-----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, VXEchW1d95tdxDtJVdOeYP3dLxFjFARtOGEEPyhLYIkrCr0binseYO6dhqqCxJ17 R6dQYTwRcV4NkLGDJ2T1OQ== /in/edgar/work/0000950134-00-008463/0000950134-00-008463.txt : 20001009 0000950134-00-008463.hdr.sgml : 20001009 ACCESSION NUMBER: 0000950134-00-008463 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 20001006 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR LODGING L P CENTRAL INDEX KEY: 0001048789 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 752544994 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506 FILM NUMBER: 735975 BUSINESS ADDRESS: STREET 1: 545 E. JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 FORMER COMPANY: FORMER CONFORMED NAME: FELCOR SUITES LP DATE OF NAME CHANGE: 19971030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR LODGING TRUST INC CENTRAL INDEX KEY: 0000923603 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 752541756 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-01 FILM NUMBER: 735976 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR/CSS HOTELS LLC CENTRAL INDEX KEY: 0001048790 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 752624290 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-02 FILM NUMBER: 735977 BUSINESS ADDRESS: STREET 1: 545 E. JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR/LAX HOTELS LLC CENTRAL INDEX KEY: 0001048791 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 752647535 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-03 FILM NUMBER: 735978 BUSINESS ADDRESS: STREET 1: 545 E. JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR EIGHT HOTELS LLC CENTRAL INDEX KEY: 0001048792 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 752582006 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-04 FILM NUMBER: 735979 BUSINESS ADDRESS: STREET 1: 545 E. JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR/CSS HOLDINGS LP CENTRAL INDEX KEY: 0001048793 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 752620463 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-05 FILM NUMBER: 735980 BUSINESS ADDRESS: STREET 1: 545 E. JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR/ST PAUL HOLDINGS LP CENTRAL INDEX KEY: 0001048794 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 752624292 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-06 FILM NUMBER: 735981 BUSINESS ADDRESS: STREET 1: 545 E. JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR/LAX HOLDINGS LP CENTRAL INDEX KEY: 0001048795 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 752624293 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-07 FILM NUMBER: 735982 BUSINESS ADDRESS: STREET 1: 545 E. JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR CANADA CO CENTRAL INDEX KEY: 0001125233 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 752773637 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-08 FILM NUMBER: 735983 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR COUNTRY VILLA HOTEL LLC CENTRAL INDEX KEY: 0001125235 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 752771072 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-09 FILM NUMBER: 735984 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR MOLINE HOTEL LLC CENTRAL INDEX KEY: 0001125236 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 752771084 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-10 FILM NUMBER: 735985 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR OMAHA HOTEL CO LLC CENTRAL INDEX KEY: 0001125237 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 752769826 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-11 FILM NUMBER: 735986 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FHAC TEXAS HOLDINGS L P CENTRAL INDEX KEY: 0001125238 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 752797670 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-12 FILM NUMBER: 735987 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FHAC NEVADA HOLDINGS LLC CENTRAL INDEX KEY: 0001125239 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 742906949 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-13 FILM NUMBER: 735988 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR NEVADA HOLDINGS LLC CENTRAL INDEX KEY: 0001125241 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 742906947 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-14 FILM NUMBER: 735989 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR HOTEL ASSET CO LLC CENTRAL INDEX KEY: 0001125242 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 752770156 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-47506-15 FILM NUMBER: 735990 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FRWY STREET 2: STE 1300 CITY: IRVING STATE: TX ZIP: 75062 S-4 1 d80556s-4.txt FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 2000 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- FELCOR LODGING LIMITED PARTNERSHIP FELCOR LODGING TRUST INCORPORATED FELCOR/CSS HOTELS, L.L.C. FELCOR/LAX HOTELS, L.L.C. FELCOR EIGHT HOTELS, L.L.C. FELCOR/CSS HOLDINGS, L.P. FELCOR/ST. PAUL HOLDINGS, L.P. FELCOR/LAX HOLDINGS, L.P. FELCOR HOTEL ASSET COMPANY, L.L.C. FHAC TEXAS HOLDINGS, L.P. FELCOR OMAHA HOTEL COMPANY, L.L.C. FELCOR MOLINE HOTEL, L.L.C. FELCOR COUNTRY VILLA HOTEL, L.L.C. FELCOR CANADA CO. (Exact name of co-registrant as specified in its charter) DELAWARE 7011 75-2564994 MARYLAND (Primary Standard Industrial 72-2541756 DELAWARE Classification Code Number) 75-2624290 DELAWARE 75-2647535 DELAWARE 75-2582006 DELAWARE 75-2620463 DELAWARE 75-2624292 DELAWARE 75-2624293 DELAWARE 75-2770156 TEXAS 75-2797670 DELAWARE 75-2769826 DELAWARE 75-2771084 DELAWARE 75-2771072 NOVA SCOTIA, CANADA 75-2773637 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization)
LAWRENCE D. ROBINSON SENIOR VICE PRESIDENT AND GENERAL COUNSEL 545 E. JOHN CARPENTER FRWY., SUITE 1300 545 E. JOHN CARPENTER FRWY., SUITE 1300 IRVING, TEXAS 75062 IRVING, TEXAS 75062 (972) 444-4900 (972) 444-4900 (Address, including zip code and telephone number, (Name, address, including zip code, and telephone including area code, of registrant's principal executive number, offices) including area code, of agent for service)
--------------------- FELCOR NEVADA HOLDINGS, L.L.C. FHAC NEVADA HOLDINGS, L.L.C. (Exact name of co-registrant as specified in its charter) NEVADA 7011 74-2906947 NEVADA (Primary Standard Industrial 74-2906949 (State or other jurisdiction Classification Code Number) (I.R.S. Employer Identification No.) of incorporation or organization)
LAWRENCE D. ROBINSON 101 CONVENTION CENTER DRIVE SENIOR VICE PRESIDENT AND GENERAL COUNSEL SUITE 850 545 E. JOHN CARPENTER FRWY., SUITE 1300 LAS VEGAS, NEVADA 89109 IRVING, TEXAS 75062 (702) 949-0211 (972) 444-4900 (Address, including zip code and telephone number, (Name, address, including zip code, and telephone including area code, of registrant's principal executive number, offices) including area code, of agent for service)
--------------------- Copies to: ROBERT W. DOCKERY JENKENS & GILCHRIST, A PROFESSIONAL CORPORATION 1445 ROSS AVENUE, SUITE 3200 DALLAS, TEXAS 75202 (214) 855-4500 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT BEING OFFERING PRICE AGGREGATE OFFERING SECURITIES BEING REGISTERED REGISTERED PER UNIT PRICE(1) - ------------------------------------------------------------------------------------------------------------------ 9 1/2% Senior Notes Due 2008....................... $400,000,000 100% $400,000,000 - ------------------------------------------------------------------------------------------------------------------ Guarantees of Senior Notes(2)...................... $400,000,000 100% $400,000,000 - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ TITLE OF EACH CLASS OF AMOUNT OF SECURITIES BEING REGISTERED REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------ 9 1/2% Senior Notes Due 2008....................... $105,600 - ------------------------------------------------------------------------------------------------------------------ Guarantees of Senior Notes(2)...................... (3) - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purposes of calculating the registration fee in accordance with Rule 457(f) under the Securities Act of 1933, as amended. (2) The following co-registrants have each guaranteed the notes issued by FelCor Lodging Limited Partnership that are being registered pursuant hereto: FelCor Lodging Trust Incorporated; FelCor/CSS Hotels, L.L.C., FelCor/LAX Hotels, L.L.C., FelCor Eight Hotels, L.L.C., FelCor/CSS Holdings, L.P., FelCor/St. Paul Holdings, L.P., FelCor/LAX Holdings, L.P., FelCor Hotel Asset Company, L.L.C., FelCor Nevada Holdings, L.L.C., FHAC Nevada Holdings, L.L.C., FHAC Texas Holdings, L.P., FelCor Omaha Hotel Company, L.L.C., FelCor Moline Hotel, L.L.C., FelCor Country Villa Hotel, L.L.C., and FelCor Canada Co. (3) Pursuant to Rule 457(n), no separate fee is payable with respect to the guarantees of the notes being registered. 3 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED OCTOBER 6, 2000 LOGO FELCOR LODGING LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------- OFFER TO EXCHANGE ALL OUTSTANDING 9 1/2% SENIOR NOTES DUE 2008 ($400,000,000 PRINCIPAL AMOUNT OUTSTANDING) FOR REGISTERED 9 1/2% SENIOR NOTES DUE 2008 - -------------------------------------------------------------------------------- We are offering to exchange all of our $400 million in outstanding 9 1/2% Senior Notes Due 2008 ("Old Notes") for $400 million in registered 9 1/2% Senior Notes Due 2008 ("New Notes"). The Old Notes and New Notes are collectively referred to as the "Notes." The Old Notes were issued on September 15, 2000. The terms of the New Notes are identical to the terms of the Old Notes except that the New Notes are registered under the Securities Act of 1933, as amended, and therefore are freely transferable, subject to certain conditions. You should consider the following: - - INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 16 OF THIS PROSPECTUS. - - Our offer to exchange Old Notes for New Notes will be open until 5:00 p.m., New York City time, on , 2000, unless we extend the offer. - - You should also carefully review the procedures for tendering the Old Notes beginning on page 25 of this prospectus. - - If you fail to tender your Old Notes, you will continue to hold unregistered securities and your ability to transfer them could be adversely affected. - - No public market currently exists for the Notes. We do not intend to list the New Notes on any securities exchange and, therefore, no active public market is anticipated. Information about the Notes: - - The Notes will mature on September 15, 2008. - - We will pay interest on the Notes semi-annually on March 15 and September 15 of each year, beginning March 15, 2001 at the rate of 9 1/2% per annum. - - We may redeem the Notes on or after September 15, 2004 at certain rates set forth on page 92 of this prospectus. - - We also have the option until September 15, 2003, to redeem up to 35% of the original aggregate principal amount of the Notes with the net proceeds of certain equity offerings. - - The Notes are unsecured obligations and rank equally with our existing and future unsecured senior debt. - - The Notes are fully and unconditionally guaranteed on an unsecured senior basis by FelCor Lodging Trust Incorporated and by certain of our subsidiaries. - - If we undergo a change of control or sell certain of our assets, we may be required to offer to purchase Notes from you. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS OCTOBER , 2000 4 TABLE OF CONTENTS
PAGE ---- Summary..................................................... 1 Risk Factors................................................ 16 The Exchange Offer.......................................... 25 Capitalization.............................................. 35 Selected Historical and Pro Forma Financial Information..... 36 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 40 Business and Properties..................................... 59 Management.................................................. 78 Certain Relationships and Related Transactions.............. 84 Description of Certain Indebtedness......................... 86 Description of the New Notes and Guarantees................. 91 Certain United States Federal Income Tax Considerations..... 129 Plan of Distribution........................................ 129 Legal Matters............................................... 130 Experts..................................................... 130 Index to Financial Statements............................... F-1
------------ We obtained market data and certain other industry data and forecasts used throughout this prospectus from internal surveys, market research, publicly available information and industry publications. Industry publications generally state that they obtain their information from sources they believe to be reliable, but they do not guarantee the accuracy and completeness of such information. Similarly, while we believe that the internal surveys, industry data and forecasts and market research are reliable, we have not independently verified such data, and neither FelCor LP nor FelCor make any representation as to the accuracy of such information. ------------ This prospectus contains registered trademarks owned or licensed by companies other than the Company, including but not limited to Bristol House(R), Club Hotels by Doubletree(R), Conrad International(R), Courtyard by Marriott(R), Crowne Plaza(R), Disney(R), Doubletree(R), Doubletree Guest Suites(R), Embassy Suites(R), Fairfield Inn(R), Four Points by Sheraton(R), Hampton Inn(R), Hampton Inn & Suites(R), Harrison Conference Centers(R), Harvey Hotel(R), Hilton(R), Hilton Garden Inn(R), Hilton HHonors(R), Holiday Inn(R), Holiday Inn Express(R), Holiday Inn Select(R), Homewood Suites(R) by Hilton, Inter-Continental(R), Radisson(R), Red Lion Hotels & Inns(R), Sheraton(R), Sheraton Suites(R), Walt Disney World(R) and Westin(R). ii 5 FORWARD-LOOKING STATEMENTS The information contained in this prospectus contains forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements can be identified by the use of forward-looking terminology such as "believes," "expects," "anticipates," "may," "will," "should," "seeks," "pro forma" or other variations thereof (including their use in the negative), or by discussions of strategies, plans or intentions. A number of factors could cause results to differ materially from those anticipated by such forward-looking statements. Among these factors are: - overall debt levels and the ability to obtain new financing and service debt; - inability to retain earnings; - liquidity and capital expenditures; - price and number of FelCor equity securities repurchased; - growth strategy and acquisition activities; - inability to reach definitive agreements for the acquisition of the lessees of, or of the leases covering, our hotels; - competitive conditions in the lodging industry; and - general economic conditions. In addition, such forward-looking statements are necessarily dependent upon assumptions and estimates that may prove to be incorrect. Accordingly, while we believe that the plans, intentions and expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such plans, intentions or expectations will be achieved. The information contained in this prospectus and in the other documents referenced herein, including "Risk Factors," identifies important factors that could cause such differences. iii 6 WHERE YOU CAN FIND MORE INFORMATION Both FelCor and FelCor LP file annual, quarterly and special reports, proxy statements and other information with the SEC. Our SEC filings are available to the public from the SEC's web site at "http://www.sec.gov" and from our web site at "http://www.felcor.com." You may also read and copy any document we file with the SEC at its public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549, at 7 World Trade Center, Suite 1300, New York, New York 10048, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. Our SEC filings are also available at the office of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. For further information on obtaining copies of our public filings at the New York Stock Exchange, you should call (212) 656-5060. We have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to our offering of New Notes. This prospectus, which constitutes part of the registration statement, does not contain all of the information in the registration statement on Form S-4. You will find additional information about us and the New Notes in the registration statement on Form S-4. All statements made in this prospectus concerning the provisions of legal documents are not necessarily complete and you should read the documents which are filed as exhibits to the registration statement or otherwise filed by us with the Commission. We "incorporate by reference" into this prospectus the information that FelCor and FelCor LP file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus and information that we file subsequently with the SEC will automatically update this prospectus. Both FelCor and FelCor LP have filed the following documents with the SEC and they are incorporated herein by reference: (1) Annual Report on Form 10-K for the fiscal year ended December 31, 1999, with the exception of the consolidated financial statements of FelCor Lodging Limited Partnership, which are included in this prospectus; (2) Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000; (3) Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000; (4) Current Report on Form 8-K dated October 4, 2000; and (5) all documents subsequently filed by either FelCor or FelCor LP with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, prior to the termination of this offering. You may request a copy of these filings (other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing) at no cost, by writing to or telephoning us at the following address: Lawrence D. Robinson, Senior Vice President, General Counsel and Secretary, FelCor Lodging Trust Incorporated, 545 East John Carpenter Freeway, Suite 1300, Irving, Texas 75062, telephone (972) 444-4900, or by e-mail at information@felcor.com. iv 7 SUMMARY You should read the following summary together with the more detailed information regarding our company, the exchange offer and our financial statements and the notes thereto appearing elsewhere in this prospectus or incorporated herein by reference. Unless the context otherwise requires, the words "we," "our," "ours," "us" and the "Company" refer to FelCor Lodging Trust Incorporated (FelCor), FelCor Lodging Limited Partnership (FelCor LP) and their respective subsidiaries, collectively. THE COMPANY OVERVIEW We are one of the nation's largest hotel REITs, with ownership interests in 188 hotels at August 31, 2000, with nearly 50,000 rooms and suites. We own a 100% interest in 163 hotels with 42,292 rooms and suites, a 90% or greater interest in entities owning seven hotels with 1,745 rooms and suites, a 60% interest in an entity owning two hotels with 983 rooms and a 50% interest in separate entities that own 16 hotels with 4,018 rooms and suites. Our hotels are located in the United States (35 states) and Canada, with a concentration in Texas (41 hotels), California (20 hotels), Florida (18 hotels) and Georgia (15 hotels). We own the largest number of Embassy Suites, Crowne Plaza, Holiday Inn and independently owned Doubletree-branded hotels in the world. The following table lists our hotels, by brand, at August 31, 2000:
BRAND TOTAL - ----- ----- Embassy Suites.............................................. 60* Holiday Inn................................................. 44 Crowne Plaza and Crowne Plaza Suites........................ 18 Doubletree and Doubletree Guest Suites...................... 14 Holiday Inn Select.......................................... 10 Sheraton and Sheraton Suites................................ 10 Hampton Inn................................................. 9 Holiday Inn Express......................................... 5 Fairfield Inn............................................... 5 Harvey Hotel................................................ 4 Independents................................................ 3 Courtyard by Marriott....................................... 2 Four Points by Sheraton..................................... 1 Hilton Suites............................................... 1 Homewood Suites............................................. 1 Westin...................................................... 1 --- Total Hotels...................................... 188 ===
- --------------- * Includes one Embassy Suites hotel that was sold on September 27, 2000. We seek to increase operating cash flow through both internal growth and selective acquisitions, while maintaining a flexible and conservative capital structure. In addition to renovating, redeveloping and repositioning our acquired hotels, we may seek to acquire new upscale properties that will benefit from affiliation with one of the premium brands available to us through our strategic brand owner and manager relationships with Hilton Hotels Corporation, Bass plc and Starwood Hotels & Resorts Worldwide, Inc. 1 8 We recently identified 25 non-strategic hotels which we presently intend to sell. If sold, we expect gross sales proceeds from these hotels should be approximately $150 million and net proceeds should be approximately $136 million (after deducting estimated transaction costs and the costs of terminating the existing leases and management rights). To date, we have reached an agreement in principle on the cost of terminating the leases on only 12 of these hotels. We anticipate that the sale of these 25 hotels would result in a book loss of approximately $63 million. Accordingly, our Board of Directors approved a $63 million reserve for the hotels held for sale at June 30, 2000, to reflect the difference between our book value and the estimated market value of these hotels. In addition to these hotels, on September 27, 2000, we sold our Embassy Suites hotel, Los Angeles International Airport (North), California for a gross sale price of approximately $24 million, resulting in a gain on sale of approximately $2.5 million. The Leases. To enable us to satisfy certain requirements for qualification as a REIT, generally we cannot operate the hotels in which we invest. Accordingly, we have leased 85 hotels to DJONT Operations, L.L.C. and its consolidated subsidiaries (DJONT) and 100 hotels to Bristol Hotels & Resorts and its consolidated subsidiaries (Bristol). Bristol became a subsidiary of Bass plc (Bass) by virtue of a merger between Bristol and a subsidiary of Bass on March 31, 2000. Two of the hotels are not leased. Our leases generally have initial terms of five to 15 years and provide for rent equal to the greater of a minimum base rent or a percentage rent based on room and suite revenues, food and beverage revenues, food and beverage rents and, in certain instances, other hotel revenues. Such arrangements are generally referred to as Percentage Leases. The Lessees. Bass, which is a publicly traded company, is one of the largest hotel operating companies in the world. DJONT is a private company controlled by Thomas J. Corcoran, Jr., the President, Chief Executive Officer and a director of FelCor. Subsidiaries of Bass manage all of the hotels leased by Bristol, plus one of the two FelCor hotels that are not leased. DJONT has entered into management agreements pursuant to which 71 hotels leased by it are managed by subsidiaries of Hilton, 11 are managed by subsidiaries of Starwood and three are managed by two independent management companies. On July 21, 2000, our independent directors approved the acquisition of 100% of DJONT effective January 1, 2001. The purchase price is expected to be approximately 417,000 FelCor LP units (valued at $9.3 million based upon the $22.375 closing share price on August 31, 2000). No binding agreements have been entered into for this acquisition. We expect that the benefits to us from the purchase of DJONT, if completed, will include: (i) a more direct relationship with the hotel and brand managers, (ii) elimination of potential conflicts of interest and (iii) consolidated hotel level financial reporting. We are currently negotiating with Bass to acquire the Bristol lessee or the leases held by it. We cannot assure you that we will successfully complete these transactions. 2 9 The Corporate Structure. The following diagram depicts our general corporate structure and debt outstanding at June 30, 2000, after giving effect to the private offering of the Old Notes, and share repurchases through August 31, 2000: [CHART] - --------------- * The line of credit was reduced to $600 million effective August 1, 2000. THE INDUSTRY The United States hotel industry profitability has improved each year since 1992, the longest sustained growth in history. According to PricewaterhouseCoopers LLP's 1999 Lodging Industry Briefing, after a period of extended unprofitability in the late 1980's and early 1990's, during which time the increase in the supply of new hotel rooms significantly outpaced growth in room demand, lodging industry profit increased every year from 1992 through 1999 and is expected to increase again in 2000. The percentage growth in room demand exceeded percentage growth in new room supply from 1992 through 1996. While 1997 and 1998 experienced the highest number of new room starts in the prior 10 years, 1999 showed a decline in new room starts of 8.2% from the 1998 level. In spite of the above-average increases in room supply since 1995, according to PricewaterhouseCoopers LLP's September 1997 and May 2000 Hospitality Directions, annual revenue per available room has grown each year from 1995 through 1999 and is expected to continue to grow in 2000. Smith Travel Research, a leading provider of industry data, classifies hotel chains into five distinct categories: Upper Upscale, Upscale, Midscale With Food & Beverage, Midscale Without Food & Beverage, and Economy. We remain focused on properties in the Upper Upscale (including Doubletree Guest Suites, Embassy Suites, Sheraton and Westin hotels), Upscale (including Crowne Plaza, Doubletree Hotels and Homewood Suites), and Midscale With Food & Beverage (including Harvey, Holiday Inn and Holiday Inn Select hotels) categories, from which we derived approximately 97% of our revenues in 1999. PricewaterhouseCoopers LLP's 3 10 Hospitality Directions, December 1999/January 2000, projects that 2000 RevPAR growth will be 2.4% for Upper Upscale hotels, 2.9% for Upscale hotels, and 3.0% for hotels in the Midscale With Food & Beverage category. The same publication projects 2000 changes in supply and demand for each segment: Upper Upscale hotels, supply growth of 4.3% and demand growth of 3.2%; Upscale hotels, supply growth of 7.0% and demand growth of 7.3%: and hotels in the Midscale with Food and Beverage category should have no change in supply with a slight decline (0.7%) in demand. BUSINESS STRATEGY We seek to increase operating cash flow through active asset management. In addition to actively overseeing the operation of our hotels by our lessees and their managers, we apply our asset management expertise to the renovation, redevelopment and rebranding of hotels, the maintenance of strong strategic relationships with our brand owners and managers and the maintenance of financial flexibility. HOTEL RENOVATION, REDEVELOPMENT AND REBRANDING We have historically differentiated ourselves from many of our competitors by: - our practice of upgrading, renovating and/or redeveloping most of our acquired hotels to enhance their competitive position and, in certain instances, rebranding them to improve their revenue generating capacity; and - our ongoing program for the maintenance of our upgraded hotel assets, which includes: - our contribution of at least 4% of annual room and suite revenue for the DJONT hotels and 3% of total annual hotel revenue for the Bristol hotels for routine capital replacements and improvements; and - our ensuring that the lessees adhere to a maintenance and repair program amounting to approximately 4.5% of annual hotel revenues. During 1998 and 1999, an aggregate of approximately $442 million in capital improvements and other capital expenditures were made to our hotels, with approximately 3% of total hotel room nights being lost in 1998 and 2% in 1999 due to renovations. During 2000, we currently expect to spend approximately $15 million on the renovation of 28 hotels, approximately $42 million to complete renovations started in 1999 at 28 hotels, and approximately $40 million for other capital expenditures. We are currently reviewing the feasibility of undertaking between $4 and $10 million of additional renovations during 2000. We expect an insignificant number of room nights to be lost during 2000 as a result of renovations. By the end of 2000, the Company will have spent more than $900 million since 1994 on renovation and other capital expenditures to its hotel portfolio, which should limit the need for future renovation expenditures primarily to those necessary to maintain the hotels in their upgraded condition. The largest single renovation project completed during 1999 was the Allerton Crowne Plaza in Chicago, which reopened in July 1999, after having been closed for more than a year. This project has received numerous awards, including Lodging Hospitality magazine's Year's Best Design competition in two categories, Bass Hotels & Resorts 1999 Newcomer of the Year award, and Chicago's Greater North Michigan Avenue Association 1999 Avenue Enhancement award. 4 11 MAINTENANCE OF STRONG STRATEGIC RELATIONSHIPS We benefit from strategic brand owner and manager relationships with Hilton (Embassy Suites and Doubletree), Bass (Crowne Plaza and Holiday Inn) and Starwood (Sheraton and Westin). - Hilton, which acquired Promus Hotel Corporation in 1999, now has a hotel portfolio of more than 1,800 hotels with more than 300,000 rooms in 50 states and the District of Columbia, and is now the largest operator of full-service, all-suite hotels in the United States. In addition to its Hilton and Conrad International-branded hotels, Hilton now owns the Embassy Suites, Doubletree and Doubletree Guest Suites brands and manages 71 of our hotels. As a result of its acquisition of Promus, Hilton acquired an equity interest in our Company having an aggregate value of approximately $32 million at August 31, 2000, and it became a 50% partner in joint ventures with us in the ownership of 12 hotels and the holder of a 10% equity interest in certain subsidiaries owning six hotels. The relationship with Promus and its Embassy Suites brand provided the foundation for our historical growth, and we expect to expand our relationship with Hilton, as the successor to Promus. - Bass operates or franchises more than 2,900 hotels worldwide. Among the brands owned by Bass are Crowne Plaza, Holiday Inn, Holiday Inn Select, Holiday Inn Express and Inter-Continental. Bass, which acquired Bristol on March 31, 2000, manages 101 of our hotels. Bass also owns FelCor common stock and FelCor LP units aggregating approximately 15.5% of our outstanding common stock and units. Bass is one of the largest hotel operating companies in the world. - Starwood is one of the world's largest hotel operating companies. Directly and through subsidiaries, Starwood owns, leases, manages or franchises approximately 700 hotels with more than 217,000 rooms in 70 countries. Our strategic alliance with Starwood, coupled with the purchase of seven Sheraton hotels in 1997, provided us with our initial entry into the upscale, full-service, non-suite hotel market. Starwood manages 11 of our hotels and is a 40% joint venture partner with us in the ownership of two hotels and a 50% joint venture partner with us in the ownership of one hotel. MAINTENANCE OF FINANCIAL FLEXIBILITY We are committed to maintaining substantial financial flexibility. In funding our growth, we have used a broad selection of financing sources to minimize our cost of capital, including public equity, collateralized mortgage-backed securities, public and private debt, and asset divestitures. We believe that our capital structure will continue to be among the most conservative in the hotel REIT industry. We believe our financial flexibility should enable us to pursue selective hotel acquisition and expansion opportunities and to take advantage of renovation, redevelopment and rebranding opportunities to help us improve our competitive position. RECENT DEVELOPMENTS During the first six months of 2000, we: - had revenues of $283 million, after adding back deferred rent of $19 million, as compared to revenues of $262 million in the first six months of 1999; - repurchased 3.1 million common shares pursuant to our share repurchase program, for approximately $56.7 million; - had Funds From Operations (FFO) of $149 million, as compared to $154 million for the same period of 1999; 5 12 - had EBITDA of $239 million, as compared to EBITDA of $224 million for the same period of 1999; - completed an aggregate of $331 million of long-term fixed rate mortgage financings, the proceeds of which were used to fund repurchases of our stock and to reduce borrowings under our line of credit; and - identified 25 non-strategic hotels to be sold, with estimated aggregate net proceeds of $136 million, and recorded a one-time reserve of $63 million in the second quarter to reflect the difference between our book value and the estimated market value of these hotels. Since June 30, 2000: - we sold our Embassy Suites hotel, Los Angeles International Airport (North), California (215 suites), for a gross sale price of approximately $24 million, resulting in a gain on sale of approximately $2.5 million; - we renewed our line of credit; the line of credit was reduced from $850 million to $600 million and the maturity was extended from July 2001 to August 2003; the effective interest rate ranges from 87.5 basis points to 250 basis points above LIBOR depending on our leverage and corporate rating; and - our independent directors approved the acquisition of 100% of DJONT, effective January 1, 2001, for an expected purchase price of approximately 417,000 FelCor LP units; no binding agreements have been entered into for this acquisition, and we cannot assure you that we will successfully complete this transaction. On January 1, 2001, the provisions of the REIT Modernization Act will become effective. These provisions will: - reduce the percentage of taxable income required to be distributed by a REIT from 95% to 90%, and - subject to certain limitations, permit a REIT to own taxable subsidiaries that engage in businesses previously prohibited to a REIT, including, among other things, leasing hotels from a hotel REIT, provided that the hotels in question continue to be managed by unrelated third parties. This act and its potential impact on the Company are discussed in further detail elsewhere in this prospectus. 6 13 THE EXCHANGE OFFER On September 15, 2000, we completed the private offering of $400 million of 9 1/2% Senior Notes Due 2008. We entered into a registration rights agreement with the initial purchasers in the private offering of such Old Notes in which we agreed, among other things, to deliver to you this prospectus and to complete this exchange offer within 180 days of the original issuance of the Old Notes. You are entitled to exchange in this exchange offer Old Notes that you hold for registered New Notes with substantially identical terms. If this exchange offer is not completed within 180 days of September 15, 2000, then the interest rate on the Old Notes will increase to 10.0% until it is completed or, under certain circumstances, a resale registration statement with respect to the Old Notes is declared effective by the SEC. You should read the discussion under the headings "-- Description of New Notes" and "Description of the New Notes and Guarantees" for further information regarding the New Notes. We believe that the New Notes to be issued in this exchange offer may be resold by you without compliance with the registration and prospectus delivery provisions of the Securities Act, subject to certain conditions. The following summarizes the terms of the exchange offer. You should read the discussion under the heading "The Exchange Offer" for further information regarding this exchange offer and resale of the New Notes. Securities to be Exchanged................ On September 15, 2000, we issued $400 million in aggregate principal amount of Old Notes to the initial purchasers in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). The terms of the New Notes and the Old Notes are substantially identical in all material respects, except that the New Notes will be freely transferable by the holders except as otherwise provided in this prospectus. See "Description of the New Notes and Guarantees." The Exchange Offer......... $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $400 million aggregate principal amount are outstanding. Based on interpretations by the staff of the Commission, as set forth in no-action letters issued to certain third parties unrelated to us, we believe that New Notes issued pursuant to the exchange offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder which is an "affiliate" of FelCor LP, FelCor or certain of their subsidiaries (the "Subsidiary Guarantors") within the meaning of Rule 405 under the Securities Act, or a broker-dealer who purchased Old Notes directly from us to resell pursuant to Rule 144A or any other available exemption under the Securities Act), without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to engage in a distribution of New Notes. However, the Commission has not considered the exchange offer in the context of a no-action letter and we cannot be sure that the staff of the Commission would make a similar 7 14 determination with respect to the exchange offer as in such other circumstances. Furthermore, each holder, other than a broker-dealer, must acknowledge that is not engaged in, and does not intend to engage or participate in, a distribution of New Notes. Each broker-dealer that receives New Notes for his own account pursuant to the exchange offer must acknowledge that it will comply with the prospectus delivery requirements of the Securities Act in connection with any resale of such New Notes. Broker-dealers who acquired Old Notes directly from us and not as a result of market-making activities or other trading activities may not rely on the staff's interpretations discussed above or participate in the exchange offer and must comply with the prospectus delivery requirements of the Securities Act in order to resell the Old Notes. Registration Rights Agreement................ We sold the Old Notes on September 15, 2000, in a private placement in reliance on Section 4(2) of the Securities Act. The Old Notes were immediately resold by the initial purchasers in reliance on Rule 144A under the Securities Act. In connection with the sale, we, together with FelCor and the Subsidiary Guarantors, entered into a Registration Rights Agreement with the initial purchasers (the "Registration Rights Agreement") requiring us to make the exchange offer. The Registration Rights Agreement further provides that we must cause the Registration Statement with respect to the exchange offer to be declared effective within 180 days of September 15, 2000. See "The Exchange Offer -- Purpose and Effect." Expiration Date............ The exchange offer will expire at 5:00 p.m., New York City time, on , 2000 or a later date and time if we extend it (the "Expiration Date"). Withdrawal................. The tender of the Old Notes pursuant to the exchange offer may be withdrawn at any time prior to the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense as soon as practicable after the expiration or termination of the exchange offer. Interest on the New Notes and the Old Notes........ Interest on the New Notes will accrue from September 15, 2000, or from the date of the last payment of interest on the Old Notes, whichever is later. No additional interest will be paid on Old Notes tendered and accepted for exchange. Conditions of the Exchange Offer.................... The exchange offer is subject to certain customary conditions, certain of which may be waived by us. See "The Exchange Offer -- Conditions of the Exchange Offer." Procedures for Tendering Old Notes................ Each holder of the Old Notes wishing to accept the exchange offer must complete, sign and date the letter of transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the letter of transmittal, or the copy, together with the Old Notes and any other required documentation, to the exchange agent at the 8 15 address set forth herein. Persons holding the Old Notes through the Depository Trust Company ("DTC") and wishing to accept the exchange offer must do so pursuant to DTC's Automated Tender Offer Program, by which each tendering participant will agree to be bound by the letter of transmittal. By executing or agreeing to be bound by the letter of transmittal, each holder will represent to us that, among other things, (1) the New Notes acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the person receiving such New Notes, (2) the holder is not engaging in and does not intend to engage in a distribution of the New Notes, (3) the holder does not have an arrangement or understanding with any person to participate in the distribution of the New Notes, and (4) the holder is not an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of FelCor LP, FelCor or any of the Subsidiary Guarantors. We will accept for exchange any and all Old Notes which are properly tendered (and not withdrawn) in the exchange offer prior to the Expiration Date. The New Notes will be delivered promptly following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." Exchange Agent............. SunTrust Bank is serving as Exchange Agent (the "Exchange Agent") in connection with the exchange offer. Federal Income Tax Considerations........... We believe the exchange of Old Notes for New Notes pursuant to the exchange offer will not constitute a sale or an exchange for federal income tax purposes. See "Certain United States Federal Income Tax Considerations." Effect of Not Tendering.... Old Notes that are not tendered or that are tendered but not accepted will, following the completion of the exchange offer, continue to be subject to the existing restrictions upon transfer. We will have no further obligation to provide for the registration under the Securities Act of the Old Notes. DESCRIPTION OF NEW NOTES Issuer..................... FelCor Lodging Limited Partnership. Securities Offered......... $400,000,000 aggregate principal amount of 9 1/2% Senior Notes Due 2008. Maturity................... September 15, 2008. Interest................... Interest will be payable in cash on March 15 and September 15 of each year, beginning March 15, 2001. Optional Redemption........ We cannot redeem the New Notes until September 15, 2004, except as described below in connection with certain equity offerings. At any time on or after September 15, 2004, we may redeem some or all of the New Notes at the redemption prices listed under the heading "Description of the Notes and Guarantees -- Optional Redemption," plus accrued and unpaid interest. 9 16 Optional Redemption After Equity Offerings... At any time before September 15, 2003, we may elect to redeem up to 35% of the outstanding New Notes with funds that we raise in one or more equity offerings, as long as: - we pay 109.5% of the face amount of the New Notes, plus interest; - we redeem the New Notes within 90 days of completing the equity offering; and - at least 65% of the aggregate principal amount of the New Notes remains outstanding afterwards. Change of Control.......... Upon a change of control, we will be required to make an offer to purchase the New Notes at 101% of the principal amount plus accrued and unpaid interest. We may not have sufficient funds available at the time of any change of control to effect the purchase. Guarantees................. The New Notes will be unconditionally guaranteed on an unsecured senior basis by FelCor and by certain wholly owned subsidiaries that are obligors on other senior debt of FelCor or FelCor LP. Ranking.................... The New Notes will be unsecured and will rank equally with all our existing and future unsecured senior debt. The New Notes will be effectively subordinated to all of our and our consolidated subsidiaries' secured debt and to all other debt of our non-guarantor subsidiaries. As of June 30, 2000, after giving effect to the private offering of the Old Notes and the application of the net proceeds, and share repurchases through August 31, 2000, we and our consolidated subsidiaries would have had approximately $789 million of secured debt, all of which is mortgage and capitalized lease debt and effectively senior to the New Notes to the extent of the value of the underlying assets. At June 30, 2000, our non-guarantor subsidiaries had no other debt. Certain Other Covenants.... The indenture governing the New Notes restricts our ability and the ability of our restricted subsidiaries to: - incur additional debt; - incur additional secured debt and subsidiary debt; - make certain distributions, investments and other restricted payments; - limit the ability of restricted subsidiaries to make payments to us; - issue or sell stock of restricted subsidiaries; - enter into transactions with affiliates; - create liens; - sell assets; 10 17 - enter into certain sale-leaseback transactions; and - with respect to FelCor LP and FelCor, consolidate, merge or sell all or substantially all of their assets. These covenants are subject to a number of important limitations and exceptions. Ratings Downgrade.......... Upon the occurrence of, and during the continuance of, a ratings downgrade, as defined, the New Notes will bear yearly interest at a rate equal to 10%. See "Description of the Notes and Guarantees -- Certain Definitions -- Ratings Downgrade." Fall-Away Covenants........ Under the indenture governing the New Notes, in the event, and only for as long as, the New Notes are rated investment grade and no default or event of default has occurred and is continuing, many of the covenants described above will not be applicable to FelCor, FelCor LP and their restricted subsidiaries. RISK FACTORS YOU SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 16 BEFORE INVESTING IN THE NOTES. 11 18 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION The following tables set forth summary historical and pro forma consolidated financial information for FelCor Lodging Limited Partnership and FelCor Lodging Trust Incorporated. The summary historical information is presented for the years ended December 31, 1997, 1998 and 1999 and the six months ended June 30, 1999 and 2000. We derived the historical financial information for the years ended December 31, 1997, 1998 and 1999 from our financial statements and the notes thereto, audited by PricewaterhouseCoopers LLP, independent accountants. The summary historical financial information as of and for the six months ended June 30, 1999 and 2000 have been derived from the unaudited financial statements which have been prepared by management on the same basis as the audited financial statements and, in the opinion of management, include all adjustments consisting of normal recurring accruals that are considered necessary for a fair presentation of the results for such periods. The results of operations for the six months ended June 30, 1999 and 2000 are not necessarily indicative of results to be anticipated for the entire year. The summary unaudited pro forma consolidated financial information for the year ended December 31, 1999, twelve months ended June 30, 2000, and the six months ended June 30, 2000, are presented for illustrative purposes only and are not necessarily indicative of what our actual results of operations would have been had the transactions described below been consummated on the date indicated. You should read the following information together with the "Selected Historical and Pro Forma Consolidated Financial Information;" "Management's Discussion and Analysis of Financial Condition and Results of Operations;" the Pro Forma Consolidated Statements of Operations, Balance Sheets and Notes thereto; and the Consolidated Financial Statements and Notes thereto included elsewhere in this prospectus or incorporated herein by reference. The pro forma consolidated financial information is presented as if the following occurred on January 1, 1999: (i) the issuance of $400 million of the Old Notes and the application of the net proceeds, (ii) the completion of the other financing transactions which occurred in 2000, (iii) the repurchase by FelCor of $164.3 million of its common stock through August 31, 2000, and (iv) the sale of 25 non-strategic hotels identified in the second quarter of 2000. 12 19 FELCOR LODGING LIMITED PARTNERSHIP
ACTUAL -------------------------------------------------------------- SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, (UNAUDITED) ------------------------------------ ----------------------- 1997 1998 1999 1999 2000(1) ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS EXCEPT RATIO DATA) STATEMENT OF OPERATIONS DATA: Total revenue................ $ 176,651 $ 339,617 $ 504,001 $ 262,104 $ 264,670 Income (loss) before nonrecurring items.......... $ 69,652 $ 123,937 $ 136,653 $ 81,521 $ (13,247) Net income (loss)............ $ 69,467 $ 121,339 $ 135,776 $ 80,408 $ (12,372) Net income (loss) applicable to unitholders.............. $ 57,670 $ 99,916 $ 111,041 $ 68,040 $ (24,730) OTHER DATA: Funds From Operations(2)..... $ 129,815 $ 217,363 $ 286,895 $ 154,232 $ 149,380 EBITDA(3).................... $ 165,613 $ 306,361 $ 432,689 $ 223,590 $ 238,753 Ratio of EBITDA to interest expense..................... 4.8x 3.8x 3.3x 4.1x 2.9x Ratio of earnings to combined fixed charges and preferred distributions(4)............ 2.6x 2.2x 1.8x 2.0x .9x Adjusted ratio of earnings to combined fixed charges and preferred distributions(5)............ 2.6x 2.2x 1.8x 2.0x 1.6x BALANCE SHEET DATA: Total assets................. $1,673,364 $4,175,383 $4,255,751 $4,280,626 $4,176,765 Debt......................... $ 476,819 $1,594,734 $1,833,954 $1,712,540 $1,882,743 PRO FORMA (UNAUDITED) ------------------------------------------ SIX MONTHS YEAR ENDED TWELVE MONTHS ENDED DECEMBER 31, ENDED JUNE 30, JUNE 30, 1999 2000 2000 ------------ -------------- ---------- (IN THOUSANDS EXCEPT RATIO DATA) STATEMENT OF OPERATIONS DATA: Total revenue................ $480,885 $484,600 $ 253,438 Income (loss) before nonrecurring items.......... $107,608 $ 87,351 $ 44,685 Net income (loss)............ $107,844 $ 88,462 $ 45,560 Net income (loss) applicable to unitholders.............. $ 83,109 $ 63,737 $ 33,202 OTHER DATA: Funds From Operations(2)..... $251,085 $257,316 $ 140,644 EBITDA(3).................... $412,871 $429,143 $ 229,229 Ratio of EBITDA to interest expense..................... 2.8x 2.7x 2.8x Ratio of earnings to combined fixed charges and preferred distributions(4)............ 1.6x 1.5x 1.5x Adjusted ratio of earnings to combined fixed charges and preferred distributions(5)............ 1.6x 1.5x 1.5x BALANCE SHEET DATA: Total assets................. $4,050,047 Debt......................... $1,768,693
FELCOR LODGING TRUST INCORPORATED
ACTUAL -------------------------------------------------------------- SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, (UNAUDITED) ------------------------------------ ----------------------- 1997 1998 1999 1999 2000(1) ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS EXCEPT RATIO DATA) STATEMENT OF OPERATIONS DATA: Total revenue................ $ 176,651 $ 339,617 $ 504,001 $ 262,104 $ 264,670 Income (loss) before nonrecurring items.......... $ 63,835 $ 117,437 $ 131,957 $ 78,682 $ (10,848) Net income (loss)............ $ 63,650 $ 114,839 $ 131,080 $ 77,569 $ (9,973) Net income (loss) applicable to common shareholders...... $ 51,853 $ 93,416 $ 106,345 $ 65,201 $ (22,331) OTHER DATA: Funds From Operations(2)..... $ 129,815 $ 217,363 $ 286,895 $ 154,232 $ 149,380 EBITDA(3).................... $ 165,613 $ 306,361 $ 432,689 $ 223,590 $ 238,753 Ratio of EBITDA to interest expense..................... 4.8x 3.8x 3.3x 4.1x 2.9x Ratio of earnings to combined fixed charges and preferred distributions(4)............ 2.6x 2.2x 1.8x 2.0x .9x Adjusted ratio of earnings to combined fixed charges and preferred distributions(5)............ 2.6x 2.2x 1.8x 2.0x 1.6x BALANCE SHEET DATA: Total assets................. $1,673,364 $4,175,383 $4,255,751 $4,280,626 $4,176,765 Debt......................... $ 476,819 $1,594,734 $1,833,954 $1,712,540 $1,882,743 PRO FORMA (UNAUDITED) ------------------------------------------ SIX MONTHS YEAR ENDED TWELVE MONTHS ENDED DECEMBER 31, ENDED JUNE 30, JUNE 30, 1999 2000 2000 ------------ -------------- ---------- (IN THOUSANDS EXCEPT RATIO DATA) STATEMENT OF OPERATIONS DATA: Total revenue................ $480,885 $484,600 $ 253,438 Income (loss) before nonrecurring items.......... $103,586 $ 82,698 $ 41,388 Net income (loss)............ $103,822 $ 83,809 $ 42,263 Net income (loss) applicable to common shareholders...... $ 79,087 $ 59,084 $ 29,905 OTHER DATA: Funds From Operations(2)..... $251,085 $257,316 $ 140,644 EBITDA(3).................... $412,871 $429,143 $ 229,229 Ratio of EBITDA to interest expense..................... 2.8x 2.7x 2.8x Ratio of earnings to combined fixed charges and preferred distributions(4)............ 1.6x 1.5x 1.5x Adjusted ratio of earnings to combined fixed charges and preferred distributions(5)............ 1.6x 1.5x 1.5x BALANCE SHEET DATA: Total assets................. $4,050,047 Debt......................... $1,768,693
- ------------ (1) In the second quarter of 2000, the Company recorded a $63 million one-time reserve for the sale of non-strategic hotel assets, which is reflected in the income statements presented for the period. 13 20 (2) The Company considers Funds From Operations to be a key measure of a REIT's performance which should be considered along with, but not as an alternative to, net income and cash flow as a measure of operating performance and liquidity. The White Paper on Funds From Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts (NAREIT) defines Funds From Operations as net income or loss (computed in accordance with generally accepted accounting principles ("GAAP")), excluding gains or losses from debt restructuring which would be extraordinary items in accordance with GAAP and sales of depreciable operating properties, plus real estate related depreciation and amortization and after comparable adjustments for the Company's portion of these items related to unconsolidated entities and joint ventures. The Company believes that Funds From Operations is helpful to investors as a measure of the performance of an equity REIT because, along with cash flow from operating activities, financing activities, and investing activities, it provides investors with an indication of the ability of the Company to incur and service debt, to make capital expenditures, and to fund other cash needs. The Company computes Funds From Operations in accordance with standards established by NAREIT, except that the Company adds back rent deferred under SAB 101 to derive Funds From Operations. This may not be comparable to Funds From Operations reported by other REITs that do not define the term in accordance with the current NAREIT definition, that interpret the current NAREIT definition differently than the Company or that do not adjust Funds From Operations for rent deferred under SAB 101. Funds From Operations does not represent cash generated from operating activities determined by GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. Funds From Operations may include funds that may not be available for management's discretionary use due to requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. The computation of Funds From Operations for FelCor LP and FelCor yields the same result. The following table details the computation of Funds From Operations for FelCor LP.
