-----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, MfwC9ojuVU7xvDbMeGpAMzBpRKbsxAaoCYU8ryc1VPmMtEa6cJQ+6PHHyN2eW0y1 8qbm9K0a/158XlZc48lsKQ== 0000950134-98-006670.txt : 19980813 0000950134-98-006670.hdr.sgml : 19980813 ACCESSION NUMBER: 0000950134-98-006670 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19980812 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: POS AM SEC ACT: SEC FILE NUMBER: 333-50509 FILM NUMBER: 98682845 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 POS AM 1 POST EFFECTIVE AMENDMENT 1 As filed with the Securities and Exchange Commission on August 12, 1998 Registration No. 333-50509 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------- POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-3 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------------- FELCOR LODGING TRUST INCORPORATED (FORMERLY FELCOR SUITE HOTELS, INC.) (Exact name of registrant as specified in its charter) MARYLAND 545 E. JOHN CARPENTER FRWY. , SUITE 1300 75-2541756 (State or other jurisdiction of IRVING, TEXAS 75062 (I.R.S. Employer incorporation or organization) (972) 444-4900 Identification No.) (Address, including ZIP code, and telephone number, including area code, of registrant's principal executive offices) ---------------------------
LAWRENCE D. ROBINSON SENIOR VICE PRESIDENT AND GENERAL COUNSEL FELCOR LODGING TRUST INCORPORATED 545 E. JOHN CARPENTER FRWY., SUITE 1300 IRVING, TEXAS 75062 (972) 444-4900 (Name, address, including ZIP code, and telephone number, including area code, of agent for service) --------------------------- Copy to: ROBERT W. DOCKERY JENKENS & GILCHRIST, P.C. 1445 ROSS AVENUE, SUITE 3200 DALLAS, TEXAS 75202-2799 --------------------------- Approximate Date of Commencement of Proposed Sale to the Public: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend reinvestment plans, check the following box: [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ] --------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 NOTE: THE CHANGES FROM THE FINAL FORM S-4 REGISTRATION STATEMENT FILED IN JUNE 1998, AS CONTAINED IN THIS POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-3, WERE VERY EXTENSIVE. A MARKED VERSION WOULD NOT BE MEANINGFUL TO SHOW REVISED LANGUAGE. 3 PROSPECTUS 22,486,234 SHARES FELCOR LODGING TRUST INCORPORATED (FORMERLY FELCOR SUITE HOTELS, INC.) COMMON STOCK (PAR VALUE $0.01 PER SHARE) --------------------------- This prospectus ("Prospectus") relates to the offer and sale by FelCor Lodging Trust Incorporated (formerly FelCor Suite Hotels, Inc.) ("FelCor") of up to 1,273,259 shares of common stock, par value $0.01 per share (the "Common Stock"), pursuant to outstanding options (the "Options") granted under the terms of the Second Amended and Restated 1995 Equity Incentive Plan (the "Incentive Plan") and the Stock Option Plan for Non-Employee Directors (the "Non-Employee Director Plan") (together with the Incentive Plan, the "Plans"). The Plans were originally adopted by Bristol Hotel Company ("Bristol"), which was merged with and into FelCor effective July 28, 1998 (the "Merger"). FelCor assumed Bristol's obligations under the Plans and Options as a result of the Merger. See "Description of the Plans." This Prospectus also relates to the offer and sale by certain selling shareholders named herein under "Selling Shareholders" ("Selling Shareholders") of up to 21,212,975 shares of Common Stock. FelCor will receive no part of the proceeds of any sales by the Selling Shareholders. With respect to 19,249,619 of these shares, certain Selling Shareholders have agreed not to transfer them for a period of six months after the Merger except in certain circumstances. All expenses of registration incurred in connection with this offering are being borne by FelCor, but all selling expenses and commissions incurred by Selling Shareholders will be borne by the Selling Shareholders. The outstanding shares of Common Stock held by the Selling Shareholders were originally issued by FelCor pursuant to the Merger in exchange for shares of Common Stock of Bristol owned by the Selling Shareholders. The Selling Shareholders were affiliates of Bristol at the time of the Merger and under applicable securities regulations cannot freely resell their shares without registration or an exemption therefrom. This Prospectus is required by FelCor's contractual obligations to register the shares of the Selling Shareholders for resale, and the Selling Shareholders are under no obligation to resell their shares. See "Selling Shareholders." The Common Stock of FelCor is listed on the New York Stock Exchange (the "NYSE") under the symbol "FCH." The last reported sale price of Common Stock on August 10, 1998, on the NYSE was $26-1/16 per share. To preserve its status as a real estate investment trust ("REIT"), FelCor's Charter limits the Common Stock that may be owned by any single person or affiliated group, subject to certain exceptions, to 9.9% of the outstanding shares and restricts the transferability thereof under certain circumstances. SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY. --------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------------- THE DATE OF THIS PROSPECTUS IS AUGUST 12, 1998. 1 4 WHERE YOU CAN FIND MORE INFORMATION AVAILABLE INFORMATION FelCor files annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). Prospective purchasers may read and copy any reports, statements or other information FelCor files at the SEC's public reference facilities in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800- SEC-0330 for further information on the public reference facilities. FelCor's SEC filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at "http://www.sec.gov." In addition, FelCor's filings can be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005. FelCor registered with the SEC the shares of Common Stock covered by this Prospectus. This Prospectus is a part of a Post-Effective Amendment No. 1 on Form S-3 to Form S-4 Registration Statement (File No. 333-50509) filed with the SEC (the "Registration Statement"). As allowed by SEC rules, this Prospectus does not contain all the information contained in the Registration Statement or in the exhibits to the Registration Statement. The Registration Statement may be inspected and copied at the public reference facilities of the SEC described above. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The SEC allows FelCor to include certain information in this document by "incorporating by reference." The following documents filed with the SEC by FelCor (File No. 001-14236) pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are incorporated by reference in this Prospectus: 1. Annual Report on Form 10-K and Forms 10-K/A for the year ended December 31, 1997; 2. Quarterly Report on Form 10-Q for the three months ended March 31, 1998; 3. Current Report on Form 8-K filed with the SEC on July 11, 1997 and amended on August 14, 1997; 4. Current Report on Form 8-K filed with the SEC on April 23, 1998; 5. Current Report on Form 8-K filed with the SEC on May 29, 1998; 6. Current Report on Form 8-K filed with the SEC on August 10, 1998; 7. Pro forma financial information contained in the definitive Joint Proxy Statement/Prospectus dated June 19, 1998 filed with the SEC in connection with the Registration Statement; and 8. The description of the Common Stock contained in the Registration Statement on Form 8-A filed with the SEC, including any amendments or reports filed for the purpose of updating such description. All documents and reports filed by FelCor pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the date all of the shares of Common Stock are sold will be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the dates of filing of such documents or reports. Any statement contained in a document incorporated or deemed to be incorporated by reference herein will be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. THE DOCUMENTS INCORPORATED BY REFERENCE (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED ON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, DIRECTED TO FELCOR LODGING TRUST INCORPORATED, 545 E. JOHN CARPENTER FREEWAY, SUITE 1300, IRVING, TEXAS 75062 (TELEPHONE NUMBER (972) 444-4900), ATTENTION: SECRETARY. 2 5 THE COMPANY FelCor Lodging Trust Incorporated (formerly FelCor Suite Hotels, Inc.) ("FelCor") is a self- administered equity REIT that, at August 10, 1998, owned an approximate 95.7% general partner interest in FelCor Lodging Limited Partnership (formerly FelCor Suites Limited Partnership), a Delaware limited partnership (the "Partnership"). At August 10, 1998, following the merger ("Merger") of Bristol Hotel Company ("Bristol") with an into FelCor, the Partnership owned interests directly, or through subsidiaries, in 193 hotels (the "Hotels") with an aggregate of approximately 50,000 suites and rooms in 35 states and Canada. Assuming completion of pending conversions, 80 of the Hotels are operated as all-suite upscale hotels, 32 are operated as upscale full service hotels, 60 are operated as traditional full service hotels, and 21 are operated as limited service hotels. The Hotels are operated primarily under the following brands: Embassy Suites(R) (58 hotels), Holiday Inn(R) and Holiday Inn Select(R) (52 hotels), Crowne Plaza(R) (20 hotels), Doubletree(R) and Doubletree Guest Suites(R) (17 hotels), Sheraton(R) and Sheraton Suites(R) (9 hotels) and other brands (37 hotels). Seventy-three of the Hotels are managed by a subsidiary of Promus Hotel Corporation ("Promus"), which includes Doubletree Hotels Corporation and its subsidiaries. Promus is the largest operator of full-service, all-suite hotels in the United States. Nine of the remaining Hotels are managed by a subsidiary of Starwood Hotels & Resorts, which includes ITT Sheraton Corporation and its subsidiaries, and three are managed by two independent management companies. The remaining 108 Hotels, including all of the hotels acquired from Bristol in the Merger, are leased or managed by subsidiaries of Bristol Hotels & Resorts, itself a former subsidiary of Bristol that was spun-off by Bristol to its stockholders prior to the Merger. Bristol Hotels & Resorts has succeeded to Bristol's hotel operating business and is one of the largest independent hotel operating companies in the United States. See "--Recent Developments--Merger with Bristol Hotel Company." Unless the context otherwise requires, all references herein to "FelCor" are references to FelCor Lodging Trust Incorporated, the Partnership and their respective subsidiaries, on a consolidated basis. To enable FelCor to satisfy certain requirements for qualification as a REIT, neither it nor the Partnership can operate the hotels in which they invest. Accordingly, on August 10, 1998, the Partnership and its subsidiaries had leased 86 Hotels to DJONT Operations, L.L.C., or one of its consolidated subsidiaries (collectively, "DJONT"), and 107 Hotels to Bristol Hotels & Resorts, or one of its consolidated subsidiaries (collectively, "BHR") pursuant to leases ("Percentage Leases") generally with initial terms (including lessee renewal options) of 10 to 15 years that provide for rent equal to the greater of a minimum base rent ("Base Rent") or a percentage rent ("Percentage Rent") based on hotel revenues. FelCor was formed as a Delaware corporation on May 16, 1994 and was reincorporated as a Maryland corporation on June 23, 1995. FelCor's executive offices are located at 545 E. John Carpenter Frwy., Suite 1300, Irving, Texas 75062, and its telephone number is (972) 444-4900. RECENT DEVELOPMENTS MERGER WITH BRISTOL HOTEL COMPANY. Effective July 28, 1998, Bristol was merged with and into FelCor. As a consequence of the Merger, Bristol's stockholders acquired approximately 46% of FelCor's outstanding Common Stock, and FelCor succeeded to Bristol's interest in 109 owned or leased hotels (the "Bristol Hotels"). References in this Prospectus to the Hotels includes the Bristol Hotels. In connection with the Merger, Bristol distributed to its stockholders all of the common stock of BHR as a separate public company (the "Spin-Off"). The Bristol Hotels have been leased by FelCor to BHR pursuant to Percentage Leases. BHR has continued Bristol's former hotel operating business and, as of August 10, 1998, operated 122 hotels, including hotels not owned by FelCor. BHR and FelCor are independent public companies with no overlap in management or their boards of directors. However, BHR's two largest stockholders also have significant ownership interests in FelCor and have representatives on the Boards of Directors of both companies, including the Chairman of the Board of FelCor. FelCor has maintained its existing headquarters facilities in Dallas, and BHR assumed responsibility for Bristol's employees and existing headquarters facilities in Dallas. OTHER RECENT ACQUISITIONS AND DISPOSITIONS. During the period from April 1, 1998, to August 10, 1998, FelCor acquired interests in 11 hotels with an aggregate of 2,749 suites and rooms for approximately $324 million in cash. These 11 hotels consist of (i) a traditional 248-room upscale full-service Doubletree hotel with approximately 11,000 square feet of meeting space located in Aurora, Colorado, (ii) a 301-room upscale full 3 6 service Hilton(R) hotel with approximately 19,000 square feet of meeting and convention space and an exhibition center of approximately 10,000 square feet located in Secaucus, New Jersey, (iii) eight hotels, located in seven states and having a total of 1,898 suites that were acquired from Starwood Hotels & Resorts including five Embassy Suites Hotels and three Doubletree Guest Suites hotels (two of which have subsequently been converted to the Sheraton Suites brand and one of which is being converted to an Embassy Suites hotel), and (iv) a traditional 302-room upscale full-service Doubletree hotel with approximately 14,000 square feet of meeting space in Dallas, Texas. FelCor has disposed of its interests in the Holiday Inn Washington, D.C. hotel and the Holiday Inn Express(R)-Atlanta N.E. hotel for total cash consideration of $7.1 million, in two separate transactions. FelCor may sell a limited number of the Bristol Hotels in the near future. 4 7 RISK FACTORS Prospective purchasers should carefully consider the following risk factors, together with the other information provided, before deciding to purchase shares of Common Stock. Each of these risk factors could adversely affect the value of an investment in the Common Stock. INABILITY TO INTEGRATE BRISTOL'S ASSETS OR REALIZE ANTICIPATED BENEFITS OF MERGER As a result of the Merger, the number of hotels owned by FelCor more than doubled. Although the Bristol Hotels are operated by BHR under long-term leases, FelCor must integrate these hotels into its hotel portfolio and may need additional people and resources to handle the increased work load. If FelCor is unable successfully to integrate the Bristol Hotels into its portfolio, FelCor's business, financial condition and results of operations could suffer. A large number of the Bristol Hotels are in the process of, or awaiting, substantial renovation, modernization and repositioning. If the implementation of these plans do not yield the anticipated results, then FelCor may have paid too much for the Bristol Hotels in the Merger. INCREASES IN LEVERAGE AND FLOATING RATE DEBT; INABILITY TO RETAIN EARNINGS OR REFINANCE DEBT As a result of the Merger, FelCor's leverage has increased. At March 31, 1998, on a pro forma basis (assuming completion of the Merger), FelCor would have had outstanding indebtedness of $1.5 billion, 46.3% of which would have been secured, and a debt-to-total-market-capitalization ratio of 33%. FelCor's pro forma ratio of EBITDA to interest paid for the three months ended March 31, 1998 would have been 4.1 to 1.0. Of FelCor's pro forma indebtedness at March 31, 1998, $860.9 million (or 59.3%) provided for the payment of interest at floating rates. Most of this floating rate debt bears interest at a rate equal to between 0.45% and 1.75% plus the 30-day LIBOR rate. At March 31, 1998, LIBOR was 5.56%. Changes in economic conditions could result in higher interest rates, thereby increasing FelCor's interest expense on its floating rate debt and reducing funds available for distribution to FelCor's stockholders. In order to qualify as a REIT, FelCor must distribute to its stockholders, annually, at least 95% of its net taxable income (excluding capital gains) and, accordingly, cannot retain any substantial portion of its earnings to meet its capital needs. Because of cross-default provisions in certain of FelCor's loan agreements, a default in outstanding debt of more than $10 million could result in the acceleration of most of FelCor's consolidated indebtedness. FelCor may be unable to refinance or repay this indebtedness in full under these circumstances. DEPENDENCE ON LESSEES' HOTEL OPERATIONS FelCor's revenues currently and in the future will consist primarily of rents received under its leases. The lessees' payment of such rental obligations is generally unsecured. As the lessee of the Bristol Hotels, BHR initially had a net worth of $30 million and is obligated to maintain certain net worth and liquidity requirements. DJONT, which leases FelCor's other hotels, has limited assets, derives its revenue solely from the operation of FelCor's hotels and, at June 30, 1998, had a stockholders' deficit of approximately $6.1 million. However, DJONT or its subsidiaries have the right to borrow, on a subordinated basis and subject to certain limitations, up to an aggregate of $17.3 million to meet its rental obligations from FelCor, Inc., Promus, Doubletree Hotel Corporation, Lee & Urbahns, L.P. and ITT Sheraton Corporation, which are equity owners and/or managers of hotels leased by DJONT. FelCor will be substantially dependent upon the operations of its hotels to enable the lessees (particularly DJONT) to meet their rental obligations under the leases. The leases with DJONT and BHR have varying terms, generally no longer than 15 years. At the expiration of the lease terms, FelCor will be required to negotiate renewals or seek replacement leases, which could adversely affect its results of operations. CONFLICTS OF INTEREST CERTAIN FELCOR DIRECTORS. As of August 10, 1998, DJONT leased 86 of the Hotels, either directly or through subsidiaries. All of the voting interests (and a 50% equity interest) in DJONT are beneficially owned by Hervey A. Feldman and Thomas J. Corcoran, Jr. All of the non-voting interests (and the remaining 50% equity interest) in DJONT are beneficially owned by the children of Charles N. Mathewson. Mr. Feldman is a co-founder 5 8 and the current Chairman Emeritus of FelCor. Mr. Corcoran is a co-founder and the President and Chief Executive Officer of FelCor. Mr. Mathewson and Mr. Corcoran serve as directors of FelCor. All of the Bristol Hotels are leased to BHR. No officer or director of BHR is also an officer or director of FelCor. However, Donald J. McNamara, the Chairman of the Board of FelCor, is a principal in a firm that controls the general partner of United/Harvey Holdings, L.P. ("United Harvey"), which beneficially owns approximately 39.5% of the stock of BHR. Five partnerships that own substantial equity interests in United Harvey also own in the aggregate approximately 14.2% of FelCor's outstanding Common Stock. In addition, Michael D. Rose and Richard C. North have joined FelCor's Board. Mr. Rose is a director of Promus. Mr. North is the Group Finance Director of the parent of Holiday Hospitality Franchising, Inc. ("Holiday Hospitality"). Promus is, and will continue to be, the franchisor and manager of many of the Hotels. Holiday Hospitality is the franchisor of most of the Bristol Hotels and, together with its affiliates, owns approximately 9.9% of the stock of BHR and approximately 14.2% of FelCor's outstanding Common Stock. Issues may arise under these leases, franchise agreements and management contracts, and in the