor Corporation Preferred Share"), 6,050,000 of which have been designated as $1.95 Series A Cumulative Convertible Preferred Stock," par value of $0.01 per share (each, a "Successor Corporation Series A Preferred Share") and 57,000 of which have been designated as "9% Series B Cumulative Redeemable Preferred Stock," par value of $0.01 per share (each, a "Successor Corporation Series B Preferred Share"). The aggregate par value of all shares of all classes of the Successor Corporation is $1,100,000. (b) At the Effective Time, the charter of the Successor Corporation will be amended such that the total number of shares of stock of all classes that the Successor Corporation will have authority to issue will be (i) 200,000,000 Successor Corporation Common Shares, and (ii) 20,000,000 Successor Corporation Preferred Shares, 6,050,000 of which will have been designated as Successor Corporation Series A Preferred Shares and 57,000 of which will have been designated as Successor Corporation Series B Preferred Shares. The aggregate par value of all shares of all classes of the Successor Corporation will be $2,200,000. EIGHTH: The manner and basis of converting or exchanging outstanding stock of the Merging Corporation into stock of the Successor Corporation or other consideration and the treatment of any outstanding stock of the Successor Corporation not to be converted or exchanged will be as follows: (a) Subject to the provisions of clause (c) below, each Merging Corporation Common Share outstanding immediately prior to the Effective Time will be converted into the right to receive 0.685 (the "Exchange Ratio") of a validly issued, fully paid and nonassessable Successor Corporation Common Share, and each Merging Corporation Common Share theretofore outstanding will cease to be outstanding and will cease to exist, and each holder of a certificate representing such Merging Corporation Common Shares will thereafter cease to have any rights with respect to such shares, except the right to receive, without interest, the number of Successor Corporation Common Shares as calculated pursuant to this clause (a) and cash in lieu of fractional Successor Corporation Common Shares in accordance with clause (c) below, upon the surrender of the stock certificate for such Merging Corporation Common Shares; (b) Each Successor Corporation Common Share, Successor Corporation Series A Preferred Share and Successor Corporation Series B Preferred Share outstanding immediately prior to the Effective Time will remain outstanding; (c) Notwithstanding any other provision hereof, no fractional Successor Corporation Common Shares will be issued in connection with the Merger. No such holder will be entitled to dividends, voting rights or any other stockholder rights in respect of any fractional share. Instead, each holder of outstanding Merging Corporation Common Shares having a fractional interest arising upon the conversion or exchange of such shares in the Merger will, at the time of surrender of its certificate representing Merging Corporation Common Shares, be paid by the Successor Corporation an amount in cash equal to the Closing Price immediately preceding the Effective Time multiplied by the fraction of Successor Corporation Common Shares to which such holder would 2 75 otherwise be entitled. For purposes of this clause (c), "Closing Price" means the closing price of the Successor Corporation Common Shares (as reported in the New York Stock Exchange, Inc. Composite Tape) on the business day immediately preceding the Effective Date; and (d) Each Merging Corporation Common Share issued and held in the Merging Corporation's treasury or by FelCor or any wholly owned subsidiary of FelCor at the Effective Time, if any, will cease to be outstanding and will be canceled and retired and will cease to exist without payment of any consideration therefor. NINTH: The terms and conditions of the transaction set forth in these Articles of Merger were advised, authorized and approved by the Merging Corporation in the manner and by the vote required by its certificate of incorporation and bylaws and the laws of the State of Delaware. The terms and conditions of the transaction set forth in these Articles of Merger, including the Articles of Amendment attached hereto, were advised, authorized and approved by the Successor Corporation in the manner and by the vote required by its charter and bylaws and the laws of the State of Maryland. The manner of approval by the Merging Corporation and the Successor Corporation of the transactions set forth in these Articles of Merger was as follows: (a) The Board of Directors of the Merging Corporation adopted a resolution by unanimous vote on March 23, 1998, which declared that the transaction set forth in these Articles of Merger is advisable and directed that the Merger Agreement be submitted for adoption by the stockholders of the Merging Corporation at an annual meeting of the stockholders of the Merging Corporation held on July 27, 1998. Notice which stated that a purpose of the annual meeting was to act on the Merger contemplated by these Articles of Merger was given in the manner required by the applicable provisions of the General Corporation Law of the State of Delaware to each stockholder entitled to such notice. The Merger Agreement was adopted by the stockholders of the Merging Corporation at the annual meeting of the stockholders of the Merging Corporation held on July 27, 1998 by the affirmative vote of a majority of all the votes entitled to be cast on the matter in accordance with the certificate of incorporation of the Merging Corporation and the General Corporation Law of the State of Delaware. (b) The Board of Directors of the Successor Corporation adopted a resolution by unanimous vote on March 23, 1998, which declared that the transaction set forth in these Articles of Merger is advisable and directed that the transaction be submitted for consideration by the stockholders of the Successor Corporation at the annual meeting of the stockholders of the Successor Corporation held on July 27, 1998. Notice which stated that a purpose of the annual meeting was to act on the Merger contemplated by these Articles of Merger, including the Articles of Amendment attached hereto, was given in the manner required by the applicable provisions of the Maryland General Corporation Law to each stockholder entitled to such notice. The transaction set forth in these Articles of Merger, including the Articles of Amendment attached hereto, was approved by the stockholders of the Successor Corporation at the annual meeting of the stockholders of the Successor Corporation held on July 27, 1998 by the affirmative vote of a majority of all the votes entitled to be cast on the matter in accordance with the charter of the Successor Corporation and the Maryland General Corporation Law. 3 76 TENTH: At the Effective Time, the Articles of Amendment and Restatement of the Successor Corporation will be amended in the manner set forth in Exhibit A hereto. 4 77 IN WITNESS WHEREOF, the Merging Corporation and the Successor Corporation have caused these Articles of Merger to be signed in their respective corporate names and on their behalf by their respective President, Vice-President, Chairman of the Board or Vice Chairman of the Board and attested to by their respective Secretary or Assistant Secretary as of the 27th day of July, 1998. ATTEST: FELCOR SUITE HOTELS, INC., a Maryland corporation By: /s/ LAWRENCE D. ROBINSON By: /s/ RANDALL L. CHURCHEY ---------------------------- ----------------------------- Secretary Name: Randall L. Churchey Title: Senior Vice President BRISTOL HOTEL COMPANY, a Delaware corporation By: /s/ [ILLEGIBLE] By: /s/ JEFFREY P. MAYER ------------------------- ------------------------------ Assistant Secretary Name: Jeffrey P. Mayer Title: Vice President 5 78 The undersigned, being the duly elected and acting Senior Vice President of FelCor Suite Hotels, Inc., a Maryland corporation, hereby acknowledges that the foregoing Articles of Merger, of which this Certificate is a part, are the act of FelCor Suite Hotels, Inc., a Maryland corporation, and certifies that, to the best of his knowledge, information and belief and under penalties for perjury, all matters and facts contained in these Articles of Merger relating to FelCor Suite Hotels, Inc., a Maryland corporation, are true in all material respects. /s/ RANDALL L. CHURCHEY --------------------------------- Name: Randall L. Churchey Senior Vice President 6 79 The undersigned, being the duly elected and acting Vice President of Bristol Hotel Company, a Delaware corporation, hereby acknowledges that the foregoing Articles of Merger, of which this Certificate is a part, are the act of Bristol Hotel Company, a Delaware corporation, and certifies that, to the best of his knowledge, information and belief and under penalties for perjury, all matters and facts contained in these Articles of Merger relating to Bristol Hotel Company, a Delaware corporation, are true in all material respects. /s/ JEFFREY P. MAYER ---------------------------------- Name: Jeffrey P. Mayer Vice President 7 80 EXHIBIT A --------- ARTICLES OF AMENDMENT TO ARTICLES OF AMENDMENT AND RESTATEMENT OF FELCOR SUITE HOTELS, INC. The undersigned, on behalf of FelCor Suite Hotels, Inc., a Maryland corporation (the "Corporation"), hereby certifies as follows: FIRST: The Corporation desires to amend its Charter as currently in effect. SECOND: Article II of the Charter of the Corporation is hereby amended to read in its entirety as follows: "Article II. Name. The name of the Corporation is: FelCor Lodging Trust Incorporated." THIRD: Paragraph A of Article V of the Charter of the Corporation is hereby amended to read in its entirety as follows: "A. Authorized Shares. The total number of shares of capital stock that the Corporation shall have authority to issue is Two Hundred Twenty Million (220,000,000) shares, consisting of Two Hundred Million (200,000,000) shares of Common Stock, of the par value of One Cent ($0.01) each, and Twenty Million (20,000,000) shares of Preferred Stock, of the par value of One Cent ($0.01) each, amounting in aggregate par value to Two Million Two Hundred Thousand Dollars ($2,200,000.00)." 81 FOURTH: The total number of shares of stock that the Corporation had authority to issue immediately prior to this amendment is One Hundred Ten Million (110,000,000) shares, consisting of One Hundred Million (100,000,000) shares of Common Stock, par value $.01 per share, and Ten Million Shares (10,000,000) shares of Preferred Stock, par value $.01 per share, amounting in aggregate par value to $1,100,000. The total number of shares of stock that the Corporation has authority to issue immediately following this amendment is Two Hundred and Twenty Million (220,000,000) shares, consisting of Two Hundred Million (200,000,000) shares of Common Stock, par value $.01 per share, and Twenty Million Shares (20,000,000) of Preferred Stock, par value $.01 per share, amounting in aggregate par value to $2,200,000. The description of each class, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption is not changed by this amendment. FIFTH: The amendment of the Corporation's Charter set forth in these Articles of Amendment was advised by the Board of Directors of the Corporation and was approved by the stockholders of the Corporation. 82 State of Maryland PARRIS N. GLENDENING [SEAL] Governor DEPARTMENT OF RONALD W. WINEHOLT ASSESSMENTS AND TAXATION Director PAUL B. ANDERSON Charter Division Administrator - ------------------------------------------------------------------------------- DOCUMENT CODE 11A BUSINESS CODE COUNTY ------------- --------- ---------- # P.A. Religious Close Stock Nonstock ----------- ---- ---- ---- ---- ---- Merging Bristol Hotel Surviving Felcor Suite --------------- -------------------------------- Company Hotels, Inc. - --------------------------- -------------------------------------------- (DE) D4126926 - --------------------------- -------------------------------------------- - --------------------------- -------------------------------------------- CODE AMOUNT FEE REMITTED - ---- ------ ------------ 10 59 Expedited Fee (New Name) Felcor Lodging ------ ---------------------------------- 61 Rec. Fee (Arts. of Inc.) Trust Incorporated ------ -------------------------------------------- 20 Organ. & Capitalization ------ -------------------------------------------- 62 Rec. Fee (Amendment) ------ 63 20 Rec. Fee (Merger, Consol.) ------ 64 Rec. Fee (Transfer) ------ 66 Rec. Fee (Revival) X Change of Name ------ ----- 65 Rec. Fee (Dissolution) Change of Principal Office ------ ----- Special Fee Change of Resident Agent ------ ----- Certificate of Conveyance Change of Resident Agent ------ ----- Address ------------------------------ Resignation of Resident Agent ------------------------------ ----- Designation of Resident Agent ------------------------------ ----- and Resident Agent's Address 21 Recordation Tax ------ Change of Business Code 22 State Transfer Tax ----- ------ --------------------------------- 23 Local Transfer Tax Adoption of Assumed Name ------ ----- 70 Change of P.O., R.A. or R.A.A. --------------------------------- ------ 31 6 1 Corp. Good Standing --------------------------------- ------ ------- 600 Returns --------------------------------- - ----------------------------------------------------------- 52 Foreign Qualification ------ NA Foreign Registration Other Change(s) ------ ----- ------------------ 51 Foreign Name Registration ------ --------------------------------- 53 Foreign Resolution ------ --------------------------------- 54 For. Supplement Cert. ------ 56 Penalty CODE 045 ------ ---------------------- 50 Cert. of Qual. or Reg. - ----------------------------------------------------------- 83 Cert. Limited Partnership ATTENTION: /S/ DAVID GIBBONS ------ -------------------------- 84 Amendment to Limited Partnership ------ ------------------------------------ 85 Termination of Limited Partnership ------ ------------------------------------ 80 For. Limited Partnership ------ 91 Amend/Cancellation, For. Limited Part. ------ 87 Limited Part. Good Standing - ----------------------------------------------------------- 67 Cert. Limited Liability Partnership ------ 68 LLP Amendment - Domestic MAIL TO ADDRESS: ------ Foreign Limited Liability Partnership -------------------- ------ LLP Amendment - Foreign ------------------------------------ - ----------------------------------------------------------- 99 Art. of Organization (LLC) ------------------------------------ ------ 98 LLC Amendment, Diss, Continuation ------------------------------------ ------ 97 LLC Cancellation. ------------------------------------ ------ 96 Registration Foreign LLC ------ 94 Foreign LLC Supplemental ------ 92 LLC Good Standing (short) - ----------------------------------------------------------- 13 16 1 Certified Copy 10 ------ ------------- ---------------- Other - -- ------ --------------------------------------- TOTAL NOTE: FEES 101 Credit Card ---- ---------- ----- Effective: 7/28/98 9:00am Eastern Time X Check Cash ----- ----- Documents on checks - -------------------- ------- APPROVED BY: -------------- Room 809 - 301 West Preston Street - Baltimore, Maryland 21201 Phone: (410) 767-1350 - Fax (410) 333-7097 - TTY users call Maryland Relay 1-800-738-2258 Toll Free in MD: 1-888-246-5941 - web site: http://www.dat.state.md.us
83 IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed in its name and on its behalf on the 27th day of July, 1998, by Randall L. Churchey, its Senior Vice President and Chief Financial Officer, who acknowledges that these Articles of Amendment are the act of the Corporation and certifies that, to the best of his knowledge, information and belief and under penalties for perjury, all matters and facts contained in these Articles of Amendment are true in all material respects. ATTEST: FELCOR SUITE HOTELS, INC. /s/ LAWRENCE D. ROBINSON By: /s/ RANDALL L. CHURCHEY (SEAL) - ----------------------------- ------------------------------------- Lawrence D. Robinson Randall L. Churchey Secretary Senior Vice President and Chief Financial Officer EX-10.14 3 4TH AMENDED & RESTATED REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.14 U.S. $1,100,000,000 FOURTH AMENDED AND RESTATED CREDIT AGREEMENT Dated as of July 1, 1998 Among FELCOR SUITE HOTELS, INC. and FELCOR SUITES LIMITED PARTNERSHIP as Borrower -- -------- and THE LENDERS PARTY HERETO and THE CHASE MANHATTAN BANK as Administrative Agent -- -------------- ----- CHASE SECURITIES INC. as Arranger BANKERS TRUST COMPANY NATIONSBANK, N.A. WELLS FARGO BANK, NATIONAL ASSOCIATION as Co-Arrangers & Documentation Agents -------------------------------------- 2 TABLE OF CONTENTS
SECTION PAGE ARTICLE I DEFINITIONS AND ACCOUNTING TERMS.................................................................................. 2 1.1. Defined Terms................................................................................. 2 1.2. Computation of Time Periods................................................................... 37 1.3. Accounting Terms.............................................................................. 37 1.4. Certain Terms................................................................................. 37 ARTICLE II AMOUNTS AND TERMS OF THE LOANS AND LETTERS OF CREDIT.............................................................. 38 2.1. The Revolving Credit Loans.................................................................... 38 2.2. The Term Loans................................................................................ 38 2.3. Making the Loans.............................................................................. 38 2.4. Fees.......................................................................................... 41 2.5. Reduction and Termination of the Commitments.................................................. 42 2.6. Repayment..................................................................................... 42 2.7. Prepayments................................................................................... 42 2.8. Conversion/Continuation Option................................................................ 44 2.9. Interest...................................................................................... 45 2.10. Interest Rate Determination and Protection.................................................... 45 2.11. Increased Costs............................................................................... 46 2.12. Illegality.................................................................................... 47 2.13. Capital Adequacy.............................................................................. 47 2.14. Payments and Computations..................................................................... 47 2.15. Taxes......................................................................................... 50 2.16. Sharing of Payments, Etc...................................................................... 52 2.17. Swing Advances................................................................................ 52 2.18. Letter of Credit.............................................................................. 54 2.19 Letter of Credit Requests..................................................................... 55 2.20 Letter of Credit Participations............................................................... 56 2.21 Agreement to Repay Letter of Credit Drawings.................................................. 58
i 3 ARTICLE III CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT AND OF LENDING AND OF ISSUANCE OF LETTERS OF CREDIT.............................................................................. 59 3.1. Conditions Precedent to Effectiveness of this Agreement, to Initial Loans and Letters of Credit............................................. 59 3.2. Additional Conditions Precedent to Effectiveness of this Agreement, to Initial Loans and Letters of Credit..................................................................................... 61 3.3. Conditions Precedent to Each Loan and Letter of Credit.............................................................................. 62 ARTICLE IV REPRESENTATIONS AND WARRANTIES.................................................................................... 63 4.1. Existence; Compliance with Law................................................................ 63 4.2. Power; Authorization; Enforceable Obligations................................................. 63 4.3. Taxes......................................................................................... 65 4.4. Full Disclosure............................................................................... 65 4.5. Financial Matters............................................................................. 65 4.6. Litigation.................................................................................... 66 4.7. Margin Regulations............................................................................ 66 4.8. Ownership of Borrower and DJONT; Subsidiaries................................................. 67 4.9. ERISA......................................................................................... 68 4.10. Indebtedness.................................................................................. 68 4.11. Restricted Payments........................................................................... 69 4.12. No Burdensome Restrictions; No Defaults....................................................... 69 4.13. Investments. ................................................................................. 69 4.14. Government Regulation......................................................................... 69 4.15. Insurance..................................................................................... 70 4.16. Labor Matters................................................................................. 70 4.17. Force Majeure................................................................................. 71 4.18. Use of Proceeds............................................................................... 71 4.19. Environmental Protection...................................................................... 71 4.20. Contractual Obligations Concerning Assets..................................................... 73 4.21. Intellectual Property......................................................................... 73 4.22. Title......................................................................................... 74 4.23. Status as REIT................................................................................ 76 4.24. Operator: Compliance with Law................................................................. 76 4.25. Operating Leases, Licenses and Management Agreement........................................... 76 4.26. FF&E Reserves................................................................................. 77
ii 4 ARTICLE V FINANCIAL COVENANTS............................................................................................... 77 5.1. Unsecured Interest Expense Coverage........................................................... 78 5.2. Fixed Charge Coverage Ratio................................................................... 78 5.3. Maintenance of Tangible Net Worth............................................................. 78 5.4. Limitations on Total Indebtedness............................................................. 78 5.5. Limitations on Total Secured Indebtedness..................................................... 78 5.6. Adjusted NOI and Hotels....................................................................... 78 5.7. Limitations on Recourse Secured Indebtedness.................................................. 79 ARTICLE VI AFFIRMATIVE COVENANTS............................................................................................. 79 6.1. Compliance with Laws, Etc..................................................................... 79 6.2. Conduct of Business........................................................................... 79 6.3. Payment of Taxes, Etc......................................................................... 80 6.4. Maintenance of Insurance...................................................................... 80 6.5. Preservation of Existence, Etc................................................................ 80 6.6. Access........................................................................................ 80 6.7. Keeping of Books.............................................................................. 81 6.8. Maintenance of Properties, Etc................................................................ 81 6.9. Performance and Compliance with Other Covenants............................................... 81 6.10. Application of Proceeds....................................................................... 81 6.11. Financial Statements.......................................................................... 81 6.12. Reporting Requirements........................................................................ 83 6.13. Leases and Operating Leases; Management Agreements and Licenses.................................................................................. 86 6.14. Intentionally Omitted......................................................................... 87 6.15. Employee Plans................................................................................ 87 6.16. Intentionally Omitted......................................................................... 87 6.17. Fiscal Year................................................................................... 87 6.18. Environmental Matters......................................................................... 87 6.19. REIT Requirements............................................................................. 88 6.20. Maintenance of FF&E Reserves.................................................................. 88 6.21. INTENTIONALLY DELETED......................................................................... 88 6.22. Further Assurances............................................................................ 88 6.23. Unencumbered Hotel Properties/Financial Covenant Imbalance.................................... 88 6.24. Hotel Documents............................................................................... 89
iii 5
ARTICLE VII NEGATIVE COVENANTS................................................................................................ 89 7.1. Restrictions on Creation of Subsidiaries...................................................... 89 7.2. Operation/Ownership of Hotels................................................................. 89 7.3. Lease Obligations............................................................................. 89 7.4. Restricted Payments........................................................................... 90 7.5. Mergers, Stock Issuances, Asset Sales, Etc.................................................... 90 7.6. Restrictions on Construction/Budget Hotels.................................................... 91 7.7. Change in Nature of Business or in Capital Structure.......................................... 91 7.8. Modification of Material Agreements........................................................... 92 7.9. Accounting Changes............................................................................ 92 7.10. Transactions with Affiliates.................................................................. 92 7.11. Adverse or Speculative Transactions........................................................... 92 7.12. Environmental Matters......................................................................... 92 7.13. Joint Enterprises............................................................................. 93 7.14. Intentionally Omitted......................................................................... 93 7.15. ERISA Plan Assets............................................................................. 93 ARTICLE VIII EVENTS OF DEFAULT................................................................................................. 94 8.1. Events of Default............................................................................. 94 8.2. Remedies...................................................................................... 96 ARTICLE IX THE ADMINISTRATIVE AGENT.......................................................................................... 97 9.1. Authorization and Action...................................................................... 97 9.2. Administrative Agent's Reliance, Etc.......................................................... 98 9.3. Chase and Affiliates.......................................................................... 99 9.4. Lender Credit Decision........................................................................ 99 9.5. Indemnification............................................................................... 99 9.6. Successor Agent...............................................................................100
iv 6 ARTICLE X MISCELLANEOUS.....................................................................................................101 10.1. Amendments, Etc...............................................................................101 10.2. Notices, Etc..................................................................................102 10.3. No Waiver; Remedies...........................................................................103 10.4. Costs; Expenses; Indemnities..................................................................103 10.5. Right of Set-off..............................................................................105 10.6. Binding Effect................................................................................105 10.7. Assignments and Participations................................................................105 10.8. Governing Law; Severability...................................................................109 10.9. Submission to Jurisdiction; Service of Process................................................109 10.10. Section Titles................................................................................109 10.11. Execution in Counterparts.....................................................................110 10.12. Entire Agreement..............................................................................110 10.13. Confidentiality...............................................................................110 10.14. WAIVER OF JURY TRIAL..........................................................................110 10.15. Joint and Several Obligations.................................................................110
v 7 SCHEDULES Schedule I - Commitments Schedule II - Applicable Lending Offices and Addresses for Notices Schedule III - Operating Lessees Schedule IV - Permitted Transferees Schedule 4.8 - Subsidiaries and Unconsolidated Entities Schedule 4.10 - Existing Indebtedness Schedule 4.13 - Existing Investments Schedule 4.19 - Environmental Protection Schedule 4.22(a) - Owned Real Estate Schedule 4.22(b) - Leased Real Estate vi 8 EXHIBITS Exhibit A-1 - Form of Revolving Credit Note Exhibit A-2 - Form of Term Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Notice of Conversion or Continuation Exhibit D - Form(s) of Opinion(s) of Counsel for the Loan Parties Exhibit E - Form of Assignment and Acceptance Exhibit F - Intentionally Deleted Exhibit G - Form of Compliance Certificate Exhibit H - Form of Operating Lease Exhibit I - Form of Subsidiary Guaranty Exhibit J - INTENTIONALLY DELETED Exhibit K - Form of Letter of Credit Request vii 9 FOURTH AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 1, 1998, among FELCOR SUITE HOTELS, INC., a Maryland corporation ("FelCor") and FELCOR SUITES LIMITED PARTNERSHIP, a Delaware limited partnership ("FelCor LP" and collectively with FelCor, the "Borrower"), the financial institutions listed on the signature pages hereof (each individually a "Lender" and collectively the "Lenders") and THE CHASE MANHATTAN BANK ("Chase"), as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, pursuant to that certain Revolving Credit Agreement dated as of September 30, 1996, among the Borrower, the financial institutions listed on the signature page thereof, the Administrative Agent and Wells Fargo Bank, National Association ("Wells Fargo") as documentation agent (the "Original Revolving Credit Agreement"), the Original Lenders agreed to make to the Borrower revolving credit advances of up to $250,000,000 (the "Previous Maximum Revolving Credit Amount") in aggregate principal amount outstanding at any one time, for the purposes and upon the terms and subject to the conditions set forth therein; WHEREAS, pursuant to that certain Amended and Restated Revolving Credit Agreement dated as of October 18, 1996, among the Borrower, the Lenders, the Administrative Agent and Wells Fargo as documentation agent (the "Amended Revolving Credit Agreement") the terms and provisions of the Original Revolving Credit Agreement were amended and restated as more particularly set forth therein; WHEREAS, pursuant to that certain Second Amended and Restated Revolving Credit Agreement dated as of March 10, 1997, among the Borrower, the Lenders, the Administrative Agent and Wells Fargo as documentation agent (the "Second Amended Revolving Credit Agreement") the terms and provisions of the Amended Revolving Credit Agreement were amended and restated as more particularly set forth therein; WHEREAS, pursuant to that certain Third Amended and Restated Revolving Credit Agreement dated as of August 14, 1997, among the Borrower, the Lenders, the Administrative Agent and Wells Fargo as documentation agent (the "Third Amended Revolving Credit Agreement") the terms and provisions of the 1 10 Second Amended Revolving Credit Agreement were amended and restated as more particularly set forth therein; WHEREAS, as of the date hereof, Revolving Credit Loans (hereinafter defined) in the aggregate principal amount of $453,000,000.00 have been advanced to the Borrower pursuant to the terms of the Third Amended Revolving Credit Agreement; and WHEREAS, the Borrower has requested, and the Lenders have agreed, to (x) increase the Previous Maximum Revolving Credit Amount, (y) make the Term Loans and (z) amend certain terms and provisions of the Third Amended Revolving Credit Agreement and to restate the same as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the parties hereto hereby agree that the aforementioned recitals are true and correct and hereby incorporated herein and that the Third Amended Revolving Credit Agreement is hereby amended and restated in its entirety so that all of the terms and conditions contained in this Agreement shall supersede and control the terms and conditions of the Third Amended Revolving Credit Agreement. ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms. As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Adjusted EBITDA" means, for any Person for any period, EBITDA of such Person for such period less the FF&E Reserve for such Person. "Adjusted Funds From Operations" means, for any Person, for any period, Net Income (Loss) of such Person for such period plus (a) the sum of the following amounts of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss): (i) depreciation expense, (ii) amortization expense and other non-cash charges of such Person and its Subsidiaries with respect to their real estate assets for such period, (iii) losses from Asset Sales of such Person and its Subsidiaries, losses resulting from restructuring of Indebtedness of such Person 2 11 and its Subsidiaries and other extraordinary losses, and (iv) minority interests attributable to FelCor LP's partnership units; less (b) the sum of the following amounts of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss): (i) gains from Asset Sales of such Person and its Subsidiaries, gains resulting from restructuring of Indebtedness of such Person and its Subsidiaries and other extraordinary gains, and (ii) the applicable share of Net Income (Loss) of such Person's Unconsolidated Entities; plus (c) such Person's Pro Rata Share of Adjusted Funds From Operations of such Person's Unconsolidated Entities. "Adjusted NOI" means, with respect to any Hotel owned or leased by the Borrower or any of its Subsidiaries, Eligible Joint Ventures or Unconsolidated Entities, for any period, the Net Operating Income for such Hotel for such period less the FF&E Reserve for such Hotel for such period. "Affiliate" means, to any Person, any Subsidiary of such Person and any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person and includes each executive officer, director, trustee, limited liability company manager or general partner of such Person, and each Person who is the beneficial owner of 10% or more of any class of voting Stock of such Person. For the purposes of this definition, "control" means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" means the Third Amended Revolving Credit Agreement, together with all Exhibits and Schedules thereto, as amended and restated by this Fourth Amended and Restated Credit Agreement, together with all Exhibits and Schedules hereto and as the same may be further amended, supplemented or otherwise modified from time to time. "Allerton Hotel" shall mean that certain Hotel located in Chicago Illinois and commonly known as the Allerton Hotel. "Alternative Currency Contract" means a currency swap agreement, currency cap agreement, currency collar agreement or forward currency agreement entered into to provide protection against fluctuations in an Alternative Currency. 3 12 "Alternative Currency" means any lawful currency of a country where a Hotel is located, other than Dollars, which is freely transferable and convertible into Dollars. "Applicable Lending Office" means, with respect to each Lender, its Domestic Lending Office in the case of a Base Rate Loan and its Eurodollar Lending Office in the case of a Eurodollar Rate Loan. "Applicable Margin" means, with respect to each Loan, the applicable percentage per annum set forth below based upon (i) with respect to Level I through IV Status, the Status then in effect and (ii) with respect to Level V through VIII Status, the Status in effect on the most recent Applicable Margin Reset Date, it being understood that the Applicable Margin for (i) Base Rate Loans shall be the percentage set forth under the column "Base Rate Loans", (ii) Eurodollar Rate Loans shall be the percentage set forth under the column "Eurodollar Rate Loans", and (iii) the Commitment Fee shall be the percentage set forth under the column "Commitment Fee":
Base Rate Eurodollar Rate Commitment Loans Loans Fee --------- ----------- ----------- Level I Status 0% .875% 0.125% Level II Status 0% 1.00% 0.15% Level III Status 0% 1.125% 0.15% Level IV Status 0% 1.25% 0.20% Level V Status 0% 1.375% 0.20% Level VI Status 0% 1.5% 0.20% Level VII Status 0.125% 1.625% 0.25% Level VIII 0.25% 1.75% 0.30%
"Applicable Margin Reset Date" shall mean the 45th day following the end of the most recent Fiscal Quarter. "Asset Sale" means any sale, conveyance, transfer, assignment, lease or other disposition (including, without limitation, by merger or consolidation, and by condemnation, eminent domain, loss, damage, or destruction, and whether by operation of law or otherwise) by the Borrower or any of its Subsidiaries to any 4 13 Person (other than to Borrower or any of its Subsidiaries) of any Stock of any of its Subsidiaries, any Stock Equivalents of any of its Subsidiaries or any Hotel, but excluding Operating Leases. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit E. "Available Credit" means, at any time, an amount equal to the then effective Revolving Credit Commitments of the Lenders less the sum of (x) the aggregate of the outstanding principal amount of the Revolving Credit Loans at such time and (y) the Letter of Credit Outstandings. "Base Rate" means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall be equal at all times to the higher of: (a) the rate of interest announced publicly by Chase at its principal office, from time to time, as Chase's base rate; and (b) the sum (adjusted to the nearest 1/8 of one percent or, if there is no nearest 1/8 of one percent, to the next higher 1/8 of one percent) of (i) 1/2 of one percent per annum plus (ii) the Federal Funds Rate. "Base Rate Loan" means any outstanding principal amount of the Loans of any Lender that bears interest with reference to the Base Rate, other than Swing Advances. "Borrower's Investment" means, with respect to any Hotel, the Borrower's or any of its Subsidiaries' investment in such Hotel (including all investments constituting, evidencing or secured by an interest in property, whether tangible or intangible and whether real, personal or mixed, that is used or intended for use in, or in any manner connected with or relating to, the ownership or leasing of such Hotel, specifically including, without limitation, investments in Subsidiaries and Unconsolidated Entities owning or leasing Hotels), at cost, on a consolidated basis, provided that in determining the cost of such investments, there shall be included (i) the amount of all cash paid and the value (as determined by the Board of Directors of FelCor for purposes of such investment) of any other property transferred therefor by the Borrower or its Subsidiary, (ii) the amount of all indebtedness and other obligations assumed or incurred by the Borrower or its 5 14 Subsidiary or to which the Borrower or its Subsidiary takes subject, and (iii) the value (as determined by the Board of Directors of FelCor for the purposes of such investment) of all equity securities of which the issuer is an entity that is, or upon such investment will be, included within the Borrower or its Subsidiary and which are issued (otherwise than for cash) to, or retained by, any person other than the Borrower or its Subsidiary in connection with such investment. For purposes of this definition only "indebtedness" of the Borrower or its Subsidiary shall mean the consolidated liabilities of the Borrower and its Subsidiaries for borrowed money (including all notes payable and drafts accepted representing extensions of credit) and all obligations evidenced by bonds, debentures, notes or other similar instruments on which interest charges are customarily paid, including obligations under Capitalized Leases. "Borrowing" means a borrowing consisting of Loans made on the same day by the Lenders ratably according to their respective Commitments. "Bristol" shall mean Bristol Hotel Company, a Delaware corporation. "Bristol Distribution" shall mean Borrower's one time earnings and profits dividend associated with the Bristol Merger. "Bristol Effective Date" shall be the date on which the Bristol Merger occurs, provided, however, if the Bristol Merger occurs after August 15, 1998 the Bristol Effective Date shall be deemed not to have occurred. "Bristol Merger" shall mean the merger between Borrower and Bristol, provided, such merger is consummated on terms substantially similar to those set forth in that certain Merger Agreement dated as of March 23, 1998, as in effect on the date hereof. "Bristol Merger Date" shall be the date on which the Bristol Merger is duly consummated. "Business Day" means a day of the year on which banks are not required or authorized to close in New York City and California and, if the applicable Business Day relates to a Eurodollar Rate Loan, a day on which dealings are also carried on in the London interbank market. "Capital Expenditures" means, for any Person for any period, the aggregate of all expenditures by such Person and its Subsidiaries, except interest 6 15 capitalized during construction, during such period for property, plant or equipment, including, without limitation, renewals, improvements, replacements and capitalized repairs, that would be reflected as additions to property, plant or equipment on a consolidated balance sheet of such Person and its Subsidiaries prepared in conformity with GAAP. For the purpose of this definition, the purchase price of equipment which is acquired simultaneously with the trade-in of existing equipment owned by such Person or any of its Subsidiaries or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment being traded in at such time or the amount of such proceeds, as the case may be. "Capitalized Lease" means, as to any Person, any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in conformity with GAAP. "Capitalized Lease Obligations" means, as to any Person, the capitalized amount of all obligations of such Person or any of its Subsidiaries under Capitalized Leases, as determined on a consolidated basis in conformity with GAAP. "Cash" shall mean coin or currency of the United States of America or immediately available federal funds. "Cash Equivalents" means (i) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States government or any agency thereof, (ii) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers' acceptances of any commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000 having maturities of one year or less from the date of acquisition, and (iii) commercial paper of an issuer rated at least "A-1" by S&P or "P-1" by Moody's, or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments. "Closing Date" means July 1, 1998. "Code" means the Internal Revenue Code of 1986 (or any successor legislation thereto), as amended from time to time. "Commitment" means, as to any Lender, such Lender's Revolving Credit Commitment and/or Term Loan Commitment and "Commitments" means the 7 16 aggregate Revolving Credit Commitments and Term Loan Commitments of all Lenders. "Commitment Fee" has the meaning specified in Section 2.4(a). "Compliance Certificate" shall have the meaning set forth in Section 3.1(j) hereof. "Contingent Obligation" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Indebtedness or Contractual Obligation of another Person, if the purpose or intent of such Person in incurring the Contingent Obligation is to provide assurance to the obligee of such Indebtedness or Contractual Obligation that such Indebtedness or Contractual Obligation will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Indebtedness or Contractual Obligation will be protected (in whole or in part) against loss in respect thereof. Contingent Obligations of a Person include, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of an obligation of another Person (including, in the case of any Guarantor, its obligations under its Subsidiary Guaranty), and (b) any liability of such Person for an obligation of another Person through any agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of a loan, advance, stock purchase, capital contribution or otherwise), (ii) to maintain the solvency or any balance sheet item, level of income or financial condition of another Person, (iii) to make take-or-pay or similar payments, if required, regardless of non-performance by any other party or parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such obligation or to assure the holder of such obligation against loss, or (v) to supply funds to or in any other manner invest in such other Person (including, without limitation, to pay for property or services irrespective of whether such property is received or such services are rendered), if in the case of any agreement described under subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary purpose or intent thereof is as described in the preceding sentence. Anything herein to the contrary notwithstanding, no agreement entered into by the Borrower or any of its Subsidiaries or Unconsolidated Entities with respect to its acquisition of any direct or indirect interest in any Hotel shall, prior to the satisfaction in full of all conditions precedent to the obligations of such Person pursuant to the agreement, be deemed or construed 8 17 to constitute a "Contingent Obligation" or "Indebtedness" of such Person hereunder, provided that pursuant to any such agreement, the Borrower or its Subsidiary or Unconsolidated Entity is not liable or responsible for, and does not assume any, development or construction risks. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported. "Contractual Obligation" of any Person means any obligation, agreement, undertaking or similar provision of any security issued by such Person or of any agreement (including, without limitation, any management or franchise agreement), undertaking, contract, lease, indenture, mortgage, deed of trust or other instrument (excluding a Loan Document) to which such Person is a party or by which it or any of its property is bound or to which any of its properties is subject. "Default" means any event which with the passing of time or the giving of notice or both would become an Event of Default. "DJONT" means DJONT Operations, L.L.C., a Delaware limited liability company. "DOL" means the United States Department of Labor, or any successor thereto. "Dollars" and the sign "$" each mean the lawful money of the United States of America. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule II or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Drawing" shall have the meaning provided in Section 2.21(a). "EBITDA" means, for any Person for any period, the Net Income (Loss) of such Person for such period taken as a single accounting period, plus (a) the sum of the following amounts of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss): (i) depreciation expense, (ii) amortization expense and other non-cash charges, (iii) interest expense, (iv) income tax expense, (v) extraordinary losses (and other losses on Asset Sales not otherwise included in extraordinary losses determined on a consolidated basis in 9 18 conformity with GAAP), and (vi) minority interests attributable to FelCor LP's partnership units, less (b) the sum of the following amounts of such Person and its Subsidiaries determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss): (i) extraordinary gains (and in the case of the Borrower, other gains on Asset Sales not otherwise included in extraordinary gains determined on a consolidated basis in conformity with GAAP), (ii) the applicable share of Net Income (Loss) of such Person's Unconsolidated Entities, (iii) cash payments made with respect to any non-cash charge which was added back to Net Operating Income to determine EBITDA for any prior period; plus (c) such Person's Pro Rata Share of EBITDA of such Person's Unconsolidated Entities. "Effective Date" has the meaning specified in Section 3.1. "Eligible Assignee" means (i) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the OECD, or a political subdivision of any such country, and having total assets in excess of $5,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD or the Cayman Islands; (iii) the central bank of any country which is a member of the OECD; corporation organized under the laws of the United States, or any State thereof, and having total assets in excess of $3,000,000,000; (iv) a mutual fund or an insurance company organized under the laws of the United States, or any State thereof, in each case having total assets in excess of $5,000,000,000; (v) any Lender; (vi) any Affiliate of any Lender; (vii) any Person other than an Affiliate of a Loan Party; and (viii) only with respect to any Lender that is a fund that invests in bank loans, any other fund or trust entity that invests in bank loans and is advised by or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor, in each case ((i) through (viii) above) acceptable (a) to the Administrative Agent, and (b) provided no Default or Event of Default exists, to the Borrower, which acceptance will not be unreasonably withheld, conditioned or delayed. "Eligible Entity" shall mean any Eligible Joint Venture in which the Borrower owns, directly or indirectly, at least a 90% equity interest and the remainder of such equity interest is owned by either (i) Promus, (ii) Sheraton or (iii) New Bristol, provided, however, such Eligible Joint Venture shall only be an Eligible Entity if (i) Borrower (x) is the sole general partner (or equivalent) in such Eligible Joint Venture or (y) owns directly or indirectly at least 90% of the Stock of the sole 10 19 general partner (or equivalent) in such Eligible Joint Venture and all other Stock of such sole general partner (or equivalent) which is not owned by Borrower is owned by either Promus, Sheraton or New Bristol, (ii) such sole general partner (or equivalent) is the only Person who can unilaterally authorize the sale or encumbrance of the assets of such Eligible Joint Venture (iii) Borrower alone controls the sole general partner (or equivalent) and (iv) such Eligible Joint Venture has no debt other than unsecured trade debt incurred in the ordinary course of business. For the purposes of this definition, "control" means the possession of the power to direct or cause the direction of management and policies of such Person (including without limitation the power to authorize the sale or encumbrance of the assets of such Person), whether through the ownership of voting securities, by contract or otherwise. "Eligible Joint Venture" means any joint venture, corporation, partnership or other business entity in which the Borrower (i) owns directly or indirectly a JV% of at least 50% and (ii) is (or owns directly or indirectly a majority of the voting Stock of and controls) the managing general partner or equivalent thereof for such entity and (iii) Borrower alone controls such managing general partner or equivalent. For the purposes of this definition, "control" means the possession of the power to direct or cause the direction of management and policies of such Person (including without limitation the power to authorize the sale or encumbrance of the assets of such Person), whether through the ownership of voting securities, by contract or otherwise. "Environmental Claim" means any accusation, allegation, notice of violation, action, claim, Environmental Lien, demand, abatement or other Order or direction (conditional or otherwise) by any Governmental Authority or any other Person for personal injury (including sickness, disease or death), tangible or intangible property damage, damage to the environment, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restriction, resulting from or based upon (i) the existence, or the continuation of the existence, of a Release (including, without limitation, sudden or non-sudden accidental or non-accidental Releases) of, or exposure to, any Hazardous Material or other nuisance (to the extent the same relates to any Hazardous Materials), or other Release in, into or onto the environment (including, without limitation, the air, soil, surface water or groundwater) at, in, by, from or related to any property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures or any activities or operations thereof; (ii) the environmental aspects of the transportation, storage, treatment or disposal of Hazardous Materials in connection with any property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures or their operations or facilities; or (iii) the violation, or alleged violation, of any 11 20 Environmental Laws, Orders or Environmental Permits of or from any Governmental Authority relating to environmental matters connected with any property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures. "Environmental Laws" means any applicable federal, state, local or foreign law (including common law), statute, code, ordinance, rule, regulation or other requirement having the force or effect of law relating to the environment, natural resources, or public or employee health and safety and includes, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. ss. 136 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq. (to the extent the same relates to any Hazardous Materials), and the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq., as such laws have been amended or supplemented, and the regulations promulgated pursuant thereto, and all analogous state and local statutes. "Environmental Liabilities and Costs" means, as to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including, without limitation, all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any other Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, including, without limitation, any thereof arising under any Environmental Law, Environmental Permit, order or agreement with any Governmental Authority or other Person, and which relate to any environmental, health or safety condition, or a Release or threatened Release, and result from the past, present or future operations of, or ownership of property by, such Person or any of its Subsidiaries or Eligible Joint Ventures. "Environmental Lien" means any Lien in favor of any Governmental Authority arising under any Environmental Law. "Environmental Permit" means any Permit required under any applicable Environmental Laws or Order and all supporting documents associated therewith. 12 21 "ERISA" means the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control or treated as a single employer with any Loan Party within the meaning of Section 414 (b), (c), (m) or (o) of the Code. "ERISA Event" means (i) an event described in Sections 4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA with respect to a Pension Plan; (ii) the withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of any Loan Party or any ERISA Affiliate from any Multiemployer Plan or the insolvency of any Multiemployer Plan; (iv) the filing of a notice of intent to terminate a Pension Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (v) the institution of proceedings by the PBGC to terminate or appoint a trustee to administer a Pension Plan or Multiemployer Plan; (vi) the failure to make any required contribution to a Pension Plan; (vii) any other event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (viii) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA; (ix) a prohibited transaction (as described in Code Section 4975 or ERISA Section 406) shall occur with respect to any Plan; or (x) any Loan Party or ERISA Affiliate shall request a minimum funding waiver from the IRS with respect to any Pension Plan. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" below its name on Schedule II (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Eurodollar Rate" means, for any Interest Period, an interest rate per annum equal to the rate per annum obtained by multiplying (a) a rate per annum equal to the rate for U.S. dollar deposits with maturities comparable to such Interest Period which appears on Telerate Page 3750 as of 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, provided, however, that if such rate does not appear on Telerate Page 3750, the "Eurodollar Rate" applicable to a particular Interest Period shall mean a rate per annum equal to 13 22 the rate at which U.S. dollar deposits in an amount approximately equal to the Principal Balance (or the portion thereof which will bear interest at a rate determined by reference to the Eurodollar Rate during the Interest Period to which such Eurodollar Rate is applicable in accordance with the provisions hereof), and with maturities comparable to the last day of the Interest Period with respect to which such Eurodollar Rate is applicable, are offered in immediately available funds in the London Interbank Market to the London office of Chase by leading banks in the Eurodollar market at 11:00 a.m., London time, two (2) Business Days prior to the commencement of the Interest Period to which such Eurodollar Rate is applicable, by (b) a fraction (expressed as a decimal) the numerator of which shall be the number one and the denominator of which shall be the number one minus the Eurodollar Rate Reserve Percentage for such Interest Period. "Eurodollar Rate Loan" means any outstanding principal amount of the Loans of any Lender that, for an Interest Period, bears interest at a rate determined with reference to the Eurodollar Rate. "Eurodollar Rate Reserve Percentage" for any Interest Period means the aggregate reserve percentages (expressed as a decimal) from time to time established by the Board of Governors of the Federal Reserve System of the United States and any other banking authority to which any of the Lenders are now or hereafter subject, including, but not limited to any reserve on Eurocurrency Liabilities as defined in Regulation D of the Board of Governors of the Federal Reserve System of the United States at the ratios provided in such Regulation from time to time, it being agreed that any portion of the Principal Balance bearing interest at a rate determined by reference to the Eurodollar Rate shall be deemed to constitute Eurocurrency Liabilities, as defined by such Regulation, and it being further agreed that such Eurocurrency Liabilities shall be deemed to be subject to such reserve requirements without benefit of or credit for prorations, exceptions or offsets that may be available to any of the Lenders from time to time under such Regulation and irrespective of whether such Lender actually maintains all or any portion of such reserve. "Existing Guarantors" means (i) FelCor/CSS Hotels, L.L.C., a Delaware limited liability company, (ii) FelCor/LAX Hotels, L.L.C., a Delaware limited liability company, (iii) FelCor/CSS Holdings, L.P., a Delaware limited partnership, (iv) FelCor/St. Paul Holdings, L.P., a Delaware limited partnership, (v) FelCor/LAX Holdings, L.P., a Delaware limited partnership and (vi) FelCor Eight Hotels L.L.C., a Delaware limited liability company. 14 23 "Existing Subsidiary Guaranty" means each Subsidiary Guaranty dated as of September 30, 1996 and executed by each Existing Guarantor in favor of the Lenders, as reaffirmed and ratified pursuant to that certain Reaffirmation and Ratification of Subsidiary Guaranties dated as of the Effective Date and executed by the Existing Guarantors in favor of the Lenders. "Event of Default" has the meaning specified in Section 8.1. "Facing Fee" shall have the meaning provided in Section 2.4(c). "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "FF&E Reserve" means, for any Person and its Subsidiaries determined on a consolidated basis in accordance with GAAP (or with respect to any Hotel) for any period, a reserve equal to four percent (4%) of Room Revenues from any Hotel owned by such Person or its Subsidiary (or from such Hotel), for such Period (unless such Person is contractually obligated to reserve a greater percentage of Room Revenues, in which case such Person shall be required to reserve such greater amount with respect to such Hotel), plus, for any Person, such Person's Pro Rata Share of any FF&E Reserve for any Hotel owned by such Person's Unconsolidated Entities. "Financial Covenant Imbalance" shall have the meaning set forth in Section 2.7(c). "Final Maturity Date" means June 30, 2001. "Fiscal Quarter" means each of the three month periods ending on March 31, June 30, September 30 and December 31. "Fiscal Year" means the twelve month period ending on December 31. 15 24 "Fixed Charges" means, for any Person for any period, (a) Gross Interest Expense for such period plus (b) the aggregate amount of scheduled principal payments on the Total Indebtedness of such Person (excluding optional prepayments and scheduled principal payments in respect of any such Total Indebtedness which is payable in a single installment at final maturity) required to be made during such period plus (c) dividends required to be paid by such Person (and its Subsidiaries determined on a consolidated basis in conformity with GAAP) in connection with preferred Stock issued by such Person (including such Person's Pro Rata Share of such dividends required to be paid by such Person's Unconsolidated Entities.) "Free Cash Flow" means, for any Person for any period, the Adjusted Funds From Operations for such period less (a) the aggregate FF&E Reserve for such Person and its Subsidiaries for such period, and (b) the aggregate amount of scheduled principal payments on the Total Indebtedness of such Person (excluding optional prepayments and scheduled principal payments in respect of any such Indebtedness which is payable in a single installment at final maturity) required to be made during such period. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination except that, for purposes of Articles V and VII, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the audited financial statements referred to in Section 4.5. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity duly exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Gross Interest Expense" means, for any Person for any period, the sum of (a) the total interest expense in respect of all Indebtedness (excluding all Contingent Obligations) of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP, plus capitalized interest of such Person and its Subsidiaries, plus (b) such Person's Pro Rata Share of Gross Interest Expense of such Person's Unconsolidated Entities. 16 25 "Guarantor" means the Existing Guarantors and each direct and indirect wholly owned Subsidiary of the Borrower formed or acquired after the date hereof, provided however, a wholly owned Subsidiary of the Borrower which is formed or acquired after the date hereof shall only be required to be a Guarantor if such Subsidiary is a Required Guarantor. "Hazardous Material" means any substance, material or waste which is regulated by any Governmental Authority of the United States as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "contaminant," "toxic waste," "toxic substance" or words of similar meaning or import under any provision of Environmental Law, which includes, but is not limited to, petroleum, petroleum products, asbestos, urea formaldehyde and polychlorinated biphenyls. "Hotel" means any Real Estate or Lease comprising an operating facility offering hotel or other lodging services. "Hotel Documents" means, with respect to any Hotel, the following documents: (i) A description of such Hotel, such description to include the age, location and number of rooms or suites of such Hotel; (ii) Details of the Borrower's Investment in such Hotel and, if available (or able to be reasonably obtained), details of the Adjusted NOI of such Hotel for the prior four (4) Fiscal Quarters; (iii) A copy of the most recent ALTA Owner's Policy of Title Insurance (or commitment to issue such a policy to the Person owning or to own such Hotel) relating to such Hotel showing the identity of the fee titleholder thereto and all matters of record as of its date; (iv) Copies of each of the Operating Lease, Management Agreement and License relating to such Hotel; (v) Copies of all engineering, mechanical, structural and maintenance studies performed by third party consultants with respect to such Hotel; 17 26 (vi) A "Phase I" environmental assessment of such Hotel prepared by an environmental engineering firm acceptable to the Administrative Agent, and any additional environmental studies or assessments available to the Borrower performed with respect to such Hotel; (vii) If such Hotel is owned pursuant to a Qualified Lease, a copy of such Lease together with all and any amendments thereto or modifications thereof; and (viii)Such other information as the Administrative Agent may reasonably request in order to evaluate the Hotel. "Improvements" has the meaning specified in Section 4.22(c). "Indebtedness" of any Person means, without duplication, the principal amount of (i) all indebtedness of such Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured) or for the deferred purchase price of property or services, (ii) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments (including, in the case of the Borrower, the Loans outstanding), (iii) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (iv) all Capitalized Lease Obligations of such Person, (v) all Contingent Obligations of such Person, (vi) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value (other than for other equity securities) any Stock or Stock Equivalents of such Person, valued, in the case of mandatorily redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (vii) all Indebtedness referred to in clause (i), (ii), (iii), (iv), (v) or (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and general intangibles) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (viii) all liabilities of such Person under Title IV of ERISA. "Indemnitees" has the meaning specified in Section 10.4. 18 27 "Interest Period" means, (a) in the case of any Eurodollar Rate Loan, (i) initially, the period commencing on the date such Eurodollar Rate Loan is made or on the date of conversion of a Base Rate Loan to such Eurodollar Rate Loan and ending one, two, three, six, nine (to the extent available) or twelve (to the extent available) months thereafter, as selected by the Borrower in its Notice of Borrowing or Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.3 or 2.8, and (ii) thereafter, if such Loan is continued, in whole or in part, as a Eurodollar Rate Loan pursuant to Section 2.8, a period commencing on the last day of the immediately preceding Interest Period therefor and ending one, two, three, six, nine (to the extent available) or twelve (to the extent available) months thereafter, as selected by the Borrower in its Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.8; provided, however, that: (A) if any Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless the result of such extension would be to extend such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (B) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (C) the Borrower may not select any Interest Period which ends after the Final Maturity Date; (D) Intentionally Omitted. (E) the Borrower may not select any Interest Period in respect of Loans having an aggregate principal amount of less than $5,000,000; and (F) there shall be outstanding at any one time no more than fifteen (15) Interest Periods in the aggregate. "Interest Rate Contracts" means interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate insurance, and other agreements or arrangements designed to provide protection against fluctuations in interest rates. 19 28 "Investment" means, with respect to any Person, (a) any loan or advance to any other Person, (b) the ownership, purchase or other acquisition of, any Stock, Stock Equivalents, other equity interest, obligations or other securities of, (i) any other Person, (ii) all or substantially all of the assets of any other Person, or (iii) all or substantially all of the assets constituting the business of a division, branch or other unit operation of any other Person, or (c) any joint venture or partnership with, or any capital contribution to, or other investment in, any other Person or any real property. "Issuing Lender" shall mean Chase. "IRS" means the Internal Revenue Service, or any successor thereto. "Joint Enterprise" shall mean with respect to any Person, any joint venture, corporation, partnership or other business entity which is not (directly or indirectly) owned 100% by such Person. "Joint Venture Hotel" means any Hotel owned by an Eligible Joint Venture. "JV%" means, with respect to any Eligible Joint Venture, the percentage ownership interest of Borrower in such Eligible Joint Venture. "L/C Cash Collateral Account" shall have the meaning set forth in Section 8.3 hereof. "L/C Supportable Obligations" shall mean (i) obligations of the Borrower, or any of its wholly-owned Subsidiaries incurred in the ordinary course of business with respect to insurance obligations and workers' compensation, surety bonds and other similar statutory obligations (ii) earnest money or performance obligations in respect of acquisitions permitted pursuant to the terms of this Agreement and (iii) such other obligations of the Borrower, or any of its wholly-owned Subsidiaries as are permitted to exist pursuant to the terms of this Agreement. "Leases" means, with respect to the Borrower or any of its Subsidiaries or Eligible Joint Ventures, all of those leasehold estates in real property owned by the Borrower or such Subsidiary or Eligible Joint Venture, as lessee, as such may be 20 29 amended, supplemented or otherwise modified from time to time to the extent permitted by this Agreement. "Legal Proceedings" means any judicial, administrative or arbitral actions, suits, proceedings (public or private) or governmental proceedings. "Letter of Credit" shall have the meaning provided in Section 2.18(a). "Letter of Credit Fee" shall have the meaning provided in Section 2.4(b). "Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the amount of all Unpaid Drawings. "Letter of Credit Request" shall have the meaning provided in Section 2.19(a). "Leverage Ratio" shall mean, at any date, a fraction (expressed as a percentage) the numerator of which is Total Indebtedness, on such date, and the denominator of which is Total Value, on such date. "License" means either (x) an agreement in favor of either the Borrower or the Operating Lessee as licensee, permitting the use of hotel system trademarks, trade names and any related rights in connection with the ownership or operation of any Hotel or (y) a Management Agreement, provided the Manager under such Management Agreement owns the rights to hotel system trademarks, trade names and any related rights in connection with the ownership or operation of any Hotel. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever intended to assure payment of any Indebtedness or other obligation, including, without limitation, any conditional sale or other title retention agreement, the interest of a lessor under a Capitalized Lease Obligation, any financing lease having substantially the same economic effect as any of the foregoing, and the filing, under the Uniform Commercial Code or comparable law of any jurisdiction, of any financing statement naming the owner of the asset to which such Lien relates as debtor. 21 30 "Loan" means a Revolving Credit Loan or a Term Loan made by a Lender to the Borrower pursuant to Article II and "Loans" means the aggregate Revolving Credit Loans and Term Loans. "Loan Documents" means, collectively, this Agreement, the Notes, the Subsidiary Guaranties and each certificate, agreement or document executed by a Loan Party and delivered to the Administrative Agent or any Lender in connection with or pursuant to any of the foregoing. "Loan Party" means each of the Borrower and each Guarantor. "Majority Lenders" means, at any time, Lenders holding at least 51% of the then aggregate unpaid principal amount of Loans (excluding Loans held by Non-Funding Lenders) or, if no such Loans are then outstanding, Lenders having at least 51% of the Commitments of all Lenders (excluding Non-Funding Lenders). "Management Agreement" means an agreement relating to the operation and/or management of any Hotel on behalf of the Operating Lessee. "Manager" means Promus, Sheraton, American General Hospitality, Inc., Coastal Hotel Group, Inc., New Bristol or such other manager as shall be reasonably approved by the Borrower and the Administrative Agent (such consent not to be unreasonably withheld or delayed) and engaged by the Operating Lessee, as manager under the Management Agreement. "Material Adverse Change" means a material adverse change in any of (i) the condition (financial or otherwise), business, performance, prospects, operations or properties of (A) either entity which comprises the Borrower or (B) the Borrower and its Subsidiaries taken as one enterprise, (ii) the legality, validity or enforceability of any Loan Document, or any material Operating Lease or the Operating Leases taken as a whole, (iii) the ability of the Borrower or its Significant Subsidiaries to repay the Obligations or to perform its obligations under any Loan Document, (iv) the ability of (x) any Operating Lessee to perform its obligations under any material Operating Lease or (y) DJONT or New Bristol to perform its obligations under their respective Operating Leases taken as a whole, or (v) the rights and remedies of the Lenders or the Administrative Agent under the Loan Documents. "Material Adverse Effect" means an effect that results in or causes, or has a reasonable likelihood of resulting in or causing, a Material Adverse Change. 22 31 "Minimum Tangible Net Worth" means, with respect to the Borrower, at any time, the sum of (a) $858,000,000; plus (b) 50% of the aggregate net proceeds received by the Borrower or any of its Subsidiaries after March 31, 1998 in connection with any offering of Stock or Stock Equivalents of the Borrower and its Subsidiaries taken as a whole. "Moody's" means Moody's Investor Service Inc. "Multiemployer Plan" means, as of any applicable date, a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, and to which any Loan Party, any of its Subsidiaries or any ERISA Affiliate is making, is obligated to make, or within the six-year period ending at such date, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "Net Income (Loss)" means, for any Person for any period, the aggregate of net income (or loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis in conformity with GAAP. "Net Operating Income" means, with respect to any Hotel, for any period, the sum of the following (without duplication) (a) all gross income, revenues, receipts and all other consideration received by the lessor under the Operating Lease for such Hotel, including, without limitation, base rent, percentage and similar rentals, late charges and interest payments, but excluding extraordinary income and, until earned, security deposits, prepaid rents and other refundable receipts, minus (b) all expenses incurred by the owner of such Hotel during such period pursuant to its obligations as lessor under the Operating Lease for such Hotel, including, without limitation, real estate taxes, personal property taxes, maintenance and repair costs of a non-capital nature for the structural portions of such Hotel and premiums payable for insurance required to be carried by the lessor on or with respect to such Hotels pursuant to the Operating Lease therefor, but excluding extraordinary expenses. "New Bristol" shall mean Bristol Hotels & Resorts, Inc and any Person controlled by Bristol Hotels and Resorts, Inc. that is a Manager. "Non-Funding Lender" has the meaning specified in Section 2.14(f). "Non-Recourse Indebtedness" of any Person means all Indebtedness of such Person with respect to which recourse for payment is limited to specific assets encumbered by a Lien securing such Indebtedness; provided, however, that personal 23 32 recourse of a holder of Indebtedness against any obligor with respect thereto for fraud, misrepresentation, misapplication of cash, waste and other circumstances customarily excluded from non-recourse provisions in non-recourse financing of real estate shall not, by itself, prevent any Indebtedness from being characterized as Non-Recourse Indebtedness, provided further that if a personal recourse claim is made in connection therewith, such claim shall not constitute Non-Recourse Indebtedness for the purposes of this Agreement). "Note" means, either a Revolving Credit Note or a Term Loan Note and "Notes" means, collectively, the Revolving Credit Notes and the Term Loan Notes. "Notice of Borrowing" has the meaning specified in Section 2.3(a). "Notice of Conversion or Continuation" shall have the meaning set forth in Section 2.8(b) hereof. "Obligations" means the Loans, the obligation to pay Unpaid Drawings and all other advances, debts, liabilities, obligations, covenants and duties owing by the Borrower to the Administrative Agent, any Lender, the Issuing Lender, any Affiliate of any of them or any Indemnitee, of every type and description, present or future, arising under this Agreement or under any other Loan Document, whether direct or indirect (including, without limitation, those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term "Obligations" includes, without limitation, all interest, charges, expenses, fees, attorneys' fees and disbursements and any other sum then payable by the Borrower under this Agreement or any other Loan Document. "OECD" means the Organization for Economic Cooperation and Development. "Operating Lease" means a lease or sublease relating to any Hotel, between the Borrower or any of its Subsidiaries or Eligible Joint Ventures or Unconsolidated Entities, as lessor, and an Operating Lessee, as lessee, substantially in a form as approved by Administrative Agent. "Operating Lessee" means either (x) DJONT or its Subsidiary (provided DJONT owns at least 50% of the voting Stock in such Subsidiary and maintains voting control over such Subsidiary), or (y) any entity listed on Schedule III attached hereto, each as lessee under an Operating Lease. 24 33 "Operator" means the Operating Lessee and/or the Manager or both (as the case may be) responsible for the operation and management of any Hotel. "Order" means any order, injunction, judgment, decree, ruling, assessment or arbitration award. "Other Taxes" has the meaning specified in Section 2.15(b). "Participant" shall have the meaning provided in Section 2.20(a). "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Pension Plan" means a plan, other than a Multiemployer Plan, which is covered by Title IV of ERISA or Code Section 412 and which any Loan Party, any of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "Permit" means any permit, approval, authorization, license, variance, registration, permission or consent required from a Governmental Authority under an applicable Requirement of Law. "Permitted Liens" means, collectively, (a) Liens arising by operation of law in favor of materialmen, mechanics, warehousemen, carriers, lessors or other similar Persons incurred by the Borrower or any of its Subsidiaries or Eligible Joint Ventures in the ordinary course of business which secure its obligations to such Person; provided, however, that (i) the Borrower or such Subsidiary or Eligible Joint Venture is not in default with respect to such payment obligation to such Person, or (ii) the Borrower or such Subsidiary or Eligible Joint Venture is in good faith and by appropriate proceedings diligently contesting such obligation and adequate provision is made for the payment thereof; (b) Liens (excluding Environmental Liens) securing taxes, assessments or governmental charges or levies; provided, however, that neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures is in default in respect of any payment obligation with respect thereto unless the Borrower or such Subsidiary or Eligible Joint Venture is in good faith and by appropriate proceedings diligently contesting such obligation and adequate provision is made for the payment thereof; and (c) Zoning restrictions, subleases, licenses or concessions for restaurants, bars, gift shops, antennas, communications equipment and similar agreements entered into in the ordinary course of such Person's business in connection with the ownership 25 34 and operation of a hotel; and easements, licenses, reservations, restrictions on the use of real property or minor irregularities incident thereto which do not in the aggregate materially detract from the value or use of the property or assets of the Borrower or any of its Subsidiaries or Eligible Joint Venture or impair, in any material manner, the use of such property for the purposes for which such property is held by the Borrower or any such Subsidiary or Eligible Joint Venture. "Permitted Transferee" shall be those entities named on Schedule IV. "Person" means an individual, partnership, corporation (including, without limitation, a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a Governmental Authority. "Plan" means an employee benefit plan, as defined in Section 3(3) of ERISA, which any Loan Party or any of its Subsidiaries maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "Previous Maximum Revolving Credit Amount" has the meaning specified in the recitals to this Agreement. "Principal Balance" means, collectively, the outstanding principal balances of the Notes from time to time. "Projections" means those financial projections covering the fiscal years ending in 1998 through 2000, inclusive, delivered to the Lenders by the Borrower. "Promus" means Promus Hotels, Inc., a Delaware corporation or any Person controlled by Promus Hotel Corporation, that is a Manager. "Pro Rata Share" means, for any Person, with respect to such Person's Unconsolidated Entities (or Subsidiaries), the percentage ownership interest of such Person in such Unconsolidated Entity (or Subsidiary), provided that, in the event that such Person is the general partner of such Unconsolidated Entity (or Subsidiary), such Person's Pro Rata Share with respect to such Unconsolidated Entity (or Subsidiary) shall be the percentage of the general partner interests owned by such Person in such Unconsolidated Entity (or Subsidiary) with respect to any Indebtedness for which recourse may be made against any general partner of such Unconsolidated Entity (or Subsidiary). 26 35 "Qualified Lease" means any Lease (a) which is a direct ground lease granted by the fee owner of real property, (b) which may be transferred and/or assigned without the consent of the lessor (or as to which the Lease expressly provides that (i) such Lease may be transferred and/or assigned with the consent of the lessor and (ii) such consent shall not be unreasonably withheld or delayed), (c) which has a remaining term (including any renewal terms exercisable at the sole option of the lessee) of at least 35 years, (d) under which no material default has occurred and is continuing, (e) with respect to which a security interest may be granted without the consent of the lessor (or as to which the Lease expressly provides that (i) a security interest in such lease may be granted with the consent of the lessor and (ii) such consent shall not be unreasonably withheld or delayed), and (f) which contains lender protection provisions reasonably acceptable to the Administrative Agent. "Ratable Portion" or "ratably" means, except as otherwise specifically provided herein, with respect to any Lender, the quotient obtained by dividing the Commitment (or, if applicable, the Revolving Credit Commitments or the Term Loan Commitments) of such Lender by the Commitments (or, if applicable, the Revolving Credit Commitments or the Term Loan Commitments) of all Lenders and that payments of principal of the Loans and interest thereon shall be made pro rata in accordance with the respective unpaid principal amounts of the Loans held by the Lenders. "R/C Lender" shall mean each Lender which has made a Revolving Credit Commitment. "Real Estate" means all of those plots, pieces or parcels of land now owned or hereafter acquired by the Borrower or any of its Subsidiaries or Eligible Joint Ventures (the "Land"), including, without limitation, those listed on Schedule 4.22(a), together with the right, title and interest of the Borrower or such Subsidiary or Eligible Joint Venture, if any, in and to the streets, the land lying in the bed of any streets, roads or avenues, opened or proposed, in front of, adjoining or abutting the Land to the center line thereof, the air space and development rights pertaining to the Land and the right to use such air space and development rights, all rights of way, privileges, liberties, tenements, hereditaments and appurtenances belonging or in any way appertaining thereto, all fixtures, all easements now or hereafter benefiting the Land and all royalties and rights appertaining to the use and enjoyment of the Land, including, without limitation, all alley, vault, drainage, mineral, water, oil and gas rights, together with all of the buildings and other improvements now or hereafter erected on the Land, and any fixtures appurtenant thereto. 27 36 "Recourse Secured Indebtedness" of any Person means the sum of the following: (A) all Indebtedness of such Person and its Subsidiaries determined on a consolidated basis in conformity with GAAP which (x) is secured by a Lien and (y) recourse for payment is not limited to the specific assets encumbered by such Lien, provided, however, that personal recourse of a holder of Indebtedness against (i) any Subsidiary (or Unconsolidated Entity) of Borrower formed specifically for the limited purpose of owning specific assets which secure Indebtedness which does not exceed 65% of the value of the assets owned by such Subsidiary (or Unconsolidated Entity) or (ii) any obligor with respect thereto for fraud, misrepresentation, misapplication of cash, waste and other circumstances customarily excluded from non-recourse provisions in non-recourse financing of real estate, shall not, by itself, cause any Indebtedness to be characterized as Recourse Secured Indebtedness, provided further that if a personal recourse claim is made in connection therewith, such claim shall constitute Recourse Secured Indebtedness for the purposes of this Agreement; plus (B) such Person's Pro Rata Share of Recourse Secured Indebtedness of such Person's Unconsolidated Entities. "Refurbishment Hotel" shall mean Hotels, designated by Borrower, which (i) will experience or are experiencing a disruption in hotel operations due to refurbishment and (ii) are continuously operating with at least 65% of its rooms in service at all times. Any given Hotel may only be characterized as a Refurbishment Hotel for a maximum of six consecutive Fiscal Quarters provided, however, that the requirement of continuous operation shall not apply with respect to the Allerton Hotel. "Register" has the meaning specified in Section 10.7. "Release" means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the indoor or outdoor environment or into or out of any property. "Remedial Action" means all actions, including without limitation any Capital Expenditures, required or necessary to (i) clean up, remove, treat or in any other way address any Hazardous Material or other substance in the indoor or outdoor environment, (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material or other substance so it does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (iii) perform pre-remedial studies and investigations or post-remedial monitoring and care, or (iv) bring facilities on any property owned or leased by the 28 37 Borrower or any of its Subsidiaries into compliance with all Environmental Laws and Environmental Permits. "Reporting Operating Lessee" shall mean any Operating Lessee which is a party to Operating Leases which in the aggregate provide at least 25% of Borrower's consolidated Operating Lease revenue. "Requested Operating Lessee" shall mean each Operating Lessee which is a party to Operating Leases which in the aggregate provide at least 10% of Borrower's consolidated Operating Lease revenue provided such Operating Lessee has been designated by the Administrative Agent as a Requested Operating Lessee. "Required Guarantor" shall mean any direct or indirect wholly-owned Subsidiary of Borrower which is formed after the date hereof, provided, the value of the assets of such Subsidiary plus the value of the assets of such Person's Subsidiaries' exceed 10% of Total Value, provided, further, that in the event the aggregate value of the assets of all wholly-owned Subsidiaries which are not Guarantors exceed 20% of Total Value then each direct or indirect wholly-owned Subsidiary formed thereafter shall be deemed a Required Guarantor if the value of the assets of such Subsidiary plus the value of the assets of such Person's Subsidiaries' exceed 1% of Total Value. "Requirement of Law" means, as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and all federal, state and local laws, rules and regulations, including, without limitation, federal, state or local securities, antitrust and licensing laws, all food, health and safety laws, and all applicable trade laws and requirements, including, without limitation, all disclosure requirements of Environmental Laws, ERISA and all orders, judgments, decrees or other determinations of any Governmental Authority or arbitrator, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" means, with respect to any Person, any of the principal executive officers or general partners of such Person. "Restricted Payments" has the meaning specified in Section 7.4. "Revolving Credit Borrowing" means a Borrowing consisting of Revolving Credit Loans made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments. 29 38 "Revolving Credit Commitment" means, as to each Lender, the commitment of such Lender to make Revolving Credit Loans to the Borrower pursuant to Section 2.1 in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender's name on Schedule I under the caption "Revolving Credit Commitment", as such amount may be reduced or modified pursuant to this Agreement, and "Revolving Credit Commitments" means the aggregate Revolving Credit Commitments of all Lenders. "Revolving Credit Loan" or "Revolving Credit Loans" means the revolving credit loan or loans made or to be made by a Lender (or Lenders) to the Borrower pursuant to Article II. "Revolving Credit Note" means a promissory note of the Borrower payable to the order of any Lender in a stated principal amount equal to the amount of such Lender's Revolving Credit Commitment as originally in effect, in substantially the form of Exhibit A-1, evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the Revolving Credit Loans made by such Lender and "Revolving Credit Notes" means, collectively the Revolving Credit Notes. "Room Revenues" has the meaning ascribed to such term in the form of Operating Lease attached as Exhibit H hereto. "S&P" means Standard & Poor's Ratings Group and its successors. "Settlement Date" has the meaning specified in Section 2.17(d). "Sheraton" shall mean Sheraton Operating Corporation or any Person controlled by Starwood Hotels & Resorts Worldwide, Inc. (or its successors or assigns) that is a Manager. "Significant Subsidiary" means, at any date of determination, (i) any Subsidiary of the Borrower which, or (ii) any group of Subsidiaries of the Borrower which when aggregated, at such date, directly or indirectly own(s) or lease(s) one or more Hotels having an aggregate value (calculated on the basis of the Borrower's Investment therein) in excess of $75,000,000. "Solvent" means, with respect to any Person, that the value of the assets of such Person (at fair value) is, on the date of determination, greater than the total amount of liabilities (including, without limitation, contingent and unliquidated liabilities) of such Person as of such date and that, as of such date, such Person is 30 39 able to pay all liabilities of such Person as such liabilities mature and does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Stated Amount" of each Letter of Credit shall, at any time, mean the maximum amount available to be drawn thereunder (in each case determined without regard to whether any conditions to drawing could then be met). "Status" means the existence of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status, Level VI Status, Level VII Status or Level VIII Status, as the case may be. As used in this definition: "Level I Status" exists on any date if, on such date, either Borrower has a long-term senior unsecured actual debt rating of A- or better by S&P and A3 or better by Moody's; "Level II Status" exists on any date if, on such date, either Borrower has a long-term senior unsecured actual debt rating of BBB+ by S&P and Baa1 by Moody's; "Level III Status" exists on any date if, on such date, either Borrower has a long-term senior unsecured actual debt rating of BBB by S&P and Baa2 by Moody's; "Level IV Status" exists on any date if, on such date, either Borrower has a long-term senior unsecured actual debt rating of BBB- by S&P and Baa3 by Moody's; "Level V Status" exists on any date if, on such date (y) none of Level I Status through Level IV Status exist and (z) the Leverage Ratio is less than 25%; "Level VI Status" exists on any date if, on such date (y) none of Level I Status through Level IV Status exist and (z) the Leverage Ratio is equal to or greater than 25% but less than 40%; 31 40 "Level VII Status" exists on any date if, on such date (y) none of Level I Status through Level IV Status exist and (z) the Leverage Ratio is equal to or greater than 40% but less than 45%; "Level VIII Status" exists on any date if, on such date (y) none of Level I Status through Level IV Status exist and (z) the Leverage Ratio is equal to or greater than 45% but less than or equal to 50%; provided that (i) if S&P and/or Moody's shall cease to issue ratings of debt securities of real estate investment trusts generally, then the Administrative Agent and the Borrower shall negotiate in good faith to agree upon a substitute rating agency or agencies (and to correlate the system of ratings of each substitute rating agency with that of the rating agency for which it is substituting) and (a) until such substitute rating agency or agencies are agreed upon, Status shall be determined on the basis of the rating assigned by the other rating agency (or, if both S&P and Moody's shall have so ceased to issue such ratings, on the basis of the Status in effect immediately prior thereto) and (b) after such substitute rating agency or agencies are agreed upon, Status shall be determined on the basis of the rating assigned by the other rating agency and such substitute rating agency or the two substitute rating agencies, as the case may be; (ii) if the long term senior unsecured actual debt ratings of either Borrower by S&P and Moody's are not equivalent, the higher rating will apply for the purposes of determining Status; and (iii) if the long term senior unsecured actual debt ratings of either Borrower by S&P and Moody's are two or more Levels apart, the rating one Level below the higher rating will apply for the purposes of determining Status. "Stock" means shares of capital stock, beneficial or partnership interests, participations or other equivalents (regardless of how designated) of or in a corporation or equivalent entity, whether voting or non-voting, and includes, without limitation, common stock and preferred stock. "Stock Equivalents" means all securities (other than Stock) convertible into or exchangeable for Stock and all warrants, options or other rights to purchase or subscribe for any stock, whether or not presently convertible, exchangeable or exercisable. "Subsidiary" means, with respect to any Person (other than FelCor LP with respect to FelCor), at any date, any corporation, partnership or other business entity the accounts of which would be consolidated with those of such Person in its 32 41 consolidated financial statements in accordance with GAAP, if such statements were prepared as of such date. "Subsidiary Guaranty" means a guaranty, in substantially the form of Exhibit I, executed by each Guarantor, as such guaranty may be amended, supplemented or otherwise modified from time to time and includes the Existing Subsidiary Guaranties. "Super Majority Lenders" means, at any time, Lenders holding at least 66-2/3% of the then aggregate unpaid principal amount of Loans (excluding Loans held by Non-Funding Lenders) or, if no such Loans are then outstanding, Lenders having at least 66-2/3% of the Commitments of all Lenders (excluding Non-Funding Lenders). "Swing Advance" has the meaning set forth in Section 2.17. "Swing Advance Bank" means Chase. "Tangible Net Worth" means, with respect to the Borrower at any date, (a) the sum of (i) the total shareholders' equity of FelCor, and (ii) the book value of all partnership interests in FelCor LP owned by Persons other than FelCor; minus (b) the sum of all intangible assets of FelCor, each as shown on the consolidated balance sheet of FelCor as of such date. "Tax Affiliate" means, as to any Person, (i) any Subsidiary of such Person, and (ii) any Affiliate of such Person with which such Person files or is eligible to file consolidated, combined or unitary tax returns. "Tax Return" has the meaning specified in Section 4.3. "Taxes" has the meaning specified in Section 2.15(a). "Telerate Page 3750" means the display designated as "Page 3750" on the Associated Press-Dow Jones Telerate Service (or such other page as may replace Page 3750 on the Associated Press-Dow Jones Telerate Service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association interest settlement rates for U.S. Dollar deposits). Any Eurodollar Rate determined on the basis of the rate displayed on Telerate Page 3750 in accordance with the provisions hereof shall be subject to corrections, if any, made in such rate and displayed by the Associated 33 42 Press-Dow Jones Telerate Service within one hour of the time when such rate is first displayed by such Service. "Term Loan" means a Loan made to the Borrower pursuant to Section 2.2 and "Term Loans" means the aggregate Term Loans. "Term Loan Borrowing" means a Borrowing consisting of Term Loans made on the same day by the Lenders ratably according to their respective Term Loan Commitments. "Term Loan Commitment" has the meaning specified in Section 2.2. "Term Loan Maturity Date" shall mean December 31, 1999. "Term Loan Note" means a promissory note of the Borrower payable to the order of any Lender in a principal amount equal to the amount of such Lender's Term Loan Commitment as originally in effect, in substantially the form of Exhibit A-2, evidencing the Indebtedness of the Borrower to such Lender resulting from the Term Loan made by such Lender and "Term Loan Notes" means, collectively the Term Loan Notes. "Termination Date" means the earliest of (i) the Final Maturity Date, and (ii) the date of termination in whole of the Commitments pursuant to Section 2.5 or 8.2. "Total Indebtedness" of any Person means the sum of the following (without duplication): (a) all Indebtedness of such Person and its Subsidiaries determined on a consolidated basis in conformity with GAAP, plus (b) such Person's Pro Rata Share of Indebtedness of such Person's Unconsolidated Entities, provided, however, Indebtedness of a Person's Subsidiary shall only be included in the calculation of Total Indebtedness to the extent of the greater of (x) such Person's Pro-Rata Share of such Indebtedness and (y) the amount of such Indebtedness guaranteed by such Person. "Total Secured Indebtedness" of any Person means any Total Indebtedness of such Person for which the obligations thereunder are secured by a pledge of or other encumbrance on any assets of such Person or its Subsidiaries or Unconsolidated Entities. "Total Value" means the sum of: 34 43 (A) for Hotels owned or leased pursuant to a Qualified Lease (including newly acquired Hotels and Hotels to be immediately acquired using the proceeds of any Loans), other than Hotels described in clause (B) below, Adjusted NOI on a consolidated basis from such Hotels for the preceding four (4) Fiscal Quarters divided by ten percent (10%); plus (B) for Hotels owned or leased pursuant to a Qualified Lease by Borrower (or any Subsidiary or Unconsolidated Entity of Borrower) for less than four (4) fiscal Quarters and (x) for which the Borrower (or any Subsidiary or Unconsolidated Entity of Borrower) does not have, or is not able to reasonably obtain, trailing four quarter audited financial information or (y) which the Borrower has designated as a Refurbishment Hotel, in each such case 95% of the Borrower's Investment in such Hotels (provided that if the Allerton Hotel is designated as a Refurbishment Hotel, then such Hotel shall be valued at 85% of the Borrower's Investment in such Hotel); plus (C) the sum of $15,000,000, being the agreed aggregate sum of the Borrower's investment at cost in (x) certain vacant land at the Kingston Plantation Hotel in Myrtle Beach, South Carolina, and (y) the Myrtle Beach Condo Management Company; plus (D) unencumbered Cash or Cash Equivalents held by the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) plus the Borrower's Pro Rata Share of unencumbered Cash or Cash Equivalents held by the Borrower's Unconsolidated Entities; provided, however, that in the case of (A) above, Adjusted NOI with respect to a Hotel shall only be included in the calculation of Total Value if such Hotel is, as at the date of such calculation, owned or leased by Borrower, its Subsidiary or its Unconsolidated Entity but only to the extent (i) in the case of Adjusted NOI attributable to the Borrower's Subsidiaries, financial statements prepared in accordance with GAAP would consolidate such Subsidiary with the Borrower and (ii) in the case of Adjusted NOI attributable to the Borrower's Unconsolidated Entities, of the Borrower's Pro Rata Share of such Adjusted NOI, and provided, further, in the case of (B) above, the Borrower's Investment with respect to a Hotel shall only be included in the calculation of Total Value if such Hotel is, as of the date of such calculation, owned by Borrower, its Subsidiary or Unconsolidated Entity. Notwithstanding the foregoing, in no event shall more than 20% of Total Value be attributable to Refurbishment Hotels which are valued at 95% (or 85% in the case of the Allerton Hotel) of Borrower's Investment. 35 44 "Unconsolidated Entity" means, with respect to any Person, at any date, any other Person in whom such Person holds an Investment, which Investment is accounted for in the financial statements of such Person on an equity basis of accounting and whose financial results would not be consolidated under GAAP with the financial results of such Person on the consolidated financial statements of such Person, if such statements were prepared as of such date. "Unencumbered" means, with respect to any Hotel, at any date of determination, the circumstance that such Hotel on such date: (a) is not subject to any Liens (including restrictions on transferability or assignability) of any kind (including any such Lien or restriction imposed by (i) any agreement governing Indebtedness, and (ii) the organizational documents of the Borrower or any of its Subsidiaries or Eligible Joint Ventures, but excluding Permitted Liens and, in the case of any Qualified Lease (to the extent permitted by the definition thereof), restrictions on transferability or assignability in respect of such Lease); (b) is not subject to any agreement (including (i) any agreement governing Indebtedness, and (ii) if applicable, the organizational documents of the Borrower or any of its Subsidiaries or Eligible Joint Ventures) which prohibits or limits the ability of the Borrower or any of its Subsidiaries or Eligible Joint Ventures to create, incur, assume or suffer to exist any Lien upon such Hotel, other than Permitted Liens (excluding any agreement or organizational document (x) which limits generally the amount of Indebtedness which may be incurred by the Borrower or its Subsidiaries or Eligible Joint Ventures or (y) in the case of an Eligible Joint Venture which is not an Eligible Entity, which requires the consent of partners (or the equivalent) in such Eligible Joint Venture (other than the Borrower or its wholly owned Subsidiaries) to create, incur, assume or suffer to exist any Lien upon such Hotel); and (c) is not subject to any agreement (including any agreement governing Indebtedness) which entitles any Person to the benefit of any Lien (other than Permitted Liens) on such Hotel, or would entitle any Person to the benefit of any such Lien upon the occurrence of any contingency (including, without limitation, pursuant to an "equal and ratable" clause, other than those certain equal and ratable clauses contained in those certain (x) 7 3/8% Redeemable Senior Notes due 2004 issued by FelCor Suites Limited Partnership and (y) 7 5/8% Redeemable Senior Notes due 2007 issued by FelCor Suites Limited Partnership). 36 45 For the purposes of this Agreement, any Joint Venture Hotel or Hotel owned by a Subsidiary or Eligible Joint Venture of the Borrower shall not be deemed to be Unencumbered unless both (i) such Hotel and (ii) all Stock owned directly or indirectly by Borrower in such Eligible Joint Venture or Subsidiary, is Unencumbered. "Unencumbered Hotel Property" means, collectively, (a) such of the Hotels owned or leased by the Borrower or any of its direct or indirect wholly-owned Subsidiaries, and (b) such of the Joint Venture Hotels, as in each case shall meet at any time and from time to time, each of the following minimum criteria: (a) such Hotel is Unencumbered; (b) such Hotel is free of all material structural and title defects and other material adverse matters; (c) such Hotel is, as of the date upon which such Hotel is included as an Unencumbered Hotel Property and as of the end of each succeeding Fiscal Quarter, (i) in compliance, in all material respects, with all applicable Environmental Laws, and (ii) not subject to any material Environmental Liabilities and Costs, in each case as initially verified by a written report of an environmental consultant reasonably acceptable to the Administrative Agent; (d) such Hotel is (i) owned in fee simple by, or (ii) leased pursuant to a Qualified Lease in favor of, the Borrower or its direct or indirect wholly-owned Subsidiary or an Eligible Joint Venture; provided that, if a Joint Venture Hotel is owned by an Eligible Joint Venture which owns more than a single Hotel, such Joint Venture Hotel shall only be an Unencumbered Hotel Property if it satisfies all of the requirements set forth in subparagraphs (a) through (d) above and all other Hotels owned by such Eligible Joint Venture satisfy the conditions set forth in subparagraphs (a) and (c) above, provided further that the parties acknowledge and agree that the Embassy Suites Hotel located at Los Angeles Airport, CA is subject to a mortgage in favor of FelCor LP but the Administrative Agent has agreed, as a one time waiver only, to accept such Hotel as Unencumbered (for purposes of clause (a) above) provided that such Hotel shall cease to be Unencumbered (for purposes of clause (a) above), inter alia, in the event that FelCor LP assigns its mortgage to any other Person. 37 46 "Unencumbered NOI" shall mean Adjusted NOI from each Unencumbered Hotel Property, provided, that (i) only Borrower's JV% of Adjusted NOI generated by any Joint Venture Hotel shall be included in Unencumbered NOI and (ii) in no event shall more than 25% of Unencumbered NOI be attributable to Unencumbered Hotel Properties leased pursuant to Qualified Leases. "Unpaid Drawing" shall have the meaning set forth in Section 2.21(a). "Unsecured Interest Expense" means, for any Person for any period, the greater of (I) the sum of (a) the total interest expense in respect of all unsecured Indebtedness of such Person (excluding, on an annual basis, up to $3,000,000 of non-cash expense which is attributable to the amortization of costs and expenses incurred in connection with the incurrance of such Indebtedness) and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP, plus capitalized interest of such Person and its Subsidiaries in respect of unsecured Indebtedness, plus (b) such Person's Pro Rata Share of Unsecured Interest Expense of such Person's Unconsolidated Entities and (II) 7.5% of the sum of (a) the average outstanding balance of all unsecured Indebtedness of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP plus (b) such Person's Pro Rata Share of unsecured Indebtedness of such Person's Unconsolidated Entities for such period. 1.2. Computation of Time Periods. In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including". 1.3. Accounting Terms. All accounting terms not specifically defined herein shall be construed in conformity with GAAP and all accounting determinations required to be made pursuant hereto shall, unless expressly otherwise provided herein, be made in conformity with GAAP. 1.4. Certain Terms. (a) The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole, and not to any particular Article, Section, subsection or clause in this Agreement. References herein to an Exhibit, Schedule, Article, Section, subsection or clause refer to the appropriate Exhibit or Schedule to, or Article, Section, subsection or clause in this Agreement. 38 47 (b) The terms "Lender" and "Administrative Agent" include their respective successors and the term "Lender" includes each assignee of such Lender who becomes a party hereto pursuant to Section 10.7. ARTICLE II AMOUNTS AND TERMS OF THE LOANS AND LETTERS OF CREDIT 2.1. The Revolving Credit Loans. On the terms and subject to the conditions contained in this Agreement, each Lender severally agrees to make loans (each a "Revolving Credit Loan") to the Borrower from time to time on any Business Day during the period from the date hereof until (but not including) the Termination Date in an aggregate amount not to exceed at any time outstanding such Lender's Revolving Credit Commitment; provided, however, that at no time shall any Lender be obligated to make a Revolving Credit Loan in excess of such Lender's Ratable Portion of the Available Credit. Within the limits of each Lender's Revolving Credit Commitment, amounts prepaid pursuant to Section 2.7(b) may be reborrowed under this Section 2.1. The Revolving Credit Loans of each Lender shall be evidenced by the Revolving Credit Note to the order of such Lender. 2.2. The Term Loans. On the terms and subject to the conditions contained in this Agreement, each Lender severally agrees to make a loan (each a "Term Loan") to the Borrower, and Borrower agrees to borrow the Term Loans, on the Bristol Effective Date, in an amount not to exceed the amount set opposite such Lender's name on Schedule I as its Term Loan Commitment (such Lender's "Term Loan Commitment"). Amounts prepaid pursuant to Section 2.7(c) may not be reborrowed. The Term Loan of each Lender shall be evidenced by the Term Note to the order of such Lender. Notwithstanding anything to the contrary contained herein, Borrower shall not be permitted to borrow any portion of any Term Loan prior to the Bristol Effective Date. 2.3. Making the Loans. (a) Each Revolving Credit Borrowing shall be made on notice, given by the Borrower to the Administrativ e Agent not later than (i) 11:00 A.M. (New York City time) on the third (3rd) Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of Eurodollar Rate Loans, and (ii) 11:00 A.M. (New York City time) on the Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of Base Rate Loans. Each such notice (a "Notice of Borrowing") shall be in substantially the form of Exhibit B, specifying therein (i) the date of such proposed Revolving Credit 39 48 Borrowing, (ii) the aggregate amount of such proposed Revolving Credit Borrowing, (iii) the amount thereof, if any, requested to be Eurodollar Rate Loans, and (iv) the initial Interest Period or Periods for any such Eurodollar Rate Loans. The Loans shall be made as Base Rate Loans unless (subject to Section 2.12) the Notice of Borrowing specifies that all or a pro rata portion thereof shall be Eurodollar Rate Loans; provided, however, that the aggregate of the Eurodollar Rate Loans for each Interest Period must be in an amount of not less than $5,000,000 or an integral multiple of $500,000 in excess thereof. (b) The Term Loan Borrowing shall be made upon receipt of a Notice of Borrowing (which clearly indicates that such Notice of Borrowing is requesting a Term Loan Borrowing), given by the Borrower to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third (3rd) Business Day prior to the Bristol Effective Date. The Notice of Borrowing shall specify therein (i) the Bristol Merger Date, (ii) the amount thereof, if any, requested to be Eurodollar Rate Loans, and (iii) the initial Interest Period or Periods for such Eurodollar Rate Loans. The Term Loans shall be made as Base Rate Loans unless (subject to Section 2.12) the applicable Notice of Borrowing specifies that all or a pro rata portion thereof shall be Eurodollar Rate Loans; provided, however, that the aggregate of the -------- ------- Eurodollar Rate Loans for each Interest Period must be in an amount of not less than $5,000,000 or an integral multiple of $500,000 in excess thereof. (c) The Administrative Agent shall give to each Lender prompt notice of the Administrative Agent's receipt of a Notice of Borrowing and, if Eurodollar Rate Loans are properly requested in such Notice of Borrowing, the applicable interest rate under Section 2.9, and each Lender's Ratable Portion of the proposed Borrowing. Each Lender shall, before 12:00 Noon (New York City time) on the date of the proposed Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 10.2, in immediately available funds, such Lender's Ratable Portion of such proposed Borrowing. By 12:00 Noon (New York City time) in the case of Eurodollar Rate Loans and Base Rate Loans, on the date specified by the Borrower in the Notice of Borrowing, subject to fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address; provided that in the event that the Administrative Agent shall have received notice from a Lender prior to the date of any proposed Borrowing that such Lender will not make available to the Administrative Agent such Lender's Ratable Portion of such Borrowing, the Administrative Agent shall be under no obligation to fund such Lender's Ratable Portion of such Borrowing. 