ACTUAL PRO FORMA ---------------------------------------------------- ----------------------------------------- SIX MONTHS ENDED JUNE 30, TWELVE MONTHS SIX MONTHS YEAR ENDED DECEMBER 31, (UNAUDITED) YEAR ENDED ENDED ENDED ------------------------------ ------------------- DECEMBER 31, JUNE 30, JUNE 30, 1997 1998 1999 1999 2000 1999 2000 2000 -------- -------- -------- -------- -------- ------------ ------------- ---------- (IN THOUSANDS) Net income (loss).......... $ 69,467 $121,339 $135,776 $ 80,408 $(12,372) $107,844 $ 88,462 $ 45,560 Deferred rent.............. 18,604 18,604 18,604 Reserve for assets held for sale...................... 63,000 Series B redeemable preferred distributions... (8,373) (12,937) (6,468) (6,468) (12,937) (12,937) (6,468) Extraordinary charge from write off of deferred financing fees............ 185 3,075 1,113 1,113 Depreciation............... 50,798 90,835 152,948 74,162 81,480 146,183 153,073 77,812 Depreciation from unconsolidated entities... 9,365 10,487 9,995 5,017 5,136 9,995 10,114 5,136 -------- -------- -------- -------- -------- -------- -------- -------- Funds From Operations (FFO)..................... $129,815 $217,363 $286,895 $154,232 $149,380 $251,085 $257,316 $140,644 ======== ======== ======== ======== ======== ======== ======== ========
14 21 (3) EBITDA is computed by adding FFO, interest expense, the Company's portion of interest expense from unconsolidated entities, amortization expense, and the Company's Series B redeemable preferred distributions. The computation of EBITDA for FelCor LP and FelCor yields the same result. EBITDA is presented because it provides useful information regarding our ability to service debt. EBITDA should not be considered as an alternative measure of operating results or cash flow from operations (as determined in accordance with GAAP). EBITDA as presented by us may not be comparable to other similarly titled measures used by other companies. A reconciliation of Funds From Operations to EBITDA is as follows:
ACTUAL PRO FORMA ---------------------------------------------------- ------------------------------------------ SIX MONTHS ENDED TWELVE MONTHS SIX MONTHS YEAR ENDED DECEMBER 31, JUNE 30, YEAR ENDED ENDED ENDED ------------------------------ ------------------- DECEMBER 31, JUNE 30, JUNE 30, 1997 1998 1999 1999 2000 1999 2000 2000 -------- -------- -------- -------- -------- ------------ -------------- ---------- (IN THOUSANDS) Funds From Operations..... $129,815 $217,363 $286,895 $154,232 $149,380 $251,085 $257,316 $140,644 Interest expense.......... 28,792 73,182 125,435 59,172 77,644 141,427 149,925 76,856 Interest expense from unconsolidated entities................. 5,895 6,521 6,729 3,343 4,787 6,729 8,173 4,787 Amortization expense...... 1,111 922 693 375 474 693 792 474 Series B redeemable preferred distributions............ 8,373 12,937 6,468 6,468 12,937 12,937 6,468 -------- -------- -------- -------- -------- -------- -------- -------- EBITDA.................... $165,613 $306,361 $432,689 $223,590 $238,753 $412,871 $429,143 $229,229 ======== ======== ======== ======== ======== ======== ======== ========
A reconciliation of EBITDA and Consolidated EBITDA as defined for the Notes is as follows:
ACTUAL PRO FORMA ---------------------------------------------------- ------------------------------------------ SIX MONTHS ENDED TWELVE MONTHS SIX MONTHS YEAR ENDED DECEMBER 31, JUNE 30, YEAR ENDED ENDED ENDED ------------------------------ ------------------- DECEMBER 31, JUNE 30, JUNE 30, 1997 1998 1999 1999 2000 1999 2000 2000 -------- -------- -------- -------- -------- ------------ -------------- ---------- (IN THOUSANDS) EBITDA.................... $165,613 $306,361 $432,689 $223,590 $238,753 $412,871 $429,143 $229,229 Deduct -- Interest Expense from unconsolidated entities................. (5,895) (6,521) (6,729) (3,343) (4,787) (6,729) (8,173) (4,787) Income from unconsolidated entities................. (6,963) (7,017) (8,484) (3,837) (5,648) (8,484) (10,295) (5,648) Gain on asset sales....... (477) (236) (875) (236) (1,111) (875) Add -- Distributions from unconsolidated entities................. 4,211 19,066 19,581 13,297 11,708 19,581 17,992 11,708 -------- -------- -------- -------- -------- -------- -------- -------- Consolidated EBITDA....... $156,966 $311,412 $436,821 $229,707 $239,151 $417,003 $427,556 $229,627 ======== ======== ======== ======== ======== ======== ======== ========
(4) For the purpose of computing the ratio of earnings to combined fixed charges and preferred distributions, earnings consist of income from continuing operations plus fixed charges and minority interest in FelCor LP (with respect to FelCor), excluding capitalized interest, and fixed charges consist of interest, whether expensed or capitalized, and amortization of loan costs. (5) The adjusted ratio of earnings to combined fixed charges and preferred distributions is computed the same as described in footnote (4) except that income from continuing operations is adjusted to add back a $63 million one-time reserve for the sale of non-strategic hotel assets recorded in the second quarter of 2000. 15 22 RISK FACTORS An investment in the Notes involves a significant degree of risk. You should carefully consider the following risk factors, together with all of the other information included in this prospectus, in evaluating the exchange offer. IF YOU DO NOT PROPERLY TENDER YOUR OLD NOTES, YOU WILL CONTINUE TO HOLD UNREGISTERED OLD NOTES AND YOUR ABILITY TO TRANSFER OLD NOTES WILL BE ADVERSELY AFFECTED. We will only issue New Notes in exchange for Old Notes that are timely received by the Exchange Agent together with all required documents, including a properly completed and signed letter of transmittal. Therefore, you should allow sufficient time to ensure timely delivery of the Old Notes and you should carefully follow the instructions on how to tender your Old Notes. Neither we nor the Exchange Agent are required to tell you of any defects or irregularities with respect to your tender of the Old Notes. If you do not tender your Old Notes properly, then, after we consummate the exchange offer, you may continue to hold Old Notes that are subject to the existing transfer restrictions. In addition, if you tender your Old Notes for the purpose of participating in a distribution of the New Notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the New Notes. If you are a broker-dealer that receives New Notes for your own account in exchange for Old Notes that you acquired as a result of market-making activities or any other trading activities, you will be required to acknowledge that you will deliver a prospectus in connection with any resale of such New Notes. After the exchange offer is consummated, if you continue to hold any Old Notes, you may have difficulty selling them because there may be only a small amount of Old Notes outstanding. In addition, if a large amount of Old Notes are not tendered or are tendered improperly, the limited amount of New Notes that would be issued and outstanding after we consummate the exchange offer could lower the market price of such New Notes. WE HAVE HAD INCREASES IN LEVERAGE THAT COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION As a result of our 1998 merger with Bristol Hotel Company, our leverage increased during 1998, and it has increased further to fund our renovation, redevelopment and rebranding program and our share repurchase program. The share repurchase program authorizes repurchases up to an aggregate maximum of $300 million. Through August 31, 2000, we have repurchased approximately 9.3 million shares of common stock under this program at an aggregate cost of approximately $164.3 million. At June 30, 2000, after giving effect to the private offering of the Old Notes and the application of the net proceeds, and share repurchases through August 31, 2000: - we would have had approximately $1.9 billion in consolidated debt, of which approximately $789 million would have been secured by mortgages or capital leases; - we would have had a ratio of consolidated debt to investment in hotels at cost of 42%; - our ratio of EBITDA to interest expense for the six months then ended would have been 2.7-to-1; and - we would have had $248 million of floating rate debt, which would have constituted 13% of our total debt. Most of this floating rate debt bears interest at a rate equal to between 0.795% and 2.00% plus the one month LIBOR rate. At August 31, 2000, the one month LIBOR rate was 6.630%. Changes in economic conditions could result in higher interest rates, thereby increasing our interest expense on our floating rate debt and reducing funds available for our current renovation, redevelopment and rebranding plans and our share repurchase program. 16 23 Our leverage could have important consequences for you. For example, it could: - make it more difficult for us to satisfy our obligations with respect to the Notes; - limit our ability to obtain additional financing, if we need it, for working capital, our renovation, redevelopment and rebranding plans, acquisitions, debt service requirements or other purposes; - increase our vulnerability to adverse economic and industry conditions; - require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities or other purposes; - limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and - place us at a competitive disadvantage compared to our competitors that have less debt. THE NOTES ARE EFFECTIVELY JUNIOR TO CERTAIN OF OUR AND OUR SUBSIDIARIES' EXISTING DEBT The Old Notes are, and the New Notes will be, unsecured and will rank equally with our existing and future unsecured senior debt. The Notes will be effectively subordinated to all of our and our consolidated subsidiaries' secured debt and to all other debt of our non-guarantor subsidiaries. As of June 30, 2000, after giving effect to the private offering of the Old Notes and the application of the net proceeds, and share repurchases through August 31, 2000, we and our consolidated subsidiaries would have had approximately $789 million of secured debt, all of which is mortgage and capitalized lease debt and effectively senior to the Notes to the extent of the value of the underlying assets. At June 30, 2000, our non-guarantor subsidiaries had no other debt. The Old Notes have, and the New Notes will have, substantially the same covenants and other terms and conditions as our existing 7 3/8% and 7 5/8% senior notes, due 2004 and 2007, respectively, except that the redemption of the Notes and the repurchase of capital stock will be subject to certain additional restrictions. WE MAY BE UNABLE TO REALIZE THE ANTICIPATED BENEFITS OF OUR RENOVATIONS The majority of our hotels either recently have been, or are in the process of being, substantially renovated, redeveloped and, in certain cases, rebranded. If the completion of the current renovation projects are significantly delayed, our operating results could be adversely affected. In addition, no assurance can be given that the recently completed and ongoing improvements will achieve the results anticipated when we made the decision to invest in the improvements. WE DEPEND ON THE LESSEES' HOTEL OPERATIONS FOR OUR REVENUES Our revenues consist primarily of rents received under our leases. The lessees' payment of such rental obligations is generally unsecured. As the lessee of 100 of our hotels, Bristol must maintain certain net worth and liquidity requirements. DJONT, which leases 85 of our hotels, has limited assets, derives its revenue solely from the operation of our hotels and, at June 30, 2000, had a shareholders' deficit of approximately $13.0 million. We substantially depend upon the successful operation of our hotels to enable the lessees, particularly DJONT, to meet their rental obligations under the leases. The leases with Bristol and DJONT have varying terms, generally no longer than 15 years. At the expiration of the lease terms, we will be required to negotiate renewals or seek replacement leases. We cannot guarantee you that we will be able to replace or renew such 17 24 leases successfully or at all, and any failure to do so could adversely affect our business, financial condition and results of operations. CONFLICTS OF INTEREST COULD ADVERSELY AFFECT OUR BUSINESS CERTAIN FELCOR DIRECTORS. DJONT leases 85 of our hotels. All of the voting interests (and a 50% common equity interest) in DJONT are beneficially owned by Hervey A. Feldman and Thomas J. Corcoran, Jr., co-founders of the Company. Furthermore, Mr. Feldman is the Chairman Emeritus of FelCor and Mr. Corcoran is the President, Chief Executive Officer and a director of FelCor. The children of Charles N. Mathewson beneficially own the remaining 50% common equity, non-voting interest in DJONT. Mr. Mathewson serves as a director of FelCor. Bristol leases or manages 101 of our hotels. Bristol became a wholly-owned subsidiary of Bass plc in March 2000. Richard C. North, who joined FelCor's Board during 1998, is the Group Finance Director of Bass plc, which is also the parent of Holiday Hospitality Franchising, Inc. Holiday Hospitality is the franchisor of most of the Bristol hotels and, together with its affiliates, owns FelCor common stock and FelCor LP units aggregating approximately 15.5% of our outstanding common stock and units. Issues may arise under the leases, franchise agreements and management contracts, and in the allocation of acquisition and leasing opportunities, that present conflicts of interests due to the relationship of these directors to the companies with which they are associated. 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 our expense. In the event we enter into new or additional hotel leases or other transactions with Bristol, the interests of Mr. North, by virtue of his relationship with Bass, may conflict with our interests. For example, any decrease in lease rental rates payable by Bristol may decrease our profits to the benefit of Bristol. Also, in the selection of franchises under which our hotels will be operated, Mr. North by virtue of his relationship with Holiday Hospitality, may have interests that conflict with our interest. We anticipate 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. We have no provisions in our bylaws or charter that require an interested director to abstain from voting upon an issue. Although each director has a fiduciary duty of loyalty to the Company, 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 our best interests. In addition, even if an interested director abstains from voting, the director's participation in the meeting and discussion of an issue in which he or companies with which he is associated have an interest could influence the votes of other directors regarding the issue. ANTICIPATED ACQUISITION OF LESSEES. As a result of the passage of the REIT Modernization Act, we will be able to form or acquire a taxable REIT subsidiary (TRS) to acquire all or a portion of our existing hotel leases, and to serve as the lessee for any hotels we acquire after January 1, 2001. In this regard, our independent directors approved the acquisition of 100% of DJONT, effective January 1, 2001, for an expected purchase price of approximately 417,000 units of limited partner interest in FelCor LP. In addition, we currently are negotiating with Bass to acquire our remaining lessee, Bristol, or the leases owned by it. There are no binding agreements with Bass, DJONT or the owners of DJONT, and any such acquisitions will be subject to further negotiations between us and the lessees or their owners. These negotiations may involve potential conflicts of interest which will need to be resolved before we can ultimately acquire these lessees or leases. We cannot assure you that we will successfully complete these transactions. NO ARMS-LENGTH BARGAINING ON DJONT PERCENTAGE LEASES. We did not negotiate the terms of the leases with DJONT on an arms-length basis. Accordingly, these Percentage Leases 18 25 may not reflect fair market values or terms. However, we believe that the terms of these leases are fair to us. The rental terms of these leases were 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. A majority of the independent directors of FelCor approved the leases at the time they were executed. ADVERSE TAX CONSEQUENCES TO CERTAIN AFFILIATES ON A SALE OF CERTAIN HOTELS. Messrs. Corcoran and Mathewson may incur additional tax liability if we sell our investments in six hotels that we acquired in July 1994 from partnerships controlled by these individuals. Consequently, our interests could differ from Messrs. Corcoran and Mathewson's interests in the event that we 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 independent directors. WE HAVE RESTRICTIVE DEBT COVENANTS THAT COULD ADVERSELY AFFECT OUR ABILITY TO RUN OUR BUSINESS At June 30, 2000, after giving effect to the private offering of the Old Notes and the application of the net proceeds, and share repurchases through August 31, 2000, we would have had approximately $406 million borrowed under our line of credit. We also had issued and outstanding $300 million in principal amount of existing 7 3/8% and 7 5/8% senior notes, in addition to the Old Notes. The indenture governing the Notes, the agreements governing our line of credit and the indenture governing our existing 7 3/8% and 7 5/8% senior notes contain various restrictive covenants including, among others, provisions restricting us from: - incurring indebtedness; - making distributions; - making investments; - engaging in transactions with affiliates; - incurring liens; - merging or consolidating with another person; - disposing of all or substantially all of our assets; or - permitting limitations on the ability of our subsidiaries to make payments to us. These restrictions may adversely affect our ability to finance our operations or engage in other business activities that may be in our best interest. In addition, certain of these agreements require us to maintain certain specified financial ratios. Our ability to comply with such ratios may be affected by events beyond our control. Under the most restrictive of these provisions, the maximum additional debt that we could incur for investment in hotel properties was limited to approximately $1 billion at June 30, 2000. These covenants also may restrict our ability to engage in certain transactions. In addition, any breach of these limitations could result in the acceleration of most of our debt, including the Notes. We may not be able to refinance or repay this debt in full under such circumstances. WE WILL ENCOUNTER INDUSTRY RELATED RISKS THAT MAY ADVERSELY AFFECT OUR BUSINESS INVESTING IN HOTEL ASSETS INVOLVES SPECIAL RISKS. We have invested only in hotel-related assets, and our hotels are subject to all of the risks common to the hotel industry. These risks 19 26 could adversely affect hotel occupancy and the rates that can be charged for hotel rooms, and generally include: - competition from other hotels; - construction of more hotel rooms in a particular area than needed to meet demand; - increases in energy costs and other travel expenses that reduce business and leisure travel; - adverse effects of declines in general and local economic activity; - fluctuations in our revenue caused by the seasonal nature of the hotel industry; - adverse effects of a downturn in the hotel industry; and - risks generally associated with the ownership of hotels and real estate, as discussed below. 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 us under the Percentage Leases and, consequently, adversely affect our results of operations. ACQUISITION OF THE LESSEES OR THE LEASES OF OUR HOTELS MAY INVOLVE ADDITIONAL RISKS. Currently, as a lessor of hotels, our revenue under the percentage leases may vary as a result of factors which affect the revenues of the hotels, but we are not subject to the risks of changes in the operating expenses of the hotels, all of which risks are now borne by the lessees. If we are successful in acquiring our lessees, or the leases held by them, we will become subject to additional risks of adverse changes in operating expenses, including but not limited to: - wage and benefit costs; - repair and maintenance expenses; - the cost of liability insurance; and - other operating expenses. WE COULD FACE INCREASED COMPETITION. Each of our 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 our hotels are located, which could adversely affect the results of operations of these hotels. According to PricewaterhouseCoopers LLP's December 1999/ January 2000 Hospitality Directions, total hotel room supply in the United States is expected to increase by 4.3%, or approximately 503,000 rooms, from 1999 to 2000, while the demand for hotel rooms is expected to increase only 3.2% during the same period. An oversupply of hotel rooms could adversely affect both occupancy and rates in the markets in which our hotels are located. A significant increase in the supply of Midprice, Upscale and Upper Upscale hotel rooms and suites, if demand fails to increase proportionately, could have a severe adverse effect on our business, financial condition, and results of operations. ACQUISITION GROWTH OPPORTUNITIES HAVE DECREASED. There has been substantial consolidation in, and capital allocated to, the U.S. lodging industry since the early 1990's. This generally has resulted in higher prices for hotels. In addition, current market prices of FelCor's common stock make its cost of equity capital relatively high. These conditions have resulted in fewer attractive acquisition opportunities. An important part of our historical growth strategy has been 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 our growth prospects. We compete for hotel investment opportunities with 20 27 other companies, some of which have greater financial or other resources than we have. Certain competitors may have a lower cost of capital and may be able to pay higher prices or assume greater risks than would be prudent for us to pay or assume. WE MUST COMPLY WITH REQUIREMENTS OF FRANCHISE AGREEMENTS. Most of our 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 our hotels, for which we 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 our failure to make required improvements or to otherwise comply with its terms, we may be liable to the franchisor for a termination payment. These termination payments would vary by franchise agreement and by hotel. The loss of a substantial number of franchise licenses and the related termination payments could have a material adverse effect on our business, financial condition and results of operations. OUR ABILITY TO GROW MAY BE LIMITED BY OUR ABILITY TO ATTRACT DEBT FINANCING Since the merger with Bristol Hotel Company, we have focused on our internal growth strategy, which includes the renovation, redevelopment and rebranding of our hotels to achieve improved revenue performance. We may not be able to fund growth solely from cash provided from operating activities because we must distribute at least 95% (90% beginning in 2001) of our taxable income each year to maintain our status as a REIT. Consequently, we must rely primarily upon the availability of debt or equity capital to fund hotel acquisitions and improvements. We do not presently intend to effect a public offering of equity securities at current market prices. Consequently, we will be largely dependent upon our ability to attract debt financing from public or institutional lenders. We cannot assure you that we will be successful in attracting sufficient debt financing to fund future growth at an acceptable cost. In addition, we currently have a policy of limiting debt to not more than 50% of our investment in hotel assets, at cost, which (unless waived or modified by our board of directors) could also limit our ability to incur additional debt to fund our continued growth. After giving effect to the completion of the private offering of Old Notes and the application of the net proceeds, and share repurchases through August 31, 2000, at June 30, 2000, our consolidated debt would have represented 42% of our investment in hotels at cost. THE RECENT MERGERS OF PROMUS AND BRISTOL CREATE UNCERTAINTIES FOR THE FUTURE While we expect our positive historical relationships with Promus and Bristol to continue with their successors, the merger of Promus Hotel Corporation into a subsidiary of Hilton Hotels Corporation, and of Bristol Hotels & Resorts into a subsidiary of Bass plc, give rise to some uncertainties. Changes in personnel, brand standards or operating methods could adversely affect our relationships, result in increases in required capital expenditures, reductions in hotel revenues or other adverse consequences of which we are not presently aware. WE ARE SUBJECT TO POTENTIAL TAX RISKS THE FEDERAL INCOME TAX LAWS GOVERNING REITS ARE COMPLEX. FelCor has operated and intends to continue to operate in a manner that is intended to qualify it as a REIT under the federal income tax laws. The REIT qualification requirements are extremely complicated, however, 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. 21 28 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 shareholders at least 95% (90% beginning in 2001) of its taxable income (other than any net capital gain). To the extent that FelCor satisfies the applicable distribution requirement, but distributes less than 100% of its taxable income, it will be subject to federal corporate income tax on its undistributed taxable income. In addition, FelCor will be subject to a 4% nondeductible tax if the actual amount it pays out to its shareholders in a calendar year is less than a minimum amount specified under federal tax laws. FelCor's only source of funds to make such distributions comes from distributions to FelCor from FelCor LP. Accordingly, we may be required to borrow money or sell assets to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the applicable distribution requirement and to avoid corporate income tax and the 4% tax in a particular year. FAILURE TO QUALIFY AS A REIT WOULD SUBJECT FELCOR TO FEDERAL INCOME TAX. If FelCor fails to qualify as a REIT, FelCor would be subject to federal income tax on its taxable income. We might need to borrow money or sell hotels in order to pay any such tax. If we cease to be a REIT, we no longer would be required to distribute most of our taxable income to our shareholders. Unless our failure to qualify as a REIT were excused under federal income tax laws, we could not re-elect REIT status until the fifth calendar year following the year in which we failed to qualify. FAILURE TO HAVE DISTRIBUTED BRISTOL HOTEL COMPANY'S EARNINGS AND PROFITS IN 1998 COULD 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. Arthur Andersen LLP prepared and provided to FelCor its computation of the accumulated earnings and profits of Bristol Hotel Company through the date of the merger of Bristol Hotel Company into FelCor, and we made a corresponding special one-time distribution to our shareholders. However, the determination of accumulated earnings and profits for federal income tax purposes is extremely complex and the computations by Arthur Andersen LLP are not binding upon the IRS. Should the IRS successfully assert that the accumulated earnings and profits of Bristol Hotel Company were greater than the amount so distributed by FelCor, we may fail to qualify as a REIT. SALE OF ASSETS ACQUIRED FROM BRISTOL HOTEL COMPANY WITHIN TEN YEARS AFTER THE MERGER WILL RESULT IN TAX. If, within ten years after the Bristol merger, we sell any asset acquired in the merger and recognize a taxable gain on such sale, FelCor will be taxed at the highest corporate rate on an amount equal to the lesser of (i) the amount of gain that FelCor recognizes at the time of the sale or (ii) the amount of gain that FelCor would have recognized if it had sold the asset at the time of the merger for its then fair market value. The sales of Bristol hotels that have been made to date have not resulted in any material amount of tax liability. If FelCor is successful in selling all of the 25 hotels shown as assets held for sale, FelCor could incur a significant tax liability, the amount of which cannot yet be determined. DEPARTURE OF KEY PERSONNEL, INCLUDING MR. CORCORAN, COULD ADVERSELY AFFECT OUR FUTURE OPERATING RESULTS. WE WILL ENCOUNTER RISKS THAT MAY ADVERSELY AFFECT REAL ESTATE OWNERSHIP GENERAL RISKS. Our investments in hotels are subject to the numerous risks generally associated with owning real estate, including among others: - adverse changes in general or local economic or real estate market conditions; - changes in zoning laws; - changes in traffic patterns and neighborhood characteristics; 22 29 - increases in assessed valuation and tax rates; - increases in the cost of property insurance; - governmental regulations and fiscal policies; - the potential for uninsured or underinsured property losses; - the impact of environmental laws and regulations; and - other circumstances beyond our control. Moreover, real estate investments are relatively illiquid, and we may not be able to vary our portfolio in response to changes in economic and other conditions. COMPLIANCE WITH ENVIRONMENTAL LAWS MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION. Real estate owners are subject to numerous federal, state and local environmental laws and regulations. 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 his property, whether or not he 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 us to incur substantial expenses and limit the use of our properties. We 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. No assurances can be given that future or amended laws, ordinances or regulations or more stringent interpretations or enforcement policies of existing environmental requirements, will not impose any material environmental liability, or that the environmental condition of the hotels will not be affected by changes (of which we are unaware) occurring subsequent to the dates of such audits, by the condition of properties in the vicinity of such hotels (such as the presence of leaking underground storage tanks) or by the actions of unrelated third parties. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION. Under the Americans with Disabilities Act of 1990, all public accommodations (including hotels) are required to meet certain federal requirements for access and use by disabled persons. We believe that our hotels substantially comply with the requirements of the Americans with Disabilities Act. However, a determination that the hotels are not in compliance with that Act could result in liability for both governmental fines and damages to private parties. If we were required to make unanticipated major modifications to the hotels to comply with the requirements of the Americans with Disabilities Act, it could adversely affect our ability to pay our obligations. UNDER CERTAIN CIRCUMSTANCES, COURTS MAY VOID THE GUARANTEES UNDER FRAUDULENT TRANSFER LAWS Federal and state fraudulent conveyance laws allow courts, under specific circumstances, to void guarantees and require noteholders to return payments received from guarantors in the event of the bankruptcy or other financial difficulty of the subsidiary guarantor. Under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee of the Notes could be voided, or claims in respect of a guarantee could be subordinated to all other 23 30 debt of the guarantor, if, among other things, at the time the guarantor incurred the debt evidenced by its guarantee, the guarantor: - received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee; and - was insolvent or was rendered insolvent by reason of such incurrence; or - was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or - intended to incur, or believed (or reasonably should have believed) that it would incur, debts beyond its ability to pay such debts as they mature. In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor. The measure of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor of the Notes would be considered insolvent if: - the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets; or - the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and matured; or - it could not pay its debts as they become due. A court is likely to find that a guarantor of the Notes did not receive fair consideration or reasonably equivalent value for its guarantee to the extent that its liability under the guarantee is greater than the direct benefit it received from the issuance of the Notes. By its terms, each guarantee of the Notes will limit the liability of the guarantor to the maximum amount that it can pay without the guarantee being deemed a fraudulent transfer. A court may not give effect to this limitation on liability. In that event, a court may find that the issuance of the guarantee rendered the subsidiary guarantor insolvent. If a court avoids the guarantee or holds it unenforceable, you will cease to have a claim against the guarantor and will be solely a creditor of FelCor LP. If the limitation on liability is effective, the amount that the guarantor is found to have guaranteed might be so low that there will not be sufficient funds to pay the Notes in full. YOU CANNOT BE SURE THAT AN ACTIVE PUBLIC TRADING MARKET WILL DEVELOP FOR THE NOTES The New Notes will be a new issue of securities for which there is currently no active trading market. We do not intend to list the New Notes on any securities exchange. Although we expect the New Notes to be eligible for trading in the PORTAL market, we cannot assure you that an active trading market for the New Notes will develop. The placement agents have advised us that they intend to make a market in the Notes. However, they are not obligated to do so and may discontinue market-making at any time without notice. The liquidity of any market for the New Notes will depend upon various factors, including: - the number of holders of the New Notes; - the interest of securities dealers in making a market for the New Notes; - the overall market for high yield securities; - our financial performance and prospects; and - the prospects for companies in our industry generally. 24 31 Accordingly, we cannot assure you that an active trading market will develop for the New Notes. If the New Notes are traded after their initial issuance, they may trade at a discount from the initial offering price of the Old Notes, depending upon prevailing interest rates and other factors including those listed above. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the Notes. Any market for the New Notes may be subject to similar disruptions. Any such disruptions may adversely affect you as a holder of the New Notes. THE EXCHANGE OFFER PURPOSE AND EFFECT We sold the Old Notes on September 15, 2000 to Deutsche Bank Alex. Brown, Chase Securities Inc., Morgan Stanley Dean Witter, Banc of American Securities LLC, Banc One Capital Markets, Inc., Credit Lyonnais Securities, and Scotia Capital Markets as the initial purchasers, pursuant to a purchase agreement. The initial purchasers subsequently resold the Old Notes under Rule 144A under the Securities Act. As part of the offering of the Old Notes, we entered into a registration rights agreement ("Registration Rights Agreement"). The Registration Rights Agreement requires, unless the exchange offer is not permitted by applicable law or Commission policy, that we - use our best efforts to cause the registration statement to become effective within 180 days following September 15, 2000; and - upon effectiveness of the registration statement, commence the exchange offer and keep the exchange offer open for at least 20 business days and not more than 30 business days. Except as provided below, upon the completion of the exchange offer, the Company's obligations with respect to the registration of the Old Notes and the New Notes will terminate. A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement, of which this prospectus is a part, and this summary of the material provisions of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the complete Registration Rights Agreement. As a result of the timely filing and the effectiveness of the Registration Statement, the Company will not have to pay certain additional interest on the Old Notes provided in the Registration Rights Agreement. Following the completion of the exchange offer (except as set forth in the paragraph immediately below), holders of Old Notes not tendered will not have any further registration rights and those Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the Old Notes could be adversely affected upon consummation of the exchange offer. In order to participate in the exchange offer, a holder must represent to the Company, among other things, that (i) the New Notes acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the holder, (ii) the holder is not engaging in and does not intend to engage in a distribution of the New Notes, (iii) the holder does not have an arrangement or understanding with any person to participate in the distribution of the New Notes and (iv) the holder is not an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of FelCor LP, FelCor or the Subsidiary Guarantors. Under certain circumstances specified in the Registration Rights Agreement, the Company may be required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of resales of the Old Notes. See "Description of the New Notes and Guarantees -- Registration Rights." For purposes of the foregoing, "Transfer Restricted 25 32 Securities" means each Old Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for an New Note in the exchange offer, (ii) following the exchange by a broker-dealer in the exchange offer of an Old Note for a New Note, the date on which such New Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of this prospectus, (iii) the date on which such Old Note has been effectively registered under the Securities Act and disposed of in accordance with such "shelf" registration statement or (iv) the date on which such Old Note is distributed to the public pursuant to Rule 144 under the Act or may be distributed to the public pursuant to Rule 144(k) under the Act. See "-- Procedures for Tendering Old Notes." Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company, the Company believes that, with the exceptions set forth below, New Notes issued pursuant to the exchange offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is an "affiliate" of the Company within the meaning of Rule 405 promulgated under the Securities Act, or a broker-dealer who purchased Old Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the New Notes are acquired in the ordinary course of business of the holder and the holder does not have an arrangement or understanding with any person to participate in the distribution of such New Notes. Any holder who tenders in the exchange offer for the purpose of participating in a distribution of the New Notes cannot rely on this interpretation by the Commission's staff and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." Broker-dealers who acquired Old Notes directly from us and not as a result of market-making activities or other trading activities may not rely on the staff's interpretations discussed above or participate in the exchange offer and must comply with the registration and prospectus delivery requirements of the Securities Act in order to sell the Old Notes. CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES Following the completion of the exchange offer, holders of Old Notes who did not tender their Old Notes, or who did not properly tender their Old Notes, will not have any further registration rights and such Old Notes will continue to be subject to restrictions on transfer. Accordingly, the liquidity of the market for a holder's Old Notes could be adversely affected upon expiration of the exchange offer if such holder elects to not participate in the exchange offer. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, we will accept for exchange any and all Old Notes that are validly tendered on or prior to 5:00 p.m. New York City time, on the Expiration Date. We will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of the outstanding Old Notes accepted in the exchange offer. Holders who have tendered their Old Notes may withdraw their tender of Old Notes at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The exchange offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange. However, the exchange offer is subject to the terms and provisions of the Registration Rights Agreement. See "-- Conditions of the Exchange Offer." 26 33 Old Notes may be tendered only in multiples of $1,000. Subject to the foregoing, holders of Old Notes may tender less than the aggregate principal amount represented by the Old Notes they hold, provided that they appropriately indicate this fact on the letter of transmittal accompanying the tendered Old Notes. The form and terms of the New Notes are substantially the same as the form and terms of the Old Notes, except that the New Notes have been registered under the Securities Act and will not bear legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be issued pursuant to, and entitled to the benefits of, the Indenture pursuant to which the Old Notes were issued. As of the date of this prospectus, $400 million in aggregate principal amount of the Old Notes is outstanding. As of September 15, 2000, Cede & Co., was the only registered holder of the Old Notes. Cede & Co. held the Old Notes for of its participants. We have fixed the close of business on , 2000 as the record date for purposes of determining the persons to whom we will mail this prospectus and the letter of transmittal initially. Only a holder of the Old Notes, or such holder's legal representative or attorney-in-fact, may participate in the exchange offer. We will not fix a record date for determining holders of the Old Notes entitled to participate in the exchange offer. We believe that, as of the date of this prospectus, no such holder is our affiliate, as defined in Rule 405 under the Securities Act. We will be deemed to have accepted validly tendered Old Notes when, as and if we have given oral or written notice thereof to the exchange agent. The exchange agent will act as agent for the tendering holders of Old Notes and for the purpose of receiving the New Notes from us. If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of other events set forth in this prospectus or otherwise, the certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering holder as promptly as practicable after the expiration date. Holders who tender Old Notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the exchange offer. The Company will pay all charges and expenses, other than certain applicable taxes, in connection with the exchange offer. See "-- Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The expiration date shall be , 2000, at 5:00 p.m., New York City time, unless we, in our sole discretion, extend the exchange offer, in which case the expiration date shall be the latest date and time to which the exchange offer is extended, but shall not be later than , 2000. In order to extend the exchange offer, we will notify the exchange agent of any extension by oral or written notice and will make a public announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. We reserve the right, in our sole discretion, - to delay accepting any Old Notes, - to extend the exchange offer, - if any of the conditions set forth below under "-- Conditions of the Exchange Offer" shall not have been satisfied, to terminate the exchange offer, by giving oral or written notice of such delay, extension, or termination to the exchange agent, and - to amend the terms of the exchange offer in any manner. 27 34 If we amend the exchange offer in a manner we determine to constitute a material change, we will promptly disclose such amendments by means of a prospectus supplement that we will distribute to the registered holders of the Old Notes. Modification of the exchange offer, including, but not limited to, - extension of the period during which the exchange offer is open, and - satisfaction of the conditions set forth below under "-- Conditions of the Exchange Offer" may require that at least five business days remain in the exchange offer. CONDITIONS OF THE EXCHANGE OFFER Notwithstanding any other provision of the exchange offer, the Company shall not be required to accept for exchange, or to issue New Notes in exchange for, any Old Notes and may terminate or amend the exchange offer if at any time before the acceptance of such Old Notes for exchange or the exchange of the New Notes for the Old Notes, the Company determines that the exchange offer violates applicable law, any applicable interpretation of the staff of the Commission or any order of any governmental agency or court of competent jurisdiction. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition or may be waived by the Company in whole or in part at any time and from time to time in its sole discretion. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time from time to time. In addition, the Company will not accept for exchange any Old Notes tendered, and no New Notes will be issued in exchange for any such Old Notes, if at such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended. In any such event the Company is required to use every reasonable effort to obtain the withdrawal of any stop order at the earliest possible time. ACCRUED INTEREST The New Notes will bear interest at a rate equal to 9 1/2% per annum, which interest shall accrue from September 15, 2000 or from the most recent interest payment date with respect to the Old Notes to which interest was paid or duly provided for. See "Description of the New Notes and Guarantees -- Principal, Maturity and Interest." PROCEDURES FOR TENDERING OLD NOTES Only a holder of Old Notes may tender the Old Notes in the exchange offer. Except as set forth under "-- Book Entry Transfer," to tender in the exchange offer a holder must complete, sign, and date the letter of transmittal, or a copy thereof, have the signatures thereon guaranteed if required by the letter of transmittal, and mail or otherwise deliver the letter of transmittal or copy to the Exchange Agent prior to the expiration date. In addition, (i) certificates for the Old Notes must be received by the Exchange Agent along with the letter of transmittal prior to the expiration date, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if that procedure is available, into the Exchange Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the expiration date or (iii) the holder must comply with the guaranteed delivery procedures described below. To be tendered effectively, the letter of transmittal and other required 28 35 documents must be received by the Exchange Agent at the address set forth under "-- The Exchange Agent; Assistance" prior to the expiration date. The tender by a holder that is not withdrawn before the expiration date will constitute an agreement between that holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUSTS COMPANIES OR NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner whose Old Notes are registered in the name of a broker-dealer, commercial bank, trust company, or other nominee and who wishes to tender should contact the registered holder promptly and instruct the registered holder to tender on the beneficial owner's behalf. If the beneficial owner wishes to tender on the owner's own behalf, the owner must, prior to completing and executing the letter of transmittal and delivering the owner's Old Notes, either make appropriate arrangements to register ownership of the Old Notes in the beneficial owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined) unless Old Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the letter of transmittal or (ii) for the account of an Eligible Institution. If signatures on a letter of transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, the guarantee must be by any eligible guarantor institution that is a member of or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or an "eligible guarantor institution" with the meaning on Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"). If the letter of transmittal is signed by a person other than the registered holder of any Old Notes listed therein, the Old Notes must be endorsed or accompanied by a properly completed bond power, signed by the registered holder as that registered holder's name appears on the Old Notes. If the letter of transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company of their authority to so act must be submitted with the letter of transmittal unless waived by the Company. All questions as to the validity, form, eligibility (including time of receipt), acceptance, and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. 29 36 Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, the Exchange Agent, nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the letter of transmittal, as soon as practicable following , 2000, unless the exchange offer is extended. In addition, the Company reserves the right in its sole discretion to purchase or make offers for any Old Notes that remain outstanding after the expiration date or, as set forth under "-- Conditions to the Exchange Offer," to terminate the exchange offer and, to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions, or otherwise. The terms of any such purchases or offers could differ from the terms of the exchange offer. By tendering, each holder will represent to the Company that, among other things, (i) the New Notes acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the registered holder, (ii) the holder is not engaging in and does not intend to engage in a distribution of such New Notes, (iii) the holder does not have an arrangement or understanding with any person to participate in the distribution of such New Notes and (iv) the holder is not an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. In all cases, issuance of New Notes for Old Notes that are accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a properly completed and duly executed letter of transmittal (or, with respect to the DTC and its participants, electronic instructions in which the tendering holder acknowledges its receipt of an agreement to be bound by the letter of transmittal), and all other required documents. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if Old Notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Old Notes will be returned without expense to the tendering holder thereof (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described below, such nonexchanged Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the exchange offer. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Old Notes at the Book-Entry Transfer Facility for purposes of the exchange offer within two business days after the date of this prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Old Notes being tendered by causing the Book-Entry Transfer Facility to transfer such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book- 30 37 Entry Transfer Facility's procedures for transfer. However, although delivery of Old Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the letter of transmittal or copy thereof, with any required signature guarantees and any other required documents, must, in any case other than as set forth in the following paragraph, be transmitted to and received by the Exchange Agent at the address set forth under "-- Exchange Agent; Assistance" on or prior to the expiration date or the guaranteed delivery procedures described below must be complied with. DTC's Automated Tender Offer Program ("ATOP") is the only method of processing exchange offers through DTC. To accept the exchange offer through ATOP, participants in DTC must send electronic instructions to DTC through DTC's communication system in lieu of sending a signed, hard copy letter of transmittal. DTC is obligated to communicate those electronic instructions to the Exchange Agent. To tender Old Notes through ATOP, the electronic instructions sent to DTC and transmitted by DTC to the Exchange Agent must reflect that the participant acknowledges its receipt of and agrees to be bound by the letter of transmittal. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Old Notes and whose Old Notes are not immediately available, or who cannot deliver their Old Notes or any other documents required by the letter of transmittal to the Exchange Agent prior to the expiration date, may tender their Old Notes according to the guaranteed delivery procedures set forth in the letter of transmittal. Pursuant to such procedures: (1) the holder tenders through an eligible institution and signs a notice of guaranteed delivery, (2) on or prior to the Expiration Date, the Exchange Agent receives from the holder and the eligible institution a written or facsimile copy of a properly completed and duly executed notice of guaranteed delivery, substantially in the form provided by the Company, setting forth the name and address of the holder, the certificate number or numbers of the tendered Old Notes, and the principal amount of tendered Old Notes, stating that the tender is being made thereby and guaranteeing that, within five business days after the date of delivery of the notice of guaranteed delivery, the tendered Old Notes, a duly executed letter of transmittal and any other required documents will be deposited by the eligible institution with the Exchange Agent, and (3) such properly completed and executed documents required by the letter of transmittal and the tendered Old Notes in proper form for transfer are received by the Exchange Agent within five business days after the Expiration Date. Any holder who wishes to tender Old Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the notice of guaranteed delivery and letter of transmittal relating to such Old Notes prior to 5:00 p.m., New York City time, on the Expiration Date. ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES Upon satisfaction or waiver of all the conditions to the exchange offer, we will accept any and all Old Notes that are properly tendered in the exchange offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the exchange offer will be delivered promptly after acceptance of the Old Notes. For purposes of the exchange offer, we shall be deemed to have accepted validly tendered Old Notes, when, as, and if we have given oral or written notice thereof to the Exchange Agent. 31 38 In all cases, issuances of New Notes for Old Notes that are accepted for exchange pursuant to the exchange offer will be made only after the Exchange Agent timely receives such Old Notes, a properly completed and duly executed letter of transmittal and all other required documents; provided, however, we reserve the absolute right to waive any defects or irregularities in the tender or conditions of the exchange offer. If we do not accept any tendered Old Notes for any reason, we will return such unaccepted Old Notes without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the exchange offer. WITHDRAWAL RIGHTS Holders may withdraw tenders of Old Notes at any time prior to 5:00 p.m., New York City time, on the Expiration Date. For the withdrawal to be effective, the Exchange Agent must receive a written notice of withdrawal at its address set forth on the back cover page of this prospectus. The notice of withdrawal must: - specify the name of the person who tendered the Old Notes to be withdrawn (the "Depositor"); - identify the Old Notes to be withdrawn, including the certificate number or numbers and principal amount of withdrawn Old Notes; - be signed by the holder in the same manner as the original signature on the letter of transmittal by which such Old Notes were tendered, including any required signature guarantees, or be accompanied by a bond power in the name of the person withdrawing the tender, in satisfactory form as determined by us in our sole discretion, duly executed by the registered holder, with the signature thereon guaranteed by an eligible institution together with the other documents required upon transfer by the indenture; and - specify the name in which such Old Notes are to be registered, if different from the person who deposited the Old Notes, pursuant to such documents of transfer. We will determine all questions as to the validity, form and eligibility, including time of receipt, of such withdrawal notices in our sole discretion. The Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any Old Notes which have been tendered for exchange but which are withdrawn will be returned to their holder without cost to such holder as soon as practicable after withdrawal. Properly withdrawn Old Notes may be retendered by following one of the procedures described under "-- Procedures for Tendering Old Notes" at any time on or prior to the Expiration Date. 32 39 THE EXCHANGE AGENT; ASSISTANCE SunTrust Bank is the Exchange Agent. All tendered Old Notes, executed letters of transmittal and other related documents should be directed to the Exchange Agent. Questions and requests for assistance and requests for additional copies of this prospectus, the letter of transmittal and other related documents should be addressed to the exchange agent as follows: BY REGISTERED OR CERTIFIED MAIL: SunTrust Bank Attention: George T. Hogan, Corporate Trust Department 25 Park Place, 24th Floor Atlanta, Georgia 30303-2900 or SunTrust Bank c/o Harris Trust of New York Attention: Corporate Trust Department Wall Street Plaza 88 Pine Street, 19th Floor New York, New York 10005 BY HAND OR OVERNIGHT COURIER: SunTrust Bank Attention: George T. Hogan, Corporate Trust Department 25 Park Place, 24th Floor Atlanta, Georgia 30303-2900 or SunTrust Bank c/o Harris Trust of New York Attention: Mary Ann Luisi, Corporate Trust Department Wall Street Plaza 88 Pine Street, 19th Floor New York, New York 10005 BY FACSIMILE: (404) 588-7335 (GA) or (212) 701-7648 (NY) Confirm by Telephone: (404) 588-7591 (GA); (212) 701-7673 (NY) 33 40 FEES AND EXPENSES We will bear all expenses incident to the consummation of the exchange offer and compliance with the Registration Rights Agreement, including, without limitation: (1) all registration and filing fees, including fees and expenses of compliance with state securities or Blue Sky laws; (2) printing expenses, including expenses of printing certificates for the New Notes in a form eligible for deposit with DTC and of printing prospectuses; (3) messenger, telephone and delivery expenses; (4) fees and disbursements of our counsel; (5) fees and disbursements of independent certified public accountants; (6) rating agency fees; (7) our internal expenses, including all salaries and expenses of our officers and employees performing legal or accounting duties; and (8) fees and expenses, if any, incurred in connection with the listing of the New Notes on a securities exchange. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptance of the exchange offer. We, however, will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. We will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the exchange offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. ACCOUNTING TREATMENT We will record the New Notes at the same carrying value as the Old Notes, as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. We will amortize expenses of the exchange offer over the term of the New Notes. 34 41 CAPITALIZATION The following table sets forth the capitalization of FelCor, L.P. at June 30, 2000, and as adjusted to reflect (i) the issuance of the Old Notes and the application of the net proceeds, (ii) the repurchase of $9.2 million of FelCor's common stock from July 1, 2000 through August 31, 2000 and (iii) the writeoff of $3.4 million of unamortized loan costs associated with the term loan repaid with the proceeds of the Old Notes.