allocation of acquisition and leasing opportunities, that present conflicts of interests due to the affiliation of these directors. As an example, any decreases in lease rental rates payable by DJONT may increase the profits of DJONT, in which Messrs. Feldman and Corcoran and Mr. Mathewson's children have a direct economic interest, at the expense of FelCor and its stockholders. In the event FelCor enters into new or additional hotel leases or other transactions with BHR, the interests of Mr. McNamara and Mr. North, as affiliates of significant investors of BHR, may conflict with the interests of FelCor and its stockholders. For example, any decrease in lease rental rates payable by BHR may decrease FelCor's profits to the benefit of BHR. Also, in the selection of franchises under which FelCor's hotels will be operated, Mr. Rose and Mr. North, as affiliates of Promus and Holiday Hospitality, respectively, which are hotel franchising companies, may have interests which conflict with those of FelCor and its stockholders. It is anticipated that any director who has a conflict of interest with respect to an issue presented to the FelCor Board will abstain from voting upon that issue although he will have no legal obligation to do so. FelCor has no provisions in its bylaws or charter that require an interested director to abstain from voting upon an issue, although each director will have a fiduciary duty of loyalty to FelCor. There is a risk that, should an interested director vote upon an issue in which he or one of his affiliates has an interest, his vote may reflect a bias that could be contrary to the best interests of FelCor. In addition, even if an interested director abstains in the actual vote, the director's participation in the meeting and discussion of an issue in which he or his affiliates have an interest could influence the votes of other directors regarding the issue. NO ARMS-LENGTH BARGAINING ON DJONT PERCENTAGE LEASES. The terms of the leases between FelCor and DJONT were not negotiated on an arms-length basis. Accordingly, these percentage leases may not reflect fair market values or terms. However, the management of FelCor believes that the terms of these leases are fair to FelCor. The rental terms of these leases are set based upon historical financial information and projected operating performance of the applicable hotel. The other terms of the leases are typical of the provisions found in other leases entered into in similar circumstances. The leases have been approved by a majority of the directors of FelCor who are not officers or employees of FelCor, DJONT or affiliates of either of them. ADVERSE TAX CONSEQUENCES TO CERTAIN AFFILIATES ON A SALE OF CERTAIN HOTELS. Messrs. Feldman, Corcoran and Mathewson may have additional tax liability if FelCor sells its investments in six hotels acquired by FelCor in July 1994 from partnerships controlled by these individuals. Consequently, the interests of FelCor and of Messrs. Feldman, Corcoran and Mathewson could be different in the event that FelCor decided to consider a sale of any of these hotels. Decisions regarding a sale of any of these six hotels must be made by a majority of the directors of FelCor who are not officers or employees of FelCor, DJONT or affiliates of either of them. RESTRICTIVE DEBT COVENANTS At August 10, 1998, FelCor's unsecured bank credit facilities provided for borrowings of up to $1.1 billion, of which FelCor had borrowed $930 million. FelCor also had issued and outstanding $300 million in principal amount of senior notes. The agreements governing FelCor's credit facilities and senior notes contain various restrictive covenants, including, among others, provisions restricting FelCor from incurring indebtedness, making investments, engaging in transactions with stockholders and affiliates, incurring liens, merging or consolidating with another person, disposing of all or substantially all of its assets or permitting limitations on its subsidiaries with respect to the payment of dividends or other amounts to FelCor. In addition, these agreements 6 9 require FelCor to maintain certain specified financial ratios. Under the most restrictive of these provisions, FelCor's maximum additional pro forma indebtedness that could be incurred for the acquisition of hotel properties would have been limited to approximately $239 million at June 30, 1998. These covenants also may restrict FelCor's ability to engage in certain transactions. In addition, any breach of these limitations could result in the acceleration of most of FelCor's outstanding indebtedness. FelCor may not be able to refinance or repay this indebtedness in full under such circumstances. MATTERS THAT MAY ADVERSELY AFFECT THE HOTEL INDUSTRY FEWER GROWTH OPPORTUNITIES. There has been substantial consolidation in, and capital allocated to, the U.S. lodging industry since the early 1990s. This has generally resulted in higher prices for hotels and fewer attractive acquisition opportunities. An important part of FelCor's growth strategy is the acquisition and, in many instances, the renovation and repositioning, of hotels at less than replacement cost. Continued industry consolidation and competition for acquisitions could adversely affect FelCor's growth prospects. FelCor competes for hotel investment opportunities with other companies, some of which have greater financial or other resources. Certain competitors may be able to pay higher prices or assume greater risks than would be appropriate for FelCor. POTENTIAL ADVERSE EFFECTS ON HOTEL OPERATIONS. The hotels owned by FelCor are subject to all of the risks common to the hotel industry. These risks could adversely affect hotel occupancy and the rates that can be charged for hotel rooms, and generally include: o The existence of competition from other hotels; o The construction of more hotel rooms in a particular area than needed to meet demand; o The increase in energy costs and other travel expenses that reduce business and leisure travel; o The adverse effects of declines in general and local economic activity; and o The risks generally associated with the ownership of hotels and real estate, as discussed in the following four paragraphs and under "--Matters That May Adversely Affect Real Estate Ownership." In addition, annual adjustments (based on changes in the Consumer Price Index) are made to the base rent and the thresholds used to compute percentage rent under the Percentage Leases. These adjustments, unless offset by increases in hotel revenues, would reduce the amount of rent payable to FelCor under the Percentage Leases and, consequently, FelCor's results of operations. COMPETITION. Each of the Hotels competes with other hotels in its geographic area. A number of additional hotel rooms have been or may be built in a number of the geographic areas in which the Hotels are located, which could adversely affect the results of operations of these hotels. According to Smith Travel Research, total hotel room supply in the United States increased by 3.4%, or approximately 116,000 rooms, from 1996 to 1997. This is compared to an average annual increase in hotel room supply in the United States of 1.1% from 1991 to 1996. It is possible that a significant increase in the supply of midscale and upscale hotel suites/rooms could occur which, if demand fails to increase proportionately, could have an adverse effect on FelCor's operations. SEASONALITY. The hotel industry is seasonal in nature. Generally, hotel revenues are highest in the second and third quarters of each year. Seasonality causes quarterly fluctuations in FelCor's revenue. FelCor may be able to reduce, but not eliminate, the effects of seasonality by continuing to diversify the geographic location and primary customer base of its hotels. INVESTMENT CONCENTRATION IN A SINGLE INDUSTRY. Historically, FelCor has only invested in hotel-related assets. In the event of a downturn in the hotel industry, the adverse effect on FelCor may be greater than on a more diversified company with assets outside of the hotel industry. 7 10 REQUIREMENTS OF FRANCHISE AGREEMENTS. Most of the Hotels are operated under various franchise licenses. Each license agreement requires that the franchised hotel be maintained and operated in accordance with certain standards. The franchisors also may require substantial improvements to the Hotels, for which FelCor would be responsible under the Percentage Leases, as a condition to the renewal or continuation of these franchise licenses. If a franchise license terminates due to FelCor's failure to make required improvements or to otherwise comply with its terms, FelCor may be liable for termination payments and for fees for a new franchise. These termination payments and fees would vary among the various franchise agreements and by hotel. The loss of a substantial number of franchise licenses and the related termination payments and new franchise fees could have a material adverse effect on FelCor's results of operations. LIMITATIONS ON ACQUISITIONS AND IMPROVEMENTS FelCor intends to continue its current growth strategy, which includes acquiring and improving hotel properties. FelCor generally cannot fund its growth from cash from its operating activities because FelCor must distribute to its stockholders at least 95% of its taxable income each year to maintain its status as a REIT. Consequently, FelCor must rely primarily upon the availability of debt or equity capital to fund hotel acquisitions and improvements. There can be no assurance that FelCor will continue to have access to the capital markets to fund future growth at an acceptable cost. In addition, FelCor's Board has adopted a policy of limiting indebtedness to not more than 40% of FelCor's investment in hotel assets, at historical cost, which could also limit FelCor's ability to incur additional indebtedness to fund its continued growth. At March 31, 1998, on a pro forma basis, FelCor's indebtedness would represent 35.9% of its investment in hotel assets at historical cost. POTENTIAL TAX RISKS Failure to qualify as a REIT would subject FelCor to federal income tax. FelCor has operated and will continue to operate in a manner that is intended to qualify it as a REIT under federal income tax laws. The REIT qualification requirements are extremely complicated and interpretations of the federal income tax laws governing qualification as a REIT are limited. Accordingly, FelCor cannot be certain that it has been or will continue to be successful in operating so as to qualify as a REIT. At any time, new laws, interpretations or court decisions may change the federal tax laws or the federal income tax consequences of qualification as a REIT. If FelCor failed to qualify as a REIT, FelCor would be required to pay federal income tax on its taxable income. FelCor might need to borrow money or sell hotels in order to pay any such tax. FelCor's payment of income tax would decrease the amount of its income available to be paid out to its stockholders. In addition, FelCor would no longer be required to pay out most of its taxable income to its stockholders. Unless its failure to qualify as a REIT were excused under federal income tax laws, FelCor could not re-elect REIT status until the fifth calendar year following the year in which it failed to qualify. FAILURE TO MAKE REQUIRED DISTRIBUTIONS WOULD SUBJECT FELCOR TO TAX. In order to qualify as a REIT, each year FelCor must pay out to its stockholders at least 95% of its taxable income (other than any net capital gain). In addition, FelCor would be subject to a 4% nondeductible tax if the actual amount it pays out to its stockholders in a calendar year were less than the minimum amount specified under federal tax laws. FelCor has paid out and intends to continue to pay out its income to its stockholders in a manner intended to satisfy the 95% test and to avoid the 4% tax. In doing so, FelCor may be required to borrow money or sell assets to pay out enough of its taxable income to satisfy the 95% test and to avoid the 4% tax in a particular year. FAILURE TO DISTRIBUTE BRISTOL'S EARNINGS AND PROFITS IN 1998 WOULD CAUSE FELCOR TO FAIL TO QUALIFY AS A REIT. At the end of any taxable year, a REIT may not have any accumulated earnings and profits (described generally for federal income tax purposes as cumulative undistributed net income) from a non-REIT corporation. Accordingly, by the end of 1998, FelCor must pay out to its stockholders an amount equal to Bristol's accumulated earnings and profits through the date of the Merger. If FelCor fails to pay out such amount for its 1998 taxable year, it will fail to qualify as a REIT. SALE OF ASSETS WITHIN TEN YEARS AFTER ACQUISITION WILL RESULT IN CORPORATE TAX. If FelCor sells any asset acquired within 10 years after its acquisition and recognizes gain, FelCor will be taxed at the highest corporate rate on an amount equal to the fair market value of the asset minus the adjusted basis of the asset as of its acquisition. 8 11 EFFECT OF MARKET INTEREST RATES ON THE PRICE OF THE COMMON STOCK One of the factors that may affect the price of the Common Stock is the amount of distributions to stockholders in comparison to yields on other financial instruments. An increase in market interest rates would provide higher yields on other financial instruments, which could adversely affect the price of the Common Stock. RELIANCE ON KEY PERSONNEL AND BOARD OF DIRECTORS FelCor's stockholders have no right to participate in FelCor's management, except through the exercise of their voting rights. FelCor's Board of Directors will be responsible for oversight of the management of FelCor. FelCor's future success will be dependent in part on its ability to retain key personnel, including Mr. Corcoran. MATTERS THAT MAY ADVERSELY AFFECT REAL ESTATE OWNERSHIP GENERAL. FelCor's investments in hotels are subject to the numerous risks generally associated with owning real estate. These risks include, among others, adverse changes in general or local economic or real estate market conditions, zoning laws, traffic patterns and neighborhood characteristics, real estate tax assessments and rates, governmental regulations and fiscal policies, the potential for uninsured or underinsured casualty and other losses, the impact of environmental laws and regulations (discussed below) and other circumstances beyond the control of FelCor. Moreover, real estate investments are relatively illiquid, which means that FelCor's ability to vary its portfolio in response to changes in economic and other conditions may be limited. POSSIBLE LIABILITY FOR ENVIRONMENTAL MATTERS. There are numerous federal, state and local environmental laws and regulations to which owners of real estate are subject. Under these laws a current or prior owner of real estate may be liable for the costs of cleaning up and removing hazardous or toxic substances found on its property, whether or not it was responsible for their presence. In addition, if an owner of real property arranges for the disposal of hazardous or toxic substances at another site, it may also be liable for the costs of cleaning up and removing such substances from the disposal site, even if it did not own or operate the disposal site. A property owner may also be liable to third parties for personal injuries or property damage sustained as a result of its release of hazardous or toxic substances (including asbestos-containing materials) into the environment. Environmental laws may require FelCor to incur substantial expenses and limit the use of its properties. FelCor could be liable for substantial amounts for a failure to comply with applicable environmental laws, which may be enforced by the government or, in certain instances, by private parties. The existence of hazardous or toxic substances on a property can also adversely affect the value of, and the owner's ability to use, sell or borrow against, the property. Generally, FelCor obtains a Phase I environmental audit from an independent environmental engineer prior to its acquisition of a hotel. With respect to the Bristol Hotels, FelCor has relied upon the Phase I audits obtained by Bristol in connection with its acquisition of these properties. No updates or new environmental audits were obtained. The primary purpose of a Phase I environmental audit is to identify indications of potential environmental contamination at a property and, secondarily, to make a limited assessment as to the potential for environmental regulatory compliance costs. Consistent with current industry standards, the Phase I environmental audits on which FelCor has relied did not include an assessment of potential off-site liability or involve any testing of groundwater, soil or air conditions. Accordingly, they would not reveal information that could only be obtained by such tests. In addition, the assessment of environmental compliance contained in such reports is general in nature and was not a detailed determination of the property's complete compliance status. The Phase I environmental audits relied upon by FelCor disclose the existence of certain hazardous or toxic substances at or near a limited number of FelCor's hotels. In these instances, FelCor made such additional investigations, if any, as they considered necessary to evaluate the risk of liability. However, FelCor's management does not believe that the identified conditions, or any other environmental conditions known to it, will have a material adverse effect on FelCor's business, assets or profits. It is possible, however, that such environmental audits and investigations do not reveal all environmental conditions or liabilities for which FelCor could be liable and there could be potential environmental liabilities of which FelCor is unaware. 