40 49 (d) Each Base Rate Loan shall be in an aggregate amount of not less than $1,000,000 or an integral multiple of $100,000 in excess thereof. (e) Intentionally omitted. (f) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any proposed Borrowing which the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Loans, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such proposed Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including, without limitation, loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund any Eurodollar Rate Loan to be made by such Lender as part of such proposed Borrowing when such Eurodollar Rate Loan, as a result of such failure, is not made on such date. (g) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any proposed Borrowing that such Lender will not make available to the Administrative Agent such Lender's Ratable Portion of such Borrowing, the Administrative Agent may assume that such Lender has made such Ratable Portion available to the Administrative Agent on the date of such Borrowing in accordance with this Section 2.3 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such Ratable Portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. If the Borrower shall repay to the Administrative Agent such corresponding amount, such payment shall not relieve such Lender of any obligation it may have to the Borrower hereunder. (h) The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, 41 50 hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing. 2.4. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender, (i) a commitment fee (the "Revolving Commitment Fee") equal to the Applicable Margin times the average daily unused portion of such Lender's Revolving Credit Commitment, from the date hereof until the Termination Date and (ii) a commitment fee equal to the Applicable Margin times the average daily unused portion of such Lender's Term Loan Commitment (notwithstanding the non-occurrence of the Bristol Effective Date), from the date hereof until the earlier of the date the Borrower (x) borrows the entire amount of the Term Loan or (y) terminates in their entirety (pursuant to the terms hereof) the Lenders Term Loan Commitments (the "Term Loan Commitment Fee" together with the Revolving Commitment Fee, the "Commitment Fees"). The Commitment Fees shall be payable in arrears with respect to each full and partial calendar quarter on (i) the last day of each calendar quarter during the term of such Lender's Commitment, commencing June 30, 1998, (ii) on the date of any reduction of the Commitments pursuant to Section 2.5, (iii) on the Termination Date and (iv) on the date Lenders make the Term Loans. For purposes of this Section 2.4, Swing Advances shall be included as part of the unused portion of the Commitments. (b) The Borrower agrees to pay to the Administrative Agent for distribution to each Lender (based on its respective Ratable Portion) a fee in respect of each Letter of Credit issued hereunder (the "Letter of Credit Fee"), for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate per annum equal to the Applicable Margin then in effect for Loans maintained as Eurodollar Rate Loans on the daily average Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be payable in arrears with respect to each calendar quarter on (i) the last day of each calendar quarter in which any Letter of Credit is outstanding, (ii) on the date on which no Letters of Credit remain outstanding and (iii) on the Termination Date. (c) The Borrower agrees to pay to the Issuing Lender, for its own account, a facing fee in respect of each Letter of Credit issued by it hereunder (the "Facing Fee") for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate per annum equal to 0.125% of the daily average Stated Amount of such Letter of Credit. Accrued Facing Fees shall be payable in arrears with respect to each calendar 42 51 quarter on (i) the last day of each calendar quarter in which such Letter of Credit is outstanding, (ii) on the date upon which such Letter of Credit has been terminated in accordance with its terms and (iii) on the Termination Date. (d) The Borrower shall pay, upon each Drawing under, issuance of, or amendment to, any Letter of Credit, such amount as shall at the time of such event be the administrative charge which the Issuing Lender is generally imposing in connection with such occurrence with respect to letters of credit. (e) The Borrower has agreed to pay to Chase additional fees, the amount and dates of payment of which are embodied in a separate agreement between the Borrower and Chase. 2.5. Reduction and Termination of the Commitments. (a) The Borrower may, upon at least three Business Days' prior notice to the Administrative Agent, terminate in whole or reduce ratably in part the unused portions of the respective Revolving Credit Commitments of the Lenders; provided, however, that each partial reduction shall be in the aggregate amount of not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof. After August 15, 1998, if the Bristol Effective Date has not occurred, the Borrower may, upon at least three Business Days' prior notice to the Administrative Agent, terminate in whole (but not in part) the Term Loan Commitments of the Lenders. (b) Upon the making of the Term Loan Borrowing, each Lender's Term Loan Commitment shall terminate. 2.6. Repayment. (a) The Borrower shall repay the entire unpaid principal amount of the Revolving Credit Loans on the Termination Date. (b) The Borrower shall repay the entire unpaid principal amount of the Term Loans on the Term Loan Maturity Date. 2.7. Prepayments. (a) The Borrower shall have no right to prepay the principal amount of any Loan other than as provided in this Section 2.7. (b) The Borrower may, upon at least two (2) Business Days' prior notice to the Administrative Agent, stating the proposed date and aggregate principal amount of the prepayment, prepay the outstanding principal amount of the Loans in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that any prepayment of any 43 52 Eurodollar Rate Loan made other than on the last day of an Interest Period for such Loan shall be subject to payment by the Borrower to the Administrative Agent of any costs, fees or expenses incurred by any Lender in connection with such prepayment including without limitation any costs to unwind any Eurodollar Rate contracts; and, provided, further, that each partial prepayment shall be in an aggregate principal amount not less than $3,000,000 or integral multiples of $100,000 in excess thereof. Upon the giving of such notice of prepayment, the principal amount of the Loans specified to be prepaid shall become due and payable on the date specified for such prepayment. (c) If at any time the Borrower shall not be in compliance with the covenant contained in Section 5.1 hereof, (a "Financial Covenant Imbalance"), the Borrower shall prepay the Loans then outstanding in an amount necessary to cure such Financial Covenant Imbalance, together with accrued interest as follows: (i) in the event that the Financial Covenant Imbalance is due to (A) any sale, conveyance, transfer, assignment or other disposition of an Unencumbered Hotel Property, (B) a financing secured by a Hotel or (C) a Drawing, the prepayment shall be made within one (1) Business Day of such event occurring; (ii) in the event that the Financial Covenant Imbalance is due to any (A) condemnation or taking by eminent domain of an Unencumbered Hotel Property, or (B) loss, damage or destruction by casualty to any Hotel, the prepayment shall be made within one (1) Business Day after receipt by the Borrower or its Subsidiary or Eligible Joint Venture of the condemnation award or insurance proceeds relating to such event; (iii) INTENTIONALLY DELETED; or (iv) in the event that the Financial Covenant Imbalance is due to a determination by the Administrative Agent, after review of the applicable Hotel Documents, that an Unencumbered Hotel Property, represented by Borrower in a Compliance Certificate to be an Unencumbered Hotel Property, fails to meet (and never actually met) the requirements for Unencumbered Hotel Properties set forth herein, the prepayment shall be made within 5 Business Days of the Administrative Agent notifying Borrower of such Hotel's failure to meet the Unencumbered Hotel Property requirements. 44 53 (d) If at any time the aggregate principal amount of Revolving Credit Loans outstanding at such time exceeds the Revolving Credit Commitments at such time, the Borrower shall forthwith prepay the Revolving Credit Loans then outstanding in an amount equal to such excess, together with accrued interest. 2.8. Conversion/Continuation Option. (a) Swing Advances shall be automatically converted to Base Rate Loans on the Business Day following the date of borrowing thereof. (b) The Borrower may elect (i) at any time to convert Base Rate Loans or any portion thereof to Eurodollar Rate Loans, (ii) at any time to convert Swing Advances or any portion thereof to Base Rate Loans or Eurodollar Rate Loans, or (iii) at the end of any Interest Period with respect thereto, to convert Eurodollar Rate Loans or any portion thereof into Base Rate Loans, or to continue such Eurodollar Rate Loans or any portion thereof for an additional Interest Period; provided, however, that the aggregate of the Eurodollar Rate Loans for each Interest Period therefor must be in the amount of $5,000,000 or an integral multiple of $500,000 in excess thereof. Each conversion or continuation shall be allocated among the Loans of all Lenders in accordance with their Ratable Portion. Each such election shall be in substantially the form of Exhibit C hereto (a "Notice of Conversion or Continuation") and shall be made by giving the Administrative Agent at least three (3) Business Days' prior written notice thereof specifying (A) the amount and type of conversion or continuation, (B) in the case of a conversion to or a continuation of Eurodollar Rate Loans, the Interest Period therefor, and (C) in the case of a conversion, the date of conversion (which date shall be a Business Day and, if a conversion from Eurodollar Rate Loans, shall also be the last day of the Interest Period therefor). The Administrative Agent shall promptly notify each Lender of its receipt of a Notice of Conversion or Continuation and of the contents thereof and such Lender's Ratable Portion of the Loans to be converted. Notwithstanding the foregoing, no conversion in whole or in part of Base Rate Loans or Swing Advances to Eurodollar Rate Loans, and no continuation in whole or in part of Eurodollar Rate Loans upon the expiration of any Interest Period therefor, shall be permitted at any time at which a Default or an Event of Default shall have occurred and be continuing. If, within the time period required under the terms of this Section 2.8, the Administrative Agent does not receive a Notice of Conversion or Continuation from the Borrower containing a permitted election to continue any Eurodollar Rate Loans for an additional Interest Period or to convert any such Loans, then, upon the expiration of the Interest Period therefor, such Loans will be automatically converted to Base Rate Loans. Each Notice of Conversion or Continuation shall be irrevocable. 45 54 2.9. Interest. (a) The Borrower shall pay interest on the unpaid principal amount of each Loan from the date thereof until the principal amount thereof shall be paid in full, at the following rates per annum: (i) For Base Rate Loans, at a rate per annum equal at all times to the Base Rate in effect from time to time plus the Applicable Margin, payable monthly on the first day of each month, on the Termination Date and on the date any Base Rate Loan is converted or paid in full. (ii) For Eurodollar Rate Loans, at a rate per annum equal at all times during the applicable Interest Period for each Eurodollar Rate Loan to the sum of the Eurodollar Rate for such Interest Period plus the Applicable Margin in effect on the most recent Applicable Margin Reset Date, payable on the last day of such Interest Period, on the Termination Date and, if such Interest Period has a duration of more than three months, on the last day of each calendar quarter during such Interest Period commencing on March 31, 1998. Notwithstanding anything to the contrary contained herein (including but not limited to the grid contained in the definition of Applicable Margin), the Applicable Margin with respect to a Term Loan maintained as a Eurodollar Rate Loan shall never be less than 100 basis points. (b) If the principal indebtedness of the Loans is declared immediately due and payable by the Administrative Agent pursuant to the provisions of this Agreement or any other Loan Document, or if the Loans are not paid in full on the Termination Date, the Borrower shall thereafter, unless and until such date, if any, as the Super Majority Lenders may elect, in their sole and absolute discretion, to waive, in writing, all or any portion of such default rate interest, pay interest on the principal sum then remaining unpaid from the date of such declaration or the Termination Date, as the case may be, until the date on which the principal sum then outstanding is paid in full (whether before or after judgment), at a rate per annum (calculated for the actual number of days elapsed on the basis of a 360-day year) equal to the greater, on a daily basis, of (x) 13% or (y) 4% plus the Base Rate, provided, however, that such interest rate shall in no event exceed the maximum interest rate which the Borrower may by law pay. 2.10. Interest Rate Determination and Protection. (a) The Eurodollar Rate for each Interest Period for Eurodollar Rate Loans shall be determined by the Administrative Agent two (2) Business Days before the first day of such Interest Period. 46 55 (b) The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.9(a) or (b). (c) If, with respect to Eurodollar Rate Loans, the Majority Lenders in good faith notify the Administrative Agent that the Eurodollar Rate for any Interest Period therefor will not adequately reflect the cost to such Majority Lenders of making such Loans or funding or maintaining their respective Eurodollar Rate Loans for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate Loan will automatically, on the last day of the then existing Interest Period therefor, convert into a Base Rate Loan; and (ii) the obligations of the Lenders to make Eurodollar Rate Loans or to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended until the Administrative Agent shall notify the Borrower that such Lenders have determined that the circumstances causing such suspension no longer exist. 2.11. Increased Costs. If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation (other than any change by way of imposition or increase of reserve requirements included in determining the Eurodollar Rate Reserve Percentage) or (ii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Eurodollar Rate Loans, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. If the Borrower so notifies the Administrative Agent within five Business Days after any Lender notifies the Borrower of any increased cost pursuant to the foregoing provisions of this Section 2.11, the Borrower may either (A) prepay in full all Eurodollar Rate Loans of such Lender then outstanding in accordance with Section 2.7(b) and, additionally, reimburse such Lender for such increased cost in accordance with this Section 2.11 or (B) convert all Eurodollar Rate Loans of all Lenders then outstanding into Base Rate 47 56 Loans in accordance with Section 2.8 and, additionally, reimburse such Lender for such increased cost in accordance with this Section 2.11. 2.12. Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to make Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate Loans, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) the obligation of such Lender to make or to continue Eurodollar Rate Loans and to convert Base Rate Loans into Eurodollar Rate Loans shall terminate and (ii) the Borrower shall forthwith prepay in full all Eurodollar Rate Loans of such Lender then outstanding, together with interest accrued thereon, unless the Borrower, within five Business Days of such notice and demand, converts all Eurodollar Rate Loans of all Lenders then outstanding into Base Rate Loans. 2.13. Capital Adequacy. If (i) the introduction of or any change in or in the interpretation of any law or regulation, (ii) compliance with any law or regulation, or (iii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by any Lender or any corporation controlling any Lender and such Lender reasonably determines that such amount is based upon the existence of such Lender's Commitments, Letters of Credit or Loans and its other commitments, letters of credit or loans of this type, then, upon demand by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's Commitments, Loans, Letter of Credit Outstandings or commitments to issue Letters of Credit. A certificate as to such amounts submitted to the Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes absent manifest error. 2.14. Payments and Computations. (a) The Borrower shall make each payment hereunder and under the Notes not later than 11:00 A.M. (New York City time) on the day when due, in Dollars, to the Administrative Agent at its address referred to in Section 10.2 in immediately available funds without set-off or counterclaim. The Administrative Agent will promptly thereafter cause to be 48 57 distributed immediately available funds relating to the payment of principal or interest or fees (other than amounts payable pursuant to Section 2.11, 2.12, 2.13, 2.15 or 2.17) to the Lenders, in accordance with their respective Ratable Portions, for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. To the extent the foregoing payments are received by the Administrative Agent prior to 11:00 A.M. (New York City time) and are not distributed to the Lenders on the same day, the Administrative Agent shall pay to each Lender in addition to the amount distributed to such Lender, interest thereon, for each day from the date such amount is received by the Administrative Agent until the date such amount is distributed to such Lender, at the Federal Funds Rate. Payment received by the Administrative Agent after 11:00 A.M. (New York City time) shall be deemed to be received on the next Business Day. (b) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or under any Loan held by such Lender, to charge from time to time against any or all of the Borrower's accounts with such Lender any amount so due. (c) All computations of interest based on the Base Rate, the Eurodollar Rate or the Federal Funds Rate and of fees shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest and fees are payable. Each determination by the Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fee, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of any Eurodollar Rate Loan to be made in the next calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due hereunder to the Lenders that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent 49 58 on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate. (f) If any Lender (a "Non-Funding Lender") has (x) failed to make a Loan required to be made by it hereunder, and the Administrative Agent has determined that such Lender is not likely to make such Loan, (y) given notice to the Borrower or the Administrative Agent that it will not make, or that it has disaffirmed or repudiated any obligation to make, Loans, in each case by reason of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 or otherwise or (z) failed to comply with its obligations pursuant to Section 2.20(c), (i) such Non-Funding Lender shall lose any and all voting rights hereunder, and (ii) any payment made on account of the principal of the Loans outstanding or Unpaid Drawings shall be made as follows: (A) in the case of any such payment made on any date when and to the extent that, in the determination of the Administrative Agent, the Borrower would be able, under the terms and conditions hereof, to reborrow the amount of such payment under the Commitments and to satisfy any applicable conditions precedent set forth in Article III to such reborrowing, such payment shall be made on account of the outstanding Loans or Unpaid Drawings held by the Lenders other than the Non-Funding Lender pro rata according to the respective outstanding principal amounts of the Loans or Unpaid Drawings of such Lenders; (B) otherwise, such payment shall be made on account of the outstanding Loans or Unpaid Drawings held by the Lenders pro rata according to the respective outstanding principal amounts of such Loans or Unpaid Drawings; and (C) any payment made on account of interest on the Loans or Unpaid Drawings shall be made pro rata according to the respective amounts of accrued and unpaid interest due and payable on the Loans or Unpaid Drawings with respect to which such payment is being made. 50 59 2.15. Taxes. (a) Any and all payments by the Borrower under each Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities (excluding, in the case of such Lender or the Administrative Agent, taxes imposed by reason of any failure of such Lender or the Administrative Agent, if such Lender or the Administrative Agent is entitled at such time to a total or partial exemption from withholding that is required to be evidenced by a United States Internal Revenue Service Form 1001 or 4224 or any successor or additional form (including but not limited to Form W8), to deliver to the Administrative Agent or the Borrower, from time to time as required by the Administrative Agent or the Borrower, such Form 1001 or 4224 (as applicable) or any successor or additional form (including but not limited to Form W8), completed in a manner reasonably satisfactory to the Administrative Agent or the Borrower) being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including, without limitation, deductions applicable to additional sums payable under this Section 2.15) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (iv) the Borrower shall deliver to the Administrative Agent evidence of such payment to the relevant taxation or other authority. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any political subdivision thereof or any applicable foreign jurisdiction which arise from any payment made under any Loan Document or from the execution, delivery or registration of, or otherwise with respect to, any Loan Document (collectively, "Other Taxes"). 51 60 (c) The Borrower will indemnify each Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.15) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including, without limitation, for penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes or Other Taxes, the Borrower will furnish to the Administrative Agent, at its address referred to in Section 10.2, the original or a certified copy of a receipt evidencing payment thereof. (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.15 shall survive the payment in full of the Obligations. (f) Prior to the Effective Date in the case of each Lender that is a signatory hereto, and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender in the case of each other Lender and from time to time thereafter if requested by the Borrower or the Administrative Agent, each Lender organized under the laws of a jurisdiction outside the United States that is entitled to an exemption from United States withholding tax, or that is subject to such tax at a reduced rate under an applicable tax treaty, shall provide the Administrative Agent and the Borrower with an IRS Form 4224 or Form 1001 or other applicable form (including but not limited to Form W8), certificate or document prescribed by the IRS certifying as to such Lender's entitlement to such exemption or reduced rate with respect to all payments to be made to such Lender hereunder and under the Notes. Unless the Borrower and the Administrative Agent have received forms or other documents satisfactory to them indicating that payments hereunder or under any Note are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender organized under the laws of a jurisdiction outside the United States. (g) Any Lender claiming any additional amounts payable pursuant to this Section 2.15 shall use its best efforts (consistent with its internal policy and 52 61 legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. 2.16. Sharing of Payments, Etc. If any Lender (other than the Swing Advance Bank or the Issuing Lender) shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set off or otherwise) on account of Loans made by it (other than pursuant to Section 2.13 or 2.15), and there is either (x) any Swing Advance outstanding in respect of which the Swing Advance Bank has not received payment in full from the Lenders pursuant to Section 2.17(d) or (e) or (y) any Unpaid Drawing in respect of which the Issuing Lender has not received payment in full from the Lenders pursuant to Section 2.20 or 2.21, such Lender (a "Purchasing Lender") shall purchase a participation in all such Swing Advances or Unpaid Drawings, as applicable, in an amount equal to the lesser of such payment and the amount of such Swing Advances or Unpaid Drawings, as applicable, for which the Swing Advance Bank or Issuing Lender has not so received payment in full. If, after giving effect to the foregoing, any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Loans made by it (other than pursuant to Sections 2.13 or 2.15) in excess of its Ratable Portion of payments on account of the Loans obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in their Loans as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them. 2.17. Swing Advances. (a) The Swing Advance Bank, on the terms and subject to the conditions contained in this Agreement, shall make advances (each a "Swing Advance") to the Borrower from time to time on any Business Day during the period from the date hereof until the day preceding the Termination Date in an aggregate amount not to exceed at any time outstanding the lesser of (i) $15,000,000, and (ii) the Available Credit; provided that the Swing Advance Bank shall not be requested to make a Swing Advance to refinance an outstanding Swing Advance. Within the limits set forth above, Swing Advances repaid may be reborrowed under this Section 2.17. (b) Each Swing Advance shall be made upon a Notice of Borrowing for a Swing Advance being given by the Borrower to the Swing Advance Bank by no later than 11:00 A.M. (New York City time) on the Business Day of the proposed Swing Advance. Upon fulfillment of the applicable conditions set forth in Article III, the Swing Advance Bank will make each Swing Advance available on the same day to the Borrower at the Administrative Agent's address referred to in Section 10.2. All Swing Advances shall bear interest at the same rate, and be payable on the same basis, as Base Rate Loans and shall be converted to Base Rate Loans pursuant to Section 2.8(a). 53 62 (c) Each Swing Advance shall be in an aggregate amount of not less than $1,000,000.00 or an integral multiple of $100,000.00 in excess thereof. (d) The Administrative Agent shall give to each R/C Lender prompt notice of the Administrative Agent's receipt of a Notice of Borrowing for a Swing Advance and each R/C Lender's Ratable Portion thereof. Each R/C Lender shall before 12:00 Noon (New York City time) on the next Business Day (the "Settlement Date") make available to the Administrative Agent, in immediately available funds, the amount of its Ratable Portion of the principal amount of such Swing Advance. Upon such payment by a R/C Lender, such R/C Lender shall be deemed to have made a Revolving Credit Loan to the Borrower in the amount of such payment. The Administrative Agent shall use such funds to repay the Swing Advance to the Swing Advance Bank. To the extent that any R/C Lender fails to make such payment to the Swing Advance Bank, the Borrower shall repay such Swing Advance on demand and, in any event, on the Termination Date. (e) During the continuance of a Default under Section 8.1(e), each R/C Lender shall acquire, without recourse or warranty, an undivided participation in each Swing Advance otherwise required to be repaid by such R/C Lender pursuant to the preceding paragraph, which participation shall be in a principal amount equal to such R/C Lender's Ratable Portion of such Swing Advance, by paying to the Swing Advance Bank on the date on which such R/C Lender would otherwise have been required to make a payment in respect of such Swing Advance pursuant to the preceding paragraph, in immediately available funds, an amount equal to such R/C Lender's Ratable Portion of such Swing Advance. If such amount is not in fact made available to the Swing Advance Bank on the date when the Swing Advance would otherwise be required to be made pursuant to the preceding paragraph, the Swing Advance Bank shall be entitled to recover such amount on demand from that R/C Lender together with interest accrued from such date at the Federal Funds Rate. From and after the date on which any R/C Lender purchases an undivided participation interest in a Swing Advance pursuant to this paragraph (e), the Swing Advance Bank shall promptly distribute to such R/C Lender such R/C Lender's Ratable Portion of all payments of principal and of interest on such Swing Advance, other than those received from a R/C Lender pursuant to Section 2.16 or this or the preceding paragraph (d). If any payment made by or on behalf of the Borrower and 54 63 received by the Swing Advance Bank with respect to any Swing Advance is rescinded or must otherwise be returned by the Swing Advance Bank for any reason and the Swing Advance Bank has made a payment to the Administrative Agent, on account thereof, each R/C Lender shall, upon notice to the Swing Advance Bank, forthwith pay over to the Swing Advance Bank an amount equal to such R/C Lender's pro rata share of the payment so rescinded or returned based on the respective amounts paid in respect thereof to the R/C Lenders pursuant to the preceding paragraph (d). 2.18. Letter of Credit. (a) Subject to and upon the terms and conditions herein set forth, the Borrower may request that the Issuing Lender issue, at any time and from time to time on and after the Closing Date and prior to the Termination Date, for the account of the Borrower and for the benefit of any holder (or any trustee, agent or other similar representative for any such holders) of L/C Supportable Obligations of the Borrower, an irrevocable standby letter of credit, in a form customarily used by the Issuing Lender or in such other form as has been approved by the Issuing Lender in its discretion (each such standby letter of credit, a "Letter of Credit") in support of such L/C Supportable Obligations. (b) Subject to the terms and conditions contained herein, the Issuing Lender hereby agrees that it will, at any time and from time to time on or after the Closing Date and prior to the Termination Date, following its receipt of the respective Letter of Credit Request, issue for the account of the Borrower one or more Letters of Credit in support of such L/C Supportable Obligations of the Borrower as are permitted to remain outstanding without giving rise to a Default or Event of Default hereunder, provided that the Issuing Lender shall be under no obligation to issue any Letter of Credit if at the time of such issuance: (i) any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain the Issuing Lender from issuing such Letter of Credit or any requirement of law applicable to the Issuing Lender or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Lender with respect to such Letter of Credit any restriction or reserve or capital requirement (for which the Issuing Lender is not otherwise compensated) not in effect on the date hereof, or any unreimbursed loss, cost or expense which was not applicable, or known to the Issuing Lender as of the date hereof and which the Issuing Lender in good faith deems material to it; or 55 64 (ii) the Issuing Lender shall have received notice from any Lender prior to the issuance of such Letter of Credit of the type described in the second sentence of Section 2.19(b). (c) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) and the aggregate principal amount of all Revolving Credit Loans then outstanding, would exceed the Revolving Credit Commitments at such time, (ii) each Letter of Credit shall be denominated in Dollars, (iii) each Letter of Credit shall by its terms terminate on or before the earlier of (A) the date which occurs 12 months after the date of the issuance thereof (although any such Letter of Credit may be automatically extendable for successive periods of up to 12 months, but not beyond the tenth Business Day prior to the Termination Date, on terms acceptable to the Issuing Lender) and (B) the tenth Business Day prior to the Termination Date, (iv) the Stated Amount of each Letter of Credit upon issuance shall be not less than $100,000 or such lesser amount as is acceptable to the Issuing Lender. 2.19 Letter of Credit Requests. (a) Whenever the Borrower desires that a Letter of Credit be issued for its account, the Borrower shall give the Administrative Agent and the Issuing Lender at least five Business Days' (or such shorter period as is acceptable to the Issuing Lender) written notice thereof. Each notice shall be in the form of Exhibit K (each a "Letter of Credit Request"). (b) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, Section 2.18(c). Unless the Issuing Lender has received notice from any R/C Lender before it issues a Letter of Credit that one or more of the conditions specified in Article III, are not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.18(c), then the Issuing Lender may issue the requested Letter of Credit for the account of the Borrower in accordance with the Issuing Lender's usual and customary practices. Upon the issuance of any Letter of Credit, the Issuing Lender shall promptly notify each R/C Lender of such issuance and such notice shall be accompanied by a copy of the issued Letter of Credit. 56 65 2.20 Letter of Credit Participations. (a) Immediately upon the issuance by the Issuing Lender of any Letter of Credit, the Issuing Lender shall be deemed to have sold and transferred to each R/C Lender, other than the Issuing Lender (each such Lender, in its capacity under Section 2.20, a "Participant"), and each such Participant shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Lender, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's Ratable Portion, in such Letter of Credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto (excluding the Facing Fee), and any security therefor or guaranty pertaining thereto. Upon any change in the Revolving Credit Commitments of the R/C Lenders, it is hereby agreed that, with respect to any outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.20 to reflect the new Ratable Portions of the R/C Lenders. (b) In determining whether to pay under any Letter of Credit, the Issuing Lender shall have no obligation relative to the other Lenders other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Issuing Lender under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Issuing Lender any resulting liability to the Borrower or any Lender. (c) In the event that the Issuing Lender makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to the Issuing Lender pursuant to Section 2.21(a), the Issuing Lender shall promptly notify the Administrative Agent, which shall promptly notify each Participant, of such failure, and each Participant shall promptly and unconditionally pay to the Issuing Lender the amount of such Participant's Ratable Portion of such unreimbursed payment in Dollars and same day funds. If the Administrative Agent so notifies any Participant prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall make available such funds to the Issuing Lender on such Business Day. If and to the extent such Participant shall not have so made its Ratable Portion of the amount of such payment available to the Issuing Lender, such Participant agrees to pay to the Issuing Lender, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Issuing Lender at the overnight Federal Funds Rate. The failure of any Participant to make available to the Issuing Lender its Ratable Portion of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to 57 66 make available to the Issuing Lender its Ratable Portion of any payment under Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Issuing Lender such other Participant's Ratable Portion of any such payment. (d) Whenever the Issuing Lender receives a payment of a reimbursement obligation as to which it has received any payments from the Participants pursuant to clause (c) above, the Issuing Lender shall forward such payment to the Administrative Agent, which in turn shall distribute such funds to each Participant in accordance with the terms of Section 2.14. (e) Upon the request of any Participant, the Issuing Lender shall furnish to such Participant copies of any Letter of Credit issued by it and such other documentation as may reasonably be requested by such Participant. (f) The obligations of the Participants to make payments to the Issuing Lender with respect to Letters of Credit issued by it shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (ii) the existence of any claim, setoff, defense or other right which the Borrower or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, the Issuing Lender, any Participant, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; or 58 67 (v) the occurrence of any Default or Event of Default. 2.21 Agreement to Repay Letter of Credit Drawings. (a) The Borrower hereby agrees to reimburse the Issuing Lender, by making payment to the Administrative Agent in accordance with the terms of the first sentence of Section 2.14, for any drawing (each, a "Drawing") made by it under any Letter of Credit (each such Drawing until reimbursed, an "Unpaid Drawing"), no later than five (5) Business Days after the date of such Drawing, with interest on the amount of such Drawing, to the extent not reimbursed prior to 11:00 A.M. (New York time) on the date of such Drawing, from and including the date of such Drawing to but excluding the date the Issuing Lender was reimbursed by the Borrower therefor at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Margin for Loans maintained as Base Rate Loans, provided, however, to the extent such amounts are not reimbursed prior to 11:00 A.M. (New York time) on the sixth Business Day following such Drawing, interest shall thereafter accrue on the amount (and until reimbursed by the Borrower) at a rate per annum which shall be the Base Rate in effect from time to time plus 4%, in each such case, with interest to be payable on demand. The Issuing Lender shall give the Borrower prompt written notice of each Drawing under any Letter of Credit, provided that the failure to give any such notice shall in no way affect, impair or diminish the Borrower's obligations hereunder. (b) The obligations of the Borrower under this Section 2.21 to reimburse the Issuing Lender with respect to Drawings (including interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any Lender (including in its capacity as the Issuing Lender or as a Participant), or any nonapplication or misapplication by the beneficiary of the proceeds of such Drawing, the Issuing Lender's only obligation to the Borrower being to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Issuing Lender under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Issuing Lender any resulting liability to the Borrower. 59 68 ARTICLE III CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT AND OF LENDING AND OF ISSUANCE OF LETTERS OF CREDIT 3.1. Conditions Precedent to Effectiveness of this Agreement, to Initial Loans and Letters of Credit. The effectiveness of this Agreement and the obligation of each Lender to make its initial Loan hereunder and the obligation of the Issuing Lender to issue a Letter of Credit hereunder is subject to satisfaction of the conditions precedent that the Administrative Agent shall have received counterparts of this Agreement duly executed by each Borrower, each Lender and the Administrative Agent, together with the following, each dated the Effective Date (hereinafter defined) unless otherwise indicated, in form and substance satisfactory to the Administrative Agent and (except for the Notes) in sufficient copies for each Lender (the date of satisfaction of the conditions precedent set forth in this Section 3.1 and in Section 3.2 being the "Effective Date"): (a) The Notes to the order of the Lenders, respectively. (b) A certificate of the Secretary or an Assistant Secretary of each Loan Party (or, as applicable, of such Loan Party's partners) certifying (i) the resolutions of its Board of Trustees or Directors, as appropriate, approving each Loan Document to which it is a party, (ii) all documents evidencing other necessary trust, partnership or corporate action, as appropriate, and required governmental and third party approvals, licenses and consents with respect to each Loan Document to which it is a party and the transactions contemplated thereby, (iii) a copy of its and each of its Subsidiaries' and Eligible Joint Ventures' declaration of trust, certificates of incorporation, by-laws, partnership agreements and certificates of partnership as appropriate, as of the Effective Date, and (iv) the names and true signatures of each of its officers who has been authorized to execute and deliver any Loan Document or other document required hereunder to be executed and delivered by or on behalf of such Person. (c) A copy of the declaration of trust or articles or certificate of incorporation or partnership agreement or certificate of partnership, as appropriate, of each Loan Party and of each of its Subsidiaries and Eligible Joint Ventures which is not a Loan Party certified as of a recent date by the Secretary of State of the state of formation of such Loan Party or Subsidiary, together with certificates of such official 60 69 attesting to the good standing of each such Loan Party, Subsidiary and Eligible Joint Ventures. (d) Favorable opinion(s) of counsel to the Loan Parties, in substantially the form(s) of Exhibit D, and as to such other matters as any Lender through the Administrative Agent may reasonably request. (e) A certificate of the chief financial officer of the Borrower, stating that the Borrower is Solvent after giving effect to the initial Loans, the application of the proceeds thereof in accordance with Section 6.10 and the payment of all estimated legal, accounting and other fees related hereto and thereto. (f) Evidence that the insurance required by Section 6.4 is in full force and effect. (g) Such additional documents, information and materials as any Lender, through the Administrative Agent, may reasonably request. (h) A certificate, signed by a Responsible Officer of the Borrower, stating that the following statements are true and correct on the Effective Date: (i) The statements set forth in Section 3.3 are true after giving effect to the Loans being made on the Effective Date. (ii) All costs and accrued and unpaid fees and expenses (including, without limitation, legal fees and expenses) required to be paid to the Lenders on or before the Effective Date, including, without limitation, those referred to in Sections 2.4 and 10.4, to the extent then due and payable, have been paid. (iii) All necessary governmental and third party approvals required to be obtained by any Loan Party in connection with the transactions contemplated hereby have been obtained and remain in effect, and all applicable waiting periods have expired without any action being taken by any competent authority which restrains, prevents, impedes, delays or imposes materially adverse conditions upon any of the transactions contemplated hereby. (iv) There exists no judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon any of the transactions contemplated hereby. 61 70 (v) There exists no claim, action, suit, investigation or proceeding (including, without limitation, shareholder or derivative litigation) pending or, to the knowledge of the Borrower, threatened in any court or before any arbitrator or Governmental Authority which relates to the Loan Documents or the financing hereunder or which, if adversely determined, would have a Material Adverse Effect. (vi) There has been no Material Adverse Change since December 31, 1997 in the corporate, capital or legal structure of the Borrower or any of its Subsidiaries without the consent of the Administrative Agent. (vii) The Borrower's Tangible Net Worth is not less than the Minimum Tangible Net Worth. (i) Administrative Agent's reasonable satisfaction with the form and substance of each Operating Lease. (j) A Compliance Certificate, executed by the Chief Financial Officer of the Borrower substantially in the form attached as Exhibit G hereto (a "Compliance Certificate"), and if requested by the Administrative Agent, together with copies (to the extent not already delivered) of the Hotel Documents in respect of each Hotel indicated by Administrative Agent. (k) Each Subsidiary Guaranty, duly executed by the Guarantor party thereto. 3.2. Additional Conditions Precedent to Effectiveness of this Agreement, to Initial Loans and Letters of Credit. The effectiveness of this Agreement, the obligation of each Lender to make its initial Loan hereunder and the obligation of the Issuing Lender to issue Letters of Credit hereunder is subject to the further conditions precedent that: (a) No Lender or the Issuing Lender in its sole judgment exercised reasonably shall have determined (i) that there has been any Material Adverse Change since December 31, 1997 or (ii) that there has occurred any adverse change which such Lender deems material in the financial markets generally, since December 31, 1997 or (iii) that there is any claim, action, suit, investigation, litigation or proceeding (including, without limitation, shareholder or derivative litigation) pending or threatened in any court or before any arbitrator or Governmental Authority which, if adversely determined, would have a Material Adverse Effect; and nothing shall 62 71 have occurred since December 31, 1997 which, in the judgment of any Lender, has had a Material Adverse Effect. (b) Each Lender and the Issuing Lender shall be satisfied, in its sole judgment, exercised reasonably, with the corporate, capital, legal and management structure of the Borrower and its Subsidiaries, and shall be satisfied, in its sole judgment exercised reasonably, with the nature and status of all Contractual Obligations, securities, labor, tax, ERISA, employee benefit, environmental, health and safety matters, in each case, involving or affecting the Borrower or any of its Subsidiaries. 3.3. Conditions Precedent to Each Loan and Letter of Credit. The obligation of each Lender to make any Loan (including the Loan being made by such Lender on the Effective Date) and the obligation of the Issuing Lender to issue a Letter of Credit shall be subject to the further conditions precedent that: (a) The following statements shall be true on the date of such Loan or issuance, before and after giving effect thereto and to the application of the proceeds therefrom (and the acceptance by the Borrower of the proceeds of such Loan or such Letter of Credit shall constitute a representation and warranty by the Borrower that on the date of such Loan or issuance such statements are true): (i) The representations and warranties of the Borrower contained in Article IV and of each Loan Party in the other Loan Documents are correct on and as of such date as though made on and as of such date (it being understood and agreed that any representation or warranty which by its terms is made on a specified date shall be required to be true and correct only as of such specified date); and (ii) No Default or Event of Default exists or will result from the Loans being made or the Letters of Credit being issued on such date. (b) The making of the Loans or the issuance of the Letters of Credit on such date does not violate any Requirement of Law and is not enjoined, temporarily, preliminarily or permanently. (c) The Administrative Agent shall have received a Compliance Certificate, executed by a Responsible Officer of the Borrower, satisfactory to the Administrative Agent, and if requested by the Administrative Agent, together 63 72 with copies (to the extent not already delivered) of the Hotel Documents in respect of each Hotel indicated by Administrative Agent. (d) The Administrative Agent shall have received such additional documents, information and materials as any Lender, through the Administrative Agent, may reasonably request. ARTICLE IV REPRESENTATIONS AND WARRANTIES To induce the Lenders and the Administrative Agent to enter into this Agreement, the Borrower represents and warrants to the Lenders and the Administrative Agent that on and after the Effective Date: 4.1. Existence; Compliance with Law. Each Loan Party and each of its Subsidiaries and Eligible Joint Ventures (i) is a real estate investment trust or a corporation, limited liability company or limited partnership, as specified herein, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; (ii) is duly qualified as a foreign corporation, limited liability company or limited partnership and in good standing under the laws of each jurisdiction where such qualification is necessary, except for failures which in the aggregate have no Material Adverse Effect; (iii) has all requisite corporate, limited liability company or partnership power and authority and the legal right to own, pledge and mortgage its properties, to lease (as lessee) the properties that it leases as lessee, to lease or sublease (as lessor) the properties it owns and/or leases (as lessee) and to conduct its business as now or currently proposed to be conducted; (iv) is in compliance with its declaration of trust or certificate of or formation and by-laws, regulations or partnership agreement, as appropriate; (v) is in compliance with all other applicable Requirements of Law except for such non-compliances as in the aggregate have no Material Adverse Effect; and (vi) has all necessary licenses, permits, consents or approvals from or by, has made all necessary filings with, and has given all necessary notices to, each Governmental Authority having jurisdiction, to the extent required for such ownership, leasing and conduct, except for licenses, permits, consents or approvals which can be obtained by the taking of ministerial action to secure the grant or transfer thereof or failures which in the aggregate have no Material Adverse Effect. 4.2. Power; Authorization; Enforceable Obligations. (a) The execution, delivery and performance by each Loan Party of the Loan Documents to 64 73 which it is a party and the consummation of the transactions related to the financing contemplated hereby: (i) are within such Loan Party's corporate, partnership or trust powers, as appropriate; (ii) have been duly authorized by all necessary corporate, partnership or trust action, as appropriate, including, without limitation, the consent of stockholders and general and/or limited partners where required; (iii) do not and will not (A) contravene any Loan Party's or any of its Subsidiaries' or Eligible Joint Ventures' respective declaration of trust, certificate of incorporation or formation or by-laws, regulations, partnership agreement or other comparable governing documents, (B) violate any other applicable Requirement of Law (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System), or any order or decree of any Governmental Authority or arbitrator, (C) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any material Contractual Obligation of any Loan Party or any of its Subsidiaries or Eligible Joint Ventures, or (D) result in the creation or imposition of any Lien upon any of the property of any Loan Party or any of its Subsidiaries or Eligible Joint Ventures; and (iv) do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person, other than those which have been obtained or made and copies of which have been or will be delivered to the Administrative Agent pursuant to Section 3.1, and each of which on the Effective Date will be in full force and effect. (b) This Agreement has been, and each of the other Loan Documents has been, or will have been upon delivery thereof pursuant to Section 3.1, duly executed and delivered by each Loan Party thereto. This Agreement is, and the other Loan Documents are or will be, when delivered hereunder, the legal, valid and binding obligation of each Loan Party thereto, enforceable against it in accordance with its terms except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting the enforcement of creditor's rights and remedies generally. 65 74 4.3. Taxes. All federal, state, local and foreign tax returns, reports and statements (collectively, the "Tax Returns") required to be filed by the Borrower or any of its Tax Affiliates have been filed with the appropriate governmental agencies in all jurisdictions in which such Tax Returns, are required to be filed, all such Tax Returns are true and correct in all material respects, and all taxes, charges and other impositions due and payable have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof, except where contested in good faith and by appropriate proceedings if (i) adequate reserves therefor have been established on the books of the Borrower or such Tax Affiliate in conformity with GAAP and (ii) all such non-payments in the aggregate have no Material Adverse Effect. Proper and accurate amounts have been withheld by the Borrower and each of its respective Tax Affiliates from their respective employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authorities. None of the Borrower or any of its Tax Affiliates has (i) executed or filed with the IRS any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any charges; (ii) agreed or been requested to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; or (iii) any obligation under any written tax sharing agreement. 4.4. Full Disclosure. No written statement prepared or furnished by or on behalf of any Loan Party or any of its Affiliates in connection with any of the Loan Documents or the consummation of the transactions contemplated thereby, and no financial statement delivered pursuant hereto or thereto, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading. 4.5. Financial Matters. (a) The consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 1997, and the related consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, audited by Coopers & Lybrand, L.L.P. and the consolidated balance sheets of the Borrower and its Subsidiaries as at December 31, 1997, and the related consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for the twelve months then ended, certified by the chief financial officer of the Borrower, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheets as at December 31, 1997, and said statements of income, retained earnings and cash flows for the twelve months then ended, to year-end audit 66 75 adjustments, the consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the consolidated results of the operations of the Borrower and its Subsidiaries for the period ended on such dates, all in conformity with GAAP. (b) Since December 31, 1997, there has been no Material Adverse Change and there have been no events or developments that in the aggregate have had a Material Adverse Effect. (c) Neither the Borrower nor any of its Subsidiaries had at December 31, 1997 any material obligation, contingent liability or liability for taxes, long-term leases or unusual forward or long-term commitment which is not reflected in the balance sheet at such date referred to in subsection (a) above or in the notes thereto. (d) The Projections that have been delivered to each Lender, were prepared on the basis of the assumptions expressed therein, which assumptions the Borrower believed to be reasonable based on the information available to the Borrower at the time so furnished and on the Closing Date. (e) The Borrower is, and on a consolidated basis the Borrower and its Subsidiaries are, Solvent. 4.6. Litigation. There are no pending or, to the knowledge of the Borrower, threatened actions, investigations or proceedings affecting the Borrower, any of its Subsidiaries or Eligible Joint Ventures, or (to the best knowledge of the Borrower) any Operating Lessee or any of their respective properties or revenues before any court, Governmental Authority or arbitrator, other than those that in the aggregate, if adversely determined, would have no Material Adverse Effect. The performance of any action by (a) any Loan Party required or contemplated by any of the Loan Documents or (b) any Operator required or contemplated by any Operating Lease or Management Agreement is not, to the best knowledge of the Borrower, restrained or enjoined (either temporarily, preliminarily or permanently), and, to the best knowledge of the Borrower, no material adverse condition has been imposed by any Governmental Authority or arbitrator upon any of the foregoing transactions contemplated by the aforementioned documents. 4.7. Margin Regulations. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Borrowing will be used to purchase or carry any 67 76 margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. 