JUNE 30, 2000 -------------------------------------------- ACTUAL ADJUSTMENTS(1) AS ADJUSTED(1) ---------- -------------- -------------- (IN THOUSANDS) Short-term debt: Current portion of mortgage and capital lease debt............... $ 20,866 $ $ 20,866 Current portion of other debt....... 10,383 10,383 Current portion of term loan........ 1,000 (1,000) ---------- --------- ---------- Total short-term debt....... $ 32,249 $ (1,000) $ 31,249 ========== ========= ========== Long-term debt(2): Line of credit...................... $ 410,000 $ (4,403) $ 405,597 Term loan........................... 373,000 (373,000) Existing senior notes(3) Due 2004......................... 125,000 125,000 Due 2007......................... 175,000 175,000 Old Notes........................... 400,000 400,000 Mortgage and capital lease debt..... 768,126 768,126 Other debt.......................... 650 650 ---------- --------- ---------- Total long-term debt........ 1,851,776 22,597 1,874,373 Redeemable units at redemption value.. 151,548 151,548 Preferred units....................... 294,515 294,515 Partners' capital..................... 1,669,188 (12,668) 1,656,520 ---------- --------- ---------- Total capitalization........ $3,967,027 $ 9,929 $3,976,956 ========== ========= ==========
- ------------ (1) The adjustments as presented do not include approximately $131 million reduction in the line of credit, and a $5 million reduction in other mortgage debt, from the pro forma sale of 25 non-strategic hotels, for which we had no binding sale agreements as of the date of this prospectus. (2) The line of credit, term loan, existing 7 3/8% and 7 5/8% senior notes due 2004 and 2007, and the Notes are effectively subordinated to the mortgage debt. (3) Does not reflect approximately $1.3 million in aggregate unamortized discount. 35 42 SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION The following tables set forth selected historical and pro forma consolidated financial information for FelCor Lodging Limited Partnership and FelCor Lodging Trust Incorporated. The selected historical information is presented for the years ended December 31, 1995, 1996, 1997, 1998 and 1999 and the six months ended June 30, 1999 and 2000. We derived the historical financial information for the years ended December 31, 1995, 1996, 1997, 1998 and 1999 from our financial statements and the notes thereto, audited by PricewaterhouseCoopers LLP, independent accountants. The selected historical financial information as of and for the six months ended June 30, 1999 and 2000 have been derived from the unaudited financial statements which have been prepared by management on the same basis as the audited financial statements and, in the opinion of management, include all adjustments consisting of normal recurring accruals that are considered necessary for a fair presentation of the results for such periods. The results of operations for the six months ended June 30, 1999 and 2000 are not necessarily indicative of results to be anticipated for the entire year. The selected unaudited pro forma consolidated financial information for the year ended December 31, 1999, the twelve months ended June 30, 2000, and the six months ended June 30, 2000, are presented for illustrative purposes only and are not necessarily indicative of what our actual results of operations would have been had the transactions described below been consummated on the date indicated. You should read the following information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Pro Forma Consolidated Statements of Operations, Balance Sheets and Notes thereto, and the Consolidated Financial Statements and Notes thereto included elsewhere in this prospectus or incorporated herein by reference. The pro forma consolidated financial information is presented as if all of the following occurred on January 1, 1999: (i) the issuance of $400 million of the Old Notes and application of the net proceeds, (ii) the completion of the other financing transactions which occurred in 2000, (iii) the repurchase by FelCor of $164.3 million of its common stock through August 31, 2000, and (iv) the sale of 25 non-strategic hotels identified in the second quarter of 2000. 36 43 FELCOR LODGING LIMITED PARTNERSHIP
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 1995 1996 1997 1998 1999 -------- -------- ---------- ---------- ---------- (IN THOUSANDS EXCEPT PER UNIT AND RATIO DATA) STATEMENT OF OPERATIONS DATA: Total revenue................. $ 25,991 $100,944 $ 176,651 $ 339,617 $ 504,001 Income (loss) before nonrecurring items.......... $ 15,322 $ 48,881 $ 69,652 $ 123,937 $ 136,653 Net income (loss)............. $ 15,322 $ 46,527 $ 69,467 $ 121,339 $ 135,776 Net income (loss) applicable to unitholders.............. $ 15,322 $ 38,793 $ 57,670 $ 99,916 $ 111,041 DILUTED EARNINGS PER UNIT: Income (loss) applicable to unitholders before extraordinary charge........ $ 1.70 $ 1.58 $ 1.68 $ 1.95 $ 1.59 Net income (loss) applicable to unitholders.............. $ 1.70 $ 1.49 $ 1.67 $ 1.87 $ 1.57 OTHER DATA: Cash distributions per unit... $ 1.84 $ 1.92 $ 2.10 $ 2.545 $ 2.20 Funds From Operations(2)...... $ 20,707 $ 77,141 $ 129,815 $ 217,363 $ 286,895 EBITDA(3)..................... $ 22,869 $ 88,355 $ 165,613 $ 306,361 $ 432,689 Weighted average units outstanding................. 8,989 29,306 39,157 58,013 75,251 Ratio of earnings to combined fixed charges and preferred distributions(4)............ 8.6x 3.5x 2.6x 2.2x 1.8x Adjusted ratio of earnings to combined fixed charges and preferred distributions(5).... 8.6x 3.5x 2.6x 2.2x 1.8x BALANCE SHEET DATA: Total assets................... $548,359 $978,788 $1,673,364 $4,175,383 $4,255,751 Debt.......................... $ 19,666 $239,425 $ 476,819 $1,594,734 $1,833,954 PRO FORMA SIX MONTHS (UNAUDITED) ENDED ----------------------------------------- JUNE 30, TWELVE MONTHS SIX MONTHS (UNAUDITED) YEAR ENDED ENDED ENDED ----------------------- DECEMBER 31, JUNE 30, JUNE 30, 1999 2000(1) 1999 2000 2000 ---------- ---------- ------------ ------------- ---------- (IN THOUSANDS EXCEPT PER UNIT AND RATIO DATA) STATEMENT OF OPERATIONS DATA: Total revenue................. $ 262,104 $ 264,670 $480,885 $484,600 $ 253,438 Income (loss) before nonrecurring items.......... $ 81,521 $ (13,247) $107,608 $ 87,351 $ 44,685 Net income (loss)............. $ 80,408 $ (12,372) $107,844 $ 88,462 $ 45,560 Net income (loss) applicable to unitholders.............. $ 68,040 $ (24,730) $ 83,109 $ 63,737 $ 33,202 DILUTED EARNINGS PER UNIT: Income (loss) applicable to unitholders before extraordinary charge........ $ 0.97 $ (0.39) $ 1.34 $ 1.03 $ 0.54 Net income (loss) applicable to unitholders.............. $ 0.95 $ (0.39) $ 1.34 $ 1.03 $ 0.54 OTHER DATA: Cash distributions per unit... $ 1.10 $ 1.10 $ 2.20 $ 2.20 $ 1.10 Funds From Operations(2)...... $ 154,232 $ 149,380 $251,085 $257,316 $ 140,644 EBITDA(3)..................... $ 223,590 $ 238,753 $412,871 $429,143 $ 229,229 Weighted average units outstanding................. 76,008 67,987 58,926 57,219 55,660 Ratio of earnings to combined fixed charges and preferred distributions(4)............ 2.0x .9x 1.6x 1.5x 1.5x Adjusted ratio of earnings to combined fixed charges and preferred distributions(5).... 2.0x 1.6x 1.6x 1.5x 1.5x BALANCE SHEET DATA: Total assets................... $4,280,626 $4,176,765 $4,050,047 Debt.......................... $1,712,540 $1,882,743 $1,768,693
FELCOR LODGING TRUST INCORPORATED
ACTUAL ---------------------------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 1995 1996 1997 1998 1999 -------- -------- ---------- ---------- ---------- (IN THOUSANDS EXCEPT PER SHARE AND RATIO DATA) STATEMENT OF OPERATIONS DATA: Total revenue.................. $ 25,991 $100,944 $ 176,651 $ 339,617 $ 504,001 Income (loss) before nonrecurring item............ $ 12,191 $ 43,291 $ 63,835 $ 117,437 $ 131,957 Net income (loss).............. $ 12,191 $ 40,937 $ 63,650 $ 114,839 $ 131,080 Net income (loss) applicable to common shareholders.......... $ 12,191 $ 33,203 $ 51,853 $ 93,416 $ 106,345 DILUTED EARNINGS PER SHARE: Income (loss) applicable to common shareholders before extraordinary charge......... $ 1.69 $ 1.53 $ 1.65 $ 1.92 $ 1.59 Net income (loss) applicable to common shareholders.......... $ 1.69 $ 1.43 $ 1.64 $ 1.86 $ 1.57 OTHER DATA: Cash dividends per common share........................ $ 1.84 $ 1.92 $ 2.10 $ 2.545 $ 2.20 Funds From Operations(2)....... $ 20,707 $ 77,141 $ 129,815 $ 217,363 $ 286,895 EBITDA(3)...................... $ 22,869 $ 88,355 $ 165,613 $ 306,361 $ 432,689 Weighted average common shares and units outstanding........ 8,989 29,306 39,157 58,013 75,257 Ratio of earnings to combined fixed charges and preferred distributions(4)............. 8.6x 3.5x 2.6x 2.2x 1.8x Adjusted ratio of earnings to combined fixed charges and preferred distributions(5)..... 8.6x 3.5x 2.6x 2.2x 1.8x BALANCE SHEET DATA: Total assets................... $548,359 $978,788 $1,673,364 $4,175,383 $4,255,751 Debt........................... $ 19,666 $239,425 $ 476,819 $1,594,734 $1,833,954 PRO FORMA (UNAUDITED) ------------------------------------ SIX MONTHS ENDED TWELVE MONTHS SIX MONTHS JUNE 30, (UNAUDITED) YEAR ENDED ENDED ENDED ----------------------- DECEMBER 31, JUNE 30, JUNE 30, 1999 2000(1) 1999 2000 2000 ---------- ---------- ------------ -------- ---------- (IN THOUSANDS EXCEPT PER SHARE AND RATIO DATA) STATEMENT OF OPERATIONS DATA: Total revenue.................. $ 262,104 $ 264,670 $480,885 $484,600 $ 253,438 Income (loss) before nonrecurring item............ $ 78,682 $ (10,848) $103,586 $ 82,698 $ 4 1,388 Net income (loss).............. $ 77,569 $ (9,973) $103,822 $ 83,809 $ 42,263 Net income (loss) applicable to common shareholders.......... $ 65,201 $ (22,331) $ 79,087 $ 59,084 $ 29,905 DILUTED EARNINGS PER SHARE: Income (loss) applicable to common shareholders before extraordinary charge......... $ 0.97 $ (0.39) $ 1.34 $ 1.03 $ 0.54 Net income (loss) applicable to common shareholders.......... $ 0.96 $ (0.39) $ 1.34 $ 1.03 $ 0.54 OTHER DATA: Cash dividends per common share........................ $ 1.10 $ 1.10 $ 2.20 $ 2.20 $ 1.10 Funds From Operations(2)....... $ 154,232 $ 149,380 $251,085 $257,316 $ 140,644 EBITDA(3)...................... $ 223,590 $ 238,753 $412,871 $429,143 $ 229,229 Weighted average common shares and units outstanding........ 76,008 67,987 58,926 57,219 55,660 Ratio of earnings to combined fixed charges and preferred distributions(4)............. 2.0x .9x 1.6x 1.5x 1.5x Adjusted ratio of earnings to combined fixed charges and preferred distributions(5)..... 2.0x 1.6x 1.6x 1.5x 1.5x BALANCE SHEET DATA: Total assets................... $4,280,676 $4,176,765 $4,050,047 Debt........................... $1,712,540 $1,882,743 $1,768,693
37 44 - ------------ (1) In the second quarter of 2000 the Company recorded a $63 million one-time reserve for the sale of non-strategic hotel assets, which is reflected in the income statements presented for the period. (2) The Company considers Funds From Operations to be a key measure of a REIT's performance which should be considered along with, but not as an alternative to, net income and cash flow as a measure of operating performance and liquidity. The White Paper on Funds From Operations approved by the Board of Governors of NAREIT defines Funds From Operations as net income or loss (computed in accordance with GAAP), excluding gains or losses from debt restructuring which would be extraordinary items in accordance with GAAP and sales of depreciable operating properties, plus real estate related depreciation and amortization and after comparable adjustments for the Company's portion of these items related to unconsolidated entities and joint ventures. The Company believes that Funds From Operations is helpful to investors as a measure of the performance of an equity REIT because, along with cash flow from operating activities, financing activities, and investing activities, it provides investors with an indication of the ability of the Company to incur and service debt, to make capital expenditures, and to fund other cash needs. The Company computes Funds From Operations in accordance with standards established by NAREIT, except that the Company adds back rent deferred under SAB 101 to derive Funds From Operations. This may not be comparable to Funds From Operations reported by other REITs that do not define the term in accordance with the current NAREIT definition, that interpret the current NAREIT definition differently than the Company or that do not adjust Funds From Operations for rent deferred under SAB 101. Funds From Operations does not represent cash generated from operating activities determined by GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. Funds From Operations may include funds that may not be available for management's discretionary use due to requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. The computation of Funds From Operations for FelCor LP and FelCor yields the same results. The following table details the computation of Funds From Operations for FelCor LP.
ACTUAL ------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------- ------------------- 1995 1996 1997 1998 1999 1999 2000 ------- ------- -------- -------- -------- -------- -------- (IN THOUSANDS) Net income (loss)....................... $15,322 $46,527 $ 69,467 $121,339 $135,776 $ 80,408 $(12,372) Deferred rent........................... 18,604 Reserve for assets held for sale........ 63,000 Series B redeemable preferred distributions.......................... (8,373) (12,937) (6,468) (6,468) Extraordinary charge from write off of deferred financing fees................ 2,354 185 3,075 1,113 1,113 Depreciation............................ 5,232 26,544 50,798 90,835 152,948 74,162 81,480 Depreciation from unconsolidated entities............................... 153 1,716 9,365 10,487 9,995 5,017 5,136 ------- ------- -------- -------- -------- -------- -------- Funds From Operations (FFO)............. $20,707 $77,141 $129,815 $217,363 $286,895 $154,232 $149,380 ======= ======= ======== ======== ======== ======== ======== Weighted average units outstanding...... 8,989 29,306 39,157 58,013 75,251 76,008 67,987 PRO FORMA ---------------------------------- TWELVE SIX MONTHS MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, JUNE 30, JUNE 30, 1999 2000 2000 ------------ -------- -------- (IN THOUSANDS) Net income (loss)....................... $107,844 $ 88,462 $ 45,560 Deferred rent........................... 18,604 18,604 Reserve for assets held for sale........ Series B redeemable preferred distributions.......................... (12,937) (12,937) (6,468) Extraordinary charge from write off of deferred financing fees................ Depreciation............................ 146,183 153,073 77,812 Depreciation from unconsolidated entities............................... 9,995 10,114 5,136 -------- -------- -------- Funds From Operations (FFO)............. $251,085 $257,316 $140,644 ======== ======== ======== Weighted average units outstanding...... 58,926 57,219 55,660
38 45 (3) EBITDA is computed by adding FFO, interest expense, the Company's portion of interest expense from unconsolidated entities, amortization expense, and the Company's Series B redeemable preferred distributions. The computation of EBITDA for FelCor LP and FelCor yields the same result. EBITDA is presented because it provides useful information regarding our ability to service debt. EBITDA should not be considered as an alternative measure of operating results or cash flow from operations (as determined in accordance with GAAP). EBITDA as presented by us may not be comparable to other similarly titled measures used by other companies. A reconciliation of Funds From Operations to EBITDA is as follows:
ACTUAL ------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------- ------------------- 1995 1996 1997 1998 1999 1999 2000 ------- ------- -------- -------- -------- -------- -------- (IN THOUSANDS) Funds From Operations................... $20,707 $77,141 $129,815 $217,363 $286,895 $154,232 $149,380 Interest expense........................ 2,004 9,803 28,792 73,182 125,435 59,172 77,644 Interest expense from unconsolidated entities............................... 818 5,895 6,521 6,729 3,343 4,787 Amortization expense.................... 158 593 1,111 922 693 375 474 Series B redeemable preferred distributions.......................... 8,373 12,937 6,468 6,468 ------- ------- -------- -------- -------- -------- -------- EBITDA.................................. $22,869 $88,355 $165,613 $306,361 $432,689 $223,590 $238,753 ======= ======= ======== ======== ======== ======== ======== PRO FORMA ---------------------------------- TWELVE SIX MONTHS MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, JUNE 30, JUNE 30, 1999 2000 2000 ------------ -------- -------- (IN THOUSANDS) Funds From Operations................... $251,085 $257,316 $140,644 Interest expense........................ 141,427 149,925 76,856 Interest expense from unconsolidated entities............................... 6,729 8,173 4,787 Amortization expense.................... 693 792 474 Series B redeemable preferred distributions.......................... 12,937 12,937 6,468 -------- -------- -------- EBITDA.................................. $412,871 $429,143 $229,229 ======== ======== ========
A reconciliation of EBITDA and Consolidated EBITDA as defined in the Notes is as follows:
ACTUAL ------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------- ------------------- 1995 1996 1997 1998 1999 1999 2000 ------- ------- -------- -------- -------- -------- -------- (IN THOUSANDS) EBITDA................................... $22,869 $88,355 $165,613 $306,361 $432,689 $223,590 $238,753 Deduct -- Interest expense from unconsolidated entities.............................. (818) (5,895) (6,521) (6,729) (3,343) (4,787) Income from unconsolidated entities..... (513) (2,010) (6,963) (7,017) (8,484) (3,837) (5,648) Gain on asset sale...................... (477) (236) (875) Add -- Distributions from unconsolidated entities.............................. 1,954 4,211 19,066 19,581 13,297 11,708 ------- ------- -------- -------- -------- -------- -------- Consolidated EBITDA...................... $22,356 $87,481 $156,966 $311,412 $436,821 $229,707 $239,151 ======= ======= ======== ======== ======== ======== ======== PRO FORMA ---------------------------------- TWELVE SIX MONTHS MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, JUNE 30, JUNE 30, 1999 2000 2000 ------------ -------- -------- (IN THOUSANDS) EBITDA................................... $412,871 $429,143 $229,229 Deduct -- Interest expense from unconsolidated entities.............................. (6,729) (8,173) (4,787) Income from unconsolidated entities..... (8,484) (10,295) (5,648) Gain on asset sale...................... (236) (1,111) (875) Add -- Distributions from unconsolidated entities.............................. 19,581 17,992 11,708 -------- -------- -------- Consolidated EBITDA...................... $417,003 $427,556 $229,627 ======== ======== ========
(4) For the purpose of computing the ratio of earnings to combined fixed charges and preferred distributions, earnings consist of income from continuing operations plus fixed charges and minority interest in FelCor LP (with respect to FelCor), excluding capitalized interest, and fixed charges consist of interest, whether expensed or capitalized, and amortization of loan costs. (5) The adjusted ratio of earnings to combined fixed charges and preferred distributions is computed the same as described in footnote (4) except that income from continuing operations is adjusted to add back a $63 million one-time reserve for the sale of non-strategic hotel assets recorded in the second quarter of 2000. 39 46 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL FelCor Lodging Limited Partnership and its subsidiaries (the "Company"), at June 30, 2000, owned interests in 188 hotels with nearly 50,000 rooms and suites. Additional organizational information relating to the Company, and the definitions of certain capitalized terms, are contained in the Notes to Consolidated Financial Statements of FelCor Lodging Limited Partnership appearing elsewhere in this prospectus or incorporated herein by reference. The Company is the owner of the largest number of Embassy Suites, Crowne Plaza, Holiday Inn and independently owned Doubletree-branded hotels in the world. At June 30, 2000, the Company leased 86 of the hotels to DJONT Operations, L.L.C., a Delaware limited liability company, or a consolidated subsidiary thereof (collectively "DJONT"), and leased 100 of the hotels to Bristol Hotels & Resorts, or a consolidated subsidiary thereof ("Bristol" and, together with DJONT, the "Lessees"). Two hotels were operated without a lease. The following table provides a schedule of the hotels, by brand, operated by each of the Company's Lessees at June 30, 2000:
NOT OPERATED BRAND DJONT BRISTOL UNDER A LEASE TOTAL - ----- ----- ------- ------------- ----- Embassy Suites................................ 60 60* Holiday Inn................................... 43 1 44 Crowne Plaza and Crowne Plaza Suites.......... 18 18 Doubletree and Doubletree Guest Suites........ 14 14 Holiday Inn Select............................ 10 10 Sheraton and Sheraton Suites.................. 10 10 Hampton Inn................................... 9 9 Holiday Inn Express........................... 5 5 Fairfield Inn................................. 5 5 Harvey Hotel.................................. 4 4 Independents.................................. 2 1 3 Courtyard by Marriott......................... 2 2 Hilton Suites................................. 1 1 Homewood Suites............................... 1 1 Four Points by Sheraton....................... 1 1 Westin........................................ 1 1 -- --- -- --- Total Hotels........................ 86 100 2 188 == === == ===
- ------------ * Includes one Embassy Suites hotel that was sold on September 27, 2000. The hotels are located in 35 states and Canada with concentrations in Texas (41), California (20), Florida (18), and Georgia (15). The principal factors affecting the Company's results of operations are changes in room and suite revenues reflected by revenue per available room ("RevPAR"), renovations, redevelopments, and rebrandings of hotels and acquisitions. On July 28, 1998, the Company completed the acquisition of the real estate assets of Bristol Hotel Company through a merger, which resulted in the net addition of 107 hotels, valued at approximately $2 billion, to the Company's portfolio. In addition to the assets acquired in the merger, the Company acquired ownership interests in 16 hotels in 1998 and one additional hotel in 1999. Nine of the hotels acquired in the merger which did not meet the Company's investment criteria were sold in 1998 and 1999. 40 47 In the second quarter of 2000, the Company identified 25 of its hotels as non-strategic hotels to be sold. The Company estimates that the aggregate net sales proceeds from these hotels will approximate $136 million. In connection with the decision to sell these hotels, the Company has recorded a one time reserve of $63 million. Additionally, on September 27, 2000 the Company sold its Embassy Suites hotel, Los Angeles International Airport (North), California for a gross sale price of approximately $24 million, resulting in a gain on sale of approximately $2.5 million. In 1999, the Company completed the major portion of its program of renovation, redevelopment, and rebranding of hotels, undertaken to improve under-performing assets and increase revenues. The Company and, prior to the merger, Bristol Hotel Company, spent nearly $220 million in 1998 on renovations, redevelopments, rebrandings, room additions to existing hotels, and other hotel improvements. In 1999 the Company completed renovations at 44 hotels during the year, totaling $193 million. Twenty-eight hotels were undergoing renovation at the end of 1999 and renovation expenditures on the hotel portfolio totaled $177 million during the year. A total of eight hotels were rebranded during 1999. Through June 30, 2000, the Company completed renovations at eight hotels. Thirteen hotels were undergoing renovation at June 30, 2000. Renovation expenditures on the hotel portfolio totaled $22.9 million through June 30, 2000, and the Company expects to spend an additional $35.0 million on renovations through the remainder of 2000. On January 1, 2000, two Doubletree Guest Suites hotels were rebranded as Embassy Suites hotels. In 2000, the Company started construction on a 90 room addition at its Holiday Inn -- French Quarter hotel located on Royal Street in New Orleans, Louisiana, with an expected cost of $10 million. Management believes that its strategy of renovating, redeveloping and rebranding selected hotels continues to be effective in improving revenue performance. Historically the Company has been financed primarily with equity, resulting in a conservative financial structure. The Company's emphasis on maintaining this conservative approach is evidenced in part, by the following, as of June 30, 2000: - Interest coverage ratio of 2.9x - Consolidated debt equal to 41% of its investment in hotels at cost - Fixed interest rate debt comprising 68% of total debt - Secured mortgage debt to total assets of 19% - Debt of approximately $17 million maturing in 2000 The Company's historical results of operations for the six months ended June 30, 2000 and 1999 and the years ended 1999, 1998, and 1997 are summarized as follows (in millions, except percentages and hotel counts):
PERCENTAGE CHANGE YEARS ENDED SIX MONTHS ENDED --------------------------------------- DECEMBER 31, JUNE 30, SIX MONTHS ------------------------ ------------------ ENDED JUNE 30, 1999 1998 1997 2000 1999 99 VS. 98 98 VS. 97 99 VS. 2000 ------ ------ ------ ------ ------ --------- --------- -------------- Hotels owned at end of period........... 188 193 73 188 187 (2.6)% 164.4% 0.1% Revenues................................ $504.0 $339.6 $176.7 $264.7(1) $262.1 48.4% 92.2% 1.0% Income (loss) before nonrecurring items.................................. $136.7 $123.9 $ 69.7 $(13.2)(2) $ 81.5 10.3% 77.8% (116.2)%(2) Net income (loss) applicable to unitholders............................ $111.0 $ 99.9 $ 57.7 $(24.7)(2) $ 68.0 11.1% 73.1% (136.3)%(2) Funds From Operations (FFO)............. $286.9 $217.4 $129.8 $149.4 $154.2 32.0% 67.5% (3.1)%
- ------------ (1) Revenues for 2000 do not include rent deferred under Staff Accounting Bulletin 101 of $18.6 million. This deferred rent is expected to be fully earned and recognized as Percentage Lease Revenue by the end of 2000. There was no deferred rent recorded in 1999. (2) Includes a one time reserve of $63 million established for the proposed sale of 25 non-strategic hotels. 41 48 RESULTS OF OPERATIONS FelCor Lodging Limited Partnership -- Actual Comparison of the Six Months Ended June 30, 2000 and 1999 For the six months ended June 30, 2000 and 1999, the Company had revenues of $264.7 million and $262.1 million, respectively, consisting primarily of Percentage Lease revenues of $256.3 million and $256.9 million, respectively. The reason for the decline in Percentage Lease revenues is approximately $18.6 million of rent deferred in 2000 but not in 1999. Effective January 2000, Percentage Leases for 68 of the Company's 188 hotels were changed to provide for the computation of rent on an annual, rather than quarterly basis. This should result in no change in annual Percentage Rent or cash flows. However, this change requires the deferral of Percentage Lease revenue until annual thresholds are exceeded in accordance with Staff Accounting Bulletin No. 101 (SAB 101). The deferred rent is expected to be fully earned and recognized as Percentage Lease revenue by the end of 2000. After adding back rent deferred under SAB 101, Percentage Lease revenues for the six months ended June 30, 2000, increased 7.0% to $274.9 million as compared to the six months ended June 30, 1999. The reason for this comparative increase is attributed to an overall increase in RevPAR of 7.7%. This change in hotel RevPAR is more fully discussed under "The Hotels" section of this "Management's Discussion and Analysis of Financial Condition and Results of Operations." Total expenses increased $97.3 million for the six months ended June 30, 2000, from $180.6 million to $277.9 million, compared to the same period in 1999. Since there was no deferred rent recorded in 1999, for comparison purposes deferred rent recorded in 2000 has been added back to total revenue for the computation of expenses as a percent of total revenue. Total expenses as a percentage of total revenue after adding back deferred rent, increased to 98.1% for the six months ended June 30, 2000, from 68.9% in the same period of 1999. Included in total expenses is a one-time reserve of $63.0 million related to the 25 non-strategic hotels the Company has identified as held for sale. This reserve represents the difference between the book value and the estimated market value of the hotels. Other major components of the increase in expenses, as a percentage of total revenue after adding back deferred rent, were interest expense and land lease expenses. Interest expense increased, as a percentage of total revenue, after adding back deferred rent, to 27.4% in the six months ended June 30, 2000, from 22.6% in the six months ended June 30, 1999. This increase in interest expense is attributed to the following: - increased debt, which was used to finance renovations and to fund $155 million of stock repurchases in 1999 and 2000, - higher average interest rates for debt refinanced in 2000 to extend maturities and convert variable rates to fixed, - an increase in the LIBOR rate which affects the Company's variable rate debt, and - reduction of interest capitalized on major renovations and construction from $3.2 million for the six months ended June 30, 1999 to approximately $497,000 in 2000. Land leases as a percent of total revenue, after adding back deferred rent, increased from 3.2% to 4.1% for the six months ended June 30, 1999 and 2000, respectively. The increase in land lease expense is primarily attributed to a reserve established in June 2000, for prior year disputed land lease expense and current year land lease expense for two hotels. The land lease 42 49 rent for these hotels is computed as a percentage of hotel revenues and these two hotels had larger than average percentage increases in revenue for the period. Comparison of the Years Ended December 31, 1999 and 1998. For the years 1999 and 1998, the Company had total revenue of $504.0 million and $339.6 million, respectively, consisting primarily of Percentage Lease revenue of $490.9 million and $328.0 million. The increase in revenue is primarily attributable to the Company's acquisition and subsequent leasing, pursuant to Percentage Leases, of interests in more than 100 hotels in 1998, including the hotels that were acquired through the merger on July 28, 1998. The hotels which were acquired during 1998, including those acquired through the merger, accounted for $151.1 million (93%) of the change in Percentage Lease revenue for the twelve months ended December 31, 1999 compared to 1998. The 73 hotels owned throughout both of the years ended December 31, 1999 and 1998 produced an increase in Percentage Lease revenues of $10.9 million (or 1.9%) between 1998 and 1999. Changes in room and suite revenues significantly affect the Company because its principal source of revenue is rent payments from the Lessees under the Percentage Leases. The Percentage Leases provide for rent based on a percentage of room and suite revenue, food and beverage revenue, food and beverage rents, and in some instances, other hotel revenues. In 1999 and 1998, Percentage Lease revenue derived from room and suite revenue represented 91% and 93% of total Percentage Lease revenue, respectively. The 73 hotels owned throughout both 1999 and 1998 increased room and suite revenue by $11.6 million (or 2%) in 1999 compared to 1998 and increased RevPAR by 1.4%. The RevPAR increase was driven by an increase in average daily rate ("ADR") of 1.5%, despite a slight drop in occupied rooms ("Occupancy") of 0.1 percentage points. Of the 73 hotels, 18 had undergone renovation in either 1998 or 1999. Those renovated hotels reflected increases in ADR of 2.2% and in RevPAR of 1.9%, which was greater than the results for hotels that had not undergone renovation. This reflects both the improvement from renovation and the impact of taking rooms out of service for such renovation. The Company generally seeks to improve those of its hotels that management believes can achieve increases in room and suite revenue and RevPAR as a result of renovation, redevelopment and rebranding. However, during the course of such improvements hotel revenue performance is often adversely affected, compared to the prior year, by such temporary factors as rooms and suites out of service and disruptions of hotel operations. During 1999, the Company spent $177 million on the renovation, redevelopment and rebranding of its hotels. As a result of the extensive renovations, the Company's portfolio experienced significant disruption during 1999, with approximately 350,000 room nights out of service, or 2% of its portfolio. (A more detailed discussion of hotel room and suite revenue is contained in the "The Hotels -- Actual" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.) Total expenses increased $151.7 million in the year ended December 31, 1999, to $367.3 million from $215.7 million in 1998. This increase resulted primarily from the additional hotels acquired in July 1998 through the merger. Total expenses as a percentage of total revenue increased to 72.9% for the twelve months ended December 31, 1999, compared to 63.4% in the same period of 1998. The major components of the increase in expenses, as a percentage of total revenue, are depreciation, land leases, and interest expense. Depreciation increased as a percentage of total revenue to 30.4% in the twelve months ended December 31, 1999, from 26.8% in 1998. The relative increase in depreciation expense is primarily attributed to depreciation on $341.4 million in capital expenditures made over the 43 50 past two years, approximately 40% of which are short-lived assets that are depreciated over 3 to 5 years. Land lease expenses represent 3.5% of total revenue in 1999 as compared to 2.4% in 1998. This increase, as a percentage of total revenue, results primarily from the larger percentage of hotels subject to land leases among those acquired through the merger. Interest expense increased, as a percentage of total revenue, to 24.9% in the twelve months ended December 31, 1999, from 21.6% in 1998. This increase in interest expense is attributed to the increased debt used to finance renovations, higher interest rates on debt that was refinanced to extend maturities and convert such debt from variable to fixed rates, the assumption of debt related to the more highly leveraged Bristol assets, and borrowings to fund the Company's stock repurchase program. General and administrative expenses and taxes, insurance and other expense remained relatively constant as a percentage of total revenue in 1999 and 1998. Comparison of the Years Ended December 31, 1998 and 1997. For the years 1998 and 1997, the Company had revenue of $339.6 million and $176.7 million, respectively, consisting primarily of Percentage Lease revenue of $328.0 million and $169.1 million. The 43 hotels owned by the Company throughout both of the years 1998 and 1997, which reflect the effect of the Company's ownership and the management by its strategic partners, experienced a growth in RevPAR during 1998 of 5.4% over 1997. The largest portion of this increase came from the 18 former Crown Sterling Suite hotels, which continued their trend of improved RevPAR throughout 1998, achieving a RevPAR of $92.05 in 1998 compared to $85.04 for 1997, an increase of 8.2%. These hotels have improved their RevPAR performance by 31.4% since 1996. The Company attributes this dramatic increase to the renovation, redevelopment and rebranding of these hotels in 1996 and early 1997. The improvement in room and suite revenue significantly impacts the Company because its principal source of revenue is rent payments from the Lessees under the Percentage Leases. The Percentage Leases provide for rent based on a percentage of room and suite revenue, food and beverage revenue, food and beverage rents, and in some instances, other hotel revenues. The portion of the Percentage Lease revenue derived from room and suite revenues was approximately 93% in 1998 and 97% in 1997. The decrease in the portion of Percentage Lease revenue derived from room and suite revenues is attributed primarily to the more extensive food and beverage operations in the Bristol hotels. Total expenses increased $108.7 million in 1998 over 1997, primarily resulting from the net acquisition of 120 hotels during 1998 and 30 hotels in 1997. Total expenses as a percentage of total revenue increased in 1998 to 63.4% from 60.6% in 1997. The major component of the increase in expenses, as a percentage of total revenue, was interest expense. Interest expense increased by $44.4 million, from $28.8 million in 1997 to $73.2 million in 1998, and increased as a percentage of total revenue, from 16.3% in 1997 to 21.6% in 1998. The relative increase in interest expense is attributed to the assumption of debt related to the more highly leveraged Bristol assets. Debt as a percentage of total assets increased from 28.5% at December 31, 1997 to 38.2% at December 31, 1998. General and administrative expenses, depreciation, and taxes, insurance and other expenses remained relatively constant as a percentage of total revenue in 1998 and 1997. Funds From Operations and EBITDA The Company considers Funds From Operations ("FFO") and earnings before interest, taxes, depreciation and amortization ("EBITDA") to be key measures of a REIT's performance 44 51 and should be considered along with, but not as an alternative to, net income and cash flow as a measure of the Company's operating performance and liquidity. The White Paper on Funds From Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from debt restructuring and sales of properties, plus real estate related depreciation and amortization, after comparable adjustments for the Company's portion of these items related to unconsolidated entities and joint ventures. The Company believes that FFO and EBITDA are helpful to investors as a measure of the performance of an equity REIT because, along with cash flow from operating activities, financing activities and investing activities, they provide investors with an indication of the ability of the Company to incur and service debt, to make capital expenditures, to pay dividends and to fund other cash needs. The Company computes FFO in accordance with standards established by NAREIT, except that the Company adds back rent deferred under SAB 101 to derive FFO. This may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition, that interpret the current NAREIT definition differently than the Company or that do not adjust FFO for rent deferred under SAB 101. FFO and EBITDA do not represent cash generated from operating activities as determined by GAAP, and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor does it necessarily reflect the funds available to fund the Company's cash needs, including its ability to make cash distributions. FFO and EBITDA may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions, and other commitments and uncertainties. The following table details the computation of FFO (in thousands):
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ------------------------------ ------------------- FFO: 1997 1998 1999 1999 2000 ---- -------- -------- -------- -------- -------- Net income (loss)............. $ 69,467 $121,339 $135,776 $ 80,408 $(12,372) Deferred rent............... 18,604 Reserve for assets held for sale..................... 63,000 Series B preferred unit distributions............ (8,373) (12,937) (6,468) (6,468) Extraordinary charge from write off of deferred financing fees........... 185 3,075 1,113 1,113 Depreciation................ 50,798 90,835 152,948 74,162 81,480 Depreciation for unconsolidated entities................. 9,365 10,487 9,995 5,017 5,136 -------- -------- -------- -------- -------- FFO........................... $129,815 $217,363 $286,895 $154,232 $149,380 ======== ======== ======== ======== ======== Weighted average units outstanding................. 39,157 58,013 75,251 76,008 67,987
- ------------ (1) Weighted average units outstanding are computed including dilutive options, unvested stock grants, and assuming conversion of Series A Preferred Units to Units. 45 52 The following table details the computation of EBITDA (in thousands):
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ------------------------------ ------------------- EBITDA: 1997 1998 1999 1999 2000 ------- -------- -------- -------- -------- -------- Funds from Operations......... $129,815 $217,363 $286,895 $154,232 $149,380 Interest expense............ 28,792 73,182 125,435 59,172 77,644 Interest expense of unconsolidated subsidiaries............. 5,895 6,521 6,729 3,343 4,787 Amortization of unearned compensation............. 1,111 922 693 375 474 Series B preferred distributions............ 8,373 12,937 6,468 6,468 -------- -------- -------- -------- -------- EBITDA........................ $165,613 $306,361 $432,689 $223,590 $238,753 ======== ======== ======== ======== ========
The Hotels -- Actual Upscale and full service hotels like Embassy Suites, Crowne Plaza, Holiday Inn and Holiday Inn Select, Doubletree and Doubletree Guest Suites, and Sheraton and Sheraton Suites hotels account for approximately 97% of the Company's Percentage Lease revenue. As a result of the renovation and rebranding of hotels, approximately 98% of Percentage Lease revenue for 2000 is expected to be derived from upscale and full service hotels. The Company believes that when analyzing the performance of the hotels, looking at "Comparable Hotels" is the most meaningful. The Company defines "Comparable Hotels" as those not undergoing renovation, redevelopment or rebranding in either of the comparison periods. Major renovations generally have an adverse affect on hotel earnings by taking rooms out of service and disrupting hotel operations. "Non-comparable Hotels" are those undergoing renovation, redevelopment or rebranding during either period. Comparison of The Hotels' Operating Statistics for the Six Months Ended June 30, 2000 and 1999 The following table sets forth historical Occupancy, ADR and RevPAR and the percentage changes therein between the periods presented for the hotels in which the Company had an ownership interest at June 30, 2000. This information is presented regardless of the date of acquisition.
SIX MONTHS ENDED JUNE 30, 2000 ------------------------------- OCCUPANCY ADR REVPAR ---------- -------- ------- DJONT Comparable Hotels............................ 75.4% $126.27 $95.07 Bristol Comparable Hotels.......................... 72.3 91.48 66.14 Total Comparable Hotels(A)....................... 73.8 109.00 80.49 Non-comparable Hotels(B)........................... 71.6 101.04 72.32 Total Hotels excluding hotels held for sale...... 73.2 106.92 78.30 Hotels held for sale(C)............................ 60.1 72.02 43.28 Total Hotels..................................... 72.1% $104.52 $75.41
46 53
SIX MONTHS ENDED JUNE 30, 1999 ------------------------------- OCCUPANCY ADR REVPAR ---------- -------- ------- DJONT Comparable Hotels............................ 73.2% $123.07 $90.04 Bristol Comparable Hotels.......................... 70.0 89.81 62.84 Total Comparable Hotels.......................... 71.5 106.68 76.33 Non-comparable Hotels.............................. 62.1 99.18 61.54 Total Hotels excluding hotels held for sale...... 69.0 104.88 72.39 Hotels held for sale............................... 60.5 72.38 43.76 Total Hotels..................................... 68.3% $102.50 $70.02
CHANGE FROM PRIOR PERIOD 2000 VS. 1999 YEAR TO DATE ---------------------------- OCCUPANCY ADR REVPAR ---------- ----- ------- DJONT Comparable Hotels............................ 2.2 pts 2.4% 5.6% Bristol Comparable Hotels.......................... 2.3 pts 1.9 5.3 Total Comparable Hotels.......................... 2.3 pts 2.2 5.5 Non-comparable Hotels.............................. 9.5 pts 1.9 17.5 Total Hotels excluding hotels held for sale...... 4.2 pts 1.9 8.2 Hotels held for sale............................... (0.4) pts (0.5) (1.1) Total Hotels..................................... 3.8 pts 2.0% 7.7%
- ------------ (A) DJONT Comparable Hotels include 65 hotels and Bristol Comparable Hotels include 56 hotels which were not undergoing renovation, redevelopment, or rebranding in either the 2000 or 1999 periods reported, and exclude hotels held for sale. (B) Non-comparable Hotels include 42 hotels undergoing redevelopment in either the 2000 or 1999 periods reported, and exclude hotels held for sale. (C) Hotels held for sale includes three DJONT leased hotels and 22 Bristol leased hotels, consisting of two Courtyard by Marriott hotels, five Fairfield Inn hotels, six Hampton Inn hotels, eight Holiday-branded hotels, three Doubletree Guest Suites hotels, and one Four Points by Sheraton. For the six months ended June 30, 2000, the Company's Comparable Hotels' RevPAR, excluding hotels held for sale, increased compared to the same period in 1999, by 5.5%. For the same period the Comparable Hotels' ADR and Occupancy increased 2.2% and 2.3 percentage points, respectively. A large portion of the increase in year-to-date 2000 RevPAR came from the second quarter 2000 hotel performance. For the second quarter, the Company's Comparable Hotels' RevPAR, excluding hotels held for sale, increased 8.2%. The ADR and Occupancy for these hotels increased 3.4% and 3.4 percentage points, respectively. The total hotel portfolio RevPAR, excluding hotels held for sale, increased 9.9%. This represents the fourth consecutive quarter that the Company's hotels reported increases in both ADR and Occupancy. 47 54 The DJONT Comparable Hotels are predominately Embassy Suites, Doubletree and Doubletree Guest Suites, and Sheraton hotels. The Bristol Comparable Hotels are predominately Holiday Inn and Crowne Plaza hotels. The following table shows the Comparable Hotel RevPAR changes (excluding hotels held for sale) for the six months ended June 30, 2000, compared to 1999:
REVPAR PERCENTAGE OF TOTAL CHANGE ROOM REVENUE ------ ------------------- Embassy Suites (50 hotels).............................. 6.5% 46.8% Holiday-branded (33 hotels)............................. 7.5 25.2 Crowne Plaza (13 hotels)................................ 6.2 11.9 Doubletree-branded (8 hotels)........................... 1.7 5.2 Sheraton (4 hotels)..................................... 1.4 4.1 Other (13 hotels)....................................... (3.8) 6.8 All Comparable Hotels (121 hotels)...................... 5.5% 100.0%
The Company attributes much of the improvement in RevPAR to the renovation, rebranding and repositioning program in which the Company has spent approximately $465 million in 1998, 1999 and the first six months of 2000. The Company's Hotels outperformed most other hotels in their respective markets during the second quarter and the Company expects this strong performance to continue. The Company's Embassy Suites hotels experienced an increase in occupancy with 50 Comparable Embassy Suites hotels achieving a 6.5% RevPAR improvement for the six months compared to the prior year. These hotels, which constitute nearly 47% of Comparable Hotel room revenues, increased ADR by 3.2% and Occupancy by 2.3 percentage points over the same six month period in 1999. The Company's Comparable Doubletree hotels had a 1.7% RevPAR gain for the six months. The Company believes, in addition to the renovation program, the recent Hilton/Promus merger and the addition of the Hilton HHonors(R) program has had and will continue to have a positive impact on its Embassy Suite and Doubletree portfolios. Bass completed its merger with Bristol Hotels & Resorts at the end of the first quarter of 2000. The Company expects the integration of the Bristol management team with Bass will continue to be beneficial to the development and strengthening of the Crowne Plaza and Holiday brands. The Company's 13 Comparable Crowne Plaza hotels (all of which were renovated and rebranded from Holiday Inn and Harvey hotels), reported increased RevPAR of 6.2% for the six months ended June 30, 2000 compared to the same period in 1999. This increase resulted from an increase of 5.8 percentage points in occupancy, which brought the average occupancy for these hotels up to 74.0% for the six months. In addition to the recent renovations, the Company attributes a portion of this improvement to the change in marketing for the brand, which now supports the marketing of Crowne Plaza with the Inter-Continental(R)brand. The Company's Holiday Inn and Holiday Inn Select hotels continue to outperform their competition. The Company's Holiday-branded hotels increased RevPAR for the six months by 7.5%. The six month increase in RevPAR resulted from a 2.4 percentage point increase in Occupancy and a 3.9% increase in ADR. The Company's 19 Comparable Holiday-branded hotels with greater than 250 rooms (representing 82% of the Company's Holiday-branded revenue) reported an increase in RevPAR of 7.9% for the six months, which came from Occupancy and ADR increases of 2.3 percentage points and 4.7%, respectively. 48 55 Nearly 60% of the Company's Comparable Hotel room revenues in the six months were derived from four states: Texas, California, Florida and Georgia. Changes in Comparable Hotel RevPAR during the six months for these states, excluding hotels held for sale, compared to the same period in 1999, are illustrated in the following table:
REVPAR PERCENTAGE OF TOTAL CHANGE ROOM REVENUE ------ ------------------- Texas (30 hotels)....................................... 2.8% 19.2% California (17 hotels).................................. 13.0 21.3 Florida (12 hotels)..................................... 2.4 12.3 Georgia (9 hotels)...................................... 3.0 6.6
The Comparable Hotels in Texas, which account for approximately 19.2% of FelCor's Comparable Hotel total room revenue, experienced the second consecutive quarter with positive RevPAR growth compared to prior year. The growth in supply from new hotels in most major markets in Texas appears to have slowed and management believes that their recently renovated hotels will continue to effectively compete in their market segments. The Company's 15 comparable hotels located in Dallas, which had been adversely affected by new competition in recent quarters, had RevPAR increases of 3.7% year-to-date. The Company's Non-comparable Hotels (42 hotels) reported an increase in RevPAR of 17.5% year-to-date. These hotels were profoundly affected by the Allerton Crowne Plaza (increased RevPAR by 391% for the first six months of 2000), which was closed for renovation in the third quarter 1998 and partially reopened in the second quarter of 1999. The Non-comparable Hotels, excluding the Allerton, reported increased RevPAR of 12.1% year-to-date. Comparison of the Hotels' Operating Statistics for the Years Ended December 31, 1999 and 1998. The following tables set forth historical Occupancy, ADR and RevPAR at December 31, 1999 and 1998, and the percentage changes therein between the years presented for the hotels in which the Company had an ownership interest at December 31, 1999. This information is presented regardless of the date of acquisition.