9 12 COSTS OF COMPLYING WITH AMERICANS WITH DISABILITIES ACT. Under the Americans with Disabilities Act of 1990 ("ADA"), all public accommodations (including hotels) are required to meet certain federal requirements for access and use by disabled persons. FelCor's management believes that its hotels are substantially in compliance with the requirements of the ADA. However, a determination that the hotels are not in compliance with the ADA could result in liability for both governmental fines and damages to private parties. If FelCor were required to make unanticipated major modifications to the hotels to comply with the requirements of the ADA, it could adversely affect its ability to pay its obligations and make distributions to its stockholders. OWNERSHIP LIMITATION In order for FelCor to maintain its status as a REIT, no more than 50% in value of its outstanding stock may be owned (actually or constructively under the applicable tax rules) by five or fewer persons during the last half of any taxable year. In connection with this requirement, FelCor's Charter prohibits, subject to certain exceptions, any person from owning more than 9.9% (determined in accordance with the Internal Revenue Code and the Securities Exchange Act of 1934, as amended) of the number of outstanding shares of any class of its capital stock. FelCor's Charter also prohibits any transfer of its capital stock that would result in a violation of the 9.9% ownership limit, reduce the number of stockholders below 100 or otherwise result in FelCor failing to qualify as a REIT. Any attempted transfer in violation of the charter prohibitions will be void and the intended transferee will not acquire any right in the shares resulting in such violation. FelCor has the right to take any lawful action that it believes necessary or advisable to ensure compliance with these ownership and transfer restrictions and to preserve its status as a REIT, including refusing to recognize any transfer of capital stock in violation of its charter. If a person holds or attempts to acquire shares in excess of FelCor's ownership and transfer restrictions, these shares will be immediately designated as "shares-in-trust" and transferred automatically and by operation of law, in trust, to a trustee designated by FelCor. The trustee will have the right to receive all distributions on, to vote and to sell these shares. The holder of the excess shares will have no right or interest in these shares, except the right (under certain circumstances) to receive the lesser of: (i) the proceeds of any sale of these shares by the trustee to a permitted owner and (ii) the amount you paid for these shares (or the market value of these shares, determined in accordance with the Charter, if the shares were received by gift, bequest or otherwise without payment). Accordingly, the record owner of any shares designated as shares-in-trust would suffer a financial loss if the price at which these shares are sold to a permitted owner is less than what was paid for these shares. CERTAIN ANTI-TAKEOVER AND CORPORATE GOVERNANCE PROVISIONS OWNERSHIP LIMIT. The ownership and transfer restrictions of FelCor's Charter may have the effect of discouraging or preventing a third party from attempting to gain control of FelCor without the approval of the FelCor Board. Therefore, it is less likely that a change in control, even if beneficial to stockholders, could be effected without the approval of the FelCor Board. STAGGERED BOARD. The FelCor Board is divided into three classes. Directors in each class are elected for terms of three years. As a result, the ability of stockholders to effect a change in control of FelCor through the election of new directors is limited by the inability of stockholders to elect a majority of the FelCor Board at any particular meeting. AUTHORITY TO ISSUE ADDITIONAL SHARES. Under the FelCor Charter, the FelCor Board may issue preferred stock without stockholder action. The preferred stock may be issued, in one or more series, with the preferences, qualifications and terms, designated by the FelCor Board that may discourage, delay or prevent a change in control of FelCor, even if such change were in the best interests of stockholders. FelCor currently has outstanding 6,050,000 shares of its $1.95 Series A Cumulative, Convertible Preferred Stock and 57,500 shares of its 9% Series B Cumulative Redeemable Preferred Stock (represented by 5,750,000 Depository Shares, each representing a 1/100 fractional interest in a share of such Series B preferred stock). The preferred stock reduces the amount of dividends available, and has dividend, liquidation and other rights superior, to the holders of the Common Stock. The Charter and bylaws of FelCor contain other provisions that also may have the effect of delaying or preventing a change in control of FelCor. MARYLAND ANTI-TAKEOVER STATUTES. As a Maryland corporation, FelCor is subject to various provisions under the Maryland General Corporation Law, including the Maryland business combination statute, which sets 10 13 forth certain procedures that must be followed in, and otherwise restricts, certain takeovers and business combinations. FelCor's Charter currently exempts FelCor from the operation of the Maryland share control statute, which may deny voting rights to shares involved in an acquisition of one-fifth or more of the voting stock of a Maryland corporation. To the extent these laws are applicable to FelCor, they may have the effect of delaying or preventing a change in control of FelCor even though beneficial to FelCor's stockholders. IMPACT OF YEAR 2000 ISSUE The year 2000 issue relates to computer programs that were written using two digits rather than four to define the applicable year. In those programs, the year 2000 may be incorrectly identified as the year 1900, which could result in a system failure or miscalculations causing a disruption of operations, including a temporary inability to process transactions, prepare financial statements or engage in other normal business activities. FelCor has recently assessed its internal computer systems and believes that they will properly utilize dates beyond December 31, 1999. Holiday Hospitality and Promus, franchisors for 165 of the Hotels, have indicated to FelCor that their reservation systems will be year 2000 compliant by the end of 1998. FelCor has been informed that the companies leasing and managing hotels owned by it are in the process of studying the year 2000 issue, including inquiries of their vendors. Upon completion of these studies, which are expected in late 1998, FelCor will determine the extent to which it may be vulnerable to third parties' failure to remedy their year 2000 issues and potential effects of any such failures. FelCor estimates that the expense associated with year 2000 compliance will not be material to FelCor's business, operations or financial condition. CERTAIN FORWARD-LOOKING STATEMENTS CERTAIN STATEMENTS IN THIS PROSPECTUS CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, AND CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE STATEMENTS UNDER THE CAPTION "RISK FACTORS" IN THIS PROSPECTUS CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS, INCLUDING MATERIAL RISKS AND UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS. 11 14 USE OF PROCEEDS The amount of proceeds to be received by FelCor upon the exercise of the Options by the Option holders will depend upon the extent to which the Options are exercised. FelCor intends that the net proceeds from the sale of Common Stock will be added to its general corporate funds and used for general corporate purposes. The Company will not receive any of the proceeds from sales of shares of Common Stock by the Selling Shareholders. DESCRIPTION OF THE PLANS AND OPTIONS GENERAL Copies of the Plans have been filed as exhibits to the Registration Statement, of which this Prospectus forms a part. The summaries of certain provisions of the Plans do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Plans, including the definitions therein of certain terms. Copies of the Plans may be obtained by contacting FelCor. Capitalized terms not otherwise defined below or elsewhere in this Prospectus have the meanings given to such terms in the Plans. The Plans were originally adopted by Bristol. The Incentive Plan was designed to attract and retain qualified officers and other key employees of Bristol. The Non-Employee Director Plan was designed to attract and retain qualified outside directors for Bristol. The Incentive Plan authorizes the grant of options to purchase shares of Bristol common stock, stock appreciation rights, restricted shares, deferred shares, performance shares and performance Units. As of July 28, 1998, only nonqualified options had been granted and were outstanding under the Incentive Plan. The Non-Employee Director Plan authorizes the grant of options to purchase Bristol common stock. Under each of the Plans, Bristol issued options at various times to purchase Bristol common stock (collectively, the "Original Options"). As a result of the Merger and the Spin-Off, each Original Option outstanding on July 28, 1998 was restated and continued in the form of two successor options, one successor option exercisable for Common Stock (an "Option") and one successor option exercisable for shares of BHR common stock (a "BHR Option"). Under the Merger Agreement, FelCor assumed the Plans and Bristol's obligations under each Option, while BHR assumed all of Bristol's obligations for each BHR Option. The exercise prices and numbers of shares covered by the Original Options were adjusted as appropriate in the Options and the BHR Options to reflect prior adjustments in Bristol common stock, the Merger, and the Spin-Off. As required by certain agreements relating to the Merger, the Plan has been amended to provide that service with FelCor or BHR will satisfy the vesting requirements and will determine the date of termination of employment for all Options and BHR Options. The FelCor Board does not currently intend to authorize any additional grants of Options under either of the Plans. ADMINISTRATION OF THE PLANS The Plans are administered by the Board of Directors of FelCor (the "FelCor Board") or the Compensation Committee of the FelCor Board. The FelCor Board or the Compensation Committee, as appropriate, has discretionary authority (subject to certain restrictions) to determine the individuals to whom Options are granted and the timing, number, vesting schedule and exercise price of each Option, and to discharge all administrative and interpretive responsibilities with respect to the Plans and the Options, including, without limitation, the discretionary authority to prescribe, amend and rescind rules and regulations of the Plans. Under certain agreements relating to the Merger, all decisions relating to the interpretation or amendment of the Options requires the approval of the Compensation Committee of BHR, except for adjustments to the exercise price or nature of securities to be awarded upon exercise of an Option in connection with a transaction in which the Options are treated in the same manner as options under other FelCor option plans. 12 15 SHARES COVERED As of July 28, 1998, the total numbers of shares of Common Stock that may be purchased under outstanding Options granted under the Non-Employee Director Plan and the Incentive Plan were 35,966 and 1,237,293, respectively. ELIGIBILITY Under the Incentive Plan, the Original Options were granted by Bristol to certain eligible persons prior to the Merger in amounts, and subject to terms, as determined by the Compensation Committee of the Board of Directors of Bristol. Eligible persons included officers, key employees, or consultants of Bristol. As of July 28, 1998, there were 163 holders of outstanding Options granted under the Incentive Plan. Under the Non-Employee Director Plan, the Original Options were granted by Bristol to eligible directors of Bristol prior to the Merger . These eligible directors automatically received an Original Option for 7,500 shares of Bristol common stock, upon becoming a director, one-third of which vested on each annual meeting date occurring on or after the date of grant of the Initial Option. Thereafter, eligible directors were automatically granted Original Options covering an additional 7,500 shares of Bristol common stock on the date of each annual meeting of Bristol stockholders, which Options become fully vested on the next annual meeting date. As of July 28, 1998, there are three holders of outstanding Options granted under the Non-Employee Director Plan. OPTION PRICE AND EXERCISE Under the Plans, the purchase price of each Original Option was generally the closing price of the Bristol common stock on the NYSE on the date of the grant. Under either Plan, shares of Common Stock purchased pursuant to the exercise of an Option must at the time of purchase be paid for in full in cash, by check, with shares of Common Stock (to be valued at the fair market value on the date of such exercise) or by a combination of such means. Under the Non-Employee Director Plan, any of the Common Stock so delivered must have been beneficially owned by the Option holder for a period of not less than six months prior to the date of exercise. The Options outstanding under the Incentive Plan contain a substantially similar six month requirement. The Incentive Plan also requires the withholding of taxes due in connection with the exercise of the Option. At the discretion of the FelCor Board or the Compensation Committee, such taxes may be paid by voluntary or mandatory relinquishment of a portion of any payment or benefit received upon exercise of the Options or by the surrender of outstanding Common Stock (with respect to Options) or BHR common stock (with respect to BHR Options). VESTING The Options granted under the Incentive Plans become exercisable over a period of continuous employment or continuous consulting services specified in each individual Option contract. Generally, the Option agreements specify a twenty-five percent, or twenty percent, rate of vesting over a period of four or five years, although some vest in their entirety only at the end of five years, or nine years. Uninterrupted service with either FelCor, BHR or any of their respective subsidiaries for the required period will satisfy the vesting requirements under the Options. Initial Options granted pursuant to the Non-Employee Director Plan vest at the rate of one-third over a period of three annual stockholders meetings, and subsequent Options granted pursuant to the Non-Employee Director Plan vest at the next annual stockholders meeting. As of July 28, 1998, at the conclusion of the Merger, the total numbers of shares of Common Stock that were subject to immediate purchase under outstanding Options granted under the Non- Employee Director Plan and the Incentive Plan were 32,541 and 786,096, respectively. 13 16 TERMINATION The restated Option agreements generally provide that the Options will terminate (i) 30 days after the holder of the Option ("Optionee") ceases to be an employee of FelCor, BHR or any of their respective subsidiaries for any reason other than death or disability, (ii) 90 days after the Optionee ceases to be an employee of FelCor, BHR or any of their respective subsidiaries if the termination of employment is under circumstances determined by the FelCor Board to be for the convenience of FelCor or BHR or is retirement under a plan at or after the earliest voluntary retirement age provided for in such plan or retirement at an earlier age with the consent of the FelCor Board, (iii) one year after the Optionee's death or disability incurred while employed (or, in certain circumstances, incurred within 90 days after termination of employment), or (iv) ten years after the date of grant. The Option will also terminate if the Optionee commits an act that the FelCor Board determines in good faith to have been intentionally committed and materially adverse to the interest of FelCor, BHR or a subsidiary thereof. Options granted pursuant to the Non-Employee Director Plan expire on the first to occur of (i) three months following the director ceasing to serve on either the FelCor Board or BHR Board of Directors (other than due to death or disability); (ii) one year after ceasing to serve on either the FelCor Board or BHR Board of Directors due to death or disability; or (iii) five years from the date of grant. AMENDMENT OF THE PLANS Amendments to the Incentive Plan may be made from time to time by the FelCor Board or Compensation Committee, while the Non-Employee Director Plan may be amended by the FelCor Board. No amendment may increase the maximum authorized number of shares of Common Stock or BHR Common Stock that may be issued under the Plans, or amend the Plans in a manner that results in the Plans not satisfying the applicable conditions of Rule 16b-3 of the Exchange Act, without shareholder approval. Under some circumstances, the FelCor Board will be required to obtain the consent and approval of the BHR Board or Compensation Committee in order to adopt an effective amendment. Options granted under the Incentive Plan may, with the consent of the Optionee, be canceled and new Options granted in their place. The new Options may or may not cover the same number of shares of Common Stock as the canceled Options. No amendment of the Plans may adversely affect any outstanding Option without the consent of the Optionee. ADJUSTMENTS UPON CERTAIN TRANSACTIONS OR EVENTS The Plans provide that the FelCor Board or the Compensation Committee may make such adjustments to the numbers of shares covered by and the exercise prices of outstanding Options, and the kind of shares (including shares of other issuers) covered by the Options, as it determines in good faith may be equitably required in order to prevent dilution or the expansion of the rights of the Optionees that might occur due to (a) stock dividends, splits, combinations, recapitalizations or other changes in the capital structure of FelCor or BHR, or (b) merger, consolidation, spin-off, spin-out, split-off, split-up, reorganization, or partial or complete liquidation of FelCor or BHR or other distribution of assets. In such an event, the Committee may provide in substitution for any or all outstanding Options such alternative consideration as it may in good faith determine to be equitable under the circumstances and may require in connection therewith the surrender of all Options so replaced. Unless such adjustments treat the Optionees and the Options in the same manner as options under other FelCor option plans, the adjustments are subject to approval of the Compensation Committee of BHR. The FelCor Board or the Compensation Committee may also make or provide for such adjustments in the maximum numbers of shares of Common Stock specified in the Plans as may be in good faith determined to be appropriate in order to reflect any transaction or event described above, subject to the same possible requirement of approval by the Compensation Committee of BHR. NON-ASSIGNABILITY The Plans provide that no Option is assignable or transferable by the Optionee other than by will or by the laws of descent and distribution. During the lifetime of a Optionee, the Options are exercisable only by the Optionee or a legal representative. 14 17 CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following summary of certain federal income tax consequences of the holding or exercise of the Options is based on the Code, as amended to date, applicable proposed and final Treasury Regulations, judicial authority and current administrative rulings and practice, all of which are subject to change. This summary does not attempt to describe all of the possible tax consequences that could result from the acquisition, holding, exercise, transfer or disposition of an Option or the Common Stock purchasable thereunder. Options granted under the Plans are intended to be non-qualified stock options. An optionee will realize no taxable income at the time he or she is granted a non-qualified stock option. Such conclusion is predicated on the assumption that, under existing Treasury Department regulations, a non-qualified stock option, at the time of its grant, has no readily ascertainable fair market value. Ordinary income will be realized when a non-qualified stock option is exercised. The amount of such income will be equal to the excess of the fair market value on the exercise date of the shares of Common Stock issued to an optionee over the exercise price. The Optionee's holding period with respect to the shares acquired will begin on the date of exercise. The tax basis of the stock acquired upon the exercise of any Option will be equal to the sum of (i) the exercise price of such option and (ii) the amount included in income with respect to such Option. Any gain or loss on a subsequent sale of the stock will be either a long-term or short-term capital gain or loss, depending on the optionee's holding period for the stock disposed of. Generally, if the Common Stock is held for more than twelve months after the date of exercise, the Optionee will be taxed at a maximum 20% tax rate. If the Optionee holds the shares for at least five years, the Optionee will be taxed at a maximum 18% rate. It is not clear whether, and to what extent, the Company will be entitled to a deduction for Federal income tax purposes as a result of the exercise of the Options. BECAUSE THE TAX CONSEQUENCES TO A PLAN PARTICIPANT MAY VARY DEPENDING ON HIS OR HER INDIVIDUAL CIRCUMSTANCES, EACH PLAN PARTICIPANT SHOULD CONSULT HIS OR HER PERSONAL TAX ADVISOR REGARDING THE FEDERAL AND ANY STATE, LOCAL OR FOREIGN TAX CONSEQUENCES TO HIM OR HER. 15 18 SELLING SHAREHOLDERS This Prospectus also related to the potential offer of the Shareholders' Shares from time to time following the Merger by the holders of Common Stock identified in the table below (the "Selling Shareholders"). See "Plan of Distribution." The following table provides the names of each Selling Shareholder, the number of shares of Common Stock beneficially owned by such holder as of July 28, 1998, and the number of shares of Common Stock that may be offered by each Selling Shareholder, to the best knowledge of FelCor.