4.8. Ownership of Borrower and DJONT; Subsidiaries. (a) The authorized capital stock of FelCor consists of (i) as of the date hereof 100,000,000 shares of common stock, $.01 par value per share, of which 36,591,080 shares are issued and outstanding as of the date hereof, and (ii) as of the date hereof 10,000,000 shares of preferred stock, $.01 par value per share, of which 6,050,000 shares, designated as $1.95 Series A Cumulative Convertible Preferred Stock, $25.00 per share liquidation preference, and 57,500 shares designated as 9% Series B Cumulative Redeemable Preferred Stock, $2,500.00 per share liquidation preference (and represented by 5,750,000 Depository Shares, each representing a 1/100 interest in such preferred stock) are outstanding as of the date hereof. All of the outstanding capital stock of FelCor has been validly issued, is fully paid and non-assessable. (b) FelCor is the sole general partner of FelCor LP and, as of the date hereof, owns beneficially and of record at least 92.7% of the partnership interests of FelCor LP free and clear of all Liens. (c) There are no outstanding classes of voting membership interests of DJONT other than the Class A membership interests. As of the date hereof Hervey A. Feldman and Thomas J. Corcoran, Jr. own, beneficially, all of the voting Class A membership interests in DJONT, free and clear of all Liens. (d) Set forth on Schedule 4.8 hereto is a complete and accurate list showing, as of the Effective Date, all Subsidiaries and Unconsolidated Entities of the Borrower and, as to each such Subsidiary and Unconsolidated Entity, the jurisdiction of its formation and the percentage of the outstanding Stock of each class owned (directly or indirectly) by the Borrower. No Stock of any Subsidiary or Unconsolidated Entity of the Borrower is subject to any outstanding option, warrant, right of conversion or purchase or any similar right other than certain rights of first refusal contained in partnership agreements to which the Borrower or a Subsidiary is a party. All of the outstanding capital Stock of each such Subsidiary and Unconsolidated Entity owned by the Borrower has been validly issued, is fully paid and (except for partnership interests) non-assessable, and all outstanding capital Stock of its Subsidiaries and Unconsolidated Entities owned by the Borrower is free and clear of all Liens. Neither the Borrower nor any such Subsidiary or Unconsolidated Entity is a party to, or has knowledge of, any agreement restricting the transfer or hypothecation of any shares of Stock of any such Subsidiary or Unconsolidated Entity, other than those imposed by Requirements of Law, or the Loan Documents. 68 77 4.9. ERISA. (a) There are no Multiemployer Plans. (b) Each Plan and any related trust intended to qualify under Code Section 401 or 501 has been determined by the IRS to be so qualified and to the best knowledge of the Borrower nothing has occurred which would cause the loss of such qualification. (c) None of the Borrower, any of its Subsidiaries or any ERISA Affiliate, with respect to any Pension Plan, has failed to make any contribution or pay any amount due as required by Section 412 of the Code or Section 302 of ERISA or the terms of any such plan, and all required contributions and benefits have been paid in accordance with the provisions of each such plan. (d) There are no pending or, to the knowledge of the Borrower, threatened claims, actions or proceedings (other than claims for benefits in the normal course), relating to any Plan other than those that in the aggregate, if adversely determined, would have no Material Adverse Effect. (e) No Pension Plan has any unfunded accrued benefit liabilities, as determined by using reasonable actuarial assumptions utilized by such plan's actuary for funding purposes. Within the last five years none of the Borrower, any of its Subsidiaries or any ERISA Affiliate has caused a Pension Plan with any such liabilities to be transferred outside of its "controlled group" (within the meaning of Section 4001(a)(14) of ERISA). (f) No Plan provides for continuing health, disability, accident or death benefits or coverage for any participant or his or her beneficiary after such participant's termination of employment (except as may be required by Section 4980B of the Code and at the sole expense of the participant or the beneficiary) which would result in the aggregate under all Plans in a liability in an amount which would have a Material Adverse Effect. (g) None of the assets of any of the Loan Parties are subject to Title I of ERISA because they consist of "plan assets" within the meaning of DOL Regulation Section 2510.3-101 by reason of an equity investment in any of the Loan Parties. 4.10. Indebtedness. Except as disclosed on Schedule 4.10, as of the date hereof, none of the Borrower or any of its Subsidiaries or Unconsolidated Entities has any Indebtedness. 69 78 4.11. Restricted Payments. From and after the Closing Date, the Borrower has not declared or made any Restricted Payments (other than those permitted pursuant to Section 7.4). 4.12. No Burdensome Restrictions; No Defaults. (a) No Loan Party nor any of its Subsidiaries or Eligible Joint Ventures (i) is a party to any Contractual Obligation the compliance with which would have a Material Adverse Effect or the performance of which by any thereof, either unconditionally or upon the happening of an event, will result in the creation of a Lien on the property or assets of any such Loan Party or its Subsidiaries, or (ii) is subject to any charter or corporate restriction which has a Material Adverse Effect. (b) No Loan Party or Subsidiary or Eligible Joint Venture of any Loan Party is in default under or with respect to any Contractual Obligation owed by it and, to the knowledge of the Borrower, no other party is in default under or with respect to any Contractual Obligation owed to any Loan Party or to any Subsidiary or Eligible Joint Venture of a Loan Party, other than those defaults which in the aggregate have no Material Adverse Effect. (c) No Event of Default or Default has occurred and is continuing. (d) There is no Requirement of Law the compliance with which by any Loan Party would have a Material Adverse Effect. (e) As of the date hereof, no Subsidiary or Eligible Joint Venture of the Borrower is subject to any Contractual Obligation (other than as set forth in the governing documents thereof) restricting or limiting its ability to transfer its assets to the Borrower or to declare or make any dividend payment or other distribution on account of any shares of any class of its Stock or its ability to purchase, redeem, or otherwise acquire for value or make any payment in respect of any such shares or any shareholder rights. 4.13. Investments. Except as disclosed on Schedule 4.8 or 4.13, the Borrower and its Subsidiaries considered as a single enterprise, is not engaged in any joint venture or partnership with any other Person nor does it maintain any Investment, as of the date hereof. 4.14. Government Regulation. Neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", 70 79 as such terms are defined in the Investment Company Act of 1940, as amended, or subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or any other federal or state statute or regulation such that its ability to incur Indebtedness is limited, or its ability to consummate the transactions contemplated hereby or by any other Loan Document, or the exercise by the Administrative Agent or any Lender of rights and remedies hereunder or thereunder, is impaired. The making of the Loans by the Lenders, the application of the proceeds and repayment thereof by the Borrower and the consummation of the transactions contemplated by the Loan Documents will not cause the Borrower or any of its Subsidiaries or Eligible Joint Ventures to violate any provision of any of the foregoing or any rule, regulation or order issued by the Securities and Exchange Commission thereunder. 4.15. Insurance. All policies of insurance of any kind or nature owned by or issued to or for the benefit of any Loan Party or any of its Subsidiaries or Eligible Joint Ventures, or issued in respect of any real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures including, without limitation, policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers' compensation and employee health and welfare insurance, are in full force and effect and are of a nature and provide such coverage as is sufficient and as is customarily carried by companies of the size and character of such Person. No Loan Party or any of its Subsidiaries or Eligible Joint Ventures has been refused insurance for which it applied or had any policy of insurance terminated (other than at its request). 4.16. Labor Matters. (a) There are no strikes, work stoppages, slowdowns or lockouts pending or threatened against or involving the Borrower or its Subsidiaries or their respective Hotels, other than those which in the aggregate have no Material Adverse Effect. (b) There are no unfair labor practice charges, arbitrations or grievances pending against or involving, or to the knowledge of the Borrower threatened against or involving the Borrower or its Subsidiaries or Eligible Joint Ventures, other than those which, in the aggregate, if resolved adversely to the Borrower or such Subsidiary or Eligible Joint Venture, would have no Material Adverse Effect. (c) As of the Effective Date, neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures are parties to, or have any obligations under, any collective bargaining agreement. 71 80 (d) There is no organizing activity involving the Borrower or any of its Subsidiaries or Eligible Joint Ventures pending or, to the Borrower's knowledge, threatened by any labor union or group of employees, other than those which in the aggregate have no Material Adverse Effect. There are no representation proceedings pending or, to the Borrower's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of the Borrower or any of its Subsidiaries or Eligible Joint Ventures have made a pending demand for recognition, other than those which in the aggregate have no Material Adverse Effect. 4.17. Force Majeure. Neither the business nor the properties of any Loan Party or any of their respective Subsidiaries or Eligible Joint Ventures are currently suffering from the effects of any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), other than those which in the aggregate have no Material Adverse Effect. 4.18. Use of Proceeds. The proceeds of the Loans will be used by the Borrower solely as follows: (a) subject to the limitations set forth herein, to fund any direct or indirect investment in existing Hotels, in Hotels and/or interests in Hotels which are to be acquired by the Borrower or any of its Subsidiaries, and for the payment of related transaction costs, fees and expenses, (b) for general corporate or working capital purposes or for Letters of Credit and (c) for repayment of indebtedness assumed by Borrower from Bristol in connection with the Bristol Merger. 4.19. Environmental Protection. Except as disclosed on Schedule 4.19 (and the Borrower represents and warrants to the Lenders and the Administrative Agent that the matters disclosed in the reports identified on Schedule 4.19 would not reasonably be expected to have a Material Adverse Effect): (a) to the best knowledge of Borrower and its Subsidiaries, all real property leased or owned by the Borrower or any of its Subsidiaries or Eligible Joint Ventures is free from contamination by any Hazardous Material which could reasonably be expected to subject the Borrower or any of its Subsidiaries to Environmental Liabilities and Costs of $5,000,000 or more; (b) the operations of the Borrower and each of its Subsidiaries or Eligible Joint Ventures, and the operations at any real property leased or owned by the Borrower or any of its Subsidiaries or Eligible Joint Ventures are in material compliance in all respects with all applicable Environmental Laws; 72 81 (c) neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures have liabilities with respect to Hazardous Materials and, to the best knowledge of the Borrower and its Subsidiaries, no facts or circumstances exist which could give rise to liabilities with respect to Hazardous Materials which could reasonably be expected to subject the Borrower or any of its Subsidiaries to Environmental Liabilities and Costs of $5,000,000 or more; (d) (i) the Borrower and its Subsidiaries and Eligible Joint Ventures and all real property owned or leased by the Borrower or its Subsidiaries and Eligible Joint Ventures have all Environmental Permits necessary for the operations at such real property and are in material compliance with such Environmental Permits, (ii) there are no Legal Proceedings pending nor, to the best knowledge of the Borrower and its Subsidiaries, threatened to revoke, or alleging the violation of, such Environmental Permits, and (iii) neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures or to the best knowledge of the Borrower and its Subsidiaries the Operators have received any notice from any source to the effect that there is lacking any Environmental Permit required in connection with the current use or operation of any property leased or owned by the Borrower or any of its Subsidiaries or Eligible Joint Ventures; (e) neither the Borrower's nor any of its Subsidiaries' or Eligible Joint Ventures' current facilities and operations, nor, to the best knowledge of the Borrower and its Subsidiaries, any Operator, any predecessor of the Borrower or any of its Subsidiaries or Eligible Joint Ventures, nor any of the Borrower's or its Subsidiaries' or Eligible Joint Ventures' past facilities and operations, nor to the best knowledge of the Borrower and its Subsidiaries, any owner of premises leased or operated by the Borrower and its Subsidiaries and Eligible Joint Ventures, are subject to any outstanding written Order or Contractual Obligation, including Environmental Liens, with any Governmental Authority or other Person, or to any federal, state, local, foreign or territorial investigation respecting (i) Environmental Laws, (ii) Remedial Action, (iii) any Environmental Claim, or (iv) the Release or threatened Release of any Hazardous Material; (f) neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures or, to the best knowledge of the Borrower and its Subsidiaries, Operators are subject to any pending Legal Proceeding alleging the violation of any Environmental Law with respect to a Hotel nor, to the best knowledge of the Borrower and its Subsidiaries, are any such proceedings threatened; 73 82 (g) neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures nor, to the best knowledge of the Borrower and its Subsidiaries, any Operators or predecessor of the Borrower or any of its Subsidiaries or Eligible Joint Ventures, nor to the best knowledge of the Borrower and its Subsidiaries any owner of premises leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, have filed any notice under federal, state or local, territorial or foreign law indicating past or present treatment, storage, or disposal of or reporting a Release of Hazardous Material into the environment; (h) none of the operations of the Borrower or any of its Subsidiaries or Eligible Joint Ventures or, to the best knowledge of the Borrower and its Subsidiaries, of any Operators or predecessor of the Borrower or any of its Subsidiaries or Eligible Joint Ventures, or, to the best knowledge of the Borrower and its Subsidiaries, of any owner of premises leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, involve or previously involved the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Part 261.3 (in effect as of the date of this Agreement) or any state, local, territorial or foreign equivalent; and (i) there is not now, nor to the best knowledge of the Borrower and its Subsidiaries, has there been in the past, on, in or under any real property leased or owned by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, to the best knowledge of the Borrower and its Subsidiaries or any of their predecessors (i) any underground storage tanks or surface tanks, dikes or impoundments (other than for surface water), (ii) any friable asbestos-containing materials, (iii) any polychlorinated biphenyls, or (iv) any radioactive substances other than naturally-occurring radioactive material. 4.20. Contractual Obligations Concerning Assets. As of the date hereof, neither the Borrower nor any of its Subsidiaries owns or holds, or is obligated under or a party to, any option, right of first refusal, or other contractual right to purchase or acquire (other than pursuant to the Bristol Merger), or any Contractual Obligation to effect an Asset Sale of, any Hotel owned or leased by the Borrower or any of its Subsidiaries, except those that in the aggregate would not have a Material Adverse Effect whether or not exercised. 4.21. Intellectual Property. The Loan Parties and its Subsidiaries and Eligible Joint Ventures or the Operating Lessee own or license or otherwise have the right to use all material licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, copyright 74 83 applications, franchises, authorizations and other intellectual property rights that are necessary for the operations of their respective businesses, without infringement upon or conflict with the rights of any other Person with respect thereto, including, without limitation, the Licenses and all trade names associated with any private label brands of any Loan Party or any of its Subsidiaries or Eligible Joint Ventures. To the best knowledge of the Borrower, no material slogan or other advertising device, product, process, method, substance, part or component, or other material now employed, or now contemplated to be employed, by any Loan Party or any of their respective Subsidiaries or Eligible Joint Ventures or the Operating Lessee infringes upon or conflicts with any rights owned by any other Person, and no claim or litigation regarding any of the foregoing is pending or threatened. 4.22. Title. (a) Each Loan Party and their respective Subsidiaries and Eligible Joint Ventures own good and marketable fee simple absolute title to all of the Real Estate purported to be owned by them, which Real Estate is at the date hereof described in Schedule 4.22(a), and good and marketable title to, or valid leasehold interests in, all other properties and assets purported to be leased by any Loan Party or any of their respective Subsidiaries or Eligible Joint Ventures, including, without limitation, valid leasehold interests pursuant to the Leases and all property reflected in the balance sheet referred to in Section 4.5(a). Each Loan Party and its respective Subsidiaries or Eligible Joint Ventures received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and have duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Loan Party's and their respective Subsidiaries' or Eligible Joint Ventures' right, title and interest in and to all such property except for such documents or actions the failure to obtain or accomplish which would not have a Material Adverse Effect. (b) All material real property leased at the date hereof by the Borrower or any of their respective Subsidiaries or Eligible Joint Ventures is listed on Schedule 4.22(b). Each of such leases is valid and enforceable in accordance with its terms and is in full force and effect. The Borrower has delivered to the Administrative Agent true and complete copies of each of such leases and all documents affecting the rights or obligations of the Borrower or any of its Subsidiaries or Eligible Joint Ventures which is a party thereto, including, without limitation, any non-disturbance and recognition agreements, subordination agreements, attornment agreements and agreements regarding the term or rental of any of the leases. None of the Borrower or any of its respective Subsidiaries or Eligible Joint Ventures nor, to the knowledge of the Borrower, any other party to any such lease is in default of its obligations thereunder or has delivered or received any notice of 75 84 default under any such lease, nor has any event occurred which, with the giving of notice, the passage of time or both, would constitute a default under any such lease, except for defaults which in the aggregate have no Material Adverse Effect. (c) All components of all improvements included within the Hotels owned or leased, as lessee, by any Loan Party or Eligible Joint Venture (collectively, "Improvements"), including, without limitation, the roofs and structural elements thereof and the heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water, paving and parking equipment, systems and facilities included therein, are in good working order and repair, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. All water, gas, electrical, steam, compressed air, telecommunication, sanitary and storm sewage lines and systems and other similar systems serving the Hotels owned or leased by any Loan Party or any of their respective Subsidiaries or Eligible Joint Ventures are installed and operating and are sufficient to enable the real property owned or leased by any Loan Party and their respective Subsidiaries or Eligible Joint Ventures to continue to be used and operated in the manner currently being used and operated, and no Loan Party or any of its Subsidiaries or Eligible Joint Ventures has any knowledge of any factor or condition that reasonably could be expected to result in the termination or material impairment of the furnishing thereof. No Improvement or portion thereof is dependent for its access, operation or utility on any land, building or other Improvement not included in the real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures other than for access provided pursuant to a recorded easement or other right of way establishing the right of such access. (d) All Permits required to have been issued or appropriate to enable all real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures to be lawfully occupied and used for all of the purposes for which they are currently occupied and used have been lawfully issued and are in full force and effect, other than those which in the aggregate have no Material Adverse Effect. (e) No Loan Party or any of its Subsidiaries or Eligible Joint Ventures has received any notice, or has any knowledge, of any pending, threatened or contemplated condemnation proceeding affecting any real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures or any part thereof, or any proposed termination or impairment of any parking at any such owned or leased real property or of any sale or other disposition of any real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures or 76 85 any part thereof in lieu of condemnation, which in the aggregate, are reasonably likely to have a Material Adverse Effect. (f) Except for events or conditions not reasonably likely to have, in the aggregate, a Material Adverse Effect, (i) no portion of any real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures has suffered any material damage by fire or other casualty loss which has not heretofore been completely repaired and restored to its condition prior to such casualty, and (ii) no portion of any real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures is located in a special flood hazard area as designated by any Federal Governmental Authorities. 4.23. Status as REIT. The Borrower is organized in conformity with the requirements for qualification as an equity-oriented real estate investment trust under the Code. Borrower has met all of the requirements for qualification as an equity-oriented real estate investment trust under the Code for its Fiscal Year ended December 31, 1997. The Borrower is in a position to qualify for its current Fiscal Year as a real estate investment trust under the Code and its proposed methods of operation will enable it to so qualify. 4.24. Operator: Compliance with Law. To the best knowledge of the Borrower and its Subsidiaries, each Operator (i) has full power and authority and the legal right to own, lease (or sublease), manage and operate (as applicable) the properties it operates and to conduct the business in which it is currently engaged with respect to any real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, (ii) is duly qualified or licensed and is in good standing under the laws of each jurisdiction where its ownership, lease (or sublease), management or operation of any real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures requires such qualification, and (iii) is in compliance with all Requirements of Law applicable to the real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, or applicable to the operation or management thereof except to the extent that the failure to comply therewith is not reasonably likely to have, in the aggregate, a Material Adverse Effect. 4.25. Operating Leases, Licenses and Management Agreement. (a) Each of the Hotels (i) is leased to an Operating Lessee under an Operating Lease (ii) is the subject of a License, and (iii) is managed and operated for the Operating Lessee pursuant to a Management Agreement. 77 86 (b) Each of the Operating Leases, Licenses and Management Agreements in respect of the Hotels (i) is in full force and effect, (ii) is a legally valid and binding obligation of each of the parties thereto, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect, and (iii) has not been modified, amended or supplemented in any material or adverse way. Neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures has collected any rents becoming due under any Operating Lease more than 30 days in advance. All rent and other sums and charges payable by any Operating Lessee under each Operating Lease to which it is a party are current, no notice of default or termination under any such Operating Lease is outstanding, no termination event or condition or uncured default on the part of the Operating Lessee exists under any Operating Lease, and no event of default has occurred which, with the giving of notice or the lapse of time or both, would constitute such a default or termination event or condition or uncured default on the part of the Borrower or its Subsidiaries or Eligible Joint Ventures or the Operators (as the case may be), subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. As to all of the Leases, Borrower and each of its Subsidiaries or Eligible Joint Ventures has performed all of its repair and maintenance obligations (if any) and, to the best knowledge and belief of Borrower, each Operating Lessee under each Operating Lease to which it is a party has performed all of its repair and maintenance obligations, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. 4.26. FF&E Reserves. An FF&E Reserve has been established in respect of each of the Hotels and the Borrower or its Subsidiaries or Eligible Joint Ventures have made any contributions to such FF&E Reserve as required by the terms of the Operating Lease and/or the Management Agreement relating thereto. 4.27 Year 2000 Compliance. Any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) the Borrower's computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which Borrower's systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be completed by January 1, 1999. The cost to the Borrower of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to the Borrower (including, without limitation, reprogramming errors and the failure of others' systems or equipment) will not result in a Default or a Material Adverse Effect. Except for such of the reprogramming referred to in the preceding sentence as may be necessary, the computer and management information systems of the Borrower and its Subsidiaries are and, with ordinary course upgrading and 78 87 maintenance, will continue for the term of this Agreement to be, sufficient to permit the Borrower to conduct its business without the occurrence of a Material Adverse Effect. ARTICLE V FINANCIAL COVENANTS As long as any of the Obligations or Commitments remain outstanding, unless the requisite Lenders specified in Section 10.1 otherwise consent in writing, the Borrower agrees with the Lenders and the Administrative Agent that: 5.1. Unsecured Interest Expense Coverage. The Borrower shall maintain at the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending on March 31, 1998, a ratio of (a) Unencumbered NOI to (b) Unsecured Interest Expense, in each case determined on the basis of the four (4) Fiscal Quarters ending on the date of determination, of not less than 2.5:1.0. 5.2. Fixed Charge Coverage Ratio. The Borrower shall maintain at the end of each Fiscal Quarter commencing with the Fiscal Quarter ending on March 31, 1998, a ratio of (a) Adjusted EBITDA to (b) Fixed Charges, in each case determined on the basis of the four (4) Fiscal Quarters ending on the date of determination, of not less than 2.0:1.0. 5.3. Maintenance of Tangible Net Worth. The Borrower shall maintain during each Fiscal Quarter a Tangible Net Worth of not less than the Minimum Tangible Net Worth. 5.4. Limitations on Total Indebtedness. The Borrower shall not, during each Fiscal Quarter on a consolidated basis, permit the Total Indebtedness (including, without limitation, the Obligations and all Capitalized Lease Obligations) of the Borrower for borrowed money to exceed 50% of Total Value. 5.5. Limitations on Total Secured Indebtedness. The Borrower shall not, during each Fiscal Quarter on a consolidated basis, permit the Total Secured Indebtedness (including, without limitation, secured Obligations and Capitalized Lease Obligations) of the Borrower, to exceed (x) prior to and including June 30, 1999, 30% of Total Value and (y) after June 30, 1999, 25% of Total Value. 79 88 5.6. Adjusted NOI and Hotels. The Borrower shall ensure that at the end of each Fiscal Quarter commencing with the Fiscal Quarter ending on June 30, 1997 at least 50% of the aggregate Adjusted NOI generated by all Hotels during the preceding four (4) Fiscal Quarters shall be generated by Hotels wholly owned or leased by the Borrower or its wholly-owned Subsidiaries, provided that, for Hotels owned or leased for less than four (4) Fiscal Quarters only the Adjusted NOI generated by such Hotels since the date of acquisition of such Hotel shall be included in calculating such aggregate Adjusted NOI. 5.7. Limitations on Recourse Secured Indebtedness. The Borrower shall not, during each Fiscal Quarter on a consolidated basis, permit the Recourse Secured Indebtedness (including, without limitation, secured Obligations and Capitalized Lease Obligations) of the Borrower, to exceed the lesser of (x) 7.5% of Total Value and (y) $200,000,000.00. ARTICLE VI AFFIRMATIVE COVENANTS As long as any of the Obligations or the Commitments remain outstanding, unless the Majority Lenders otherwise consent in writing, the Borrower agrees with the Lenders and the Administrative Agent that: 6.1. Compliance with Laws, Etc. The Borrower shall comply, and shall cause each of its Subsidiaries and Eligible Joint Ventures to comply, in all material respects with all Requirements of Law, Contractual Obligations, commitments, instruments, licenses, permits and franchises, including, without limitation, all Permits; provided, however, that the Borrower shall not be deemed in default of this Section 6.1 if all such non-compliances in the aggregate have no Material Adverse Effect. 6.2. Conduct of Business. The Borrower shall (a) conduct, and shall cause each of its Subsidiaries and Eligible Joint Ventures to conduct, its business in the ordinary course and consistent with past practice; (b) use, and cause each of its Subsidiaries and Eligible Joint Ventures to use, its reasonable efforts, in the ordinary course and consistent with past practice, to (i) preserve its business and the goodwill and business of the customers, advertisers, suppliers and others having business relations with the Borrower or any of its Subsidiaries or Eligible Joint Ventures, and (ii) keep available the services and goodwill of its present employees; (c) preserve, and cause each of its Subsidiaries and Eligible Joint Ventures to preserve, all 80 89 registered patents, trademarks, trade names, copyrights and service marks with respect to its business; and (d) perform and observe, and cause each of its Subsidiaries and Eligible Joint Ventures to perform and observe, all the terms, covenants and conditions required to be performed and observed by it under its Contractual Obligations (including, without limitation, to pay all rent and other charges payable under any lease and all debts and other obligations as the same become due), and do, and cause its Subsidiaries and Eligible Joint Ventures to do, all things necessary to preserve and to keep unimpaired its rights under such Contractual Obligations; provided, however, that, in the case of each of clauses (a) through (d), the Borrower shall not be deemed in default of this Section 6.2 if all such failures in the aggregate have no Material Adverse Effect. 6.3. Payment of Taxes, Etc. The Borrower shall pay and discharge, and shall cause each of its Subsidiaries and Eligible Joint Ventures, as appropriate, to pay and discharge, before the same shall become delinquent, all lawful governmental claims, taxes, assessments, charges and levies, except where contested in good faith, by proper proceedings, if adequate reserves therefor have been established on the books of the Borrower or the appropriate Subsidiary or Eligible Joint Venture in conformity with GAAP; provided, however, that the Borrower shall not be deemed in default of this Section 6.3 if all such non-payments in the aggregate have no Material Adverse Effect. 6.4. Maintenance of Insurance. The Borrower shall maintain, and shall cause each of its Subsidiaries and Eligible Joint Ventures to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks (including, without limitation, fire, extended coverage, vandalism, malicious mischief, public liability, product liability, and business interruption) as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary or Eligible Joint Venture. The Borrower will furnish to the Lenders from time to time such information as may be requested as to such insurance. 6.5. Preservation of Existence, Etc. The Borrower shall preserve and maintain, and shall cause each of its Subsidiaries and Eligible Joint Ventures to preserve and maintain, its corporate or partnership existence, rights (charter and statutory) and franchises, except as permitted under Section 7.5. 6.6. Access. The Borrower shall, at any reasonable time and from time to time, permit the Administrative Agent or any of the Lenders, or any agents or representatives thereof, at the expense of the Lenders (but such expense to be 81 90 reimbursed by the Borrower in the event that any of the following reveal a material Default by the Borrower), to (a) examine and make copies of and abstracts from the records and books of account of the Borrower and each of its Subsidiaries and Eligible Joint Ventures, (b) visit the properties of the Borrower and each of its Subsidiaries and Eligible Joint Ventures, (c) discuss the affairs, finances and accounts of the Borrower and each of its Subsidiaries and Eligible Joint Ventures with any of their respective officers or directors, and (d) communicate directly with the Borrower's independent certified public accountants. 6.7. Keeping of Books. The Borrower shall keep, and shall cause each of its Subsidiaries and Eligible Joint Ventures to keep, proper books of record and account, in which proper entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary or Eligible Joint Venture. 6.8. Maintenance of Properties, Etc. The Borrower shall maintain and preserve, and shall cause each of its Subsidiaries and Eligible Joint Ventures to maintain and preserve, (i) all of its properties which are used or useful or necessary in the conduct of its business in good working order and condition, and (ii) all rights, permits, licenses, approvals and privileges (including, without limitation, all Permits) which are used or useful or necessary in the conduct of its business; provided, however, that the Borrower shall not be deemed in default of this Section 6.8 if all such failures in the aggregate have no Material Adverse Effect. 6.9. Performance and Compliance with Other Covenants. The Borrower shall perform and comply with, and shall cause each of its Subsidiaries and Eligible Joint Ventures to perform and comply with, each of the covenants and agreements set forth in each Contractual Obligation to which it or any of its Subsidiaries or Eligible Joint Ventures is a party; provided, however, that the Borrower shall not be deemed in default of this Section 6.9 if all such failures in the aggregate have no Material Adverse Effect. 6.10. Application of Proceeds. The Borrower shall use the entire amount of the proceeds of the Loans as provided in Section 4.18. 6.11. Financial Statements. The Borrower shall furnish to the Lenders: (a) as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, consolidated 82 91 balance sheets of the Borrower and its Subsidiaries and the Reporting Operating Lessees and any Requested Operating Lessee as of the end of such quarter and consolidated statements of income, retained earnings and cash flow of the Borrower and its Subsidiaries and the Reporting Operating Lessees and any Requested Operating Lessee for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, all prepared in conformity with GAAP and certified by the chief financial officer of the Borrower or the chief financial officer of the Reporting Operating Lessees or a Requested Operating Lessee, as appropriate, as fairly presenting the financial condition and results of operations of the Borrower and its Subsidiaries and the Reporting Operating Lessees and any Requested Operating Lessee at such date and for such period, together with (i) a certificate of said officer stating that no Default or Event of Default has occurred and is continuing or, if a Default or an Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which the Borrower, any Reporting Operating Lessees or any Requested Operating Lessee, as appropriate, proposes to take with respect thereto, (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by the Borrower or any Reporting Operating Lessee or any Requested Operating Lessee, as appropriate, in determining compliance with all financial covenants contained herein, and (iii) a written discussion and analysis by the management of the Borrower or any Reporting Operating Lessee or any Requested Operating Lessee, as appropriate, of the financial statements furnished in respect of such Fiscal Quarter; (b) as soon as available and in any event within 90 days after the end of each Fiscal Year, consolidated balance sheets of the Borrower and its Subsidiaries and the Reporting Operating Lessees as of the end of such year and consolidated statements of income, retained earnings and cash flow of the Borrower and its Subsidiaries and the Reporting Operating Lessees for such Fiscal Year, all prepared in conformity with GAAP and certified, in the case of such consolidated financial statements, in a manner reasonably acceptable to the Administrative Agent without qualification as to the scope of the audit by Coopers & Lybrand or other independent public accountants of recognized national standing together with (i) a schedule in form satisfactory to the Administrative Agent of the computations used by the Borrower in determining, as of the end of such Fiscal Year, the Borrower's or a Reporting Operating Lessee's, as appropriate, compliance with all financial covenants contained herein, and (ii) a written discussion and analysis by the management of the Borrower or any Reporting Operating Lessee, as appropriate, of the financial statements furnished in respect of such Fiscal Year; and 83 92 (c) promptly after the same are received by the Borrower, a copy of each management letter provided to the Borrower by its independent certified public accountants which refers in whole or in part to any inadequacy, defect, problem, qualification or other lack of fully satisfactory accounting controls utilized by the Borrower or any of its Subsidiaries. (d) within 45 days after the end of each Fiscal Quarter, a Compliance Certificate as of the end of such Fiscal Quarter, executed by the Chief Financial Officer of the Borrower and if requested by the Administrative Agent, together with copies (to the extent not already delivered) of the Hotel Documents in respect of each Hotel indicated by Administrative Agent. 6.12. Reporting Requirements. The Borrower shall furnish to the Lenders: (a) prior to any Asset Sale generating proceeds in excess of 10% of the Total Value of the Borrower, a notice (i) describing the assets being sold, (ii) stating the estimated Asset Sales proceeds in respect of such Asset Sale and (iii) accompanied by a Compliance Certificate and a certificate of the Chief Financial Officer of the Borrower stating that before and after giving effect to such Asset Sale, the Borrower shall be in compliance with all of its covenants set forth in the Loan Documents and that no Default or Event of Default will result from such Asset Sale. (b) as soon as available and in any event within 90 days after the end of each Fiscal Year (or earlier if approved earlier by the Board of Directors of the Borrower), an annual budget of the Borrower and its Subsidiaries for the succeeding Fiscal Year, displaying on a quarterly basis anticipated balance sheets, forecasted Capital Expenditures, working capital requirements, revenues, net income, cash flow, EBITDA, all on a consolidated basis; (c) promptly and in any event within 30 days after the Borrower, any of its Subsidiaries or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a written statement of the Chief Financial Officer or other appropriate officer of the Borrower describing such ERISA Event or waiver request and the action, if any, which the Borrower, its Subsidiaries and ERISA Affiliates propose to take with respect thereto and a copy of any notice filed by or with the PBGC or the IRS pertaining thereto; (d) promptly and in any event within 10 days after receipt thereof, a copy of any adverse notice, determination letter, ruling or opinion the Borrower, any 84 93 of its Subsidiaries or any ERISA Affiliate receives from the PBGC, DOL or IRS with respect to any Plan, other than those which, in the aggregate, do not have any reasonable likelihood of resulting in a Material Adverse Change; (e) promptly after the commencement thereof, notice of all actions, suits and proceedings before any domestic or foreign Governmental Authority or arbitrator, affecting the Borrower or any of its Subsidiaries, except those which in the aggregate, if adversely determined, would have no Material Adverse Effect; (f) promptly and in any event within two Business Days after the Borrower becomes aware of the existence of (i) any Default or Event of Default, (ii) any breach or non-performance of, or any default under, any Operating Lease, Management Agreement or any Contractual Obligation which is material to the business, prospects, operations or financial condition of the Borrower and its Subsidiaries taken as one enterprise, or (iii) any Material Adverse Change or any event, development or other circumstance which has any reasonable likelihood of causing or resulting in a Material Adverse Change, telephonic or telecopied notice in reasonable detail specifying the nature of the Default, Event of Default, breach, non-performance, default, event, development or circumstance, including, without limitation, the anticipated effect thereof, which notice shall be promptly confirmed in writing within five days; (g) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to its security holders generally, and copies of all reports and registration statements which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange or the National Association of Securities Dealers, Inc.; (h) promptly upon the request of any Lender, through the Administrative Agent, copies of all federal tax returns and reports filed by the Borrower or any of its Subsidiaries in respect of taxes measured by income (excluding sales, use and like taxes); (i) promptly and in any event within ten days of the Borrower or any Subsidiary learning of any of the following, written notice to the Administrative Agent of any of the following: (i) the Release or threatened Release of any Hazardous Material on or from any property owned or leased by the Borrower of any of its Subsidiaries or Eligible Joint Ventures and any written order, notice, 85 94 permit, application or other written communication or report received by the Borrower, any of its Subsidiaries or Eligible Joint Ventures in connection with or relating to any such Release or threatened Release, unless such Release or threatened Release is not reasonably likely to subject the Borrower or any of its Subsidiaries to Environmental Liabilities and Costs of $5,000,000 or more; (ii) any notice or claim to the effect that the Borrower, any of its Subsidiaries or any Eligible Joint Ventures is or may be liable to any Person as a result of the Release or threatened Release of any Hazardous Material into the environment; (iii) receipt by the Borrower, any of its Subsidiaries or Eligible Joint Ventures or any Operator of notification that any real or personal property of the Borrower or any of its Subsidiaries is subject to an Environmental Lien; (iv) any Remedial Action taken by the Borrower or any of its Subsidiaries or Eligible Joint Ventures or any other Person on their behalf in response to any Hazardous Material on, under or about any real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, unless such Remedial Action is not reasonably likely to subject the Borrower or any of its Subsidiaries or Eligible Joint Ventures to Environmental Liabilities and Costs of $5,000,000 or more; (v) receipt by the Borrower or any of its Subsidiaries or Eligible Joint Ventures of any notice of violation of, or knowledge by the Borrower or any of its Subsidiaries or any Eligible Joint Ventures that there exists a condition which may result in a violation by the Borrower or any of its Subsidiaries or Eligible Joint Ventures of, any Environmental Law, unless such violation is not reasonably likely to subject the Borrower or any of its Subsidiaries to Environmental Liabilities and Costs of $5,000,000 or more; (vi) any proposed Capital Expenditure by the Borrower or any of its Subsidiaries or Eligible Joint Ventures intended or designed to implement any existing or additional Remedial Action, unless such expenditures are not reasonably likely to exceed $5,000,000; (vii) the commencement of any judicial or administrative proceeding or investigation alleging a violation of any Environmental Law; or 86 95 (viii) any proposed acquisition of stock, assets or real property, or any proposed leasing of property by the Borrower, or any of its Subsidiaries or Eligible Joint Ventures, unless such action is not reasonably likely to subject the Borrower and its Subsidiaries to Environmental Liabilities and Costs to the Borrower in excess of $5,000,000; (j) promptly, such additional financial and other information respecting the financial or other condition of the Borrower or any of its Subsidiaries or Eligible Joint Ventures or the Operating Lessee or the status or condition of any real property owned or leased by the Borrower or its Subsidiaries or Eligible Joint Ventures, or the operation thereof which the Borrower is entitled to or can otherwise reasonably obtain, as the Administrative Agent from time to time reasonably requests; and (k) upon written request by any Lender through the Administrative Agent, a report providing an update of the status of any Environmental Claim, Remedial Action or any other issue identified in any notice or report required pursuant to this Section 6.12. 6.13. Leases and Operating Leases; Management Agreements and Licenses. (a) If requested by Administrative Agent, the Borrower shall provide the Administrative Agent, within 30 days of such request, with a copy of each Qualified Lease and each Operating Lease (to the extent not already delivered). The Borrower shall, and shall cause each of its Subsidiaries and Eligible Joint Ventures to, (i) comply in all material respects with all of their respective obligations under all of their respective Leases and Operating Leases now or hereafter held respectively by them with respect to real property, including, without limitation, the Leases set forth in Schedule 4.22(b); (ii) not modify, amend, cancel, extend or otherwise change in any materially adverse manner any of the terms, covenants or conditions of any such Leases or Operating Leases; (iii) not assign any Leases or sublet any portion of the premises if such assignment or sublet would have a Material Adverse Effect; (iv) provide the Administrative Agent with a copy of each notice of default under any Lease or Operating Lease received by the Borrower or any Subsidiary or Eligible Joint Venture of the Borrower immediately upon receipt thereof and deliver to the Administrative Agent a copy of each notice of default sent by the Borrower or any Subsidiary or Eligible Joint Venture of the Borrower under any Lease or Operating Lease simultaneously with its delivery of such notice under such Lease or Operating Lease except to the extent that such defaults, in the aggregate, would not have a Material Adverse Effect; (v) notify the Administrative Agent, not later than 30 days prior to the date of the expiration of the term of any Qualified Lease, of the 87 96 Borrower's or any Subsidiary or Eligible Joint Venture of the Borrower's intention either to renew or to not renew any such Qualified Lease, and, if the Borrower or any Subsidiary or Eligible Joint Venture of the Borrower intends to renew such Qualified Lease, the terms and conditions of such renewal; and (vi) maintain each Operating Lease in full force and effect and enforce the obligations of the Operating Lessee thereunder, in a timely manner except to the extent that the failure to do so, in the aggregate, would not have a Material Adverse Effect. (b) The Borrower shall take all actions and do all things within its power or control necessary or required to cause each Operating Lessee to (i) keep, observe, comply with and perform all of the terms, provisions, covenants and undertakings on its part required by each Operating Lease, each License, each sublease and Management Agreement relating to any Hotel, and (ii) to enforce the provisions of each License and each Management Agreement, if the failure to comply or enforce such agreements would be reasonably likely, in the aggregate, to have a Material Adverse Effect. 6.14. Intentionally Omitted. 6.15. Employee Plans. For each Plan and any related trust hereafter adopted or maintained by a Loan Party or any of its ERISA Affiliates intended to qualify under Code Section 125, 401 or 501, the Borrower shall (i) seek, and cause such of its ERISA Affiliates to seek, and receive determination letters from the IRS to the effect that such plan is so qualified; and (ii) cause such plan to be so qualified. 6.16. Intentionally Omitted. 6.17. Fiscal Year. The Borrower shall maintain as its Fiscal Year the twelve month period ending on December 31 of each year. 6.18. Environmental Matters. (a) The Borrower shall comply and shall cause each of its Subsidiaries and Eligible Joint Ventures and each property owned or leased by such parties to comply in all material respects with all applicable Environmental Laws currently or hereafter in effect. (b) If Administrative Agent or Lenders at any time have a reasonable basis to believe that there may be a material violation of any Environmental Law by the Borrower or any of its Subsidiaries and Eligible Joint Ventures or any Operator related to any real property owned or leased by the Borrower or any of its Subsidiaries and Eligible Joint Ventures, or real property 88 97 adjacent to such real property, then the Borrower agrees, upon request from the Administrative Agent, to provide the Administrative Agent, at the Borrower's expense, with such reports, certificates, engineering studies or other written material or data as the Administrative Agent or Lenders may reasonably require so as to reasonably satisfy the Administrative Agent and Lenders that the Borrower or such Subsidiary, Eligible Joint Venture or real property owned or leased by them is in material compliance with all applicable Environmental Laws. Furthermore, Administrative Agent shall have the right to inspect during normal business hours any real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures if at any time Administrative Agent or Lenders have a reasonable basis to believe that there may be such a material violation of Environmental Law. (c) The Borrower shall, and shall cause each of its Subsidiaries and Eligible Joint Ventures and each Operating Lessee to, take such Remedial Action or other action as required by Environmental Laws, as any Governmental Authority requires, except to the extent contested in good faith and by proper proceedings, or as is appropriate and consistent with good business practice. 6.19. REIT Requirements. The Borrower shall operate its business at all times so as to satisfy all requirements necessary to qualify as an equity-oriented real estate investment trust under Sections 856 through 860 of the Code. The Borrower will maintain adequate records so as to comply with all record-keeping requirements relating to the qualification of the Borrower as an equity-oriented real estate investment trust as required by the Code and applicable regulations of the Department of the Treasury promulgated thereunder and will properly prepare and timely file with the IRS all returns and reports required thereby. The Borrower will request from its shareholders all shareholder information required by the Code and applicable regulations of the Department of Treasury promulgated thereunder. 6.20. Maintenance of FF&E Reserves. The Borrower shall cause to be maintained the FF&E Reserves pursuant to the terms of the Operating Leases. 6.21. INTENTIONALLY DELETED 6.22. Further Assurances. At any time upon the request of the Administrative Agent, the Borrower will, promptly and at its expense, execute, acknowledge and deliver such further documents and do such other acts and things as the Administrative Agent may reasonably request to evidence the Loans made hereunder and interest thereon in accordance with the terms of this Agreement; 89 98 6.23. Unencumbered Hotel Properties/Financial Covenant Imbalance. (a) The Borrower shall promptly notify the Administrative Agent in writing in the event that at any time the Borrower or any of its Subsidiaries receives or otherwise gains knowledge that (i) any Hotel included in the calculation of a prior Compliance Certificate as an Unencumbered Hotel Property, ceases, for any reason whatsoever, to be an Unencumbered Hotel Property or (ii) a Financial Covenant Imbalance exists, and the amount of the Loans which must be repaid to cure such Financial Covenant Imbalance. (b) The Administrative Agent, at the expense of the Lenders, which expense shall not exceed $10,000 without the consent of the Majority Lenders (but such expense to be reimbursed by the Borrower in the event that a Hotel fails to meet requirements for an Unencumbered Hotel Property in any material respect) may make physical and other verifications of any Hotels included as Unencumbered Hotel Properties in any reasonable manner and through any medium that the Administrative Agent considers advisable, and the Borrower shall furnish all such assistance and information as the Administrative Agent may require in connection therewith. 6.24. Hotel Documents. Within 30 days of Administrative Agent's request, Borrower shall deliver to Administrative Agent Hotel Documents (to the extent not already delivered) for any Hotel indicated by Administrative Agent. ARTICLE VII NEGATIVE COVENANTS As long as any of the Obligations or Commitments remain outstanding, without the written consent of the Administrative Agent, the Borrower agrees with the Lenders and the Administrative Agent that: 7.1. Restrictions on Wholly-Owned Subsidiaries. (a) The Borrower shall not create or acquire any direct or indirect wholly-owned Subsidiary after the Closing Date unless (i) if such Subsidiary is a Required Guarantor, concurrently with the creation or acquisition thereof, such Subsidiary executes and delivers to the Administrative Agent a Subsidiary Guaranty or (ii) if such Subsidiary is not a Required Guarantor the organizational documents and agreement of limited partnership (or equivalent) of such Subsidiary provide that such Subsidiary shall not incur any Indebtedness (other than (A) intercompany Indebtedness owed to Borrower and (B) Indebtedness which is either (x) Non-Recourse Indebtedness or (y) recourse to such Subsidiary provided such Indebtedness (I) does not exceed 65% of the value of 90 99 such Subsidiary's assets which secures such Indebtedness and (II) is secured by all of the Hotels owned by such Subsidiary). (b) No wholly-owned Subsidiary which is acquired or created after the Closing Date may (i) incur any Indebtedness (other than (A) intercompany Indebtedness owed to Borrower and (B) Indebtedness which is either (x) Non-Recourse Indebtedness or (y) recourse to such Subsidiary provided such Indebtedness (I) does not exceed 65% of the value of such Subsidiary's assets which secures such Indebtedness and (II) is secured by all of the Hotels owned by such Subsidiary) or (ii) be subject to any contractual restriction on such Subsidiary's ability to declare or pay dividends or distribute cash or other assets to Borrower or any of its Subsidiaries. (c) Borrower shall not permit any direct or indirect wholly-owned Subsidiary to own assets (including the assets of such Person's Subsidiaries) the value of which exceed 10% of Total Value unless such Subsidiary executes and delivers to the Administrative Agent a Subsidiary Guaranty, provided, that in the event the aggregate value of the assets of all wholly-owned Subsidiaries which are not Guarantors exceed 20% of Total Value then Borrower shall not permit any direct or indirect wholly-owned Subsidiary formed thereafter to own assets (including the assets of such Person's Subsidiaries) the value of which exceed 1% of Total Value unless such Subsidiary executes and delivers to the Administrative Agent a Subsidiary Guaranty. 7.2. Operation/Ownership of Hotels. (a) Borrower shall not own or lease (directly or indirectly) any Hotels which are not (i) leased to an Operating Lessee pursuant to an Operating Lease within 90 days of Borrower's (or a Subsidiary's) acquisition of such Hotel, (ii) managed pursuant to a Management Agreement and (iii) operated pursuant to and with the benefit of a License. The aggregate value of any Hotels owned or leased by the Borrower (directly or indirectly) which are not managed by a Manager may not exceed 10% of Total Value. (b) The aggregate value of any Hotels owned or leased by the Borrower (directly or indirectly) which are not operated under a nationally recognized brand may not exceed 10% of Total Value. 