1999 ---------------------------- OCCUPANCY ADR REVPAR --------- ------- ------ DJONT Comparable Hotels............................ 73.0% $123.00 $89.79 Bristol Comparable Hotels.......................... 65.7 81.55 53.59 Total Comparable Hotels(A)....................... 69.6 104.61 72.79 DJONT Non-Comparable Hotels........................ 67.9 108.58 73.74 Bristol Non-Comparable Hotels...................... 66.4 89.84 59.64 Total Non-Comparable Hotels(B)................... 66.9 96.64 64.68 Total Hotels..................................... 68.3% $100.72 $68.77
1998 ---------------------------- OCCUPANCY ADR REVPAR --------- ------- ------ DJONT Comparable Hotel............................. 73.0% $121.42 $88.67 Bristol Comparable Hotels.......................... 67.3 80.00 53.86 Total Comparable Hotels.......................... 70.3 102.74 72.27 DJONT Non-comparable Hotels........................ 69.7 106.08 73.96 Bristol Non-comparable Hotels...................... 65.9 83.67 55.14 Total Non-comparable Hotels...................... 67.3 92.02 61.90 Total Hotels..................................... 68.8% $ 97.56 $67.16
49 56
CHANGE FROM PRIOR PERIOD 1999 VS. 1998 ------------------------ OCCUPANCY ADR REVPAR --------- --- ------ DJONT Comparable Hotels................................. 0.0 pts 1.3% 1.3% Bristol Comparable Hotels............................... (1.6) pts 1.9 (0.5) Total Comparable Hotels............................... (0.7) pts 1.8 0.7 DJONT Non-comparable Hotels............................. (1.8) pts 2.4 (0.3) Bristol Non-comparable Hotels........................... 0.5 pts 7.4 8.2 Total Non-comparable Hotels........................... (0.3) pts 5.0 4.5 Total Hotels.......................................... (0.5) pts 3.2% 2.4%
- ------------ (A) DJONT Comparable Hotels includes 55 hotels and Bristol Comparable Hotels includes 49 hotels which were not undergoing renovation, redevelopment, or rebranding in either the 1999 or 1998 periods reported. (B) DJONT Non-comparable Hotels includes 32 hotels and Bristol Non-comparable Hotels includes 52 hotels undergoing redevelopment in either the 1999 or 1998 periods reported. For the twelve months ended December 31, 1999, the Company's Comparable Hotels' RevPAR increased, compared to the same period in 1998, by 0.7%. In the twelve months ended December 31, 1999, the Comparable Hotels' ADR increased 1.8%, but Occupancy fell 0.7 percentage points. In general, the Company is encouraged by the relative firming of room rates in the last half of the year, which appears to be indicative of the absorption of the new rooms introduced in certain markets during the past year. The DJONT Comparable Hotels are predominately Embassy Suites, Doubletree and Doubletree Guest Suites, and Sheraton hotels. The Bristol Comparable Hotels are predominately Holiday Inn and Crowne Plaza hotels. The following table shows the Comparable Hotel RevPAR changes for these five brands for the year ended December 31, 1999, compared to 1998:
REVPAR PERCENTAGE OF TOTAL CHANGE ROOM REVENUE ------ ------------------- Embassy Suites (45 hotels).............................. 1.3% 56.9% Holiday Inn (29 hotels)................................. 1.4 22.5 Sheraton (3 hotels)..................................... 1.4 4.4 Doubletree (5 hotels)................................... 2.5 2.9 Crowne Plaza (2 hotels)................................. (8.9) 2.0
The poor performance of the Comparable Crowne Plaza hotels is primarily the result of one hotel in Jackson, Mississippi, which was converted to a Crowne Plaza in 1997. This hotel suffered both significant competition from a new full service hotel and the relocation of a major employer that had contributed significant business in prior years. The Comparable Embassy Suites and Holiday Inn hotels showed improving RevPAR trends in the last half of 1999, which appear to be continuing into 2000. Nearly 52% of the Company's 1999 Comparable Hotel revenue was derived from four states: Texas, California, Georgia and Florida. Changes in Comparable Hotel RevPAR during 1999 for these states, compared to 1998, are illustrated in the following table:
REVPAR PERCENTAGE OF TOTAL CHANGE ROOM REVENUE ------ ------------------- Texas (25 hotels)...................................... (3.9)% 24.0% California (12 hotels)................................. 3.3 11.5 Georgia (10 hotels).................................... 1.0 9.6 Florida (7 hotels)..................................... 4.6 6.7
The Company's exposure in overbuilt markets, such as Dallas, Texas, had a negative impact on Comparable Hotel trends during 1999, although management expects the rate of new supply 50 57 additions to decline in 2000. During 1999, the Company's Texas hotels, experienced a 3.9% decrease in RevPAR, while the 10 Comparable Hotels in the Dallas market experienced a 5.9% decline in RevPAR. Management is encouraged, although it continues to see an oversupply in the Dallas market, that the situation appears to be improving and supply growth is now expected to begin a gradual decline. In addition, the Company has recently renovated eight of its 18 Dallas-based properties and management is currently projecting positive RevPAR growth for the majority of its hotels in this market during 2000. The Non-comparable Hotel performance was most profoundly affected by the Allerton Crowne Plaza, which was closed for renovation in the third quarter of 1998 and partially reopened in the second quarter of 1999. The Allerton generated an 84.3% increase in its RevPAR for the year ended December 31, 1999, as compared to the same period in 1998. The remainder of the Bristol Non-comparable Hotels also showed improvements in RevPAR, which are attributed to the completion of renovations at many of these hotels. Most of the DJONT Non-comparable Hotels where renovations had been completed also showed strong RevPAR increases for the year, compared to the same period last year. Other factors which management believes will have favorable impacts on future hotel revenues are the recent merger between Hilton Hotels Corporation and Promus Hotel Corporation and the recently completed merger between Bristol and Bass plc. The Hilton/Promus merger, which was completed in November 1999, should provide stability and focus for the Embassy Suites and Doubletree brands. In addition, the Promus brands should benefit from the distribution of the Hilton brands in the United States and worldwide, cross-selling through the larger Hilton/Promus reservation system and the addition of Hilton's Honors frequent traveler and loyalty program to the Company's Embassy Suites and Doubletree hotels. The Bass/Bristol merger, which was completed March 31, 2000, will serve to match the management of the Company's Bass branded hotels with the brand owner, which management expects to be beneficial to the development and strengthening of these brands and should help strengthen the Company's relationship with the brand owner. DJONT - Actual Comparison of the Six Months Ended June 30, 2000 and 1999 Total revenues increased to $448.7 million in the first six months of 2000, from $409.6 million in the first six months of 1999, an increase of 9.5% Total revenues consisted primarily of room and suite revenue of $364.7 million and $334.8 million in the first six months of 2000 and 1999, respectively. The increase in room and suite revenue resulted from a 2.7 percentage point increase in Occupancy combined with a 2.3% increase in ADR and the addition of one hotel to the DJONT portfolio in January of 2000, which contributed $14.4 million in room and suite revenue. DJONT's total expenses decreased as a percentage of total revenues from 101.5% in the six months ended June 30, 1999, to 100.0% in the six months ended June 30, 2000. This is largely due to reductions of Percent Rent as a percentage of total revenue from 41.4% to 39.7%. Net income for DJONT for the six months ended June 30, 2000, was $104,000 compared to a loss of $6.3 million in the same period in 1999. Comparison of the Years Ended December 31, 1999 and 1998 Total revenues increased to $797.6 million in the twelve months ended December 31, 1999, from $749.5 million in the same period of 1998, an increase of 6.4%. Total revenues 51 58 consisted primarily of room and suite revenue of $649.3 million and $618.1 million in the twelve months of 1999 and 1998, respectively. The increase in total revenues is primarily a result of the acquisition of twelve additional hotels in 1998. Room and suite revenues from the these twelve hotels, for the twelve months ended December 31, 1999 over 1998, increased 1.9% or $10.6 million. The room and suite revenue for 73 hotels which were leased for all of 1999 and 1998 increased $11.6 million as a result of an increase in ADR of $1.81, with a slight decrease, Occupancy of 0.1%. The Embassy Suites and Doubletree branded hotels, collectively 74 hotels, should benefit from the recently completed merger between Hilton Hotel Corporation and Promus Hotel corporation (the brand manager for all but two of DJONT's Embassy Suites and Doubletree hotels). Hilton's upscale hotel experience and integration into Hilton's central reservation system, marketing infrastructure and frequent stay program has the potential to increase both incremental occupancy and rate. DJONT's income before Percentage Lease rent decreased as a percentage of total revenues from 38.8% in the twelve months ended December 31, 1998 to 37.9% in the twelve months ended December 31, 1999. For the twelve months ended December 31, 1999, DJONT incurred losses of $4.9 million. This is largely due to increased property operating costs resulting from higher labor costs and related payroll benefits, increased reservation costs, and increased fees related to the former Crowne Sterling hotels. Percentage lease expense remained relatively constant as a percentage of total revenue in 1999 and 1998. Comparison of the Years Ended December 31, 1998 and 1997 Total revenues increased to $749.5 million in 1998 from $534.5 million in 1997, an increase of 40.2%. Total revenues consisted primarily of suite revenue of $618.1 million and $456.6 million in 1998 and 1997, respectively. The increase in total revenues is primarily a result of the increase in the number of hotels leased to 86 hotels at December 31, 1998, from 73 hotels at December 31, 1997. Suite revenues for the 43 hotels which were leased for all of 1998 and 1997 increased 8.0% or $19.3 million. The increase in revenues at these hotels is due primarily to improved average daily room rates of $122.33, for the year ended December 31, 1998, as compared to $114.77 for the year ended December 31, 1997. DJONT recorded a net income of $844,000 in 1998 compared to a net loss of $2.7 million in 1997. This improvement in operating performance is primarily attributed to improved profitability of food and beverage operations for DJONT and a decrease in percentage lease expenses as a percentage of total revenue. Food and beverage profits increased to 1.6% of total revenue in 1998 from 0.3% in 1997, an increase of $10.2 million. This change is attributed to the increased number of hotels leased by DJONT which have a greater emphasis on food and beverage than the traditional Embassy Suites. Food and beverage revenue, as a percentage of total revenue, increased to 10.4% in 1998 compared to 6.5% in 1997. Percentage lease expenses as a percentage of total revenue decreased to 39% from 41%. A portion of this change is attributed to the increase in food and beverage revenues, as a percentage of total revenues, which bear a lower percentage rent than room revenues. 52 59 Renovations, Redevelopments and Rebrandings The Company has historically differentiated itself from many of its competitors by: - the practice of upgrading, renovating and/or redeveloping most of its acquired hotels to enhance their competitive position, and, in certain instances, rebranding them to improve their revenue generating capacity; and - the ongoing program for the maintenance of the Company's upgraded hotel assets, which includes: - the contribution of at least 4% of annual room and suite revenue for the DJONT hotels, and 3% of total annual hotel revenue for the Bristol hotels, for routine capital replacements and improvements; and - ensuring the Lessees' adherence to a maintenance and repair program amounting to approximately 4.5% of annual hotel revenues. Renovation and Redevelopment Program The Company has demonstrated its ability to successfully execute renovations. Its renovation and rebranding of the 18 Crown Sterling Suites hotels, which were acquired during 1996 and 1997, achieved an overall RevPAR increase of 34.1% between 1996 and 1999. During 1998 and 1999, an aggregate of approximately $442 million in capital improvements and other capital expenditures were made to the Company's hotels, with approximately 3% of total hotel room nights being lost due to renovation in 1998 and 2% in 1999. During 2000, the Company currently expects to spend approximately $15 million on the renovation of 28 hotels, approximately $42 million to complete renovations started in 1999 at 28 hotels, and approximately $40 million for other capital expenditures. The Company is currently reviewing the feasibility of undertaking between $4 and $10 million of additional renovations during 2000. The Company currently expects an insignificant number of room nights to be lost during 2000 as a result of renovations. By the end of 2000, the Company will have spent more than $900 million since 1994 on renovations and other capital expenditures to its hotel portfolio, which should limit the need for future renovation expenditures primarily to those necessary to maintain the hotels in their upgraded condition. The largest single renovation project completed during 1999 was the Allerton Crowne Plaza in Chicago, which was partially reopened in July 1999, after having been closed for more than a year. This project has received numerous awards, including Lodging Hospitality magazine's Year's Best Design competition in two categories, Bass Hotels & Resorts 1999 Newcomer of the Year award, and Chicago's Greater North Michigan Avenue Association 1999 Avenue Enhancement award. 53 60 Rebranding In 1998, 1999, and through the first six months of 2000, the Company re-branded 26 hotels as follows:
NEW BRAND PRIOR BRAND LOCATION - --------- ----------- -------- Crowne Plaza.................. Holiday Inn Hartford, Connecticut Crowne Plaza.................. Holiday Inn San Francisco, California Crowne Plaza.................. Hilton Secaucus, New Jersey Crowne Plaza.................. Holiday Inn Houston, Texas Crowne Plaza.................. Holiday Inn Select Greenville, South Carolina Crowne Plaza.................. Holiday Inn Select Miami, Florida Crowne Plaza.................. Holiday Inn Select Philadelphia, Pennsylvania Crowne Plaza.................. Harvey Hotel Atlanta, Georgia Crowne Plaza.................. Harvey Hotel Dallas, Texas Crowne Plaza.................. Harvey Hotel Addison, Texas Crowne Plaza.................. Holiday Inn Select Irvine, California Crowne Plaza.................. Holiday Inn San Jose, California Crowne Plaza.................. Independent Chicago, Illinois Crowne Plaza.................. Holiday Inn Omaha, Nebraska Crowne Plaza Suites........... Bristol Suites Dallas, Texas Doubletree.................... Radisson Wilmington, Delaware Embassy Suites................ Doubletree Guest Suites BWI, Maryland Embassy Suites................ Doubletree Guest Suites Troy, Michigan Embassy Suites................ Doubletree Guest Suites Bloomington, Minnesota Embassy Suites................ Doubletree Guest Suites Dallas, Texas Holiday Inn & Suites.......... Harvey Suites Houston, Texas Independent................... Embassy Suites Beaver Creek, Colorado Sheraton...................... Radisson Dallas, Texas Sheraton Suites............... Doubletree Guest Suites Lexington, Kentucky Sheraton Suites............... Doubletree Guest Suites Ft. Lauderdale, Florida Westin........................ Sheraton Dallas, Texas
Room Additions During 1998, the Company completed construction of an aggregate of 224 suites at its Embassy Suites hotels in Jacksonville (67) and Orlando (North) (67), Florida, and New Orleans (90), Louisiana. In 2000, the Company completed construction on a 90 room addition to its Doubletree hotel in Wilmington, Delaware and started construction on a 90 room addition to its Holiday Inn -- French Quarter hotel in New Orleans, Louisiana, with an estimated cost of $10 million. Capital Reserve It is the Company's policy to contribute a minimum of 4% of room and suite revenue from the DJONT leased hotels and 3% of total hotel revenue from the Bristol leased hotels to a capital reserve account in order to provide funds for necessary ongoing capital replacements and improvements. During 1999, approximately $49.3 million was spent on such replacements and improvements (which is in addition to the $161 million spent under the Renovation and Redevelopment Program described above). During 2000, the Company expects to spend approximately $40 million on replacements and improvements, of which approximately $20.3 million had been spent through June 30, 2000. 54 61 Repairs and Maintenance During the year ended December 31, 1999, approximately $38.5 million and $32.7 million were spent by the Lessees on routine repairs and maintenance at the Hotels leased by DJONT and Bristol, respectively. This represents approximately 4.6% of total hotel revenues. LIQUIDITY AND CAPITAL RESOURCES The Company's principal source of cash to meet its cash requirements, including distributions to unitholders and repayments of indebtedness, is its share of the cash flow from the Percentage Leases. For the six months ended June 30, 2000, net cash flow provided by operating activities, consisting primarily of Percentage Lease revenue, was $138.7 million and Funds From Operations was $149.4 million. The Lessees' obligations under the Percentage Leases are largely unsecured. The Lessees have limited capital resources, and, accordingly, their ability to make lease payments under the Percentage Leases is substantially dependent on the ability of the Lessees to generate sufficient cash flow from the operation of the hotels. DJONT recorded net income of $104,000 for the six months ended June 30, 2000, but had a cumulative shareholders' deficit of $13.0 million, largely as a result of losses in prior years. Consistent with the operating results for the six months ended June 30, 2000, management anticipates revenue growth at the DJONT hotels during 2000, but DJONT may record a small operating loss for the year 2000. On July 21, 2000, FelCor's Independent Directors approved the acquisition of 100% of DJONT Operations, LLC and its subsidiaries effective January 1, 2001 (the effective date for the recently passed REIT Modernization Act). The purchase price is expected to be approximately 417,000 FelCor LP units (valued at $9.3 million based upon the $22.375 closing share price on August 31, 2000). No binding agreements have been entered into for this acquisition. The Company expects the benefits to it from the purchase of DJONT, if completed, will include: (i) a more direct relationship with the hotel and brand managers, (ii) elimination of potential conflicts of interest and (iii) consolidated hotel level financial reporting. There can be no assurance that the Company will successfully complete this transaction. Bristol had entered into an absolute and unconditional guarantee of the obligations of the Bristol Lessees under the Percentage Leases, and is required to maintain a minimum liquid net worth. At June 30, 2000, a portion of this liquid net worth was being satisfied through a letter of credit for the benefit of the Company, in the amount of $9.1 million. On July 27, 2000, the letter of credit was replaced with an absolute and unconditional guarantee not to exceed $20 million, by a wholly owned subsidiary of Bass. The Company currently is negotiating to acquire the Bristol Percentage Leases from Bass by January 1, 2001, but at this date has not entered into any agreements to acquire the Bristol Lessees or their leasehold interests. There can be no assurance that the Company will successfully complete this transaction. The Company has identified 25 non-strategic hotels which it intends to sell. The Company expects gross sale proceeds from these hotels to be approximately $150 million and net proceeds to be approximately $136 million (after deducting estimated transaction costs). The Company anticipates that the sale of these 25 hotels will result in a book loss of approximately $63 million. Accordingly, FelCor's Board of Directors approved the establishment of a $63 million reserve for hotels held for sale, to reflect the difference between book value and the estimated market value of these hotels. In January 2000, FelCor's Board of Directors authorized an increase in its share repurchase program to an aggregate of $300 million. The stock repurchases may, at the discretion of 55 62 FelCor's management, be made from time to time at prevailing prices in the open market or through privately negotiated transactions. FelCor expects to fund the repurchase of stock through redemption of FelCor LP's units, which will be funded from existing credit facilities and proceeds from the sale of assets. From January 2000 through June 30, 2000, FelCor repurchased approximately 3.1 million shares of its outstanding common stock on the open market for approximately $56.7 million and FelCor LP has redeemed a like number of units. The Company may incur indebtedness to make property acquisitions, to purchase shares of its capital stock, or to meet distribution requirements imposed on a REIT under the Internal Revenue Code, to the extent that working capital and cash flow from the Company's investments and asset sales are insufficient for such purposes. Debt at June 30, 2000, and December 31, 1999, consisted of the following (in thousands):
JUNE 30, DECEMBER 31, COLLATERAL INTEREST RATE MATURITY DATE 2000 1999 ---------------- ------------------- ------------- ---------- ------------ Floating Rate Debt: Line of credit.............. (a) LIBOR + 163bp June 2001 $ 285,000 $ 351,000 Senior term loan............ (a) LIBOR + 275bp March 2004 249,000 250,000 Mortgage debt............... 3 hotels LIBOR + 200bp February 2003 62,239 62,553 Other....................... Uncollateralized Up to LIBOR + 200bp Various 11,032 32,282 ---------- ---------- Total floating rate debt................ 607,271 695,835 ---------- ---------- Fixed Rate Debt: Line of credit -- swapped... (a) 7.17-7.56% June 2001 125,000 313,000 Publicly-traded term notes..................... (a) 7.38% October 2004 174,441 174,377 Publicly-traded term notes..................... (a) 7.63% October 2007 124,271 124,221 Mortgage debt............... 15 hotels 7.24% November 2007 141,367 142,542 Senior term loan -- swapped................... (a) 8.56% March 2004 125,000 125,000 Mortgage debt............... 7 hotels 7.54% April 2009 98,354 99,075 Mortgage debt............... 6 hotels 7.55% June 2009 73,946 74,483 Mortgage debt............... 7 hotels 8.73% May 2010 144,865 Mortgage debt............... 8 hotels 8.70% May 2010 185,762 Other....................... 13 hotels 6.96%-7.23% 2000-2005 82,466 85,421 ---------- ---------- Total fixed rate debt................ 1,275,472 1,138,119 ---------- ---------- Total debt............ $1,882,743 $1,833,954 ========== ==========
- ------------ (a) Collateralized by stock and partnership interests in certain subsidiaries of FelCor, which were released upon the completion of the private offering of Old Notes and the application of the net proceeds thereof. The line of credit and the senior term loan contain various affirmative and negative covenants, including limitations on total indebtedness, total secured indebtedness, restricted payments (such as stock repurchases and cash distributions), as well as the obligation to maintain certain minimum tangible net worth and certain minimum interest and debt service coverage ratios. At June 30, 2000, the Company was not in default with respect to any such covenants. The Company's other borrowings contain affirmative and negative covenants that are generally equal to or less restrictive than the line of credit and senior term loan. Most of the mortgage debt is nonrecourse to the Company (with certain exceptions) and contains provisions allowing for the substitution of collateral upon satisfaction of certain conditions. Most of the mortgage debt is prepayable, subject, however, to various prepayment penalties, yield maintenance, or defeasance obligations. 56 63 At June 30, 2000, the Company had $50.8 million of cash and cash equivalents and had utilized $410 million of the $850 million then available under the line of credit. On August 1, 2000, the Company renewed, reduced in size, and extended for two years its line of credit. The new $600 million line of credit matures in August 2003. The effective interest rate ranges from 87.5 basis points to 250 basis points above LIBOR depending on the Company's leverage and corporate rating. The initial spread is 200 basis points. To manage the relative mix of its debt between fixed and variable rate instruments, the Company has entered into interest rate swap agreements with six financial institutions. These interest rate swap agreements modify a portion of the interest characteristics of the Company's outstanding debt under its line of credit and senior term loan without an exchange of the underlying principal amount and effectively convert variable rate debt to a fixed rate. The fixed rates to be paid, the effective fixed rate, and the variable rate to be received by the Company at June 30, 2000, are summarized in the following table:
EFFECTIVE SWAP RATE RECEIVED NOTIONAL SWAP RATE EFFECTIVE (VARIABLE) AT SWAP AMOUNT PAID (FIXED) FIXED RATE 6/30/00 MATURITY - ------------ ------------ ---------- ------------- --------- $ 25 million ..................... 5.5575% 7.1825% 8.2663% July 2001 25 million ..................... 5.5480 7.1730 8.2663 July 2001 75 million ..................... 5.5550 7.1800 8.2663 July 2001 100 million ..................... 5.7955 8.5455 9.3913 July 2003 25 million ..................... 5.8260 8.5760 9.3913 July 2003 - ------------ $250 million ============
The differences to be paid or received by the Company under the terms of the interest rate swap agreements are accrued as interest rates change and recognized as an adjustment to interest expense by the Company, pursuant to the terms of its interest rate agreement, and will have a corresponding effect on its future cash flows. Agreements such as these contain a credit risk in that the counterparties may be unable to meet the terms of the agreement. The Company minimizes that risk by evaluating the creditworthiness of its counterparties, who are limited to major banks and financial institutions, and does not anticipate nonperformance by the counterparties. The Company spent approximately $8.3 million during the quarter on upgrading and renovating its hotels during the three months ended June 30, 2000 and a total of $22.9 million for the year 2000. It had completed renovations at three hotels during the quarter and had 13 additional hotels undergoing renovation at the end of the quarter. Room nights out-of-service, due to renovation, were less than 1% during the quarter. The Company currently plans to spend an additional $35 million on hotel renovations during the remainder of 2000 and expects an insignificant number of room nights to be lost as a result of such renovations. Quantitative and Qualitative Disclosures About Market Risk The Company's primary market risk exposure is to changes in interest rates on its floating rate debt. The Company manages the risk of increasing interest rates on its floating rate debt through the use of interest rate swaps, which effectively convert variable rate debt to a fixed rate, by locking the interest rates paid. The Company had entered into interest rate swap contracts relating to debt of $250 million at June 30, 2000. The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. For debt obligations at June 30, 2000, the table presents scheduled maturities and weighted 57 64 average interest rates, by maturity dates. For interest rate swaps, the table presents notional amounts and weighted average interest rates, by contractual maturity dates. Weighted average variable rates are based on implied forward rates in the yield curve as of June 30, 2000. The Fair Value of the Company's fixed rate debt indicates the estimated principal amount of debt having the same debt service requirements which could have been borrowed at June 30, 2000 at then current market interest rates. The Fair Value of the Company's variable to fixed interest rate swaps indicates the estimated amount that would have been received by the Company had they been sold at June 30, 2000.
EXPECTED MATURITY DATE -------------------------------------------- REMAINDER OF 2000 2001 2002 2003 ------------ -------- ------- -------- (IN THOUSANDS, EXCEPT RATES) LIABILITIES Debt: Fixed rate................. $ 6,656 $ 23,721 $13,040 $ 34,905 Average interest rate.... 8.01% 9.38% 8.19% 8.09% Variable rate.............. $10,712 $411,711 $ 1,785 $ 61,413 Average interest rate.... 8.29% 8.84% 9.92% 9.57% INTEREST RATE DERIVATIVES Interest rate swaps: Variable to fixed.......... $125,000 $125,000 Average pay rate......... 5.55% 5.80% Average receive rate..... 7.21% 7.56% EXPECTED MATURITY DATE ------------------------------- 2004 2005 THEREAFTER TOTAL FAIR VALUE -------- ------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT RATES) LIABILITIES Debt: Fixed rate................. $188,669 $43,090 $715,391 $1,025,472 $913,929 Average interest rate.... 7.44% 8.67% 8.05% Variable rate.............. $371,000 $ 650 $ 857,271 $857,271 Average interest rate.... 10.31% 9.63% INTEREST RATE DERIVATIVES Interest rate swaps: Variable to fixed.......... $ 250,000 $ 6,207 Average pay rate......... Average receive rate.....
Swap contracts, such as those described above, contain a credit risk, in that the counterparties may be unable to fulfill the terms of the agreement. The Company minimizes that risk by evaluating the creditworthiness of its counterparties, who are limited to major banks and financial institutions, and does not anticipate nonperformance by the counterparties. INFLATION Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, limit the Lessees' ability to raise room rates. SEASONALITY The hotels' operations historically have been seasonal in nature, reflecting higher occupancy rates primarily during the first three quarters of each year. This seasonality can be expected to cause fluctuations in the Company's quarterly lease revenue, particularly during the fourth quarter, to the extent that it receives Percentage Rent. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in lease revenue, the Company expects to utilize cash on hand or borrowings under the line of credit to make distributions to its equity holders. 58 65 BUSINESS AND PROPERTIES COMPANY OVERVIEW We are one of the nation's largest hotel REITs, with ownership interests in 188 hotels at August 31, 2000, with nearly 50,000 rooms and suites. We own a 100% interest in 163 hotels with 42,292 rooms and suites, a 90% or greater interest in entities owning seven hotels with 1,745 rooms and suites, a 60% interest in an entity owning two hotels with 983 rooms and a 50% interest in separate entities that own 16 hotels with 4,018 rooms and suites. Our hotels are located in the United States (35 states) and Canada, with a concentration in Texas (41 hotels), California (20 hotels), Florida (18 hotels) and Georgia (15 hotels). We own the largest number of Embassy Suites, Crowne Plaza, Holiday Inn and independently owned Doubletree-branded hotels in the world. We seek to increase operating cash flow through both internal growth and selective acquisitions, while maintaining a flexible and conservative capital structure. In addition to renovating, redeveloping and repositioning our acquired hotels, we may seek to acquire new upscale properties that will benefit from affiliation with one of the premium brands available to us through our strategic brand owner and manager relationships with Hilton, Bass and Starwood. In support of this strategy, on July 28, 1998, we merged Bristol Hotel Company into FelCor, acquiring its 107 primarily full-service hotels. These hotels added more than 28,000 rooms and suites to our portfolio, more than doubling our size. The merger also provided diversification, both geographically and by asset class, by adding hotels in many of our key markets and broadening our portfolio in the full-service, upscale and midscale hotel markets. During 1998, we purchased 16 hotels in addition to those acquired in the merger. During 1999, we sold six of the hotels acquired in the Bristol merger that did not meet our investment criteria and acquired a 50% joint venture interest in one hotel. We recently identified 25 non-strategic hotels which we presently intend to sell. If sold, we expect gross sales proceeds from these hotels should be approximately $150 million and net proceeds should be approximately $136 million (after deducting estimated transaction costs, and the costs of terminating the existing leases and management rights). To date, we have reached an agreement in principle on the cost of terminating the leases on only 12 of these hotels. We anticipate that the sale of these 25 hotels would result in a book loss of approximately $63 million. Accordingly, our Board of Directors approved a $63 million reserve for the hotels held for sale at June 30, 2000, to reflect the difference between our book value and the estimated market value of these hotels. In addition to these hotels, on September 27, 2000, we sold our Embassy Suites hotel, Los Angeles International Airport (North), California, for a gross sale price of approximately $24 million, resulting in a gain on sale of approximately $2.5 million. THE INDUSTRY The United States hotel industry profitability has improved each year since 1992, the longest sustained growth in history. According to PricewaterhouseCoopers LLP's 1999 Lodging Industry Briefing, after a period of extended unprofitability in the late 1980's and early 1990's, during which time the increase in the supply of new hotel rooms significantly outpaced growth in room demand, lodging industry profit increased every year from 1992 through 1999 and is expected to increase again in 2000. The percentage growth in room demand exceeded percentage growth in new room supply from 1992 through 1996. While 1997 and 1998 experienced the highest number of new room starts in the prior 10 years, 1999 showed a decline in new room starts of 8.2% from the 1998 level. In spite of the above-average 59 66 increases in room supply since 1995, according to PricewaterhouseCoopers LLP's September 1997 and May 2000 Hospitality Directions, annual revenue per available room has grown each year from 1995 through 1999 and is expected to continue to grow in 2000. Smith Travel Research, a leading provider of industry data, classifies hotel chains into five distinct categories: Upper Upscale, Upscale, Midscale With Food & Beverage, Midscale Without Food & Beverage, and Economy. We remain focused on properties in the Upper Upscale (including Doubletree Guest Suites, Embassy Suites, Sheraton and Westin hotels), Upscale (including Crowne Plaza, Doubletree Hotels and Homewood Suites), and Midscale With Food & Beverage (including Harvey, Holiday Inn and Holiday Inn Select hotels) categories, from which we derived approximately 97% of our revenues in 1999. Smith Travel Research also categorizes hotels based upon their relative market positions, as measured by ADR, as Luxury, Upscale, Midprice, Economy and Budget. The following table contains information with respect to average occupancy, ADR and RevPAR for our hotels, as well as all Upscale U.S. hotels, Midprice U.S. hotels and U.S. hotels as reported by Smith Travel Research, for the periods indicated.
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED -------------------------------------------- JUNE 30, 1995 1996 1997 1998 1999 2000 ------ ------- ------- ------ ------ ---------- NUMBER OF FELCOR HOTELS.............. 19 43 73 193 188 188 OCCUPANCY: FelCor hotels(1)................... 73.8% 71.6% 73.2% 68.3% 68.3% 72.1% All Upscale U.S. hotels(2)......... 68.5 68.4 67.9 65.9 65.1% 65.0 All Midprice U.S. hotels(3)........ 65.7 65.5 64.9 62.0 61.3% 61.2 All U.S. hotels.................... 65.2 65.1 64.5 63.8 63.3% 63.5 ADR: FelCor hotels(1)................... $95.23 $105.50 $112.47 $96.62 100.72 $104.52 All Upscale U.S. hotels(2)......... 79.27 83.94 88.25 85.33 87.37 90.17 All Midprice U.S. hotels(3)........ 60.42 62.85 67.67 62.15 64.74 67.20 All U.S. hotels.................... 66.67 70.95 75.31 78.15 81.27 84.88 REVPAR: FelCor hotels(1)................... $70.31 $ 75.52 $ 82.37 $66.02 68.77 $ 75.41 All Upscale U.S. hotels(2)......... 54.27 57.40 59.92 56.23 56.88 58.61 All Midprice U.S. hotels(3)........ 39.71 41.16 43.91 38.53 39.69 41.13 All U.S. hotels.................... 43.45 46.21 48.44 49.86 51.44 53.90
- ------------ (1) Information is historical, including periods prior to ownership by FelCor. (2) This category includes hotels in the "upscale price level," defined as hotels with ADRs in the 70th to 85th percentiles in their respective markets. (3) This category includes hotels in the "midprice level," defined as hotels with ADRs in the 40th to 70th percentiles in their respective markets. BUSINESS STRATEGY We seek to increase operating cash flow through active asset management. In addition to actively overseeing the operation of our hotels by our lessees and their managers, we apply our asset management expertise to the renovation, redevelopment and rebranding of hotels, the maintenance of strong strategic relationships with our brand owners and managers and the maintenance of financial flexibility. 60 67 Hotel Renovation, Redevelopment and Rebranding We have historically differentiated ourselves from many of our competitors by: - our practice of upgrading, renovating and/or redeveloping most of our acquired hotels to enhance their competitive position, and, in certain instances, rebranding them to improve their revenue generating capacity; and - our ongoing program for the maintenance of our upgraded hotel assets, which includes: - our contribution of at least 4% of annual room and suite revenue for the DJONT hotels and 3% of total annual hotel revenue for the Bristol hotels for routine capital replacements and improvements; and - our ensuring that the lessees adhere to a maintenance and repair program amounting to approximately 4.5% of annual hotel revenues. We have demonstrated our ability to successfully execute renovations. Our renovation and rebranding of the 18 Crown Sterling Suites hotels, which were acquired during 1996 and 1997, achieved an overall RevPAR increase of 34.1% between 1996 and 1999. During 1998 and 1999, an aggregate of approximately $442 million in capital improvements and other capital expenditures were made to our hotels, with approximately 3% of total hotel room nights being lost in 1998 and 2% in 1999 due to renovations. During 2000, we currently expect to spend approximately $15 million on the renovation of 28 hotels, approximately $42 million to complete renovations started in 1999 at 28 hotels, and approximately $40 million for other capital expenditures. We are currently reviewing the feasibility of undertaking between $4 and $10 million of additional renovations during 2000. We expect an insignificant number of room nights to be lost during 2000 as a result of renovations. By the end of 2000, the Company will have spent more than $900 million since 1994 on renovation and other capital expenditures to its hotel portfolio, which should limit the need for future renovation expenditures primarily to those necessary to maintain the hotels in their upgraded condition. The largest single renovation project completed during 1999 was the Allerton Crowne Plaza in Chicago, which reopened in July 1999, after having been closed for more than a year. This project has received numerous awards, including Lodging Hospitality magazine's Year's Best Design competition in two categories, Bass Hotels & Resorts 1999 Newcomer of the Year award, and Chicago's Greater North Michigan Avenue Association 1999 Avenue Enhancement award. Maintenance of Strong Strategic Relationships We benefit from strategic brand owner and manager relationships with Hilton (Embassy Suites and Doubletree), Bass (Crowne Plaza and Holiday Inn) and Starwood (Sheraton and Westin). - Hilton, which acquired Promus Hotel Corporation in 1999, now has a hotel portfolio of more than 1,800 hotels with more than 300,000 rooms in 50 states and the District of Columbia, and is now the largest operator of full-service, all-suite hotels in the United States. In addition to its Hilton and Conrad International-branded hotels, Hilton now owns the Embassy Suites, Doubletree and Doubletree Guest Suites brands and manages 71 of our hotels. As a result of its acquisition of Promus, Hilton acquired an equity interest in our Company having an aggregate value of approximately $32 million at August 31, 2000, and it became a 50% partner in joint ventures with us in the ownership of 12 hotels and the holder of a 10% equity interest in certain subsidiaries owning six hotels. The relationship with Promus and its Embassy Suites brand provided the foundation for our historical growth and we expect to expand our relationship with Hilton, as the successor to Promus. 61 68 - Bass operates or franchises more than 2,900 hotels worldwide. Among the brands owned by Bass are Crowne Plaza, Holiday Inn, Holiday Inn Select, Holiday Inn Express and Inter-Continental. Bass, which acquired Bristol on March 31, 2000, manages 101 of our hotels. Bass, also owns FelCor common stock and FelCor LP units aggregating approximately 15.5% of our outstanding common stock and units. Bass is one of the largest hotel operating companies in the world. - Starwood is one of the world's largest hotel operating companies. Directly and through subsidiaries, Starwood owns, leases, manages or franchises approximately 700 hotels with more than 217,000 rooms in 70 countries. Our strategic alliance with Starwood, coupled with the purchase of seven Sheraton hotels in 1997, provided us with our initial entry into the upscale, full-service, non-suite hotel market. Starwood manages 11 of our hotels and is a 40% joint venture partner with us in the ownership of two hotels and a 50% joint venture partner with us in the ownership of one hotel. MAINTENANCE OF FINANCIAL FLEXIBILITY We are committed to maintaining substantial financial flexibility. In funding our growth, we have used a broad selection of financing sources to minimize our cost of capital, including public equity, collateralized mortgage-backed securities, public and private debt, and asset divestitures. We believe that our capital structure will continue to be among the most conservative in the hotel REIT industry. We believe our financial flexibility should enable us to purse selective hotel acquisition and expansion opportunities and to take advantage of renovation, redevelopment and rebranding opportunities to help us improve our competitive position. MERGER WITH BRISTOL HOTEL COMPANY Effective July 28, 1998, we merged with Bristol. As a result of the merger, we issued approximately 31 million shares of FelCor common stock to Bristol's shareholders (approximately 46% of FelCor's then outstanding common stock), and FelCor succeeded to Bristol's interests in a net 107 owned or leased hotels. Based upon the closing price of FelCor's common stock on the NYSE on July 27, 1998, the transaction was valued at approximately $1.7 billion, including the assumption of approximately $870 million in debt. As a result of the merger, we established ourself as one of the largest lodging REITs in the nation. The merger added more than 28,000 rooms and suites to our portfolio, more than doubling the size of the portfolio and providing diversification, both geographically and by asset class, by adding hotels in many key markets and broadening the portfolio in the full-service, upscale and midscale hotel markets. Of the 107 acquired Bristol hotels, 87 are either all-suite upscale, upscale full service, or traditional full service hotels. The average Bristol hotel has 266 rooms or suites and more than 8,000 square feet of meeting space. Based upon the closing price of FelCor's common stock on the NYSE on July 27, 1998, the price per room/suite paid for the Bristol hotels was approximately $59,000. Following the effectiveness of the merger, FelCor contributed substantially all of the assets acquired by it in the merger to FelCor LP in exchange for additional units of general partner interest in FelCor LP. In addition, following the merger, FelCor refinanced approximately $496 million of assumed secured indebtedness, constituting approximately 72% of Bristol's total secured debt, with borrowings under its credit facility. Through the merger we established a significant brand owner and manager relationship with Bass plc and its subsidiary, Bass Hotels & Resorts, which acquired approximately 14% of FelCor's then outstanding common stock in the merger. On March 31, 2000 Bass acquired Bristol through a merger. In connection with the efforts of Bass to acquire Bristol, a Bass subsidiary contributed approximately 4.7 million outstanding shares of FelCor common stock to the Operating Partnership in exchange for a like number of units of limited partnership interest. 62 69 This exchange did not effect the Company's FFO or earnings per share, although it resulted in reducing FelCor's percentage ownership in the Operating Partnership from approximately 95% to approximately 88%. It is currently anticipated that Bass will contribute an additional 1 million shares of FelCor common stock to FelCor LP, for a like number of additional units, during September 2000. As a result of the merger, in addition to being the owner of the largest number of Embassy Suites hotels, FelCor also became the owner of the largest number of Bass-branded hotels, including Crowne Plaza and Holiday Inn hotels. The merger also established a strategic relationship with Bristol, which is now a wholly-owned subsidiary of Bass plc following the merger of Bristol and a subsidiary of Bass in March 2000. The Bristol hotels are leased to Bristol pursuant to Percentage Leases. By the end of 2000, we expect to have substantially completed the renovation, redevelopment and rebranding program commenced by Bristol in November 1997, providing for the investment of approximately $400 million in the renovation, redevelopment and/or rebranding of Crowne Plaza and Holiday Inn hotels owned by FelCor and leased to Bristol. Under this program, at June 30, 2000, the redevelopment of 60 hotels had been completed and redevelopment was planned or in process on an additional 14 hotels. Bass operates or franchises more than 2,700 hotels and 450,000 guestrooms in more than 90 countries and territories under the brand names Holiday Inn, Crowne Plaza and Inter-Continental Hotels, among others. HOTELS HELD FOR SALE FelCor has identified 25 non-strategic hotels which it presently intends to sell. If sold, the Company expects gross sales proceeds from these hotels should be approximately $150 million and net proceeds should be approximately $136 million (after deducting estimated transaction costs, and the costs of terminating the existing leases and management rights). These hotels include most of the Company's limited service hotels, a number of its small market Holiday Inn hotels, and all of the Company's Marriott-branded hotels. These hotels represent 8.3% of total rooms owned by the Company, but only 4.2% of total revenues. Management believes the sale of these non-strategic hotels will allow the Company and its brand managers to focus their efforts on the Company's upscale and full service hotels in more strategic markets. The Company anticipates that the sale of these hotels will result in a book loss of approximately $63 million. Accordingly, FelCor's Board of Directors approved a $63 million reserve for the hotels held for sale, to reflect the difference between our book value and estimated market value for these hotels. RECENT DEVELOPMENTS During the first six months of 2000, we: - had revenues of $283 million, after adding back deferred rent of $19 million, as compared to $262 million in the first six months of 1999; - repurchased 3.1 million common shares pursuant to our stock repurchase program, for approximately $56.7 million; - had Funds From Operations (FFO) of $149 million, as compared to $154 million for the same period of 1999; - had EBITDA of $239 million, as compared to EBITDA of $224 million for the same period of 1999; - completed an aggregate of $331 million of long-term fixed rate mortgage financings, the proceeds of which were used to fund repurchases of our stock and to reduce the size of our line of credit; and 63 70 - identified 25 non-strategic hotels to be sold, with estimated aggregate net proceeds of $136 million, and recorded a one-time reserve of $63 million in the second quarter to reflect the difference between our book value and the estimated market value of these hotels. Since June 30, 2000: - we sold our Embassy Suites hotel, Los Angeles International Airport(North), California (215 suites), for a gross sale price of approximately $24 million, resulting in a gain on sale of approximately $2.5 million; - we renewed our line of credit; the line of credit was reduced from $850 million to $600 million and the maturity was extended from July 2001 to August 2003; the effective interest rate ranges from 87.5 basis points to 250 basis points above LIBOR depending on our leverage and corporate rating; and - our independent directors approved the acquisition of 100% of DJONT effective January 1, 2001, for an expected purchase price of approximately 417,000 FelCor LP units; no binding agreements have been entered into for this acquisition, and we cannot assure you that we will successfully complete this transaction. On January 1, 2001, the provisions of the REIT Modernization Act will become effective. These provisions, among other things, will reduce the distribution requirement for REITs from 95% of taxable income to 90% of taxable income. In addition, these provisions will allow REITs, subject to certain limitations, to own (directly or indirectly) up to 100% of the stock of a taxable REIT subsidiary ("TRS") that can engage in businesses previously prohibited to a REIT. In particular, these provisions will permit hotel REITs to own a TRS that can lease hotels from the REIT, rather than requiring the lessee to be a separate, unaffiliated party. Hotels leased to a TRS will still have to be managed, however, by an unaffiliated third party. The TRS provisions are complex and impose several conditions on the use of TRSs, generally to assure that TRSs are subject to an appropriate level of corporate taxation. Further, no more than 20% of a REIT's assets may consist of securities of TRSs, and no more than 25% of a REIT's assets may consist of non-qualifying assets, including securities of TRSs and other taxable subsidiaries. Although the TRS provisions will become effective on January 1, 2001, a taxable subsidiary of FelCor in existence on July 12, 1999, such as Kingston Plantation Development Corp. ("Kingston"), a corporation of which FelCor LP owns 100% of the nonvoting stock, representing 97% of the value of Kingston's outstanding stock, will be grandfathered unless and until (1) it engages in a new line of business or acquires a substantial new asset or (2) FelCor acquires additional stock in the taxable subsidiary. Such existing taxable subsidiaries can be converted into TRSs on a tax-free basis at any time before January 1, 2004. As a result of these provisions, we will be able to form or acquire a TRS to acquire all or a portion of our existing hotel leases and to serve as the lessee for any hotels we acquire after the effective date of the TRS provisions. Any "profit" from leases held by the TRS, after payment of the applicable corporate tax, will be available for distribution to us. As a result of the passage of the REIT Modernization Act, on July 21, 2000, our independent directors approved the acquisition of 100% of DJONT effective January 1, 2001. The purchase price is expected to be approximately 417,000 FelCor LP units (currently valued at $9.3 million based upon the $22.375 closing share price on August 31, 2000). No binding agreements have been entered into for this acquisition. We expect the benefits to us from the purchase of DJONT, if completed, will include: (i) a more direct relationship with the hotel and brand managers, (ii) elimination of potential conflicts of interest and (iii) consolidated hotel level financial reporting. We are currently negotiating with Bass to acquire the Bristol lessee or 64 71 the leases held by it, although at this time we have not entered into a definitive agreement for this acquisition. We cannot assure you that we will successfully complete these transactions. HOTEL BRANDS Embassy Suites Hotels Fifty-nine of our hotels are Embassy Suites hotels operating under franchise licenses from Hilton. Embassy Suites hotels are upscale, full-service, all-suite hotels designed to attract frequent business travelers, leisure travelers and weekend guests. Embassy Suites consistently achieves one of the highest guest satisfaction ratings in the industry. Embassy Suites hotels offer numerous services and amenities, such as: - two-room suites, containing two telephones, a mini-refrigerator, coffee maker, microwave oven, wet bar, and two color televisions; - complimentary, full, cooked-to-order breakfast; - complimentary cocktails during two hours every evening (subject to local laws and regulations) in an atrium environment; - fitness center, indoor heated pool, sauna, whirlpool and steam room; and - guest laundry and valet services. Restaurant, banquet, in-room dining and lounge services are available to guests at customary rates. Embassy Suites hotels are constructed, maintained and operated in accordance with a comprehensive set of building, maintenance, operational, record keeping and reservation system guidelines designed to ensure a uniformly high level of service, appearance and quality. The Embassy Suites system was among the first hotel chains to offer guests an unconditional 100% satisfaction guarantee. Embassy Suites, the predecessor-in-interest to Promus, was organized in 1983, and the first Embassy Suites hotel was opened in Overland Park, Kansas in 1984. Mr. Feldman, Chairman Emeritus of the Company, served as the founding President and Chief Executive Officer of Embassy Suites from 1983 until 1990, and as its Chairman of the Board from 1990 until January 1992. From 30 hotels in 10 states at December 31, 1984, the Embassy Suites chain has grown to over 150 hotels in 35 states. In November 1999, Promus Hotel Corporation and Hilton Hotels Corporation merged, resulting in Hilton becoming one of the world's largest hotel companies. It now franchises and operates the following hotels: - Conrad International; - Doubletree, Doubletree Guest Suites, and Doubletree Club Hotels; - Embassy Suites; - Hampton Inn; - Hampton Inn & Suites; - Hilton; - Hilton Garden Inn; - Harrison Conference Centers; - Homewood Suites by Hilton; and - Red Lion Hotels & Inns. Hilton's hotel portfolio includes more than 1,800 hotels with more than 300,000 rooms in 50 states and the District of Columbia. 65 72 Doubletree and Doubletree Guest Suites Hotels Eleven of our hotels are Doubletree Guest Suites hotels. The Doubletree Guest Suites all-suite hotels comprise one of the largest all-suite hotel chains in the United States, as measured by number of suites and system revenues. The Doubletree Guest Suites all-suite hotels are targeted at business travelers and families who need or desire greater space than that which is typically provided at traditional hotels. Each guest suite has a separate living room and dining/work area, with a color television, refrigerator and wet bar. Three of our hotels are licensed as full-service Doubletree hotels. Traditional full-service Doubletree hotels are targeted at business travelers, group meetings and leisure travelers, and typically include a swimming pool, gift shop, meeting and banquet facilities, at least one restaurant and cocktail lounge, room service, parking facilities and other amenities. Holiday Inn and Holiday Inn Select Hotels Forty-four of our hotels are Holiday Inn hotels and 10 of our hotels are Holiday Inn Select hotels. The Holiday Inn brand is positioned to attract the business and leisure traveler seeking up-to-date products and features, value and friendly service. Holiday Inn hotels typically offer a full-service restaurant and lounge, swimming pool, meeting and banquet facilities, optional fitness center and electronic locks. In-room amenities generally include a hair dryer, coffee maker, iron and ironing board, alarm/clock radio and 25" television. The Holiday Inn name is recognized around the world, with more than 1,500 hotels currently being operated under this brand. The Holiday Inn Select hotels are focused on the business traveler. Each room offers a residential decor with a well-lit work area, including a dataport and voicemail, and in-room coffee makers. Amenities offered at the Holiday Inn Select hotels generally include full business services such as photocopying and telecopying, meeting capabilities for small to mid-size groups, swimming pool, exercise facilities and full-service restaurant and lounge. There are more than 70 Holiday Inn Select hotels operating in the Americas. The Holiday Inn, Holiday Inn Select and Crowne Plaza brands are part of the family of brands owned, operated and franchised by Bass. Bass operates or franchises more than 2,900 hotels worldwide. Crowne Plaza Hotels Eighteen of our hotels are Crowne Plaza and Crowne Plaza Suites hotels. Crowne Plaza hotels offer upscale accommodations for business and leisure travelers looking for a full range of services. Guests receive personalized attention, including welcoming valet and bell staff, concierge service and full health and exercise facilities. Large guest rooms provide a well-lit work area, two telephones with dataport and voicemail, in-room coffee maker, iron, hair dryer, make-up mirror and free newspaper delivered every weekday. Full business services are available to handle guest secretarial requirements. Crowne Plaza hotels also provide attractive and functional meeting areas that are suitable for a variety of occasions, ranging from small private gatherings to banquets and large conferences. There are currently more than 140 Crowne Plaza hotels and over 40,000 guest rooms in major urban centers, gateway cities and resort destinations worldwide. Sheraton Hotels Four of our hotels are Sheraton Suites hotels. Sheraton Suites hotels typically offer two-room suites, each with a wet bar, refrigerator, microwave, coffee maker and two televisions. Restaurant, lounge, swimming pool and fitness center facilities are also typically available to guests. 66 73 Six of our hotels are full-service upscale Sheraton hotels. While each of these hotels offers some suite accommodations, the substantial percentage of the accommodations are non-suite rooms. Sheraton hotels generally offer numerous amenities and facilities, such as multiple restaurants, banquet and meeting space, recreational facilities (including indoor and/or outdoor pools and fitness centers) and business centers. Sheraton hotels, including Sheraton Suites, are part of Starwood Hotels & Resorts, which owns the Sheraton, Westin and other brand names. Starwood owns, leases, manages and/or franchises approximately 700 hotels with over 217,000 rooms in over 70 countries. Other Hotels Thirty-two hotels are operated under other brands, as follows: - Hampton Inn (9 hotels); - Holiday Inn Express (5 hotels); - Fairfield Inn (5 hotels); - Harvey Hotel (4 hotels); - Courtyard by Marriott (2 hotels); - Hilton Suites (1 hotel); - Homewood Suites (1 hotel); - Four Points by Sheraton (1 hotel); - Westin (1 hotel); and - Independents (3 hotels). HOTEL PORTFOLIO The following table sets forth certain descriptive information regarding our hotels at August 31, 2000:
YEAR ACQUIRED NUMBER OF LOCATION FRANCHISE BRAND LESSEE BY THE COMPANY ROOMS/SUITES - -------- ----------------------- ------ -------------- ------------ Birmingham, AL(4).............................. Embassy Suites DJONT 1996 242 Montgomery (East I-85), AL..................... Holiday Inn Bristol 1998 213 Flagstaff, AZ.................................. Embassy Suites DJONT 1995 119 Phoenix (Airport-44th St.), AZ................. Embassy Suites DJONT 1998 229 Phoenix (Camelback), AZ........................ Embassy Suites DJONT 1996 233 Phoenix (Crescent), AZ(4)...................... Sheraton DJONT 1997 342 Scottsdale (Downtown), AZ(1)(7)................ Fairfield Inn Bristol 1998 218 Tempe (ASU), AZ(4)............................. Embassy Suites DJONT 1998 224 Texarkana (I-30), AR(1)........................ Holiday Inn Bristol 1998 210 Anaheim (Disney Area), CA(4)................... Embassy Suites DJONT 1996 222 Burlingame (S.F. Airport So.), CA(1)........... Embassy Suites DJONT 1995 339 Covina (I-10), CA(2)(4)........................ Embassy Suites DJONT 1997 264 Dana Point, CA................................. Doubletree Guest Suites DJONT 1997 198 El Segundo (LAX Airport South), CA(1).......... Embassy Suites DJONT 1996 350 Irvine (Orange County Airport), CA............. Crowne Plaza Bristol 1998 335 Los Angeles (LAX Airport North), CA(6)......... Embassy Suites DJONT 1997 215 Milpitas, CA(4)................................ Embassy Suites DJONT 1996 267 Milpitas (San Jose North), CA.................. Crowne Plaza Bristol 1998 305 Napa, CA(4).................................... Embassy Suites DJONT 1996 205 Oxnard (Mandalay Beach), CA.................... Embassy Suites DJONT 1996 249 Palm Desert, CA(4)............................. Embassy Suites DJONT 1998 198 Pleasanton, CA................................. Crowne Plaza Bristol 1998 244 Santa Barbara, CA(4)........................... Holiday Inn Bristol 1998 160 San Diego (On the Bay), CA(1).................. Holiday Inn Bristol 1998 600 San Francisco (Financial District), CA(1)...... Holiday Inn Bristol 1998 566
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YEAR ACQUIRED NUMBER OF LOCATION FRANCHISE BRAND LESSEE BY THE COMPANY ROOMS/SUITES - -------- ----------------------- ------ -------------- ------------ San Francisco (Fisherman's Wharf), CA(1)....... Holiday Inn Bristol 1998 584 San Francisco (Union Square), CA............... Crowne Plaza Bristol 1998 400 San Rafael (Marin Co.), CA(2)(4)............... Embassy Suites DJONT 1996 235 South San Francisco (S.F. Airport No.), CA(4).. Embassy Suites DJONT 1996 312 Aurora (Denver (SE)), CO....................... Doubletree DJONT 1998 248 Avon (Beaver Creek Resort), CO................. Independent 1996 72 Hartford (Downtown), CT........................ Crowne Plaza Bristol 1998 342 Stamford, CT(1)................................ Holiday Inn Select Bristol 1998 383 Wilmington, DE................................. Doubletree DJONT 1998 244 Boca Raton, FL(7).............................. Doubletree Guest Suites DJONT 1995 182 Boca Raton, FL................................. Embassy Suites DJONT 1996 263 Cocoa Beach (Oceanfront Resort), FL............ Holiday Inn Bristol 1998 500 Deerfield Beach, FL(4)......................... Embassy Suites DJONT 1996 244 Ft. Lauderdale, FL(4).......................... Embassy Suites DJONT 1996 359 Ft. Lauderdale (Cypress Creek), FL(4).......... Sheraton Suites DJONT 1998 253 Jacksonville, FL............................... Embassy Suites DJONT 1994 277 Kissimmee (Nikki Bird), FL(1).................. Holiday Inn Bristol 1998 529 Lake Buena Vista (Walt Disney World), FL(1).... Doubletree Guest Suites DJONT 1997 229 Miami (Airport), FL(1)......................... Crowne Plaza Bristol 1998 304 Miami (Airport), FL(4)......................... Embassy Suites DJONT 1996 314 Orlando (North), FL............................ Embassy Suites DJONT 1994 277 Orlando (South), FL(4)......................... Embassy Suites DJONT 1994 244 Orlando (International Drive Resort), FL....... Holiday Inn Bristol 1998 652 Orlando (Airport), FL.......................... Holiday Inn Select Bristol 1998 288 Tampa (Busch Gardens), FL(7)................... Doubletree Guest Suites DJONT 1995 129 Tampa (Rocky Point), FL........................ Doubletree Guest Suites DJONT 1997 203 Tampa (Near Busch Gardens), FL(1).............. Holiday Inn Bristol 1998 395 Atlanta (Downtown), GA(7)...................... Courtyard by Marriott Bristol 1998 211 Atlanta (Airport), GA.......................... Crowne Plaza Bristol 1998 378 Atlanta (Powers Ferry), GA(4).................. Crowne Plaza Bristol 1998 296 Atlanta (Buckhead), GA(4)...................... Embassy Suites DJONT 1996 317 Atlanta (Airport), GA.......................... Embassy Suites DJONT 1998 233 Atlanta (Perimeter Center), GA(2)(4)........... Embassy Suites DJONT 1997 241 Atlanta (Downtown), GA(7)...................... Fairfield Inn Bristol 1998 242 Marietta, GA(7)................................ Hampton Inn Bristol 1998 140 Atlanta (Airport North), GA(1)(4).............. Holiday Inn Bristol 1998 493 Atlanta (Jonesboro South), GA(4)............... Holiday Inn Bristol 1998 180 Atlanta (Perimeter Dunwoody), GA(4)............ Holiday Inn Select Bristol 1998 250 Atlanta (Airport Gateway), GA.................. Sheraton DJONT 1997 395 Atlanta (Galleria), GA(4)...................... Sheraton Suites DJONT 1997 278 Brunswick, GA.................................. Embassy Suites DJONT 1995 130 Columbus (Airport North), GA(1)................ Holiday Inn Bristol 1998 223 Chicago (Allerton), IL......................... Crowne Plaza Bristol 1998 443 Chicago (Lombard), IL(2)(4).................... Embassy Suites DJONT 1995 262 Chicago (O'Hare), IL(4)........................ Sheraton Suites DJONT 1997 297 Deerfield, IL(4)............................... Embassy Suites DJONT 1996 237 Moline, IL(7).................................. Hampton Inn Bristol 1998 138 Moline (Airport), IL(7)........................ Holiday Inn Bristol 1998 216 Moline (Airport), IL(7)........................ Holiday Inn Express Bristol 1998 111 Indianapolis (North), IN(2)(4)................. Embassy Suites DJONT 1996 222 Davenport, IA(7)............................... Hampton Inn Bristol 1998 132 Davenport, IA(7)............................... Holiday Inn Bristol 1998 287 Colby, KS(7)................................... Holiday Inn Express Bristol 1998 72 Great Bend, KS(7).............................. Holiday Inn Bristol 1998 175 Hays, KS(7).................................... Hampton Inn Bristol 1998 116 Hays, KS(7).................................... Holiday Inn Bristol 1998 190 Overland Park, KS(2)(4)........................ Embassy Suites DJONT 1997 199 Salina, KS(4)(7)............................... Holiday Inn Bristol 1998 192
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YEAR ACQUIRED NUMBER OF LOCATION FRANCHISE BRAND LESSEE BY THE COMPANY ROOMS/SUITES - -------- ----------------------- ------ -------------- ------------ Salina (I-70), KS(7)........................... Holiday Inn Express Bristol 1998 93 Hotel & Suites Lexington, KY.................................. Hilton Suites DJONT 1996 174 Lexington, KY(4)............................... Sheraton Suites DJONT 1998 155 Baton Rouge, LA(4)............................. Embassy Suites DJONT 1996 224 New Orleans, LA(4)............................. Embassy Suites DJONT 1994 372 New Orleans (Chateau LeMoyne), LA(1)(2)(4)..... Holiday Inn 1998 171 New Orleans (French Quarter), LA(1)(4)......... Holiday Inn Bristol 1998 276 Baltimore, MD.................................. Embassy Suites DJONT 1997 251 Boston (Marlborough), MA(4).................... Embassy Suites DJONT 1995 229 Boston (Government Center), MA(1).............. Holiday Inn Select Bristol 1998 303 Leominster, MA(7).............................. Four Points(R) Bristol 1998 187 Troy, MI....................................... Embassy Suites DJONT 1997 251 Bloomington, MN................................ Embassy Suites DJONT 1997 219 Minneapolis (Airport), MN(4)................... Embassy Suites DJONT 1995 311 Minneapolis (Downtown), MN..................... Embassy Suites DJONT 1995 218 St. Paul, MN(3)................................ Embassy Suites DJONT 1995 210 Jackson (Downtown), MS(4)...................... Crowne Plaza Bristol 1998 354 Jackson (Briarwood), MS(4)(7).................. Hampton Inn Bristol 1998 119 Jackson (North), MS(4)......................... Holiday Inn Hotel & Bristol 1998 224 Suites Olive Branch (Whispering Woods Hotel and Conference Center), MS....................... Independent Bristol 1998 179 Kansas City (Country Club Plaza), MO(1)(2)(4).................................. Embassy Suites DJONT 1997 266 Kansas City (Northeast), MO.................... Holiday Inn Bristol 1998 167 St. Louis (Downtown), MO....................... Embassy Suites DJONT 1998 297 St. Louis (Westport), MO(4).................... Holiday Inn Bristol 1998 318 Omaha, NE...................................... Doubletree Guest Suites DJONT 1998 189 Omaha (Central), NE(4)......................... Hampton Inn Bristol 1998 132 Omaha (Southwest), NE.......................... Hampton Inn Bristol 1998 131 Omaha (I-80), NE(4)............................ Holiday Inn Bristol 1998 383 Omaha (Old Mill Northwest), NE................. Crowne Plaza Bristol 1998 213 Omaha (Southwest), NE.......................... Holiday Inn Express Bristol 1998 78 Hotel & Suites Omaha (Southwest), NE.......................... Homewood Suites Bristol 1998 108 Parsippany, NJ(2)(4)........................... Embassy Suites DJONT 1996 274 Piscataway, NJ(4).............................. Embassy Suites DJONT 1996 225 Secaucus, NJ(1)(2)............................. Embassy Suites DJONT 1997 261 Meadowlands, NJ................................ Crowne Plaza Bristol 1998 301 Albuquerque (Mountainview), NM................. Holiday Inn Bristol 1998 360 Syracuse, NY................................... Embassy Suites DJONT 1997 215 Charlotte, NC(2)(4)............................ Embassy Suites DJONT 1996 274 Raleigh/Durham, NC............................. Doubletree Guest Suites DJONT 1997 203 Raleigh, NC(2)(4).............................. Embassy Suites DJONT 1997 225 Cleveland, OH.................................. Embassy Suites DJONT 1995 268 Columbus, OH................................... Doubletree Guest Suites DJONT 1998 194 Dayton, OH(4).................................. Doubletree Guest Suites DJONT 1997 138 Tulsa, OK...................................... Embassy Suites DJONT 1994 240 Philadelphia (Center City), PA(4).............. Crowne Plaza Bristol 1998 445 Philadelphia (Independence Mall), PA(4)........ Holiday Inn Bristol 1998 364 Philadelphia (Society Hill), PA(4)............. Sheraton DJONT 1997 365 Pittsburgh, PA(1)(4)........................... Holiday Inn Select Bristol 1998 251 Charleston (Mills House), SC................... Holiday Inn Bristol 1998 214 Greenville (Roper), SC......................... Crowne Plaza Bristol 1998 208 Myrtle Beach (Kingston Plantation), SC......... Embassy Suites DJONT 1996 255 Knoxville (Central), TN(1)..................... Holiday Inn Bristol 1998 242 Nashville (Airport), TN(7)..................... Doubletree Guest Suites DJONT 1997 138 Nashville, TN.................................. Embassy Suites DJONT 1994 296 Nashville (Opryland/Airport), TN(1)............ Holiday Inn Select Bristol 1998 385
69 76
YEAR ACQUIRED NUMBER OF LOCATION FRANCHISE BRAND LESSEE BY THE COMPANY ROOMS/SUITES - -------- ----------------------- ------ -------------- ------------ Amarillo (I-40), TX(1)......................... Holiday Inn Bristol 1998 247 Austin (Downtown), TX.......................... Doubletree Guest Suites DJONT 1997 189 Austin (Airport North), TX(2)(4)............... Embassy Suites DJONT 1997 261 Austin (Town Lake), TX......................... Holiday Inn Bristol 1998 320 Beaumont (Midtown I-10), TX.................... Holiday Inn Bristol 1998 253 Corpus Christi, TX(4).......................... Embassy Suites DJONT 1995 150 Dallas, TX, Bristol House...................... Independent Bristol 1998 127 Addison (North Dallas), TX(4).................. Crowne Plaza Bristol 1998 429 Dallas (Market Center), TX(4).................. Crowne Plaza Bristol 1998 354 Dallas (Park Central), TX(4)................... Crowne Plaza Suites Bristol 1998 295 Dallas (Campbell Center), TX................... Doubletree DJONT 1998 302 Dallas (DFW Airport South), TX................. Embassy Suites DJONT 1998 305 Dallas (Love Field), TX(4)..................... Embassy Suites DJONT 1995 248 Dallas (Market Center), TX(4).................. Embassy Suites DJONT 1997 244 Dallas (Park Central), TX...................... Embassy Suites DJONT 1994 279 Dallas (Regal Row), TX(7)...................... Fairfield Inn Bristol 1998 204 Dallas (Downtown West End), TX................. Hampton Inn Bristol 1998 311 Dallas, TX(4).................................. Harvey Hotel Bristol 1998 313 Irving (DFW Airport North), TX(4).............. Harvey Hotel Bristol 1998 506 Irving (DFW Airport North), TX(4).............. Harvey Suites Bristol 1998 164 Dallas (Park Central), TX(5)................... Sheraton DJONT 1998 438 Dallas (Park Central), TX(5)................... Westin DJONT 1997 545 Houston (Near the Galleria), TX(7)............. Courtyard by Marriott Bristol 1998 209 Houston (Medical Center), TX(4)................ Crowne Plaza Bristol 1998 297 Houston (Near the Galleria), TX(7)............. Fairfield Inn Bristol 1998 107 Houston (I-10 East), TX(7)..................... Fairfield Inn Bristol 1998 160 Houston (I-10 East), TX(7)..................... Hampton Inn Bristol 1998 90 Houston (Medical Center), TX(1)(4)............. Holiday Inn Hotel & Bristol 1998 285 Suites Houston (International Airport), TX(4)......... Holiday Inn Bristol 1998 401 Houston (I-10 West), TX........................ Holiday Inn Select Bristol 1998 345 Houston (Near Greenway Plaza), TX(4)........... Holiday Inn Select Bristol 1998 355 Midland (Country Villa), TX.................... Holiday Inn Bristol 1998 250 Odessa (Parkway Blvd.), TX..................... Holiday Inn Express Bristol 1998 186 Hotel & Suites Odessa (Centre), TX............................ Holiday Inn Hotel & Bristol 1998 245 Suites Plano, TX(4)................................... Harvey Hotel Bristol 1998 279 Plano, TX...................................... Holiday Inn Bristol 1998 161 San Antonio (Airport), TX(2)(4)................ Embassy Suites DJONT 1997 261 San Antonio (Northwest), TX(2)(4).............. Embassy Suites DJONT 1997 217 San Antonio (Downtown), TX(1).................. Holiday Inn Bristol 1998 315 San Antonio (International Airport), TX........ Holiday Inn Select Bristol 1998 397 Waco (I-35), TX................................ Holiday Inn Bristol 1998 171 Salt Lake City (Airport), UT(1)................ Holiday Inn Bristol 1998 191 Burlington, VT(4).............................. Sheraton DJONT 1997 309 Tysons Corner, VA(2)(4)........................ Sheraton DJONT 1999 437 Cambridge, Canada.............................. Holiday Inn Bristol 1998 139 Kitchener (Waterloo), Canada................... Holiday Inn Bristol 1998 182 Peterborough (Waterfront), Canada.............. Holiday Inn Bristol 1998 155 Sarnia, Canada................................. Holiday Inn Bristol 1998 151 Toronto (Yorkdale), Canada..................... Holiday Inn Bristol 1998 370 Toronto (Airport), Canada...................... Holiday Inn Select Bristol 1998 444
- ------------ (1) Situated on land leased under a long-term ground lease. (2) This hotel is one of 16 hotels owned by unconsolidated entities in which the Company owns a 50% equity interest. (3) Owned subject to a capitalized industrial revenue bond lease that expires in 2011 and permits the Company to purchase the fee interest at expiration for a nominal amount. (4) Encumbered by mortgage debt. 70 77 (5) This hotel is one of two hotels owned by a joint venture in which the Company owns a 60% equity interest. (6) This hotel was sold on September 27, 2000. (7) This hotel is one of the 25 non-strategic hotels which the Company intends to sell. HOTEL OPERATIONS The Six Months Ended June 30, 2000 For the six months ended June 30, 2000, RevPAR of the comparable hotel portfolio (which includes those hotels that were not undergoing major renovations for the period in either the current year or prior year and excludes hotels held for sale) (121 hotels) increased 5.5% over the same period in 1999. Comparable hotel RevPAR changes for the six months by brand are as follows: Embassy Suites (50 hotels).................................. 6.5% Holiday Inn branded hotels (33 hotels)...................... 7.5 Crown Plaza (13 hotels)..................................... 6.2 Doubletree branded hotels (8 hotels)........................ 1.7 Sheraton (4 hotels)......................................... 1.4 Other (13 hotels)........................................... (3.8) All comparable hotels (121 hotels).......................... 5.5%
The Company attributes much of the improvement in RevPAR to the renovation, rebranding and reposition program in which the Company has spent approximately $465 million in 1998, 1999 and the first six months of 2000. The non-comparable hotel portfolio's (42 hotels) RevPAR increased 17.5% over the same period in 1999. Included in the non-comparable hotels is the Allerton Crowne Plaza (increased RevPAR by 236% for the second quarter), which was closed for renovation in the third quarter of 1998 and partially reopened in the second quarter of 1999. The non-comparable hotels, excluding the Allerton, had an increase in RevPAR of 11.6%. The Year Ended December 31, 1999 Our 104 comparable hotels, owned at December 31, 1999, produced a RevPAR increase of 0.7% over 1998. The Company's exposure in overbuilt markets, such as Dallas, Texas, had a negative impact on comparable hotel trends during 1999, although management expects the rate of new supply additions to decline in 2000. During 1999, the Company's Texas hotels, experienced a 3.9% decrease in RevPAR, while the 10 comparable hotels in the Dallas market experienced a 5.9% decline in RevPAR. Management is encouraged, although it continues to see an oversupply in the Dallas market, that the situation appears to be improving and supply growth is now expected to begin a gradual decline. In addition, the Company has recently renovated eight of its 18 Dallas-based properties and management is currently projecting positive RevPAR growth for the majority of its hotels in this market during 2000. The non-comparable hotel portfolio's (84 hotels) RevPAR increased 4.5% over the same period in 1999. The portfolio's performance was most profoundly affected by the Allerton Crowne Plaza, which was closed for renovation in the third quarter 1998 and partially reopened in the second quarter of 1999. The Allerton generated an 84.3% increase in its RevPAR for the year ended December 31, 1999, as compared to the same period in 1998. Many of the remainder of the non-comparable hotels where renovations had been completed also showed improvements in RevPAR, which are attributed to the completion of renovations at these hotels. 71 78 THE PERCENTAGE LEASES Lease Terms Each of the hotels (with two exceptions) is leased pursuant to a Percentage Lease. The terms of each Percentage Lease with DJONT were approved by FelCor's independent directors at the time the lease was executed. The DJONT Percentage Leases The principal terms of the Percentage Leases with DJONT (DJONT Leases) are summarized below, although certain terms vary from hotel to hotel. Term. The DJONT Leases typically have a term of 10 years. Rent. The annual base rent is typically set at approximately 60% of the initial year's anticipated total rent. The percentage rent is calculated in two tiers: a first tier typically equal to 17% of room and suite revenues up to a specified amount (Room and Suite Revenue Breakpoint) and a second tier typically equal to 65% of room and suite revenues above such Room and Suite Revenue Breakpoint. In addition, the DJONT Lessee typically pays us 5% of the food and beverage revenues from each hotel in which the restaurant and bar operations are conducted directly by the DJONT Lessee and 98% of the food and beverage rent revenues from each hotel in which the restaurant and bar operations are subleased by the DJONT Lessee to an unrelated third party. The amount of base rent and of the Room and Suite Revenue Breakpoint in each DJONT Lease formula generally is subject to adjustment, annually, based upon a formula taking into account changes in the Consumer Price Index. The adjustment is calculated at the beginning of each calendar year, for the hotels acquired prior to July of the previous year. The adjustment in any year may not exceed 7%. The Consumer Price Index adjustment for 1996 was 0.74%, for 1997 was 1.42%, for 1998 was 0.50%, for 1999 was 0.55% and for 2000 was 1.05%. Events of Default. If an event of default occurs and continues beyond any curative period, we may terminate the DJONT Lease or any or all other DJONT Leases. Events of default under the DJONT Leases include typical defaults such as failure to pay rent, certain insolvency events and, among others, the following: - the breach by the DJONT Lessee of any term of a DJONT Lease that is not cured within certain specified periods or an event of default under any other DJONT Lease; - if the DJONT Lessee voluntarily discontinues operations of a leased hotel for more than 30 days, except as a result of damage, destruction, or condemnation; or - if the franchise agreement with respect to a leased hotel is terminated by the franchisor as a result of any action or failure to act by the DJONT Lessee or its agents. Termination of Percentage Leases on Disposition of the Hotels. If we enter into an agreement to sell or otherwise transfer a leased hotel, we may terminate the DJONT Lease with respect to such leased hotel upon 90 days' prior written notice upon either (1) paying the DJONT lessee the fair market value of the leasehold interest in the remaining term of the DJONT lease to be terminated or (2) offering to lease a substitute hotel on terms that would create a leasehold interest with a fair market value equal to or exceeding the fair market value of the remaining leasehold interest under the DJONT Lease to be terminated. We must also pay, or reimburse the DJONT lessee, for certain fees and expenses resulting from the termination of the DJONT Lease. 72 79 Maintenance and Modifications. Under the DJONT Leases, we must: - maintain the underground utilities and the structural elements of the improvements, including exterior walls (excluding plate glass) and the roof of each leased hotel; - fund periodic improvements (in addition to maintenance of structural elements) to the buildings and grounds comprising the leased hotels; and - fund the periodic repair, replacement and refurbishment of furniture, fixtures and equipment in the leased hotels, when and as required to meet the requirements of the applicable franchise licenses. We are required to establish and maintain a reserve in an amount equal to 4% of hotel room and suite revenues, on a cumulative basis. Our obligation is not limited to the amount in such reserve. Otherwise, the DJONT lessee must, at its expense, maintain the leased hotels in good order and repair, except for ordinary wear and tear, and make nonstructural repairs, whether foreseen or unforeseen, ordinary or extraordinary, which may be necessary and appropriate to keep the leased hotels in good order and repair. Insurance and Property Taxes. We pay real estate and personal property taxes and property insurance premiums on the leased hotels (except to the extent that personal property associated with the leased hotels is owned by the DJONT lessee). The DJONT lessee pays the cost of all liability insurance on the leased hotels, which includes extended coverage, comprehensive general public liability, workers' compensation and other insurance appropriate and customary for properties similar to the leased hotels. Indemnification. Each DJONT lessee must indemnify us for certain losses relating to the leased hotel, including: - losses related to any accident or injury to person or property at the leased hotels, - certain environmental liability, taxes and assessments (other than real estate and personal property taxes and any income taxes of the Company on income attributable to the leased hotels), - the sale or consumption of alcoholic beverages, or - any breach of the DJONT Leases by the DJONT lessee. Other Lease Covenants. Each DJONT lessee has agreed to maintain a ratio of total debt to consolidated net worth of less than or equal to 50%, exclusive of capitalized leases and debt subordinated in right to repayment to the rent due under the DJONT Leases. In addition, each DJONT lessee has agreed to refrain from paying fees to any of its affiliates. Breach by Company. Upon notice from the DJONT lessee that we have breached the lease, we have 30 days to cure the breach or proceed to cure the breach, which period may be extended in the event of certain specified, unavoidable delays. If we fail to cure our breach, the DJONT lessee may purchase the leased hotel from us for a purchase price equal to the leased hotel's then fair market value. Bristol Master Hotel Agreement We are a party with Bristol to an Amended and Restated Master Hotel Agreement, pursuant to which, among other things, the Bristol lessees are required to use their reasonable best efforts to permit us to continue to qualify as a REIT under the Code. The Bristol lessees are required to maintain a minimum liquid net worth (including not only working capital and other liquid assets, but also income-producing or readily-marketable assets, and any letters of credit or other credit enhancements necessary to meet such requirement) at all times at least 73 80 equal to fifteen percent (15%) of projected annual rent under all of the Bristol leases during each calendar year. If such minimum liquid net worth is not maintained and Bristol fails to cure the deficiency, the leases will be in default, and the Bristol lessees generally will be prohibited from making cash dividends or other distributions or any other payments to affiliates. Under the Master Hotel Agreement, the Bristol hotels are treated as a whole, and the leases are cross-defaulted, for purposes of our remedies upon default. Upon certain material defaults under one or more leases, we may terminate the particular lease(s) in default, or all leases to which the defaulting Bristol lessee is a party, or all (but not less than all) of the Bristol leases. The Bristol Percentage Leases The principal terms of the Percentage Leases with Bristol are summarized below, although certain terms vary from hotel to hotel. Term. The Bristol Leases are for initial terms of five to ten years, with renewal options on the same terms for a total of 15 years. If a Bristol lease has been extended to 15 years, the Bristol lessee may renew the lease for an additional five years at then current market rates. Rent. The Bristol lessees pay a monthly rent equal to the greater of base rent or percentage rent. The percentage rent is based on specified percentages of various revenue streams. Those percentages vary from hotel to hotel within the following ranges: Room and Suite Revenues.... 0% to 10%, up to a revenue breakpoint amount specified for each hotel, then 60% to 75% above such breakpoint. Food & Beverage Revenues... 5% to 25%. Telephone Revenues......... 5% to 10%. Other Revenues............. Varying percentages depending on the nature and source of such revenues.
The base rent and the thresholds for computing percentage rent under the Bristol leases are adjusted annually to reflect changes in the Consumer Price Index. The CPI adjustment for 1999 was 1.6% and for 2000 was 2.2%. The parties to the Bristol leases will renegotiate the rent in the event of any rebranding, substantial renovations (other than those agreed upon prior to the execution of the Bristol leases) or other, future hotel repositioning strategies resulting in significant disruption of the operations of the leased hotels. The Bristol lessees have the right to require us to renegotiate the rent for all the hotels in a particular region if there is an extended, material reduction in midscale hotel occupancy rates in the United States and in such region. If we cannot agree on a reduction in rent, the Bristol lessees may terminate all Bristol leases in the respective region. The Bristol lessee also may require us to renegotiate the rent for a particular hotel if, as a result of certain force majeure events, there is an extended, material decline in the travel or hotel business and a material reduction in the occupancy rate of such hotel and the hotel's competitive set. If we are unable to agree on a change in rent, the Bristol lessee may terminate the lease for such hotel. Termination. We may terminate a Bristol lease for typical defaults such as failure to pay rent, certain insolvency events and the following reasons, among others: - if Bristol fails to satisfy certain performance targets for any one hotel and all other hotels in the aggregate during any three consecutive years based on budgeted room revenues, unless Bristol pays us the difference between the actual rent paid and 80% (or, in certain circumstances, 90%) of the budgeted rent; 74 81 - if there is a change in control of Bristol (defined as the acquisition of more than 50% of Bristol's stock by any person or group not approved by Bristol's board of directors) or the election of a majority of directors not supported by Bristol's board of directors; - if there is any breach by the Bristol lessee of the agreements under the lease that is not cured within certain specified periods; - if Bristol fails to maintain a minimum liquid net worth or to provide other credit support for the obligations of the Bristol lessees under the Bristol leases; - if a franchisor terminates a franchise license as a result of the Bristol lessee's default under the franchise agreement; or - if we sell the hotel to an unaffiliated third party. If we terminate the lease upon the sale of a hotel and Bristol does not continue as a manager or lessee of the hotel (or a substitute hotel offered by the Company), Bristol will be entitled to monthly termination payments during the remainder of the lease term equal to one-twelfth of 60% of the average monthly profit and allocable overhead contribution associated with operating the hotel over the 12 months ending on the termination date. Indemnification. The Bristol lessee will indemnify us for certain losses relating to the hotel, including losses related to any accident or injury to persons or property at the hotel, any breach of the lease by the Bristol lessee and certain environmental and tax liabilities not assumed by us in connection with our acquisition of the Bristol hotels. We will indemnify the Bristol lessee for any breach of the lease by us, for liability for the environmental condition of the hotel at the time the lease commences and for our acts of gross negligence or willful misconduct. Maintenance and Capital Expenditures. The Bristol lessee is responsible for maintaining the leased hotel in good order and repair and for making all repairs that do not constitute capital improvements. The Bristol lessee is generally required to budget and expend an amount equal to at least 4.5% of gross revenues of the hotel for maintenance and repairs (other than capital improvements) during each lease year. The Bristol lessee must supply and maintain the inventory that is necessary to operate the leased hotel. We are responsible for all hotel capital improvements (including those required by applicable law or, with certain exceptions, the respective franchise license) and for maintaining the underground utilities and all hotel improvements, furniture, fixtures and equipment owned by us to the extent such maintenance constitutes capital expenditures in accordance with GAAP or the capital improvements policy agreed to by both us and the Bristol lessee. We must make available an amount equal to at least 3% of the hotel's gross revenues, on a cumulative basis, for budgeted or other approved capital expenditures. Insurance and Property Taxes. We pay all real estate and personal property taxes and property insurance premiums on the leased hotels, other than with respect to the Bristol lessee's personal property. The Bristol lessee pays for all liability insurance on the leased hotels, including extended coverage, comprehensive general public liability, workers' compensation and other insurance appropriate and customary for properties similar to the leased hotels. COMPETITION The hotel industry is highly competitive. Each of our hotels is located in a developed area that includes other hotel properties and competes for guests primarily with other upscale hotels in its immediate vicinity and secondarily with other full service hotel properties in its geographic market. We believe that brand recognition, location, the quality of the hotel and services provided, and price are the principal competitive factors affecting our hotels. 75 82 ENVIRONMENTAL MATTERS We customarily obtain a Phase I environmental audit from independent environmental engineers before acquiring a hotel. The principal purpose of a Phase I audit is to identify indications of potential environmental contamination for which such hotels may be responsible and, secondarily, to assess, to a limited extent, the potential for environmental regulatory compliance liabilities. The Phase I audits of the hotels were designed to meet the requirements of the then current industry standards governing Phase I audits, and consistent with those requirements, none of the audits involved testing of groundwater, soil or air. Accordingly, they do not represent evaluations of conditions at the studied sites that would be revealed only through such testing. In addition, their assessment of environmental regulatory compliance issues was general in scope and was not a detailed determination of the hotels' complete compliance status. Similarly, the audits did not involve comprehensive analysis of potential off-site liability. The Phase I audit reports did not reveal any environmental liability that we believe would have a material adverse effect on our business, assets or results of operations, nor are we aware of any such liability. Nevertheless, it is possible that these reports do not reveal all environmental liabilities or that there are material environmental liabilities of which we are unaware. We believe that the hotels are in compliance, in all material respects, with all federal, state and local ordinances and regulations regarding hazardous or toxic substances and other environmental matters, the violation of which would have a material adverse effect on us. We have not been notified by any governmental authority of any material noncompliance, liability or claim relating to hazardous or toxic substances or other environmental matters in connection with any of its present or former properties. TAX STATUS FelCor elected to be taxed as a REIT under the federal income tax laws, commencing with its initial taxable year ended December 31, 1994. As a REIT, FelCor generally is not subject to federal income taxation, at the corporate level, on its taxable income that is distributed to its shareholders. FelCor may, however, be subject to certain state and local taxes on its income and property. A REIT is subject to a number of organizational and operational requirements, including a requirement that it currently distribute at least 95% (90% beginning in 2001) of its taxable income. In connection with FelCor's election to be taxed as a REIT, FelCor's charter imposes restrictions on the transfer of shares of its stock. FelCor has adopted the calendar year as its taxable year. EMPLOYEES FelCor LP has no employees. Management functions of FelCor LP are performed by FelCor as the sole general partner. Mr. Corcoran entered into an employment agreement with FelCor in 1994 that continues through 2000. None of FelCor's other executive officers has an employment agreement with FelCor. In addition to Mr. Corcoran, FelCor had 48 other full-time employees at August 31, 2000. All persons employed in the day-to-day operation of our hotels are employees of the lessees, or of the management companies engaged by the lessees, to operate such hotels and are not our employees. PERSONNEL AND OFFICE SHARING ARRANGEMENTS The Company shares executive offices with DJONT and FelCor, Inc. (a private company controlled by Messrs. Feldman and Corcoran). Each entity bears an allocated share of the costs thereof, including but not limited to rent, salaries of certain personnel (other than Mr. Corcoran, who is compensated solely by FelCor), office supplies, telephones and depreciation of office furniture, fixtures and equipment. FelCor LP reimburses FelCor for its share of such allocated 76 83 costs. Such allocations of shared costs are subject to the approval of a majority of the independent directors of FelCor. During 1999 and the first six months of 2000, approximately $5.9 million and $3.3 million, respectively (approximately 89.5% of all allocable expenses) were ultimately borne by FelCor LP under this arrangement. LEGAL PROCEEDINGS There is no litigation pending or known to be threatened against us or affecting any of our hotels other than claims arising in the ordinary course of business or which are not considered to be material. Furthermore, most of such claims are substantially covered by insurance. We do not believe that any claims known to us (individually or in the aggregate) will have a material adverse effect on us, without regard to any potential recoveries from insurers or other third parties. 77 84 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The board of directors has eleven members, at least seven of whom are not officers or employees of the Company or the lessees (independent directors). The board of directors is divided into three classes who serve staggered three-year terms with the term of each director expiring at the annual meeting of shareholders held three years after his election. Executive officers of FelCor constitute all of the managers and executive officers of the subsidiary guarantors and serve in such capacities without additional compensation. The directors and executive officers are as follows:
YEAR FIRST TERM NAME POSITION ELECTED CLASS EXPIRES - ---- -------- ------- --------- ------- Donald J. McNamara........ Chairman of the Board 1998 Class II 2002 Thomas J. Corcoran, President, Chief Executive Officer 1994 Class II 2002 Jr. .................... and Director Melinda J. Bush........... Independent Director 2000 Class I 2001 Richard S. Ellwood........ Independent Director 1994 Class III 2000 Richard O. Jacobson....... Independent Director 1994 Class III 2000 Charles A. Ledsinger, Independent Director 1997 Class I 2001 Jr. .................... Robert H. Lutz, Jr. ...... Independent Director 1998 Class I 2001 Charles N. Mathewson...... Independent Director 1994 Class III 2000 Thomas A. McChristy....... Independent Director 1994 Class II 2002 Richard C. North.......... Director 1998 Class II 2002 Michael D. Rose........... Independent Director 1998 Class I 2001 Lawrence D. Robinson...... Senior Vice President, General 1996 -- -- Counsel and Secretary William P. Stadler........ Senior Vice President, Director of 1995 -- -- Corporate Acquisitions Jack Eslick............... Senior Vice President, Director of 1996 -- -- Asset Management June H. McCutchen......... Senior Vice President, Director of 1995 -- -- Design and Construction Larry J. Mundy............ Senior Vice President, Director of 1998 -- -- Administration and Business Initiatives Andrew J. Welch........... Vice President and Treasurer 1998 -- -- Lester C. Johnson......... Vice President and Controller 1995 -- --
Donald J. McNamara (age 47). Mr. McNamara was the Chairman of the Board of Bristol Hotel Company from November 1994 until its merger into FelCor in July 1998. Since the merger, he has served as the Chairman of the Board of FelCor. Mr. McNamara previously served as a director of FelCor from July 1994 until November 1997. He is also the Chairman of The Hampstead Group, a private equity real estate investment company, and is an affiliate of certain partnerships owning, in the aggregate, approximately 14.1% of FelCor's outstanding common stock. Thomas J. Corcoran, Jr. (age 51). Mr. Corcoran is the President and Chief Executive Officer of FelCor and has served in that capacity since its formation in 1994. From 1991 to 1994, Mr. Corcoran held the same positions with the general partner of the partnerships that were merged into FelCor at its formation. From October 1990 to December 1991, he served as the Chairman, President and Chief Executive Officer of Fiesta Foods, Inc., a manufacturer of tortilla chips and taco shells. From 1979 to 1990, Mr. Corcoran held various positions with ShowBiz Pizza Time, Inc. (now CEC Entertainment, Inc.), an operator and franchisor of family entertainment center/pizza restaurants, and with Integra -- A Hotel and Restaurant Company 78 85 (formerly Brock Hotel Corporation). He served as the President and Chief Executive Officer of Integra from 1986 to 1990. Melinda J. Bush (age 60). Mrs. Bush was elected as a director of FelCor in May 2000. From more than five years ago until September 1996, she was Executive Vice President of Reed Elsevier's Reed Travel Group/Hotel & Travel Index, which was engaged in hotel industry marketing and publishing activities on a global basis. Since that time, she has served as the Executive Vice President, Editorial and Publishing Director of Premier Hotels & Resorts, www.premierhotels.com, a division of Advanstar Communications. Mrs. Bush has more than 20 years experience in the hospitality industry, and is also a director and trustee of the American Hotel Foundation. She has honorary degrees from Cornell Hotel School and Johnson & Wales Universities and carries the CHA (Certified Hotel Administrator) designation awarded by the industry to hotel operators and general managers. She was also named Woman of the Year in Travel by the Travel Industry of America and is the recipient of several other industry awards for her achievements in the industry. Richard S. Ellwood (age 69). Mr. Ellwood, a director of FelCor since its formation in 1994, is the founder and President of R.S. Ellwood & Co., Inc., a real estate investment banking firm which was organized in 1987. Prior to 1987, as an investment banker, Mr. Ellwood was elected successively in 1963 a vice president of Morgan Guaranty Trust Company, in 1968 a general partner of White Weld & Co., in 1978 a managing director of Warburg Paribas Becker, Incorporated and in 1984 a managing director and senior banker of Merrill Lynch Capital Markets. Mr. Ellwood has extensive experience in hotel financing. He was a founder of Hotel Investors Trust, a REIT, and served as a trustee from 1970 until its merger with another REIT in 1987. He is currently a director of Apartment Investment and Management Company and Florida East Coast Industries, Inc. Richard O. Jacobson (age 63). Mr. Jacobson has served as a director of FelCor since its formation in 1994 and is the Chairman of the Board of Jacobson Warehouse Company, Inc., a privately held warehouse company with facilities in 17 locations in eight states, which Mr. Jacobson founded 31 years ago. He is also Chairman of the Board of Jacobson Transportation Company, Inc., a truckload common carrier with authority to operate in the United States (48 states) and Canada. Mr. Jacobson is a member of the boards of directors of Atrion Corporation, Firstar Bank Des Moines, N.A., Firstar Bank of Iowa, N.A. and Heartland Express, Inc. Charles A. Ledsinger, Jr. (age 50). Mr. Ledsinger has served as a director of FelCor since November 1997. Mr. Ledsinger became the President and Chief Executive Officer of Choice Hotels International in August 1998. Prior to that time, Mr. Ledsinger served as Senior Vice President and Chief Financial Officer of St. Joe Corporation from May 1997 until his election as President and Chief Operating Officer of that corporation in February 1998. From June 1995 until May 1997, Mr. Ledsinger was Senior Vice President and Chief Financial Officer of Harrah's Entertainment, Inc. For more than three years prior to that, Mr. Ledsinger served as Senior Vice President and Chief Financial Officer of The Promus Companies Incorporated, the former parent of Harrah's Entertainment, Inc. He is also a director of Choice Hotels International, TBC Corporation and Friendly Ice Cream Corporation. He is a member and a past chairman of the Real Estate Financial Advisory Council of the American Hotel and Motel Association. Robert H. Lutz, Jr. (age 51). Mr. Lutz served as a director of Bristol from December 1995 until its merger into FelCor in July 1998, and has served as a director of FelCor since that time. Since 1994, Mr. Lutz has been the Chairman and Chief Executive Officer, and is a member of the executive committee, of Amresco, Inc., a financial services company. From 1991 to 1994, Mr. Lutz served as President and Chief Operating Officer of Balcor/Allegiance Realty Group, a subsidiary of the American Express Company engaged in real estate ownership and management. 79 86 Charles N. Mathewson (age 72). Mr. Mathewson has served as a director of FelCor since its formation in 1994. Additionally, Mr. Mathewson has served, for more than the past five years, in various positions with International Game Technology (IGT), a company engaged in the design and manufacture of microprocessor based gaming products and gaming monitoring systems. Since February 1988, he has served as the Chairman of the Board of IGT. He has served as a director of IGT since December 1985, as President from December 1986 to February 1988, and as Chief Executive Officer from December 1986 until June 1993 and from February 1996 until the present. Mr. Mathewson is also a member of the board of directors of Baron Asset Fund. Thomas A. McChristy (age 74). Mr. McChristy has served as a director of FelCor since its formation in 1994. He was the President of T.A. McChristy Co., Inc., a real estate investment company from 1957 to 1996. Mr. McChristy also served as the president and Chief Operating Officer of Syntech International, Inc., a lottery systems and equipment manufacturing company, from 1986 to 1988 and as its Chief Executive Officer from 1989 to 1992. Richard C. North (age 50). Mr. North served as a director of Bristol from 1997 until its merger into FelCor in July 1998, and has served as a director of FelCor since that time. Mr. North has been the Group Finance Director of Bass plc since 1994. Bass plc is the parent of Bass Hotels & Resorts, Inc., which operates or franchises more than 2,700 hotels in more than 75 countries under various brands, including Crowne Plaza and Holiday Inn. Prior to 1994, Mr. North served as the Group Finance Director of The Burton Group. Michael D. Rose (age 58). Mr. Rose has served as a director of FelCor since July 1998. He served as the Chairman of the Board of Promus from April 1995 through December 1997 and, thereafter, as a director until December 1998. Mr. Rose served as Chairman of the Board of Harrah's Entertainment Inc. from June 1995 until his retirement as of December 31, 1996. He also served as Chairman of the Board of The Promus Companies Incorporated from November 1989 through June 1995 and as Chief Executive Officer of that company from November 1989 to April 1994. Mr. Rose is also a director of Ashland, Inc., First Tennessee National Corporation, General Mills, Inc., Stein Mart, Inc., Resortquest International, Inc. and Darden Restaurants, Inc. Lawrence D. Robinson (age 57). Mr. Robinson has served as the Senior Vice President, General Counsel and Secretary of FelCor since May 1996. From 1972 to 1989, Mr. Robinson was a partner in the Kansas City-based law firm of Stinson, Mag & Fizzell, for which he founded and managed a Dallas, Texas office from 1982 to 1989. From 1989 through April 1996, Mr. Robinson was a partner in the Houston-based law firm of Bracewell & Patterson, L.L.P., where he served as the managing partner of its Dallas office until 1992, as the head of that office's corporate and securities law section and as chairman of its firmwide hospitality group. William P. Stadler (age 46). Mr. Stadler began his employment with FelCor in July 1995 as Vice President, Director of Acquisition and Development. On January 14, 1998, Mr. Stadler was promoted to Senior Vice President, Director of Corporate Acquisitions. Mr. Stadler has more than 20 years of experience in hotel acquisition and development, having served as Vice President Development for Coastal Hotel Group from 1994 until he joined FelCor in 1995, as Vice President-Development for Embassy Suites, Inc. from 1992 to 1994, as Senior Vice President-Development for Landmark Hotels, Inc. from 1989 to 1991 and as Vice President-Development for Marriott Corporation from 1985 to 1989. Jack Eslick (age 49). Mr. Eslick joined FelCor in April 1996 as its Vice President, Director of Asset Management. He was named Senior Vice President, Director of Asset Management in 1998. Mr. Eslick has more than 20 years experience in hotel operations. From April 1991 until he joined FelCor, Mr. Eslick served as Vice President of Operations of Promus, where he had direct responsibility for all operations in a region that grew from 14 hotels to 26 hotels. Prior to 80 87 April 1991, he served in various capacities with Holiday Inns, Inc., including serving as general manager of various hotels and as a Regional Director of Operations. June H. McCutchen (age 44). Ms. McCutchen joined FelCor in October 1995 as Vice President, Director of Design and Construction, and was named Senior Vice President, Director of Design and Construction in 1998. Prior to her engagement by FelCor, she was an Account Executive for Hospitality Restoration & Builders, Inc. From 1992 to 1994 she was Project Manager for American General Hospitality, Inc. where she managed all capital improvement work for more than 35 properties. Prior to 1992, Ms. McCutchen was Project Manager for Hilton Hotels, Inc. from 1987 to 1992, and prior to 1987, she served as design coordinator and purchasing manager for Embassy Suites, Inc. Larry J. Mundy (age 50). Mr. Mundy joined FelCor in January 1998 and is the Senior Vice President, Director of Administration and Business Initiatives. From 1995 until he joined FelCor, he was Vice President of Franchise Development for Motel 6. From 1987 to 1995, he was Vice President of Development in the South/Southeast for Hilton Hotels and prior to 1987 he served as corporate counsel for Residence Inns and Embassy Suites. Andrew J. Welch (age 38). Mr. Welch joined FelCor in July 1998 and is the Company's Vice President and Treasurer. Prior to joining FelCor, Mr. Welch had served as Vice President and Treasurer of Bristol Hotel Company from August 1997. Prior to joining Bristol, Mr. Welch was responsible for originating investment banking and corporate banking business for Bank of America, N.A., from October 1991 to August 1997, Citibank, N.A., from January 1990 to October 1991, and NationsBank, N.A., from May 1984 to January 1990. Lester C. Johnson (age 48). Mr. Johnson joined FelCor in September 1995 as its Vice President and Controller. Prior to joining FelCor, Mr. Johnson held various positions with Integra -- A Hotel and Restaurant Company and Show Biz Pizza Time, Inc. (now CEC Entertainment, Inc.) from 1981 to 1995. He served as the Vice President and Controller of Integra from 1991 to 1995. In addition to the executive officers, Hervey A. Feldman, the founding Chairman of the Board of FelCor, serves as the Chairman Emeritus of FelCor, a position he has held since his retirement from the board of directors in July 1998. In his capacity as Chairman Emeritus, Mr. Feldman is an honorary non-voting member of the board of directors who is entitled to attend meetings of the board, although his presence or absence from a meeting is not considered for purposes of determining a quorum of the board of directors. We expect that Mr. Feldman will be available from time to time to consult with the board of directors and senior management on significant strategic and other corporate matters. Mr. Feldman spent over 25 years in the hotel industry, including serving in various management positions with Embassy Suites, Inc., Brock Hotel Corporation, Holiday Inns, Inc. and Brock Residence Inns, Inc. 81 88 SECURITY OWNERSHIP OF MANAGEMENT The following table shows how much FelCor common stock, Series A preferred stock and Series B preferred stock was beneficially owned on August 31, 2000, by certain executive officers, each director and all directors and those executive officers as a group. Unless otherwise indicated, each person owns directly the shares shown after his name in the following table.