Shares Shares Offered Percent of All Beneficially by this Outstanding FelCor Owned Prospectus Common Shares (1) ----- ---------- ----------------- United/Harvey Investors I, L.P. 2,170,140 2,170,140 3.2% United/Harvey Investors II, L.P. 2,034,746 2,034,746 3.0% United/Harvey Investors III, L.P. 1,356,497 1,356,497 2.0% United/Harvey Investors IV, 1,356,497 1,356,497 2.0% L.P. United/Harvey Investors V, L.P. 2,712,995 2,712,995 4.0% Bass America Inc. 7,161,698 7,161,698 10.6% Holiday Corporation 2,457,046 2,457,046 3.6% J. Peter Kline 817,617 817,617 1.2% Robert L. Miars 667,195 667,195 1.0% John A. Beckert 478,544 478,544 0.7% ---------- ---------- Total 21,212,975 21,212,975 ========== ==========
- ------------------------------- (1) Based on 67,599,205 outstanding shares of FelCor's Common Stock. Each of the five United/Harvey partnerships listed in the foregoing table ("United/Harvey Partnerships") is an affiliate of Donald J. McNamara, who served as Chairman of the Board of Bristol prior to the Merger and since the Merger has served as Chairman of the Board of FelCor. Mr. McNamara also served as a director of FelCor from July 1994 to November 1997, and is a principal in The Hampstead Group which may be deemed to be an affiliate of these partnerships. Bass America Inc. and Holiday Corporation (the "Bass Entities") are affiliates of the entities that franchise the Bass Hotels & Resorts brands of hotels and of Richard L. North, who served as a director of Bristol prior to the Merger and since the Merger has served as a director of FelCor. Each of Messrs. Kline, Beckert and Miars were executive officers of Bristol prior to the Merger. The Selling Shareholders were affiliates of Bristol at the time of the Merger and under applicable securities regulations cannot freely resell their shares without registration or an exemption therefrom. This Prospectus is required by FelCor's contractual obligations to register the shares of the Selling Shareholders for resale, and the Selling Shareholders are under no obligation to resell their shares. PLAN OF DISTRIBUTION As part of the Merger between Bristol and FelCor, FelCor assumed Bristol's obligations under the Plans and the outstanding Options previously granted by Bristol under the Plans. Each Option entitles its holder to purchase shares of Common Stock, subject to adjustment of certain circumstances. See "Description of the Plans" for information regarding the terms of the Options, including the manner of exercise. This Prospectus relates to the offer by FelCor to issue shares of Common Stock from time to time upon exercise of the Options by the Option holders. No commission or fee will be paid by FelCor in connection with the exercise of any Option. This Prospectus also relates to the offer and sale from time to time following the Merger by the Selling Shareholders of Common Stock issued to them pursuant to the Merger (the "Shareholders' Shares"). FelCor has 16 19 registered these offers and resales by the Selling Shareholders of Shareholders' Shares to satisfy FelCor's obligations under the Stockholders' and Registration Rights Agreement among FelCor, the Bass Entities and the United/Harvey Partnerships (the "Shareholders' Agreement"). Registration of the Shareholders' Shares does not necessarily mean that any of the Shareholders' Shares will be offered or sold by the Selling Shareholders. Under the Shareholders' Agreement, the Bass Entities and the United/Harvey Partnerships have agreed not to sell or transfer their Common Stock for a period of six months after the Merger, except in compliance with Rule 145 under the Securities Act. FelCor will not receive any of the proceeds of the sale of the Shareholders' Shares offered by the Selling Shareholders. The distribution of Shareholders' Shares may be effected from time to time in one or more underwritten transactions at a fixed price or prices, which may be changed, or in other transactions at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Any such underwritten offering may be on either a "best efforts" or a "firm commitment" basis. In connection with any such underwritten offering, underwriters or agents may receive compensation in the form of discounts, concessions or commissions from the Selling Shareholders and/or from purchasers of the Shareholders' Shares for whom they may act as agents. Underwriters may sell the Shareholders' Shares to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. The Selling Shareholders and any underwriters, dealers or agents that participated in the distribution of Shareholders' Shares may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on the sale of Shareholders' Shares by them and any discounts, commissions or concessions received by any such underwriters, dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. At a time a particular offer of Shareholders' Shares is made by a Selling Shareholder, a prospectus supplement, if required, will be distributed that will set forth the names of any underwriters, dealers or agents and any discounts, commissions and other terms constituting compensation from the Selling Shareholders and any other required information. The sale of Shareholders' Shares by the Selling Shareholders may also be effected from time to time by selling Shareholders' Shares directly to purchasers or to or through broker-dealers. In connection with any such sale, any such broker-dealer may act as agent for the Selling Shareholders or may purchase from the Selling Shareholders all or a portion of the Shareholders' Shares as principal, and sales may be made pursuant to any of the methods described below. Such sales may be made on the NYSE or other exchanges on which the Shareholders' Shares are then traded, in the over-the-counter market, in negotiated transactions or otherwise, in each case at prices and at terms then prevailing or at prices related to the then-current market prices or at prices otherwise negotiated. The Shareholders' Shares may also be sold in one or more of the following transactions: (i) block transactions (which may involve crosses) in which a broker-dealer may sell all or a portion of such shares as agent but may position and resell all or a portion of the block as principal to facilitate the transaction; (ii) purchases by any such broker-dealer as principal and resale by such broker-dealer for its own account pursuant to a prospectus supplement; (iii) a special offering, an exchange distribution or a secondary distribution in accordance with applicable NYSE or other stock exchange rules; (iv) ordinary brokerage transactions and transactions in which any such broker-dealer solicits purchasers; (v) sales "at the market" to or through a market maker or into an existing trading market, on an exchange or otherwise, for such shares; and (vi) sales in other ways not involving market makers or established trading markets, including direct sales to purchasers. In effecting sales, broker-dealers engaged by the Selling Shareholders may arrange for other broker-dealers to participate. Broker-dealers will receive commissions or other compensation from the Selling Shareholders in amounts to be negotiated immediately prior to the sale that will not exceed those customary in types of transactions involved. Broker-dealers may also receive compensation from purchasers of Shareholders' Shares which is not expected to exceed that customary in the types of transactions involved. In connection with distributions of Shareholders' Shares or otherwise, the Selling Shareholders may enter into hedging transactions with broker-dealers or others. Such broker-dealers may engage in short sales of Shareholders' Shares or other transactions in the course of hedging the positions assumed by such persons in 17 20 connection with such hedging transactions or otherwise. The Selling Shareholders may also sell Shareholders' Shares short and redeliver Shareholders' Shares to close out such short positions; enter into option or other transactions with broker-dealers or others which may involve the delivery to such persons of the Shareholders' Shares offered hereby, which Shareholders' Shares such persons may resell pursuant to this Prospectus; and/or pledge Shareholders' Shares to a broker or dealer or others and, upon default, such persons may effect sales of Shareholders' Shares pursuant to this Prospectus. In addition, any Shareholders' Shares covered by this Prospectus that qualify for resale pursuant to Rule 145 of the Securities Act may be sold under Rule 145 rather than with this Prospectus. In order to comply with securities laws of certain states, if applicable, Shareholders' Shares may be sold only through registered or licensed brokers or dealers. Until the distribution of Shareholders' Shares is completed, rules of the SEC may limit the ability of any underwriters and selling group members to bid for and purchase Shareholders' Shares. As an exception to these rules, underwriters are permitted to engage in certain transactions that stabilize the price of Shareholders' Shares. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of Shareholders' Shares. The lead underwriters may also impose a penalty bid on certain other underwriters participating in the offering and selling group members. This means that if the lead underwriters purchase Shareholders' Shares in the open market to reduce the underwriters' short position or to stabilize the price of Shareholders' Shares, they may reclaim the amount of any selling concession from the underwriters and selling group members who sold those Shareholders' Shares as part of the offering. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. The imposition of a penalty bid might also have an effect on the price of a security to the extent that it were to discourage resale of the security before the distribution is completed. FelCor makes no representation or prediction as to the direction or magnitude of any effect that the transactions described above might have on the price of Shareholders' Shares. In addition, FelCor makes no representation that the underwriters will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. All expenses incident to the offering and sale of Shareholders' Shares (other than brokerage and underwriting commissions and certain taxes) will be paid by FelCor. FelCor has agreed to indemnify certain of the Selling Shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the issuance of the Common Stock has been passed upon for FelCor by Jenkens & Gilchrist, a Professional Corporation, Dallas, Texas. Jenkens & Gilchrist, a Professional Corporation has relied upon the opinion of Miles & Stockbridge P.C., Baltimore, Maryland, with respect to matters involving Maryland law relating to the Common Stock issued to the Selling Shareholders in the Merger. 18 21 EXPERTS The consolidated financial statements of FelCor as of December 31, 1997 and 1996 and for the years ended December 31, 1997, 1996 and 1995, the consolidated financial statements of DJONT Operations, L.L.C. as of December 31, 1997 and 1996 and for the years ended December 31, 1997, 1996 and 1995, the combined financial statements of the Sheraton Acquisition Hotels as of December 31, 1996 and for the year then ended, the consolidated financial statements of Bristol for the eleven months ended December 31, 1995 and the combined financial statements of Harvey Hotel Companies for the one month ended January 31, 1995 have been incorporated by reference in this Prospectus in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. The consolidated financial statements of Bristol as of December 31, 1997 and 1996 and for the years ended December 31, 1997 and 1996, incorporated by reference in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. 19 22 ================================================================================ NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FELCOR. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF FELCOR SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. --------------------------- TABLE OF CONTENTS --------------------------- Where You Can Find More Information.............. 2 The Company...................................... 3 Risk Factors..................................... 5 Use of Proceeds.................................. 12 Description of the Plans and Options............. 12 Selling Shareholders............................. 16 Plan of Distribution............................. 16 Legal Matters.................................... 18 Experts.......................................... 19
22,486,234 SHARES FELCOR LODGING TRUST INCORPORATED (FORMERLY FELCOR SUITE HOTELS, INC.) COMMON STOCK --------------------------- PROSPECTUS --------------------------- ================================================================================ 23 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Set forth below is an estimate of the approximate amount of the fees and expenses (other than underwriting commissions and discounts) payable by the Registrant in connection with the issuance and distribution of the Common Stock pursuant to the Prospectus only. The following table is not intended to summarize all fees and expenses relating to the Merger. Securities and Exchange Commission, registration fee..... $205,607 Printing and mailing..................................... 1,500 Accountant's fees and expenses........................... 3,000 Counsel fees and expenses................................ 10,000 Miscellaneous............................................ 9,893 -------- Total........................................... $230,000
The Selling Shareholders will pay or bear any selling or underwriting discounts and commissions and other selling expenses with respect to the offer and sale of their shares of Common Stock. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Charter of FelCor generally limits the liability of FelCor's directors and officers to FelCor and the Shareholders for money damages to the fullest extent permitted from time to time by the laws of the state of Maryland. The Charter also provides generally for the indemnification of directors and officers, among others, against judgments, settlements, penalties, fines, and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made a party by reason of their service in those or other capacities except in connection with a proceeding by or in the right of FelCor in which the director was adjudged liable to FelCor or in connection with any other proceeding, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors and officers of FelCor pursuant to the foregoing provisions or otherwise, FelCor has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. FelCor may purchase director and officer liability insurance for the purpose of providing a source of funds to pay any indemnification described above. II-1 24 ITEM 16. EXHIBITS 4.1 -- Form of Share Certificate for Common Stock (filed as Exhibit 4.1 to the Registrant's Form 10-Q for the quarter ended June 30, 1996 and incorporated herein by reference) 5.1* -- Opinion of Jenkens & Gilchrist, a Professional Corporation (as to shares issued by Selling Shareholders in the Merger) 5.2* -- Opinion of Miles & Stockbridge P.C. (as to shares issued to Selling Shareholders in the Merger) 5.3 -- Opinion of Jenkens & Gilchrist, a Professional Corporation (as to shares to be issued under Options) 23.1 -- Consent of Jenkens & Gilchrist, a Professional Corporation (included in Exhibits 5.1 and 5.3) 23.2 -- Consent of PricewaterhouseCoopers LLP 23.3 -- Consent of Arthur Andersen LLP 23.4 -- Consent of Miles & Stockbridge P.C. (included in Exhibit 5.2) 24.1* -- Power of Attorney 99.1 -- Second Amended and Restated 1995 Equity Incentive Plan 99.2 -- Amended and Restated Stock Option Plan for Non-Employee Directors 99.3 -- Form of Nonqualified Stock Option Agreement for 1995 Equity Incentive Plan 99.4 -- Form of Nonqualified Stock Option Agreement for Non-Employee Directors Stock Option Plan - ---------------------- *Previously filed
ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration statement to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offering therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the II-2 25 Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referred to in Item 15 of this Registration Statement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question as to whether such indemnification by it is against public policy as expressed in the act, and will be governed by the final adjudication of such issue. II-3 26 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Post-Effective Amendment No. 1 on Form S-3 to Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on the 11th day of August, 1998. FELCOR LODGING TRUST INCORPORATED By: /s/ Lawrence D. Robinson --------------------------------------------- Lawrence D. Robinson Senior Vice President and General Counsel PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-3 TO FORM S-4 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- Chairman of the Board and - ------------------------------------------ Director Donald J. McNamara President, Chief Executive - ------------------------------------------ Officer and Director Thomas J. Corcoran, Jr. * Senior Vice President and - ------------------------------------------ Chief Financial Officer Randall L. Churchey * Vice President and Controller - ------------------------------------------ (Principal Accounting Lester C. Johnson Officer) * Director - ------------------------------------------ Charles N. Mathewson * Director - ------------------------------------------ Richard S. Ellwood * Director - ------------------------------------------ Richard O. Jacobson * Director - ------------------------------------------ Charles A. Ledsinger, Jr. * Director - ------------------------------------------ Thomas A. McChristy *By: /s/ Lawrence D. Robinson Attorney-in-Fact August 11, 1998 --------------------------------------- Lawrence D. Robinson Director - ------------------------------------------- Richard C. North Director - ------------------------------------------- Robert H. Lutz, Jr. Director - ------------------------------------------- Michael D. Rose
II-4 27 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION ------ ----------- 4.1 -- Form of Share Certificate for Common Stock (filed as Exhibit 4.1 to the Registrant's Form 10-Q for the quarter ended June 30, 1996 and incorporated herein by reference) 5.1* -- Opinion of Jenkens & Gilchrist, a Professional Corporation (as to shares issued by Selling Shareholders in the Merger) 5.2* -- Opinion of Miles & Stockbridge P.C. (as to shares issued to Selling Shareholders in the Merger) 5.3 -- Opinion of Jenkens & Gilchrist, a Professional Corporation (as to shares to be issued under Options) 23.1 -- Consent of Jenkens & Gilchrist, a Professional Corporation (included in Exhibits 5.1 and 5.3) 23.2 -- Consent of PricewaterhouseCoopers LLP 23.3 -- Consent of Arthur Andersen LLP 23.4 -- Consent of Miles & Stockbridge P.C. (included in Exhibit 5.2) 24.1* -- Power of Attorney 99.1 -- Second Amended and Restated 1995 Equity Incentive Plan 99.2 -- Amended and Restated Stock Option Plan for Non-Employee Directors 99.3 -- Form of Nonqualified Stock Option Agreement for 1995 Equity Incentive Plan 99.4 -- Form of Nonqualified Stock Option Agreement for Non-Employee Directors Stock Option Plan - ---------------------- *Previously filed