7.3. Lease Obligations. (a) The Borrower shall not create or suffer to exist, or permit any of its Subsidiaries or Eligible Joint Ventures to create or suffer to exist, any obligations as lessee for the rental or hire of real or personal property of any kind under other leases or agreements to lease entered into otherwise than in the ordinary course of business. 91 100 (b) The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to, become or remain liable as lessee or guarantor or other surety with respect to any lease, whether an operating lease or a Capitalized Lease, of any property (whether real or personal or mixed), whether now owned or hereafter acquired, which (i) the Borrower or any of its Subsidiaries or Eligible Joint Ventures has sold or transferred or is to sell or transfer to any other Person, or (ii) the Borrower or any of its Subsidiaries or Eligible Joint Ventures intends to use for substantially the same purposes as any other property which has been or is to be sold or transferred by that entity to any other Person in connection with such lease. 7.4. Restricted Payments. The Borrower, unless otherwise required in order to maintain FelCor's status as a real estate investment trust in accordance with the written advice of independent counsel to the Borrower, shall not declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities (other than the Bristol Distribution) on account or in respect of any of its Stock or Stock Equivalents (collectively, "Restricted Payments"); provided, that, notwithstanding the foregoing, during any period of four consecutive Fiscal Quarters, (i) the Borrower may make Restricted Payments in an aggregate amount not to exceed 85% of the consolidated Adjusted Funds From Operations of the Borrower for such period and (ii) the aggregate amount of Restricted Payments made shall not exceed 100% of Free Cash Flow of the Borrower for such period. 7.5. Mergers, Stock Issuances, Asset Sales, Etc. (a) The Borrower shall not sell, convey, transfer, lease or otherwise dispose of all or substantially all of its assets or properties, and shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to, (i) merge with any Person, or (ii) consolidate with any Person, unless the Borrower or its Subsidiary or Eligible Joint Venture is the surviving or resulting entity and, following such merger or consolidation, no Default or Event of Default shall have occurred. (b) The Borrower shall not and shall not permit any of its Subsidiaries or Eligible Joint Ventures to effect, enter into, consummate or suffer to exist any Asset Sale(s) of any Hotel(s) generating proceeds aggregating more than 25% of the greater of the value of the Hotels owned by the Borrower, its Subsidiaries and Eligible Joint Ventures (x) as at the Closing Date or (y) if the Bristol Merger occurs, as at the Bristol Merger Date. (c) The Borrower shall not sell or otherwise dispose of, or factor at maturity or collection, or permit any of its Subsidiaries or Eligible Joint Ventures to 92 101 sell or otherwise dispose of, or factor at maturity or collection, any accounts receivables. 7.6. Restrictions on Construction/Budget Hotels. (a) The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to (i) engage in the construction of new hotels (provided that nothing herein shall prohibit expansions to existing Hotels) or (ii) enter into any commitments or agreements to purchase any Hotels under, or to be under, original construction (provided that nothing herein shall limit commitments or agreements for expansions to existing Hotels), pursuant to which (A) such Persons' obligations, in the aggregate, exceed the lesser of (x) 15% of the Total Value of the Borrower as of the end of the Fiscal Quarter immediately preceding the date of any such commitment or agreement and (y) $300,000,000, or (B) any such Person is or may be liable for, or otherwise assumes, any risks relating to the development or construction (but not operation) of such Hotel, whether by way of providing any guaranties of completion, payment of any construction loans, payment of construction cost overruns, or otherwise. (b) Other than Borrower's (or its Subsidiary's or Unconsolidated Entity's) investments in budget hotels, limited service hotels or extended stay hotels which are in existence as of the Effective Date plus those acquired by Borrower (as a direct result of the Bristol Merger) on the Bristol Merger Date, the Borrower's investments (direct or indirect) in any budget hotels, limited service hotels or extended stay hotels, shall not exceed, in the aggregate, 10% of Total Value. 7.7. Change in Nature of Business or in Capital Structure. (a) The Borrower shall not make, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to make, any material change in the nature or conduct of its business as carried on at the Closing Date except as contemplated by the Bristol Merger on the Bristol Merger Date. (b) The Borrower shall not make, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to make, any change in its capital structure (including, without limitation, in the terms of its outstanding Stock) or amend its declaration of trust, certificate of incorporation or by-laws or other equivalent documents other than for changes or amendments which in the aggregate have no Material Adverse Effect. 7.8. Modification of Material Agreements. The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to, alter, amend, modify, rescind, terminate, supplement or waive any of their respective rights 93 102 under, or fail to comply in all material respects with, any of its material Contractual Obligations unless approved by the Administrative Agent, which approval shall not be unreasonably withheld, conditioned or delayed; provided, however, that, with respect to any such failure to comply with any Contractual Obligation, the Borrower shall not be deemed in default of this Section 7.8 if all such failures in the aggregate would have no Material Adverse Effect; and provided, further, that in the event of any breach or event of default by a Person other than the Borrower or any of its Subsidiaries or Eligible Joint Ventures, the Borrower shall promptly notify the Administrative Agent of any such breach or event of default and take all such action as may be reasonably necessary in order to endeavor to avoid having such breach or event of default have a Material Adverse Effect. 7.9. Accounting Changes. The Borrower shall not make, nor permit any of its Subsidiaries to make, any change in accounting treatment and reporting practices or tax reporting treatment, except as required by GAAP or law and disclosed to the Lenders and the Administrative Agent. 7.10. Transactions with Affiliates. The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures, to enter into any transaction or series of related transactions, including, without limitation, any Asset Sale or the rendering of any service, with any Affiliate (other than among the Borrower and its wholly owned Subsidiaries) unless (a) no Default or Event of Default would occur as a result thereof, and (b) such transaction is (i) in the ordinary course of the Borrower's or such Subsidiary's or Eligible Joint Venture's business, and (ii) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary or Eligible Joint Venture, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. 7.11. Adverse or Speculative Transactions. The Borrower shall not and shall not permit any of its Subsidiaries or Eligible Joint Ventures to engage in any transaction involving contracts for commodity options or futures contracts other than Interest Rate Contracts and Alternative Currency Contracts. 7.12. Environmental Matters. (a) The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures or any Operating Lessee, or, to the extent reasonably practicable, any other Person to dispose of any Hazardous Material by placing it in or on the ground or waters of any property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures. 94 103 (b) The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures, or, to the extent practicable, authorize any other Person to, dispose or to arrange for the disposal of any Hazardous Material on behalf of the Borrower or any of its Subsidiaries or Eligible Joint Ventures except in material compliance with all applicable Environmental Laws currently and hereinafter in effect. 7.13. Joint Enterprises. Other than investments in (x) Joint Enterprises in existence as of the Effective Date plus those investments in Joint Enterprises acquired by Borrower on the Bristol Merger Date and as a direct result of the Bristol Merger and (y) Eligible Entities, the Borrower's investments (direct or indirect) in Joint Enterprises shall not exceed, in the aggregate, 15% of Total Value. 7.14. Intentionally Omitted. 7.15. ERISA Plan Assets. The Borrower shall not and shall not permit any of its Subsidiaries to have any of their assets become subject to Title I of ERISA because they constitute "plan assets" within the meaning of the DOL Regulation Section 2510.3-101 and by reason of an investment in the Borrower or any Subsidiary. ARTICLE VIII EVENTS OF DEFAULT 8.1. Events of Default. Each of the following events shall be an Event of Default: (a) The Borrower shall fail to pay any principal (including, without limitation, mandatory prepayments of principal) of, or interest on, any Loan, any Unpaid Drawing, any fee, any other amount due hereunder or under the other Loan Documents or other of the Obligations when the same becomes due and payable; or (b) Any representation or warranty made or deemed made by any Loan Party in any Loan Document or by any Loan Party (or any of its officers) in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or 95 104 (c) Any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in this Agreement or in any other Loan Document if such failure shall remain unremedied for thirty days after the earlier of the date on which (A) a Responsible Officer of the Borrower becomes aware of such failure or (B) written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or (d) Any Loan Party or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any Recourse Indebtedness of such Loan Party or Subsidiary having a principal amount of $10,000,000 or more (excluding Indebtedness evidenced by the Notes and any Non-Recourse Indebtedness), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall become or be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), or any Loan Party or any of its Subsidiaries shall be required to repurchase or offer to repurchase such Indebtedness, prior to the stated maturity thereof; or (e) The Borrower or any of its Significant Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors, or any proceeding shall be instituted by or against the Borrower or any of its Significant Subsidiaries seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a custodian, receiver, trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceedings instituted against the Borrower or any of its Significant Subsidiaries (but not instituted by it), either such proceedings shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceedings shall occur; or the Borrower or any of its Significant Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or 96 105 (f) Any judgment or order for the payment of money in excess of $10,000,000 to the extent not fully covered by insurance shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order, or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) An ERISA Event shall occur which, in the reasonable determination of the Majority Lenders, has a reasonable possibility of a liability, deficiency or waiver request of the Borrower or any ERISA Affiliate, whether or not assessed, exceeding $5,000,000; or (h) The Borrower or any of its Subsidiaries shall have entered into any consent or settlement decree or agreement or similar arrangement with an Governmental Authority or any judgment, order, decree or similar action shall have been entered against the Borrower or any of its Subsidiaries, in each case based on or arising from the violation of or pursuant to any Environmental Law, or the generation, storage, transportation, treatment, disposal or Release of any Hazardous Material and, in connection with all the foregoing, the Borrower and its Subsidiaries are likely to incur Environmental Liabilities and Costs in excess of $5,000,000; or (i) There shall occur a Material Adverse Change or an event which is reasonably likely to have a Material Adverse Effect; or (j) FelCor shall cease, for any reason, to maintain its status as an equity-oriented real estate investment trust under Sections 856 through 860 of the Code; or (k) FelCor shall cease at any time to be the sole general partner of FelCor LP; or (l) INTENTIONALLY DELETED (m) Hervey A. Feldman or Thomas J. Corcoran, Jr. shall sell, transfer or encumber (otherwise than to (i) members of their respective families, (ii) entities controlled by them, (iii) trusts for the benefit of any of the foregoing or (iv) a Permitted Transferee) their voting Class A membership interest in DJONT; or 97 106 (n) INTENTIONALLY DELETED (o) Any provision of any Subsidiary Guaranty after delivery thereof under Section 3.1 shall for any reason cease to be valid and binding on any Significant Subsidiary party thereto, or any Significant Subsidiary Party shall so state in writing. 8.2. Remedies. (a) If there shall occur and be continuing any Event of Default, the Administrative Agent (i) shall at the request, or may with the consent, of the Majority Lenders by notice to the Borrower, declare the obligation of each Lender to make Loans and the Issuing Lender to issue a Letter of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Majority Lenders by notice to the Borrower, declare the Loans, all interest thereon and all other amounts and Obligations payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts and Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that upon the occurrence of the Event of Default specified in subparagraph 8.1(e) above, (A) the obligation of each Lender to make Loans and of the Issuing Lender to issue Letters of Credit shall automatically be terminated and (B) the Loans, all such interest and all such amounts and Obligations shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. In addition to the remedies set forth above, the Administrative Agent may exercise any remedies provided by applicable law. (b) If the Administrative Agent exercises any rights or remedies pursuant to subparagraph 8.2(a), the Administrative Agent shall not, without the consent of the Majority Lenders, rescind the exercise of said rights or remedies. 8.3 Actions in Respect of Letters of Credit. (a) Upon the Termination Date, the Borrower shall pay to the Administrative Agent in immediately available funds at the Administrative Agent's office, for deposit in a special non-interest-bearing cash collateral account (the "L/C Cash Collateral Account") to be maintained with and in the name of the Administrative Agent on behalf of the Lenders at such place as shall be designated by the Administrative Agent, an amount equal to all outstanding Letter of Credit Outstandings. 98 107 (b) The Borrower hereby pledges, and grants to the Administrative Agent a Lien on all of its right, title and interest in and to all funds held in the L/C Cash Collateral Account from time to time, and all proceeds thereof, as security for the payment of all amounts due and to become due from the Borrower to the Lenders and the Issuing Lender. (c) The Administrative Agent may, from time to time after funds are deposited in the L/C Cash Collateral Account, apply funds then held in the L/C Cash Collateral Account to the payment of any amounts, in such order as the Administrative Agent may elect, as shall have become or shall become due and payable by the Borrower to the Issuing Lender or Lenders in respect of the Letter of Credit Outstandings. (d) Neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the L/C Cash Collateral Account. The Borrower agrees that it will not (i) sell or otherwise dispose of any interest in the L/C Cash Collateral Account or any funds held therein or (ii) create or permit to exist any Lien upon or with respect to the L/C Cash Collateral Account or any funds held therein, except as provided in or contemplated by this Agreement. (f) The Administrative Agent may also exercise, in its sole discretion, in respect of the L/C Cash Collateral Account, in addition to the other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of New York at that time, and the Administrative Agent may, without notice except as specified below, sell the L/C Cash Collateral Account or any part thereof in one or more sales, at public or private sale, at any of the Administrative Agent's offices or elsewhere, for cash, or credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable. The Borrower agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of the L/C Cash Collateral Account, regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. 99 108 (g) Any cash held in the L/C Cash Collateral Account, and all cash proceeds received by the Administrative Agent in respect of any sale of, collection from or other realization upon all or any part of the L/C Cash Collateral Account, may, in the discretion of the Administrative Agent, then or at any time thereafter be applied (after all payments provided for in Section 8.3(c), the expiration of all outstanding Letters of Credit and the payment of any amounts payable pursuant to Section 10.4) in whole or in part by the Administrative Agent against all or any part of the other Obligations in such order as the Administrative Agent shall elect. Any surplus of such cash or cash proceeds held by the Administrative Agent and remaining after the indefeasible cash payment in full of all of the Obligations shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive such surplus. ARTICLE IX THE ADMINISTRATIVE AGENT 9.1. Authorization and Action. (a) Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Without limitation of the foregoing, each Lender hereby authorizes the Administrative Agent to execute and deliver, and to perform its obligations under, each of the Loan Documents to which the Administrative Agent is a party, and to exercise all rights, powers and remedies that the Administrative Agent may have under such Loan Documents. (b) As to any matters not expressly provided for by this Agreement and the other Loan Documents (including, without limitation, enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action which the Administrative Agent in good faith believes exposes it to personal liability or is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of (a) each notice and, (b) to the extent the Administrative Agent grants any consents, approvals, disapprovals or waivers to the Borrower pursuant to the directions of the Majority Lenders or all of the Lenders as required hereunder, notice of such consent, 100 109 approval, disapproval or waiver, given to it by, or by it to, any Loan Party pursuant to the terms of this Agreement or the other Loan Documents. 9.2. Administrative Agent's Reliance, Etc. Neither the Administrative Agent, nor any of its Affiliates or any of the respective directors, officers, agents or employees of the Administrative Agent or any such Affiliate shall be liable for any action taken or omitted to be taken by it, him, her or them under or in connection with this Agreement or the other Loan Documents, except for its, his, her or their own gross negligence or wilful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent (i) may treat the payee of any Note as the holder thereof until such note has been assigned in accordance with Section 10.7; (ii) may rely on the Register to the extent set forth in Section 10.7(c); (iii) may consult with legal counsel (including, without limitation, counsel to the Borrower or any other Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iv) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents; (v) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any of the other Loan Documents on the part of the Borrower or any other Loan Party or to inspect the property (including, without limitation, the books and records) of the Borrower or any other Loan Party; (vi) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (vii) shall incur no liability under or in respect of this Agreement or any of the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, cable, telex or facsimile transmission) believed by it to be genuine and signed or sent by the proper party or parties. 9.3. Chase and Affiliates. With respect to its Commitments, the Loans made by it and each Note issued to it, and Letters of Credit issued by it, Chase shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Chase in its individual capacity. Chase and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower or any other Loan Party or any of their respective Subsidiaries 101 110 and any Person who may do business with or own securities of the Borrower or any other Loan Party or any of their respective Subsidiaries, all as if Chase were not the Administrative Agent and without any duty to account therefor to the Lenders. 9.4. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Article IV and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and other Loan Documents. 9.5. Indemnification. The Lenders agree to indemnify the Issuing Lender, the Administrative Agent and their Affiliates, and their respective directors, officers, employees, agents and advisors (to the extent not reimbursed by the Borrower or other Loan Parties), ratably according to the respective principal amounts of the Notes then held by each of them (or if no Notes are at the time outstanding, ratably according to the respective amounts of the aggregate of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements (including, without limitation, fees and disbursements of legal counsel) of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against, the Administrative Agent in any way relating to or arising out of this Agreement or the other Loan Documents or any action taken or omitted by the Administrative Agent under this Agreement or the other Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's or such Affiliate's gross negligence or wilful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including, without limitation, fees and disbursements of legal counsel) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of its rights or responsibilities under, this Agreement or the other Loan Documents, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower or another Loan Party. 102 111 9.6. Successor Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed by the Super Majority Lenders in the event that the Administrative Agent commits a willful breach of, or is grossly negligent in the performance of, its material obligations hereunder. Furthermore, in the event that at any time the Administrative Agent assigns its entire interest as a Lender hereunder to an Eligible Assignee as permitted by Section 10.7 hereof, which Eligible Assignee is not an Affiliate of the Administrative Agent, then the Administrative Agent shall resign as Administrative Agent. Upon any such resignation or removal (which shall be effective upon such date as a successor Agent accepts its appointment), the Majority Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Super Majority Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof, having a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. ARTICLE X MISCELLANEOUS 10.1. Amendments, Etc. (a) No amendment or waiver of any provision of this Agreement nor consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, (x) the Administrative Agent shall have the right to waive or depart from any of the requirements or criteria contained in the definition of Qualified Lease and (y) subject to Sections 10.1(b) and (c) below, the Administrative Agent shall have the right to 103 112 make non-material waivers of non-economic provisions of this Agreement or consent to non-material departures therefrom. The parties hereto agree that any non-material waiver of any provision of this Agreement or any other Loan Document shall be effective upon the execution by the party so charged of a written agreement to such effect. (b) Notwithstanding anything set forth in subparagraph (a) above, no amendment, waiver or consent shall, unless in writing and signed by all the Lenders do any of the following: (i) waive any of the conditions specified in Article III except as otherwise provided therein; (ii) increase the Commitments of the Lenders or subject the Lenders to any additional obligations; (iii) reduce the principal of, or interest on, the Loans or any fees or other amounts payable hereunder; (iv) waive or postpone any date fixed for any payment of principal of, or interest on, the Loans or any fees or other amounts payable hereunder; (v) change the percentage of the Commitments, the aggregate unpaid principal amount of the Loans, or the number of Lenders which shall be required for the Lenders or any of them to take any action hereunder; (vi) waive any of the financial covenants specified in Sections 5.1, 5.2 or 5.4; (vii) change the definitions of Available Credit, Majority Lenders or Super Majority Lenders (provided that the foregoing shall not include changes in any defined terms used in such definitions), (viii) release any Loan Party from its obligations under any Note or any Subsidiary Guaranty, or (ix) amend this Section 10.1; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or the other Loan Documents. (c) Notwithstanding anything set forth in subparagraph (a) above, no amendment, waiver or consent shall, (x) unless in writing and signed by the Super Majority Lenders do any of the following: (i) waive any of the covenants specified in Sections 5.3 or 5.5, (ii) change the definitions of Unencumbered Hotel Property or Eligible Joint Venture (provided that the foregoing shall not include changes in any defined terms used in such definitions), (iii) waive payment of any default rate interest pursuant to Section 2.9(b), or (iv) remove the Administrative Agent for a willful breach of, or gross negligence in the performance of, its material obligations hereunder pursuant to Section 9.6 or (y) unless in writing and signed by the Majority Lenders change the definitions of Adjusted NOI or Unencumbered NOI (provided that the foregoing shall not include changes in any defined terms used in such definitions). (d) Each Lender shall reply promptly, but in any event within ten (10) Business Days of receipt by such Lender of a request for consent, approval, 104 113 disapproval or waiver, from the Administrative Agent (the "Lender Reply Period"). Unless a Lender shall give written notice to the Administrative Agent that it objects to consenting, approving, disapproving or waiving any matter as requested by the Administrative Agent (together with a written explanation of the reasons behind such objection) within the Lender Reply Period, such Lender shall be deemed to have consented, approved, disapproved or waived such matters as specified in the Administrative Agent's request. 10.2. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including, without limitation, telegraphic, telex, telecopy or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered by hand, if to the Borrower, at its address at 545 East John Carpenter Freeway, Suite 1300, Irving, Texas 75062 (telecopy number: 972-444-4949) (telephone number: 972-444-4900), Attention: Chief Financial Officer, with a copy to Attention: General Counsel; if to any Lender, at its Domestic Lending Office specified opposite its name on Schedule II; and if to the Administrative Agent, at its address at 380 Madison Avenue, 10th Floor, New York, New York 10017 (telecopy number: 212-622-3395) (telephone number: 212-622-3369), Attention Charles Hoagland with a copy to One Chase Manhattan Plaza, 8th Floor, New York, New York 10081 (telecopy number: 212-552-5701) (telephone number: 212-552-7469), Attention Linda Rodriguez; or, as to the Borrower or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied, cabled or delivered, be effective when deposited in the mails, delivered to the telegraph company, confirmed by telex answerback, telecopied with confirmation of receipt, delivered to the cable company or delivered by hand to the addressee or its agent, respectively, except that notices and communications to the Administrative Agent pursuant to Article II or IX shall not be effective until received by the Administrative Agent. 10.3. No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 105 114 10.4. Costs; Expenses; Indemnities. (a) The Borrower agrees to pay on demand (i) all costs and expenses of the Administrative Agent and its respective Affiliates in connection with the preparation, execution, delivery, administration, syndication, modification and amendment of this Agreement, each of the other Loan Documents and each of the other documents to be delivered hereunder and thereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel, accountants, appraisers, consultants or industry experts retained by the Administrative Agent with respect thereto and, as to the Administrative Agent, with respect to advising it as to its rights and responsibilities under this Agreement and the other Loan Documents, and (ii) all costs and expenses of the Administrative Agent or any of the Lenders (including, without limitation, the fees and out-of-pocket expenses of counsel, accountants, appraisers, consultants or industry experts retained by the Administrative Agent or any Lender) in connection with the restructuring or enforcement (whether through negotiation, legal proceedings or otherwise) of this Agreement and the other Loan Documents. (b) The Borrower agrees to indemnify and hold harmless the Administrative Agent, each Lender and the Issuing Lender and their respective Affiliates, and the directors, officers, employees, agents, attorneys, consultants and advisors of or to any of the foregoing (including, without limitation, those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Article III) (each of the foregoing being an "Indemnitee") from and against any and all claims, damages, liabilities, obligations, losses, penalties, actions, judgments, suits, costs, disbursements and expenses of any kind or nature (including, without limitation, fees and disbursements of counsel to any such Indemnitee and experts, engineers and consultants and the costs of investigation and feasibility studies) which may be imposed on, incurred by or asserted against any such Indemnitee in connection with or arising out of any investigation, litigation or proceeding, whether or not any such Indemnitee is a party thereto, whether direct, indirect, or consequential and whether based on any federal, state or local law or other statutory regulation, securities or commercial law or regulation, or under common law or in equity, or on contract, tort or otherwise, in any manner relating to or arising out of or based upon or attributable to this Agreement, any other Loan Document, any document delivered hereunder or thereunder, any Obligation, or any act, event or transaction related or attendant to any thereof, including, without limitation, (i) arising from any misrepresentation or breach of warranty under Section 4.18 or any Environmental Claim or any Environmental Lien or any Remedial Action arising out of or based upon anything relating to real property owned or leased by the Borrower or any of its Subsidiaries (collectively, the "Indemnified Matters"); provided, however, that the Borrower shall not have any obligation under this Section 106 115 10.4(b) to an Indemnitee with respect to any Indemnified Matter caused by or resulting from the gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction in a final non-appealable judgment or order. (c) If any Lender receives any payment of principal of, or is subject to a conversion of, any Eurodollar Rate Loan other than on the last day of an Interest Period relating to such Loan, as a result of any payment or conversion made by the Borrower or acceleration of the maturity of the Notes pursuant to Section 8.2 or for any other reason, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), to the extent not previously paid to such Lender pursuant to any other provision hereof, pay to the Administrative Agent for the account of such Lender all amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or conversion, including, without limitation, any loss (including, without limitation, loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain such Loan. (d) The Borrower shall indemnify the Administrative Agent, the Lenders and the Issuing Lender for, and hold the Administrative Agent, the Lenders and the Issuing Lender harmless from and against, any and all claims for brokerage commissions, fees and other compensation made against the Administrative Agent and the Lenders for any broker, finder or consultant with respect to any agreement, arrangement or understanding made by or on behalf of any Loan Party or any of its Subsidiaries in connection with the transactions contemplated by this Agreement. (e) The Borrower agrees that any indemnification or other protection provided to any Indemnitee pursuant to this Agreement (including, without limitation, pursuant to this Section 10.4) or any other Loan Document shall (i) survive payment of the Obligations and (ii) inure to the benefit of any Person who was at any time an Indemnitee under this Agreement or any other Loan Document. 10.5. Right of Set-off. Upon the occurrence and during the continuance of any Event of Default each Lender and the Issuing Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the Obligations now or hereafter existing whether or not such Lender shall have made 107 116 any demand under this Agreement or any Note or any other Loan Document and although such Obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section are in addition to the other rights and remedies (including, without limitation, other rights of set-off) which such Lender may have. 10.6. Binding Effect. This Agreement shall become effective as of the Effective Date and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, each Lender and the Issuing Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. 10.7. Assignments and Participations. (a) Each Lender and the Issuing Lender may sell, transfer, negotiate or assign to one or more other Lenders or Eligible Assignees all or a portion of its Commitments, commitment to issue Letters of Credit, the Loans and Letter of Credit Outstandings owing to it and the Notes held by it and a commensurate portion of its rights and obligations hereunder and under the other Loan Documents; provided, however, that (i) the aggregate amount of the Commitments, Loans and Letter of Credit Outstandings being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than the assignor's entire interest, except (x) with the consent of the Borrower and the Administrative Agent, or (y) during the continuance of an Event of Default, or (z) a Lender may assign a portion of its Commitments, Loans and Letter of Credit Outstandings to another existing Lender or Lenders only, provided that the aggregate amount of the Commitments, Loans and Letter of Credit Outstandings retained by the assignor shall in no event be less than $10,000,000, and (ii) each assignee hereunder shall also be an Eligible Assignee. The parties to each assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording, an Assignment and Acceptance, together with the Notes (or an Affidavit of Loss and Indemnity with respect to such Notes satisfactory to the Administrative Agent) subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (A) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to such assignee pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and thereunder, and (B) the assignor thereunder shall, to the extent that rights and 108 117 obligations under this Agreement have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except those which survive the payment in full of the Obligations) and be released from its obligations under the Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any of the statements, warranties or representations made in or in connection with this Agreement or any other Loan Document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under this Agreement or any other Loan Document or of any other instrument or document furnished pursuant hereto or thereto; (iii) such assigning Lender confirms that it has delivered to the assignee and the assignee confirms that it has received a copy of this Agreement and each of the Loan Documents together with a copy of the most recent financial statements delivered by the Borrower to the Lenders pursuant to each of the clauses of Section 6.11 (or if no such statements have been delivered, the financial statements referred to in Section 4.5 of this Agreement) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender and if such assignor was the Issuing Lender, of the Issuing Lender. 109 118 (c) The Administrative Agent shall maintain at its address referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitments of and principal amount of the Loans and Letters of Credit Outstandings owing to each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Loan Parties, the Administrative Agent, the Issuing Lender and the Lenders may treat each Person whose name is recorded in the Register as a Lender for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, the Administrative Agent, the Issuing Lender or any Lender at any reasonable time and from time to time upon reasonable prior notice. The Administrative Agent shall supply to the Borrower promptly after any amendment thereto, a copy of the amended Register. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender or Issuing Lender and an assignee representing that it is an Eligible Assignee, together with the Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent, in exchange for such surrendered Notes, new Notes to the order of such Eligible Assignee in an amount equal to the Commitments assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained Commitments hereunder, new Notes to the order of the assigning Lender in an amount equal to the Commitments retained by it hereunder. Such new Notes shall be dated the same date as the Surrendered Notes and be in substantially the form of Exhibit A hereto. (e) In addition to the other assignment rights provided in this Section 10.7, each Lender may assign, as collateral or otherwise, any of its rights under this Agreement (including, without limitation, rights to payments of principal or interest on the Loans) to any Federal Reserve Bank without notice to or consent of the Borrower or the Administrative Agent; provided, however, that no such assignment shall release the assigning Lender from any of its obligations hereunder. The terms and conditions of any such assignment and the documentation evidencing such assignment shall be in form and substance satisfactory to the assigning Lender and the assignee Federal Reserve Bank. 110 119 (f) Each Lender may sell participations to one or more banks or other Persons in or to all or a portion of its rights and obligations under the Loan Documents (including, without limitation, all or a portion of its Commitments, the Loans and Letters of Credit Outstandings owing to it and the Notes held by it). The terms of such participation shall not, in any event, require the participant's consent to any amendments, waivers or other modifications of any provision of any Loan Documents, the consent to any departure by any Loan Party therefrom, or to the exercising or refraining from exercising any powers or rights which such Lender may have under or in respect of the Loan Documents (including, without limitation, the right to enforce the obligations of the Loan Parties), except if any such amendment, waiver or other modification or consent would reduce the amount, or postpone any date fixed for, any amount (whether of principal, interest or fees) payable to such participant under the Loan Documents, to which such participant would otherwise be entitled under such participation. In the event of the sale of any participation by any Lender, (i) such Lender's obligations under the Loan Documents (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of such Notes and Obligations for all purposes of this Agreement, and; (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. (g) Each participant shall be entitled to the benefits of Sections 2.11, 2.13, 2.15 and 10.4 as if it were a Lender; provided, however, that anything herein to the contrary notwithstanding, the Borrower shall not, at any time, be obligated to pay to any assignee or participant of any interest of any Lender, under Section 2.11, 2.13, 2.15 or 10.4, any sum in excess of the sum which if the Borrower would not at the time of such assignment have been obligated to pay to such assignor Lender any such amount in respect of such interest had such assignment not been effected or had such participation not been sold. (h) Notwithstanding the foregoing provisions of this Section 10.7, the aggregate Commitments and Loans of (i) Chase shall be at least equal to that of any other Lender, (ii) Bankers Trust Company shall be at least equal to that of any other Lender, (iii) NationsBank, N.A. shall be at least equal to that of any other Lender and (iv) Wells Fargo Bank, National Association shall be at least equal to that of any other Lender; provided that, (i) if an Event of Default exists, Chase, Bankers Trust Company, NationsBank, N.A. and/or Wells Fargo Bank, National Association may assign all or any portion of their respective Commitments and Loans and (ii) if 111 120 Chase ceases to be Administrative Agent for any reason, Chase may assign all or any portion of their respective Commitments and Loans. 10.8. Governing Law; Severability. This Agreement and the Notes and the rights and obligations of the parties hereto and thereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 10.9. Submission to Jurisdiction; Service of Process. (a) Any legal action or proceeding with respect to this Agreement or the Notes or any document related thereto may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, the Borrower hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. (b) The Borrower irrevocably consents to the service of process of any of the aforesaid courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Borrower at its address provided herein. (c) Nothing contained in this Section 10.9 shall affect the right of the agent, any Lender or any holder of a Note to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction. 10.10. Section Titles. The Section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 10.11. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, 112 121 each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 10.12. Entire Agreement. This Agreement, together with all of the other Loan Documents and all certificates and documents delivered hereunder or thereunder, and the agreements referred to in Section 2.4(b) embody the entire agreement of the parties and supersedes all prior agreements and understandings relating to the subject matter hereof. 10.13. Confidentiality. Each Lender and the Administrative Agent agree to keep information obtained by it pursuant hereto and the other Loan Documents confidential and agrees that it will only use such information in connection with the transactions contemplated by this Agreement and not disclose any of such information other than (i) to such Lender's or the Administrative Agent's, as the case may be, Affiliates, employees, representatives and agents who are or are expected to be involved in the evaluation of such information in connection with the transactions contemplated by this Agreement and who are advised of the confidential nature of such information, (ii) to the extent such information presently is or hereafter becomes available to such Lender or the Administrative Agent, as the case may be, on a non-confidential basis from a source other than the Borrower, (iii) to the extent disclosure is required by law, regulation or judicial order or requested or required by bank regulators or auditors, or (iv) to assignees or participants or potential assignees or participants who agree to be bound by the provisions of this sentence. 10.14. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY HERETO. 10.15. Joint and Several Obligations. Unless the context clearly indicates otherwise each covenant, agreement, undertaking, condition or other matter stated herein as a covenant, agreement, undertaking or matter involving the Borrower shall be jointly and severally binding upon each of the parties comprising Borrower. 113 122 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. FELCOR SUITE HOTELS, INC. By:/s/ RANDALL L. CHURCHEY ----------------------------------------- Name: Randall L. Churchey Title: Senior Vice President & Chief Financial Officer FELCOR SUITES LIMITED PARTNERSHIP By: FelCor Suite Hotels, Inc. its general partner By:/s/ RANDALL L. CHURCHEY ----------------------------------------- Name: Randall L. Churchey Title: Senior Vice President & Chief Financial Officer THE CHASE MANHATTAN BANK, as Administrative Agent By:/s/ THOMAS H. KOZIARK ----------------------------------------- Name: Thomas H. Koziark Title: Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 123 BANKERS TRUST COMPANY, as Documentation Agent By: /s/ GARRETT W. THELANDER ----------------------------------------- Name: Garrett W. Thelander Title: Vice President NATIONSBANK, N.A., as Documentation Agent By:/s/ M. DAVID HOWARD ----------------------------------------- Name: M. David Howard Title: Vice President WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent By:/s/ KENT HOWARD ----------------------------------------- Name: Kent Howard Title: Vice President 124 Lenders THE CHASE MANHATTAN BANK By:/s/ THOMAS H. KOZIARK ----------------------------------------- Name: Thomas H. Koziark Title: Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 125 WELLS FARGO BANK, NATIONAL ASSOCIATION By:/s/ KENT HOWARD ----------------------------------------- Name: Kent Howard Title: Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 126 BANK ONE, TEXAS, N.A. By:/s/ EDDIE HODGES ----------------------------------------- Name: Eddie Hodges Title: Assistant Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 127 BANKBOSTON, N.A. By: /s/ JEFFREY L. WARWICK ----------------------------------------- Name: Jeffrey L. Warwick Title: Director [SIGNATURES CONTINUE ON FOLLOWING PAGE] 128 PNC BANK, NATIONAL ASSOCIATION By:/s/ TERRI L. ROBISON ----------------------------------------- Name: Terri L. Robison Title: Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 129 NATIONSBANK, N.A. By:/s/ M. DAVID HOWARD ----------------------------------------- Name: M. David Howard Title: Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 130 THE FIRST NATIONAL BANK OF CHICAGO By:/s/ MICHAEL A. PARISI ----------------------------------------- Name: Michael A. Parisi Title: Corporate Banking Officer [SIGNATURES CONTINUE ON FOLLOWING PAGE] 131 AMSOUTH BANK OF ALABAMA By:/s/ [ILLEGIBLE] ----------------------------------------- Name: [ILLEGIBLE} Title: Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 132 SOCIETE GENERALE, SOUTHWEST AGENCY By:/s/ THOMAS K. DAY ----------------------------------------- Name: Thomas K. Day Title: Director [SIGNATURES CONTINUE ON FOLLOWING PAGE] 133 CREDIT LYONNAIS NEW YORK BRANCH By:/s/ JOSEPH A. ASCIOLLA ----------------------------------------- Name: Joseph A. Asciolla Title: Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 134 BANK OF MONTREAL(CHICAGO BRANCH) By:/s/ CATHERINE SAHAGIAN MOUSSEAU ----------------------------------------- Name: Catherine Sahagian Mousseau Title: Director [SIGNATURES CONTINUE ON FOLLOWING PAGE] 135 CIBC INC. By: CIBC OPPENHEIMER CORP. By:/s/ DEAN J. DECKER ----------------------------------------- Name: Dean J. Decker Title: Executive Director CIBC Oppenheimer Corp., AS AGENT [SIGNATURES CONTINUE ON FOLLOWING PAGE] 136 THE SUMITOMO BANK, LIMITED By:/s/ YASUO MIYAZAWA ----------------------------------------- Name: Yasuo Miyazawa Title: Joint General Manager [SIGNATURES CONTINUE ON FOLLOWING PAGE] 137 THE BANK OF NOVA SCOTIA By:/s/ BRUCE G. FERGUSON ----------------------------------------- Name: Bruce G. Ferguson Title: Senior Relationship Manager [SIGNATURES CONTINUE ON FOLLOWING PAGE] 138 BANKERS TRUST COMPANY By:/s/ GARRETT W. THELANDER ----------------------------------------- Name: Garrett W. Thelander Title: Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 139 CHANG HWA COMMERCIAL BANK, LTD., a New York Branch By:/s/ WAN-TU YEH ----------------------------------------- Name: Wan-Tu Yeh Title: Vice President & General Manager [SIGNATURES CONTINUE ON FOLLOWING PAGE] 140 CREDITANSTALT CORPORATE FINANCE, INC. By:/s/ WILLIAM E. MCCOLLUM, JR. By:/s/ SCOTT KRAY ------------------------------ ------------------------------ Name: William E. McCollum, Jr. Name: Scott Kray title: Senior Associate Title: Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 141 DEUTSCHE BANK AG New York Branch and/or Cayman Islands Branch By:/s/ HANS-JOSEF THIELE ----------------------------------------- Name: Hans-Josef Thiele Title: Director By:/s/ JOEL MAKOWSKY ----------------------------------------- Name: Joel Makowsky Title: Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 142 ERSTE BANK By:/s/ JOHN S. RUNNION ----------------------------------------- Name: John S. Runnion Title: First Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 143 METROPOLITAN LIFE INSURANCE COMPANY By:/s/ ROBERT N. JENKINS ----------------------------------------- Name: Robert N. Jenkins Title: Vice-President [SIGNATURES CONTINUE ON FOLLOWING PAGE] 144 OCTAGON LOAN TRUST By: Octagon Credit Investors By:/s/ JAMES P. FERGUSON ----------------------------------------- Name: James P. Ferguson Title: Managing Director [SIGNATURES CONTINUE ON FOLLOWING PAGE] 145 SCHEDULE I COMMITMENTS
REVOLVING CREDIT TERM LOAN LENDER COMMITMENT COMMITMENT - ---------------------------------- ---------------- ------------ The Chase Manhattan Bank, $75,000,000 $109,000,000 Administrative Agent and Arranger Bankers Trust Company, $75,000,000 $25,000,000 Co-Arranger NationsBank, N.A., $75,000,000 $25,000,000 Co-Arranger Wells Fargo Bank, Co-Arranger $75,000,000 $25,000,000 AmSouth Bank of Alabama $35,000,000 $5,000,000 Bank of Montreal (Chicago Branch) $40,000,000 $-0- The Bank of Nova Scotia $60,000,000 $-0- Bank One, Texas N.A. $30,000,000 $-0- Chang Hwa Commercial Bank $12,000,000 $8,000,000 CIBC Inc. $60,000,000 $-0- Credit Lyonnais New York Branch $60,000,000 $-0- Creditanstalt $35,000,000 $-0- Deutsche Bank AG $20,000,000 $-0- Erste Bank $15,000,000 $-0- The First National Bank of Boston $30,000,000 $-0-
I 146
REVOLVING CREDIT TERM LOAN LENDER COMMITMENT COMMITMENT - ---------------------------------- ---------------- ------------ The First National Bank of Chicago $40,000,000 $-0- Metlife $-0- $25,000,000 PNC Bank, National Association $33,000,000 $-0- Societe Generale, Southwest $60,000,000 $10,000,000 Agency The Sumitomo Bank, Limited $20,000,000 $-0- Octagon Loan Trust $-0- $18,000,000 TOTALS $850,000,000 $250,000,000
II 147 SCHEDULE II APPLICABLE LENDING OFFICES AND ADDRESSES FOR NOTICES
LENDER DOMESTIC LENDING OFFICE AND ADDRESS EURODOLLAR LENDING OFFICE FOR NOTICES - ----------- ----------------------------------- -------------------------------- Chase 1 Chase Manhattan Plaza 1 Chase Manhattan Plaza 8th Floor 8th Floor New York, NY 10081 New York, NY 10081 Attention: Linda Rodriguez Attention: Linda Rodriguez Telecopy: (212) 552-5701 Telecopy: (212) 552-5701 Bankers 130 Liberty Street 130 Liberty Street Trust 25th Floor New York, NY 10006 Company New York, New York 10006 Attn: Wendy Williams Attn: Caryl Mooney Telecopy: (212) 250-7351 Telecopy: (212) 669-0732 Nations 901 Main, 51st Floor 901 Main, 51st Floor Bank Dallas, TX 75202 Dallas, TX 75224 Attn: David Howard Attn: Mary Burnette Telecopy: (214) 508-0085 Telecopy: (2140 508-1571 Wells Fargo 12377 Merit Drive, Suite 300 2120 East Park Place, Suite 100 Dallas, TX 75251 El Segundo, CA 90245 Attention: Kent Howard Attention: Match Fundings Telecopy:(972) 386-4723 Administrator Telecopy:(310) 335-1014 AmSouth P.O. Box 11007 P.O. Box 11007 Bank of Brimingham, AL 35288 Brimingham, AL 35288 Alabama Attn: Buddy Sharbel Attn: Buddy Sharbel Telecopy: (205) 326-4075 Telecopy: (205) 326-4075 Bank of 115 South LaSalle Street 115 South LaSalle Street Montreal Chicago, IL 60603 Chicago, IL 60603 (Chicago Attn: David Mazujian Attn: Debra Sandt Branch) Telecopy: (312) 750-4352 Telecopy: (312) 750-4345
III 148
LENDER DOMESTIC LENDING OFFICE AND ADDRESS EURODOLLAR LENDING OFFICE FOR NOTICES - ----------- ----------------------------------- -------------------------------- The Bank Real Estate Banking 600 Peachtree St., N.E. of Nova One Liberty Plaza Suite 2700 Scotia New York, NY 10006 Atlanta, GA 30308 Attn: Bruce Ferguson Attn: Craig Subryan Telecopy: (212) 225-5166 Telecopy: (404) 888-8998 Bank One Bank One, Texas Bank One, Texas Texas 1717 Main Street, 4th Floor 1717 Main Street, 4th Floor Dallas, TX 75201 Dallas, TX 75201 Attention: Eddie Hodges Attention: Eddie Hodges Telecopy: (214) 290-2275 Telecopy: (214) 290-2275 Chang Hwa One World Trade Center One World Trade Center Commercial 32nd Floor Suite 3211 32nd Floor Suite 3211 Bank New York, NY 10048 New York, NY 10048 Attn: Teddy Mou Attn: Teddy Mou Telecopy: 212-390-0120 Telecopy: 212-390-0120 CIBC Inc. 2727 Paces Road, Suite 1200 2727 Paces Road, Suite 1200 Atlanta, GA 30339 Atlanta, GA 30339 Attn: Kim Perrone Attn: Kim Perrone Telecopy: (770) 319-4950 Telecopy: (770) 319-4950 Creditanstalt 2 Ravinia Drive 2 Ravinia Drive Suite 1680 Suite 1680 Atlanta, GA 30346 Atlanta, GA 30346 Attn: Scott Kray Attn: Scott Kray Telecopy: (770) 390-1851 Telecopy: (770) 390-1851 Credit 1301 Avenue of the Americas 1301 Avenue of the Americas Lyonnais New York, NY 10019 New York, NY 10019 Attn: Jan Hazelton Attn: Hotel Finance/18th Telecopy: (212) 261-7540 Floor Telecopy: (212) 261-7890 Deutsche 31 West 52nd Street 31 West 52nd Street Bank AG New York, NY 10019 New York, NY 10019 Attn: Stephan Wiedemann Attn: Stephan Wiedemann Telecopy: (212) 469-8212 Telecopy: (212) 469-8212
IV 149
LENDER DOMESTIC LENDING OFFICE AND ADDRESS EURODOLLAR LENDING OFFICE FOR NOTICES - ----------- ----------------------------------- -------------------------------- Erste Bank 280 Park Avenue 280 Park Avenue West Building West Building New York, NY 10017 New York, NY 10017 Attn: Paul Judicke Attn: Paul Judicke Telecopy: (212) 984-5627 Telecopy: (212) 984-5627 First 115 Perimeter Ctr Place, Suite 500 115 Perimeter Ctr Place, Suite 500 National Atlanta, GA 30346 Atlanta, GA 30346 Bank of Att: Steven P. Selbo Attn: Jeanette Streander Boston Telecopy:(770) 390-8434 Telecopy:(770) 390-8434 The First One First National Plaza One First National Plaza National Suite 1051 Suite 1051 Bank of Chicago, IL 60607 Chicago, IL 60607 Chicago Attn: Rebecca McCloskey Attn: Ernest M. Misioria Telecopy: (312) 732-1117 Telecopy: (312) 732-1117 MetLife 200 Park Avenue 200 Park Avenue 10th Floor 10th Floor New York, NY New York, NY Attn: Tara Innes Attn: Tara Innes Telecopy: (212) 578-2927 Telecopy: (212) 578-2927 PNC Bank, One PNC Plaza, P1-POPP-19-2 One PNC Plaza, P1-POPP-192 National 249 Fifth Avenue 249 Fifth Avenue Assoc. Pittsburgh, PA 15222-2702 Pittsburgh, PA 15222-2702 Att: Jan Dotchin Att: Jan Dotchin Telecopy: (412) 768-5754 Telecopy: (412) 768-5754 Societe 2001 Ross Avenue 2001 Ross Avenue Generale, Suite 4900 Suite 4900 Southwest Dallas, TX 75201 Dallas, TX 75201 Agency Attn: Carina Huynh Attn: Martha Fleming Telecopy: (214) 979-2727 Telecopy: (214) 979-2727
V 150
LENDER DOMESTIC LENDING OFFICE AND ADDRESS EURODOLLAR LENDING OFFICE FOR NOTICES - ----------- ----------------------------------- -------------------------------- The Sears Tower Sears Tower Sumitomo Suite 4800 Suite 4800 Bank Limited 233 South Wacker Drive 233 South Wacker Drive Chicago, IL 60606 Chicago, IL 60606 Attn: Tom Batterham Attn: Tom Batterham Telecopy: (312) 876-6436 Telecopy: (312) 876-643 Octagon 380 Madison Avenue 380 Madison Avenue Loan Trust New York, NY 10017 New York, NY 10017 Attn: Yalin Karadagon Attn: Yalin Karadagon Telecopy: (212) 622-3797 Telecopy: (212) 622-3797