AMOUNT AND AMOUNT AND AMOUNT AND NATURE OF NATURE OF NATURE OF BENEFICIAL BENEFICIAL BENEFICIAL PERCENT OWNERSHIP OF PERCENT OWNERSHIP OF PERCENT NAME OF OWNERSHIP OF OF SERIES A OF SERIES B OF BENEFICIAL OWNER COMMON STOCK CLASS(1) PREFERRED STOCK CLASS(1) PREFERRED STOCK CLASS(1) - ---------------- ------------ -------- --------------- -------- --------------- -------- Melinda J. Bush................. 1,000(2) * 0 * 0 * Thomas J. Corcoran, Jr. ........ 772,379(3) 1.3% 3,000 * 800 * Richard S. Ellwood.............. 14,300(4) * 0 * 0 * Richard O. Jacobson............. 42,058 * 0 * 0 * Charles A. Ledsinger, Jr. ...... 3,975 * 0 * 0 * Robert H. Lutz, Jr. ............ 26,614(5) * 0 * 0 * Charles N. Mathewson............ 1,351,993(6) 2.5% 170,000(15) 2.8% 71,600(15) 1.2% Thomas A. McChristy............. 144,973(7) * 0 * 0 * Donald J. McNamara.............. 9,639,178(8) 17.7% 0 * 0 * Richard C. North................ 0 * 0 * 0 * Michael D. Rose................. 68,425(9) * 0 * 10,000(16) * Jack Eslick..................... 71,268(10) * 0 * 0 * Lawrence D. Robinson............ 138,032(11) * 0 * 1,267(17) * William P. Stadler.............. 68,090(12) * 100 * 0 * June H. McCutchen............... 50,860(13) * 0 * 0 * All executive officers and directors as a group (18 persons)...................... 12,260,524(14) 22.5% 173,100 2.9% 82,067 1.4%
- ------------ * Represents less than 1% of the outstanding shares of such class. (1) Based upon 54,393,790 shares of common stock, 6,030,600 shares of Series A preferred stock and 5,750,000 Depository Shares representing 57,500 shares of Series B preferred stock outstanding as of August 31, 2000. (2) Represents shares owned by her IRA. (3) Includes 294,915 shares that FelCor, Inc. has the right to receive upon redemption of FelCor LP Units. Mr. Corcoran is a 50% shareholder and director of FelCor, Inc. and may be deemed to beneficially own all of the units owned by FelCor, Inc. Also includes (1) an aggregate of 63,600 shares issued pursuant to stock grants (9,000 in February 1995, 9,000 in December 1995, 15,000 in February 1997 and 30,600 in April 2000), which vest over a five-year period from the date of grant at 20% annually and of which 25,200 shares are fully vested, (2) 364,257 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days, (3) 2,325 shares issuable upon conversion of 3,000 shares of Series A preferred stock, (4) 4,285 shares owned by his children, (5) 100 shares owned by his spouse, (6) 500 shares owned by Corcoran Investments, L.L.C., a limited liability company wholly-owned by him, and (7) 1,995 shares owned by his IRA. (4) Includes (1) 3,000 shares held by trusts of which Mr. Ellwood is a beneficiary and trustee and (2) 1,500 shares held by R. S. Ellwood & Co., Inc., of which Mr. Ellwood is the sole shareholder. (5) Includes (1) 15,414 shares issuable pursuant to currently exercisable stock options, and (2) 2,500 shares owned by Mr. Lutz's spouse. (6) Includes 540,009 shares representing Mr. Mathewson's pro rata interest in partnerships having the right to receive common stock upon redemption of FelCor LP units. Also includes 131,784 shares issuable upon conversion of 170,000 shares of Series A preferred stock held by the Charles N. Mathewson Trust. (7) Includes (1) 101,503 shares held by the T. A. McChristy Living Trust, (2) 4,200 shares held by his spouse's trust, (3) 1,800 shares held by his spouse's IRA, and (4) 3,000 shares held by his IRA. (8) Includes 9,630,878 shares held by United/Harvey Investor I, L.P.; United/Harvey Investors II, L.P.; United/ Harvey Investors III, L.P.; United/Harvey Investors IV, L.P.; and United/Harvey Investors V, L.P. ("Partnerships"). Mr. McNamara is the sole shareholder and director of Hampstead Associates, Inc., which is the managing general partner of HH GenPar Partners. HH GenPar Partners is the managing general partner of 82 89 Hampstead GenPar, L.P., which is the general partner of each of the Partnerships. Mr. McNamara disclaims beneficial ownership of the shares held by the Partnerships, except to the extent of his pecuniary interest therein. (9) Includes (1) 21,600 shares owned by a trust of which Mr Rose is the trustee, (2) 43,275 shares owned by a corporation controlled by Mr. Rose, (3) 750 shares owned by Mr. Rose's spouse, and (4) 2,800 shares credited to his account in the FelCor Deferred Compensation Plan. (10) Includes (1) 44,768 shares issuable pursuant to currently exercisable stock options and (2) 25,500 issued pursuant to stock grants which vest over a five-year period from the date of grant at 20% annually and of which 2,000 shares are fully vested. (11) Includes (1) 38,000 shares issued pursuant to stock grants, which shares vest over a five-year period from the date of grant at 20% annually, of which 11,100 shares are fully vested, (2) 95,744 shares issuable pursuant to stock options exercisable within 60 days, (3) 2,288 shares held by his IRA, and (4) 2,000 shares credited to his account in the FelCor Deferred Compensation Plan. (12) Includes (1) 26,000 shares issued pursuant to stock grants, which shares vest over a five-year period from the date of grant at 20% annually, of which 2,500 shares are fully vested, (2) 42,013 shares issuable pursuant to stock options exercisable within 60 days, and (3) 77 shares issuable upon conversion of 100 shares of Series A preferred stock. (13) Includes (1) 23,500 shares issued pursuant to a stock grant which vests over a five-year period from the date of grant at 20% annually, none of which shares are currently vested and (2) 27,360 shares issuable pursuant to stock options exercisable within 60 days. (14) See notes 2 through 11. (15) Represents shares held by the Charles N. Mathewson Trust. (16) Represents shares owned by a corporation controlled by Mr. Rose. (17) Represents shares owned by his IRA. 83 90 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS We leased all but two of the 188 hotels owned at August 31, 2000 directly to, or to subsidiaries of, either DJONT (86 hotels) or Bristol (100 hotels) under Percentage Leases. Hervey A. Feldman and Thomas J. Corcoran, Jr. own all of the voting common equity interests (50% common equity interest) in, and serve as officers and managers of, DJONT. The remaining 50% non-voting common equity interest in DJONT is owned by entities owned by the children of Charles N. Mathewson. Bristol is a subsidiary of Bass plc. Subsidiaries of Bass plc own FelCor common stock and FelCor units aggregating approximately 15.5% of the outstanding common stock and units of the Company. Richard C. North, a director of FelCor, is the Group Finance Director of Bass plc. On July 21, 2000, FelCor's independent directors approved the acquisition of 100% of DJONT effective January 1, 2001. The purchase price is expected to be approximately 417,000 FelCor LP units (currently valued at $9.3 million based upon the $22.375 closing share price on August 31, 2000). No binding agreements have been entered into for this acquisition and we cannot assure you that we will successfully complete this transaction. THE PERCENTAGE LEASES The Percentage Leases generally have initial terms of five to 15 years and provide for the payment by the lessees to the FelCor subsidiary that owns the property a minimum base rent or, if greater, rent measured as a percentage of room or suite revenue and certain other hotel revenues. The lessees are entitled to all profits from the operation of the hotels leased by them, after the payment of rent and the operating, management and certain other expenses of the hotels. During 1999, lease rent earned from DJONT was approximately $256.1 million and lease rent earned from Bristol was approximately $234.8 million. For the six months ended June 30, 2000, lease rent earned from DJONT was approximately $142.7 million and lease rent earned from Bristol was approximately $119.2 million. SHARING OF OFFICES AND EMPLOYEES FelCor shares its executive offices and certain employees with DJONT and another entity controlled by Messrs. Feldman and Corcoran, and each company bears its share of the costs thereof, including an allocated portion of the rent, salaries of certain personnel (other than Mr. Corcoran), office supplies, telephones and depreciation of office furniture, fixtures and equipment. The allocation of shared expenses to FelCor must be approved by a majority of the independent directors of FelCor. During 1999 and the six months ended June 30, 2000, FelCor paid approximately $5.9 million and $3.3 million, respectively (approximately 89.5% of all allocable expenses) under this arrangement. Mr. Corcoran's salary is paid solely by FelCor, and he receives no salary from either of the other entities. Mr. Corcoran is the President, Chief Executive Officer and a director of FelCor and also serves as a director (or manager) and the President of each of such other entities. EMPLOYMENT ARRANGEMENTS We have entered into an employment agreement with Mr. Corcoran that expires on December 31, 2000, and automatically renews for successive one-year terms unless otherwise terminated. Under this agreement, Mr. Corcoran serves as the President and Chief Executive Officer of FelCor. The agreement provides for a salary of not less than $120,000 per year and a comprehensive medical plan for Mr. Corcoran and his dependents. None of the other officers of FelCor has an employment agreement. FelCor has entered into change in control and severance agreements with each of its executive officers and certain other key employees. Each of these agreements expires on December 31, 2000, and automatically renews for successive one-year terms unless otherwise 84 91 terminated. Under the agreements, each covered employee agrees to remain in the employ of FelCor until the earlier of one year following the "potential change in control" or six months following an actual "change in control." "Change in control" is defined to include (1) the acquisition of 35% or more of FelCor's voting stock by any person or group, (2) a change in a majority of the board of directors not approved by existing directors, (3) a merger in which existing shareholders of FelCor would own less than 65% of the surviving corporation's voting stock (but excluding transactions which are the functional equivalent of an asset acquisition by FelCor and in which there is no change in its senior management), and (4) the adoption of a plan for the liquidation, sale or other disposition (excluding leases in the ordinary course of business) of all or substantially all of FelCor's assets. Following a "change in control," if a covered employee's employment is terminated by FelCor other than for disability, retirement, or "cause" (or by the employee for "good reason"), then the employee will be entitled to (1) the immediate vesting of all stock options, awards of restricted stock and other benefits previously awarded or credited to his account and (2) a lump sum severance payment of between 0.5 and 2.99 times the employee's average total annual compensation over the past three years. FelCor will be required to "gross-up" the severance payment to cover excise taxes on the benefits, thereby providing such benefits to the employee on a net basis, after payment of any such excise taxes. 85 92 DESCRIPTION OF CERTAIN INDEBTEDNESS Our debt consists primarily of the Old Notes, the existing 7 3/8% and 7 5/8% senior notes due 2004 and 2007, amounts borrowed under our line of credit, and nonrecourse mortgage debt. As of June 30, 2000, after giving effect to the private offering of the Old Notes and the application of the net proceeds, and share repurchases through August 31, 2000, our total consolidated debt would have been approximately $1.9 billion, including the following: - $400 million under the Old Notes, - $300 million under the existing 7 3/8% and 7 5/8% senior notes, - $406 million under our line of credit, - $789 million under nonrecourse mortgage and lease debt, and - $11 million under other debt. Line of Credit. On August 1, 2000, we entered into an amended and restated credit agreement, pursuant to which we reduced our line of credit to $600 million. The Chase Manhattan Bank serves as administrative agent under the line of credit. The line of credit has a term of three years ending August 1, 2003, provided that the maturity date may be extended to March 31, 2004, subject to certain conditions. The line of credit is guaranteed by certain of our subsidiaries, which are also guarantors of the existing 7 3/8% and 7 5/8% senior notes and the Old Notes, and which will be guarantors of the New Notes. Borrowings under the line of credit bear interest, at our option, - at a base rate ("Base Rate") equal to the higher of the base rate announced from time to time by The Chase Manhattan Bank or 0.5% plus the Federal funds rate, in either case plus an applicable margin of 0% to 1.000%, or - at a Eurodollar rate ("Eurodollar Rate") based upon the 1, 2, 3, 6, 9 or 12-month LIBOR plus an applicable margin of 0.875% to 2.500%. The applicable margin varies depending upon our long-term senior unsecured actual debt rating or leverage ratio. At August 31, 2000, the margin was 0.30% in the case of Base Rate borrowings and 2.00% in the case of Eurodollar Rate borrowings. At August 31, 2000, borrowings outstanding under our line of credit aggregated $410 million and bore interest at a weighted average interest rate of 8.62% per annum. Our line of credit requires FelCor and FelCor LP to comply with certain financial tests and to maintain certain financial ratios. We must maintain: (1) a ratio of Unencumbered NOI to Unsecured Interest Expense for the four most recent quarters of not less than 2.25 to 1.0; (2) a ratio of Adjusted EBITDA to Fixed Charges for the four most recent quarters of not less than 1.75 to 1.0; and (3) Tangible Net Worth of not less than the sum of (a) $1.5 billion plus (b) 50% of the aggregate net proceeds received by us after June 30, 2000 in connection with any offering of stock or stock equivalents. We must ensure that at the end of each fiscal quarter at least 50% of the aggregate Adjusted NOI generated by all hotels during the preceding four fiscal quarters shall be generated by hotels wholly owned or leased by us or our wholly owned subsidiaries; provided that, for hotels owned or leased for less than four fiscal quarters only the Adjusted NOI generated by such hotels since the date of acquisition of such hotel shall be included in calculating such aggregate Adjusted NOI. In addition, we shall not, during each fiscal quarter on a consolidated basis permit (a) Total Indebtedness to exceed 55% of Total Value or (b) Total Secured Indebtedness to exceed 25% of Total Value or (c) Recourse Secured Indebtedness to exceed the lesser of 7.5% of Total Value and $200 million. 86 93 For purposes of the financial covenants in our line of credit, the following terms have the definitions set forth below: "Adjusted EBITDA" means, for any person, EBITDA less the aggregate FF&E Reserves for such period in respect of each hotel owned or leased by such person and its subsidiaries. "Adjusted NOI" means, with respect to any hotel, for any period, the net operating income for such hotel for such period less the FF&E Reserve for such hotel. "EBITDA" means, for any person for any period, the net income (loss) for such period plus (a) the sum of the following amounts: (1) depreciation expense, (2) amortization expense and other non-cash charges, (3) interest expense, (4) income tax expense, (5) extraordinary losses (and other losses on certain asset sales not otherwise included in extraordinary losses determined on a consolidated basis in accordance with GAAP) and (6) minority interests attributable to FelCor LP's partnership units, less (b) the sum of the following amounts: (1) extraordinary gains (and in the case of FelCor and FelCor LP, other gains on certain asset sales not otherwise included in extraordinary gains), (2) the applicable share of net income (loss) of such person's unconsolidated entities and (3) cash payments made with respect to any non-cash charge that was added back to net operating income to determine EBITDA for any prior period; plus (c) such person's pro rata share of EBITDA of such person's unconsolidated entities, but excluding dividends on qualified preferred stock). "FF&E Reserve" means, for any person (or with respect to any hotel) for any period, a reserve equal to 4% of room or suite revenues from any hotel owned by such person for such period plus for any person, such person's pro rata share of any FF&E Reserve for any hotel owned by such person's unconsolidated entities. "Fixed Charges" means, for any person for any period, (a) Gross Interest Expense for such period plus (b) the aggregate amount of scheduled principal payments on the Total Indebtedness of such person (excluding optional prepayments and scheduled principal payments in respect of any such Total Indebtedness which is payable in a single installment at final maturity) required to be made during such period, plus (c) dividends required to be paid by such person (and its consolidated subsidiaries) in connection with preferred stock issued by such person (including such person's pro rata share of dividends required to be paid by such person's unconsolidated entities but excluding dividends on qualified preferred stock). "Gross Interest Expense" means, for any person for any period, the sum of (a) the total interest expense in respect of all Indebtedness (excluding all contingent obligations) of such person and its subsidiaries for such period determined on a consolidated basis in conformity with GAAP, plus capitalized interest of such person and its subsidiaries plus (b) such person's pro rata share of Gross Interest Expense of such person's unconsolidated entities. "Indebtedness" of any person means, without duplication, the principal amount of (1) all indebtedness of such person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured) or for the deferred purchase price of property or services, (2) all obligations of such person evidenced by notes, bonds, debentures or similar instruments, (3) all indebtedness of such person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such person, (4) all capitalized lease obligations of such person, (5) all contingent obligations of such person, (6) all obligations of such person to purchase, redeem, retire, defease or otherwise acquire for value any stock or stock equivalents of such person, valued, in the case of mandatorily redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (7) all Indebtedness referred to in clauses (1), (2), (3), (4), (5) or (6) above secured by any lien upon or in property owned by such person, even 87 94 though such person has not assumed or become liable for the payment of such Indebtedness and (8) all liabilities of such person under Title IV of ERISA. "Recourse Secured Indebtedness" of any person means the sum of the following: (A) all Indebtedness of such person and its subsidiaries determined on a consolidated basis in conformity with GAAP which (x) is secured by a lien and (y) recourse for payment is not limited to the specific assets encumbered by such lien (provided that certain recourse liability that is limited to (1) any subsidiary or unconsolidated entity of FelCor or FelCor LP formed specifically for the limited purpose of owning the assets which secure the Indebtedness which do not exceed 65% of the value of the assets owned by such subsidiary or unconsolidated entity or (2) certain customary exclusions from non-recourse provisions in non-recourse financings of real estate, shall not cause such Indebtedness to be characterized as Recourse Secured Indebtedness), plus (B) such person's pro rata share of Recourse Secured Indebtedness of such person's unconsolidated entities. "Tangible Net Worth" means, with respect to FelCor or FelCor LP at any date, (a) the sum of (1) the total shareholders' equity of FelCor and (2) the book value of all partnership interests in FelCor LP owned by persons other than FelCor; minus (b) the sum of all intangible assets of FelCor, each as shown on the consolidated balance sheet of FelCor as of such date. "Total Indebtedness" of any person means the sum of the following (without duplication): (a) all Indebtedness of such person and its subsidiaries determined on a consolidated basis in accordance with GAAP, plus (b) such person's pro rata share of Indebtedness of such person's unconsolidated entities. "Total Secured Indebtedness" of any person means any Total Indebtedness of such person for which the obligations thereunder are secured by a pledge of or other encumbrance (other than a permitted lien) on any assets of such person or its subsidiaries or unconsolidated entities. "Total Value" means the sum of: (A) for hotels owned or leased (including newly acquired hotels and hotels to be immediately acquired using the proceeds of any loans under our credit facilities) other than hotels described in clause B below, Adjusted NOI on a consolidated basis from such hotels for the preceding four fiscal quarters divided by ten percent; plus (B) for hotels owned or leased (x) for less than four fiscal quarters and for which FelCor or FelCor LP (or any subsidiary or unconsolidated entity) does not have, or is not able to reasonably obtain, trailing four quarter audited financial information or (y) which FelCor or FelCor LP has designated as a refurbishment hotel, in each such case, generally 95% of FelCor's or FelCor LP's investment in such hotel; plus (C) the sum of $15,000,000, being the agreed aggregate sum of FelCor and FelCor LP's investment at cost in certain properties; plus (D) unencumbered cash or cash equivalents held by FelCor or FelCor LP and their subsidiaries (determined on a consolidated basis in accordance with GAAP); plus FelCor's or FelCor LP's pro rata share of unencumbered cash or cash equivalent held by their unconsolidated entities; all as subject to adjustment in certain limited cases. "Unencumbered NOI" means Adjusted NOI from each hotel that is not encumbered in any way, provided, that only FelCor's or FelCor LP's pro rata interest in a hotel owned by a joint venture shall be included in Unencumbered NOI and in no event shall more than 25% of Unencumbered NOI be attributable to unencumbered leased hotels. "Unsecured Interest Expense" means, for any person for any period, the greater of (1) the sum of (a) the total interest expense in respect of all Unsecured Indebtedness of such person (excluding up to $3 million of certain non-cash amortization expense) and its subsidiaries for such period determined on a consolidated basis in conformity with GAAP, plus capitalized interest of such person and its subsidiaries in respect of unsecured Indebtedness, plus (b) such person's pro rata share of Unsecured Interest Expense of such person's unconsoli- 88 95 dated entities and (2) 7.5% of the sum of (a) the average outstanding balance of all unsecured Indebtedness of such person and its subsidiaries for such period determined on a consolidated basis in conformity with GAAP, plus (b) such person's pro rata share of Unsecured Indebtedness of such person's unconsolidated entities for such period. Failure to satisfy any of the financial covenants would constitute an Event of Default, notwithstanding our ability to meet our debt service obligations. An Event of Default also includes without limitation, a cross-default to other indebtedness, bankruptcy and a change of control. In addition to the financial covenants, our line of credit includes certain other affirmative and negative covenants, including: (a) a requirement that substantially all hotels that are leased or owned by FelCor or FelCor LP be (1) leased to an operating lessee pursuant to an operating lease, (2) managed pursuant to a management agreement and (3) operated pursuant to and with the benefit of a license; (b) a restriction on the creation or acquisition of any direct or indirect wholly owned subsidiary, other than certain specified special purpose and other subsidiaries, (1) having assets with a value in excess of 2% of Total Value unless such subsidiary becomes a guarantor under our credit facilities, and (2) having assets with a value less than 2% of Total Value unless the organizational documents of such subsidiary provide for certain limitations on its ability to incur debt; (c) restrictions on the declaration or payment of dividends or other distribution of assets, properties, cash, rights, obligations or securities in respect of any stock or stock equivalents; (d) restrictions on the sale of assets or merger of the Company or its subsidiaries and (e) restrictions on construction of new hotels or investments in budget hotels. Existing Senior Notes. In October 1997, we issued $175,000,000 aggregate principal amount of 7 3/8% senior notes due 2004 and $125,000,000 aggregate principal amount of 7 5/8% senior notes due 2007. The existing senior notes were issued under an indenture containing covenants and other terms and conditions substantially similar to those governing the Old Notes; however, the indenture governing the Old Notes contains additional restrictions upon the redemption of the Notes and the repurchase of capital stock. See "Description of the Notes and Guarantees." Interest Rate Swaps. To manage the relative mix of its debt between fixed and variable rate instruments, the Company has entered into interest rate swap agreements with six financial institutions. These interest rate swap agreements modify a portion of the interest characteristics of the Company's outstanding debt under its line of credit and a term loan that was repaid from the proceeds of the private offering of the Old Notes, without an exchange of the underlying principal amount and effectively convert variable rate debt to a fixed rate. The fixed rates to be paid, the effective fixed rate, and the variable rate to be received by the Company at June 30, 2000, are summarized in the following table:
EFFECTIVE SWAP RATE RECEIVED SWAP RATE EFFECTIVE (VARIABLE) AT SWAP NOTIONAL AMOUNT PAID (FIXED) FIXED RATE 6/30/00 MATURITY - --------------- ------------ ---------- ------------- --------- $ 25 million.................... 5.5575% 7.1825% 8.2663% July 2001 25 million.................... 5.5480 7.1730 8.2663 July 2001 75 million.................... 5.5550 7.1800 8.2663 July 2001 100 million.................... 5.7955 8.5455 9.3913 July 2003 25 million.................... 5.8260 8.5760 9.3913 July 2003 - ------------ $250 million ============
89 96 The differences to be paid or received by the Company under the terms of the interest rate swap agreements are accrued as interest rates change and recognized as an adjustment to interest expense by the Company, pursuant to the terms of its interest rate agreement, and will have a corresponding effect on its future cash flows. Agreements such as these contain a credit risk in that the counterparties may be unable to meet the terms of the agreement. The Company minimizes that risk by evaluating the creditworthiness of its counterparties, who are limited to major banks and financial institutions, and does not anticipate nonperformance by the counterparties. 90 97 DESCRIPTION OF THE NEW NOTES AND GUARANTEES The Old Notes were, and the New Notes will be, issued by FelCor LP under the Indenture dated September 15, 2000 (the "Indenture") among itself, FelCor, the Subsidiary Guarantors and SunTrust Bank, as trustee (the "Trustee"). The terms of the Old Notes and the New Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The New Notes are substantially identical to the terms and provisions of the Old Notes, except for certain transfer restrictions and registration rights relating to the Old Notes. The term "Notes" refers to both the Old Notes and the New Notes. The following description is a summary of the material provisions of the Indenture. It does not restate the Indenture in its entirety. Because this is a summary, we urge you to read the Indenture and the relevant portions of the Trust Indenture Act because they, and not this description, define your rights as holders of the Notes. We have filed copies of the Indenture as an exhibit to the registration statement which includes this prospectus. You can find the definitions of certain terms used in this description under the subheading "Certain Definitions." For purposes of this section only, references to FelCor LP and FelCor do not include their respective subsidiaries. GENERAL The Notes will be in the aggregate principal amount of $400 million and will be unsecured senior obligations of FelCor LP. The Notes will mature on September 15, 2008. The Notes will initially bear yearly interest at 9 1/2% from September 15, 2000 or from the most recent interest payment date to which interest has been paid or provided for, payable semiannually to holders of record at the close of business on the March 1 or the September 1, immediately preceding the interest payment date on March 15 and September 15 of each year, commencing March 15, 2001. Notwithstanding anything to the contrary contained herein, upon the occurrence of, and during the continuance of, a Ratings Downgrade, the Notes will bear yearly interest at the rate set forth in the immediately preceding sentence plus 0.5%. Principal of, premium, if any, and interest on the Notes will be payable, and the Notes may be exchanged or transferred, at the office or agency of FelCor LP in the Borough of Manhattan, the City of New York, which initially will be the corporate trust office of the trustee c/o Harris Trust of New York, Wall Street Plaza, 88 Pine Street, 19th Floor, New York, New York 10005, as agent for the trustee; provided that, at the option of FelCor LP, payment of interest may be made by check mailed to the holders at their addresses as they appear in the security register for the Notes. The Old Notes have been, and the New Notes will be, issued only in fully registered form, without coupons, in denominations of $1,000 of principal amount and any integral multiple. See "-- Book-Entry; Delivery and Form." No service charge will be made for any registration of transfer or exchange of Notes, but FelCor LP may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection with a registration of transfer. Subject to the covenants described below under "Covenants" and applicable law, FelCor LP may issue additional Notes under the Indenture. The Notes and any additional notes subsequently issued under the Indenture will be treated as a single class for all purposes under the Indenture. 91 98 GUARANTEES AND SUBSIDIARY GUARANTORS The Old Notes are, and the New Notes will be, guaranteed on an unsecured senior basis by FelCor and the Subsidiary Guarantors. At present, the Subsidiary Guarantors consist of FelCor/ CSS Hotels, L.L.C., FelCor/LAX Hotels, L.L.C., FelCor Eight Hotels, L.L.C., FelCor/CSS Holdings, L.P., FelCor/St. Paul Holdings, L.P., FelCor/LAX Holdings, L.P., FelCor Hotel Asset Company, L.L.C., FelCor Nevada Holdings L.L.C., FHAC Nevada Holdings, L.L.C., FHAC Texas Holdings, L.P., FelCor Omaha Hotel Company, L.L.C., FelCor Country Villa Hotel, L.L.C., FelCor Moline Hotel, L.L.C., and FelCor Canada Co., each of which is a guarantor with respect to the Line of Credit and the existing 7 3/8% and 7 5/8% senior notes. The guarantees are unconditional regardless of the enforceability of the Notes and the Indenture. FelCor currently conducts no other business and has no significant assets other than its general partner interest and an indirect limited partner interest in FelCor LP. The four Subsidiary Guarantors that are limited partnerships own directly an aggregate of 27 of the hotels and own general partner interests in a partnership that owns directly one additional hotel in which FelCor and FelCor LP have an interest. Four of the Subsidiary Guarantors that are limited liability companies directly own an aggregate of 59 of the hotels and own direct or indirect membership interests in other entities that own an aggregate of 27 of the hotels, including 12 hotels that are owned directly by a limited partnership that is a Subsidiary Guarantor and six hotels that are owned directly by FelCor Canada Co., another Subsidiary Guarantor. None of the remaining five Subsidiary Guarantors directly owns any hotel properties or engages in any business other than the ownership of partnership and membership interests in other entities. FelCor LP and certain of the Subsidiary Guarantors own additional subsidiaries, none of which is material to FelCor LP. Each future Restricted Subsidiary that subsequently guarantees Indebtedness of FelCor LP or FelCor that ranks equally with or subordinate in right of payment to the Notes will be required to execute a Subsidiary Guarantee. See "Limitation on Issuances of Guarantees by Restricted Subsidiaries." OPTIONAL REDEMPTION Optional Redemption. Except as described below, FelCor LP will not have the right to redeem any Notes prior to September 15, 2004. The Notes will be redeemable at the option of FelCor LP, in whole or in part, at any time, and from time to time, on and after September 15, 2004, upon not less than 30 days' nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the 12-month period commencing September 15 of the years indicated below, in each case together with accrued and unpaid interest thereon to the redemption date:
REDEMPTION YEAR PRICE - ---- ---------- 2004................................................... 104.750 2005................................................... 103.167 2006................................................... 101.583 2007 and thereafter.................................... 100.000%
Optional Redemption upon Equity Offerings. At any time, or from time to time, on or prior to September 15, 2003, FelCor LP may, at its option, use the net cash proceeds of one or more Equity Offerings (as defined below) to redeem up to 35% of the principal amount of the Notes issued under the Indenture at a redemption price of 109.5% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of redemption; provided that: (1) at least 65% of the principal amount of Notes issued under the Indenture remains outstanding immediately after such redemption; and 92 99 (2) FelCor LP makes such redemption not more than 90 days after the consummation of any such Equity Offering. "Equity Offering" means a public or private offering of Capital Stock (other than Disqualified Stock) of FelCor or FelCor LP; provided that, the proceeds received by FelCor or FelCor LP directly or indirectly from such offering are not less than $50 million. SELECTION AND NOTICE OF REDEMPTION In the event that FelCor LP chooses to redeem less than all of the Notes, selection of the Notes for redemption will be made by the trustee either: (1) in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed; or, (2) on a pro rata basis, by lot or by such method as the trustee shall deem fair and appropriate. No Notes of a principal amount of $1,000 or less shall be redeemed in part. If a partial redemption is made with the proceeds of an Equity Offering, the trustee will select the Notes only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures) unless such method is otherwise prohibited. Notice of redemption will be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address. Unless FelCor LP defaults in the payment of the redemption price, on and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption. SINKING FUND There will be no sinking fund payments for the Notes. REGISTRATION RIGHTS FelCor LP and FelCor have agreed with the initial purchasers of the Old Notes, for the benefit of the holders, that FelCor LP and FelCor will use their best efforts, at their cost, to file and cause to become effective a registration statement with respect to a registered exchange offer to exchange the Old Notes for an issue of notes that will be senior notes of FelCor LP ("Exchange Notes") with terms identical to the notes tendered, including the guarantee by FelCor and the Subsidiary Guarantors, except that the Exchange Notes will not have legends restricting transfer. When the SEC declares the registration statement relating to the exchange offer effective, FelCor LP will offer the Exchange Notes in return for surrender of the Old Notes. The exchange offer will remain open for at least 20 business days after the date notice of the exchange offer is mailed to the holders. For each Old Note surrendered to FelCor LP under the exchange offer, the holder will receive an Exchange Note of equal principal amount. Interest on each Exchange Note accrues from the last interest payment date on which interest was paid on the Old Notes surrendered or, if no interest has been paid on the Old Notes, from the closing date for the private offering. In the event that applicable interpretations of the SEC staff do not permit FelCor LP and FelCor to effect the exchange offer, or under certain other circumstances, FelCor LP and FelCor will, at their cost, use their best efforts to cause a shelf registration statement with respect to resales of the Notes to become effective and to keep such shelf registration statement effective until the expiration of the time period referred to in Rule 144(k) under the Securities Act, or until an earlier date when all of the Notes have been sold under the shelf registration statement. FelCor LP and FelCor shall, in the event of a shelf registration, provide each holder copies of the prospectus, notify each holder when the shelf registration statement for the Notes has become effective and take other actions that are required to permit 93 100 resales of the Notes. A holder that sells its Notes pursuant to the shelf registration statement generally will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with those sales and will be bound by those provisions of the registration rights agreement that are applicable to that holder, including certain indemnification obligations. Based on an interpretation by the Commission's staff set forth in no-action letters issued to third parties unrelated to the Company, the Company believes that, with the exceptions set forth below, New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by Holders thereof (other than any holder which is an "affiliate" of the Company within the meaning of Rule 405 promulgated under the Securities Act, or a broker-dealer who purchased Old Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the New Notes are acquired in the ordinary course of business of the Holder and the Holder does not have an arrangement or understanding with any person to participate in the distribution of such New Notes. Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes cannot rely on this interpretation by the Commission's staff and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." Broker-dealers who acquired Old Notes directly from us and not as a result of market-making activities or other trading activities may not rely on the staff's interpretations discussed above or participate in the Exchange Offer and must comply with the prospectus delivery requirements of the Securities Act in order to sell the Old Notes. If the exchange offer is not consummated and a shelf registration statement is not declared effective by the SEC on or prior to March 14, 2001, the annual interest rate borne by the Notes will be increased by 0.5% until the exchange offer is consummated or the SEC declares the shelf registration statement effective. If FelCor LP and FelCor effect the exchange offer, FelCor LP and FelCor will be entitled to close the exchange offer 20 business days after its commencement; provided that FelCor LP has accepted all Old Notes validly tendered in accordance with the terms of the exchange offer. Notes not tendered in the exchange offer will bear interest at the rate set forth on the cover page of this prospectus and will be subject to all of the terms and conditions specified in the Indenture and to the transfer restrictions described in "Transfer Restrictions." This description of some of the provisions of the registration rights agreement is a summary only. We urge you to read the registration rights agreement because it defines your rights regarding registration of the Notes. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus is a part. RANKING The Notes will be unsecured senior obligations of FelCor LP, and will rank equally in right of payment with other unsecured Senior Indebtedness of FelCor LP. The Notes will be effectively subordinated to all of our and our consolidated Subsidiaries' secured Indebtedness and to all other Indebtedness of the non-guarantor Subsidiaries. After giving effect to the private offering of the Old Notes and the application of the net proceeds, our secured Indebtedness will include only mortgage and capitalized lease debt. As of June 30, 2000, after giving effect to the private 94 101 offering of the Old Notes and the application of the net proceeds, and share repurchases through August 31, 2000, we and our consolidated Subsidiaries would have had approximately $789 million of mortgage and capitalized lease debt, which is effectively senior to the Notes to the extent of the value of the underlying assets. As of June 30, 2000 our non-guarantor Subsidiaries had no other Indebtedness. CERTAIN DEFINITIONS Set forth below are definitions of certain terms contained in the Indenture that are used in this description. Please refer to the Indenture for the definition of other capitalized terms used in this description that are not defined below. "Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with an Asset Acquisition from such Person by a Restricted Subsidiary and not incurred by such Person in connection with, or in anticipation of, such Person becoming a Restricted Subsidiary or such Asset Acquisition; provided that Indebtedness of such Person that is redeemed, defeased, retired or otherwise repaid at the time of or immediately upon consummation of the transactions by which such Person becomes a Restricted Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness. "Adjusted Consolidated Net Income" means, for any period, the aggregate net income (or loss) of FelCor, FelCor LP and their respective Restricted Subsidiaries for such period determined on a consolidated basis in conformity with GAAP plus the minority interest in FelCor LP, if applicable; provided that the following items shall be excluded in computing Adjusted Consolidated Net Income, without duplication: (1) the net income of any Person, other than FelCor LP, FelCor or a Restricted Subsidiary, except to the extent of the amount of dividends or other distributions actually paid to FelCor LP, FelCor or any of their respective Restricted Subsidiaries by such Person during such period; (2) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary; (3) any after-tax gains or losses attributable to Asset Sales; (4) for so long as the Notes are not rated Investment Grade, any amount paid or accrued as dividends on Preferred Stock of FelCor LP, FelCor or any Restricted Subsidiary owned by Persons other than FelCor or FelCor LP and any of their respective Restricted Subsidiaries; and (5) all extraordinary gains and extraordinary losses. "Adjusted Consolidated Net Tangible Assets" means the total amount of assets of FelCor LP, FelCor and their respective Restricted Subsidiaries (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting from the total amount of assets: (1) all current liabilities of FelCor LP, FelCor and their respective Restricted Subsidiaries, excluding intercompany items, and 95 102 (2) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most recent quarterly or annual consolidated balance sheet of FelCor LP or FelCor and their respective Restricted Subsidiaries, prepared in conformity with GAAP and filed with the SEC or provided to the trustee pursuant to the "SEC Reports and Reports to Holders" covenant. "Adjusted Total Assets" means, for any Person, the sum of: (1) Total Assets for such Person as of the end of the calendar quarter preceding the Transaction Date as set forth on the most recent quarterly or annual consolidated balance sheet of FelCor LP or FelCor and their respective Restricted Subsidiaries, prepared in conformity with GAAP and filed with the SEC or provided to the trustee pursuant to the "SEC Reports and Reports to Holders" covenant, and (2) any increase in Total Assets following the end of such quarter including, without limitation, any increase in Total Assets resulting from the application of the proceeds of any additional Indebtedness. "Affiliate" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Asset Acquisition" means: (1) an investment by FelCor LP or FelCor or any of their respective Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with FelCor LP or FelCor or any of their respective Restricted Subsidiaries; provided that such Person's primary business is related, ancillary, incidental or complementary to the businesses of FelCor LP or FelCor or any of their respective Restricted Subsidiaries on the date of such investment; or (2) an acquisition by FelCor LP or FelCor or any of their respective Restricted Subsidiaries from any other Person that constitutes substantially all of a division or line of business, or one or more hotel properties, of such Person; provided that the property and assets acquired are related, ancillary, incidental or complementary to the businesses of FelCor LP or FelCor or any of their respective Restricted Subsidiaries on the date of such acquisition. "Asset Disposition" means the sale or other disposition by FelCor LP or FelCor or any of their respective Restricted Subsidiaries, other than to FelCor LP, FelCor or another Restricted Subsidiary, of: (1) all or substantially all of the Capital Stock of any Restricted Subsidiary, or (2) all or substantially all of the assets that constitute a division or line of business, or one or more hotel properties, of FelCor LP or FelCor or any of their respective Restricted Subsidiaries. "Asset Sale" means any sale, transfer or other disposition, including by way of merger, consolidation or sale-leaseback transaction, in one transaction or a series of related transactions 96 103 by FelCor LP or FelCor or any of their Restricted Subsidiaries to any Person other than FelCor LP or FelCor or any of their respective Restricted Subsidiaries of: (1) all or any of the Capital Stock of any Restricted Subsidiary other than sales permitted under clause (4) of the "Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries" covenant described below, (2) all or substantially all of the property and assets of an operating unit or business of FelCor LP or FelCor or any of their respective Restricted Subsidiaries, or (3) any other property and assets of FelCor LP or FelCor or any of their respective Restricted Subsidiaries outside the ordinary course of business of FelCor LP or FelCor or such Restricted Subsidiary and, in each case, that is not governed by the provisions of the Indenture applicable to mergers, consolidations and sales of assets of FelCor LP and FelCor; provided that "Asset Sale" shall not include: - sales or other dispositions of inventory, receivables an other current assets, - sales, transfers or other dispositions of assets with a fair market value not in excess of $1 million in any transaction or series of related transactions, or - sales or other dispositions of assets for consideration at least equal to the fair market value of the assets sold or disposed of, to the extent that the consideration received would satisfy the second bullet of clause (1) of the second paragraph of the "Limitation on Asset Sales" covenant. "Average Life" means at any date of determination with respect to any debt security, the quotient obtained by dividing: (1) the sum of the products of: - the number of years from such date of determination to the dates of each successive scheduled principal payment of such debt security, and - the amount of such principal payment, by (2) the sum of all such principal payments. "Capital Stock" means, with respect to any Person, any and all shares, interests, participation or other equivalents (however designated, whether voting or non-voting), including partnership interests, whether general or limited, in the equity of such Person, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all Common Stock, Preferred Stock and Units. "Capitalized Lease" means, as applied to any Person, any lease of any property, whether real, personal or mixed, of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person. "Capitalized Lease Obligations" means the discounted present value of the rental obligations under a Capitalized Lease as reflected on the balance sheet of such Person in accordance with GAAP. "Change of Control" means such time as: (1) a "person" or "group" (as such terms are defined in Sections 13(d) and 14(d)(2) of the Securities and Exchange Act of 1934 (the "Exchange Act")), becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of 97 104 more than 35% of the total voting power of the Voting Stock of FelCor or, other than by FelCor, of FelCor LP on a fully diluted basis; or (2) individuals who on the Closing Date constitute the Board of Directors (together with any new or replacement directors whose election by the Board of Directors or whose nomination by the Board of Directors for election by FelCor's shareholders was approved by a vote of at least a majority of the members of the Board of Directors then still in office who either were members of the Board of Directors on the Closing Date or whose election or nomination for election was so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office. "Closing Date" means September 15, 2000, the date on which the Notes were first issued. "Common Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) that have no preference on liquidation or with respect to distributions over any other class of Capital Stock, including partnership interests, whether general or limited, of such Person's equity, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all series and classes of common stock. "Consolidated EBITDA" means, for any period, Adjusted Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Adjusted Consolidated Net Income: (1) Consolidated Interest Expense, (2) income taxes (other than income taxes (either positive or negative) attributable to extraordinary and non-recurring gains or losses or sales of assets), (3) depreciation expense, (4) amortization expense, and (5) all other non-cash items reducing Adjusted Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be, made), less all non-cash items increasing Adjusted Consolidated Net Income, all as determined on a consolidated basis for FelCor LP, FelCor and their respective Restricted Subsidiaries in conformity with GAAP; provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to: - the amount of the Adjusted Consolidated Net Income attributable to such Restricted Subsidiary multiplied by - the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by FelCor LP or FelCor or any of their respective Restricted Subsidiaries. "Consolidated Interest Expense" means, for any period, without duplication, the aggregate amount of interest expense in respect of Indebtedness during such period, all as determined on a consolidated basis (without taking into account Unrestricted Subsidiaries) in conformity with GAAP including, without limitation: - amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with GAAP; 98 105 - all commissions, discounts and other fees and expenses owed with respect to letters of credit and bankers' acceptance financing; - the net costs associated with Interest Rate Agreements and Indebtedness that is Guaranteed or secured by assets of FelCor LP, FelCor or any of their respective Restricted Subsidiaries; and - all but the principal component of rentals in respect of capitalized lease obligations paid, accrued or scheduled to be paid or to be accrued by FelCor LP, FelCor and their respective Restricted Subsidiaries; excluding (A) the amount of such interest expense of any Restricted Subsidiary if the net income of such Restricted Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income pursuant to clause (2) of the definition thereof (but only in the same proportion as the net income of such Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated Net Income pursuant to clause (2) of the definition thereof) and (B) any premiums, fees and expenses (and any amortization thereof) payable in connection with the offering of the Notes or paid in connection with any other Indebtedness outstanding on June 30, 2000, all as determined on a consolidated basis (without taking into account Unrestricted Subsidiaries) in conformity with GAAP. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Disqualified Stock" means any class or series of Capital Stock of any Person that by its terms or otherwise is: (1) required to be redeemed prior to the Stated Maturity of the Notes, (2) redeemable at the option of the holder of such class or series of Capital Stock, other than Units, at any time prior to the Stated Maturity of the Notes, or (3) convertible into or exchangeable for Capital Stock referred to in clause (1) or (2) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in "Limitation on Asset Sales" and "Repurchase of Notes upon a Change of Control" covenants described below and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to FelCor LP's repurchase of the Notes as are required to be repurchased pursuant to the "Limitation on Asset Sales" and "Repurchase of Notes upon a Change of Control" covenants described below. "DJONT" means DJONT Operations, L.L.C., a Delaware limited liability company. "Fair market value" means the price that would be paid in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution. 99 106 "Funds From Operations" for any period means the consolidated net income of FelCor LP, FelCor and their respective Restricted Subsidiaries for such period in conformity with GAAP excluding gains or losses from debt restructurings which would be extraordinary items in accordance with GAAP and sales of depreciable operating property, plus depreciation of real property (including furniture and equipment) and after adjustments for unconsolidated partnerships and joint ventures plus the minority interest in FelCor LP, if applicable; provided that for purposes of the payment of any dividend or distribution by FelCor LP or FelCor, "Funds From Operations" shall be equal to $80 million plus the amount thereof computed for the period commencing with the first day of the fiscal quarter in which the Closing Date occurs and ending on the last day of the last fiscal quarter preceding the payment of such dividend or distribution. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations contained or referred to in the Indenture shall be computed in conformity with GAAP applied on a consistent basis, except that calculations made for purposes of determining compliance with the terms of the covenants and with other provisions of the Indenture shall be made without giving effect to: - the amortization of any expenses incurred in connection with the offering of the Notes, and - except as otherwise provided, the amortization of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 and 17. "Government Securities" means direct obligations of, obligations guaranteed by, or participations in pools consisting solely of obligations of or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States of America is pledged and that are not callable or redeemable at the option of the issuer thereof. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise), or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantors" means FelCor and the Subsidiary Guarantors, collectively. "Incur" means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness, including an "Incurrence" of 100 107 Acquired Indebtedness; provided that neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person at any date of determination (without duplication): (1) all indebtedness of such Person for borrowed money, (2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (3) the face amount of letters of credit or other similar instruments (excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations (other than obligations described in (1) or (2) above or (5), (6) or (7) below) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement), (4) all unconditional obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables, (5) all Capitalized Lease Obligations, (6) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at that date of determination and (B) the amount of such Indebtedness, (7) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person, and (8) to the extent not otherwise included in this definition or the definition of Consolidated Interest Expense, obligations under Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations of the type described above and, with respect to obligations under any Guarantee, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided that: - the amount outstanding at any time of any Indebtedness issued with original issue discount shall be deemed to be the face amount with respect to such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at the date of determination in conformity with GAAP, and - Indebtedness shall not include any liability for federal state, local or other taxes. "Interest Coverage Ratio" means, on any Transaction Date, the ratio of: - the aggregate amount of Consolidated EBITDA for the then most recent four fiscal quarters prior to such Transaction Date for which reports have been filed with the SEC or provided to the Trustee pursuant to the "SEC Reports and Reports to Holders" covenant ("Four Quarter Period") to - the aggregate Consolidated Interest Expense during such Four Quarter Period. 101 108 In making the foregoing calculation, (1) pro forma effect shall be given to any Indebtedness Incurred or repaid (other than in connection with an Asset Acquisition or Asset Disposition) during the period ("Reference Period") commencing on the first day of the Four Quarter Period and ending on the Transaction Date (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such Four Quarter Period unless any portion of such Indebtedness is projected, in the reasonable judgment of the senior management of FelCor LP or FelCor, to remain outstanding for a period in excess of 12 months from the date of the Incurrence thereof), in each case as if such Indebtedness had been Incurred or repaid on the first day of such Reference Period; (2) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period; (3) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition and any Indebtedness Incurred or repaid in connection with any such Asset Acquisitions or Asset Dispositions) that occur during such Reference Period but subsequent to the end of the related Four Quarter Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and (4) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition and any Indebtedness Incurred or repaid in connection with any such asset acquisitions or asset dispositions) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into FelCor LP or FelCor or any of their respective Restricted Subsidiaries during such Reference Period but subsequent to the end of the related Four Quarter Period and that would have constituted Asset Dispositions or Asset Acquisitions during such Reference Period but subsequent to the end of the related Four Quarter Period had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions and had occurred on the first day of such Reference Period; provided that to the extent that clause (3) or (4) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business, or one or more hotel properties, of the Person that is acquired or disposed of to the extent that such financial information is available. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement with respect to interest rates. "Investment" in any Person means any direct or indirect advance, loan or other extension of credit (including without limitation by way of Guarantee or similar arrangement, but excluding advances to customers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable on the consolidated balance sheet of FelCor LP, FelCor and their respective Restricted Subsidiaries) or capital contribution to (by means of any transfer of cash or other property (tangible or intangible) to others or any payment for property or 102 109 services solely for the account or use of others, or otherwise), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar instruments issued by, such Person and shall include: (1) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary, and (2) the fair market value of the Capital Stock (or any other Investment), held by FelCor LP or FelCor or any of their respective Restricted Subsidiaries of (or in) any Person that has ceased to be a Restricted Subsidiary, including without limitation, by reason of any transaction permitted by clause (3) of the "Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries" covenant; provided that the fair market value of the Investment remaining in any Person that has ceased to be a Restricted Subsidiary shall be deemed not to exceed the aggregate amount of Investments previously made in such Person valued at the time such Investments were made, less the net reduction of such Investments. For purposes of the definition of "Unrestricted Subsidiary" and the "Limitation on Restricted Payments" covenant described below: - "Investment" shall include the fair market value of the assets (net of liabilities (other than liabilities to FelCor LP or FelCor or any of their respective Restricted Subsidiaries)) of any Restricted Subsidiary at the time such Restricted Subsidiary is designated an Unrestricted Subsidiary, - the fair market value of the assets (net of liabilities (other than liabilities to FelCor LP or FelCor or any of their respective Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be considered a reduction in outstanding Investments, and - any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer. "Investment Grade" means a rating of the Notes by both S&P and Moody's, each such rating being in one of such agency's four highest generic rating categories that signifies investment grade (i.e. BBB- (or the equivalent) or higher by S&P and Baa3 (or the equivalent) or higher by Moody's); provided, in each case, such ratings are publicly available; provided, further, that in the event Moody's or S&P is no longer in existence for purposes of determining whether the Notes are rated "Investment Grade," such organization may be replaced by a nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) designated by FelCor LP and FelCor, notice of which shall be given to the Trustee. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to give any security interest). "Line of Credit" means the credit facility established pursuant to the Fifth Amended and Restated Credit Agreement dated as of August 1, 2000 among FelCor LP, FelCor, the lenders party thereto, The Chase Manhattan Bank, as Administrative Agent, Chase Securities, Inc., as Joint Lead Arranger, Joint Book Manager and Syndication Agent, Bankers Trust Company, as Joint Lead Arranger, Joint Book Manager and Documentation Agent, Bank of America, N.A., as Documentation Agent, and Wells Fargo Bank, National Association, as Co-Documentation Agent, together with all other agreements, instruments and documents executed or delivered pursuant thereto or in connection therewith, in each case as such agreements, instruments or documents may be amended, supplemented, extended, renewed, replaced or otherwise modified from time to time; provided that, with respect to an agreement providing for the refinancing of Indebtedness under the Line of Credit, such agreement shall be the Line of Credit 103 110 under the Indenture only if a notice to that effect is delivered by FelCor LP and FelCor to the trustee. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means: (1) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to FelCor LP or FelCor or any of their respective Restricted Subsidiaries) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of: - brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale, - provisions for all taxes actually paid or payable as a result of such Asset Sale by FelCor LP, FelCor and their respective Restricted Subsidiaries, taken as a whole, - payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (A) is secured by a Lien on the property or assets sold or (B) is required to be paid as a result of such sale, and - amounts reserved by FelCor LP, FelCor and their respective Restricted Subsidiaries against any liabilities associated with such Asset Sale, including without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined on a consolidated basis in conformity with GAAP, and (2) with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to FelCor LP or FelCor or any of their respective Restricted Subsidiaries) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorney's fees, accountants's fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of tax paid or payable as a result thereof. "Offer to Purchase" means an offer to purchase Notes by FelCor LP, from the holders commenced by mailing a notice to the trustee and each holder stating: (1) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis; (2) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) ("Payment Date"); (3) that any Note not tendered will continue to accrue interest pursuant to its terms; (4) that, unless FelCor LP defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; 104 111 (5) that holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Payment Date; (6) that holders will be entitled to withdraw their election if the Payment Agent receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such holder, the principal amount of Notes delivered for purchase and a statement that such holder is withdrawing his election to have such Notes purchased; and (7) that holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. On the Payment Date, FelCor LP shall - accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; and - deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted; - and shall promptly thereafter deliver, or cause to be delivered, to the trustee all Notes or portions thereof so accepted together with an Officers' Certificate specifying the Notes or portions thereof accepted for payment by FelCor LP. The Paying Agent shall promptly mail to the holders of Notes so accepted payment in an amount equal to the purchase price, and the trustee shall promptly authenticate and mail to such holders a new Note equal in principal amount to any unpurchased portion of any Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. FelCor LP will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. FelCor LP will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that FelCor LP is required to repurchase Notes pursuant to an Offer to Purchase. "Permitted Investment" means: (1) an Investment in FelCor LP or FelCor or any of their Restricted Subsidiaries or a Person that will, upon the making of such Investment, become a Restricted Subsidiary or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, FelCor LP or FelCor or any of their Restricted Subsidiaries; provided that such person's primary business is related, ancillary, incidental or complementary to the businesses of FelCor LP or FelCor or any of their respective Restricted Subsidiaries on the date of such Investment; (2) Temporary Cash Investments; (3) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; and (4) stock, obligations or securities received in satisfaction of judgments. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participation or other equivalents (however designated, whether voting or non-voting) that 105 112 have a preference on liquidation or with respect to distributions over any other class of Capital Stock, including preferred partnership interests, whether general or limited, or such Person's preferred or preference stock, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all series and classes of such preferred or preference stock. "Ratings Downgrade" means a rating of the Notes (1) by S&P and Moody's lower than, in the case of S&P, BB- and, in the case of Moody's, Ba3; provided in each case such ratings are publicly available or (2) by S&P or Moody's lower than, in the case of S&P, BB- or, in the case of Moody's, Ba3; provided that in any such case such rating is the only rating publicly available. "Restricted Subsidiary" means any Subsidiary of FelCor LP or FelCor other than an Unrestricted Subsidiary. "Secured Indebtedness" means any Indebtedness secured by a Lien upon the property of FelCor LP or FelCor or any of their respective Restricted Subsidiaries, other than Indebtedness secured by a Stock Pledge to the extent such Indebtedness does not exceed 50% of Adjusted Total Assets. "Senior Indebtedness" means the following obligations of FelCor LP or FelCor or any of their respective Restricted Subsidiaries, whether outstanding on the Closing Date or thereafter Incurred: (1) all Indebtedness and all other monetary obligations (including expenses fees and other monetary obligations) of FelCor LP and FelCor under the Line of Credit; (2) all Indebtedness and all other monetary obligations of FelCor LP or FelCor or any of their respective Restricted Subsidiaries (other than the Notes), including principal and interest on such Indebtedness, unless such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued is expressly subordinated in right of payment to the Notes; and (3) Subsidiary Debt. Senior Indebtedness will also include interest accruing subsequent to events of bankruptcy of FelCor LP and FelCor and their respective Restricted Subsidiaries at the rate provided for the document governing such Senior Indebtedness, whether or not such interest is an allowed claim enforceable against the debtor in a bankruptcy case under bankruptcy law. "Significant Subsidiary" means, at any determination date, any Restricted Subsidiary that, together with its Subsidiaries: (1) for the most recent fiscal year of FelCor LP and FelCor, accounted for more than 10% of the consolidated revenues of FelCor LP, FelCor and their respective Restricted Subsidiaries, or (2) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of FelCor LP, FelCor and their respective Restricted Subsidiaries, all as set forth on the most recently available consolidated financial statements thereof for such fiscal year. "S&P" means Standard & Poor's Ratings Services and its successors. "Stated Maturity" means: (1) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable, and 106 113 (2) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable. "Stock Pledge" means a first priority security interest in the equity interests of subsidiaries of FelCor and/or FelCor LP. "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person and the accounts of which would be consolidated with those of such Person in its consolidated financial statements in accordance with GAAP, if such statements were prepared as of such date. "Subsidiary Debt" means all unsecured Indebtedness of which a Restricted Subsidiary is the primary obligor. "Subsidiary Guarantee" means a Guarantee by each Subsidiary Guarantor for payment of the Notes by such Subsidiary Guarantor. The Subsidiary Guarantee will be an unsecured senior obligation of each Subsidiary Guarantor and will be unconditional regardless of the enforceability of the Notes and the Indenture. Notwithstanding the foregoing, each Subsidiary Guarantee by a Subsidiary Guarantor shall provide by its terms that it shall be automatically and unconditionally released and discharged upon any sale, exchange or transfer, to any Person not an Affiliate of FelCor LP or FelCor, of all of the Capital Stock owned by FelCor LP, FelCor and their respective Restricted Subsidiaries in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not then prohibited by the Indenture). "Subsidiary Guarantor" means each of the following: (1) FelCor/CSS Hotels, L.L.C., a Delaware limited liability company; (2) FelCor/LAX Hotels, L.L.C., a Delaware limited liability company; (3) FelCor/CSS Holdings, L.P., a Delaware limited partnership; (4) FelCor/St. Paul Holdings, L.P., a Delaware limited partnership; (5) FelCor/LAX Holdings, L.P., a Delaware limited partnership; (6) FelCor Eight Hotels, L.L.C., a Delaware limited liability company; (7) FelCor Hotel Asset Company, L.L.C., a Delaware limited liability company; (8) FelCor Nevada Holdings L.L.C., a Nevada limited liability company; (9) FHAC Nevada Holdings, L.L.C., a Nevada limited liability company; (10) FHAC Texas Holdings, L.P., a Texas limited partnership; (11) FelCor Omaha Hotel Company, L.L.C., a Delaware limited liability company; (12) FelCor Country Villa Hotel, L.L.C., a Delaware limited liability company; (13) FelCor Moline Hotel, L.L.C., a Delaware limited liability company; (14) FelCor Canada Co., a Nova Scotia unlimited liability company; and (15) each other Restricted Subsidiary that executes a Subsidiary Guarantee in compliance with the "Limitation on Issuances of Guarantees by Restricted Subsidiaries" covenant below. "Temporary Cash Investment" means any of the following: (1) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally guaranteed by the United States of America or any agency thereof, 107 114 (2) time deposits accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50 million and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor, (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above, (4) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of FelCor LP or FelCor) organized and in existence under the laws of the United States of America, any state of the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P, and (5) securities with maturities of six months or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or Moody's. "Total Assets" means the sum of: (1) Undepreciated Real Estate Assets, and (2) all other assets of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis determined in conformity with GAAP (but excluding intangibles and accounts receivables). "Total Unencumbered Assets" as of any date means the sum of: (1) those Undepreciated Real Estate Assets not securing any portion of Secured Indebtedness, and (2) all other assets (but excluding intangibles and accounts receivable) of FelCor LP, FelCor and their respective Restricted Subsidiaries not securing any portion of Secured Indebtedness determined on a consolidated basis in accordance with GAAP. "Trade Payables" means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services. "Transaction Date" means, with the respect to the Incurrence of any Indebtedness by FelCor LP or FelCor or any of their respective Restricted Subsidiaries, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "Undepreciated Real Estate Assets" means, as of any date, the cost (being the original cost to FelCor LP or FelCor or any of their respective Restricted Subsidiaries plus capital improvements) of real estate assets of FelCor LP, FelCor and their Restricted Subsidiaries on such date, before depreciation and amortization of such real estate assets, determined on a consolidated basis in conformity with GAAP. 108 115 "Units" means the limited partnership units of FelCor LP, that by their terms are redeemable at the option of the holder thereof and that, if so redeemed, at the election of FelCor are redeemable for cash or Common Stock of FelCor. "Unrestricted Subsidiary" means (1) any Subsidiary of FelCor LP or FelCor that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of FelCor LP or FelCor) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, FelCor LP or FelCor or any of their respective Restricted Subsidiaries; provided that: - any Guarantee by FelCor LP or FelCor or any of their respective Restricted Subsidiaries of any Indebtedness of the Subsidiary being so designated shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by FelCor LP or FelCor or such Restricted Subsidiary (or all, if applicable) at the time of such designation; - either (i) the Subsidiary to be so designated has total assets of $1,000 or less or (ii) if such Subsidiary has assets greater than $1,000, such designation would be permitted under the "Limitation on Restricted Payments" covenant described below; and - if applicable, the Incurrence of Indebtedness and the Investment referred to in the first bullet of this proviso would be permitted under the "Limitation on Indebtedness" and "Limitation on Restricted Payments" covenants described below. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that: - no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such designation; and - all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately after such designation would, if Incurred at such time, have been permitted to be Incurred (and shall be deemed to have been Incurred) for all purposes of the Indenture. Any such designation by the Board of Directors shall be evidenced to the trustee by promptly filing with the trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "Unsecured Indebtedness" means any Indebtedness of FelCor LP or FelCor or any of their respective Restricted Subsidiaries that is not Secured Indebtedness. "Voting Stock" means with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. "Wholly Owned" means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director's qualifying shares or Investments by individuals mandated by applicable law) by such Person or one or more Wholly Owned Subsidiaries of such Person. 109 116 COVENANTS The Indenture contains, among others, the following covenants, provided that the Indenture will provide that the "Limitation on Liens," the "Limitation on Sale-Leaseback Transactions," the "Limitation on Restricted Payments," the "Limitation on Dividend and other Payment Restrictions Affecting Restricted Subsidiaries," the "Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries," the "Limitation on Issuances of Guarantees by Restricted Subsidiaries," and the "Limitation on Transactions with Affiliates" covenants will not be applicable in the event, and only for so long as, the Notes are rated Investment Grade and no Default or Event of Default has occurred and is continuing. Limitation on Indebtedness (1) Neither FelCor LP nor FelCor will, and neither FelCor LP nor FelCor will permit any of their respective Restricted Subsidiaries to, Incur any Indebtedness if, immediately after giving effect to the Incurrence of such additional Indebtedness, the aggregate principal amount of all outstanding Indebtedness of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis determined in accordance with GAAP is greater than 60% of Adjusted Total Assets. (2) Neither FelCor LP nor FelCor will, and neither FelCor LP nor FelCor will permit any of their respective Restricted Subsidiaries to, Incur any Subsidiary Debt or any Secured Indebtedness if, immediately after giving effect to the Incurrence of such additional Subsidiary Debt or Secured Indebtedness, the aggregate principal amount of all outstanding Subsidiary Debt and Secured Indebtedness of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis is greater than 45% of Adjusted Total Assets. (3) Neither FelCor LP nor FelCor will, and neither FelCor LP nor FelCor will permit any of their respective Restricted Subsidiaries to, Incur any Indebtedness (other than the existing 7 3/8% and 7 5/8% senior notes, the Subsidiary Guarantees relating to the existing 7 3/8% and 7 5/8% senior notes and other Indebtedness existing on the Closing Date); provided that FelCor LP or FelCor or any of their respective Restricted Subsidiaries may Incur Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis would be greater than 2.0 to 1. (4) Notwithstanding paragraphs (1), (2) or (3), FelCor LP or FelCor or any of their respective Restricted Subsidiaries (except as specified below) may Incur each and all of the following: (A) Indebtedness outstanding under the Line of Credit at any time in an aggregate principal amount not to exceed $700 million less any amount of such Indebtedness permanently repaid as provided under the "Limitation on Asset Sales" covenant described below; (B) Indebtedness owed to: - FelCor LP or FelCor evidenced by an unsubordinated promissory note, or - to any Restricted Subsidiary; provided that any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to FelCor LP or FelCor or any other Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (B); (C) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, outstanding Indebtedness (other than Indebtedness Incurred under 110 117 clause (A), (B), (D) or (F) of this paragraph (4)) and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that ranks equally with or subordinate in right of payment to, the Notes shall only be permitted under this clause (C) if: - in case the Notes are refinanced in part or the Indebtedness to be refinanced ranks equally with the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, ranks equally with or is expressly made subordinate in right of payment to the remaining Notes, - in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes, and - such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; and provided further that in no event may Indebtedness of FelCor LP or FelCor that ranks equally with or subordinate in right of payment to the Notes be refinanced by means of any Indebtedness of any Restricted Subsidiary pursuant to this clause (C); (D) Indebtedness: - in respect of performance, surety or appeal bonds provided in the ordinary course of business, - under Currency Agreements and Interest Rate Agreements; provided that such agreements (i) are designed solely to protect FelCor LP or FelCor or any of their respective Restricted Subsidiaries against fluctuations in foreign currency exchange rates or interest rates and (ii) do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder, and - arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of FelCor LP or FelCor or any of their respective Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis in connection with such disposition; 111 118 (E) Indebtedness of FelCor LP or FelCor, to the extent the net proceeds thereof are promptly: - used to purchase Notes tendered in an Offer to Purchase made as a result of a Change in Control, or - deposited to defease the Notes as described below under "Defeasance;" or (F) Guarantees of the Notes and the existing 7 7/8% and 7 5/8% notes and Guarantees of Indebtedness of FelCor LP or FelCor by any of their respective Restricted Subsidiaries provided the guarantee of such Indebtedness is permitted by and made in accordance with the "Limitation on Issuances of Guarantees by Restricted Subsidiaries" covenant described below. (5) Notwithstanding any other provision of this "Limitation on Indebtedness" covenant, the maximum amount of Indebtedness that FelCor LP or FelCor or any of their respective Restricted Subsidiaries may Incur pursuant to this "Limitation on Indebtedness" covenant shall not be deemed to be exceeded, with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies. (6) For purposes of determining any particular amount of Indebtedness under this "Limitation on Indebtedness" covenant, - Indebtedness Incurred under the Line of Credit on or prior to the Closing Date shall be treated as Incurred pursuant to clause (A) of paragraph (4) of this "Limitation on Indebtedness" covenant, - Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included, and - any Liens granted pursuant to the equal and ratable provisions referred to in the "Limitation on Liens" covenant described below shall not be treated as Indebtedness. For purposes of determining compliance with this "Limitation on Indebtedness" covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses (other than Indebtedness referred to in second bullet in this paragraph (6), each of FelCor LP and FelCor, in its sole discretion, shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses; provided that FelCor LP and FelCor must classify such item of Indebtedness in an identical fashion. Maintenance of Total Unencumbered Assets FelCor LP, FelCor and their respective Restricted Subsidiaries will maintain Total Unencumbered Assets of not less than 150% of the aggregate outstanding principal amount of the Unsecured Indebtedness of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis. Limitation on Liens Neither FelCor LP nor FelCor shall secure any Indebtedness under the Line of Credit by a Lien unless contemporaneously therewith effective provision is made to secure the notes equally and ratably with the Indebtedness under the Line of Credit for so long as the Indebtedness under the Line of Credit is secured by such Lien. 112 119 Limitation on Sale-Leaseback Transactions Neither FelCor LP nor FelCor will, and neither FelCor LP nor FelCor will permit any of their respective Restricted Subsidiaries to, enter into any sale-leaseback transaction involving any of its assets or properties whether now owned or hereafter acquired, whereby any of them sells or transfers such assets or properties and then or thereafter leases such assets or properties or any substantial part thereof. The foregoing restriction does not apply to any sale-leaseback transaction if: (1) the lease is for a period, including renewal rights, of not in excess of three years; (2) the lease secures or relates to industrial revenue or pollution control bonds; (3) the transaction is solely between FelCor LP or FelCor and any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted Subsidiaries; or (4) FelCor LP or FelCor or any of their respective Restricted Subsidiaries, within 12 months after the sale or transfer of any assets or properties is completed, applies an amount not less than the net proceeds received from such sale in accordance with clause (1) or (2) of the second paragraph of the "Limitation on Asset Sales" covenant described below. Limitation on Restricted Payments Neither FelCor LP nor FelCor will, and neither FelCor LP nor FelCor will permit any of their respective Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any distribution on or with respect to its Capital Stock held by Persons other than FelCor LP or FelCor or any of their respective Restricted Subsidiaries, other than: - dividends or distributions payable solely in shares of its Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to acquire shares of such Capital Stock, and - pro rata dividends or distributions on Common Stock of FelCor LP or any Restricted Subsidiary held by minority stockholders; (2) purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock of: - FelCor LP, FelCor or an Unrestricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by any Person other than FelCor LP or FelCor or any of their respective Restricted Subsidiaries unless in connection with such purchase the Unrestricted Subsidiary is designated as a Restricted Subsidiary, or - a Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by an Affiliate of FelCor LP or FelCor (other than a Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such holder) of 5% or more of the Capital Stock of FelCor LP or FelCor; (3) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness of FelCor LP or FelCor that is subordinated in right of payment to the Notes; or (4) make an Investment, other than a Permitted Investment, in any Person (such payments or any other actions described in clauses (1) through (4) above being 113 120 collectively "Restricted Payments") if, at the time of, and after giving effect to, the proposed Restricted Payment: (A) a Default or Event of Default shall have occurred and be continuing, (B) FelCor LP or FelCor could not Incur at least $1.00 of Indebtedness under the paragraphs (1), (2) and (3) of the "Limitation on Indebtedness" covenant, or (C) the aggregate amount of all Restricted Payments (the amount, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) made after the Closing Date shall exceed the sum of: - 95% of the aggregate amount of the Funds From Operations (or, if the Funds From Operations is a loss, minus 100% of the amount of such loss) (determined by excluding income resulting from transfers of assets by FelCor LP or FelCor or any of their respective Restricted Subsidiaries to an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter in which the Closing Date occurs and ending on the last day of the last fiscal quarter preceding the Transaction Date for which reports have been filed with the SEC or provided to the Trustee pursuant to the "SEC Reports and Reports to Holders" covenant, plus - the aggregate Net Cash Proceeds received by FelCor LP or FelCor after the Closing Date from the issuance and sale permitted by the Indenture of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of FelCor LP or FelCor, including an issuance or sale permitted by the Indenture of Indebtedness of FelCor LP or FelCor for cash subsequent to the Closing Date upon the conversion of such Indebtedness into Capital Stock (other than Disqualified Stock) of FelCor LP or FelCor, or from the issuance to a Person who is not a Subsidiary of FelCor LP or FelCor of any options, warrants or other rights to acquire Capital Stock of FelCor LP or FelCor (in each case, exclusive of any Disqualified Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated Maturity of the Notes), plus - an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in any Person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to FelCor LP or FelCor or any of their respective Restricted Subsidiaries or from the Net Cash Proceeds from the sale of any such Investment (except, in each case, to the extent any such payment or proceeds are included in the calculation of Funds From Operations) or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments") not to exceed, in each case, the amount of Investments previously made by FelCor LP, FelCor and their respective Restricted Subsidiaries in such Person or Unrestricted Subsidiary, plus - the purchase price of noncash tangible assets acquired in exchange for an issuance of Capital Stock (other than Disqualified Stock) of FelCor LP or FelCor subsequent to the Closing Date. 114 121 Notwithstanding the foregoing, FelCor LP or FelCor may declare or pay any dividend or make any distribution that is necessary to maintain FelCor's status as a REIT under the Code if: - the aggregate principal amount of all outstanding Indebtedness of FelCor LP or FelCor on a consolidated basis at such time is less than 60% of Adjusted Total Assets, and - no Default or Event of Default shall have occurred and be continuing. The foregoing provisions shall not be violated by reason of: (1) the payment of any dividend within 60 days after the date of declaration thereof if, at said date of declaration, such payment would comply with the foregoing paragraph; (2) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the Notes including premium, if any, and accrued and unpaid interest, with the proceeds of, or in exchange for, Indebtedness Incurred under clause (C) of paragraph (4) of the "Limitation on Indebtedness" covenant; (3) the repurchase, redemption or other acquisition of Capital Stock of FelCor LP or FelCor or an Unrestricted Subsidiary (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the proceeds of a substantially concurrent issuance of, shares of Capital Stock (other than Disqualified Stock) of FelCor LP or FelCor (or options, warrants or other rights to acquire such Capital Stock); (4) the making of any principal payment on, or the repurchase, redemption, retirement, defeasance or other acquisition for value of, Indebtedness of FelCor LP or FelCor which is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of, a substantially concurrent issuance of, shares of the Capital Stock (other than Disqualified Stock) of FelCor LP or FelCor (or options, warrants or other rights to acquire such Capital Stock); (5) payments or distributions, to dissenting stockholders pursuant to applicable law pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of the Indenture applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of FelCor LP or FelCor; (6) Investments in any Person or Persons in an aggregate amount not to exceed $150 million; or (7) Restricted Payments in an aggregate amount not to exceed $200 million, provided that at the time of, and after giving effect to, the proposed Restricted Payment FelCor LP and FelCor could have incurred at least $1.00 of Indebtedness under paragraphs (1), (2) and (3) of the "Limitation on Indebtedness" covenant; provided that, except in the case of clauses (1) and (3), no Default or Event of Default shall have occurred and be continuing or occur as a direct consequence of the actions or payments set forth therein. Each Restricted Payment permitted pursuant to this paragraph (other than the Restricted Payment referred to in clause (2) of this paragraph, an exchange of Capital Stock for Capital Stock or Indebtedness referred to in clause (3) or (4) of this paragraph, an Investment referred to in clause (6) of this paragraph or a Restricted Payment referred to in clause (7) of this paragraph), and the Net Cash Proceeds from any issuance of Capital Stock referred to in clauses (3) and (4), shall be included in calculating whether the conditions of clause (C) of the first paragraph of this "Limitation on Restricted Payments" covenant have been met with respect to any subsequent Restricted Payments. 115 122 Notwithstanding anything to the contrary contained in this "Limitation on Restricted Payments" covenant, except in the case of clauses (3) and (5) of the immediately preceding paragraph, in no case shall FelCor LP, FelCor or any of their respective Restricted Subsidiaries, directly or indirectly, purchase, redeem or otherwise acquire any Capital Stock unless at the time of, and after giving effect to, such proposed Restricted Payment, the ratio of Indebtedness to Consolidated EBITDA of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis would be equal to or less than 4.85 to 1. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries Neither FelCor LP nor FelCor will, and neither FelCor LP nor FelCor will permit any of their respective Restricted Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to: - pay dividends or make any other distributions permitted by applicable law on any Capital Stock of such Restricted Subsidiary owned by FelCor LP or FelCor or any of their respective Restricted Subsidiaries, - pay any Indebtedness owed to FelCor LP, FelCor or any other Restricted Subsidiary, - make loans or advances to FelCor LP, FelCor or any other Restricted Subsidiary, or - transfer its property or assets to FelCor LP, FelCor or any other Restricted Subsidiary. The foregoing provisions shall not restrict any encumbrances or restrictions: (1) existing on the Closing Date in the Indenture, the Line of Credit and any other agreement in effect on the Closing Date to the extent listed on a schedule to the Indenture, and any extensions, refinancings, renewals or replacements of such agreements; provided that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements are no less favorable in any material respect to the holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced; (2) existing under or by reason of applicable law; (3) existing with respect to any Person or the property or assets of such Person acquired by FelCor LP, FelCor or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired; (4) in the case of the last bullet in the first paragraph of this "Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries" covenant: - that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, - existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of FelCor LP, FelCor or any Restricted Subsidiary not otherwise prohibited by the Indenture, or - arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of FelCor LP, FelCor or any Restricted Subsidiary in any manner material to FelCor LP, FelCor and their respective Restricted Subsidiaries taken as a whole; 116 123 (5) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary; or (6) contained in the terms of any Indebtedness or any agreement pursuant to which such Indebtedness was issued if: - the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant contained in such Indebtedness or agreement, - the encumbrance or restriction is not material more disadvantageous to the holders of the Notes than is customary in comparable financings (as determined by FelCor LP and FelCor), and - each of FelCor LP and FelCor determines that an such encumbrance or restriction will not materially affect such Persons' ability to make principal or interest payments on the Notes. Nothing contained in this "Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries" covenant shall prevent FelCor LP, FelCor or any Restricted Subsidiary from: - creating, incurring, assuming or suffering to exist any Liens otherwise permitted in the "Limitation on Liens" covenant, or - restricting the sale or other disposition of property or assets of FelCor LP or FelCor or any of their respective Restricted Subsidiaries that secure Indebtedness of FelCor LP, FelCor or any of their respective Restricted Subsidiaries. Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries Neither FelCor LP nor FelCor will sell, and neither FelCor LP nor FelCor will permit any of their respective Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except: (1) to FelCor LP, FelCor or a Wholly Owned Restricted Subsidiary; (2) issuances of director's qualifying shares or sales to individuals of shares of Restricted Subsidiaries, to the extent required by applicable law or to the extent necessary to obtain local liquor licenses; (3) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under the "Limitation on Restricted Payments" covenant if made on the date of such issuance or sale, or (4) sales of not greater than 20% of the Capital Stock of a newly-created Restricted Subsidiary made in connection with, or in contemplation of, the acquisition or development by such Restricted Subsidiary of one or more properties to any Person that is, or is an Affiliate of, the entity that provides, franchise management or other services, as the case may be, to one or more properties owned by such Restricted Subsidiary. 117 124 Limitation on Issuances of Guarantees by Restricted Subsidiaries Neither FelCor LP nor FelCor will permit any of their respective Restricted Subsidiaries, directly or indirectly, to Guarantee any Indebtedness of FelCor LP or FelCor which ranks equally with or subordinate in right of payment to the Notes ("Guaranteed Indebtedness"), unless: (1) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a Subsidiary Guarantee by such Restricted Subsidiary, and (2) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against FelCor LP, FelCor or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall not be applicable to any Guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not Incurred in connection with, or in contemplation of, such person becoming a Restricted Subsidiary. If the Guaranteed Indebtedness: - ranks equally with the Notes, then the Guarantee of such Guaranteed Indebtedness shall rank equally with, or subordinate to, the Subsidiary Guarantee, or - is subordinate to the Notes, then the Guarantee of such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes. Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted Subsidiary may provide by its terms that it shall be automatically and unconditionally released and discharged upon: (1) any sale, exchange or transfer, to any Person not an Affiliate of FelCor LP or FelCor, of all of Capital Stock held by FelCor LP, FelCor and their respective Restricted Subsidiaries in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by the Indenture), or (2) the release or discharge of the Guarantee which resulted in the creation of such Subsidiary Guarantee, except a discharge or release by or as a result of payment under such Guarantee. Limitation on Transactions with Affiliates Neither FelCor LP nor FelCor will, and neither FelCor LP nor FelCor will permit any of their respective Restricted Subsidiaries to, directly or indirectly, enter into, renew or extend any transaction (including, without limitations, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of FelCor LP or FelCor or with any Affiliate of FelCor LP or FelCor or any of their respective Restricted Subsidiaries, except upon fair and reasonable terms no less favorable to FelCor LP, FelCor or such Restricted Subsidiary than could be obtained, at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a Person that is not such a holder or an Affiliate. The foregoing limitation does not limit, and shall not apply to: (1) transactions (A) approved by a majority of the independent directors of FelCor or (B) for which FelCor LP, FelCor or any Restricted Subsidiary delivers to the trustee a written opinion of a nationally recognized investment banking firm stating that the 118 125 transaction is fair to FelCor LP, FelCor or such Restricted Subsidiary from a financial point of view; (2) any transaction solely between FelCor LP or FelCor and any of their respective Wholly Owned Restricted Subsidiaries or solely between Wholly Owned Restricted Subsidiaries; (3) the payment of reasonable and customary fees and expenses to directors of FelCor who are not employees of FelCor; (4) any payments or other transactions pursuant to any tax-sharing agreement between FelCor LP or FelCor and any other Person with which FelCor LP or FelCor files a consolidated tax return or with which FelCor LP or FelCor is part of a consolidated group for tax purposes; or (5) any Restricted Payments not prohibited by the "Limitation on Restricted Payments" covenant. Notwithstanding the foregoing, any transaction or series of related transactions covered by the first paragraph of this "Limitation on Transactions with Affiliates" covenant and not covered by (2) through (5) of the immediately foregoing paragraph, - the aggregate amount of which exceeds $2 million in value or relates to the leasing of one or more hotel properties to DJONT, must be approved or determined to be fair in the manner provided for in clause (1)(A) or (B) above, and - the aggregate amount of which exceeds $5 million in value, must be determined to be fair in the manner provided for in clause (1)(B) above. Limitation on Asset Sales Neither FelCor LP nor FelCor will, and neither FelCor LP or FelCor will permit any of their respective Restricted Subsidiaries to, consummate any Asset Sale, unless: (1) the consideration received by FelCor LP, FelCor or such Restricted Subsidiary is at least equal to the fair market value of the assets sold or disposed of, and (2) at least 75% of the consideration received consists of cash or Temporary Cash Investments; provided, with respect to the sale of one or more hotel properties that up to 75% of the consideration may consist of indebtedness of the purchaser of such hotel properties; provided, further, that such indebtedness is secured by a first priority Lien on the hotel property or properties sold. In the event and to the extent that the Net Cash Proceeds received by FelCor LP, FelCor or such Restricted Subsidiary from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the date closest to the commencement of such 12-month period for which a consolidated balance sheet of FelCor LP, FelCor and their respective Restricted Subsidiaries has been filed with the SEC or provided to the Trustee pursuant to the "SEC Reports and Reports to Holders" covenant), then FelCor LP or FelCor shall or shall cause the relevant Restricted Subsidiary to: (1) within 12 months after the date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets: - apply an amount equal to such excess Net Cash Proceeds to permanently reduce Senior Indebtedness of FelCor LP, FelCor, or any Restricted Subsidiary or Indebted- 119 126 ness of any other Restricted Subsidiary, in each case owing to a Person other than FelCor LP, FelCor or any of their respective Restricted Subsidiaries, or - invest an equal amount, or the amount not so applied pursuant to the foregoing bullet (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a Restricted Subsidiary having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, FelCor LP or FelCor or any of their respective Restricted Subsidiaries existing on the date of such investment, and (2) apply (no later than the end of the 12-month period referred to in clause (1)) such excess Net Cash Proceeds (to the extent not applied pursuant to clause (1)) as provided in the following paragraph of this "Limitation on Asset Sales" covenant. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (1) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not previously subject to an Offer to Purchase pursuant to this "Limitation on Asset Sales" covenant totals at least $10 million, FelCor LP must commence, not later than the fifteenth Business Day of such month, and consummate an Offer to Purchase from the holders on a pro rata basis an aggregate principal amount of Notes equal to the Excess Proceeds on such date, at a purchase price equal to 100% of the principal amount of the Notes, plus, in each case, accrued interest (if any) to the Payment Date. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL FelCor LP must commence, within 30 days of the occurrence of a Change of Control, and consummate an Offer to Purchase for all Notes then outstanding, at a purchase price equal to 101% of the principal amount of the Notes, plus accrued interest (if any) to the Payment Date. There can be no assurance that FelCor LP will have sufficient funds available at the time of any Change of Control to make any debt payment (including repurchases of Notes) required by the foregoing covenant (as well as any covenant that may be contained in other securities of FelCor LP or FelCor that might be outstanding at the time). The above covenant requiring FelCor LP to repurchase the Notes will, unless consents are obtained, require FelCor LP to repay all indebtedness then outstanding which by its terms would prohibit such Note repurchase, either prior to or concurrently with such Note repurchase. SEC REPORTS AND REPORTS TO HOLDERS Whether or not FelCor LP or FelCor is then required to file reports with the SEC, FelCor LP and FelCor shall file with the SEC all such reports and other information as they would be required to file with the SEC by Sections 13(a) or 15(d) under the Exchange Act if they were subject thereto; provided that, if filing such documents by FelCor LP or FelCor with the SEC is not permitted under the Exchange Act, FelCor LP or FelCor shall provide such documents to the trustee and upon written request supply copies of such documents to any prospective holder; provided, further, that if the rules and regulations of the SEC permit FelCor LP and FelCor to file combined reports or information pursuant to the Exchange Act, FelCor LP and FelCor may file combined reports and information. FelCor LP and FelCor shall supply the trustee and each holder or shall supply to the trustee for forwarding to each such holder, without cost to such holder, copies of such reports and other information. 120 127 EVENTS OF DEFAULT Events of Default under the Indenture include the following: (1) default in the payment of principal of, or premium, if any, on any Note when they are due and payable at maturity, upon acceleration, redemption or otherwise; (2) default in the payment of interest on any Note when they are due and payable, and such default continues for a period of 30 days; (3) default in the performance or breach of the provisions of the Indenture applicable to mergers, consolidations and transfers of all or substantially all of the assets of FelCor LP and FelCor or the failure by FelCor LP to make or consummate an Offer to Purchase in accordance with the "Limitations on Asset Sales" or "Repurchase of Notes upon a Change of Control" covenants; (4) FelCor LP or FelCor defaults in the performance of or breaches any other covenant or agreement of FelCor LP or FelCor in the Indenture or under the Notes (other than a default specified in clause (1), (2) or (3) above) and such default or breach continues for a period of 30 consecutive days after written notice by the trustee or the holders of 25% or more in aggregate principal amount of the Notes; (5) there occurs with respect to any issue or issues of Indebtedness of FelCor LP or FelCor or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, - an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or - the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (6) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not covered by insurance): - shall be rendered against FelCor LP or FelCor or any Significant Subsidiary and shall not be paid or discharged, and - and there shall be any period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (7) a court having jurisdiction in the premises enters a decree or order for: - relief in respect of FelCor LP or FelCor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, - appointment of a receiver, liquidator, assignee custodian, trustee, sequestrator or similar official of FelCor LP or FelCor or any Significant Subsidiary or for all or substantially all of the property and assets of FelCor LP or FelCor or any Significant Subsidiary, or 121 128 - the winding up or liquidation of the affairs of FelCor LP or FelCor or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (8) FelCor LP or FelCor or any Significant Subsidiary: - commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under such law, - consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of FelCor LP or FelCor or Significant Subsidiary or for all or substantially all of the property and assets of FelCor LP or FelCor or any Significant Subsidiary, or - effects any general assignment for the benefit of its creditors. If an Event of Default (other than an Event of Default specified in clause (7) or (8) above that occurs with respect to FelCor LP or FelCor) occurs and is continuing under the Indenture, the trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to FelCor LP and FelCor (and to the trustee if such notice is given by the holders), may, and the trustee at the request of the holders of at least 25% in aggregate principal amount of the Notes then outstanding shall, declare the principal of, premium, if any, and accrued interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued interest shall be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (5) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (5) shall be remedied or cured by FelCor LP, FelCor or the relevant Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event or Default specified in clause (7) or (8) above occurs with respect to FelCor LP or FelCor, the principal of, premium, if any, and accrued interest on the Notes then outstanding shall automatically become and be immediately due and payable without any declaration or other act on the part of the trustee or any holder. The holders of at least a majority in principal amount of the outstanding Notes by written notice to FelCor LP, FelCor and to the trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if: - all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived, and - the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. As to the waiver of defaults, see "-- Modification and Waiver." The holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee. However, the trustee may refuse to follow any direction that conflicts with law or the Indenture, that may involve the trustee in personal liability, or that the trustee determines in good faith may be unduly prejudicial to the rights of holders of Notes not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from 122 129 holders of Notes. A holder may not pursue any remedy with respect to the Indenture or the Notes unless: (1) the holder gives the trustee written notice of a continuing Event of Default; (2) the holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the trustee to pursue the remedy; (3) such holder or holders offer the trustee indemnity satisfactory to the trustee against any costs, liability or expense; (4) the trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (5) during such 60-day period, the holders of a majority in aggregate principal amount of the outstanding Notes do not give the trustee a direction that is inconsistent with the request. However, such limitations do not apply to the right of any holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment on or after the due date expressed in the Notes, which right shall not be impaired or affected without the consent of the holder. The Indenture requires certain officers of FelCor LP and FelCor to certify, on or before a date not more than 90 days after the end of each fiscal year, that a review has been conducted of the activities of FelCor LP and FelCor and their respective Restricted Subsidiaries and of their performance under the Indenture and that FelCor LP and FelCor have fulfilled all obligations thereunder, or, if there has been a default in fulfillment of any such obligation, specifying each such default and the nature and status thereof. FelCor LP and FelCor will also be obligated to notify the trustee of any default or defaults in the performance of any covenants or agreements under the Indenture. CONSOLIDATION, MERGER AND SALE OF ASSETS Neither FelCor LP nor FelCor will merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into FelCor LP or FelCor unless: (1) FelCor LP or FelCor shall be the continuing Person, or the Person (if other than FelCor LP or FelCor) formed by such consolidation or into which FelCor LP or FelCor is merged or that acquired or leased such property and assets of FelCor LP or FelCor shall be an entity organized and validly existing under the laws of the United States of America or any state or jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the trustee, all of the obligations of FelCor LP or FelCor on the Notes and under the Indenture; (2) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (3) immediately after giving effect to such transaction on a pro forma basis FelCor LP or FelCor, or any Person becoming the successor obligor of the Notes, as the case may be, could Incur at least $1.00 of Indebtedness under paragraphs (1), (2) and (3) of the "Limitation on Indebtedness" covenant; provided that this clause (3) shall not apply to a consolidation or merger with or into a Wholly Owned Restricted Subsidiary with a positive net worth; provided that, in connection with any such merger or consolidation, no consideration (other than Capital Stock (other than Disqualified Stock) in the surviving 123 130 Person or FelCor LP or FelCor) shall be issued or distributed to the holders of Capital Stock of FelCor LP or FelCor; and (4) FelCor LP or FelCor delivers to the trustee an Officers' Certificate (attaching the arithmetic computations to demonstrate compliance with clause (3)) and an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with; provided that clause (3) above does not apply if, in the good faith determination of the Board of Directors of FelCor LP or FelCor, whose determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the state of domicile of FelCor LP or FelCor; and provided, further, that any such transaction shall not have as one of its purposes the evasion of the foregoing limitations. DEFEASANCE Defeasance and Discharge. The Indenture provides that FelCor LP, FelCor and the Subsidiary Guarantors will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes or any Subsidiary Guarantee on the 123rd day after the deposit referred to below, and the provisions of the Indenture will no longer be in effect with respect to the Notes (except for, among other things: certain obligations to register the transfer or exchange of the Notes; to replace stolen, lost or mutilated Notes; to maintain paying agencies and to hold monies for payment in trust) if, among other things, (1) FelCor LP has deposited with the trustee, in trust, money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Notes, (2) FelCor LP has delivered to the trustee: (A) either - an Opinion of Counsel to the effect that holders will not recognize income, gain or loss for federal income tax purposes as a result of FelCor LP's exercise of its option under this "Defeasance" provision and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, which Opinion of Counsel must be based upon (and accompanied by a copy of) a ruling of the Internal Revenue Service to the same effect unless there has been a change in applicable federal income tax law after the Closing Date such that a ruling is no longer required, or - a ruling directed to the trustee received from the Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel, and (B) an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the Investment Company Act of 1940 and after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law, (3) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after the date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, any other agreement or 124 131 instrument to which FelCor LP, FelCor or any of their respective Restricted Subsidiaries is a party or by which FelCor LP, FelCor or any of their respective Restricted Subsidiaries are bound, and (4) if at such time the Notes are listed on a national securities exchange, FelCor LP has delivered to the trustee an Opinion of Counsel to the effect that the Notes will not be delisted as a result of such deposit, defeasance and discharge. Defeasance of Certain Covenants and Certain Events of Default. The Indenture further provides that the provisions of the Indenture will no longer be in effect with respect to clause (3) under "Consolidation, Merger and Sale of Assets" and all the covenants described herein under "Covenants," clause (3) under "Events of Default" with respect to such clause (3) under "Consolidation, Merger and Sale of Assets," clause (4) under "Events of Default" with respect to such other covenants and clauses (5) and (6) under "Events of Default" shall be deemed not to be Events of Default upon, among other things: (1) the deposit with the trustee, in trust, of money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Notes, (2) the satisfaction of the provisions described in clauses (2)(B), (3) and (4) of the preceding paragraph titled "Defeasance and Discharge," and (3) the delivery by FelCor LP to the trustee of an Opinion of Counsel to the effect that, among other things, the holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. Defeasance and Certain Other Events of Default. In the event FelCor LP exercises its option to omit compliance with certain covenants and provisions of the Indenture with respect to the Notes as described in the immediately preceding paragraph and the Notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of money and/or U.S. Government Obligations on deposit with the trustee will be sufficient to pay amounts due on the Notes at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Notes at the time of the acceleration resulting from such Event of Default. However, FelCor LP, FelCor and the Subsidiary Guarantors will remain liable for such payments. MODIFICATION AND WAIVER Subject to certain limited exceptions, modifications and amendments of the Indenture may be made by FelCor LP, FelCor and the trustee with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding Notes; provided that no such modification or amendment may, without the consent of each holder affected thereby: (1) change the Stated Maturity of the principal of, or any installment of interest on, any Note, (2) reduce the principal amount of, or premium, if any, or interest on, any Note, (3) change the place of payment of principal of, or premium, if any, or interest on, any Note, 125 132 (4) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the Redemption Date) of any Note, (5) reduce the above-stated percentages of outstanding Notes the consent of whose holders is necessary to modify or amend the Indenture, (6) waive a default in the payment of principal of, premium, if any, or interest on the Notes, (7) voluntarily release a Guarantor of the Notes, or (8) reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose holders is necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults. NO PERSONAL LIABILITY OF INCORPORATORS, PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR EMPLOYEES The Indenture provides that no recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of FelCor LP or FelCor in the Indenture, or in any of the Notes or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, partner, stockholder, officer, director, employee or controlling person of FelCor LP, FelCor or the Subsidiary Guarantors or of any successor Person thereof. Each holder, by accepting the Notes, waives and releases all such liability. CONCERNING THE TRUSTEE The Indenture provides that, except during the continuance of a Default, the trustee will not be liable, except for the performance of such duties as are specifically set forth in the Indenture. If an Event of Default has occurred and is continuing, the trustee will use the same degree of care and skill in its exercise of the rights and powers vested in it under the Indenture as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The Indenture and provisions of the Trust Indenture Act of 1939 incorporated by reference into the Indenture contain limitations on the rights of the trustee, should it become a creditor of FelCor LP or FelCor, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The trustee is permitted to engage in other transactions; provided that if it acquires any conflicting interest, it must eliminate such conflict or resign. BOOK ENTRY; DELIVERY AND FORM The certificates representing the New Notes will be issued in fully registered form without interest coupons. Old Notes sold in reliance on Rule 144A are represented by the Global Old Notes. New Notes issued in exchange for the Global Old Notes will be issued in the form of one or more Global New Notes and will be deposited with the trustee as custodian for, and registered in the name of a nominee of, DTC. Old Notes originally purchased by or transferred to Institutional Accredited Investors who are not qualified institutional buyers ("Non-Global Purchasers") were in registered form without interest coupons and represented by the Certificated Old Notes. New Notes issued in exchange for the Certificated Old Notes will be issued in the form of one or more Certificated New Notes. 