EX-5.3 2 OPINION OF JENKINS & GILCHRIST 1 EXHIBIT 5.3 [JENKENS & GILCHRIST LETTERHEAD] August 11, 1998 FelCor Lodging Trust Incorporated 545 E. John Carpenter Frwy., Suite 1300 Irving, Texas 75062 Re: FelCor Lodging Trust Incorporated Post-Effective Amendment No. 1 on Form S-3 to Form S-4 Ladies and Gentlemen: This firm has acted as counsel to FelCor Lodging Trust Incorporated (formerly FelCor Suite Hotels, Inc.), a Maryland corporation (the "Company"), in connection with the preparation of the Post-Effective Amendment No. 1 on Form S-3 to Form S-4 Registration Statement (the "Registration Statement") to be filed with the Securities and Exchange Commission on or about August 12, 1998, under the Securities Act of 1933, as amended (the "Securities Act"), relating to the offer and sale of up to 1,273,259 shares (the "Shares") of the Company's common stock, par value $0.01 per share (the "Common Stock"), that may be issued by the Company pursuant to outstanding options (the "Options") granted under the terms of the Second Amended and Restated 1995 Equity Incentive Plan (the "Incentive Plan") and the Stock Option Plan for Non- Employee Directors (the "Non-Employee Director Plan") (together with the Incentive Plan, the "Plans"), which Plans were originally adopted by Bristol Hotel Company ("Bristol"), which was merged with and into the Company effective July 28, 1998 (the "Merger"), whereupon the Company assumed Bristol's obligations under the Plans and Options as a result of the Merger. You have requested the opinion of this firm with respect to certain legal aspects of the proposed offering. In connection therewith, this firm has examined and relied upon the original, or copies identified to our satisfaction, of (1) the Company's Articles of Amendment and Restatement, as amended and supplemented; (2) the bylaws of the Company, as amended; (3) minutes and records of the corporate proceedings of the Company with respect to the Merger, the assumption of the Plans and Options, and related matters; (4) the Registration Statement and exhibits thereto, including the Plans; and (5) such other documents and instruments as this firm has deemed necessary for the expression of these opinions. In making the foregoing examinations, this firm has assumed the genuineness of all signatures and the authenticity of all documents submitted to this firm as originals, and the conformity to original documents of all documents submitted to this firm as certified or photostatic copies. As to various questions of fact material to this opinion letter, and as to the content and form of the Articles of Amendment and Restatement, the bylaws, minutes, records, resolutions and other documents or writings of the Company, this firm has relied, to the extent it deems reasonably appropriate, upon representations or certificates of officers or directors of the Company and upon documents, records and instruments furnished to this firm by the Company, without independent check or verification of their accuracy. 2 FelCor Lodging Trust Incorporated August 11, 1998 Page 2 Based upon our examination, consideration of, and reliance on the documents and other matters described above, this firm is of the opinion that: (1) All corporate actions necessary to authorize the issuance by the Company of the Shares upon the exercise of the Options have been duly and validly taken; and (2) Assuming (i) that all relevant corporate actions heretofore taken by the Company remain in full force and effect and (ii) that the Shares are issued, sold and delivered as contemplated by, the Registration Statement and in accordance with the terms and conditions of the corporate authorization and the Options and the Plans, such Shares will be duly authorized, validly issued, fully paid and nonassessable shares of Common Stock of the Company. The opinions expressed in this letter assume that (1) the Plans and the Options were duly authorized and validly issued by Bristol, and (2) each exercise price for the Options remains at not less than the par value per share of the Common Stock. This firm hereby consents (i) to the reference to us under the caption "Legal Matters" in the Prospectus, which constitutes a part of the Registration Statement referred to above, (ii) to the filing of this opinion letter as an exhibit to the Registration Statement and (iii) to references to our firm included in or made a part of the Registration Statement. In giving this consent, this firm does not admit that it comes within the category of person whose consent is required under Section 7 of the Securities Act or the Rules and Regulations of the Securities and Exchange Commission thereunder. Very truly yours, JENKENS & GILCHRIST, a Professional Corporation By: /s/ DARYL B. ROBERTSON ------------------------------ Daryl B. Robertson, Authorized Signatory DBR/em EX-23.2 3 CONSENT OF PRICEWATERSHOUSE COOPERS LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of FelCor Lodging Trust Incorporated We consent to the incorporation by reference in Post-Effective Amendment No. 1 on Form S-3 to Form S-4 to the registration statement of FelCor Suite Hotels, Inc. on Form S-4 (File No. 333-50509) of our reports dated (i) January 20, 1998, except for Note 14 as to which the date is February 17, 1998, and our audits of the consolidated financial statements and financial statement schedule of FelCor Suite Hotels, Inc. as of December 31, 1997 and 1996, and for the years ended December 31, 1997 and 1996, and 1995, (ii) March 13, 1998, on our audits of the consolidated financial statements of DJONT Operations, L.L.C. as of December 31, 1997 and 1996, and for the years ended December 1, 1997, 1996 and 1995, (iii) July 25, 1997 on our audit of the combined financial statements of the Sheraton Acquisition Hotels as of December 31, 1996 and the year then ended, (iv) February 23, 1996 on our audits of the consolidated financial statements of Bristol Hotel Company as of December 31, 1995 and for the eleven months then ended and the combined financial statements of Harvey Hotel Companies as of January 31, 1995 and for the one month then ended, which reports are incorporated by reference herein. We also consent to the reference to our firm under the caption "Experts". /s/ PRICEWATERHOUSECOOPERS LLP Dallas, Texas August 11, 1998 EX-23.3 4 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated February 6, 1998 (except with respect to the matter discussed in Note 20 as to which the date is March 25, 1998), on the consolidated financial statements of the Bristol Hotel Company and to the use of our report dated February 6, 1998 (except with respect to the matter discussed in Note 18 as to which the date is March 25, 1998), on the consolidated financial statements of the Bristol Hotel Asset Company (and to all references to our Firm), incorporated by reference into the Post-Effective Amendment No. 1 on Form S-3 to Form S-4 for FelCor Lodging Trust Incorporated. /s/ ARTHUR ANDERSEN LLP Dallas, Texas, August 11, 1998 EX-99.1 5 2ND AMENDED & RESTATED 1995 EQUITY INCENTIVE AGMNT 1 EXHIBIT 99.1 FELCOR LODGING TRUST INCORPORATED AMENDED AND RESTATED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS The Bristol Hotel Company Stock Option Plan For Non-Employee Directors has been amended and restated in its entirety effective July 27, 1998 by the Committee, acting in accordance with Section 10, in order to reflect and to take into account the Spin-Off and the Merger, as well as the resulting conversion of Bristol Hotel Company Common Stock into BHR Common Stock and Common Stock issued by the Corporation, and further to reflect the ongoing relationship between BHR and the Corporation which has resulted in the decision by the Corporation to continue this Plan for the benefit of those Eligible Directors of BHR and the Corporation whose motivation and performance will benefit the Corporation. 1. PURPOSES. The purposes of this Plan are to encourage outside directors of BHR and the Corporation to own Common Shares and thereby to align their interests more closely with the interests of the other stockholders of the Company, to encourage the highest level of director performance by providing such directors with a direct interest in the Company's attainment of its financial goals, and to provide financial incentives that will help attract and retain the most qualified outside directors. 2. DEFINITIONS. As used in this Plan: "ANNUAL OPTION" means an Option Right granted to an Eligible Director pursuant to Section 5 of this Plan. "BHR" means Bristol Hotels & Resorts, a Delaware corporation formerly known as Bristol Hotels & Resorts, Inc. "BHR COMMON STOCK" means shares of common stock, par value $0.01 per share, of BHR. "BOARD" means the Board of Directors of the Corporation. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "COMMITTEE" means the Committee described in Section 9 of this Plan. "COMMON SHARES" means, collectively, the FelCor Common Stock and the BHR Common Stock and any security into which Common Shares may be converted by reason of any transaction or event of the type referred to in Section 7 of this Plan, except that where a reference THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 2 to Common Shares is limited to FelCor Common Stock, or BHR Common Stock, individually, reference shall be made to the appropriate shares. "COMPANY" means, individually and collectively as the context requires, whichever of the Corporation (or its Subsidiary), or BHR (or its Subsidiary), on whose board of directors the Eligible Director of reference serves at the time of reference. "CORPORATION" means FelCor Lodging Trust Incorporated (f.k.a. FelCor Suite Hotels, Inc.) a Maryland corporation. "DATE OF GRANT" means the date on which an Initial Option or an Annual Option is granted as provided in Sections 4(a) and 5(a), respectively. "DIRECTOR" means a member of the Board. "DISABILITY" means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An Optionee shall not be considered to be subject to a Disability until he or she furnishes a certification from a practicing physician in good standing to the effect that such Optionee meets the criteria described in this definition. "EFFECTIVE DATE" means the date the Plan is approved by the Company's stockholders. "ELIGIBLE DIRECTOR" means a Director who does not beneficially own (within the meaning of Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) 10% or more of the outstanding Common Shares and who is not an employee of the Company or any person or entity which beneficially owns 10% or more of the outstanding Common Shares or an affiliate thereof. For purposes of this Plan, an employee is an individual whose wages are subject to the withholding of federal income tax under Sections 3401 and 3402 of the Code. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time. "FELCOR COMMON STOCK" means shares of the common stock, par value $0.01 per share, of the Corporation. "FIRST ANNUAL MEETING" means the first annual meeting of stockholders of the Company following the Date of Grant of an Option Right. "INITIAL OPTION" means an Option Right granted to an Eligible Director pursuant to Section 4 of this Plan. "MARKET VALUE" as of a given date means the greater of (i) the stated par value of the Common Shares or (ii) the closing sale price of the Common Shares as reported on the 2 3 Composite Tape of the New York Stock Exchange (the "NYSE") on such date. If there are no Common Share transactions on such date, the Market Value per Share shall be determined as of the immediately preceding date on which there were Common Share transactions. "MERGER" means the merger of Bristol Hotel Company with and into the Corporation effective at 9:00 a.m. Eastern time on July 28, 1998. "OPTIONEE" means a Director who has been granted an Option Right under the Plan. "OPTION PRICE" means the purchase price payable upon the exercise of an Option Right. "OPTION RIGHT" means the right to purchase Common Shares from the Company upon the exercise of an Initial Option or an Annual Option granted pursuant to this Plan. Option Rights may be evidenced by written agreements, notifications or other documents containing terms and conditions not inconsistent with this Plan. "PLAN" means the Bristol Hotel Company Stock Option Plan for Non-Employee Directors, as the same may be amended from time to time. "RULE 16B-3" means Rule 16b-3 or any successor rule to the same effect, as promulgated and amended from time to time by the Securities and Exchange Commission under the Exchange Act. "SPIN-OFF" means the distribution by Bristol Hotel Company to its stockholders of all of the outstanding shares of BHR Common Stock effective at 4:30 p.m. Eastern time on July 27, 1998. "TERMINATION OF SERVICE" means the time at which the Optionee ceases to serve as a Director for any reason, with or without cause, which includes termination by resignation, removal, death or retirement. "VOTING STOCK" has the meaning set forth in Section 13(a). 3. SHARES AVAILABLE UNDER THE PLAN. Subject to Sections 3(b) and 7 of this Plan, the number of Common Shares issued upon exercise of Option Rights, plus the number of Common Shares covered by outstanding Option Rights, shall not in the aggregate exceed 500 Common Shares (without limiting the generality of Section 7, as adjusted to reflect adjustments under Section 7 prior to the Spin-Off and Merger, and to reflect the Spin-Off and Merger), which may be Common Shares of original issuance or Common Shares held in treasury or a combination thereof. In connection with the issuance of Common Shares pursuant to the Plan, the Company may repurchase Common Shares in the open market or otherwise. 3 4 (b) For the purposes of this Section 3, Common Shares subject to an Option Right that has been canceled or terminated prior to exercise shall again be available for the grant of Option Rights to the extent of such cancellation or termination. 4. INITIAL OPTIONS. With respect to each person who first becomes an Eligible Director of the Company after the Effective Date of this Plan, an option to purchase 25 Common Shares shall be automatically granted to such Eligible Director as of the date such person first becomes an Eligible Director. No Option Rights shall be granted under this Section 4(a) after the date of the Spin-Off. (b) (i) Subject to subsection (ii) of this Section 4(b) and Section 13 of this Plan, each Initial Option, until terminated as provided in Section 6(c), shall become exercisable to the extent of 34% of the Common Shares subject thereto after the Optionee has continuously served as a Director through the date of the First Annual Meeting, and to the extent of an additional 33% of the Common Shares subject to the Initial Option after the Optionee has continuously served as a Director through the date of the annual stockholders' meeting immediately succeeding the First Annual Meeting and to the extent of an additional 33% of the Common Shares subject to the Initial Option after the Optionee has continuously served as a Director through the date of the second annual stockholders' meeting succeeding the First Annual meeting. (ii) If an Optionee ceases to be a Director by reason of death or Disability, all Initial Options held by such Optionee that would have otherwise become exercisable had such Director continuously served as a Director through the date of the Company's annual meeting of stockholders immediately following such death or Disability shall, notwithstanding subsection (i) of this Section 4(b), become immediately exercisable in full. 5. ANNUAL OPTIONS. On the date of each annual meeting of the Company's stockholders (beginning with the annual meeting of stockholders in 1996), an option to purchase 25 Common Shares shall be automatically granted as such date to each Eligible Director who is elected a Director at such meeting or whose term of office as a Director continues after such meeting. No Option Rights shall be granted under this Section 5(a) on or after the date of the Spin-Off. (b) (i) Subject to subsection (ii) of this Section 5(b) and Section 13 of this Plan, each Annual Option, until terminated as provided in Section 6(c), shall become exercisable to the extent of 100% of the Common Shares subject thereto after the Optionee has continuously served as a Director until the date of the First Annual Meeting. (ii) If an Optionee ceases to be a Director by reason of death or Disability, all Annual Options held by such Optionee shall, notwithstanding subsection (i) of this Section 5(b), become immediately exercisable in full. 6. TERMS OF OPTION RIGHTS. 4 5 (a) The Option Price per share of each Option Right shall be equal to the Market Value per Common Share on the Date of Grant. (b) To the extent exercisable, each Option Right shall be exercisable in whole or in part from time to time by written notice to the Company at its principal executive office specifying the number of Common Shares with respect to which the Option Right is being exercised and payment of the Option Price for such Common Shares in accordance with Section 6(d) of the Plan. (c) Each Option Right shall terminate on the earliest to occur of the following dates: (i) Three months following the effective date of the Optionee's Termination of Service, if such Termination of Service results other than from the Optionee's death or Disability; (ii) One year following the effective date of the Optionee's Termination of Service, if such Termination of Service results from the Optionee's death or Disability; or (iii) Five years from the Date of Grant. (d) The Option Price shall be payable (a) in cash or by check acceptable to the Company whose Common Shares are being acquired, and delivered (i) in the case of Option Rights with respect to Common Shares which are FelCor Common Stock, to the Corporation, and (ii) in the case of Option Rights with respect to Common Shares which are BHR Common Stock, to BHR, (b) by transfer to the Company whose Common Shares are being acquired, Common Shares (iii) in the case of an Option Right with respect to Common Shares which are FelCor Common Stock , of FelCor Common Stock, and (iv) in the case of an Option Right with respect to Common Shares which are BHR Common Stock , of BHR Common Stock, in each case which have been owned by the Optionee for more than six months prior to the date of exercise and which have a Market Value on the date of exercise equal to the Option Price, or (c) by a combination of such methods of payment. The requirement of payment in cash shall be deemed satisfied if the Optionee shall have made arrangements satisfactory to the Company of reference with a broker who is a member of the National Association of Securities Dealers, Inc. to sell on the exercise date a sufficient number of Common Shares being purchased so that the net proceeds of the sale transaction will at least equal the Option Price of the Common Shares being purchased, and pursuant to which the broker undertakes to deliver the full Option Price of the Common Shares being purchased to the Company of reference not later than the date on which the sale transaction will settle in the ordinary course of business. (e) No Optionee shall have any rights as a stockholder with respect to Common Shares subject to an Option Right until a certificate or certificates representing such Common Shares has been issued. 5 6 (f) No Option Right shall be transferable other than by will or the laws of descent and distribution. During an Optionee's lifetime, Option Rights held by such Optionee shall be exercisable only by the Optionee or, in the event of the Optionee's incapacity, including incapacity arising from a Disability, by the Optionee's guardian or legal representative acting in a fiduciary capacity. (g) Option Rights granted pursuant to this Plan shall be options that are not intended to qualify under any particular provision of the Code. 7. ADJUSTMENTS. The Committee shall make or provide for such adjustments in the number of Common Shares covered by outstanding Option Rights, the Option Prices per Common Share applicable to any such Option Rights, and the kind of shares (including shares of another issuer) covered thereby, as the Committee shall in good faith determine to be equitably required in order to prevent dilution or expansion of the rights of Optionees that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, or (b) any merger, consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of warrants or other rights to purchase securities or any other corporate transaction or event having an effect similar to any of the foregoing. The Committee shall also make or provide for such adjustments in the maximum number of Common Shares specified in Section 3(a) of this Plan and the number of Common Shares specified in Sections 4(a) and 5(a) of this Plan as the Committee may in good faith determine to be appropriate in order to reflect any transaction or event described in this Section 7. 8. FRACTIONAL SHARES. Neither the Corporation nor BHR shall be required to issue fractional Common Shares pursuant to this Plan, provided they settle such fractional Common Shares in cash. 9. ADMINISTRATION OF THE PLAN. (a) Except as provided in subsection 9(c), this Plan shall be administered by a committee of the Board, which shall be composed of not less than two Directors ("Committee"). Notwithstanding the foregoing, grants of Option Rights under this Plan shall be automatic as described in Sections 4 and 5, and the Committee shall have no authority, discretion or power to determine the terms of Option Rights to be granted pursuant to the Plan, the number of Common Shares to be issued thereunder or the time at which such Option Rights are to be granted, or the duration and nature of Option Rights, except in the sense of administering the Plan in accordance with the provisions of the Plan. (b) Except as provided in subsection 9(c) and subject to subsection 9(a), the interpretation and construction by the Committee of any provision of this Plan or any agreement, notification or document evidencing the grant of Option Rights, and any determination by the Committee pursuant to any provision of this Plan or any such agreement, notification or document, shall be final and conclusive. No member of the Committee shall be liable for any such action taken or determination made in good faith. (c) Notwithstanding any provision of the Plan to the contrary, all references in the preceding subsection 9(a) and (b) to the Board and the Committee shall be deemed references to the 6 7 board of directors, and the committee, respectively of BHR to the extent, as reasonably determined by the Committee, such provisions shall relate to Option Rights outstanding on the date of the Merger with respect to BHR Common Stock of (i) Eligible Directors serving on the board of directors of BHR at the time of reference, or (ii) former Eligible Directors of BHR (or Bristol Hotel Company) who have not served on the Board of the Corporation; provided, however, that such authority may not be exercised in a manner which the Committee reasonably determines to be contrary to the terms of the Plan or of the Option Right(s) of reference. 10. AMENDMENTS AND OTHER MATTERS. (a) Except as provided in subsection 9(c), this Plan may be terminated, and from time to time amended, by the Board;; provided, however, that except as provided in Section 7, no such amendment shall (i) increase the number of Common Shares specified in Section 3(a) hereof, materially modify the definition of "Eligible Director" or otherwise cause this Plan or any grant of Option Rights to cease to satisfy any applicable condition of Rule 16b-3, without further approval of the stockholders of the Corporation, (ii) cause any Optionee to fail to qualify as a "disinterested person" within the meaning of Rule 16b-3, or (iii) amend, or otherwise directly or indirectly limit the scope of, subsections 9(b) and (c) without the express consent of board of directors, or the compensation committee, of BHR; provided further that Plan provisions relating to the terms of Option Rights and the timing of grants of Option Rights shall not be amended more than once every six months, other than to comport with changes in the Code, the Employment Retirement Income Security Act, or the rules promulgated thereunder. No amendment or termination of the Plan shall adversely affect any outstanding Option Right without the consent of the Optionee. (b) Any grant of Option Rights pursuant to an amendment to this Plan shall be null and void if it is subsequently determined that (i) stockholder approval of such amendment was required in order for this Plan to continue to satisfy the applicable conditions of Rule 16b-3, or (ii) such grant or amendment disqualified any Optionee as a "disinterested person" within the meaning of Rule 16b-3. 11. NO ADDITIONAL RIGHTS. Nothing contained in this Plan or in any award granted under this Plan shall interfere with or limit in any way the right of the stockholders of the Company to remove any Director from the Board pursuant to state law or the Certificate of Incorporation or Bylaws of the Company, nor confer upon any Director any right to continue in the service of the Company. 