VI EX-10.17 4 AMENDED & RESTATED MASTER HOTEL AGREEMENT 1 EXHIBIT 10.17 AMENDED AND RESTATED MASTER HOTEL AGREEMENT THIS AMENDED AND RESTATED MASTER HOTEL AGREEMENT ("Agreement") is made as of 3:00 p.m. Central Time on July 27, 1998, among Bristol Hotels & Resorts, Inc., a Delaware corporation that intends to change its name to Bristol Hotels & Resorts ("BHR"), FelCor Suite Hotels, Inc., a Maryland corporation that intends to change its name to FelCor Lodging Trust Incorporated ("FelCor"), FelCor Suites Limited Partnership, a Delaware limited partnership that intends to change its name to FelCor Lodging Limited Partnership ("FSLP"), and each of the affiliates thereof signing below. RECITALS: A. Bristol Hotel Company, a Delaware corporation ("Bristol Hotel Company"), and FelCor have entered into an Agreement and Plan of Merger dated as of March 23, 1998, (the "Merger Agreement") pursuant to which, inter alia, BHR will be spun-off to the shareholders of Bristol Hotel Company, Bristol Hotel Company will merge with and into FelCor (the "Merger") and, as a condition to such Merger, the Lessors (as hereinafter defined) shall have leased the Existing Hotels (as hereinafter defined) to Lessees (as hereinafter defined). B. BHR, FelCor and FSLP are parties to that certain Master Hotel Agreement dated as of May 29, 1998 (the "MHA"), pursuant to which the parties have set forth certain rights and obligations with respect to the Existing Hotels. C. The parties desire to amend and restate the MHA in order to set forth and clarify the terms and conditions on which Lessors will lease the Existing Hotels to Lessees, and to reaffirm certain other agreements as set forth herein. AGREEMENT: NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, and the MHA is hereby amended and restated to read in its entirety, as follows: 1. Certain Definitions. As used in this Agreement, the following terms have the meanings set forth in this Section or in the Section indicated. Unless the context otherwise requires, (a) references to the singular shall include the plural and vice versa, (b) references to gender shall 2 include all genders, (c) references to designated "Sections" or other subdivisions are references to the designated Sections or other subdivisions of this Agreement, (d) all accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with GAAP and, if applicable, the Uniform System (as defined in the Percentage Leases), and (e) the words "herein," "hereof," and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision. CAPITALIZED TERMS USED AND NOT DEFINED HEREIN SHALL HAVE THE RESPECTIVE MEANINGS, IF ANY, SET FORTH IN THE PERCENTAGE LEASES. Affiliate--shall mean, with respect to any Person, any Person that, directly or indirectly, controls or is controlled by or is under common control with such Person, or any other Person that owns, beneficially, directly or indirectly, fifty percent (50%) or more of the outstanding capital stock, shares or equity interests of such Person. For the purposes of this definition, "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any entity shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, through the ownership of voting securities, partnership interests or other equity interests. Affiliated Manager--shall mean an entity that is a manager of one of the Hotels and an Affiliate of BHR or a Lessee. Agreement--shall have the meaning set forth in the Preamble. Closing Date--shall mean the effective date of the Merger. Code--shall mean the Internal Revenue Code of 1986, as amended. Credit Enhancement--shall mean an unconditional letter of credit in form reasonably acceptable to FelCor, provided by Bankers Trust Company or any other financial institution reasonably acceptable to FelCor for the benefit of the applicable Lessor(s) and FelCor, or a guaranty in the form of the Guaranty provided by BHR (or, if permitted by Lessor, other Affiliates of Lessee), or other form of credit enhancement with respect to the Percentage Leases that is reasonably acceptable to the applicable Lessor(s). The form of any Credit Enhancement shall be subject to the reasonable approval of Lessor, and any Credit Enhancement shall be subject to the reasonable approval of FelCor's REIT tax counsel. 2 3 Credit Enhancement Amount--shall mean the aggregate amount that is currently available, (without material restriction) under all forms of Credit Enhancement obtained by a Lessee, to make payments due under the Percentage Leases to which it is a party. Default by Lessee--shall have the meaning set forth in Section 10(a). Existing Hotels--shall mean the Hotels listed on Exhibit A attached hereto, as such Exhibit A is amended or supplemented from time to time by written agreement between FelCor and BHR. GAAP--shall mean, as of any date of determination, accounting principles (a) set forth as generally accepted in then currently effective Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) set forth as generally accepted in then currently effective Statements of the Financial Accounting Standards Board or (c) that are then approved by such other entity as may be approved by a significant segment of the accounting profession in the United States of America. The term "consistently applied," as used in connection therewith, means that the accounting principles applied are consistent in all material respects to those applied at prior dates or for prior periods. Guaranty--shall mean a Guaranty of a Percentage Lease substantially in the form attached hereto as Exhibit C. Hostile Change of Control--shall mean, at the relevant time, (i) any event resulting in any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the 1934 Act), other than United/Harvey Holdings, L.P. or any Affiliate thereof, becoming the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the 1934 Act) directly or indirectly, of more than fifty percent (50%) of the total voting power of all classes of capital stock of BHR or, if applicable, the ultimate parent ("Parent"), at the relevant time, of BHR or a Lessee or an Affiliated Manager then outstanding and entitled to vote generally in elections of directors ("Voting Stock") and such beneficial ownership was acquired within a period of two (2) years following a tender offer by such person (or any of its Affiliates) for shares of Voting Stock of such Parent or a solicitation of proxies with respect to Voting Stock of such Parent by such person, if, in either case, such tender offer or solicitation of proxies was not approved by a majority of the Board of Directors of such Parent in office at the time such tender offer or proxy solicitation was commenced, or (ii) a majority of the Board of Directors of the Parent, at the relevant time, being constituted of individuals who were elected pursuant to a 3 4 solicitation of proxies with respect to Voting Stock of such Parent, if such solicitation of proxies was not approved by a majority of the Board of Directors of such Parent in office at the time such solicitation of proxies was commenced. Hotels--shall mean, with respect to any pertinent date, the Existing Hotels and any New Hotels which are then currently leased by a Lessor to a Lessee and, with respect to any pertinent period, the Existing Hotels and any New Hotels, that are leased by a Lessor to a Lessee at any time during such period. Lessee--shall mean each of the direct or indirect subsidiaries of BHR that is a lessee of a Hotel under a Percentage Lease, including, without limitation, those listed under the heading "Lessee" on the signature pages of this Agreement that have entered into the Percentage Leases effective as of the Closing Date. Lessee Income Before Corporate Overhead--shall mean, for any period, the amount (not less than zero) by which the Gross Revenues of a Hotel for such period exceed the sum of (i) the Gross Operating Expenses for such period for which Lessee is responsible under the Percentage Lease covering such Hotel (other than management fees payable to any Affiliated Manager) and (ii) the Rent payable to Lessor for such period under such Percentage Lease. Lessor--shall mean any one of the owners of the Hotels that is an Affiliate of FelCor from and after the Closing Date and that is a lessor of a Hotel under a Percentage Lease, including, without limitation, those listed under the heading "Lessor" on the signature pages of this Agreement. Liquid Assets Amount--shall mean, for any Person, the sum of (i) the Person's and the proportionate share of its Subsidiaries' Working Capital and (ii) the lesser of the aggregate GAAP book value and the aggregate current fair market value of such Person's assets, and the proportionate share of its Subsidiaries' assets, of the following types: (A) any contracts to lease or manage hotels or other hospitality properties owned by Persons other than Lessor, Lessee and their Affiliates, (B) any hotels, hospitality properties or other marketable real property owned by such Person and its Subsidiaries, and (C) to the extent reasonably acceptable to Lessor, any other income-producing or readily marketable tangible property, equity interests, securities or other investments owned by such Person and its Subsidiaries. In the case of assets described in clause (ii) of the preceding sentence, both the GAAP book value and the current market value of any such assets shall be 4 5 determined net of any indebtedness or liabilities (including such Person's liability under any Guaranty) not expressly or structurally subordinated to the payment of Rent on terms reasonably acceptable to Lessor. Any disputes regarding the fair market value of an asset will be resolved in accordance with the appraisal procedures set forth in Article 33 of the Percentage Leases. Liquid Net Worth--shall mean the lesser of (i) the sum of (A) the Net Worth of a Lessee and (B) the Lessee's Credit Enhancement Amount, and (ii) the sum of (C) the Lessee's Liquid Assets Amount and (D) the Lessee's Credit Enhancement Amount, as reasonably approved by FelCor's REIT tax counsel, which Liquid Net Worth is required to be not less than $30,000,000 as of the Closing Date. Merger--shall have the meaning set forth in the Preamble. Merger Agreement--shall have the meaning set forth in the Preamble. Minimum Liquid Net Worth--shall mean, as of any pertinent date, aggregate Liquid Net Worth for a Lessee (or, where appropriate, all of the Lessees in the aggregate) equal to fifteen percent (15%) of the Rent projected (budgeted) to be paid by such Lessee (or, where appropriate, all Lessees) under approved Revenue Budgets prepared in conformity with the Percentage Leases during the then current calendar year (or as otherwise projected by FelCor and BHR in the case of 1998 and the final year of the Term, including any extension thereof), as adjusted from time to time as set forth below. To the extent that a Lessee leases one or more New Hotels from Lessor, the Minimum Liquid Net Worth requirement for the respective Lessee (for the remainder of the then current calendar year or until another adjustment is required hereunder, whichever first occurs) will be increased as a result of each such New Hotel by an amount equal to fifteen percent (15%) of the Percentage Rent projected to be paid during the first twelve (12) months of the Percentage Lease for such New Hotel. In addition, to the extent that the Percentage Lease for any Hotel is terminated or expires, the Minimum Liquid Net Worth requirement with respect to the respective Lessee will be reduced (for the remainder of the then current calendar year or until another adjustment is required hereunder, whichever first occurs) by the amount of the Minimum Liquid Net Worth requirement attributable to such Hotel. Each Lessee's allocable Minimum Liquid Net Worth shall be determined based on the Rent projected to be paid by such Lessee. 5 6 Net Economic Benefit--shall mean, with respect to a proposed, terminated or replacement Percentage Lease or a replacement management agreement hereunder, the net present value of the Lessee Income Before Corporate Overhead that is projected to be earned by the related Lessee or Affiliate of BHR during the remaining term of such Percentage Lease or management agreement (including, in the case of a proposed, terminated or replacement Percentage Lease, the First Extension, regardless of whether the Lessee has exercised its option with respect to such First Extension, and the Second Extension if, but only if, the Lessee has properly exercised its option with respect to such Second Extension prior to the date on which the Lessor provides notice to the Lessee of an anticipated Percentage Lease termination), calculated using an agreed discount rate based upon a then market discount rate. In addition, the parties shall make any mutually agreeable adjustments to the foregoing calculation that are necessary or appropriate to assure that the calculation properly reflects the economic value of the Percentage Lease or management agreement to the Lessee or Affiliate of BHR. Net Worth--shall mean the excess of total assets over total liabilities, total assets and total liabilities each to be determined in accordance with GAAP, excluding, however, from the determination of total assets: (a) unamortized goodwill, organizational expenses, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, and other similar intangibles; (b) all deferred charges that are required to be capitalized in accordance with GAAP or unamortized debt discounts and expense; (c) treasury stock; (d) securities which are not readily marketable, (e) any write-up in the book value of any asset resulting from a revaluation thereof, other than as recognized pursuant to the terms of this Agreement; (f) the Percentage Leases; and (g) any items (other than assets included in Liquid Assets Amount) that are not included in clauses (a) through (f) above that are treated as intangibles in conformity with GAAP. New Hotels--shall mean the hotels (if any) other than the Existing Hotels that, as of any pertinent date, are then currently leased by a Lessor to a Lessee and have not been excluded from treatment as a New Hotel under this Agreement as provided in Section 4 below. Non-Consent Hotels--shall mean any Hotel as to which: (i) with respect to an Existing Hotel, the Ground Lessor or Mortgagee refuses to give any required consent to the subjecting of such Hotel to a proposed Percentage Lease (or any other 6 7 required consent) in connection with the Merger and neither BHR nor an Affiliate of BHR is retained to manage, or offered the right to manage, the Hotel pursuant to a management agreement providing the hotel manager with substantially the same (or greater) projected Net Economic Benefit as would have a Percentage Lease entered into pursuant to this Agreement; provided, however, that any such Hotel shall not be deemed a Non-Consent Hotel in the event that the Ground Lease or Lessor's interest therein is terminated by the Ground Lessor or Mortgagee as a result of the failure to obtain any such consent to (or in connection with) the Merger or a Percentage Lease of such Hotel; or (ii) With respect to any Hotel, Lessor hereafter defaults under the Mortgage (other than as a result of a default by Lessee under the Percentage Lease) and the Mortgagee, its designee or a purchaser at foreclosure acquires the Hotel (by foreclosure or transfer in lieu of foreclosure) free of the interest of Lessee therein and does not retain BHR or an Affiliate thereof to manage the Hotel. 1933 Act--shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 1934 Act--shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. Percentage Lease--shall mean, with respect to one or more Existing Hotels, a lease entered into between Lessor and Lessee on or about the date hereof with respect to such Hotel substantially in the form executed of even date herewith with respect to the Existing Hotels and, with respect to each New Hotel, any lease as entered into between a Lessor and a Lessee pursuant to Section 4 hereof. Post-Default Operating Expenses--shall mean the Gross Operating Expenses of continuing to operate a Hotel under a Percentage Lease as to which an Event of Default has occurred and is continuing, to the extent incurred prior to the effective date of termination of such Percentage Lease by the Lessor, other than amounts (including management fees) payable to Affiliates of Lessee; provided, however, that Post-Default Operating Expenses may include (i) reasonable out-of-pocket Gross Operating Expenses reimbursable to such Affiliate and (ii) the portion of any monthly management fee due by Lessee to an Affiliated Manager in an amount not in excess of one and one-half percent (1.5%) of the then current monthly amount of Gross Revenues of the Hotel. 7 8 Recognition Agreement--shall mean any agreement entered into between FelCor and/or the Lessors, on the one hand, and any senior lender to BHR and/or the Lessees, on the other hand, providing such senior lender with notice of and an opportunity to cure defaults by Lessee and other commercially reasonable provisions reasonably acceptable to FelCor designed to protect the interests of such senior lender. REIT Restrictions--shall have the meaning set forth in Section 8 below Rent--shall mean the rent payable under each Percentage Lease (including both Base Rent and Percentage Rent). Sale Hotels--Any Existing Hotel heretofore identified by BHR and FelCor as not properly within FelCor's strategic target portfolio and therefore likely to be sold within a reasonable time following the Closing Date rather than renovated by Lessor, as listed on Exhibit B attached hereto. Short Term Sale Hotels--Any Sale Hotel that has been owned by the related Lessor, as of the effective date of the Termination Fee Payment Event, for less than eighteen (18) months following the Commencement Date. SEC--shall mean the U.S. Securities and Exchange Commission. Termination Fee--shall mean all amounts paid or credited under Section 3(e) below. Termination Fee Base Amount--shall mean (i) an amount equal to seventy-five percent (75%) of the Lessee Income Before Corporate Overhead for an Existing Hotel (other than a Short-Term Sale Hotel) for the twelve (12) full calendar months prior to the effective date of the Termination Fee Payment Event with respect to such Existing Hotel; (ii) an amount equal to fifty percent (50%) of the Lessee Income Before Corporate Overhead for a Short-Term Sale Hotel for the twelve (12) full calendar months prior to the effective date of the Termination Fee Payment Event with respect to such Short-Term Sale Hotel; and (iii) an amount equal to one hundred percent (100%) of the Lessee Income Before Corporate Overhead for a New Hotel for the twelve (12) full calendar months prior to the effective date of the Termination Fee Payment Event with respect to such New Hotel. In the case of a Hotel that has been owned by the related Lessor for less than twelve (12) full calendar months following the Commencement Date and prior to the effective date of the Termination Fee Payment Event, the Lessee Income Before Corporate Overhead for such Hotel for the twelve-month measuring period will be determined on a pro forma basis as though the related Percentage Lease had 8 9 been in effect for the entire measuring period. Notwithstanding the foregoing, no Termination Fee shall be payable with respect to the sale of the Holiday Inn Express - Atlanta Northeast (#257), which is scheduled for closing in August, 1998. Termination Fee Payment Event--shall mean: (i) a sale or other transfer by Lessor of a Hotel (other than a Short-Term Sale Hotel) as to which (A) the Percentage Lease covering such Hotel is to be terminated by Lessor solely as a result of such sale or other transfer as permitted by the Percentage Lease, and (B) neither any Lessee nor any Affiliate of BHR shall continue to be (or become) the lessee or manager of such Hotel or, with respect to the Sale Hotels (other than Short-Term Sale Hotels), one or more other hotels offered by FelCor in substitution therefor and accepted by a Lessee or another Affiliate of BHR in the exercise of its sole discretion pursuant to a replacement Percentage Lease and/or management agreement, in either case, projected to provide equal or greater Net Economic Benefit to such Lessee or other Affiliate of BHR; or (ii) a sale or other transfer by Lessor of a Short-Term Sale Hotel as to which (A) the Percentage Lease covering such Hotel is to be terminated by Lessor solely as a result of such sale or other transfer as permitted by the Percentage Lease, and (B) neither any Lessee nor any Affiliate of BHR shall continue to be (or become) the lessee or manager of such Short-Term Sale Hotel or one or more other hotels offered by FelCor in substitution therefor (at any time within eighteen (18) months following the Termination Fee Payment Event), and accepted by a Lessee or another Affiliate of BHR (in the exercise of their reasonable discretion if not accepted prior to the sale or other transfer of such Short-Term Sale Hotel) pursuant to a replacement Percentage Lease and/or management agreement, in either case, projected to provide equal or greater Net Economic Benefit to such Lessee or other Affiliate of BHR; provided, however, that the Percentage Leases for the Four Points, Leominster, Massachusetts, the Meadowlands Hilton, Secaucus, New Jersey, and the Holiday Inn Select, University Center, Pittsburgh, Pennsylvania, each a New Hotel recently purchased by Affiliates of FelCor, shall be deemed to be accepted, replacement Percentage Leases hereunder with respect to any Percentage Leases for Short-Term Sale Hotels that are terminated as a result of the sale of the related Short-Term Sale Hotel, to the extent that the Net Economic Benefit of the Percentage Lease associated with the Short-Term Sale Hotel that is sold, when aggregated with the 9 10 Net Economic Benefit of the Percentage Leases associated with Short-Term Sale Hotels that previously have been sold, does not exceed the aggregate Net Economic Benefit of the Percentage Leases associated with those three (3) replacement New Hotels; or (iii) an event by which an Existing Hotel shall become a Non-Consent Hotel, unless any Lessee or other Affiliate of BHR shall become the lessee or manager of another hotel offered by FelCor (or the Mortgagee, its designee or a purchaser at foreclosure or transfer in lieu of foreclosure of the Hotel) in substitution therefor, and accepted by a Lessee or another Affiliate of BHR in the exercise of its sole discretion, pursuant to a replacement Percentage Lease and/or management agreement, in either case, projected to provide equal or greater Net Economic Benefit to such Lessee or other Affiliate of BHR. Transfer--(i) any merger, sale of the stock of any Transferor, or sale, transfer or conveyance of all or substantially all of the assets of any Transferor if, as a result thereof, Transferor or any surviving entity or purchaser of the assets of Transferor (each, the "Transferee") would cease to be controlled by BHR or (ii) any event resulting in a "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the 1934 Act), other than United/Harvey Holdings, L.P. or any Affiliate thereof, becoming the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the 1934 Act) directly or indirectly, of more than fifty percent (50%) of the Voting Stock of BHR or, if applicable, the Parent of BHR, or a Lessee or an Affiliated Manager, or (iii) any sale or assignment of the leasehold interest in any of the Percentage Leases to any third party that is not an Affiliate of BHR. Transferor--shall mean any one or more of BHR, the Parent of BHR, a Lessee, or an Affiliated Manager involved in a transaction that will constitute a Transfer. Working Capital--shall mean the excess of a Lessee's current assets over such Lessee's current liabilities, both as determined in accordance with GAAP. 2. Effective Date. All of the terms and conditions of this Agreement shall become effective upon the Closing Date. The effectiveness of this Agreement is conditioned upon the occurrence of Closing under the Merger Agreement. If the condition to the effectiveness of this Agreement described above has not been satisfied on or before the date three (3) months after the date of this Agreement, this Agreement shall be null and void, subject to the rights of the parties at 10 11 law or in equity if the failure of such conditions to occur is the result of the default of any party hereto. 3. Execution of Percentage Leases; Computation of Rent; Basic Assumptions; Contemplated Renovations; SPE Financings; Termination Payments. (a) Execution of Percentage Leases. Prior to the Closing Date, Lessors and Lessees shall execute and deliver the Percentage Leases, pursuant to which the Existing Hotels shall be leased by a Lessor to a Lessee. (b) Computation of Rent; Basic Assumptions. The Base Rent and Percentage Rent for each Percentage Lease of an Existing Hotel has been reasonably agreed by Lessors and Lessees in good faith. The intent of the parties is for the aggregate of Base Rent and Percentage Rent for all Existing Hotels for the years 1998, 1999 and 2000 to be approximately equal to 95% of the forecast (utilized by FelCor and BHR as the basis for negotiating the Merger) of aggregate Lessee Income Before Corporate Overhead, minus Lessees' corporate overhead ("Splitable Income") of Lessees from such Existing Hotels; provided, however, that to the extent that the actual performance of the Existing Hotels for such period(s) deviates from such forecasted Splitable Income, the terms of the Percentage Leases as written will prevail and no adjustment will be made to the Rent solely as a result of any such deviation. Notwithstanding the terms of each Percentage Lease, aggregate Rent thereunder for the month of August 1998 (in the amount of approximately $10.9 million) shall be due and payable on or before February 28, 1999, together with interest on the outstanding amount of such deferred Rent at a floating rate of interest equal to LIBOR plus 150 basis points; provided, however, that Lessees may only prepay such amount upon at least two (2) business days notice to Lessors, and in minimum payments of at least $500,000. For purposes of Section 3.6 of the Percentage Leases, the basic assumptions underlying the computation of Base Rent and Percentage Rent are set forth in this Section 3(b) above and in Schedule 1 attached hereto. (c) Contemplated Renovations; Land Use Flexibility. The Percentage Leases will require Lessors to be responsible for the completion of certain contemplated renovations to Existing Hotels as generally set forth in the budgets on Schedule 1 hereto, with the nature and timing of such renovations to be agreed to between the parties in good faith. The parties agree that such budgets 11 12 are preliminary only and may be reasonably adjusted upwards or downwards, and/or accelerated or delayed, following further review and analysis. In addition, however, FelCor and BHR agree to cause Lessors and Lessees to negotiate in good faith with respect to the exclusion (before or after the execution of the Percentage Leases for the Existing Hotels) from the Leased Property under any Percentage Lease of Land or Improvements not reasonably necessary for, and directly related to, the operation of the Hotel at the time of such determination ("Excess Realty"), which FelCor proposes to put to more profitable use, redevelopment or disposition (such as, by example, but without limitation, by the construction of a parking structure on Land used for surface parking for a Hotel, in connection with which a portion of the Land may be sold by Lessor as no longer reasonably necessary to the operation of the Hotel following construction of such parking structure) as long as (1) the applicable Lessor pays its share of any direct or indirect costs or expenses fairly allocable to the Excess Realty (including, but not limited to, the cost of utilities servicing both the leased property and the excess realty, the cost to maintain and repair elevators, HVAC systems and other systems serving both the Leased Property and the Excess Realty, and the cost of security, janitorial and other services provided to both the Leased Property and the Excess Realty) and enters into an expense allocation agreement if requested by the applicable Lessee, and (2) Lessee is reasonably compensated for any detrimental effect upon its Hotel operations or its Lessee Income Before Corporate Overhead as a result of such use, redevelopment or disposition by Lessor, including, without limitation, by an appropriate reduction in the Rent under such Percentage Lease and/or the payment of a fee to Lessee. (d) SPE Financings. If requested by FelCor or a Lessor, BHR and each Lessee agree that it will cooperate, and will cause any New Financing Lessees (defined below) to cooperate, in good faith to promptly form one or more new entities which are wholly-owned by such Lessee and/or the general partner and/or the parent of the general partnership of such Lessee (each, a "New Financing Lessee"), to serve as the lessee for one or more Hotels designated by FelCor, and will assign to the New Financing Lessee, and cause the New Financing Lessee to assume, the Percentage Leases with respect to such Hotels, except with respect to obligations accrued through the date of such assignment assumption. 12 13 Lessee and any New Financing Lessee will (a) include in its and/or its general partner's organizational documents, or promptly amend its and/or its general partner's existing organizational documents to include, provisions sufficient to qualify such entity as a single-purpose, bankruptcy-remote entity (or a similar entity) as determined by Lessor's lender with reference to rating agency requirements, (b) operate in accordance with such provisions so as to qualify or continue to qualify as such a single purpose, bankruptcy-remote entity (or a similar entity) and (c) reasonably cooperate with FelCor and Lessor and the Lessor's lender in connection with the foregoing, and with the Lessor's counsel, including with respect to such counsel's legal opinion regarding the bankruptcy-remoteness and/or non-consolidation of the Lessee or New Financing Lessee and/or its general partner with any other persons or entities and other customary matters. Such Lessor will pay Lessee's reasonable out-of-pocket costs incurred in connection with this Section 3(d), including, without limitation, organizing or amending the organizational documents of the New Financing Lessees and in obtaining such legal opinions. (e) Termination Fee Payments. In the event of the occurrence of a Termination Fee Payment Event with respect to a Percentage Lease (the "Terminated Lease"), the Lessor shall be obligated to pay (in the manner described below) the Monthly Termination Payment (as defined below) to the Lessee for the number of months remaining following the effective date of the Termination Fee Payment Event (or, with respect to a Sale Hotel, any later date permitted for commencement of monthly payments by Lessor hereunder) through (i) in the case of a Sale Hotel, the end of the original Term of the Terminated Lease or (ii) in the case of a Hotel other than a Sale Hotel, the end of the First Extension of the Terminated Lease (regardless of whether the Lessee has exercised its option with respect to such First Extension) or, if the Lessee has properly exercised its option with respect to the Second Extension of the Terminated Lease prior to the date on which the Lessor provides notice to the Lessee of an anticipated Termination Fee Payment Event, the end of the Second Extension of the Terminated Lease (the "Payment Period"). The "Monthly Termination Payment" shall be an amount equal to one-twelfth (1/12) of the amount of the Termination Fee Base Amount. The amount of any Monthly Termination Payment or, at Lessor's option, the entire Termination Fee Base Amount, shall be applied in accordance with this paragraph. First, all or any 13 14 portion of the Monthly Termination Payment (or the Termination Fee Base Amount, as applicable) shall, at the Lessor's option, be applied first to past due Rent under the Terminated Lease or any other Percentage Leases, without curing any Event of Default that has occurred and is continuing thereunder, and each Lessee hereby authorizes the offset of any Monthly Termination Payment (or the Termination Fee Base Amount, as applicable) due against past due Rent under the Terminated Lease or other Percentage Lease to which it is a party or under any other Terminated Lease or other Percentage Lease with any Lessee, as determined in the exercise of its sole discretion by the Lessor. Second, any remaining Monthly Termination Payment then shall be applied to Rent due or to become due (as it becomes due) under other Percentage Leases (with such Lessee or any other Lessee) during the Payment Period. Notwithstanding the foregoing, in the event of the termination (in the same transaction or series of transactions) of a sufficient number of Percentage Leases that the aggregate monthly amount owed to Lessee(s) for Monthly Termination Payments is greater than the aggregate monthly amount of Rent payable to Lessor(s) under the remaining Percentage Leases during the applicable Payment Period(s), the aggregate amount of Monthly Termination Payments that would have been paid over the remaining term(s) of the applicable Payment Period(s) shall be discounted to net present value at an agreed reasonable discount rate and such amount shall be paid to BHR or Lessee(s) in a lump sum in satisfaction of all of Lessor(s) obligations with respect to such aggregate Termination Fees, and Lessee(s) shall continue to pay Rent on all remaining Percentage Leases, if any, as set forth therein. 4. Future Percentage Leases. FelCor and BHR hereby agree that, unless otherwise agreed by FelCor and BHR in their sole discretion in connection with the acquisition of a New Hotel, the form of Percentage Lease between Lessor and Lessee with respect to each New Hotel shall be in substantially the form of the Percentage Leases for the Existing Hotels; provided, however, that all economic terms of such new Percentage Lease for a New Hotel shall be negotiated in good faith by the parties at the time. In the event that FelCor or an Affiliate acquires the "Bristol House" hotel in Dallas, Texas, it will offer a Lessee the opportunity to enter into a Percentage Lease for such Hotel upon terms negotiated in good faith by the parties at the time; provided, however, that FelCor and its Affiliates shall have no obligation to offer any other hotels to BHR or its Affiliates. 14 15 5. Minimum Liquid Net Worth Requirements; Lessee Reporting Obligations; Letter of Credit Adjustments; Limitations on Distributions. (a) Liquid Net Worth. At all times during the Terms of the Percentage Leases, the Lessees collectively shall maintain an aggregate Liquid Net Worth in an amount at least equal to the Minimum Liquid Net Worth for all Lessees. Furthermore, at all times during the Terms of the Percentage Leases relating to a particular Lessee, such Lessee shall maintain a Liquid Net Worth in an amount at least equal to such Lessee's allocable Minimum Liquid Net Worth. (b) Lessee Reporting Obligations; Letter of Credit Adjustments. Concurrently with (i) the delivery of all financial statements to FelCor and Lessors pursuant to Section 7(a)(i) hereof, and (ii) the execution of any Percentage Lease for any New Hotel (and, at Lessee's option, in connection with the termination of any then existing Percentage Lease or at any other time), each Lessee shall certify to FelCor and its REIT tax counsel as to (i) the amount of its Liquid Net Worth and its then-applicable Minimum Liquid Net Worth in a certificate signed by the chief financial officer, chief accounting officer or treasurer of BHR and by such Lessee and (ii) the aggregate Liquid Net Worth and Minimum Liquid Net Worth then applicable to the Lessees collectively (a "Liquid Net Worth Certificate"). Each Lessee's Liquid Net Worth and Minimum Liquid Net Worth shall be determined from time to time (x) from the most recent Liquid Net Worth Certificate delivered by BHR and such Lessee, or (y) in the absence of a timely Liquid Net Worth Certificate when required hereunder, as reasonably determined (or estimated) by FelCor pending receipt of such Liquid Net Worth Certificate. In the event that a letter of credit has been provided to any Lessor as Credit Enhancement, then within ten (10) days after receipt of a Liquid Net Worth Certificate, each applicable Lessor and Lessee agrees to deliver a notice of reduction to the issuer of the letter of credit or take such other action as any Lessee or Lessor may reasonably request in order to reduce the amount of such letter of credit to such amount as BHR or such Lessee shall request, which amount may not be less than that necessary to ensure that the individual Lessee's or the Lessees' aggregate Liquid Net Worth is at least equal to the individual Lessee's or the Lessees' aggregate Minimum Liquid Net Worth, each as reflected on such Liquid Net Worth Certificate. (c) Obligation of BHR to Supplement Liquid Net Worth. If, upon any determination of Liquid Net Worth, the Liquid Net Worth of any Lessee (or the Lessees collectively) 15 16 is less than the then-applicable Minimum Liquid Net Worth, but Lessors are prohibited by any Lessor's mortgage financing from exercising their rights under Section 10(b) to terminate all Percentage Leases, BHR shall have the obligation, to the extent of cash, cash equivalents and other liquid assets reasonably available to BHR (as certified in writing by BHR to FelCor), to contribute (or cause to be contributed) to such Lessee(s), promptly after written notice from Lessor, additional cash, marketable securities or other assets that qualify for the Liquid Assets Amount with a current fair market value (as of the date of such contribution), or to provide additional Credit Enhancement, at least equal to such deficiency in the Liquid Net Worth of such Lessee(s). Except as expressly set forth in this Section 5(c), or in a Guaranty, BHR shall have no obligation to make or cause to be made any other capital contributions to any Lessee. (d) Limitation on Distributions. No dividends or other distributions (other than distributions in the form of additional equity interests in a Lessee) shall, for any period, be declared, paid or set apart for payment on any equity interest in any Lessee (the "Lessee's Capital"), and no Lessee Capital shall be redeemed, purchased or otherwise acquired by Lessee for any consideration (except by conversion into or exchange for other equity interests in Lessee), unless, after giving effect to such proposed distribution, (i) the Liquid Net Worth of each Lessee (and the Lessees collectively) equals or exceeds the Minimum Liquid Net Worth then applicable to such Lessee(s), and (ii) no uncured monetary default of any Lessee exists under this Agreement nor any uncured default in the payment of Rent (including, without limitation, estimated or actual monthly payments of Percentage Rent) under any Percentage Lease (unless such dividend or other distribution will be used to cure such default). (e) Payments to Affiliates. Except for Post-Default Operating Expenses and distributions to holders of equity interests permitted under Section 5(d) above, no Lessee shall make, directly or indirectly, any payments (for services or otherwise) to Affiliates of Lessee unless, after giving effect to such proposed payment, (i) the Liquid Net Worth of each Lessee (and the Lessees collectively) shall equal or exceed the Minimum Liquid Net Worth then applicable to such Lessee(s), and (ii) no uncured monetary default of any Lessee exists under this Agreement nor any uncured default in the payment of Rent (including, without limitation, estimated or actual monthly payments of Percentage Rent) under any Percentage Lease. 16 17 6. Changes of Control and Activities of Lessees. (a) Voluntary Transfers or Changes in Structure. BHR represents that, except with respect to the Percentage Lease for, and Lessee of, the Chateau LeMoyne Hotel (to the extent included in the Existing Hotels), on the Closing Date, each Lessee will be a wholly-owned subsidiary of BHR and BHR will have sole economic and voting interest in each Lessee. During the Term of the Percentage Leases, BHR and Lessees may, but shall not be obligated to, seek the prior written consent of FelCor (following not less than sixty (60) days prior written notice to FelCor), which consent shall not be unreasonably withheld, to a Transfer. If requested, FelCor shall not have the right to withhold its consent to any Transfer if (i) the Transferee (or its parent) has Liquid Net Worth at least equal to that of, and otherwise is as creditworthy as, BHR as of the end of the Fiscal Year preceding such Transfer, and (ii) the Transferee (A) has a good reputation in the U.S. hospitality industry and (B) either (x) has substantial expertise in the management of hotels comparable to the Hotels or (y) will retain a substantial number of hotel management employees, including executive management, of Transferor. In the event of a Transfer to which FelCor does not consent, (i) the percentage hurdle for purposes of a Revenue Performance Shortfall under the Percentage Leases affected by such Transfer shall increase from eighty percent (80%) to ninety percent (90%), (ii) the Overall Shortfall Cure Percentage shall be increased from ninety percent (90%) to one hundred percent (100%), (iii) the Revenue Performance Shortfall test period shall be reduced from three (3) years to one (1) year, and (iv) the respective Lessee shall have no opportunity to cure any Revenue Performance Shortfall thereafter (including but not limited to the first full Fiscal Year following the effective date of any such Transfer). (b) Hostile Change of Control. In the event of a Hostile Change of Control, Lessors shall have the absolute right and option (in its sole, unreviewable discretion) to terminate any or all of the Percentage Leases upon not less than thirty (30) days prior written notice to the respective Lessee, without payment of any Termination Fee. (c) Other Business Activities. After the occurrence and during the continuance of a Default by Lessee, without the prior written consent of FelCor, no Lessee shall engage in or incur any expenses or liabilities related to any business or activity in which it is not engaged at the time of such Default. 17 18 7. Financial Statements; Indemnification; Due Diligence; Confidentiality. (a) Financial Disclosure. (i) During the term of any Percentage Lease, BHR and Lessees agree: (A) to deliver, and otherwise make available, to FelCor, FSLP and Lessors, (1) not more than forty-five (45) days following the end of each calendar quarter of each year during the Terms of the Percentage Leases, quarterly unaudited financial statements, including balance sheet, statement of operations, statement of shareholders' equity, statement of cash flows for Lessee for the most recently ended calendar quarter and the comparable prior year period prepared in conformity with GAAP; (2) not more than ninety (90) days after the end of each calendar year during the Terms of the Percentage Leases, (A) a hotel-by-hotel breakdown of revenue by source, occupied and available rooms, and maintenance and repair expenses, and (B) audited annual financial statements and schedules for the most recently ended calendar year prepared in accordance with GAAP, audited by a nationally recognized certified public accounting firm reasonably acceptable to FelCor, FSLP and Lessors; (3) any historical financial information reasonably necessary to re-state historical financial information to conform to the presentation of FelCor's, FSLP's or Lessor's audited and unaudited financial statements at any future time; and (4) on a timely basis, any other information reasonably requested by FelCor, FSLP and Lessors to permit FelCor, FSLP and Lessors to meet their filing and reporting requirements under the 1934 Act and to file and have declared effective registration statements under the 1933 Act, including providing information necessary to complete the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of FelCor's 1934 Act reports and 1933 Act registration statements as it may relate to BHR, Lessees or the Hotels; and (B) that BHR or Lessees shall bear the cost of obtaining, preparing and providing all information required to be furnished to FelCor, FSLP and Lessors under this Section 7(a)(i), including the cost and related expenses of the annual audit of Lessees' financial statements. 18 19 (ii) During the term of any Percentage Lease, FelCor and Lessor agree to make available to BHR and Lessees on a timely basis, any information reasonably requested by BHR and Lessees to permit BHR to meet its filing and reporting requirements under the 1934 Act and to file and have declared effective registration statements under the 1933 Act, including providing information necessary to complete the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of BHR's 1934 Act reports and 1933 Act registration statements as it may relate to Lessors or the Hotels. (b) Indemnification. (i) FelCor, FSLP and each Lessor agree, jointly and severally, to indemnify, defend (with counsel reasonably acceptable to BHR and Lessees), and hold harmless BHR, each Lessee and each Affiliated Manager, and their stockholders, partners, limited liability company members, officers, directors and controlling persons (collectively, "Lessee Indemnified Parties") from and against any losses, claims, damages, expenses or liabilities (or actions in respect thereof) to which the Lessee Indemnified Parties may become subject under the 1933 Act, the 1934 Act or otherwise, insofar as such losses, claims, damages, expenses or liabilities or actions in respect thereof arise out of or are based upon the 1934 Act reports or 1933 Act registration statements of FelCor, FSLP or Lessors, except to the extent any such claims, liabilities, losses, damages, expenses, or liabilities (or actions in respect thereof) result from any untrue statement of a material fact or omission of any material fact in the information provided by (or on behalf of) a Lessee Indemnified Party to FelCor, FSLP or Lessor pursuant to Section 7(a)(i) above. (ii) BHR and each Lessee agree, jointly and severally, to indemnify, defend (with counsel reasonably acceptable to FelCor, FSLP and Lessors) and hold harmless FelCor, FSLP and Lessors, and their respective stockholders, partners, limited liability company members, officers, directors and controlling persons (collectively, "Lessor Indemnified Parties") from and against any losses, claims, damages, expenses or liabilities (or actions in respect thereof) to which the Lessor Indemnified Parties may become subject under the 1933 Act, the 1934 Act or otherwise, insofar as such losses, claims, damages, expenses or liabilities or actions in respect thereof arise out of or are based upon the 1934 Act reports or 1933 Act registration statements of BHR or Lessees, except to the extent any such claims, liabilities, losses, damages, expenses, or liabilities (or actions in respect thereof) result from 19 20 any untrue statement of a material fact or omission of any material fact in the information provided by (or on behalf of) a Lessor Indemnified Party to BHR or Lessees pursuant to Section 7(a)(ii) above. (c) Due Diligence. During the term of each Percentage Lease, BHR and Lessees agree: (i) to permit FelCor, FSLP and Lessees, together with their independent public accountants, counsel, financial advisors, underwriters, underwriters' counsel, rating agencies, lenders and others having a legitimate interest in Lessees' or the Hotels' financial condition and results of operations, during regular business hours, upon reasonable notice and at the sole cost of FelCor, FSLP or Lessors (provided there shall be no charge by Lessees or BHR to FelCor, FSLP or Lessors for the reasonable time of Lessees' and BHR's officers or employees), to interview officers and employees of Lessees or BHR and to have access to and review: (A) the general accounting records of Lessees or any Hotel for purposes of performing an audit of FelCor, FSLP, Lessors or any Hotel in accordance with generally accepted auditing standards and to conduct reasonable due diligence with respect to Lessees and their business activities and the Hotels; and (B) Lessees' entity records, minute books, contracts and other information, documents, agreements or items relating to the operation of the Hotels and Lessees' financial condition. (ii) to cooperate promptly and fully with FelCor, FSLP and Lessors upon request and at the cost of FelCor, FSLP or Lessors (except with respect to the cost of obtaining, preparing and providing the information required to be furnished to FelCor, FSLP and Lessors under Section 7(a)(i) above and any costs relating to the reasonable time of employees or officers of Lessees or BHR), in making available such information with respect to Lessees or the Hotels as may be then required by any regulatory agency, including the SEC or any stock exchange on which FelCor's, FSLP's or Lessors' securities may be registered, listed or traded. (iii) to use their reasonable best efforts to cause the independent public accountants preparing audits of BHR and Lessees to provide FelCor, FSLP and Lessors, at the sole cost of FelCor, FSLP or Lessors with all consents and comfort letters of such accountants required 20 21 for FelCor's or Lessors' filings under the 1933 Act or the 1934 Act or to have FelCor's or Lessors' registration statements be declared effective under the 1933 Act. During the term of each Percentage Lease, FelCor, FSLP and Lessors agree: (i) to permit BHR and Lessees, together with their independent public accountants, counsel, financial advisors, underwriters, underwriters' counsel, rating agencies, lenders and others having a legitimate interest in Lessors' or the Hotels' financial condition and results of operations, during regular business hours, upon reasonable notice and at the sole cost of BHR and Lessees (provided there shall be no charge by FelCor, FSLP or Lessors to Lessees or BHR for the reasonable time of FelCor's, FSLP's or Lessors' officers or employees), to interview officers and employees of FelCor, FSLP and Lessors) and to have access to and review: (A) the general accounting records of Lessors or any Hotel for purposes of performing an audit of BHR, Lessees or any Hotel in accordance with generally accepted auditing standards and to conduct reasonable due diligence with respect to Lessors and their business activities and the Hotels; and (B) Lessors' entity records, minute books, contracts and other information, documents, agreements or items relating to the operation of the Hotels and Lessors' financial condition. (ii) to cooperate promptly and fully with Lessees and BHR, upon request and at the cost of Lessees, in making available such information with respect to FelCor, FSLP or Lessors as may be then required by any regulatory agency, including the SEC or any stock exchange on which BHR's or Lessees' securities may be registered, listed or traded. (iii) to use their reasonable best efforts to cause the independent public accountants preparing audits of FelCor, FSLP or Lessors to provide BHR and Lessees, at the sole cost of Lessees and BHR, with all consents and comfort letters of such accountants required for BHR's or Lessees' filings under the 1933 Act or the 1934 Act or to have BHR's or Lessees' registration statements be declared effective under the 1933 Act. (d) Confidentiality. To the extent Lessors or FelCor on the one hand, or Lessees or BHR on the other, obtains information or becomes aware of material information concerning the other that is not disclosed in a public announcement or filing under the 1933 Act or 21 22 the 1934 Act by BHR or FelCor, each party agrees that it shall not improperly disclose or unlawfully utilize such information or otherwise act unlawfully with respect thereto. 8. REIT Requirements. (a) BHR has been advised by FelCor and understands that, in order for FelCor to qualify as a real estate investment trust under the Code ("REIT"), the following requirements (the "REIT Requirements") must be satisfied: (i) The average of the adjusted tax bases of a Lessor's personal property that is leased to a Lessee under a Percentage Lease at the beginning and end of a calendar year cannot exceed fifteen percent (15%) of the average of the aggregate adjusted tax bases of such Lessor's real and personal property that is leased to such Lessee under such Percentage Lease at the beginning and end of such calendar year. (ii) No Lessee can sublet the Hotels and related property that are leased to it by a Lessor, or enter into any similar arrangement, on any basis such that the rental or other amounts paid by the sublessee thereunder would be based, on whole or in part, on either (i) the net income or profits derived by the business activities of the sublessee or (ii) any other formula such that any portion of the Percentage Rent or other rent paid by the Lessee to the Lessor would fail to qualify as "rents from real property" within the meaning of Section 856(d) of the Code. (iii) No Lessee can sublease the Hotels and related property leased to it by a Lessor to, or enter into any similar arrangement with, any person in which FelCor owns, directly or indirectly, a ten percent (10%) or greater ownership interest, within the meaning of Section 856(d)(2)(B) of the Code. (iv) FelCor cannot own, directly or indirectly, a ten percent (10%) or greater ownership interest in BHR or any Lessee, within the meaning of Section 856(d)(2)(B) of the Code. (v) Unless specifically permitted by the Board of Directors of FelCor, no person can own, directly or indirectly, capital stock of FelCor that exceeds the limit set forth in FelCor's Charter. (b) BHR and Lessees agree, and agree to use reasonable efforts to cause their Affiliates, to use their reasonable best efforts to permit the REIT Requirements to be satisfied. BHR 22 23 and Lessees agree, and agree to use their reasonable best efforts to cause their Affiliates, to cooperate in good faith with FelCor, FSLP and Lessors to ensure that the REIT Requirements are satisfied, including but not limited to, providing FelCor with information about the ownership of BHR, Lessees, and their Affiliates to the extent that such information is reasonably available, and complying with the related obligations of Lessees under each Percentage Lease. BHR and Lessees agree, and agree to use their reasonable best efforts to cause their Affiliates, upon request by FelCor (and, where appropriate action not already required by the terms hereof or of the Percentage Leases is required by this Section 8(b), at FelCor's expense), to take reasonable action necessary to ensure compliance with the REIT Requirements. Immediately after becoming aware that any REIT Requirement is not, or will not be, satisfied, BHR or Lessees shall notify, or use reasonable efforts to cause their Affiliates to notify, FelCor of such noncompliance. 9. Cross Default. From and after the Closing Date, a Financial Default (as hereinafter defined) by any Lessee under the Percentage Lease with respect to any Hotel will constitute and continue to create an Event of Default (until cured, if curable) under the Percentage Leases with respect to all other Hotels, except to the extent prohibited by Lessors' mortgage financing secured by a lien upon any such other Hotel. A "Financial Default" shall mean and refer to any Event of Default under a Percentage Lease consisting of one or more of the following: (i) if Lessee fails to pay Base Rent or Percentage Rent to Lessor as and when due (following any applicable grace or cure period); (ii) if Lessee (A) shall file a petition in bankruptcy or reorganization for an arrangement pursuant to any federal or state bankruptcy law or any similar federal or state law, or shall be adjudicated a bankrupt or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due, or if a petition or answer proposing the adjudication of Lessee as a bankrupt or its reorganization pursuant to any federal or state bankruptcy law or any similar federal or state law shall be filed in any court and Lessee shall be adjudicated a bankrupt and such adjudication shall not be vacated or set aside or stayed within sixty (60) days after the entry of an order in respect thereof, or if a receiver of Lessee or of the whole or substantially all of the assets of Lessee shall be appointed in any proceeding brought by Lessee or if any such receiver, trustee or liquidator shall be appointed in any proceeding brought against Lessee and shall not be vacated or set aside or stayed within sixty (60) days after such appointment, or (B) is liquidated or dissolved, or begins proceedings toward such liquidation or dissolution, or, in any manner, permits the sale or divestiture of substantially all of its assets, except as permitted hereunder; or 23 24 (iii) if a material Event of Default (including, without limitation, any of those listed above) occurs under any Percentage Lease at any time during any period of twelve (12) consecutive months in which any material Events of Default have occurred under at least four (4) other Percentage Leases. 10. Default by Lessee. (a) A "Default by Lessee" shall exist under this Agreement if any one or more of the following occur: (i) Liquid Net Worth Covenants. During the term of any Percentage Lease, a Lessee (or the Lessees collectively) fails to maintain its (or their aggregate) Minimum Liquid Net Worth as required in, or makes distributions or payments prohibited by, Sections 5 hereof (each, a "LNW Deficiency"), and fails to cure such LNW Deficiency within thirty (30) days following notice thereof from FelCor to BHR; provided, however that if BHR is required to raise debt or equity capital in order to supply cash, marketable securities or other assets that qualify for the Liquid Assets Amount or Credit Enhancement to cure such LNW Deficiency, and in good faith commences and continues to raise such debt or equity capital within thirty (30) days after such determination of Liquid Net Worth, BHR shall have a reasonable period not to exceed ninety (90) days to raise such debt or equity capital and to cause such required cash, marketable securities or other assets that qualify for the Liquid Assets Amount or Credit Enhancement to be included in such Lessee's Liquid Net Worth in order to eliminate any LNW Deficiency. (ii) Default Under Percentage Leases. A Financial Default occurs under any of the Percentage Leases to which such Lessee is a party. (iii) Other Breaches. BHR or any Lessee fails to comply with any other provision of this Agreement for a period of thirty (30) days after being notified by FelCor in writing of the provisions of this Agreement with which such Lessee has failed to comply; provided that if such default (other than if Lessee fails to pay any Base Rent or Percentage Rent under any Percentage Lease, when due after any applicable cure period, which failure shall be subject to the provisions set forth in the Percentage Leases, or if Lessee fails to maintain its Minimum Liquid Net Worth as required in, or makes distributions or payments prohibited by, Section 5 hereof) cannot with due diligence be cured within a thirty (30) day period, such period shall be extended for such reasonable 24 25 time as BHR or such Lessee promptly and with due diligence commences and continues the cure thereof but in no event for a period of more than ninety (90) days following the date of notice from FelCor to BHR. (b) In the event of a Default by Lessee, and without prejudice to the rights and remedies of any Lessor under any Percentage Lease, Lessors may, subject to its compliance with the terms of any Recognition Agreement, elect to terminate all of the Percentage Leases (or all of the Percentage Leases to which the Lessee in default is a party), except to the extent expressly prohibited by mortgage financing of Lessors that is secured by a lien upon the Hotel covered by such Percentage Lease. In no event shall Lessors have the option to terminate less than all Percentage Leases (or all Percentage Leases to which the Lessee in default is a party) as to which they have both the contractual and legal right so to terminate. 11. Recognition Agreement. FelCor and Lessors agree to negotiate in good faith and enter into Recognition Agreements with Bankers Trust Company prior to the Closing Date and, if an agreement can be reached on mutually acceptable terms, with any other lender to BHR and/or any Lessees subsequent to the Closing Date, addressing such matters as are reasonably required by any such lender and reasonably acceptable to FelCor and Lessors. Without limiting the generality of the foregoing, FelCor would agree to lender protection provisions, in any Recognition Agreement to which BHR's lenders and a Lessee that is a Subsidiary of BHR are parties, substantially in the form attached hereto as Exhibit D. 12. Miscellaneous. (a) Entire Agreement; Modification, Amendments and Waivers. This Agreement, together with the Percentage Leases and instruments and agreements referenced herein and therein, constitutes the entire agreement among the parties hereto with respect to the subject matter of this Agreement and supersedes the MHA and any prior oral agreements among the parties hereto. No modification, amendment or waiver of any provision of this Agreement shall be effective unless the same is in a writing signed by FelCor and BHR. (b) Notices. All notices, demands, requests, consents approvals and other communications ("Notice") hereunder shall be in writing and personally served, mailed (by registered 25 26 or certified mail, return receipt requested and postage prepaid), sent by Fed Ex or other nationally recognized overnight courier, or sent by facsimile to the parties as set forth below: If to BHR or any Lessee: Bristol Hotels & Resorts, Inc. 14295 Midway Road Dallas, Texas 75244 Facsimile: 972/391-3497 Attention: President (with a copy to Attention: General Counsel) If to FelCor, FSLP or any Lessor: FelCor Suite Hotels, Inc. 545 E. John Carpenter Frwy, Suite 1300 Irving, Texas 75062 Facsimile: 972/444-4949 Attention: President (with a copy to Attention: General Counsel) or to such other address or addresses as either party may hereafter designate. Personally delivered Notice (including any confirmed facsimile transmission or delivery by nationally recognized overnight courier) shall be effective upon receipt at the specified address. Notice given by mail shall be complete at the time of deposit in the U.S. Mail system, but any prescribed period of Notice and any right or duty to do any act or make any response within any prescribed period or on a date certain after the service of such Notice given by mail shall be extended five (5) days. (c) Successors and Assigns. The provisions of this Agreement shall be binding upon the parties hereto and all of their permitted successors and assigns and inure to the benefit of the parties hereto and their permitted successors and assigns. (d) Termination. This Agreement (other than the parties' indemnification rights and obligations hereunder) shall terminate (without prejudice to any accrued claims hereunder) at such time as all of the Percentage Leases have terminated. (e) Governing Law. This Agreement shall be governed by the laws of the State of Texas. 26 27 (f) Counterparts. This Agreement may be signed in one or more counterparts, each of which shall be an original once all parties have signed a counterpart hereof, with the same force and effect as if the signatures thereto and hereto were upon the same instrument. (g) WAIVERS. EACH PARTY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY PROCEEDINGS BROUGHT BY EITHER PARTY TO ENFORCE THE PROVISIONS OF THIS AGREEMENT. IN ANY SUIT OR OTHER CLAIM BROUGHT BY EITHER PARTY SEEKING DAMAGES AGAINST THE OTHER PARTY FOR BREACH OF ITS OBLIGATIONS UNDER THIS AGREEMENT, THE PARTY AGAINST WHOM SUCH CLAIM IS MADE SHALL BE LIABLE TO THE OTHER PARTY ONLY FOR ACTUAL DAMAGES AND NOT FOR CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES. (h) Time of the Essence. Time is of the essence of this Agreement. (i) Conflict. In the event of any actual conflict or inconsistency between the terms of this Agreement and the terms of any Percentage Lease, the terms of this Agreement shall take precedence. (j) Further Assurances. From time to time, as when requested by a party hereto, the other parties will execute and deliver, or cause to be executed and delivered, all such other documents and instruments as may be reasonably required to further or better evidence the agreements herein. (k) Interpretation; Arbitration. No provision of this Agreement will be interpreted in favor of, or against, any of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting hereof or by reason of the extent to which any such provision is inconsistent with any prior draft hereof. Any disputes arising under this Agreement will be resolved in accordance with the arbitration procedures set forth in Section 22.1 of the Percentage Leases. (l) Future Affiliates. Any currently existing or future Affiliate of FelCor or the Lessors that is or in the future may be a Lessor under a Percentage Lease shall become a party to this Agreement, entitled to the same rights, benefits and remedies to which FelCor and the Lessors are entitled hereunder by execution of an addendum to this Agreement. Any currently existing or 27 28 future Affiliate of BHR or the Lessees that is or in the future may be a Lessee under a Percentage Lease shall become a party to this Agreement, entitled to the same rights, benefits and remedies to which BHR and the other Lessees are entitled hereunder by execution of an addendum to this Agreement. Upon the request of any party, such future Lessors and Lessees shall execute any documents, instruments or amendments hereto reasonably requested by a party hereto to further evidence any such Affiliate's rights, benefits and remedies hereunder. (m) Representatives. This Agreement provides the Lessors certain rights, benefits and remedies. FelCor is hereby designated and appointed the representative of the Lessors, and the Lessees and BHR shall be permitted to rely upon any written or oral communication or notification from FelCor as being from the respective Lessor. Any notice required to be given hereunder shall be given to FelCor as representative for any and all of the Lessors. This Agreement provides the Lessees certain rights, benefits and remedies. BHR is hereby designated and appointed the representative of the Lessees, and the Lessors and FelCor shall be permitted to rely upon any written or oral communication or notification from BHR as being from the respective Lessee. Any notice required to be given hereunder shall be given to BHR as representative for any or all of the Lessees. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BRISTOL HOTELS & RESORTS, INC. By: /s/ JEFFREY P. MAYER ------------------------------------- Jeffrey P. Mayer, Vice President FELCOR SUITE HOTELS, INC. By: /s/ LAWRENCE D. ROBINSON ------------------------------------- Lawrence D. Robinson, Senior Vice President 28 29 FELCOR SUITES LIMITED PARTNERSHIP By: FelCor Suite Hotels, Inc., its general partner By: /s/ LAWRENCE D. ROBINSON --------------------------------- Lawrence D. Robinson Senior Vice President LESSORS: By: /s/ JEFFREY P. MAYER ------------------------------------- Jeffrey P. Mayer, Vice President of each of the Lessors, or the Subsidiaries of Bristol Hotel Company acting on behalf of the Lessors, listed on Schedule 3 attached hereto LESSEES: By: /s/ JEFFREY P. MAYER ------------------------------------- Jeffrey P. Mayer, Vice President of each of the Lessees, or the Subsidiaries of BHR acting on behalf of the Lessees, listed on Schedule 2 attached hereto 29 30 Exhibit A - Existing Hotels Exhibit B - Sale Hotels Exhibit C - Form of Guaranty Exhibit D - Leasehold Lender Protection Provisions Schedule 1 - Contemplated Renovations Schedule 2 - Lessors Schedule 3 - Lessees 30 31 EXHIBIT A EXISTING HOTELS