12. SECURITIES LAW MATTERS. (a) The Company may require any Optionee, as a condition of receiving Option Rights, to give written assurances in substance and form satisfactory to the Company and its counsel to the effect that such person is acquiring the Common Shares subject to the Option Rights for his own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws. (b) Each award of Option Rights shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of 7 8 the Common Shares subject to such Option Rights upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance of shares thereunder, such grant of Option Rights may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to such counsel. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification. (c) To the extent necessary for the grant of an Option Right, its exercise or the sale of Common Shares acquired thereunder to be exempt from Section 16(b) of the Exchange Act, such Option Right shall be held six months from the Date of Grant, or at least six months shall elapse from the Date of Grant to the date of disposition of the Common Shares acquired upon exercise of such Option Right. 13. TERMINATION OF THE PLAN. No further Option Rights shall be granted under this Plan after the passage of ten years from the Effective Date. 14. OPTION AMENDMENTS TO REFLECT SPIN-OFF AND MERGER. (a) Effective on the date of the Spin-Off each then outstanding Option Right will be deemed to have been amended to the extent necessary, in the sole judgment of the Committee, so as to redenominate such Option Right into two Option Rights (each of which are continuations of such Option Right), one to acquire Common Stock of Bristol Hotel Company (the Corporation on such date), and the other to acquire BHR Common Stock, in each case at a price, and in an amount, set forth in the documents relating to the Spin-Off and otherwise in accordance with the provisions of Section 7. (b) Effective on the date of the Merger, each then outstanding Option Right will be amended in writing, to the extent deemed necessary in the sole discretion of the Committee, (i) to reflect the matters described in (a) above, (ii) to reflect the right to acquire FelCor Common Stock in lieu of the common stock of Bristol Hotel Company at a price, and in an amount, set forth in the documents evidencing the Merger and otherwise in accordance with the provisions of Section 7, and (iii) to reflect other matters affected by the amendment and restatement of this Plan and the requirements set forth in the documents relating to the Spin-Off and Merger. 8 EX-99.2 6 AMENDED & RESTATED STOCK OPTION PLAN 1 EXHIBIT 99.2 FELCOR LODGING TRUST INCORPORATED SECOND AMENDED AND RESTATED 1995 EQUITY INCENTIVE PLAN The Bristol Hotel Company Amended and Restated 1995 Equity Incentive Plan has been amended and restated in its entirety effective July 27, 1998 by the Committee, acting in accordance with Section 15, in order to reflect and to take into account the Spin-Off and the Merger, as well as the resulting conversion of Bristol Hotel Company Common Stock into BHR Common Stock and Common Stock issued by the Corporation, and further to reflect the ongoing relationship between BHR and the Corporation which has resulted in the decision by the Corporation to continue this Plan for the benefit of those employees of BHR, the Corporation and Subsidiaries whose motivation and performance will benefit the Corporation. 1. PURPOSE. The purpose of this Plan is to attract and retain qualified officers and other key employees of the Corporation, BHR, and Subsidiaries, and to provide such persons with appropriate incentives. 2. DEFINITIONS. As used in this Plan, "APPRECIATION RIGHT" means a right granted pursuant to Section 5 of this Plan, including a Free-standing Appreciation Right and a Tandem Appreciation Right. "BASE PRICE" means the price to be used as the basis for determining the Spread upon the exercise of a Free-standing Appreciation Right. "BHR" means Bristol Hotels & Resorts, a Delaware corporation formerly known as Bristol Hotels & Resorts, Inc. "BHR COMMON STOCK" means shares of common stock, par value $0.01 per share, of BHR. "BOARD" means the Board of Directors of the Corporation. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "COMMITTEE" means the Compensation Committee of the Board of Directors, as described in Section 14(a) of this Plan, or, in the absence of a Compensation Committee, the full Board. "COMMON SHARES" means, collectively, the FelCor Common Stock and the BHR Common Stock and any security into which Common Shares may be converted by reason of any transaction or event of the type referred to in Section 10 of this Plan, except that where a reference to Common Shares is limited to FelCor Common Stock, or BHR Common Stock, individually, reference shall be made to the appropriate shares. THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 2 "CORPORATION" means FelCor Lodging Trust Incorporated (f.k.a. FelCor Suite Hotels, Inc.), a Maryland corporation. "DATE OF GRANT" means the date specified by the Committee on which a grant of Option Rights, Appreciation Rights or Performance Shares or Performance Units or a grant or sale of Restricted Shares or Deferred Shares shall become effective, which shall not be earlier than the date on which the Committee takes action with respect thereto. "DEFERRAL PERIOD" means the period of time during which Deferred Shares are subject to deferral limitations under Section 7 of this Plan. "DEFERRED SHARES" means an award pursuant to Section 7 of this Plan of the right to receive Common Shares at the end of a specified Deferral Period. "EMPLOYER" means, individually and collectively as the context requires, whichever of the Corporation (or its Subsidiary), or BHR (or its Subsidiary), employs the Participant of reference at the time of reference. "FELCOR COMMON STOCK" means shares of the common stock, par value $0.01 per share, of the Corporation. "FREE-STANDING APPRECIATION RIGHT" means an Appreciation Right granted pursuant to Section 5 of this Plan that is not granted in tandem with an Option Right or similar right. "INCENTIVE STOCK OPTION" means an Option Right that is intended to qualify as an "incentive stock option" under Section 422 of the Code or any successor provision thereto. "MANAGEMENT OBJECTIVES" means the achievement of a performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares or Performance Units or, when so determined by the Committee, Restricted Shares, Deferred Shares, Option Rights or Appreciation Rights. Management Objectives may be described in terms of Employer-wide objectives or objectives that are related to the performance of the individual Participant or the Subsidiary, division, department or function within the Employer or Subsidiary in which the Participant is employed. The Management Objectives applicable to any award to a Participant who is, or is determined by the Committee to be likely to become, a "covered employee" within the meaning of Section 162(m) of the Code (or any successor provision) shall be limited to specified levels of or growth in: (i) return on invested capital; (ii) return on equity; (iii) return on operating assets; (iv) earnings per share; and/or -2- 3 (v) market value per share. Except in the case of such a covered employee, if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Employer, or the manner in which it conducts its business, or other events or circumstances render the Management Objectives unsuitable, the Committee may modify such Management Objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable. "MARKET VALUE PER SHARE" means the fair market value of the Common Shares as determined by the Committee from time to time. "MERGER" means the merger of Bristol Hotel Company with and into the Corporation effective at 9:00 a.m. Eastern time on July 28, 1998. "NONQUALIFIED OPTION" means an Option Right that is not intended to qualify as a Tax-qualified Option. "OPTIONEE" means the person so designated in an agreement evidencing an outstanding Option Right. "OPTION PRICE" means the purchase price payable upon the exercise of an Option Right. "OPTION RIGHT" means the right to purchase Common Shares upon the exercise of a Nonqualified Option or a Tax-qualified Option granted pursuant to Section 4 of this Plan. "PARTICIPANT" means a person who is selected by the Committee to receive benefits under this Plan and (i) is at that time an officer of the Employer, including without limitation an officer who may also be a member of the board of directors of the Employer, or other key employee of or consultant to the Employer or any Subsidiary, or (ii) has agreed to commence serving in any such capacity. "PERFORMANCE PERIOD" means, in respect of a Performance Share or Performance Unit, a period of time established pursuant to Section 8 of this Plan within which the Management Objectives relating thereto are to be achieved. "PERFORMANCE SHARE" means a bookkeeping entry that records the equivalent of one Common Share awarded pursuant to Section 8 of this Plan. "PERFORMANCE UNIT" means a bookkeeping entry that records a unit equivalent of $1.00 awarded pursuant to Section 8 of this Plan. "RELOAD OPTION RIGHTS" means additional Option Rights automatically granted to an Optionee upon the exercise of Option Rights pursuant to Section 4(f) of this Plan. -3- 4 "RESTRICTED SHARES" means Common Shares granted or sold pursuant to Section 6 of this Plan as to which neither the substantial risk of forfeiture nor the restrictions on transfer referred to in Section 6 hereof has expired. "RULE 16B-3" means Rule 16b-3, as promulgated and amended from time to time by the Securities and Exchange Commission under the Securities Exchange Act of 1934, or any successor rule to the same effect. "SPIN-OFF" means the distribution by Bristol Hotel Company to its stockholders of all of the shares of BHR Common Stock effective at 4:30 p.m. Eastern time on July 27, 1998. "SPREAD" means, in the case of a Free-standing Appreciation Right, the amount by which the Market Value per Share on the date when the Appreciation Right is exercised exceeds the Base Price specified therein or, in the case of a Tandem Appreciation Right, the amount by which the Market Value per Share on the date when the Appreciation Right is exercised exceeds the Option Price specified in the related Option Right. "SUBSIDIARY" means a corporation, partnership, joint venture, unincorporated association or other entity in which the Corporation or BHR has a material direct or indirect ownership or other equity interest. "TANDEM APPRECIATION RIGHT" means an Appreciation Right granted pursuant to Section 5 of this Plan that is granted in tandem with an Option Right or any similar right granted under any other plan of the Corporation. "TAX-QUALIFIED OPTION" means an Option Right that is intended to qualify under particular provisions of the Code, including without limitation an Incentive Stock Option. 3. SHARES AND PERFORMANCE UNITS AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as provided in Section 10 of this Plan, the number of Common Shares comprising FelCor Common Stock, and BHR Common Stock, respectively, which may be (i) issued or transferred upon the exercise of Option Rights or Appreciation Rights, (ii) awarded as Restricted Shares and released from substantial risk of forfeiture thereof or Deferred Shares or (iii) issued or transferred in payment of Performance Shares or Performance Units that have been earned, shall not in the aggregate exceed 3,130,00 Common Shares (without limiting the generality of Section 10, as adjusted to reflect the Spin-Off and Merger), which may be Common Shares of original issuance or Common Shares held in treasury or a combination thereof; provided, however, that, notwithstanding any provision hereof to the contrary, no Restricted Shares shall be granted. For the purposes of this Section 3(a): (i) The payment of the Option Price with respect to Common Shares which are FelCor Common Stock shall be made to the Corporation. (ii) The payment of the Option Price with respect to Common Shares which are BHR Common Stock shall be made to BHR. -4- 5 (iii) Upon payment in cash of the benefit provided by any award granted under this Plan, any Common Shares that were covered by that award shall again be available for issuance or transfer hereunder. (iv) Upon the full or partial payment of any Option Price by the transfer to the Corporation (with respect to FelCor Common Stock) or to BHR (with respect to BHR Common Stock) of its respective Common Shares or upon satisfaction of tax withholding obligations in connection with any such exercise or any other payment made or benefit realized under this Plan by the transfer or relinquishment of Common Shares, there shall be deemed to have been issued or transferred under this Plan only the net number of Common Shares actually issued or transferred less the number of Common Shares so transferred or relinquished. (b) Notwithstanding anything in Section 3(a) hereof, or elsewhere in this Plan, to the contrary, the aggregate number of Common Shares actually issued or transferred upon the exercise of the Incentive Stock Options shall not exceed the total number of Common Shares first specified in Section 3(a) hereof. (c) The number of Performance Units that may be granted under this Plan shall not in the aggregate exceed the number of Common Shares first specified in Section 3(a) hereof. Performance Units that are granted under this Plan and are not paid in Common Shares or are not earned by the Participant at the end of the Performance Period shall be available for future grants of Performance Units hereunder. (d) Notwithstanding any other provision of this Plan to the contrary, in no event shall any Participant in any calendar year receive awards of Performance Shares and Performance Units having an aggregate value as of their respective Dates of Grant in excess of $250,000. (e) Notwithstanding any other provision of this Plan to the contrary, no Participant shall be granted Option Rights and Appreciation Rights, in the aggregate, for more than 7.69% of Common Shares of each type first specified in Section 3(a) hereof. 4. OPTION RIGHTS. The Committee may from time to time authorize grants to Participants of options to purchase Common Shares upon such terms and conditions as the Committee may determine in accordance with the following provisions: (a) Each grant shall specify the number of Common Shares to which it pertains. (b) Each grant shall specify an Option Price per Common Share, which may be equal to or greater or less than the Market Value per Share on the Date of Grant. (c) Each grant shall specify the form of consideration to be paid in satisfaction of the Option Price and the manner of payment of such consideration, which may include (i) cash in the form of currency or check or other cash equivalent acceptable to the Corporation, (ii) nonforfeitable, unrestricted Common Shares, which are already owned by the Optionee, (iii) any other legal consideration that the Committee may deem appropriate, including without -5- 6 limitation any form of consideration authorized under Section 4(d) below, on such basis as the Committee may determine in accordance with this Plan and (iv) any combination of the foregoing. (d) Any grant of a Nonqualified Option may provide that payment of the Option Price may also be made in whole or in part in the form of Restricted Shares or other Common Shares that are subject to risk of forfeiture or restrictions on transfer. Unless otherwise determined by the Committee on or after the Date of Grant, whenever any Option Price is paid in whole or in part by means of any of the forms of consideration specified in this Section 4(d), the Common Shares received by the Optionee upon the exercise of the Nonqualified Option shall be subject to the same risks of forfeiture or restrictions on transfer as those that applied to the consideration surrendered by the Optionee; provided, however, that such risks of forfeiture and restrictions on transfer shall apply only to the same number of Common Shares received by the Optionee as applied to the forfeitable or restricted Common Shares surrendered by the Optionee. (e) Any grant may, if there is then a public market for the Common Shares, provide for deferred payment of the Option Price from the proceeds of sale through a broker of some or all of the Common Shares to which the exercise relates. (f) Any grant may provide for the automatic grant to the Optionee of Reload Option Rights upon the exercise of Option Rights, including Reload Option Rights, for Common Shares or any other noncash consideration authorized under Sections 4(c) and (d) above; provided, however, that the term of any Reload Option Right shall not extend beyond the term of the Option Right originally exercised. (g) Successive grants may be made to the same Optionee regardless of whether any Option Rights previously granted to the Optionee remain unexercised. (h) Each grant shall specify the period or periods of continuous employment, or continuous engagement of the consulting services, of the Optionee by the Employer that are necessary before the Option Rights or installments thereof shall become exercisable, and any grant may provide for the earlier exercise of the Option Rights in the event of a change in control of the Corporation or other similar transaction or event. (i) Option Rights granted pursuant to this Section 4 may be Nonqualified Options or Tax-qualified Options or combinations thereof. (j) Any grant of an Option Right may provide for the payment to the Optionee of dividend equivalents thereon in cash or Common Shares on a current, deferred or contingent basis, or the Committee may provide that any dividend equivalents shall be credited against the Option Price. (k) No Option Right granted pursuant to this Section 4 may be exercised more than 10 years from the Date of Grant. -6- 7 (l) Each grant shall be evidenced by one or more agreement(s), which shall be executed on behalf of the Corporation, or by BHR, by any officer thereof and delivered to and accepted by the Optionee and shall contain such terms and provisions as the Committee may determine consistent with this Plan. 5. APPRECIATION RIGHTS. The Committee may also authorize grants to Participants of Appreciation Rights. An Appreciation Right shall be a right of the Participant to receive from the Corporation an amount, which shall be determined by the Committee and shall be expressed as a percentage (not exceeding 100%) of the Spread at the time of the exercise of an Appreciation Right. Any grant of Appreciation Rights under this Plan shall be upon such terms and conditions as the Committee may determine in accordance with the following provisions: (a) Any grant may specify that the amount payable upon the exercise of an Appreciation Right may be paid by the Corporation in cash, Common Shares or any combination thereof and may (i) either grant to the Participant or reserve to the Committee the right to elect among those alternatives or (ii) preclude the right of the Participant to receive and the Corporation to issue Common Shares or other equity securities in lieu of cash. (b) Any grant may specify that the amount payable upon the exercise of an Appreciation Right shall not exceed a maximum specified by the Committee on the Date of Grant. (c) Any grant may specify (i) a waiting period or periods before Appreciation Rights shall become exercisable and (ii) permissible dates or periods on or during which Appreciation Rights shall be exercisable. (d) Any grant may specify that an Appreciation Right may be exercised only in the event of a change in control of the Corporation or other similar transaction or event. (e) Any grant may provide for the payment to the Participant of dividend equivalents thereon in cash or Common Shares on a current, deferred or contingent basis. (f) Each grant shall be evidenced by an agreement, which shall be executed on behalf of the Corporation by any officer thereof and delivered to and accepted by the Optionee and shall describe the subject Appreciation Rights, identify any related Option Rights, state that the Appreciation Rights are subject to all of the terms and conditions of this Plan and contain such other terms and provisions as the Committee may determine consistent with this Plan. (g) Regarding Tandem Appreciation Rights only: Each grant shall provide that a Tandem Appreciation Right may be exercised only (i) at a time when the related Option Right (or any similar right granted under any other plan of the Corporation) is also exercisable and the Spread is positive and (ii) by surrender of the related Option Right (or such other right) for cancellation. (h) Regarding Free-standing Appreciation Rights only: -7- 8 (i) Each grant shall specify in respect of each Free-standing Appreciation Right a Base Price per Common Share, which shall be equal to or greater than the Market Value per Share on the Date of Grant; (ii) Successive grants may be made to the same Participant regardless of whether any Free-standing Appreciation Rights previously granted to the Participant remain unexercised; (iii) Each grant shall specify the period or periods of continuous employment, or continuous engagement of the consulting services, of the Participant by the Corporation or any Subsidiary that are necessary before the Free-standing Appreciation Rights or installments thereof shall become exercisable; and any grant may provide for the earlier exercise of the Free-standing Appreciation Rights in the event of a change in control of the Corporation or other similar transaction or event; and (iv) No Free-standing Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant. 6. RESTRICTED SHARES. The Committee may also authorize grants or sales to Participants of Restricted Shares upon such terms and conditions as the Committee may determine in accordance with the following provisions: (a) Each grant or sale shall constitute an immediate transfer of the ownership of Common Shares to the Participant in consideration of the performance of services, entitling such Participant to dividend, voting and other ownership rights, subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to. (b) Each grant or sale may be made without additional consideration from the Participant or in consideration of a payment by the Participant that is less than the Market Value per Share on the Date of Grant. (c) Each grant or sale shall provide that the Restricted Shares covered thereby shall be subject to a "substantial risk of forfeiture" within the meaning of Section 83 of the Code for a period to be determined by the Committee on the Date of Grant, and any grant or sale may provide for the earlier termination of such period in the event of a change in control of the Corporation or other similar transaction or event. (d) Each grant or sale shall provide that, during the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Shares shall be prohibited or restricted in the manner and to the extent prescribed by the Committee on the Date of Grant. Such restrictions may include without limitation rights of repurchase or first refusal in the Corporation or provisions subjecting the Restricted Shares to a continuing substantial risk of forfeiture in the hands of any transferee. -8- 9 (e) Any grant or sale may require that any or all dividends or other distributions paid on the Restricted Shares during the period of such restrictions be automatically sequestered and reinvested on an immediate or deferred basis in additional Common Shares, which may be subject to the same restrictions as the underlying award or such other restrictions as the Committee may determine. (f) Each grant or sale shall be evidenced by an agreement, which shall be executed on behalf of the Corporation by an officer thereof and delivered to and accepted by the Participant and shall contain such terms and provisions as the Committee may determine consistent with this Plan. Unless otherwise directed by the Committee, all certificates representing Restricted Shares, together with a stock power that shall be endorsed in blank by the Participant with respect to the Restricted Shares, shall be held in custody by the Corporation until all restrictions thereon lapse. 7. DEFERRED SHARES. The Committee may also authorize grants or sales of Deferred Shares to Participants upon such terms and conditions as the Committee may determine in accordance with the following provisions: (a) Each grant or sale shall constitute the agreement by the Corporation to issue or transfer Common Shares to the Participant in the future in consideration of the performance of services, subject to the fulfillment during the Deferral Period of such conditions as the Committee may specify. (b) Each grant or sale may be made without additional consideration from the Participant or in consideration of a payment by the Participant that is less than the Market Value per Share on the Date of Grant. (c) Each grant or sale shall provide that the Deferred Shares covered thereby shall be subject to a Deferral Period, which shall be fixed by the Committee on the Date of Grant, and any grant or sale may provide for the earlier termination of the Deferral Period in the event of a change in control of the Corporation or other similar transaction or event. (d) During the Deferral Period, the Participant shall not have any right to transfer any rights under the subject award, shall not have any rights of ownership in the Deferred Shares and shall not have any right to vote the Deferred Shares, but the Committee may on or after the Date of Grant authorize the payment of dividend equivalents on the Deferred Shares in cash or additional Common Shares on a current, deferred or contingent basis. (e) Each grant or sale shall be evidenced by an agreement, which shall be executed on behalf of the Corporation by any officer thereof and delivered to and accepted by the Participant and shall contain such terms and provisions as the Committee may determine consistent with this Plan. 8. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Committee may also authorize grants of Performance Shares and Performance Units, which shall become payable to the Participant -9- 10 upon the achievement of specified Management Objectives, upon such terms and conditions as the Committee may determine in accordance with the following provisions: (a) Each grant shall specify the number of Performance Shares or Performance Units to which it pertains, which may be subject to adjustment to reflect changes in compensation or other factors. (b) The Performance Period with respect to each Performance Share or Performance Unit shall be determined by the Committee on the Date of Grant and may be subject to earlier termination in the event of a change in control of the Corporation or other similar transaction or event. (c) Each grant shall specify the Management Objectives that are to be achieved by the Participant, which may be described in terms of Corporation-wide objectives or objectives that are related to the performance of the individual Participant or the Subsidiary, division, department or function within the Corporation or Subsidiary in which the Participant is employed or with respect to which the Participant provides consulting services. (d) Each grant shall specify in respect of the specified Management Objectives a minimum acceptable level of achievement below which no payment will be made and shall set forth a formula for determining the amount of any payment to be made if performance is at or above the minimum acceptable level but falls short of full achievement of the specified Management Objectives. (e) Each grant shall specify the time and manner of payment of Performance Shares or Performance Units that shall have been earned, and any grant may specify that any such amount may be paid by the Corporation in cash, Common Shares or any combination thereof and may either grant to the Participant or reserve to the Committee the right to elect among those alternatives. (f) Any grant of Performance Shares may specify that the amount payable with respect thereto may not exceed a maximum specified by the Committee on the Date of Grant. Any grant of Performance Units may specify that the amount payable, or the number of Common Shares issued, with respect thereto may not exceed maximums specified by the Committee on the Date of Grant. (g) On or after the Date of Grant of Performance Shares, the Committee may provide for the payment to the Participant of dividend equivalents thereon in cash or additional Common Shares on a current, deferred or contingent basis. (h) The Committee may adjust Management Objectives and the related minimum acceptable level of achievement if, in the sole judgment of the Committee, events or transactions have occurred after the Date of Grant that are unrelated to the performance of the Participant and result in distortion of the Management Objectives or the related minimum acceptable level of achievement. -10- 11 (i) Each grant shall be evidence by an agreement, which shall be executed on behalf of the Corporation by any officer thereof and delivered to and accepted by the Participant and shall contain such terms and provisions as the Committee may determine consistent with this Plan. 9. TRANSFERABILITY. (a) No Option Right, Appreciation Right or other derivative security (as that term is used in Rule 16b-3) granted under this Plan may be transferred by a Participant except by will or the laws of descent and distribution. Option Rights and Appreciation Rights granted under this Plan may not be exercised during a Participant's lifetime except by the Participant or, in the event of the Participant's legal incapacity, by his guardian or legal representative acting in a fiduciary capacity on behalf of the Participant under state law and court supervision. Notwithstanding the foregoing, the Committee, in its sole discretion, may provide for the transferability of particular awards under this Plan so long as such provisions will not disqualify the exemption for other awards under Rule 16b-3 under the Securities Exchange Act of 1934, if such Rule is then applicable to awards under the Plan. (b) Any grant made under this Plan may provide that all or any part of the Common Shares that are to be issued or transferred by the Corporation upon the exercise of Option Rights or Appreciation Rights or upon the termination of the Deferral Period applicable to Deferred Shares or in payment of Performance Shares or Performance Units, or are no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan, shall be subject to further restrictions upon transfer. 10. ADJUSTMENTS. (a) The Committee may make or provide for such adjustments in the number of Common Shares covered by outstanding Option Rights, Appreciation Rights, Deferred Shares and Performance Shares granted hereunder, the Option Prices per Common Share or Base Prices per Common Share applicable to any such Option Rights and Appreciation Rights, and the kind of shares (including shares of another issuer) covered thereby, as the Committee may in good faith determine to be equitably required in order to prevent dilution or expansion of the rights of Participants that otherwise would result from (i) any stock dividend, stock split, combination of shares, recapitalization or similar change in the capital structure of the Corporation or (ii) any merger, consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of warrants or other rights to purchase securities or any other corporate transaction or event having an effect similar to any of the foregoing. In the event of any such transaction or event, the Committee may provide in substitution for any or all outstanding awards under this Plan such alternative consideration as it may in good faith determine to be equitable under the circumstances and may require in connection therewith the surrender of all awards so replaced. Moreover, the Committee may on or after the Date of Grant provide in the agreement evidencing any award under this Plan that the holder of the award may elect to receive an equivalent award in respect of securities of the surviving entity of any merger, consolidation or other transaction or event having a similar effect, or the Committee may provide that the holder will automatically be entitled to receive such an equivalent award. The Committee may also make or provide for such adjustments in the maximum numbers of Common Shares specified in Section 3 of this Plan as the Committee may in good faith determine to be appropriate in order to reflect any transaction or event described in this Section 10. -11- 12 (b) If another corporation is merged into the Corporation or the Corporation otherwise acquires another corporation, the Committee may elect to assume under this Plan any or all outstanding stock options or other awards granted by such corporation under any stock option or other plan adopted by it prior to such acquisition. Such assumptions shall be on such terms and conditions as the Committee may determine; provided, however, that the awards as so assumed do not contain any terms, conditions or rights that are inconsistent with the terms of this Plan. Unless otherwise determined by the Committee, such awards shall not be taken into account for purposes of the limitations contained in Section 3 of this Plan. 11. FRACTIONAL SHARES. Neither the Corporation nor BHR shall be required to issue fractional Common Shares pursuant to this Plan, provided they settle such fractional Common Shares in cash. 12. WITHHOLDING TAXES. To the extent that withholding of federal, state, local or foreign taxes is required in connection with the exercise of an Option Right or otherwise in connection with any benefit realized by a Participant or other person under this Plan, such amounts will be withheld by the Employer employing the Participant at the time of reference; and provided, further, that to the extent the amounts readily available to such Employer are insufficient, it shall be a condition to the receipt of any such payment or the realization of any such benefit that the Participant or such other person make arrangements satisfactory to such Employer for payment of the balance of any taxes required to be withheld. At the discretion of such Employer, any such arrangements may without limitation include voluntary or mandatory relinquishment of a portion of any such payment or benefit or the surrender of outstanding Common Shares. Such Employer and any Participant or such other person may also make similar arrangements with respect to the payment of any taxes with respect to which withholding is not required. 13. CERTAIN TERMINATIONS OF EMPLOYMENT OR CONSULTING SERVICES, HARDSHIP, AND APPROVED LEAVES OF ABSENCE. Notwithstanding any other provision of this Plan to the contrary, in the event of termination of employment or consulting services by reason of death, disability, normal retirement, early retirement with the consent of the Corporation, termination of employment or consulting services to enter public or military service with the consent of the Corporation or leave of absence approved by the Corporation, or in the event of hardship or other special circumstances, of a Participant who holds an Option Right or Appreciation Right that is not immediately and fully exercisable, any Restricted Shares as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, any Deferred Shares as to which the Deferral Period is not complete, any Performance Shares or Performance Units that have not been fully earned, or any Common Shares that are subject to any transfer restriction pursuant to Section 9(b) of this Plan, the Committee may take any action that it deems to be equitable under the circumstances or in the best interests of the Corporation, including without limitation waiving or modifying any limitation or requirement with respect to any award under this Plan. 14. ADMINISTRATION OF THE PLAN. (a) Except as provided in Section 14(c), this Plan shall be administered by the Compensation Committee of the Board, which shall be composed of not less than two members of the Board, or, in the absence of a Compensation Committee, by the full Board, each of whom shall be a "disinterested person" within the meaning of Rule 16b-3 and an "outside director" within the meaning of Section 162(m) of the Code. A majority of the Committee shall -12- 13 constitute a quorum, and the acts of the members of the Committee who are present at any meeting thereof at which a quorum is present, or acts unanimously approved by the members of the Committee in writing, shall be the acts of the Committee. (b) Except as provided in Section 14(c), the interpretation and construction by the Committee of any provision of this Plan or any agreement, notification or document evidencing the grant of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares or Performance Units, and any determination by the Committee pursuant to any provision of this Plan or any such agreement, notification or document, shall be final and conclusive. No member of the Committee shall be liable for any such action taken or determination made in good faith. (c) Notwithstanding any provision of the Plan to the contrary, all references in the preceding Sections 14(a) and 14(b) to the Board and the Committee shall be deemed references to the board of directors, and the compensation committee, respectively of BHR to the extent, as reasonably determined by the Committee, such provisions shall relate to Option Rights outstanding on the date of the Merger with respect to BHR Common Stock of (i) Participants employed by BHR at the time of reference, or (ii) former employees of BHR (or Bristol Hotel Company) who have not been employed by the Corporation; provided, however, that such authority may not be exercised in a manner which the Committee reasonably determines to be contrary to the terms of the Plan or of the Option Right(s) of reference. 15. AMENDMENTS AND OTHER MATTERS. (a) Except as provided in Section 14(c), this Plan may be amended from time to time by the Committee; and provided, however, except as expressly authorized by this Plan, no such amendment shall (i) increase the maximum number of Common Shares or Restricted Shares specified in Section 3(a) hereof, (ii) increase the maximum number of Performance Units specified in Section 3(c) hereof, (iii) increase the numbers of Common Shares specified in Sections 3(d) and 3(e) hereof, (v) otherwise cause this Plan to cease to satisfy any applicable condition of Rule 16b-3, or (vi) otherwise cause any award under the Plan to cease to qualify for the performance-based exception to Section 162(m) of the Code, without the further approval of the stockholders of the Corporation. Notwithstanding any provision of this Plan to the contrary, this Plan shall not be amended so as to directly or indirectly limit the scope of Sections 14(b) and (c) without the express consent of board of directors, or the compensation committee, of BHR. (b) With the concurrence of the affected Participant, the Committee may cancel any agreement evidencing Option Rights or any other award granted under this Plan. In the event of any such cancellation, the Committee may authorize the granting of new Option Rights or other awards hereunder, which may or may not cover the same number of Common Shares as had been covered by the canceled Option Rights or other award, at such Option Price, in such manner and subject to such other terms, conditions and discretion as would have been permitted under this Plan had the canceled Option Rights or other award not been granted. (c) The Committee may condition the grant of any award or combination of awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Employer to the Participant. -13- 14 (d) This Plan shall not confer upon any Participant any right with respect to continuance of employment or other service with the Employer and shall not interfere in any way with any right that the Employer would otherwise have to terminate any Participant's employment or other service at any time. (e) To the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as a Tax-qualified Option from so qualifying, any such provision shall be null and void with respect to any such Option Right; provided, however, that any such provision shall remain in effect with respect to other Option Rights, and there shall be no further effect on any provision of this Plan. (f) Any award that may be made pursuant to an amendment to this Plan that shall have been adopted without the approval of the stockholders of the Corporation shall be null and void if it is subsequently determined that such approval was required in order for this Plan to continue to satisfy the applicable conditions of Rule 16b-3. (g) Unless otherwise determined by the Committee, this Plan is intended to comply with and be subject to Rule 16b-3 as in effect on and after May 1, 1991. 16. OPTION AMENDMENTS TO REFLECT SPIN-OFF AND MERGER. (a) Effective on the date of the Spin-Off each then outstanding Option Right will be deemed to have been amended to the extent necessary, in the sole judgment of the Committee, so as to redenominate such Option Right into two Option Rights (each of which are continuations of such Option Right), one to acquire Common Stock of Bristol Hotel Company (the Corporation on such date), and the other to acquire BHR Common Stock, in each case at a price, and in an amount, set forth in the documents relating to the Spin-Off and otherwise in accordance with the provisions of Section 10. (b) Effective on the date of the Merger, each then outstanding Option Right will be amended in writing, to the extent deemed necessary in the sole discretion of the Committee, (i) to reflect the matters described in (a) above, (ii) to reflect the right to acquire FelCor Common Stock in lieu of the common stock of Bristol Hotel Company at a price, and in an amount, set forth in the documents evidencing the Merger and otherwise in accordance with the provisions of Section 10, and (iii) to reflect other matters affected by the amendment and restatement of this Plan and the requirements set forth in the documents relating to the Spin-Off and Merger. -14- EX-99.3 7 FORM OF NONQUALIFIED STOCK OPTION AGREEMENT 1 EXHIBIT 99.3 No. of Shares_________________ Date of Grant______________ 1995 EQUITY INCENTIVE PLAN Nonqualified Stock Option Agreement to Acquire FelCor Shares WHEREAS, [INSERT OPTIONEE'S NAME] (the "Optionee") was issued an option nder the Bristol Hotel Company Amended and Restated 1995 Equity Incentive Plan ("Prior Plan") prior to July 27, 1998 ("Prior Option") to acquire shares of common stock of Bristol Hotel Company ("Prior Shares"); and WHEREAS, this nonqualified stock option ("Option") has been issued, effective July 28, 1998, under the second amendment and restatement of the Prior Plan as the FelCor Lodging Trust Incorporated Second Amended and Restated 1995 Equity Incentive Plan ("Plan"), which amendment and restatement was effective July 27, 1998 and was effected primarily to reflect and to take into account the Spin-Off of Bristol Hotels & Resorts ("BHR"), and the Merger of Bristol Hotel Company into FelCor Lodging Trust Incorporated (the "Corporation") (BHR or the Corporation being sometimes referred to herein as the "Employer") and the resulting conversion of Prior Shares into BHR Common Stock and FelCor Common Stock; and WHEREAS, this Option is subject to the terms and conditions of the Plan (including, without limitation, all definitions), all of which terms and conditions are incorporated herein by reference; and WHEREAS, this Option is a continuation and replacement of the Prior Option with respect to the portion of the Prior Option which related to the acquisition of FelCor Common Stock and, to that extent, the Prior Option is null and void as of July 28, 1998; and WHEREAS, although this Option is a replacement and continuation of a portion of the Prior Option, for convenience, and in order to simplify the provisions of this Option, it is prepared in the form of a new option issued under the Plan; and WHEREAS, this Option is intended to be a nonqualified stock option. NOW, THEREFORE, the Corporation hereby grants to the Optionee this nonqualified stock option (the "Option") to purchase _______ shares of the FelCor Common Stock, par value $0.01 per share ("Common Stock"), at the exercise price of $_______ per whole share of Common Stock (the "Exercise Price"), and agrees to cause certificates for any shares of Common Stock or fractions thereof purchased hereunder to be delivered to the Optionee upon full payment of the Exercise Price, subject to the terms and conditions hereinafter set forth. 