LEGEND: "BLTC" Bristol Lodging Tenant Company, a Delaware corporation "FHAC" FelCor Hotel Asset Company, L.L.C., a Delaware limited liability company "FLC" FelCor Lodging Company, L.L.C., a Delaware limited liability company "FOHC" FelCor Omaha Hotel Company, L.L.C., a Delaware limited liability company
LEASED PROPERTY NO. STATE LESSOR (OWNER): LESSEE: - ----------------------------------------- ------- ----------------- --------------------------------- ------------- 1. Holiday Inn - Montgomery East I-85 806 AL FHAC BHTC (O) 2. Holiday Inn - Texarkana I-30 (GL) 822 AR FHAC BHTC 3. Days Inn - Flagstaff (O) 721 AZ FHAC BHTC 4. Fairfield Inn - Downtown Scottsdale 522 AZ FHAC BHTC (GL) 5. Crowne Plaza - Pleasanton (O) 842 CA FHAC BHTC 6. Holiday Inn - San Diego On the Bay 836 CA FHAC BHTC (GL) 7. Holiday Inn - San Francisco Financial 840 CA FHAC BHTC District (GL) 8. Holiday Inn - San Francisco 841 CA FHAC BHTC Fisherman's Wharf (GL) 9. Holiday Inn - San Jose North 843 CA FHAC BHTC (Milpitas) (O) 10. Holiday Inn - Santa Barbara (O) 531 CA FLC BLTC 11. Holiday Inn Select - Irvine Orange 837 CA FHAC BHTC County Airport (O) 12. Holiday Inn Select - San Francisco 838 CA FHAC BHTC Union Square (O) 13. Holiday Inn - Cambridge (O) 858 CN FelCor Canada Co. BHTC Canada, Inc. 14. Holiday Inn - Kitchener Waterloo (O) 857 CN FelCor Canada Co. BHTC Canada, Inc. 15. Holiday Inn - Peterborough - 859 CN FelCor Canada Co. BHTC Canada, Inc. Waterfront (O) 16. Holiday Inn - Sarnia (O) 860 CN FelCor Canada Co. BHTC Canada, Inc. 17. Holiday Inn - Toronto Yorkdale (O) 856 CN FelCor Canada Co. BHTC Canada, Inc. 18. Holiday Inn - Toronto Airport (O) 855 CN FelCor Canada Co. BHTC Canada, Inc. 19. Holiday Inn Express - Colorado 711 CO FHAC BHTC Springs Central (O)
32
LEASED PROPERTY NO. STATE LESSOR (OWNER): LESSEE: - ----------------------------------------- ------- ----------------- --------------------------------- ------------- 20. Ramada Inn - Colorado Springs 712 CO FHAC BHTC North (O) 21. Holiday Inn - Hartford Downtown (O) 850 CT FHAC BHTC 22. Holiday Inn Select - Stamford (GL) 849 CT FHAC BHTC 23. Holiday Inn - Cocoa Beach 812 FL FHAC BHTC Oceanfront Resort (O) 24. Holiday Inn - Near Bush Gardens 813 FL FHAC BHTC Tampa (GL) 25. Holiday Inn - Nikki Bird Resort 809 FL FHAC BHTC (Disney Main Gate) (GL) 26. Holiday Inn - Orlando International 810 FL FHAC BHTC Drive Resort (O) 27. Holiday Inn Select - Miami 814 FL FHAC BHTC International Airport (O) 28. Holiday Inn Select - Orlando 808 FL FHAC BHTC International Airport (O) 29. Courtyard by Marriott - Downtown 234 GA FHAC BHTC Atlanta (O) 30. Crowne Plaza - Airport Atlanta (O, 562 GA FHAC BHTC but GL on portion of parking lot) 31. Fairfield Inn - Downtown Atlanta (O) 235 GA FHAC BHTC 32. Hampton Inn - Marietta (O) 690 GA FHAC BHTC 33. Harvey Hotel - Atlanta Powers Ferry 374 GA FLC BLTC (O) (converting to Crowne Plaza) 34. Holiday Inn - Atlanta Airport North (O, 287 GA FLC BLTC but GL on portion of parking lot) 35. Holiday Inn - Atlanta South (prior to 365 GA FLC BLTC 9/4/97 Jonesboro) (O) 36. Holiday Inn - Columbus Airport North 805 GA FHAC BHTC (GL) 37. Holiday Inn Express - Atlanta I-20 759 GA FHAC BHTC East (O) 38. Holiday Inn Express - Atlanta 257 GA FHAC BHTC Northeast (O) 39. Holiday Inn Select - Atlanta Perimeter 680 GA FLC BLTC Dunwoody (O) 40. Hampton Inn - Davenport (O) 875 IA FOHC BHTC 41. Holiday Inn - Davenport (O) 874 IA FOHC BHTC
2 33
LEASED PROPERTY NO. STATE LESSOR (OWNER): LESSEE: - ----------------------------------------- ------- ----------------- --------------------------------- ------------- 42. Allerton Hotel - Chicago (O) 800 IL FHAC BHTC 43. Hampton Inn - Moline (Lots 2 and 4) 871 IL FelCor Moline Hotel, L.L.C. BHTC (O) 44. Hampton Inn - Moline Airport (O) 873 IL FelCor Moline Hotel, L.L.C. BHTC 45. Holiday Inn and Holiday Inn Express - 872 IL FelCor Moline Hotel, L.L.C. BHTC Moline Airport (O) 46. Hampton Inn - Hays (O) 877 KS FOHC BHTC 47. Holiday Inn - Great Bend (O) 880 KS FOHC BHTC 48. Holiday Inn - Hays (O) 876 KS FOHC BHTC 49. Holiday Inn - Salina (GL) 878 KS FOHC BHTC 50. Holiday Inn Express - Colby (O) 881 KS FOHC BHTC 51. Holiday Inn Express Hotel & Suites - 879 KS FOHC BHTC Salina I-70 (GL) 52. Holiday Inn - New Orleans French 830 LA FLC BLTC Quarter (GL) 53. Holiday Inn Select - Boston 846 MA FHAC BHTC Government Center (GL) 54. Holiday Inn - Kansas City Northeast 845 MO FHAC BHTC (O) 55. Holiday Inn - Westport (O) 863 MO FelCor St. Louis Company, BHTC L.L.C. 56. Crowne Plaza - Downtown Jackson 369 MS FLC BLTC (O) (prior to 10-1-97 Harvey Hotel) 57. Hampton Inn - Jackson North (O) 686 MS FHAC BHTC 58. Harvey Hotel & Suites - Jackson 709 MS FLC BHTC North (O) (Converting to Holiday Inn) 59. Holiday Inn - Executive Conference 826 MS FHAC BHTC Center Olive Branch (O) (Converting to Whispering Woods) 60. Holiday Inn - Jackson Southwest (O) 227 MS FLC BLTC 61. Hampton Inn - Omaha Southwest (O) 869 NE FOHC BHTC 62. Hampton Inn - Omaha Central (O) 866 NE FOHC BHTC 63. Holiday Inn - Omaha Northwest (Old 868 NE FOHC BHTC Mill) (O) 64. Holiday Inn Express & Suites - 870 NE FOHC BHTC Omaha Southwest (O)
3 34
LEASED PROPERTY NO. STATE LESSOR (OWNER): LESSEE: - ----------------------------------------- ------- ----------------- --------------------------------- ------------- 65. Holiday Inn - Omaha Central I-80 (O) 865 NE FOHC BHTC 66. Homewood Suites Hotel - Omaha (O) 867 NE FOHC BHTC 67. Holiday Inn - Albuquerque 844 NM FHAC BHTC Mountainview (O) 68. Holiday Inn - Independence Mall (O) 864 PA FelCor Pennsylvania Company, BHTC L.L.C. 69. Holiday Inn Select - Philadelphia 847 PA Center City Hotel Associates BHTC Center City (O) (Converting to Crowne Plaza) 70. Holiday Inn - Columbia Airport (O) 804 SC FHAC BHTC 71. Holiday Inn - Spartanburg West (O) 803 SC FHAC BHTC 72. Holiday Inn Select - Greenville 802 SC FHAC BHTC (Roper) (O) 73. The Mills House Hotel - Charleston 801 SC FHAC BHTC Holiday Inn (O) 74. Holiday Inn - Chattanooga Southeast 807 TN FHAC BHTC I-75 (O) 75. Holiday Inn - Knoxville West (GL) 824 TN FHAC BHTC 76. Holiday Inn Select - Nashville 827 TN FHAC BHTC Opryland/Airport (Nashville-Briley Parkway) (GL) 77. Crowne Plaza Suites - Dallas (GL) 550 TX FelCor Hotel Company, Ltd. BHTC (Bristol Suites prior to 7//98) 78. Courtyard by Marriott - Houston Near 299 TX FHAC BHTC The Galleria (O) 79. Fairfield Inn - Dallas Regal Row (O) 505 TX FHAC BHTC 80. Fairfield Inn - Houston I-10 East (O) 729 TX FHAC BHTC 81. Fairfield Inn - Houston Near The 396 TX FHAC BHTC Galleria (O) 82. Hampton - Downtown Dallas/West 564 TX FHAC BHTC End (O) 83. Hampton Inn - Houston I-10 East (O) 792 TX FHAC BHTC 84. Crowne Plaza - Addison (O) 546 TX FelCor Hotel Company, Ltd. BHTC (prior to 7/98 Harvey Hotel) 85. Harvey Hotel - Dallas (GL) 542 TX FelCor Hotels Investments II, BHTC Ltd. 86. Crowne Plaza Hotel - Dallas 607 TX FLC BLTC Brookhollow (Harvey Hotel prior to 7/98)(O)
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LEASED PROPERTY NO. STATE LESSOR (OWNER): LESSEE: - ----------------------------------------- ------- ----------------- --------------------------------- ------------- 87. Harvey Hotel - DFW Airport (GL) 560 TX FelCor Hotel Company, Ltd. BHTC 88. Harvey Hotel - Plano (O) 544 TX FelCor Hotels Investments I, Ltd. BHTC 89. Harvey Suites - DFW Airport (O) 548 TX FLC BLTC 90. Harvey Suites - Houston Medical 556 TX FLC BLTC Center (GL) (Converting to Holiday Inn Hotel and Suites) 91. Holiday Inn - Amarillo I-40 (GL) 820 TX FHAC BHTC 92. Holiday Inn - Austin Town Lake (GL 815 TX FHAC BHTC on parking garage) 93. Holiday Inn - Beaumont Midtown I-10 821 TX FHAC BHTC (O) 94. Holiday Inn - Houston Intercontinental 747 TX FLC BLTC Airport (O) 95. Holiday Inn - Medical Center Houston 667 TX FLC BLTC Medical Center (O) 96. Holiday Inn - Midland County Villa (O) 882 TX FelCor Country Villa Hotel, BHTC L.L.C. 97. Holiday Inn - Plano (O) 545 TX FHAC BHTC 98. Holiday Inn - San Antonio Downtown 818 TX FHAC BHTC (GL) 99. Holiday Inn - Waco I-35 (O) 823 TX FHAC BHTC 100. Holiday Inn Express Hotel & Suites - 884 TX FelCor Country Villa Hotel, BHTC Odessa Parkway Blvd. (O) L.L.C. 101. Holiday Inn Hotel & Suites - Odessa 883 TX FelCor Country Villa Hotel, BHTC Centre (O) L.L.C. 102. Holiday Inn Select - Houston I-10 816 TX FHAC BHTC West (O) 103. Holiday Inn Select - Houston Near 554 TX FLC BLTC Greenway Plaza (O) 104. Holiday Inn Select - San Antonio 817 TX FHAC BHTC International Airport (O) 105. Holiday Inn - Salt Lake City Airport 862 UT FelCor Salt Lake, Inc. Bristol Salt Lake Tenant (GL) Company
5 36 EXHIBIT B SALE HOTELS [INTENTIONALLY OMITTED] 37 EXHIBIT C FORM OF GUARANTY GUARANTY [INTENTIONALLY OMITTED] Bristol Hotels & Resorts, Inc. By: ------------------------------------- Jeffrey P. Mayer, Vice President 38 EXHIBIT D LEASEHOLD LENDER PROTECTION PROVISIONS [INTENTIONALLY OMITTED] 1 39 SCHEDULE 1 CONTEMPLATED RENOVATIONS [INTENTIONALLY OMITTED] 40 SCHEDULE 2 LESSORS(1) FelCor Hotel Asset Company, L.L.C. FelCor Lodging Company, L.L.C. FelCor Omaha Hotel Company, L.L.C. FelCor Canada Co., a Nova Scotia unlimited liability company FelCor Moline Hotel, L.L.C. FelCor St. Louis Company, L.L.C. FelCor Pennsylvania Company, L.L.C. Center City Hotel Associates, a Pennsylvania limited partnership (by FelCor Philadelphia Center, L.L.C., as general partner of, and on its behalf) FelCor Hotel Company, Ltd., a Texas limited partnership (by FelCor Hotels GenPar, L.L.C., as general partner of and on behalf of FelCor HHHC GenPar, P.P., a Delaware limited partnership, as general partner of, and on its behalf) FelCor Hotels Investments I, Ltd., a Texas limited partnership (by FelCor Hotels Financing I, L.L.C., as general partner of, and on its behalf) FelCor Hotels Investments II, Ltd., a Texas limited partnership (by FelCor Hotels Financing I, L.L.C., as general partner of, and on its behalf) FelCor Country Villa Hotel, L.L.C. FelCor Salt Lake, L.L.C. FelCor Hospitality Company, L.L.C. - -------------------------------------- (1) Each a Delaware limited liability company, unless otherwise specified. 41 SCHEDULE 3 LESSEES(2) BHTC Canada, Inc., an Ontario corporation Bristol Hospitality Tenant Company Bristol Hotel Tenant Company Bristol Lodging Tenant Company Bristol Salt Lake Tenant Company - -------------------------------------- (2) Each a Delaware corporation, unless otherwise specified. EX-10.18 5 STOCKHOLDERS & REGISTRATION RIGHTS AGMT - 7/27/98 1 EXHIBIT 10.18 ================================================================================ STOCKHOLDERS' AND REGISTRATION RIGHTS AGREEMENT BY AND AMONG FELCOR SUITE HOTELS, INC. BASS PLC BASS AMERICA INC. HOLIDAY CORPORATION UNITED/HARVEY INVESTORS I, L.P. UNITED/HARVEY INVESTORS II, L.P. UNITED/HARVEY INVESTORS III, L.P. UNITED/HARVEY INVESTORS IV, L.P. AND UNITED/HARVEY INVESTORS V, L.P. DATED JULY 28, 1998 ================================================================================ 2 TABLE OF CONTENTS Page
ARTICLE I DEFINITIONS..................................................1 1.1. Definitions.......................................1 ARTICLE II REGISTRATION RIGHTS..........................................5 2.1. Shelf Registration of Resales.....................5 2.2. "Market Stand-Off" Agreement......................5 2.3. Registration Procedures...........................6 2.4. Registration Expenses............................13 2.5. Indemnification..................................13 2.6. Rule 144.........................................17 2.7. Underwritten Registrations.......................17 2.8. Indemnification of Statutory Underwriters........17 ARTICLE III CORPORATE GOVERNANCE........................................18 3.1. Composition of the Board.........................18 3.2. Voting................................................18 ARTICLE IV RESTRICTIONS ON TRANSFER....................................18 4.1. General Restriction..............................18 4.2. Transfers in Compliance with Law.................19 4.3. Legends..........................................19 4.4. Unauthorized Transfers...........................20 4.5. Transfers to Affiliates..........................20 ARTICLE V RIGHT TO PARTICIPATE IN SALES...............................20 5.1. Right to Participate in Sales....................20 5.2. Securities Not Subject to Tag-Along Right........22 5.3. Termination......................................23 ARTICLE VI PREEMPTIVE RIGHTS; WAIVER...................................23 6.1. Preemptive Rights................................23 6.2. Regulatory Restrictions; Termination.............23 ARTICLE VII MISCELLANEOUS...............................................24 7.1. Enforcement......................................24
i 3 TABLE OF CONTENTS
Page 7.2. No Inconsistent Agreements.......................24 7.3. Amendments and Waivers...........................24 7.4. Notices..........................................25 7.5. Owner of Registrable Securities..................25 7.6. Successors and Assigns...........................26 7.7. Counterparts.....................................26 7.8. Headings.........................................26 7.9. Governing Law....................................26 7.10. Entire Agreement.................................26 7.11. Attorneys' Fees..................................26 7.12. Severability.....................................26 7.13. Changes in Outstanding Securities................27 7.14. Termination......................................27 7.15. Acquisition of BHR Shares........................27
ii 4 INDEX OF DEFINED TERMS
Page Affiliate ..................................................1 Agreement ..................................................1 BAI ..................................................1 Bass Parties ..................................................2 Beneficial ownership..................................................2 BHR ..................................................5 BHR Common Shares .................................................27 Blackout .................................................12 Board ..................................................2 Bristol ..................................................1 Business Day ..................................................2 Co-Sale Acceptance Period............................................20 Co-Sale Notice .................................................20 Co-Selling Stockholder...............................................20 Control ..................................................2 Derivatives .................................................19 Election Notice .................................................23 Exchange Act ..................................................2 Excluded Securities ..................................................2 Excluded Transaction.................................................21 Fair Market Value ..................................................2 FelCor ..................................................1 FelCor Common Stock ..................................................1 Form S-4 ..................................................5 HC ..................................................1 Holdings Parties ..................................................2 indemnified party .................................................15 indemnifying party .................................................15 Initial Ownership ..................................................2 Lock-Up Period .................................................18 Losses .................................................13 Market Stand-Off ..................................................5 Merger Agreement ..................................................1 Non-Offering Stockholders............................................20 Offer Notice .................................................20 Offer Price .................................................20 Offered Securities .................................................20 Offering Stockholder.................................................20 Ownership Percentage..................................................3 Partnership A ..................................................1 Partnership B ..................................................1 Permitted Transferee..................................................3 Person ..................................................3 PLC ..................................................1 Portion .................................................21 Pro Rata Number .................................................21 Prospectus ..................................................3 Public Offering ..................................................3 Qualified Offering .................................................23
iii 5 Qualified Offering Notice............................................23 Registrable Securities................................................3 Registration Statement................................................4 Registration Stockholder..............................................4 Regulatory Objection.................................................23 Rule 144 ..................................................4 Rule 145 ..................................................4 Rule 415 ..................................................4 SEC ..................................................4 Securities .................................................19 Securities Act ..................................................4 Special Counsel ..................................................6 Stockholder ..................................................4 Subsidiary ..................................................4 Suspension Notice .................................................12 Third Party ..................................................4 Third Party Sale .................................................20 Total Voting Power ..................................................4 Transfer .................................................18 Unauthorized Transfer................................................20 Underwritten Registration or Underwritten Offering....................4 Voting Securities ..................................................5
iv 6 STOCKHOLDERS' AND REGISTRATION RIGHTS AGREEMENT This STOCKHOLDERS' AND REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made and entered into as of July 27, 1998, by and among FelCor Suite Hotels, Inc., a Maryland corporation ("FelCor"), Bass America Inc., a Delaware corporation ("BAI"), Holiday Corporation, a Delaware corporation ("HC"), Bass plc, an English public limited company ("PLC"), United/Harvey Investors I, L.P., a Delaware limited partnership ("Partnership A"), United/Harvey Investors II, L.P., a Delaware limited partnership ("Partnership B"), United/Harvey Investors III, L.P., a Delaware limited partnership ("Partnership C"), United/Harvey Investors IV, L.P., a Delaware limited partnership ("Partnership D") and United/Harvey Investors V, L.P., a Delaware limited partnership ("Partnership E"). RECITALS A. On March 23, 1998, FelCor and Bristol Hotel Company, a Delaware corporation ("Bristol"), entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which Bristol will merge with and into FelCor subject to the terms and conditions thereof. B. Upon consummation of the Merger, each Stockholder will beneficially own the number of shares of common stock, par value $0.01 per share, of FelCor ("FelCor Common Stock") set forth on Schedule A hereto. C. PLC has agreed to be a party to this Agreement solely for the purposes set forth on the signature pages hereto. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions. For purposes of this Agreement, the following terms have the respective meanings set forth below when used herein with initial capital letters. Capitalized terms used herein and not defined herein have the meanings set forth in the Merger Agreement. "Affiliate" means, with respect to any Person, any other Person who is directly or indirectly Controlling, Controlled by or under the common Control with such Person; provided that no Stockholder of FelCor shall be deemed an Affiliate of any other 7 Stockholder of FelCor solely by reason of any investment in FelCor or by this Agreement. "Bass Parties" means, collectively, BAI, HC and any of their Permitted Transferees who are Affiliates of PLC. "Beneficial ownership", "beneficially own" and "beneficial owner" shall be determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the date hereof. "Board" means the Board of Directors of FelCor. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York or Dallas, Texas are authorized or obligated to close. "Control" (including the terms "Controlling", "Controlled by" and "under common Control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time. "Excluded Securities" means (i) options granted to directors, officers and employees of FelCor to purchase capital stock of FelCor, and the securities issued pursuant to such options or plans under which options may be granted, which have been authorized by the Board, (ii) capital stock issued or sold upon exercise of warrants, options or rights, or upon conversion of convertible securities, which warrants, options, rights or convertible securities are outstanding on the date hereof or were the subject of the preemptive rights under Article VI or (iii) any securities which are issued to all stockholders by means of a distribution, stock dividend or stock split or reclassification. "Fair Market Value" means the price agreed upon by a willing buyer and a willing seller both in possession of reasonable knowledge of all relevant facts, with neither party being under any compulsion to act or not act. "Holdings Parties" means, collectively, Partnership A, Partnership B, Partnership C, Partnership D and Partnership E and any of their Permitted Transferees who are Affiliates of The Hampstead Group, LLC. "Initial Ownership" means, with respect to each Stockholder, the total number of shares (equitably adjusted to reflect any 2 8 stock split, dividend, reclassification or any similar event) of FelCor Common Stock beneficially owned by such Stockholder as of the Effective Time. "Ownership Percentage" means with respect to each Stockholder at any time, the percentage derived by dividing (i) the aggregate number of shares of FelCor Common Stock beneficially owned by such Stockholder as of such time, by (ii) the total number of shares of FelCor Common Stock outstanding as of such time. "Permitted Transferee" means with respect to each Stockholder, (i) any Affiliate of such Stockholder, (ii) in the case of Partnership A, Partnership B, Partnership C, Partnership D or Partnership E, any direct or indirect constituent partner of such partnership (as to its pro rata interest in the partnership), and (iii) any transferee approved in writing by FelCor; provided that, in each case, such transferee has executed a copy of this Agreement and agreed to be bound by the provisions herein as a Stockholder. "Person" means an individual, corporation, partnership, association, trust, limited liability company, joint venture or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Prospectus" means the prospectus included in any Registration Statement (including without limitation a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Public Offering" means an underwritten public offering of Securities of FelCor pursuant to an effective registration statement under the Securities Act. "Registrable Securities" means (i) all shares of FelCor Common Stock received by a Registration Stockholder pursuant to the Merger, (ii) all shares of FelCor Common Stock which a Registration Stockholder has an option to purchase at the Effective Time (including shares of FelCor Common Stock subject to the Amended and Restated Put/Call Option Agreement, dated as of November 16, 1995, by and between Harvey Hotel Holdings, Inc., H.K. Huie, Jr. and the other parties thereto, as amended from time to time), and (iii) all other shares of FelCor Common Stock and shares issued upon exercise of preemptive rights or upon 3 9 purchase from another Stockholder, until, in the case of any such security, (a) such security is disposed of in accordance with a Registration Statement, (b) such security is saleable by the holder thereof pursuant to Rule 144(k), (c) such security is saleable by the holder thereof pursuant to Rule 144 without regard to any volume limitations, or (d) such security is distributed to the public pursuant to Rule 144. "Registration Statement" means any registration statement of FelCor under the Securities Act that covers the Registrable Securities pursuant to the provisions of Article II of this Agreement, including the related Prospectus, all amendments and supplements to such registration statement (including post-effective amendments), all exhibits and all materials incorporated by reference or deemed to be incorporated by reference in such registration statement. "Registration Stockholder" means each of (i) the Bass Parties and (ii) the Holdings Parties, in each case, including any of their Permitted Transferees. "Rule 144", "Rule 145" or "Rule 415", as applicable, means Rule 144, Rule 145, or Rule 415 under the Securities Act, as each such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder, as in effect from time to time. "Stockholder" means each of (i) the Bass Parties, as a group, (ii) Partnership A, (iii) Partnership B, (iv) Partnership C, (v) Partnership D, and (vi) Partnership E. "Subsidiary" means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by such Person. "Third Party" means a prospective purchaser of Securities in an arm's-length transaction from a Stockholder where such purchaser is not a Permitted Transferee of such Stockholder. "Total Voting Power" means the aggregate number of votes which may be cast by holders of outstanding Voting Securities. "Underwritten Registration" or "Underwritten Offering" means a registration under the Securities Act in which securities of 4 10 FelCor are sold to an underwriter or group of underwriters for reoffering to the public. "Voting Securities" means all securities of FelCor entitled, in the ordinary course, to vote in the election of directors of FelCor. ARTICLE II REGISTRATION RIGHTS 2.1. Shelf Registration of Resales. (a) Registration of Resales. Subject to Section 2.1(b), FelCor will file with the SEC a Registration Statement under Rule 415 with respect to all Registrable Securities and use its reasonable best efforts to cause such Registration Statement to become effective no later than the expiration of the Lock-Up Period. Subject to Section 2.1(b), FelCor will file with the SEC, if necessary, a Registration Statement under Rule 415 with respect to all shares of FelCor Common Stock issued in the Merger and held by officers and directors of Bristol Hotels & Resorts, Inc., a Delaware corporation ("BHR"), who may be deemed to be "affiliates" under Rule 145 at the Effective Time and use its reasonable best efforts to cause such Registration Statement to be effective as of the Effective Time. (b) Conversion of Form S-4. Subject to the other provisions of this Agreement (including the covenant contained in Section 2.3 with respect to the absence of Suspension Notices), FelCor may, in its sole discretion, convert the Form S-4 Registration Statement filed by FelCor in connection with its issuance of shares of FelCor Common Stock pursuant to the Merger (the "Form S-4") to a Registration Statement on another form permitted to be used by FelCor for the registration under the Securities Act of the Registration Stockholders' offering and resale of Registrable Securities (in accordance with the intended methods of distribution). References herein to the "Form S-4" will be deemed to include the Registration Statement into which it may be converted, and the Form S-4 will be deemed to be a "Registration Statement" for all purposes of this Agreement. (c) Maintenance of Effectiveness. FelCor will keep the Registration Statement filed pursuant to this Section 2.1 effective so long as the Registration Stockholders hold Registrable Securities. 2.2. "Market Stand-Off" Agreement. The Bass Parties and the Holdings Parties will not, to the extent requested (by timely written notice) by the managing underwriter or underwriters for any Underwritten Offering of FelCor's capital stock (or any securities issued by FelCor that are exercisable to purchase, convertible into or exchangeable for shares of capital stock of 5 11 FelCor) for FelCor's account in which the expected gross proceeds of such Offering equal or exceed $100 million, sell, make any short sale of, lend, grant any option for the purchase of or otherwise Transfer any Registrable Securities (except to the extent permitted in the Underwritten Offering) without the prior written consent of FelCor and/or the managing underwriter or underwriters on the same terms and for the same period of time from the effective date of the Registration Statement relating to the Underwritten Offering as the officers and directors of FelCor agree to refrain from taking such actions; provided, however, such period of time shall not exceed 90 calendar days during any 12 month period. FelCor may impose stop-transfer instructions with respect to the Registrable Securities of each Stockholder until the end of such period (not to exceed 90 calendar days during any 12 month period) in order to enforce these restrictions. In no event, however, will the foregoing parties be required to enter into more than two such agreements in any 12 month period. 2.3. Registration Procedures. In connection with FelCor's registration obligations pursuant to this Article II, FelCor will use its reasonable best efforts to effect such registration to permit the sale of the Registrable Securities in accordance with the Registration Stockholders' intended method or methods of distribution of those Registrable Securities, and pursuant thereto FelCor will as expeditiously as possible: (a) Prepare and file with the SEC a Registration Statement on any appropriate form under the Securities Act available for the sale of the Registrable Securities by the Registration Stockholders in accordance with the Registration Stockholders' intended method or methods of distribution thereof, and use its reasonable best efforts to cause the Registration Statement to become effective and remain effective as provided herein; provided, however, that not less than three Business Days before filing a Registration Statement or Prospectus or any amendments or supplements thereto (excluding documents that would be incorporated or deemed to be incorporated therein by reference) FelCor will furnish to the Registration Stockholders whose Registrable Securities are covered by that Registration Statement, counsel for such Registration Stockholders with respect to such registration ("Special Counsel") and the managing underwriter, if any, copies of all documents proposed to be filed, which documents will be subject to the review of the Registration Stockholders, the Special Counsel and the managing underwriters, if any, and FelCor will not file a Registration Statement or any amendment thereto or any Prospectus or any supplement thereto (excluding any documents which, upon filing, would be incorporated or deemed to be incorporated by reference therein) to which the Registration Stockholders whose 6 12 Registrable Securities are covered by that Registration Statement, the Special Counsel or the managing underwriter, if any, may reasonably object on a timely basis; (b) Prepare and file with the SEC any amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement continuously effective for the period herein specified; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act with respect to the distribution of all securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in the Registration Statement as so amended or to the Prospectus as so supplemented; (c) Notify the Registration Stockholders selling Registrable Securities, the Special Counsel and the managing underwriters, if any, promptly, and (if requested by any of those Persons) confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the Registration Statement or amendment has become effective, (ii) of any request by the SEC or any other federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if at any time the representations and warranties of FelCor contained in any agreement contemplated by Section 2.3(l) (including any underwriting agreement) cease to be true and correct, (v) of the receipt by FelCor of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (vi) of the occurrence of any event which makes any statement made in the Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or which requires the making of any changes in a Registration Statement, Prospectus or document so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and, 7 13 in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated or that is necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vii) of FelCor's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate; (d) Use every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest possible moment; (e) If requested by the managing underwriters, if any, or Registration Stockholders whose Registrable Securities are being registered, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriters, if any, and those Registration Stockholders agree should be included therein to comply with applicable law and (ii) make all required filings of the Prospectus supplement or such post-effective amendment as soon as practicable after FelCor has received notification of the matters to be incorporated in the Prospectus supplement or post-effective amendment; provided, however, that FelCor will not be required to take any actions under this Section 2.3(e) that are not, in the reasonable opinion of counsel for FelCor, in compliance with applicable law; (f) Furnish to each Registration Stockholder whose Registrable Securities are being registered, the Special Counsel and each managing underwriter, if any, without charge, conformed copies of the Registration Statement and each post-effective amendment or supplement thereto, including financial statements (including schedules, all documents incorporated or deemed incorporated therein by reference and all exhibits) as such Registration Stockholders may reasonably request in order to facilitate the disposition of the Registrable Securities owned by each such Registration Stockholder; (g) Deliver to each Registration Stockholder whose Registrable Securities are being registered, the Special Counsel and the underwriters, if any, without charge, copies of the Prospectus or Prospectuses relating to the Registrable Securities (including each preliminary prospectus) and any amendment or supplement thereto as those Persons may reasonably request; and FelCor hereby consents to the use of that Prospectus or each amendment or supplement thereto by each of the Registration Stockholders 8 14 whose Registrable Securities are being registered, and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by that Prospectus or any amendment or supplement thereto; (h) Cooperate with the Registration Stockholders that are selling Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates will not bear any restrictive legends; and enable the Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, may request at least two Business Days prior to any sale of Registrable Securities to the underwriters; (i) Use reasonable efforts to cause the sale of Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities within the United States, except as may be required solely as a consequence of the nature of a Registration Stockholder's business, in which case FelCor will cooperate in all reasonable respects with the filing of the Registration Statement and the granting of such approvals as may be necessary to enable such Registration Stockholder or the underwriters, if any, to consummate the disposition of such Registrable Securities; (j) Upon the occurrence of any event contemplated by Section 2.3(c)(vi) or 2.3(c)(vii) hereof, promptly prepare a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (k) Use its best efforts to cause all Registrable Securities covered by the Registration Statement to be (i) listed on each securities exchange, if any, on which similar securities issued by FelCor are then listed or, if no similar securities issued by FelCor are then so listed, on the New York Stock Exchange or another national securities exchange if the securities qualify to be so listed or (ii) authorized to be quoted on the Nasdaq National Market System or the Nasdaq SmallCap Market if the securities qualify to be so quoted; in each case, if requested by the holders of a majority of the Registrable Securities covered 9 15 by the Registration Statement or the managing underwriters, if any; (l) Enter into such agreements (including, in the event of an Underwritten Offering, an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other actions as may be reasonably requested by the managing underwriters or the placement agent or other counterparty to the transaction in order to expedite or facilitate the disposition of the Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, (i) make such representations and warranties as may be reasonably requested by the Registration Stockholders whose Registrable Securities are being registered and the underwriters, if any, with respect to the business of FelCor and its Subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in Underwritten Offerings and confirm those representations and warranties if and when requested; (ii) obtain opinions of counsel to FelCor and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, addressed to each of the underwriters and covering the matters customarily covered in opinions requested in Underwritten Offerings and such other matters as may be reasonably requested by the underwriters); (iii) use its best efforts to obtain "comfort" letters and updates thereof from the independent certified public accountants of FelCor (and, if necessary, any other certified public accountants of any subsidiary of FelCor or of any business acquired by FelCor for which financial statements and financial data is, or is required to be, included in the Registration Statement), addressed to each Registration Stockholder whose Registrable Securities are being registered and each of the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "comfort" letters in connection with Underwritten Offerings; (iv) deliver such documents and certificates as may be requested by any Registration Stockholder whose Registrable Securities are being registered, the Special Counsel and the managing underwriters, if any, to evidence the continued validity of the representations and warranties of FelCor and its Subsidiaries made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or similar agreement entered into by FelCor; (v) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration 10 16 Statement such information as the managing underwriter or underwriters, if any, and such Registration Stockholders agree should be included therein as may be required by applicable law; and (vi) make all required filings of such Prospectus supplement or such post-effective amendment (or other Registration Statement) as soon as practicable after FelCor has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment (or other Registration Statement); provided, however, that FelCor will not be required to take any actions under clauses (v) and (vi) that are not, in the opinion of counsel for FelCor, in compliance with applicable law. The foregoing actions will be taken in connection with each closing under such underwriting or similar agreement as and to the extent required thereunder; (m) Make available for inspection by a representative of the Registration Stockholders whose Registrable Securities are being registered, any underwriter participating in any disposition of Registrable Securities and any attorney or accountant retained by such Registration Stockholders or underwriter, all financial and other records, pertinent corporate documents and properties of FelCor and its Subsidiaries, and cause the officers, directors and employees of FelCor and its Subsidiaries to supply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with the Registration Statement; provided, however, that any records, information or documents that are designated by FelCor in writing as confidential at the time of delivery of such records, information or documents will be kept confidential by those Persons unless (i) those records, information or documents are in the public domain or otherwise publicly available, (ii) disclosure of those records, information or documents is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, or (iii) disclosure of those records, information or documents, in the opinion of counsel to such Person, is otherwise required by law (including, without limitation, pursuant to the requirements of the Securities Act); (n) Comply with all applicable rules and regulations of the SEC and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 calendar days after the end of any 12-month period (or 90 calendar days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or 11 17 best efforts Underwritten Offering, and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of FelCor, after the effective date of a Registration Statement, which statements shall cover that 12-month period; (o) Cause its directors, officers and other appropriate employees to participate in any presentations regarding any Underwritten Offering reasonably requested by the Registration Stockholders or the managing underwriter or underwriters participating in the disposition of those Registrable Securities, provided that so doing does not unreasonably interfere with the business of FelCor and the out-of-pocket costs thereof are reimbursed to FelCor; (p) Use all reasonable efforts to facilitate the Stockholders' purchase or sale of puts, calls and forward contracts, short sales and other hedging transactions involving Registrable Securities; and (q) Use all reasonable efforts to take all of the steps necessary or advisable to effect the registration of the Registrable Securities pursuant to the Registration Statement. FelCor may require each Registration Stockholder whose Registrable Securities are being registered to furnish to FelCor such information regarding the distribution of its Registrable Securities as FelCor may, from time to time, reasonably request in writing and FelCor may exclude from such registration the Registrable Securities of any Registration Stockholder that unreasonably fails to furnish such information within a reasonable time after receiving such request. Each Registration Stockholder will be deemed to have agreed by virtue of its acquisition of Registrable Securities that, upon receipt of any notice from FelCor of the occurrence of any event of the kind described in Section 2.3(c)(ii), 2.3(c)(iii), 2.3(c)(v), 2.3(c)(vi) or 2.3(c)(vii) (each, a "Suspension Notice"), the Registration Stockholder will forthwith discontinue disposition of its Registrable Securities covered by the Registration Statement or Prospectus (a "Blackout") until the Registration Stockholder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 2.3(j), or until it is advised in writing by FelCor that the use of the applicable Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus. FelCor will not give a Suspension Notice at any time prior to the date which is 60 calendar days after the effective date of the Registration Statement (or after expiration of the Lock-Up Period if the Form S-4 is converted under Section 12 18 2.1(b)) and in no event will the aggregate number of days the Registration Stockholders are subject to Blackout during any period of 12 consecutive months exceed 180 days. 2.4. Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by FelCor will be borne by FelCor. Those fees and expenses will include, without limitation, (i) all registration and filing fees (including without limitation fees and expenses with respect to filings required to be made with the National Association of Securities Dealers, Inc.), (ii) printing expenses (including without limitation expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing or photocopying prospectuses), (iii) messenger, telephone and delivery expenses, (iv) reasonable fees and disbursements of counsel for FelCor and the Special Counsel (provided however, that FelCor will reimburse the Registration Stockholders for the reasonable fees and disbursements of not more than one Special Counsel chosen by the Registration Stockholders), (v) fees and disbursements of all independent certified public accountants referred to in Section 2.3(l)(iii) (including the expenses of any special audit and "comfort" letters required by or incident to such performance), (vi) Securities Act liability insurance if FelCor so desires that insurance, and (vii) fees and expenses of all other Persons retained by FelCor; but excluding underwriting discounts and commissions and transfer Taxes, if any, relating to the sale or disposition of Registrable Securities, which shall be borne by the Registration Stockholders. In addition, FelCor will pay its internal expenses (including without limitation all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange on which similar securities issued by FelCor are then listed and the fees and expenses of any Person, including special experts, retained by FelCor. 2.5. Indemnification. (a) Indemnification by FelCor. FelCor will, without limitation as to time, indemnify and hold harmless, to the fullest extent permitted by law, each Registration Stockholder holding Registrable Securities registered pursuant to this Agreement, the officers, directors, partners, stockholders, agents and employees of each of them, each Person who Controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) a Registration Stockholder and the officers, directors, partners, stockholders, agents and employees of any such Controlling Person, from and against all losses, claims, damages, liabilities, costs (including without limitation the costs of investigation and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of or based upon any untrue or alleged 13 19 untrue statement of a material fact contained in any Registration Statement, Prospectus or form of Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are based solely upon information furnished in writing to FelCor by such Registration Stockholder expressly for use therein; provided, however, that FelCor will not be liable to any Registration Stockholder to the extent that any such Losses arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus if either (i)(A) that Registration Stockholder failed to send or deliver a copy of the Prospectus with or prior to the delivery of written confirmation of the sale by that Registration Stockholder of a Registrable Security to the Person asserting the claim from which such Losses arise and (B) the Prospectus would have completely corrected such untrue statement or alleged untrue statement or such omission or alleged omission; (ii) such untrue statement or alleged untrue statement, omission or alleged omission is completely corrected in an amendment or supplement to the Prospectus previously furnished by or on behalf of FelCor with copies of the Prospectus as so amended or supplemented, and that Registration Stockholder thereafter fails to deliver such Prospectus as so amended or supplemented prior to or concurrently with the sale of a Registrable Security to the Person asserting the claim from which such Losses arise; or (iii) such untrue statement or alleged untrue statement, omission or alleged omission was contained in any information so furnished in writing by that Stockholder to FelCor expressly for use in the Registration Statement or Prospectus and was relied upon by FelCor in the preparation of the Registration Statement, Prospectus or preliminary prospectus. (b) Indemnification by Holders of Registrable Securities. In connection with the Registration Statement, the Registration Stockholders selling Registrable Securities will furnish to FelCor in writing such information as FelCor reasonably requests for use in connection with the Registration Statement or Prospectus and will severally, but not jointly, indemnify, to the fullest extent permitted by law, FelCor, its directors and officers, agents and employees, each Person who Controls (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) FelCor, and the directors, officers, agents or employees of such Controlling Persons, from and against all Losses arising out of or based upon any untrue statement of a material fact contained in any Registration Statement, Prospectus or preliminary prospectus or arising out of or based upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by that 14 20 Registration Stockholder to FelCor expressly for use in the Registration Statement or Prospectus and was relied upon by FelCor in the preparation of the Registration Statement, Prospectus or preliminary prospectus. In no event will the liability of any Registration Stockholder under this Section 2.5(b) be greater in amount than the dollar amount of the proceeds (net of payment of all expenses) received by that Registration Stockholder upon the sale of the Registrable Securities giving rise to the indemnification obligation. (c) Conduct of Indemnification Proceedings. In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section 2.5, such Person (the "indemnified party") will promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, will retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and will pay the fees and disbursements of such counsel related to such proceeding; provided that the failure of any indemnified party so to notify the indemnifying party will not relieve the indemnifying party of its obligations hereunder except to the extent that the indemnifying party is actually prejudiced by such failure to notify. In any such proceeding, any indemnified party will have the right to retain its own counsel, but the fees and expenses of such counsel will be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party will not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all indemnified parties and that all such fees and expenses will be reimbursed as they are incurred. The indemnifying party will not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any Loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it will be liable 15 21 for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party will, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) Contribution. If the indemnification provided for in this Section 2.5 is unavailable to an indemnified party under Section 2.5(a) or 2.5(b) in respect of any Losses or is insufficient to hold the indemnified party harmless (other than giving effect to the last sentence of Section 2.5(b)), then each applicable indemnifying party, in lieu of indemnifying the indemnified party, will, jointly and severally, contribute to the amount paid or payable by the indemnified party as a result of the Losses, in the proportion as is appropriate to reflect the relative fault of the indemnifying party or indemnifying parties, on the one hand, and the indemnified party, on the other hand, in connection with the actions, statement or omissions that resulted in the Losses as well as any other relevant equitable considerations. The relative fault of the indemnifying party or indemnifying parties, on the one hand, and the indemnified party, on the other hand, will be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or related to information supplied by, the indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses will be deemed to include any legal or other fees or expenses incurred by such party in connection with any action or proceeding. In no event will the obligation of a Registration Stockholder under this Section 2.5(d) be greater in amount than the dollar amount of the proceeds (net of payment of all expenses) received by that Registration Stockholder upon the sale of the Registrable Securities giving rise to the contribution obligation. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this 16 22 Section 2.5(d), an indemnifying party that is a Registration Stockholder will not be required to contribute any amount in excess of the dollar amount of the proceeds (net of payment of all expenses) received by that Registration Stockholder upon the sale of the Registrable Securities giving rise to the contribution obligation over the amount of any damages which that Registration Stockholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The indemnity, contribution and expense reimbursement obligations of FelCor hereunder will be in addition to any liability FelCor may otherwise have under this Agreement. The provisions of this Section 2.5 will survive so long as Registrable Securities remain outstanding, notwithstanding any transfer of the Registrable Securities by any holder thereof or any termination of this Agreement. 2.6. Rule 144. FelCor will file the reports required to be filed by it under the Securities Act and the Exchange Act, and will cooperate with any Registration Stockholder (including without limitation by making any representations as any Registration Stockholder may reasonably request), all to the extent required from time to time to enable the Registration Stockholder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemptions provided by Rule 144. Upon the request of any Registration Stockholder, FelCor will deliver to such Registration Stockholder a written statement as to whether it has complied with such filing requirements. Notwithstanding the foregoing, nothing in this Section 2.6 will be deemed to require FelCor to register any of its securities under any section of the Exchange Act. 2.7. Underwritten Registrations. If any of the Registrable Securities are to be sold in an Underwritten Offering (other than an Underwritten Offering with respect to Securities that are sold primarily on behalf of FelCor), the underwriter or underwriters and the managing underwriter or managing underwriters will be selected by the Registration Stockholders holding a majority of such Registration Securities; provided, that such underwriter or managing underwriter shall be reasonably satisfactory to FelCor. Each party hereby agrees that, in connection with any Underwritten Offering hereunder in which it participates, it will undertake to offer customary indemnification to the participatory underwriters. 2.8. Indemnification of Statutory Underwriters. Any institutional buyer, placement agent or counterparty who is deemed to be an underwriter pursuant to Section 2(11) of the 17 23 Securities Act in connection with the sale of Registrable Securities by a Registration Stockholder to such Person will be entitled to the indemnity set forth in Section 2.5(a). ARTICLE III CORPORATE GOVERNANCE 3.1. Composition of the Board. Each of the Bass Parties as a group and the Holdings Parties as a group have designated on Schedule 1.7 to the Merger Agreement one Person to serve as a director of FelCor effective upon the Merger. FelCor will take all necessary action in order to ensure that the Persons designated pursuant to this Section 3.1 are appointed to the Board promptly following or upon the effectiveness of the Merger to serve in the class of directors specified thereon and, in the case of Donald J. McNamara, to serve as the Chairman of the Board and of its Executive Committee. 3.2. Voting. Until either the Holdings Parties or the Bass Parties owns less than 25% of its Initial Ownership, each of the Bass Parties and the Holdings Parties will vote its Voting Securities, or execute written consents, as the case may be, and each of the Bass Parties and the Holdings Parties will take all other necessary action (including causing FelCor to call a special meeting of stockholders), in order to ensure that the Person designated by the Bass Parties and the Person designated by the Holdings Parties are elected to the Board, and none of the Bass Parties or the Holdings Parties will vote any of their Voting Securities in favor of the removal of any director who shall have been so designated, unless such removal shall be for cause or the Person entitled to designate such director shall have consented to such removal in writing. When either the Holdings Parties or the Bass Parties, as applicable, no longer own at least 25% of their Initial Ownership, each Stockholder's obligations to take or refrain from taking certain actions pursuant to this Section 3.2 will terminate without further action. For the avoidance of doubt, this Article III will not apply to any Voting Securities held or received by the direct or indirect constituent partners of any of the Holdings Parties. ARTICLE IV RESTRICTIONS ON TRANSFER 4.1. General Restriction. Until the six month anniversary of the Effective Time (such period, the "Lock-Up Period"), no Stockholder may, directly or indirectly, sell, assign, transfer, grant a participation in, pledge or otherwise dispose of ("Transfer") any shares of FelCor Common Stock or any securities convertible into, or exchangeable for shares of FelCor Common 18 24 Stock or rights to purchase shares of FelCor Common Stock ("Derivatives" and collectively with the shares of FelCor Common Stock referred to herein as "Securities") except (a) to a Permitted Transferee, (b) in compliance with the limitations of Rule 145, (c) pursuant to a tender offer or other transaction that has been approved by the Board and is made to all holders of Securities that are the subject of the tender offer or other transaction, (d) any pledge of Securities by a Stockholder made in connection with a bona fide loan to such Stockholder, (e) any involuntary Transfer resulting from a lender foreclosing on any pledge of any Securities which pledge existed on the date hereof or was made in accordance with this Section 4.1, or (f) any Transfer made with the prior written consent of FelCor. 4.2. Transfers in Compliance with Law. No Stockholder may Transfer any Securities at any time to any Person except in compliance with applicable federal, state and foreign securities laws. 4.3. Legends. Each Stockholder understands and agrees that stop transfer instructions will be given to FelCor's transfer agent with respect to certificates evidencing the FelCor Common Stock such Stockholder may acquire pursuant to the Merger and that there will be placed on the certificate evidencing the FelCor Common Stock such Stockholder may acquire pursuant to the Merger a legend stating in substance: "THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE OTHER CONDITIONS SPECIFIED IN THAT CERTAIN STOCKHOLDERS' AND REGISTRATION RIGHTS AGREEMENT DATED JULY 27, 1998 AMONG FELCOR AND THE STOCKHOLDERS NAMED THEREIN, A COPY OF WHICH WILL BE MAILED TO THE HOLDER HEREOF WITHOUT CHARGE WITHIN FIVE DAYS AFTER RECEIPT OF WRITTEN REQUEST THEREFOR." FelCor agrees to notify the transfer agent of the removal of such stop transfer instructions and legend upon (i) the transfer of the FelCor Common Stock represented by such certificate pursuant to a Registration Statement under the Securities Act or in accordance with the applicable provisions of Rule 145 (including without limitation paragraph (d) thereof), (ii) the expiration of the restrictive period set forth in Rule 145(d), or (iii) the delivery by the Stockholder to FelCor of a copy of a letter from the staff of the SEC, or an opinion of counsel in form and substance reasonably satisfactory to FelCor, to the effect that 19 25 the shares subject thereto may be offered and sold without registration under the Securities Act. 4.4. Unauthorized Transfers. Any purported Transfer of any Securities in violation of the provisions of this Article IV (an "Unauthorized Transfer") will be null and void. FelCor will not register, recognize or give effect to any Unauthorized Transfer and the purported transferee of any Securities pursuant to an Unauthorized Transfer will not thereby acquire any rights in those Securities. FelCor will, immediately upon becoming aware of an actual or attempted Unauthorized Transfer, instruct the transfer agent or registrar for the Securities to issue an appropriate stop-transfer order with regard to the Unauthorized Transfer or attempted Unauthorized Transfer. 4.5. Transfers to Affiliates. No Stockholder will Transfer any of its shares of FelCor Common Stock to an Affiliate unless such Affiliate executes a copy of this Agreement and agrees to be bound by all the provisions herein, whereupon references in this Agreement to a Stockholder will be deemed to include any such Affiliates; provided, however, this Section 4.5 will not apply to any distribution by Partnership A or Partnership B to their respective direct or indirect constituent partners. ARTICLE V RIGHT TO PARTICIPATE IN SALES 5.1. Right to Participate in Sales. (a) If a Stockholder (the "Offering Stockholder") proposes to sell any or all of the Securities owned by the Offering Stockholder (the "Offered Securities") to a Third Party in a bona fide transaction not involving an Excluded Transaction (a "Third Party Sale"), the Offering Stockholder will, prior to effecting any Third Party Sale, deliver to the other Stockholders (the "Non-OfferingStockholders") a written notice (an "Offer Notice") specifying (i) the aggregate amount of cash consideration, the amount of any promissory note or other debt instrument and the Fair Market Value of any other non-cash consideration (the "Offer Price") for which the Offering Stockholder proposes to sell the Offered Securities in the proposed Third Party Sale, (ii) the identity of the purchaser in the proposed Third Party Sale, (iii) the date the proposed Third Party Sale is scheduled to close, and (iv) all other material terms of the proposed Third Party Sale, including without limitation any other contract or transaction entered into or proposed to be entered into in connection with the Third Party Sale. If a Non-Offering Stockholder so requests in a written notice (a "Co-Sale Notice") delivered to the Offering Stockholder within 20 calendar days following the delivery of the Offer Notice (the "Co-Sale Acceptance Period"), such Non-Offering Stockholder (a "Co-Selling Stockholder") will be permitted to 20 26 sell in that Third Party Sale, on the same terms as the Offering Stockholder, up to the number of Securities held by such Co- Selling Stockholder as is specified in the Co-Sale Notice; provided that the number of Securities to be sold by such Co- Selling Stockholder participating in such Third Party Sale will in no event exceed the Portion corresponding to such Co-Selling Stockholder. As used herein, "Portion" means, with respect to a Co-Selling Stockholder, the number of Securities beneficially owned by such Co-Selling Stockholder multiplied by a fraction the numerator of which is the number of Securities to be sold by the Offering Stockholder and its Permitted Transferees in such Third Party Sale and the denominator of which is the aggregate number of Securities beneficially owned by the Offering Stockholder and its Permitted Transferees, without duplication, immediately prior to such Third Party Sale. If a Co-Selling Stockholder requests to include more Securities than provided under the preceding sentences, the Offering Stockholder will attempt to cause the Third Party purchaser to acquire those additional Securities, but will have no liability for the Third Party purchaser's refusal to purchase those additional Securities. To the extent that the Third Party purchaser is unwilling to purchase all of the Securities proposed to be sold by the Offering Stockholder and the Co-Selling Stockholders, the number of Securities to be sold by each of the Offering Stockholder and the Co-Selling Stockholders will be reduced to their respective Pro Rata Number of Securities. "Pro Rata Number" means, with respect to the participation of the Offering Stockholder and each Co-Selling Stockholder in a Third Party Sale, the product of (i) the total number of Securities proposed to be sold by such Stockholder (not to exceed, with respect to any Co-Selling Stockholder, such Co- Selling Stockholder's Portion) and (ii) a fraction, the numerator of which is the total number of Securities proposed to be purchased by the Third Party purchaser, and the denominator of which is the total number of Securities proposed to be sold by both the Offering Stockholder and all of the Co-Selling Stockholders (not to exceed, with respect to any Co-Selling Stockholder, such Co-Selling Stockholder's Portion). For purposes of this Section 5.1, an "Excluded Transaction" will mean any Transfer (i) pursuant to or as a result of (A) a public offering or (B) a hedging transaction with a broker-dealer, bank or other financial institution, (ii) in an open-market transaction effected on a national securities exchange or national quotation system or a transaction involving as a counterparty an underwriter, broker-dealer or other similar Person effecting a transaction in or consistent with the ordinary course of its business, (iii) to one or more financial institutions, investment companies, pension or other employee benefit plans, trusts, mutual or similar funds or "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act, (iv) pursuant to a tender offer or other transaction that has been approved by the Board, or (v) resulting from any pledge of Securities by a Stockholder made in connection 21 27 with a bona fide loan to the Stockholder, including any Transfer resulting from a lender foreclosing on any pledge of any Security or exercising its other rights in respect thereof. (b) Notwithstanding anything to the contrary herein contained, the Offering Stockholder (i) will have the right to elect not to consummate any Third Party Sale (without liability to the Non-Offering Stockholders) if it is unable to sell all of the Offered Securities as initially set forth in the Offer Notice and (ii) may increase the number of Securities included in the Offered Securities to accommodate any Securities proposed to be sold by a Non-Offering Stockholder. (c) If a Co-Selling Stockholder properly elects to participate in a Third-Party Sale, the Offering Stockholder will represent such Co-Selling Stockholder in the sale but will not assume any fiduciary duty to the Co-Selling Stockholder under this Agreement. The Co-Selling Stockholder will execute and deliver the documentation providing for the Third Party Sale as negotiated by the Offering Stockholder; provided that, at any time prior to such execution and delivery, the Co-Selling Stockholder may decline to participate in the Third Party Sale if the documentation is not reasonably acceptable to it. If the Co- Selling Stockholder fails to execute and deliver the documentation or timely to perform its obligations thereunder, the Offering Stockholder may complete the Third Party Sale without the participation of the Co-Selling Stockholder. The Offering Stockholder will have no responsibility to the Co-Selling Stockholder if it fails to consummate a Third Party Sale, and the Offering Stockholder will in all events be free to abandon any Third Party Sale at any time prior to its consummation without any liability to the Non-Offering Stockholders. If the Holdings Parties so request, the Bass Parties will deliver to the Holdings Parties such documents as the Holdings Parties may reasonably request consistent with this Section 5.1 confirming the terms hereof for the benefit of any Third Party, including without limitation execution of a written acknowledgment prepared by the Holdings Parties within a reasonable period of time, not to exceed two Business Days, confirming that, with respect to a particular Excluded Transaction, the provisions of this Section 5.1 do not apply to a sale of any Securities owned by any of the Holdings Parties in such Excluded Transaction. 5.2. Securities Not Subject to Tag-Along Right. For the avoidance of doubt, this Article V will not apply to (i) the Transfer of Securities by either of the Holdings Parties to any of their direct or indirect constituent partners or (ii) Securities held or received by such direct or indirect partners. Nothing in this Article V or VI will constitute a 22 28 waiver, modification or amendment of any restriction on transfer or ownership arising under FelCor's charter or Section 4.1 hereof. 5.3. Termination. This Article V will terminate on the date either the Bass Parties or the Holdings Parties beneficially own less than 25% of their Initial Ownership. ARTICLE VI PREEMPTIVE RIGHTS; WAIVER 6.1. Preemptive Rights. Except for the issuance of Excluded Securities, FelCor will provide the Bass Parties and the Holdings Parties with written notice of any sale by it for cash of any Securities of FelCor in which the gross proceeds of such sale to FelCor and its Subsidiaries equals or exceeds $100 million (such offering, a "Qualified Offering") no later than the closing date of the Qualified Offering (such notice, the "Qualified Offering Notice"). The Qualified Offering Notice will specify the Securities issued, the purchase price (which, in the case of a public offering, will be the initial offering price to the public, and in all other cases, the price to the purchasers of the Securities without regard to underwriting discounts or commissions), the issuance date and all other material terms of such issuance. No later than five calendar days after receipt of the Qualified Offering Notice, each Stockholder must deliver to FelCor a written notice stating whether such Stockholder desires to acquire the same type of Securities that were issued and the number of Securities it intends to purchase (the "Election Notice"). The Election Notice will constitute a binding contract by the Stockholder to acquire, on the terms set forth in the Qualified Offering Notice, up to that number of Securities such that, after giving effect to the consummation of the Qualified Offering and the issuance to the Stockholder pursuant to this Section 6.1, the Stockholder would hold that Ownership Percentage equal to such Stockholder's Ownership Percentage immediately prior to the Qualified Offering, to be completed five days after the Qualified Offering or on such other date to which FelCor and the relevant Stockholder agree. Payment will be made in immediately available funds on such completion date. 6.2. Regulatory Restrictions; Termination. (a) FelCor may modify this Article VI in whole or in part to the extent necessary to address any objections raised by the NYSE or any other securities exchange or quotation system on which the FelCor Common Stock is listed (a "Regulatory Objection"). FelCor will use all reasonable efforts to address any Regulatory Objection so as to preserve to the greatest extent practicable the parties' rights hereunder. 23 29 (b) This Article VI will terminate (i) with respect to any Stockholder that fails three times to deliver an Election Notice with respect to the full number of Securities purchasable under Section 6.1 and (ii) as to the Bass Parties or the Holdings Parties, as applicable, on the date the Bass Parties or the Holdings Parties, respectively, beneficially own less than 50% of their Initial Ownership. ARTICLE VII MISCELLANEOUS 7.1. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in any Delaware State court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) consents to submit itself (without making such submission exclusive) to the personal jurisdiction of any federal court located in the State of Delaware or any Delaware State court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement and (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court. Process in any action, suit or proceeding hereunder may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 7.4 will be deemed effective service of process or such party. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity will be cumulative and not alternative, and the exercise of any thereof by any party will not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. 7.2. No Inconsistent Agreements. FelCor has not, as of the date hereof, and will not, on or after the date hereof, enter into any agreement with respect to the Securities which is inconsistent with the rights granted to the holders of Securities in this Agreement or otherwise conflicts with the provisions hereof. 7.3. Amendments and Waivers. Except as set forth in Section 6.2(a), no provision of this Agreement may be waived except by an instrument in writing executed by the party against whom the 24 30 waiver is to be effective. The provisions of this Agreement may not be amended, modified or supplemented without the prior written consent of FelCor and the Stockholders. Notwithstanding the foregoing, a waiver or consent to depart from the provisions of this Agreement with respect to a matter that relates exclusively to the rights of a particular Stockholder and that does not directly or indirectly affect the rights of the other Stockholders may be given only by affected Stockholders; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. 7.4. Notices. All notices, requests, claims, demands and other communications under this Agreement will be in writing and will be delivered personally, sent by overnight courier (providing proof of delivery) to the parties or sent by telecopy (providing confirmation of transmission) if to FelCor, at the address or telecopy number below and if to a Stockholder, at the address or telecopy number set forth on Schedule A (or at such other address or telecopy number for a party as will be specified by like notice): if to FelCor: FelCor Suite Hotels, Inc. 545 E. John Carpenter Freeway Suite 1300 Irving, Texas 75062 Attention: President Attention: General Counsel Telecopy No.: (972) 444-4949 with a copy to: Jenkens & Gilchrist, P.C. 1445 Ross Avenue Suite 3200 Dallas, Texas 75202 Attention: Robert W. Dockery Telecopy No.: (214) 855-4300 All notices will be deemed to be given only when actually received. 7.5. Owner of Registrable Securities. FelCor will maintain, or will cause its registrar and transfer agent to maintain, a stock book with respect to FelCor Common Stock, in which all transfers of Registrable Securities of which FelCor has received notice will be recorded. FelCor may deem and treat the person in whose name Registrable Securities are registered in the stock 25 31 book of FelCor as the owner thereof for all purposes, including without limitation the giving of notices under this Agreement. 7.6. Successors and Assigns. Except as provided elsewhere herein, no party may assign its rights or delegate its obligations under this Agreement. Notwithstanding the foregoing, Permitted Transferees will succeed to the rights granted under Article II and Article III (to the extent provided therein), and to the extent applicable thereto, Articles I and VII, of this Agreement. 7.7. Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties hereto. 7.8. Headings. Article and Section headings in this Agreement are included herein for convenience of reference only and will not constitute a part of this Agreement for any other purpose. 7.9. Governing Law. This Agreement will be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable conflict of laws principles thereof. 7.10. Entire Agreement. This Agreement constitutes the entire agreement, and supersedes all prior agreements and undertakings, both written and oral, including without limitation, the Stockholders' Agreement, dated as of April 28, 1997, among Holdings, HC, BAI, PLC and Bristol and the Registration Rights Agreement, dated as of April 28, 1997, among Holdings, HC, BAI and Bristol, with respect to the subject matter of this Agreement. 7.11. Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the prevailing party, as determined by the court, will be entitled to recover reasonable attorneys' fees and related disbursements and expenses in addition to any other available remedy. 7.12. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as 26 32 to be unenforceable, the provision will be interpreted to be only so broad as is enforceable. 7.13. Changes in Outstanding Securities. The provisions of this Agreement regarding Registrable Securities, FelCor Common Stock and other securities of FelCor will apply to securities of FelCor or any successor or assign of FelCor (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, or by reason of any stock dividend, stock split, stock issuance, reverse stock split, combination, recapitalization, reclassification, merger, consolidation or otherwise. Upon the occurrence of any such event, the definitions of FelCor Common Stock and Registrable Securities will be appropriately modified by the board of directors of FelCor. 7.14. Termination. Except as otherwise provided herein, this entire Agreement will terminate on the earlier of (i) the voluntary or involuntary dissolution or liquidation of FelCor, and (ii) the mutual agreement of the parties hereto. 7.15. Acquisition of BHR Shares. The Bass Parties will not, and will not permit their Affiliates to, purchase or otherwise acquire, or agree or offer to purchase or otherwise acquire, beneficial ownership of any shares ("BHR Common Shares") of the common stock, par value $0.01 per share, of BHR if after giving effect thereto the Bass Parties would be deemed to own, by virtue of the attribution provisions of Section 544 of the Code (as modified by Section 856 (h)(i)(B) of the Code) (assuming that BHR is a REIT for such purposes) and/or Section 318 of the Code (as modified by Section 856(d)(5) of the Code), BHR Common Shares representing more than 9.9% of the total number of outstanding BHR Common Shares, without the prior written consent of FelCor. 27 33 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. FELCOR SUITE HOTELS, INC. By: /s/ LAWRENCE D. ROBINSON ------------------------ Name: Lawrence D. Robinson Title: Senior Vice President/ General Counsel BASS AMERICA INC. By: /s/ A.E. STERN ------------------------ Name: A.E. Stern Title: Vice President and Treasurer HOLIDAY CORPORATION By: /s/ THOMAS R. OLIVER ------------------------ Name: Thomas R. Oliver Title: President UNITED/HARVEY INVESTORS I, L.P., By: Hampstead Genpar, L.P., its General Partner By: HH GenPar Partners, its General Partner By: Hampstead Associates, Inc., its Managing General Partner By: /s/ DANIEL A DECKER ------------------------ Name: Daniel A Decker Title: Vice President 34 UNITED/HARVEY INVESTORS II, L.P., By: Hampstead Genpar, L.P., its General Partner By: HH GenPar Partners, its General Partner By: Hampstead Associates, Inc., its Managing General Partner By: /s/ DANIEL A DECKER ------------------------ Name: Title: UNITED/HARVEY INVESTORS III, L.P. By: Hampstead Genpar, L.P., its General Partner By: HH GenPar Partners, its General Partner By: Hampstead Associates, Inc., its Managing General Partner By: /s/ DANIEL A DECKER ------------------------ Name: Title: UNITED/HARVEY INVESTORS IV, L.P. By: Hampstead Genpar, L.P., its General Partner By: HH GenPar Partners, its General Partner By: Hampstead Associates, Inc., its Managing General Partner By: /s/ DANIEL A DECKER ------------------------ Name: Title: 35 UNITED/HARVEY INVESTORS V, L.P. By: Hampstead Genpar, L.P., its General Partner By: HH GenPar Partners, its General Partner By: Hampstead Associates, Inc., its Managing General Partner By: /s/ DANIEL A DECKER ------------------------ Name: Title: The undersigned agrees to the terms of Article IV and Section 7.15. By: /s/ R.C. NORTH ---------------------------------- Name: R.C. North Title: Financial Director 36
SCHEDULE A Name and Address Number of Shares of of Stockholder FelCor Common Stock - ---------------- ------------------- Bass America Inc. 7,161,698 1105 North Market Street Suite 1046 Wilmington, Delaware 19801 Attn: Ed White Holiday Corporation 2,457,046 Three Ravinia Drive Suite 2900 Atlanta, Georgia 30346 Attn: Craig H. Hunt Telecopy: (770) 604-5988 United/Harvey Investors I, L.P. 2,170,140 2200 Ross Avenue Suite 4200 West Dallas, Texas 75201 Attn: Daniel A. Decker United/Harvey Investors II, L.P. 2,034,746 2200 Ross Avenue Suite 4200 West Dallas, Texas 75201 Attn: Daniel A. Decker United/Harvey Investors III, 1,356,497 L.P. 2200 Ross Avenue Suite 4200 West Dallas, Texas 75201 Attn: Daniel A. Decker United/Harvey Investors IV, L.P. 1,356,497 2200 Ross Avenue Suite 4200 West Dallas, Texas 75201 Attn: Daniel A. Decker United/Harvey Investors V, L.P. 2,712,995 2200 Ross Avenue Suite 4200 West Dallas, Texas 75201 Attn: Daniel A. Decker
EX-99.1 6 FINANCIAL STATEMENTS ON BRISTOL HOTEL 1 EXHIBIT 99.1 BRISTOL HOTEL COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1998 AND DECEMBER 31, 1997 (Dollars in Thousands)
March 31, December 31, 1998 1997 ---------- ------------ ASSETS (Unaudited) Current assets Cash and cash equivalents ................................................... $ 79,649 $ 86,167 Accounts receivable, net .................................................... 36,407 31,305 Inventory ................................................................... 8,393 8,286 Deposits and other current assets ........................................... 10,673 9,298 ---------- ---------- Total current assets ............................................. 135,122 135,056 Property and equipment (net of accumulated depreciation of $88,356 and $76,172, respectively) ........................................ 1,468,407 1,439,167 Other assets Restricted cash ............................................................. 8,670 9,283 Investments in joint ventures, net .......................................... 12,659 12,396 Goodwill (net of accumulated amortization of $1,226 and $891, respectively) .................................................. 52,394 52,773 Deferred charges and other non-current assets, net .......................... 15,915 17,963 ---------- ---------- Total assets ..................................................... $1,693,167 $1,666,638 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt ........................................... $ 8,025 $ 8,455 Accounts payable and accrued expenses ....................................... 45,957 29,852 Accrued property, sales and use taxes ....................................... 13,230 15,911 Accrued insurance reserves .................................................. 10,773 9,530 ---------- ---------- Total current liabilities ........................................ 77,985 63,748 Long-term debt, excluding current portion ....................................... 706,865 708,864 Deferred income taxes ........................................................... 243,751 242,530 Other liabilities ............................................................... 2,693 2,702 ---------- ---------- Total liabilities ................................................ 1,031,294 1,017,844 ---------- ---------- Common stock ($.01 par value; 150,000,000 shares authorized, 45,734,472 shares issued, and 43,804,901 and 43,641,401 shares outstanding at March 31, 1998 and December 31, 1997, respectively) ......................................... 438 436 Additional paid-in capital ...................................................... 608,529 606,935 Cumulative translation adjustment ............................................... 406 286 Retained earnings ............................................................... 52,500 41,137 ---------- ---------- Total stockholders' equity ....................................... 661,873 648,794 ---------- ---------- Total liabilities and stockholders' equity ....................... $1,693,167 $1,666,638 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 2 BRISTOL HOTEL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (Unaudited, in thousands except per share amounts)
March 31, ------------------------------ 1998 1997 ------------ ------------ REVENUE Rooms .................................................................... $ 120,372 $ 41,731 Food and beverage ........................................................ 28,050 12,475 Management fees .......................................................... 1,516 85 Other .................................................................... 8,864 3,970 ------------ ------------ Total revenue ................................................. 158,802 58,261 ------------ ------------ OPERATING COSTS AND EXPENSES Departmental expenses: Rooms ................................................................ 33,424 9,888 Food and beverage .................................................... 21,239 8,409 Other ................................................................ 2,455 1,207 Undistributed operating expenses: Administrative and general ........................................... 15,737 5,116 Marketing ............................................................ 11,380 3,838 Property occupancy costs ............................................. 24,474 8,326 Depreciation and amortization ........................................ 12,906 5,164 Corporate expense .................................................... 6,290 3,012 ------------ ------------ Operating income ............................................................. 30,897 13,301 Other (income) expense: Interest expense ......................................................... 12,513 6,278 Equity in income of joint ventures ....................................... (554) -- ------------ ------------ Income before income taxes ................................................... 18,938 7,023 Income taxes ................................................................. 7,576 2,613 ------------ ------------ Net income ................................................................... $ 11,362 $ 4,410 ============ ============ Earnings per common and common equivalent share: Net income: Basic ................................................................ $ 0.26 $ 0.18 Diluted .............................................................. $ 0.26 $ 0.17 Weighted average number of common and common equivalent shares outstanding: Basic ................................................................ 43,718,751 24,848,760 Diluted .............................................................. 44,535,273 25,796,808
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 3 BRISTOL HOTEL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (Unaudited, in thousands)
March 31, ---------------------- 1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ...................................................................................... $ 11,362 $ 4,410 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization ............................................................... 12,906 5,164 Amortization of deferred financing costs .................................................... 1,257 528 Equity in earnings of joint ventures ........................................................ (554) -- Non-cash portion of foreign currency translation ............................................ 120 -- Compensation expense recognized for employee stock options .................................. 73 64 Changes in working capital ...................................................................... 7,413 (3,628) Increase in advance deposits .................................................................... 714 286 (Increase) decrease in restricted cash .......................................................... 613 (190) Deferred income taxes provision ................................................................. 1,221 624 Distribution from joint ventures ................................................................ 175 -- Decrease in other liabilities ................................................................... (9) (1,062) -------- -------- Cash provided by operating activities ................................................ 35,291 6,196 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Improvements to property and equipment .......................................................... (40,820) (6,156) Purchase of property and equipment .............................................................. -- (35,000) -------- -------- Cash used in investing activities .................................................... (40,820) (41,156) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt .................................................................... (2,429) (1,665) Proceeds from senior term facility .............................................................. -- 41,200 Proceeds from exercise of employee stock options ................................................ 1,523 -- Increase in deferred charges and other non-current assets ....................................... (83) (3,262) -------- -------- Cash provided by (used in) financing activities ...................................... (989) 36,273 -------- -------- Net increase (decrease) in cash and cash equivalents ................................................ (6,518) 1,313 Cash and cash equivalents at beginning of period .................................................... 86,167 4,666 -------- -------- Cash and cash equivalents at end of period .......................................................... $ 79,649 $ 5,979 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 4 BRISTOL HOTEL COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION Bristol Hotel Company (the "Company" or "Bristol") is a Delaware corporation which was incorporated in November 1994 and began operations after the acquisitions of Harvey Hotel Company, Ltd. and its subsidiaries and United Inns, Inc. At March 31, 1998, the Company owned 86 hotels and managed 15 additional hotels, two of which are owned by joint ventures in which the Company owns a 50% interest. The properties, which contain approximately 28,800 rooms, are located in 22 states, the District of Columbia and Canada. The Company acquired the ownership and/or management of 60 of these properties on April 28, 1997 (the "Holiday Inn Acquisition"). The condensed consolidated balance sheet at December 31, 1997 has been derived from the audited balance sheet at that date. The condensed consolidated balance sheet at March 31, 1998, the condensed consolidated statements of income for the three months ended March 31, 1998 and 1997, and the condensed consolidated statements of cash flow for the three months ended March 31, 1998 and 1997 have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly, in all material respects, the financial position of the Company as of March 31, 1998, and the results of operations and cash flows for the three months ended March 31, 1998 and 1997 have been made. Interim results are not necessarily indicative of fiscal year performance because of seasonal and short-term variations. 2. SUBSEQUENT EVENTS On April 21, 1998, the Company acquired the 187-room Sheraton Four Points Hotel in Leominster, Massachusetts for $9.0 million. The purchase price was funded with borrowings from the FelCor Facility (as described below). On April 30, 1998 the Company acquired 20 midwestern hotels (the "Omaha Acquisition"). The total consideration for these assets was $40 million of assumed debt (of which $24.9 million was paid off at closing), $20 million in cash and 1.43 million shares of the Company's common stock. The portfolio consists of nine full-service Holiday Inns, five Holiday Inn Express hotels, five Hampton Inns and one Homewood Suites, with locations in Omaha, Nebraska; Moline, Illinois; Davenport, Iowa; central Kansas and Midland/Odessa, Texas. The Company funded the cash portion of the purchase price and the $24.9 million of debt prepayments with borrowings under the FelCor Facility (as described below). On April 21, 1998, the Company entered into an interim credit facility with FelCor Suite Hotels, Inc. ("FelCor") pursuant to which the Company can borrow up to $120 million to fund acquisitions and redevelopment costs and for other corporate purposes (the "FelCor Facility"). The FelCor Facility bears interest at a rate of LIBOR plus 2% and will mature on December 31, 2003. On May 11, 1998, the Company refinanced its existing $455 million loan from Nomura Asset Capital Corporation and Bankers Trust Company with a new $455 million loan from Bankers Trust Company (the "BT Loan"). The BT Loan is secured by a pledge of stock in the subsidiaries of the Company, bears interest at LIBOR plus 1-3/4% and will mature on May 11, 2001. The Company incurred approximately $34 million in yield maintenance costs and prepayment penalties related to the payoff of the existing facility, which, along with approximately $6.8 million of deferred financing charges, will be recognized as an extraordinary loss in the second quarter of 1998. 6 5 BRISTOL HOTEL COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. PROPOSED MERGER WITH FELCOR SUITE HOTELS, INC. On March 24, 1998, the Company announced a proposed merger with FelCor, subject to approval by shareholders of both companies. Under the terms of the proposed merger (the "FelCor Merger"), Felcor will acquire the real estate holdings and assume the associated debt of the Company in return for 31.7 million shares of newly issued FelCor stock. Prior to the FelCor Merger, the Company will spin-off, as a taxable dividend, its hotel operating business as a separate publicly traded hotel operating company to be known as Bristol Hotels & Resorts ("New Bristol"). The spin-off will be followed by the merger of Bristol into Felcor, with Felcor acquiring all of Bristol's remaining assets, including its 110 owned hotels (giving effect to acquisitions closed subsequent to quarter end). Each of the Company's hotels acquired by FelCor in the merger will be leased to and operated by New Bristol. The merged company, which will be renamed FelCor Lodging Trust, Ltd., will be the largest non-paired share lodging REIT and New Bristol will be the largest independent hotel operating company in the U.S. The two companies will be separately owned and managed, but are expected to work together in the acquisition and leasing of additional hotels. In the spin-off, Bristol stockholders will receive one common share of New Bristol for every two of their existing Bristol common shares. In the merger, Bristol stockholders will receive 0.685 FelCor common shares for each of their existing Bristol common shares. FelCor stockholders will continue to hold their current FelCor common shares. As a result of these transactions, existing Bristol stockholders will own all of New Bristol's equity and 44% of FelCor's outstanding common equity. The spin-off will be taxable to Bristol and its stockholders, while the merger will be tax-free. The following unaudited pro forma statements of income of New Bristol give effect to Bristol's contribution of its hotel operating business to New Bristol, the Holiday Inn Acquisition, the spin-off, the merger and the Omaha Acquisition as if each event had occurred on January 1 of the periods presented. The pro forma statements of income are presented for illustrative purposes only and do not purport to be indicative of the results that would have actually been obtained had such transactions been completed for the periods presented or that may be obtained in the future. 7 6 BRISTOL HOTEL COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. PROPOSED MERGER WITH FELCOR SUITE HOTELS, INC. (CONTINUED)
Pro Forma for the Three Months Ended March 31, 1998 1997 ---------- ---------- (unaudited, in thousands except per share amounts) ------------------------- Total revenue ....................................... $ 170,410 $ 160,448 Departmental expenses ............................... 62,206 60,240 Undistributed operating expenses (including tenant lease expense) ................................... 105,457 97,562 ---------- ---------- Operating income .................................... 2,747 2,646 Interest expense .................................... 205 205 ---------- ---------- Income before income taxes .......................... 2,542 2,441 Income taxes ........................................ 1,017 974 ---------- ---------- Net income .......................................... $ 1,525 $ 1,467 ========== ========== Earnings per common and common equivalent share ................................. $ 0.09 $ 0.10 ========== ========== Weighted average number of common and common equivalent shares outstanding ............. 17,565,343 15,101,288 ========== ==========
4. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME The following unaudited pro forma statement of income gives effect to the Holiday Inn Acquisition and related debt refinancings as if each event had occurred on January 1, 1997. The pro forma statement of income is presented for illustrative purposes only and does not purport to be indicative of the results that would have actually been obtained had such transactions been completed as of the assumed dates and for the period presented or that may be obtained in the future. This pro forma statement of income is used for comparison to the actual operating results for the three months ended March 31, 1998 in "Management's Discussion and Analysis of Results of Operations and Financial Condition." 8 7 BRISTOL HOTEL COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
Pro Forma for the Three Months Ended March 31, 1997 ----------------- (unaudited, in thousands except per share amounts) Total revenue ............................................ $ 148,684 Departmental expenses .................................... 55,152 Undistributed operating expenses ......................... 66,074 ----------- Operating income ......................................... 27,458 Other (income) expenses: Interest expense ....................................... 14,809 Equity in income of joint ventures ..................... (339) ----------- Income before income taxes ............................... 12,988 Income taxes ............................................. 5,012 ----------- Net income ............................................... $ 7,976 =========== Earnings per common and common equivalent share ...................................... $ 0.20 =========== Weighted average number of common and common equivalent shares outstanding .................. 39,838,770 ===========
NOTE TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME A. Bristol acquired the Allerton Hotel in Chicago (the "Allerton") on January 31, 1997. There were no adjustments made to the pro forma condensed consolidated statement of income for this property. Results of operations for this property are included from the acquisition date. 9 EX-99.2 7 PRESS RELEASE DATED JULY 27, 1998 1 EXHIBIT 99.2 [FELCOR SUITE HOTELS INC. LETTERHEAD] FOR IMMEDIATE RELEASE: Contacts: Thomas J. Corcoran, Jr. President & CEO Randy Churchey Senior Vice President & CFO Monica L. Hildebrand Vice President/Director of Communications (972) 444-4900 FELCOR SHAREHOLDERS APPROVE MERGER WITH BRISTOL IRVING, TEXAS... JULY 27, 1998 - FelCor Suite Hotels, Inc., (NYSE:FCH), the largest non-paired share hotel real estate investment trust (REIT), announced that its shareholders had approved the previously announced merger with Bristol Hotel Company (NYSE:BH) at FelCor's 1998 Annual Shareholders' Meeting held today. The merger will result in FelCor's acquisition of 109 Bristol hotels. Approximately 75% of FelCor's outstanding common stock voted in favor of, and less than 1% voted against, the proposed merger. At the meeting, shareholders also elected two directors and adopted amendments to FelCor's charter to change the name of the company to FelCor Lodging Trust Incorporated and to increase its number of authorized shares of capital stock. Bristol's shareholders also approved the proposed merger at a shareholders' meeting held today. The merger is expected to become effective at 9:00 a.m. EDT on Tuesday, July 28, 1998. FelCor will continue to trade on the New York Stock Exchange under the symbol FCH. Prior to the effectiveness of the merger, Bristol will spin-off, as a taxable dividend, all of its hotel management business into a newly formed public company known as Bristol Hotels & Resorts. At the 1998 Annual Meeting of Shareholders, Hervey A. Feldman assumed a new role as FelCor's Chairman Emeritus and did not stand for re-election. Mr. Feldman will continue to be involved in FelCor's growth and strategic plans for the future. Michael D. Rose, the former Chairman of Promus Hotel Corporation, and Charles N. Mathewson, the Chairman and CEO of International Game Technology, were elected to FelCor's board of directors at the annual meeting. In addition, following the closing of the merger with Bristol, Richard C. North, Financial Director of Bass plc, Robert H. Lutz, Jr., Chairman and CEO of Amresco, Inc., and Donald J. McNamara, Chairman of The Hampstead Group will join FelCor's board, bringing to ten the number of directors on FelCor's board. - more - 2 FelCor Shareholders Approve Bristol Merger July 27, 1998 Page 2 Following effectiveness of the merger on July 28, 1998, FelCor Lodging Trust will own 195 hotels with 49,882 rooms and suites. FelCor is the largest owner of Embassy Suites(R) hotels. As a result of the merger, FelCor expects to become the largest owner of Crowne Plaza(R) and Holiday Inn(R)-branded hotels upon completion of planned conversions. The vast majority of the 195 hotels are operated under the Embassy Suites, Doubletree Guest Suites(R), Doubletree(R), Sheraton Suites(R), Sheraton(R), Crowne Plaza, Holiday Inn or Hilton Suites(R) brands. FelCor's total market capitalization will be approximately $4.0 billion. With the exception of historical information, the matters discussed in this news release include "forward looking statements" within the meaning of the federal securities law and are qualified by cautionary statements contained herein and in FelCor's filings with the Securities and Exchange Commission. ### EX-99.3 8 PRESS RELEASE DATED JULY 28, 1998 1 EXHIBIT 99.3 [FELCOR LODGING TRUST LETTERHEAD] FOR IMMEDIATE RELEASE: Contacts: Thomas J. Corcoran, Jr. President & CEO Randy Churchey Senior Vice President & CFO Monica L. Hildebrand Vice President/Director of Communications (972) 444-4900 FELCOR AND BRISTOL COMPLETE MERGER TRANSACTION TRANSACTION CREATES $4.0 BILLION HOTEL REIT DALLAS, JULY 28, 1998 - FelCor Lodging Trust Incorporated (NYSE: FCH), formerly FelCor Suite Hotels, Inc., today announced completion of the merger of Bristol Hotel Company's real estate holdings with and into FelCor. The merger, which was initially announced on March 24, 1998, establishes FelCor Lodging Trust as the nation's largest non-paired share hotel real estate investment trust (REIT) and one of the country's premier lodging companies. FelCor will continue to trade under the ticker symbol FCH on the New York Stock Exchange. On July 27, 1998, the merger was approved by the shareholders of both FelCor and Bristol. The merger results in FelCor's acquisition of 109 Bristol hotels in return for 31.1 million shares of newly issued FelCor common stock. Based on the July 27, 1998 closing stock prices, the transaction is valued at approximately $1.7 billion, including the assumption of approximately $700 million in debt. With the completion of this transaction, FelCor's market capitalization will be approximately $4 billion and the REIT will own approximately 195 hotels with nearly 50,000 rooms and suites. The Bristol hotels add more than 28,000 rooms to the FelCor portfolio. The average Bristol hotel has 266 keys and more than 8,000 square feet of meeting space. Based on the current FelCor stock price, the Bristol hotels price per key is approximately $59,000. Eighty-seven of the newly acquired Bristol hotels are either all-suite upscale, upscale full service or traditional full-service hotels. FelCor is the largest owner of Embassy Suites(R) hotels. As a result of the merger, FelCor is the owner of the largest number of Crowne Plaza(R) and Holiday Inn(R) hotels. -more- 2 FelCor and Bristol Complete Merger July 28, 1998 Page 2 The merger establishes significant brand owner/manager relationships for FelCor with Bass plc and its subsidiary Bass Hotels & Resorts, which acquired approximately 13% of FelCor's common stock in the merger. FelCor also establishes a strategic relationship with Bristol Hotels & Resorts (NYSE:BH), the new hotel operating company spun off from Bristol prior to its merger into FelCor, which leases and operates the hotels acquired by FelCor in the merger. Following the merger with Bristol, FelCor will continue Bristol's repositioning and redevelopment program, under which the redevelopment of 39 hotels was recently completed, and pursuant to which 43 hotels are currently in the process of redevelopment or are expected to be completed in 1999. FelCor also expands its potential acquisition pool through its new alliance with Bass Hotels & Resorts, which operates or franchises more than 2,600 hotels and 450,000 guestrooms in more than 90 countries and territories. As a result of the merger, FelCor also diversifies its portfolio both geographically and by asset class, adding hotels in many key markets and broadening its portfolio in the upscale and traditional full-service hotel segments. FelCor's hotel portfolio is concentrated in the upscale and traditional full-service segments with over 93% of revenues derived from the hotels in those segments. Bristol Hotels & Resorts, as the successor to Bristol's hotel operating business and as the lessee of the Bristol hotels acquired by FelCor, will remain a leading franchisee in Bass Hotels & Resorts' $1.5 billion modernization program. By the year 2000, FelCor expects to complete the investment, commenced by Bristol in 1997, of approximately $400 million (of which approximately $200 million remains to be spent) in the redevelopment of Crowne Plaza and Holiday Inn hotels owned by FelCor and leased to Bristol Hotels & Resorts. Concurrently with the completion of the merger, Richard North, Financial Director of Bass p1c; Robert Lutz, Chairman and CEO of Amresco, Inc.; and Donald J. McNamara, Chairman of The Hampstead Group, each of whom had been a director of Bristol, became FelCor directors, bringing the number of directors on it's board to 10. "This merger transaction creates new strategic alliances for FelCor with Bristol Hotels & Resorts and with Bass Hotels & Resorts and is a natural extension of our original business plan of aligning ourselves with top brands and strong management/operating teams while primarily acquiring hotels at below their replacement cost and repositioning and/or rebranding them for strong internal growth," said Thomas J. Corcoran, Jr., President and CEO of FelCor. FelCor Lodging Trust Incorporated is the largest non-paired share hotel REIT. The company is the largest owner of Promus-branded hotels (NYSE:PRH). Since its initial public offering in 1994, the company's portfolio has grown to 195 hotels with nearly 50,000 rooms and suites. The company maintains strategic relationships with key hotel brand owners/management companies. These include Promus Hotel Corporation, Bristol Hotels and Resorts, Bass Hotels & Resorts and Starwood Hotels & Resorts. The company's hotels are operated under a number of the nation's leading hotel brands, including the Embassy Suites, Doubletree Guest Suites(R), Doubletree(R), Sheraton Suites(R), Sheraton(R), Crowne Plaza, Holiday Inn and Hilton Suites(R) brands. With the exception of historical information, the matters discussed in this news release include "forward looking statements" within the meaning of the federal securities law and are qualified by cautionary statements contained herein and in FelCor's filings with the Securities and Exchange Commission. ### 3 FelCor and Bristol Complete Merger July 28, 1998. Page 3 SUMMARY FACT SHEET (Statistics are pro forma for all hotels owned at December 31, 1997)
Bristol FelCor Combined ------------ ------------ -------------- Owned Hotels 109 86 195 Rooms 28,718 21,164 49,882 Current Equity Market Capitalization $1.0 Billion $1.5 Billion $ 2.5 Billion Debt $0.7 Billion $0.8 Billion $ 1.5 Billion Current Total Market Capitalization $1.7 Billion $2.3 Billion $ 4.0 Billion 1997 Occupancy 72.2% 73.2% 72.7% 1997 ADR $ 74.47 $ 112.44 $ 89.34 1997 RevPAR $ 53.77 $ 82.33 $ 64.95 1997 RevPAR Growth 7.5% 8.8% 8.3% 1997 Hotel Acquisitions $773 Million $700 Million $1.473 Billion Shares (Diluted) 46.3 44.6 76.3(1)
(1) Reflects an exchange ratio of 0.685 FelCor shares for each Bristol share. 4 FelCor and Bristol Complete Merger July 28, 1998 Page 4 PORTFOLIO INFORMATION
FelCor Bristol Combined Brand Hotels Rooms Hotel Rooms Hotels Rooms ----- ------ ------ ------ ----- ------ ------ All-Suite Upscale Embassy Suites 58 14,332 0 0 58 14,332 Doubletree Guest Suites 14 2,713 0 0 14 2,713 Sheraton Suites 4 984 0 0 4 984 Hilton Suites 1 174 0 0 1 174 Crowne Plaza Suites 0 0 1 295 1 295 Homewood Suites 0 0 1 108 1 108 Bristol House 0 0 1 127 1 127 Sub-total 77 18,203 3 530 80 18,733 Upscale Full Service Crowne Plaza 0 0 19 6,814 19 6,814 Doubletree Hotel 3 704 0 0 3 704 Harvey Hotel 0 0 4 1,262 4 1,262 Sheraton 5 1,956 0 0 5 1,956 Hilton 1 301 0 0 1 301 Sub-total 9 2,961 23 8,076 32 11,037 Traditional Full Service Holiday Inn 0 0 47 12,939 47 12,939 Holiday Inn Select 0 0 6 2,145 6 2,145 Ramada 0 0 1 220 1 220 Days Inn 0 0 1 157 1 157 Courtyard by Marriott 0 0 2 420 2 420 Holiday Inn & Suites 0 0 2 509 2 509 Sheraton Four Points 0 0 1 187 1 187 Independent 0 0 1 181 1 181 Sub-total 0 0 61 16,758 61 16,758 Limited Service Holiday Inn Express 0 0 8 1,113 8 1,113 Fairfield Inn 0 0 5 931 5 931 Hampton Inn 0 0 9 1,310 9 1,310 Sub-total 0 0 22 3,354 22 3,354 TOTAL 86 21,164 109 28,718 195 49,882
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