1. Vesting of Option. (a) Unless terminated as hereinafter provided, the Option will become cumulatively exercisable to the extent of 25% of the shares of Common Stock covered thereby on _______ of 20___, 20___, 20___ and 20__, so long as the Optionee remains in the continuous full-time employ of the Employer. For the purposes of this Agreement, the continuous 1 2 employment of the Optionee with the Employer will not be deemed to have been interrupted by a leave of absence specifically approved by the Board. (b) Notwithstanding the provisions of Section 1(a) hereof, the Option will, upon the death or disability of the Optionee, become vested and exercisable to the extent of 1.967% of the shares of Common Stock covered thereby for each full calendar month since the Date of Grant prior to the Optionee's death or disability. For purposes of this Agreement, "disability" means the Optionee's incapacity due to physical or mental illness substantially to perform his duties on a full-time basis for six consecutive months and within 30 calendar days after a notice of termination is thereafter given by the Employer the Optionee shall not have returned to the full-time performance of the Optionee's duties. (c) To the extent that the Option shall have become exercisable in accordance with the terms of this Section 1, it may be exercised in whole or in part from time to time thereafter and may be exercised for fractional shares of Common Stock. 2. Payment of Exercise Price. The Exercise Price will be payable (i) in cash in the form of currency or check or other cash equivalent acceptable to the Corporation, (ii) by actual or constructive transfer to the Corporation of nonforfeitable, nonrestricted shares of Common Stock that have been owned by the Optionee for at least six months prior to the date of exercise, or (iii) by any combination of the foregoing methods of payment. Nonforfeitable, nonrestricted shares of Common Stock that are transferred by the Optionee in payment of all or any part of the Exercise Price shall be valued on the basis of their fair market value (as defined below) on the date of exercise. The requirement of payment in cash shall be deemed satisfied if the Optionee makes arrangements satisfactory to the Corporation with a broker that is a member of the National Association of Securities Dealers, Inc. to sell a sufficient number of the shares of Common Stock, which are being purchased pursuant to the exercise, so that the net proceeds of the sale transaction will at least equal the amount of the aggregate Exercise Price and pursuant to which the broker undertakes to deliver to the Corporation the amount of the aggregate Exercise Price not later than the date on which the sale transaction will settle in the ordinary course of business. For purposes of this Agreement, fair market value as of a given date means the greater of (A) the stated par value of the Common Stock or (B) the closing sale price per share of Common Stock as reported on the Composite Tape of the New York Stock Exchange on such date. If there are no transactions in shares of Common Stock on such date, the Market Value shall be determined as of the immediately preceding date on which there were transactions in Common Stock. 3. Termination of Option. The Option will terminate automatically and without further notice on the earliest of the following dates: (a) 30 calendar days after the Optionee ceases to be an employee of the Employer for any reason other than death or disability or as described in Section 3(b); (b) 90 calendar days after the Optionee ceases to be an employee of the Employer by reason of (i) termination of employment under circumstances determined by the Board to be for the 2 3 convenience of the Employer as communicated to the Optionee in writing, or (ii) retirement under a retirement plan of Employer (at the time of reference) at or after the earliest voluntary retirement age provided for in such retirement plan or retirement at an earlier age with the consent of the Board; (c) One year after the Optionee's death or disability if the Optionee dies or becomes disabled (i) while in the employ of the Employer, or (ii) within the period of 90 calendar days referred to in Section 3(b); or (d) Ten years from the Date of Grant. In the event that the Optionee commits an act (i) of gross misconduct as set forth in the Employer's (at the time of reference) Employee Guidelines Manual or related publications or announcements (collectively the "Guidelines"), or (ii) that the Board has determined in good faith, by an affirmative vote of no less than 75% of the Board, that the Optionee has intentionally committed an act which is materially adverse to the Employer's (at the time of reference) or its subsidiaries' interests (collectively the "Cause"), the Option will terminate at the time such determination is made or, if later, upon delivery of written notice of such determination to the Optionee, notwithstanding any other provision of this Agreement or any other agreement or instrument to which the Employer (at the time of reference) is a party. 4. Compliance with Law. The Corporation will make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, notwithstanding any other provision of this Agreement, the Option will not be exercisable if the exercise thereof would result in a violation of any such law. 5. Transferability and Exercisability. Neither the Option nor any interest therein may be transferred by the Optionee except by will or the laws of descent and distribution, and the Option may not be exercised during the lifetime of the Optionee except by the Optionee or, in the event of his legal incapacity, by his guardian or legal representative acting on behalf of the Optionee in a fiduciary capacity under state law and court supervision. 6. Adjustments. The Board may make such adjustments in the Exercise Price and the number or kind of shares of stock or other securities covered by the Option that the Board determines to be required to prevent any dilution or expansion of the Optionee's rights under this Agreement that otherwise would result from any (a) stock dividend, stock split, combination of shares, recapitalization or similar change in the capital structure of the Corporation, (b) merger, consolidation, separation, reorganization or partial or complete liquidation involving the Corporation, (c) extraordinary dividend or distribution to holders of Common Stock or (d) other transaction or event having an effect similar to any of foregoing. Furthermore, in the event that any transaction or event described or referred to in the immediately preceding sentence occurs, the Board may provide in substitution of any or all of the Optionee's rights under this Agreement such alternative consideration as the Board may determine to be equitable under the circumstances. 3 4 7. Withholding Taxes. If the Employer is required to withhold any federal, state, local or foreign tax in connection with any exercise of the Option or other event contemplated hereby, the Optionee will pay the tax or make provisions that are satisfactory to the Employer for the payment thereof. The Optionee may elect to satisfy all or any part of any such withholding obligation by surrendering to the Employer a portion of the Common Stock that is issued or transferred to the Optionee upon the exercise of the Option, and the Common Stock so surrendered by the Optionee will be credited against any such withholding obligation at the fair market value of such shares on the date of such surrender as determined by the Board; provided, however, if the Optionee is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such election will be subject to approval by the Board and all of the other applicable conditions of Rule 16b-3 promulgated by the Securities and Exchange Commission under Section 16(b) of the Exchange Act. 8. Right to Terminate Employment and to Adjust Compensation. No provision of this Agreement will limit in any way whatsoever any right that the Employer (at the time of reference) may otherwise have to terminate the employment or adjust the compensation of the Optionee at any time. 9. Relation to Other Benefits. Any economic or other benefit to the Optionee under this Agreement or the Plan will not be taken into account in determining any benefits to which the Optionee may be entitled under any profit-sharing, retirement or similar benefit or compensation plan maintained by the Employer and will not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Employer. 10. Employment with a Subsidiary. For purposes of this Agreement, employment with any corporation, partnership, joint venture, unincorporated association or other entity which is a subsidiary of the Employer will be deemed to be employment with the Employer. 11. Amendment to Plan. Any amendment to the Plan will be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment may adversely affect the number of shares of Common Stock to which this Option relates, the Exercise Price, the vesting schedule hereunder or the term of the Option without the Optionee's consent. 12. Severability. In the event that one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated will be deemed to be separable from the other provisions hereof, and the remaining provisions hereof will continue to be valid and fully enforceable. 13. Entire Agreement. This Agreement (including any addendum hereto) supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the subject matter hereof and contains all of the covenants and agreements between the parties with respect to such subject matter. This Agreement shall consist of this Agreement (and the Plan which is incorporated by reference), Addendum, if any, attached hereto, and Memorandum of Employment, 4 5 if any, which is executed by both a duly qualified and authorized officer of the Employer, and the Optionee. 14. Governing Law. This Agreement is made under, and will be construed in accordance with, the laws of the State of Delaware, without giving effect to the principles of conflict of laws of such State. This Agreement is executed as of this ___ day of _________, 1998, to be effective as of the Date of Grant as a replacement and continuation of the portion of the Prior Option which, as redenominated, related to Common Stock. FELCOR LODGING TRUST INCORPORATED, ------------------------------------ Thomas J. Corcoran, Jr. President and C.E.O. The undersigned Optionee hereby acknowledges receipt of an executed original of this Agreement, and accepts the Option granted hereunder subject to the terms and conditions hereinabove set forth and, without limitation, acknowledges and agrees that the portion of the Prior Option which related to FelCor Common Stock is null, void and of no effect as of July 28, 1998. ------------------------------------ [INSERT OPTIONEE'S NAME] 5 EX-99.4 8 FORM ON NONQUALIFIED STOCK OPTION AGREEMENT 1 EXHIBIT 99.4 No. of Shares_________________ Date of Grant______________ STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS Nonqualified Stock Option Agreement to Acquire FelCor Shares WHEREAS, [INSERT OPTIONEE'S NAME] (the "Optionee") was issued an option under the Bristol Hotel Company Stock Option Plan For Non-Employee Directors ("Prior Plan") prior to July 27, 1998 ("Prior Option") to acquire shares of common stock of Bristol Hotel Company ("Prior Shares"); and WHEREAS, this nonqualified stock option ("Option") has been issued, effective July 28, 1998, under the second amendment and restatement of the Prior Plan as the FelCor Lodging Trust Incorporated Amended and Restated Stock Option Plan for Non-Employee Directors ("Plan"), which amendment and restatement was effective July 27, 1998 and was effected primarily to reflect and to take into account the Spin-Off of Bristol Hotels & Resorts ("BHR"), and the Merger of Bristol Hotel Company ("Bristol") into FelCor Lodging Trust Incorporated (the "Corporation") (BHR or the Corporation being sometimes referred to herein as the "Successor", and Bristol, BHR and the Corporation sometimes, collectively, referred as the "Group" ) and the resulting conversion of Prior Shares into BHR Common Stock and FelCor Common Stock; and WHEREAS, all references hereunder which relate to the Optionee's current status (or cessation of such status) as a director shall be references to his current status (or cessation) as a director of whichever of the Group on whose board he serves (or last served) at the time of reference. WHEREAS, this Option is subject to the terms and conditions of the Plan (including, without limitation, all definitions), all of which terms and conditions are incorporated herein by reference; and WHEREAS, this Option is a continuation and replacement of the Prior Option with respect to the portion of the Prior Option which related to the acquisition of FelCor Common Stock ("Common Stock") and, to that extent, the Prior Option is null and void as of July 28, 1998; and WHEREAS, although this Option is a replacement and continuation of a portion of the Prior Option, for convenience, and in order to simplify the provisions of this Option, it is prepared in the form of a new option issued under the Plan; and WHEREAS, this Option is intended to be a nonqualified stock option. NOW, THEREFORE, pursuant to the Plan and subject to the terms and conditions thereof and the terms and conditions hereinafter set forth, the Corporation hereby grants to the Optionee this nonqualified stock option (the "Option") to purchase _______ shares of Common Stock, par value $0.01 per share ("Common Stock"), of the Corporation at a price equal to $______ per share (the "Option Price"), payable upon exercise of the Option, and agrees to cause certificates representing any shares of Common Stock purchased hereunder to be delivered to the Optionee upon full payment of the Option Price, subject to the terms and conditions hereinafter set forth. 2 1. Vesting of Option. The Option will vest and become exercisable as follows: (a) Subject to subsection (b) of this Section 1, the Option, until terminated as provided in Section 3 hereof, shall become exercisable to the extent of 100% of the shares of Common Stock subject thereto after the Optionee has continuously served as a director of the Group through the date of the first annual meeting of the stockholders of the applicable member of the Group following the Date of Grant. (b) If the Optionee ceases to be a director of the Group by reason of death or Disability (as defined below), the portion of the Option that would have otherwise become exercisable had the Optionee continuously served as a director through the date of the applicable Group member's annual meeting of stockholders immediately following such death or Disability shall, notwithstanding subsection (a) of this Section 1, become immediately exercisable in full. For purposes of this Agreement, "Disability" means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. The Optionee shall not be considered to be subject to a Disability until he furnishes a certification from a practicing physician in good standing to the effect that he meets the criteria described in this definition of "Disability." 2. Payment of Option Price. The Option Price will be payable (i) in cash or by check acceptable to the Corporation, (ii) by transfer to the Corporation of shares of Common Stock which have been owned by the Optionee for more than six months prior to the date of exercise and which have a Market Value (as defined below) on the date of exercise equal to the Option Price, or (iii) by a combination of such methods of payment. The requirement of payment in cash shall be deemed satisfied if the Optionee shall have made arrangements satisfactory to the Corporation with a broker who is a member of the National Association of Securities Dealers, Inc. to sell on the exercise date a sufficient number of shares of Common Stock being purchased so that the net proceeds of the sale transaction will at least equal the Option Price of the Common Stock being purchased, and pursuant to which the broker undertakes to deliver the full Option Price of the Common Stock being purchased to the Corporation not later than the date on which the sale transaction will settle in the ordinary course of business. For purposes of this Agreement, "Market Value" as of a given date means the greater of (A) the stated par value of the Common Stock or (B) the closing sale price per share of Common Stock as reported on the Composite Tape of the New York Stock Exchange on such date. If there are no transactions in shares of Common Stock on such date, the Market Value shall be determined as of the immediately preceding date on which there were transactions in Common Stock. 3. Termination of Option. The Option will terminate on the earliest to occur of: (a) Three months following the effective date of the Optionee's Termination of Service (as defined below), if such Termination of Service results other than from the Optionee's death or Disability; (b) One year following the effective date of the Optionee's Termination of Service, if such Termination of Service results from the Optionee's death or Disability; or 2 3 (c) [INSERT DATE OF EXPIRATION].For purposes of this Agreement, "Termination of Service" means the time at which the Optionee ceases to serve as a director of the Successor for any reason, with or without cause, which includes termination by resignation, removal, death or retirement. 4. Transferability and Exercisability. The Option is not transferable by the Optionee otherwise than by will or the laws of descent and distribution. During the Optionee's lifetime, the Option will be exercisable only by the Optionee or, in the event of the Optionee's incapacity, including incapacity arising from a Disability, by the Optionee's guardian or legal representative acting in a fiduciary capacity. 5. Compliance with Law. The Option will not be exercisable if such exercise would involve a violation of any applicable federal or state securities law, and the Corporation will use reasonable efforts to comply with all such securities laws. 6. Adjustments. The Committee (as defined in the Plan) may make or provide for such adjustments in the number of shares of Common Stock covered by the Option, the Option Price and the kind of shares (including shares of another issuer) covered thereby as the Committee in good faith determines to be equitably required to prevent dilution or expansion of the rights of the Optionee that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Corporation, (b) any merger, consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial or complete liquidation, or other distribution of assets or issuance of warrants or other rights to purchase securities or any other corporate transaction or event having an effect similar to any of the foregoing. 7. Withholding Taxes. If the Corporation is required to withhold any federal, state, local or foreign tax in connection with any exercise of the Option or other event contemplated hereby, the Optionee will pay the tax or make provisions that are satisfactory to the Corporation for the payment therefor. The Optionee may elect to satisfy all or any part of any such withholding obligation by surrendering to the Corporation a portion of the Common Stock that is issued or transferred to the Optionee upon the exercise of the Option, and the Common Stock so surrendered by the Optionee will be credited against any such withholding obligation at the Market Value of such shares on the date of such surrender; provided, however, that such election will be subject to approval by the Committee and all of the applicable conditions of Rule 16b-3 promulgated by the Securities and Exchange Commission under Section 16(b) of the Securities Exchange Act of 1934, as amended. 8. Amendment. Any amendment to the Plan will be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment may adversely affect the number of shares of Common Stock to which the Option relates, the Option Price, the vesting schedule hereunder or the term of the Option without the Optionee's consent. 9. Severability. In the event that one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated will be deemed to be separable from the other provisions hereof, and the remaining provision hereof will continue to be valid and fully enforceable. 3 4 10. Governing Law. This Agreement is made under, and will be construed in accordance with, the laws of the State of Delaware, without giving effect to the principles of conflict of laws of such State. This Agreement is executed as of this ___ day of _________, 1998, to be effective as of the Date of Grant as a replacement and continuation of the portion of the Prior Option which, as redenominated, related to Common Stock. FELCOR LODGING TRUST INCORPORATED, ------------------------------------ Thomas J. Corcoran, Jr. President and C.E.O. The undersigned Optionee hereby acknowledges receipt of an executed original of this Agreement, and accepts the Option granted hereunder subject to the terms and conditions hereinabove, and hereafter, set forth and, without limitation, acknowledges and agrees that the portion of the Prior Option which related to FelCor Common Stock is null, void and of no effect as of July 28, 1998. The undersigned Optionee further (a) represents that it is his intention that all shares of Common Stock or other securities purchased by him hereunder will be acquired for investment and not with a view to distribution, and (b) agrees that each time such Optionee makes any purchase of shares of Common Stock or other securities pursuant hereto he will, unless and to the extent waived by the Board of Directors, agree with and represent to the Corporation that such shares and securities are then being acquired for investment and not with a view to distribution. The provisions of this paragraph shall not be applicable to an offer for sale or sale of any shares of Common Stock or other securities which at the time of such offer or sale are registered under the Securities Act of 1933, as amended, or which without such registration and apart from the provisions of this paragraph could be offered for sale or sold without violation of such Act. For purposes of this paragraph, the term "Optionee" includes his legatee(s), executor(s) and administrator(s). ------------------------------------ [INSERT DIRECTOR'S NAME] 4 -----END PRIVACY-ENHANCED MESSAGE-----