126 133 Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. Ownership of beneficial interests in a Global Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Qualified institutional buyers may hold their interests in a Global Note directly through DTC if they are participants in such system, or indirectly through organizations that are participants in such system. So long as DTC, or its nominee, is the registered owner or holder of a Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Note for all purposes under the Indenture and the Notes. No beneficial owner of an interest in a Global Note will be able to transfer that interest except in accordance with DTC's applicable procedures, in addition to those provided for under the Indenture. Payments of the principal of, and interest on, a Global Note will be made to DTC or its nominee, as the case may be, as the registered owner thereof. Neither FelCor LP, FelCor, any Subsidiary Guarantor, the trustee nor any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. FelCor LP expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of DTC or its nominee. FelCor LP also expects that payments by participants to owners of beneficial interests in such Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. FelCor LP expects that DTC will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in a Global Note is credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC will exchange the applicable Global Note for Certificated Notes, which it will distribute to its participants and which, in the case of a Global Old Note, may be legended with respect to the restrictions on transfer thereof. FelCor LP understands that: DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). 127 134 Although DTC is expected to follow the foregoing procedures in order to facilitate transfers of interests in a Global Note among its participants, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither FelCor LP, FelCor, any Subsidiary Guarantor, nor the trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing its operations. If DTC is at any time unwilling or unable to continue as a depositary for the Global Notes and a successor depositary is not appointed by FelCor LP within 90 days, FelCor LP will issue Certificated Notes, which, in the case of a Global Old Note, may bear a legend with respect to the restrictions on transfer thereof, in exchange for the Global Notes. Holders of an interest in a Global Note may receive Certificated Notes, which, in the case of a Global Old Note, may bear a legend with respect to the restrictions on transfer thereof, in accordance with the DTC's rules and procedures in addition to those provided for under the Indenture. 128 135 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following general discussion summarizes the material United States federal income tax aspects of the exchange offer to holders of the Old Notes. This discussion is for general information only and does not consider all aspects of exchange offer that might impact owners of the Old Notes in light of such holder's personal circumstances. This discussion deals only with Old Notes held as "capital assets" within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code") (generally property held for investment and not for sale to customers in the ordinary course of a trade or business). This discussion also does not address the U.S. federal income tax consequences to holders subject to special treatment under the U.S. federal income tax laws, such as dealers in securities, or foreign currency, tax-exempt entities, banks, thrifts, insurance companies, persons that hold the Old Notes as part of a "straddle", a "hedge" against currency risk or a "conversion transaction"; persons that have a "functional currency" other than the U.S. dollar, and investors in pass-through entities. In addition, this discussion does not address any of the United States federal income tax consequences of owning or disposing of New Notes, nor does it address any tax consequences arising out of the tax laws of any state, local or foreign jurisdiction. This discussion is based upon the Internal Revenue Code of 1986, as amended, existing and proposed regulations thereunder, Internal Revenue Service ("IRS") rulings and pronouncements, reports of congressional committees, judicial decisions and current administrative rulings and practice, all as in effect on the date hereof, all of which are subject to change at any time, and any such change may be applied retroactively in a manner that could adversely affect the tax consequences described below. The Company has not and will not seek any rulings or opinions from the IRS or counsel with respect to the matters discussed below. There can be no assurance that the IRS will not take positions concerning the tax consequences of the exchange offer which are different from those discussed herein. The exchange of Old Notes for New Notes pursuant to the exchange offer should not constitute a taxable exchange. As a result, a holder (1) should not recognize taxable gain or loss as a result of exchanging Old Notes for New Notes pursuant to the exchange offer, (2) the holding period of the New Notes should include the holding period of the Old Notes exchanged therefor and (3) the adjusted tax basis of the New Notes should be the same as the adjusted tax basis of the Old Notes exchanged therefore immediately before the exchange. THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS OF OLD NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED ABOVE IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, INCLUDING THE EFFECTS OF CHANGES IN SUCH LAWS. PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. We have agreed that, starting on the expiration date and ending on the close of business one year after the expiration date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 2000, all dealers effecting transactions in the New Notes may be required to deliver a prospectus. 129 136 We will not receive any proceeds from any sales of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of New Notes and any commissions or concessions received by such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver, and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the securities act. We have agreed to pay all expenses incident to our performance of, or compliance with, the Registration Rights Agreement and will indemnify the holders of Old Notes (including any broker-dealers), and certain parties related to such holders, against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS Certain legal matters with respect to the legality of the Notes will be passed upon for FelCor and FelCor LP by Jenkens & Gilchrist, a Professional Corporation, Dallas, Texas. Certain legal matters relating to the offering are being passed upon for the initial purchasers by King & Spalding, Atlanta, Georgia. Jenkens & Gilchrist and King & Spalding will rely on the opinion of Miles & Stockbridge, a Professional Corporation, Baltimore, Maryland, with respect to all matters involving Maryland law. EXPERTS The consolidated financial statements of FelCor Lodging Limited Partnership as of December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999 included in this Prospectus; the consolidated financial statements of FelCor Lodging Trust Incorporated incorporated in this prospectus by reference to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K for the year ended December 31, 1999 and the financial statements of FelCor Lodging Trust Incorporated incorporated in this prospectus by reference to the Current Report on Form 8-K dated October 4, 2000; and the consolidated financial statements of DJONT Operations, L.L.C. incorporated in this prospectus by reference to the Annual Report on Form 10-K of FelCor Lodging Trust Incorporated for the year ended December 31, 1999 have been so included or incorporated in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 130 137 INDEX TO FINANCIAL STATEMENTS FELCOR LODGING LIMITED PARTNERSHIP
PAGE ---- Consolidated Balance Sheets -- June 30, 2000 (unaudited) and December 31, 1999......................................... F-2 Consolidated Statements of Operations for the three and six months ended June 30, 2000 and 1999 (unaudited)........... F-3 Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999 (unaudited).................. F-4 Notes to Consolidated Financial Statements.................. F-5 Unaudited Pro Forma Financial Information: Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2000, the twelve months ended June 30, 2000, and the year ended December 31, 1999.... F-15 Notes to Pro Forma Consolidated Statements of Operations............................................. F-19 Pro Forma Consolidated Balance Sheet as of June 30, 2000................................................... F-20 Notes to Pro Forma Consolidated Balance Sheet............. F-22 Report of Independent Accountants........................... F-23 Consolidated Balance Sheets -- December 31, 1999 and 1998... F-24 Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997.......................... F-25 Consolidated Statements of Partners' Capital for the years ended December 31, 1999, 1998 and 1997.................... F-26 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997.......................... F-27 Notes to Consolidated Financial Statements.................. F-28 FELCOR LODGING TRUST INCORPORATED Consolidated Balance Sheets -- June 30, 2000 (unaudited) and December 31, 1999......................................... F-51 Consolidated Statements of Operations for the three and six months ended June 30, 2000 and 1999 (unaudited)........... F-52 Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999 (unaudited).................. F-53 Notes to Consolidated Financial Statements.................. F-54 Unaudited Pro Forma Financial Information: Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2000, the twelve months ended June 30, 2000, and the year ended December 31, 1999.... F-62 Notes to Pro Forma Consolidated Statements of Operations............................................. F-66 Pro Forma Consolidated Balance Sheet as of June 30, 2000................................................... F-67 Notes to Pro Forma Consolidated Balance Sheet............. F-69
F-1 138 FELCOR LODGING LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JUNE 30, DECEMBER 31, 2000 1999 -------- ------------ (UNAUDITED) ASSETS Investment in hotels, net of accumulated depreciation of $397,735 at June 30, 2000 and $330,555 at December 31, 1999...................................................... $3,796,755 $4,035,344 Investment in unconsolidated entities....................... 133,038 136,718 Assets held for sale........................................ 135,647 Cash and cash equivalents................................... 50,852 36,123 Due from Lessees............................................ 28,598 18,394 Note receivable from unconsolidated entity.................. 7,728 7,760 Deferred expenses, net of accumulated amortization of $6,874 at June 30, 2000 and $4,491 at December 31, 1999.......... 17,093 15,473 Other assets................................................ 7,054 5,939 ---------- ---------- Total assets...................................... $4,176,765 $4,255,751 ========== ========== LIABILITIES AND PARTNERS' CAPITAL Debt, net of discount of $1,288 at June 30, 2000 and $1,401 at December 31, 1999...................................... $1,882,743 $1,833,954 Distributions payable....................................... 35,237 39,657 Accrued expenses and other liabilities...................... 73,335 65,480 Deferred rent............................................... 18,604 Minority interest in other partnerships..................... 50,710 51,671 ---------- ---------- Total liabilities................................. 2,060,629 1,990,762 ---------- ---------- Commitments and contingencies (Notes 5 and 6) Redeemable units at redemption value........................ 151,948 52,338 Preferred units: Series A Cumulative Preferred Units, 6,031 and 6,050 units issued and outstanding at June 30, 2000 and December 31, 1999, respectively................................. 150,765 151,250 Series B Redeemable Preferred Units, 58 units issued and outstanding............................................ 143,750 143,750 Partners' capital........................................... 1,669,673 1,917,651 ---------- ---------- Total liabilities and partners' capital........... $4,176,765 $4,255,751 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-2 139 FELCOR LODGING LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED, IN THOUSANDS EXCEPT FOR PER UNIT DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Revenues: Percentage lease revenue................ $133,286 $131,891 $256,335 $256,882 Equity in income from unconsolidated entities............................. 3,769 2,591 5,648 3,837 Other revenue........................... 810 705 2,687 1,385 -------- -------- -------- -------- Total revenues.................. 137,865 135,187 264,670 262,104 -------- -------- -------- -------- Expenses: Depreciation............................ 41,080 37,737 81,480 74,162 Reserve for assets held for sale........ 63,000 63,000 Interest expense........................ 39,740 30,750 77,644 59,172 Taxes, insurance, and other............. 17,234 15,425 35,877 32,372 Land leases............................. 6,151 4,479 11,711 8,485 General and administrative.............. 2,713 2,509 6,112 4,753 Minority interest in other partnerships......................... 1,125 833 2,093 1,639 -------- -------- -------- -------- Total expenses.................. 171,043 91,733 277,917 180,583 -------- -------- -------- -------- Net income (loss) before nonrecurring items................................... (33,178) 43,454 (13,247) 81,521 Gain on sale of land...................... 875 875 Extraordinary charge from write off of deferred financing fees................. (1,113) (1,113) -------- -------- -------- -------- Net income (loss)......................... (32,303) 42,341 (12,372) 80,408 Preferred distributions................... 6,174 6,184 12,358 12,368 -------- -------- -------- -------- Net income (loss) applicable to unitholders............................. $(38,477) $ 36,157 $(24,730) $ 68,040 ======== ======== ======== ======== Per unit data: Basic: Net income (loss) applicable to unitholders.......................... $ (0.62) $ 0.51 $ (0.39) $ 0.96 ======== ======== ======== ======== Weighted average units outstanding...... 62,312 71,000 63,066 70,998 ======== ======== ======== ======== Diluted: Net income (loss) applicable to unitholders.......................... $ (0.62) $ 0.51 $ (0.39) $ 0.95 ======== ======== ======== ======== Weighted average units outstanding...... 62,543 71,338 63,297 71,334 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-3 140 FELCOR LODGING LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED, IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, -------------------------- 2000 1999 ----------- ----------- Cash flows from operating activities: Net income (loss)......................................... $ (12,372) $ 80,408 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation........................................... 81,480 74,162 Gain on sale of land................................... (875) Reserve for assets held for sale....................... 63,000 Amortization of deferred financing fees................ 2,383 1,303 Accretion of debt...................................... (446) (494) Amortization of unearned officers' and directors' compensation......................................... 472 350 Equity in income from unconsolidated entities.......... (5,648) (3,837) Extraordinary charge for write off of deferred financing fees....................................... 1,113 Minority interest in other partnerships................ 2,093 1,639 Changes in assets and liabilities: Due from Lessees....................................... (10,204) (13,356) Deferred expenses...................................... (4,003) (5,538) Other assets........................................... (1,251) (1,140) Deferred rent.......................................... 18,604 Accrued expenses and other liabilities................. 5,510 15,343 --------- --------- Net cash flow provided by operating activities.... 138,743 149,953 --------- --------- Cash flows used in investing activities: Improvements and additions to hotels...................... (41,408) (148,519) Acquisition of hotel assets............................... (10,802) Proceeds from sale of assets.............................. 1,071 15,091 Cash distributions from unconsolidated entities........... 11,708 13,297 --------- --------- Net cash flow used in investing activities........ (28,629) (130,933) --------- --------- Cash flows from financing activities: Proceeds from borrowings.................................. 500,892 744,000 Repayment of borrowings................................... (451,847) (630,899) Purchase of treasury stock................................ (56,733) Buyback of assumed stock options.......................... (1,860) Other distributions....................................... (3,054) Distributions paid to preferred unitholders............... (12,368) (13,619) Distributions paid to unitholders......................... (70,415) (102,625) --------- --------- Net cash flow used in financing activities........ (95,385) (3,143) --------- --------- Net change in cash and cash equivalents..................... 14,729 15,877 Cash and cash equivalents at beginning of periods........... 36,123 34,692 --------- --------- Cash and cash equivalents at end of periods................. $ 50,852 $ 50,569 ========= ========= Supplemental cash flow information -- Interest paid............................................. $ 73,259 $ 55,549 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-4 141 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION FelCor Lodging Limited Partnership and its subsidiaries (the "Company") at June 30, 2000, owned interests in 188 hotels with nearly 50,000 rooms and suites (collectively the "Hotels"). The sole general partner of the Company is FelCor Lodging Trust Incorporated ("FelCor"), one of the nation's largest hotel real estate investment trusts ("REIT"). At June 30, 2000 FelCor owned a greater than 88% equity interest in the Company. The Company owns 100% of the interest in 163 of the Hotels, a 90% or greater interest in entities owning seven hotels, a 60% interest in an entity owning two hotels and 50% interests in separate entities that own 16 hotels. The Company is the owner of the largest number of Embassy Suites(R), Crowne Plaza(R), Holiday Inn(R), and independently owned Doubletree(R) branded hotels in the world. At June 30, 2000, the Company leased 86 of the Hotels to DJONT Operations, L.L.C., a Delaware limited liability company, or a consolidated subsidiary thereof (collectively "DJONT"), and leased 100 of the Hotels to Bristol Hotels & Resorts, or a consolidated subsidiary thereof ("Bristol" and, together with DJONT, the "Lessees"). Two Hotels were operated without a lease. The following table provides a schedule of the Hotels, by brand, operated by each of the Company's Lessees at June 30, 2000:
NOT OPERATED BRAND DJONT BRISTOL UNDER A LEASE TOTAL - ----- ----- ------- ------------- ----- Embassy Suites................................ 60 60 Holiday Inn................................... 43 1 44 Crowne Plaza and Crowne Plaza Suites(R)....... 18 18 Doubletree and Doubletree Guest Suites(R)..... 14 14 Holiday Inn Select(R)......................... 10 10 Sheraton(R) and Sheraton Suites(R)............ 10 10 Hampton Inn(R)................................ 9 9 Holiday Inn Express(R)........................ 5 5 Fairfield Inn(R).............................. 5 5 Harvey Hotel(R)............................... 4 4 Independents.................................. 2 1 3 Courtyard by Marriott(R)...................... 2 2 Four Points by Sheraton(R).................... 1 1 Hilton Suites(R).............................. 1 1 Homewood Suites(R)............................ 1 1 Westin(R)..................................... 1 1 -- --- -- --- Total Hotels........................ 86 100 2 188 == === == ===
The Hotels are located in the United States (35 states) and Canada, with a concentration in Texas (41 hotels), California (20 hotels), Florida (18 hotels) and Georgia (15 hotels). Thomas J. Corcoran, Jr., the President, Chief Executive Officer, and a Director of FelCor, and Hervey A. Feldman, Chairman Emeritus of FelCor, beneficially own a 50% voting common equity interest in DJONT. The remaining 50% nonvoting common equity interest is beneficially owned by the children of Charles N. Mathewson, a director of FelCor and major initial investor in the Company. At June 30, 2000, DJONT had entered into management agreements pursuant to which 72 of the Hotels leased by it were managed by subsidiaries of Hilton Hotels Corporation F-5 142 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ("Hilton"), 11 were managed by subsidiaries of Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") and three were managed by two unrelated management companies. At June 30, 2000, Bristol, which became a subsidiary of Bass plc ("Bass") by virtue of the merger between Bristol and a subsidiary of Bass on March 31, 2000, leased and managed 100 Hotels and managed and operated one hotel, in which the Company owned a 50% interest, without a lease. Bass is one of the largest hotel operating companies in the world. Certain reclassifications have been made to prior period financial information to conform to the current period's presentation with no effect to previously reported net income or shareholder's equity. The financial information for the three and six months ended June 30, 2000 and 1999, is unaudited but includes all adjustments (consisting only of normal recurring accruals) which the Company considers necessary for a fair presentation of the results for the periods. The financial information should be read in conjunction with the consolidated financial statements for the year ended December 31, 1999, included herein. Operating results for the three and six months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2000. 2. DEFERRED RENT Effective January 2000, Percentage Leases with regard to 68 of the Company's 188 hotels were changed to provide for the computation of rent on an annual, rather than quarterly basis. This should result in no change in annual Percentage Rent or cash flows. In accordance with Staff Accounting Bulletin No. 101 (SAB 101), this change requires that the Company defer Percentage Lease revenue until annual thresholds are exceeded. This deferred rent is expected to be fully earned and recognized as Percentage Lease Revenue by the end of 2000. 3. ASSETS HELD FOR SALE The Company has identified 25 hotels that it considers non-strategic and has announced its intention to sell such hotels within the next year. Three of the hotels are leased by DJONT and the other 22 are leased and managed by Bristol. The Company expects gross sales proceeds from these hotels to be approximately $150 million and net proceeds to be approximately $136 million. In connection with the decision to sell these hotels, the Company has recorded, at June 30, 2000, a one-time reserve of $63 million representing the difference between the net book value of these hotels and the estimated net proceeds. The results of operations associated with the assets held for sale, included in the Company's results of operations, for the six months ended June 30, 2000, is $6.1 million. The hotels were depreciated through June 30, 2000. 4. INVESTMENT IN UNCONSOLIDATED ENTITIES The Company owned 50% interests in separate entities owning 16 hotels at June 30, 2000, and 15 hotels at June 30, 1999, a parcel of undeveloped land, and a condominium management company. The Company also owned a 97% nonvoting interest in an entity that owns an annex to a hotel owned by the Company and holds a 50% interest in an entity that is developing condominiums for sale. The Company accounts for its investments in these unconsolidated entities under the equity method. F-6 143 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Summarized unaudited combined financial information for 100% of these unconsolidated entities is as follows (in thousands):
JUNE 30, ------------------- 2000 1999 -------- -------- Balance sheet information: Investment in hotels..................................... $339,795 $269,123 Non-recourse mortgage debt............................... $265,874 $196,462 Equity................................................... $ 88,096 $ 93,524
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ----------------- 2000 1999 2000 1999 -------- -------- ------- ------- Statements of Operations Information: Total revenues............................... $21,245 $17,137 $39,173 $31,297 Net income................................... $ 8,715 $ 6,358 $13,649 $10,078 Net income attributable to the Company....... $ 4,304 $ 3,127 $ 6,719 $ 4,908 Amortization of cost in excess of book value..................................... (535) (536) (1,071) (1,071) ------- ------- ------- ------- Equity in income from unconsolidated entities.................................. $ 3,769 $ 2,591 $ 5,648 $ 3,837 ======= ======= ======= =======
5. DEBT Debt at June 30, 2000, and December 31, 1999, consisted of the following (in thousands):
JUNE 30, DECEMBER 31, COLLATERAL INTEREST RATE MATURITY DATE 2000 1999 ---------------- ------------------- ------------- ---------- ------------ Floating Rate Debt: Line of credit............ (a) LIBOR + 163bp June 2001 $ 285,000 $ 351,000 Senior term loan.......... (a) LIBOR + 275bp March 2004 249,000 250,000 Mortgage debt............. 3 hotels LIBOR + 200bp February 2003 62,239 62,553 Other..................... Uncollateralized Up to LIBOR + 200bp Various 11,032 32,282 ---------- ---------- Total floating rate debt.............. 607,271 695,835 ---------- ---------- Fixed Rate Debt: Line of credit -- swapped................. (a) 7.17-7.56% June 2001 125,000 313,000 Publicly-traded term notes................... (a) 7.38% October 2004 174,441 174,377 Publicly-traded term notes................... (a) 7.63% October 2007 124,271 124,221 Mortgage debt............. 15 hotels 7.24% November 2007 141,367 142,542 Senior term loan -- swapped................. (a) 8.56% March 2004 125,000 125,000 Mortgage debt............. 7 hotels 7.54% April 2009 98,354 99,075 Mortgage debt............. 6 hotels 7.55% June 2009 73,946 74,483 Mortgage debt............. 7 hotels 8.73% May 2010 144,865 Mortgage debt............. 8 hotels 8.70% May 2010 185,762 Other..................... 13 hotels 6.96%-7.23% 2000-2005 82,466 85,421 ---------- ---------- Total fixed rate debt.............. 1,275,472 1,138,119 ---------- ---------- Total debt.......... $1,882,743 $1,833,954 ========== ==========
- ------------ (a) Collateralized by stock and partnership interests in certain subsidiaries of FelCor. F-7 144 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Thirty-day LIBOR at June 30, 2000, was 6.649%. A portion of the Company's Line of Credit and Senior Term Loan is matched with interest rate swap agreements which effectively convert the variable rate on the Line of Credit and Senior Term Loan to a fixed rate. The Line of Credit and the Senior Term Loan contain various affirmative and negative covenants including limitations on total indebtedness, total secured indebtedness, and cash distributions, as well as the obligation to maintain certain minimum tangible net worth and certain minimum interest and debt service coverage ratios. At June 30, 2000, the Company was not in default with respect to any such covenants. The Company's other borrowings contain affirmative and negative covenants that are generally equal to or less restrictive than the Line of Credit and Senior Term Loan. Most of the mortgage debt is non-recourse to the Company (with certain exceptions) and contains provisions allowing for the substitution of collateral upon satisfaction of certain conditions. Most of the mortgage debt is prepayable; subject, however, to various prepayment penalties, yield maintenance, or defeasance obligations. On April 26, 2000, the Company closed a 10-year, $145 million First Mortgage Term Loan, which is secured by seven Sheraton hotels and carries an 8.73% fixed interest rate. On May 2, 2000, the Company closed $186 million of 10-year, First Mortgage Term Loans which are secured by eight Embassy Suites hotels and carry an 8.70% fixed interest rate. The loans are non-recourse, mature in May 2010, and amortize over 25 years. The proceeds of these loans were used to reduce borrowings under the Company's $850 million Line of Credit. 6. COMMITMENTS AND RELATED PARTY TRANSACTIONS The Company is to receive rental income from the Lessees under the Percentage Leases which expire in 2003 (six hotels), 2004 (11 hotels), 2005 (18 hotels), 2006 (22 hotels), 2007 (27 hotels), 2008 (44 hotels), and thereafter (19 hotels). The rental income under the Percentage Leases between 15 of the unconsolidated entities, of which the Company owns 50%, is payable by the Lessee to the respective entities and is not included in the schedule of future lease commitments to the Company. Minimum future rental income (i.e., base rents) payable to the Company under these noncancelable operating leases at June 30, 2000, excluding the 25 hotels that have been designated as held for sale, is as follows (in thousands):
LESSEES ----------------------- YEAR DJONT BRISTOL TOTAL - ---- ---------- ---------- ---------- Remainder of 2000........................ $ 72,351 $ 84,402 $ 156,753 2001..................................... 148,009 168,805 316,814 2002..................................... 148,240 168,816 317,056 2003..................................... 137,190 166,123 303,313 2004..................................... 132,584 158,827 291,411 2005 and thereafter...................... 447,848 620,570 1,068,418 ---------- ---------- ---------- $1,086,222 $1,367,543 $2,453,765 ========== ========== ==========
F-8 145 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Minimum future rental income (i.e., base rents) payable to the Company under the noncancelable operating leases for the 25 hotels held for sale as of June 30, 2000 is as follows (in thousands):
LESSEES ----------------- YEAR DJONT BRISTOL TOTAL - ---- ------- ------- -------- Remainder of 2000................................ $ 1,575 $ 6,338 $ 7,913 2001............................................. 3,150 12,676 15,826 2002............................................. 3,150 12,676 15,826 2003............................................. 3,150 12,578 15,728 2004............................................. 3,150 12,382 15,532 2005 and thereafter.............................. 4,696 34,255 38,951 ------- ------- -------- $18,871 $90,905 $109,776 ======= ======= ========
Certain entities owning interests in DJONT and managers for certain hotels have agreed to make loans to DJONT of up to an aggregate of approximately $17.3 million to the extent necessary to enable DJONT to pay rent and other obligations due under the respective Percentage Leases relating to a total of 38 of the Hotels. No such loans were outstanding at June 30, 2000. DJONT engages third-party managers to operate the Hotels leased by it and generally pays such managers a base management fee based on a percentage of room and suite revenue and an incentive management fee based on DJONT's income before overhead expenses for each hotel. In certain instances, the hotel managers have subordinated fees and are committed to make subordinated loans to DJONT, if needed, to meet its rental and other obligations under the Percentage Leases. Bristol serves as both the lessee and manager of 100 Hotels leased to it by the Company at June 30, 2000, and, as such, is compensated for both roles through the profitability of the Hotels, after meeting their operating expenses and rental obligations under the Percentage Leases. Bristol has entered into an absolute and unconditional guarantee of the obligations of the Bristol Lessees under the Percentage Leases, and is required to maintain a minimum liquid net worth. A portion of this liquid net worth is being satisfied through a letter of credit for the benefit of the Company. This letter of credit is subject to periodic reductions upon satisfaction of certain conditions and, at June 30, 2000, totaled $9.1 million. 7. SEGMENT INFORMATION The Company has determined that its reportable segments are those that are consistent with the Company's method of internal reporting, which segments its business by Lessee. The Company's Lessees at June 30, 2000, were DJONT and Bristol. F-9 146 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following tables present information for the reportable segments for the three and six months ended June 30, 2000 and 1999 for both DJONT and Bristol (in thousands):
CORPORATE SEGMENT NOT ALLOCABLE CONSOLIDATED THREE MONTHS ENDED JUNE 30, 2000 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL - -------------------------------- ------- -------- -------- ------------- ------------ Total revenues................. $74,338 $ 62,717 $137,055 $ 810 $137,865 Net income (loss).............. $33,193 $(23,785) $ 9,408 $(41,711) $(32,303) Funds from operations.......... $68,567 $ 57,197 $125,764 $(44,879) $ 80,885 Weighted average units outstanding(1)............... 67,232
CORPORATE SEGMENT NOT ALLOCABLE CONSOLIDATED THREE MONTHS ENDED JUNE 30, 1999 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL - -------------------------------- ------- ------- -------- ------------- ------------ Total revenues................. $72,845 $62,114 $134,959 $ 228 $135,187 Net income (loss).............. $43,252 $33,233 $ 76,485 $(34,144) $ 42,341 Funds from operations.......... $65,385 $51,264 $116,649 $(36,266) $ 80,383 Weighted average units outstanding(1)............... 76,029
CORPORATE SEGMENT NOT ALLOCABLE CONSOLIDATED SIX MONTHS ENDED JUNE 30, 2000 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL - ------------------------------ -------- -------- -------- ------------- ------------ Total revenues............... $142,746 $119,237 $261,983 $ 2,687 $264,670 Net income (loss)............ $ 69,892 $ (1,059) $ 68,833 $(81,205) $(12,372) Funds from operations........ $132,459 $104,459 $236,918 $(87,538) $149,380 Weighted average units outstanding(1)............. 67,987
CORPORATE SEGMENT NOT ALLOCABLE CONSOLIDATED SIX MONTHS ENDED JUNE 30, 1999 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL - ------------------------------ -------- -------- -------- ------------- ------------ Total revenues............... $146,901 $114,752 $261,653 $ 451 $262,104 Net income (loss)............ $ 87,200 $ 57,795 $144,995 $(64,587) $ 80,408 Funds from operations........ $131,827 $ 92,348 $224,175 $(69,943) $154,232 Weighted average units outstanding(1)............. 76,008
- ------------ (1) Weighted average units outstanding are computed including dilutive options, unvested stock grants, and assuming conversion of Series A Preferred Units to Units. 8. TREASURY STOCK REPURCHASE PROGRAM On January 4, 2000, FelCor announced that its Board of Directors had approved a stock repurchase program, authorizing FelCor to purchase up to an aggregate of $200 million of its outstanding common shares. During the six months ended June 30, 2000, FelCor had repurchased approximately 3.1 million shares of FelCor common stock for approximately $56.7 million. This has been recorded as a reduction to Partners' Capital as a result of the redemption of units held by FelCor to fund the repurchase. F-10 147 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. BASS STOCK CONTRIBUTION In connection with the efforts of Bass to acquire Bristol, a Bass subsidiary (Bass America, Inc.) contributed 4,713,185 outstanding FelCor common shares held by it to the Company in exchange for a like number of units on February 28, 2000. This exchange did not affect the Company's FFO or earnings per unit, although it resulted in reducing FelCor's percentage ownership in the Company from approximately 95% to approximately 88%. 10. BUYBACK OF ASSUMED STOCK OPTIONS In the second quarter of 2000 the Company purchased options covering an aggregate of 349,443 shares of FelCor's Common Stock for approximately $1.9 million. The options were held by employees of Bristol Hotels & Resorts and were issued in substitution for stock options previously granted by Bristol Hotel Company that were outstanding at the time of its merger with FelCor in 1998. The options so purchased and retired had exercise prices ranging from $10.33 to $16.95 per share and the majority of these options were scheduled to vest in the third quarter of 2000. 11. EARNINGS PER UNIT The following table sets forth the computation of basic and diluted earnings (loss) per unit for the three and six months ended June 30, 2000 and 1999 (in thousands, except per unit data):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE JUNE ------------------ ------------------ 2000 1999 2000 1999 -------- ------- -------- ------- Numerator: Net income (loss) applicable to unitholders............................. $(38,477) $36,157 $(24,730) $68,040 Denominator: Denominator for basic earnings per unit -- weighted average units.................. 62,312 71,000 63,066 70,998 Effect of diluted securities: Options................................. 273 271 Restricted units........................ 231 65 231 65 -------- ------- -------- ------- Denominator for diluted earnings per unit-- adjusted weighted average units and assumed conversions..................... 62,543 71,338 63,297 71,334 ======== ======= ======== ======= Earnings (loss) per unit data: Basic...................................... $ (0.62) $ 0.51 $ (0.39) $ 0.96 Diluted.................................... $ (0.62) $ 0.51 $ (0.39) $ 0.95
The Series A Preferred Units and most of the options granted are anti-dilutive and not included in the calculation of diluted earnings per unit. 12. CONSOLIDATING FINANCIAL INFORMATION Certain of the Company's wholly-owned subsidiaries (FelCor/CSS Holdings, L.P.; FelCor/ CSS Hotels, L.L.C.; FelCor/LAX Hotels L.L.C.; FelCor Eight Hotels, L.L.C.; FelCor/St. Paul Holdings, L.P.; FelCor/LAX Holdings, L.P.; FHAC Nevada Holdings, L.L.C.; FHAC Texas F-11 148 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Holdings, L.P., FelCor Omaha Hotel Company, L.L.C., FelCor Country Villa Hotel, L.L.C., FelCor Moline Hotel, L.L.C., FelCor Canada Co. and FelCor Hotel Asset Company, L.L.C., collectively "Subsidiary Guarantors"), together with FelCor and one of its wholly-owned subsidiaries (FelCor Nevada Holdings, L.L.C.), are guarantors of senior debt. The following tables present consolidating information for the Subsidiary Guarantors. CONSOLIDATING BALANCE SHEET JUNE 30, 2000 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ---------- ------------- ------------ ------------ ASSETS Net investment in hotel properties.................. $ 593,248 $1,663,611 $1,539,896 $3,796,755 Investment in consolidated entities.................... 2,814,305 (2,814,305) Investment in unconsolidated entities.................... 116,811 16,227 133,038 Assets held for sale.......... 4,582 118,510 12,555 135,647 Cash and cash equivalents..... 21,582 8,269 21,001 50,852 Due from Lessee............... 14,278 18,218 (3,898) 28,598 Due (to) from subsidiary...... (244,385) 263,404 (19,019) Note receivable from unconsolidated entity....... 7,728 7,728 Deferred assets............... 10,772 1,245 5,076 17,093 Other assets.................. 5,215 1,834 5 7,054 ---------- ---------- ---------- ----------- ---------- Total assets......... $3,344,136 $2,091,318 $1,555,616 $(2,814,305) $4,176,765 ========== ========== ========== =========== ========== LIABILITIES AND PARTNERS' CAPITAL Debt.......................... $1,117,360 $ 118,227 $ 647,156 $1,882,743 Distributions payable......... 35,237 35,237 Accrued expenses and other liabilities................. 73,335 73,335 Deferred rent................. 2,068 7,771 8,765 18,604 Minority interest -- other partnerships................ 50,710 50,710 ---------- ---------- ---------- ----------- ---------- Total liabilities.... 1,228,000 125,998 706,631 -- 2,060,629 ---------- ---------- ---------- ----------- ---------- Redeemable units, at redemption value............ 151,948 151,948 Preferred Units............... 294,515 294,515 Partners' capital............. 1,669,673 1,965,320 848,985 (2,814,305) 1,669,673 ---------- ---------- ---------- ----------- ---------- Total liabilities and partners' capital............ $3,344,136 $2,091,318 $1,555,616 $(2,814,305) $4,176,765 ========== ========== ========== =========== ==========
F-12 149 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED ----------- ---------- ------------- ------------ Revenues: Percent rent........................... $ 55,332 $123,202 $ 77,801 $256,335 Equity in income from unconsolidated entities............................. 4,933 715 5,648 Other revenue.......................... 2,687 2,687 -------- -------- -------- -------- Total revenue................ 62,952 123,917 77,801 264,670 -------- -------- -------- -------- Expenses: General and administrative............. 1,319 2,937 1,856 6,112 Depreciation........................... 17,803 37,591 26,086 81,480 Taxes, insurance and other............. 7,480 15,292 13,105 35,877 Land leases............................ 965 9,491 1,255 11,711 Reserve for assets held for sale....... 6,170 53,200 3,630 63,000 Interest expense....................... 54,574 5,454 17,616 77,644 Minority interest other partnerships... 1,493 600 2,093 -------- -------- -------- -------- Total expenses............... 89,804 123,965 64,148 277,917 -------- -------- -------- -------- Net income (loss) before nonrecurring items................................ (26,852) (48) 13,653 (13,247) Gain on sale of assets................. 875 875 -------- -------- -------- -------- Net income (loss)...................... (26,852) 827 13,653 (12,372) Preferred distributions................ 12,358 12,358 -------- -------- -------- -------- Net income (loss) applicable to unitholders.......................... $(39,210) $ 827 $ 13,653 $(24,730) ======== ======== ======== ========
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED ----------- ---------- ------------- ------------ Cash flows from operating activities.... $ 4,335 $ 90,052 $ 44,356 $138,743 Cash flows from (used in) investing activities............................ (1,174) (16,628) (10,827) (28,629) Cash flows from (used in) financing activities............................ 15,328 (77,573) (33,140) (95,385) ------- -------- -------- -------- Change in cash and cash equivalents..... 18,489 (4,149) 389 14,729 Cash and cash equivalents at beginning of period............................. 3,093 12,418 20,612 36,123 ------- -------- -------- -------- Cash and cash equivalents at end of period................................ $21,582 $ 8,269 $ 21,001 $ 50,852 ======= ======== ======== ========
F-13 150 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. SUBSEQUENT EVENTS On July 14, the Company entered into a binding sale contract to sell its Embassy Suites hotel, Los Angeles International Airport-North, California (215 suites) for a gross price of approximately $24 million. The Company expects the sale will close by the end of August 2000, and FelCor will record a gain on sale of approximately $3 million, in the third quarter of 2000. This hotel is not included in the 25 hotels held for sale. On July 21, 2000, FelCor's Independent Directors approved the acquisition of 100% of DJONT effective January 1, 2001. The purchase price is approximately 417,000 units of the Company. On August 1, 2000, the Company renewed its Line of Credit. The Line of Credit was reduced from $850 million to $600 million and the maturity was extended from July 2001 to August 2003. The effective interest rate ranges from 87.5 basis points to 250 basis points above LIBOR depending on the Company's leverage and corporate rating. On September 15, 2000, the Company completed the private placement of $400 million in aggregate principal amount of its long-term senior unsecured notes. The notes bear interest at 9 1/2% per annum, mature in 2008, and were priced at 98.633% to yield 9 3/4%. F-14 151 FELCOR LODGING LIMITED PARTNERSHIP PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE TWELVE MONTHS ENDED JUNE 30, 2000, AND THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) The following unaudited Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2000, the twelve months ended June 30, 2000, and the year ended December 31, 1999 are based in part upon the Consolidated Statements of Operations of FelCor Lodging Limited Partnership ("FelCor LP") for the six months ended June 30, 2000, and the year ended December 31, 1999 included herein. The Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2000, the twelve months ended June 30, 2000, and the year ended December 31, 1999 assumes that all the following occurred on January 1, 1999: (i) the issuance of $400 million of senior unsecured debt and the application of the net proceeds, (ii) the completion of the financing transactions which occurred in 2000, (iii) the repurchase by FelCor of $164.3 million of its common stock through August 31, 2000, and (iv) the sale of 25 non-strategic hotels identified in the second quarter of 2000. In management's opinion, all material adjustments necessary to reflect the effects of the foregoing transactions have been made. The following unaudited pro forma consolidated statements of operations are not necessarily indicative of what the actual results of operations of FelCor LP would have been assuming such transactions had been completed as of January 1, 1999, nor do they purport to represent the results of operations for future periods. F-15 152 FELCOR LODGING LIMITED PARTNERSHIP PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE TWELVE MONTHS ENDED JUNE 30, 2000, AND THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER UNIT AMOUNTS)
DEBT TRANSACTION AND STOCK REPURCHASE SENIOR FELCOR LP COMPLETED THROUGH SALE OF UNSECURED THE SIX MONTHS ENDED JUNE 30, HISTORICAL AUGUST 31, 2000 25 HOTELS DEBT PRO FORMA 2000 (A) (B) (C) (D) TOTAL - ----------------------------- ---------- ----------------- --------- --------- --------- Revenues: Percentage lease revenue... $256,335 $(11,232) $245,103 Equity in income of unconsolidated entities................. 5,648 5,648 Other revenue.............. 2,687 2,687 -------- ------- -------- ------- -------- Total revenue....... 264,670 (11,232) 253,438 -------- ------- -------- ------- -------- Expenses: General and administrative........... 6,112 6,112 Land Leases................ 11,711 (21) 11,690 Reserve for assets held for sale..................... 63,000 (63,000) Depreciation............... 81,480 (3,668) 77,812 Taxes, insurance and other.................... 35,877 (1,687) 34,190 Interest................... 77,644 $ 2,350(E) (5,359) $ 2,221(F) 76,856 Minority interest in other partnerships............. 2,093 2,093 -------- ------- -------- ------- -------- Total expenses...... 277,917 2,350 (73,735) 2,221 208,753 -------- ------- -------- ------- -------- Net income (loss) before nonrecurring items......... (13,247) (2,350) 62,503 (2,221) 44,685 Gain on sale of land......... 875 875 -------- ------- -------- ------- -------- Net income (loss)............ (12,372) (2,350) 62,503 (2,221) 45,560 Preferred dividends.......... 12,358 12,358 -------- ------- -------- ------- -------- Net income (loss) applicable to unitholders............. $(24,730) $(2,350) $ 62,503 $(2,221) $ 33,202 ======== ======= ======== ======= ======== Diluted per unit data: Net income applicable to unitholders........... $ (0.39) $ 0.54 ======== ======== Weighted average units outstanding........... 63,297 (1,501)(G) 61,796 ======== ======= ========
See notes to pro forma consolidated statements of operations. F-16 153 FELCOR LODGING LIMITED PARTNERSHIP PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE TWELVE MONTHS ENDED JUNE 30, 2000, AND THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER UNIT AMOUNTS)
DEBT TRANSACTIONS AND STOCK FELCOR LP FELCOR LP REPURCHASE SIX MONTHS SIX MONTHS COMPLETED ENDED ENDED THROUGH SENIOR JUNE 30, DECEMBER 31, AUGUST 31, SALE OF UNSECURED THE TWELVE MONTHS ENDED 2000 1999 2000 25 HOTELS DEBT PRO FORMA JUNE 30, 2000 (A) (A) (B) (C) (D) TOTAL - ----------------------- ---------- ------------ ------------ --------- --------- --------- Revenues: Percentage lease revenue...... $256,335 $234,011 $(21,967) $468,379 Equity in income of unconsolidated entities..... 5,648 4,647 10,295 Other revenue................. 2,687 3,239 5,926 -------- -------- -------- -------- Total revenue........... 264,670 241,897 (21,967) 484,600 -------- -------- -------- -------- Expenses: General and administrative.... 6,112 4,369 10,481 Land leases................... 11,711 9,073 (45) 20,739 Reserve for assets held for sale........................ 63,000 (63,000) Depreciation.................. 81,480 78,786 (7,193) 153,073 Taxes, insurance and other.... 35,877 27,200 (3,213) 59,864 Interest...................... 77,644 66,263 $ 10,551(E) (10,556) $ 6,023(F) 149,925 Minority interest in other partnerships................ 2,093 1,074 3,167 -------- -------- -------- -------- ------- -------- Total expenses.......... 277,917 186,765 10,551 (84,007) 6,023 397,249 -------- -------- -------- -------- ------- -------- Net income (loss) before nonrecurring items............ (13,247) 55,132 (10,551) 62,040 (6,023) 87,351 Gain on sale of assets.......... 875 236 1,111 -------- -------- -------- -------- ------- -------- Net income (loss)............... (12,372) 55,368 (10,551) 62,040 (6,023) 88,462 Preferred dividends............. 12,358 12,367 24,725 -------- -------- -------- -------- ------- -------- Net income (loss) applicable to unitholders................... $(24,730) $ 43,001 $(10,551) $ 62,040 $(6,023) $ 63,737 ======== ======== ======== ======== ======= ======== Diluted per unit data: Net income applicable to unitholders............... $ (0.39) $ 0.62 $ 1.03 ======== ======== ======== Weighted average units outstanding............... 63,297 69,775 (1,573)(F) 61,724 ======== ======== ======== ========
See notes to pro forma consolidated statements of operations. F-17 154 FELCOR LODGING LIMITED PARTNERSHIP PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE TWELVE MONTHS ENDED JUNE 30, 2000, AND THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER UNIT AMOUNTS)
DEBT TRANSACTIONS AND STOCK REPURCHASE COMPLETED THROUGH FELCOR LP AUGUST 31, SALE OF SENIOR UNSECURED THE YEAR ENDED HISTORICAL 2000 25 HOTELS DEBT PRO FORMA DECEMBER 31, 1999 (A) (B) (C) (D) TOTAL ----------------- ---------- ----------------- --------- ---------------- --------- Revenues: Percentage lease revenue................ $490,893 $(23,116) $467,777 Equity in income of unconsolidated entities............... 8,484 8,484 Other revenue............ 4,624 4,624 -------- -------- -------- Total revenue..... 504,001 (23,116) 480,885 -------- -------- -------- Expenses: General and administrative......... 9,122 9,122 Depreciation............. 152,948 (6,765) 146,183 Taxes, insurance and other.................. 59,572 (3,256) 56,316 Land Leases.............. 17,558 (42) 17,516 Interest................. 125,435 $ 16,922(E) (10,145) $ 9,215(F) 141,427 Minority interest in other partnerships..... 2,713 2,713 -------- -------- -------- -------- -------- Total expenses.... 367,348 16,922 (20,208) 9,215 373,277 -------- -------- -------- -------- -------- Net income before nonrecurring item........ 136,653 (16,922) (2,908) (9,215) 107,608 Gain on sale of assets..... 236 236 -------- -------- -------- -------- -------- Net income................. 136,889 (16,922) (2,908) (9,215) 107,844 Preferred dividends........ 24,735 24,735 -------- -------- -------- -------- -------- Net income applicable to unitholders.............. $112,154 $(16,922) $ (2,908) $ (9,215) $ 83,109 ======== ======== ======== ======== ======== Diluted per unit data: Net income applicable to unitholders....... $ 1.59 $ 1.34 ======== ======== Weighted average units outstanding.......... 70,561 (8,656)(G) 61,905 ======== ======== ======== ======== ========
See notes to pro forma consolidated statements of operations. F-18 155 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE TWELVE MONTHS ENDED JUNE 30, 2000 AND THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) (A) Represents FelCor LP's historical results of operations, excluding extraordinary charges from the write off of deferred financing fees. (B) Represents adjustment to FelCor LP's historical results of operations assuming that (i) the debt transactions completed in 2000, which include placement of $330.6 million of mortgage debt and renewal of the Company's Line of Credit and (ii) the $164.3 million repurchase by FelCor of its common stock through August 31, 2000, had occurred as of January 1, 1999. (C) Represents the historical results of operations for the 25 non-strategic hotels that the Company has announced its intent to sell. The reduction in interest expense reflects the repayment of $5 million in mortgage debt, and of $131 million borrowed under our line of credit, from the net proceeds of the sale of the 25 hotels. The interest rate used to calculate the pro forma interest on the Line of Credit during the periods presented is the applicable historical rate under the Line of Credit during the periods. (D) Represents adjustment to FelCor LP's historical results of operations assuming the completion of the issuance of the $400 million senior unsecured debt. (E) Represents pro forma interest expense based on (i) $330.6 million of mortgage debt borrowed in 2000 and used to paydown the Line of Credit and (ii) $164.3 million of FelCor's common stock repurchased through August 31, 2000. The interest rates used to calculate pro forma interest expense on the mortgage debt borrowed in 2000 are the actual rates for the new mortgage notes, of 8.73% and 8.70%. The rate for the paydown on the Line of Credit is the historical rate on the Line of Credit during the periods presented. The interest rate used to calculate pro forma interest on the $164.3 million stock repurchase is the historical rate on the Line of Credit during the periods presented adjusted to reflect the August 2000 renewal of the Line of Credit. (F) Represents pro forma interest expense on the $400 million of senior unsecured debt after using the net proceeds to repay a $374 million term loan and to reduce borrowings under the Line of Credit. The interest rates used to calculate pro forma interest expense are 9.50% for the senior unsecured debt and historical rates on the term loan and Line of Credit for the periods presented. (G) Represents the units retired associated with the number of shares of FelCor common stock which had been repurchased through August 31, 2000. F-19 156 FELCOR LODGING LIMITED PARTNERSHIP PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 (UNAUDITED) The following unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2000 is based in part on the Consolidated Balance Sheet of FelCor LP included herein. The Pro Forma Consolidated Balance Sheet assumes the completion of (i) the $400 million of senior unsecured debt, subsequent payoff of a $374 million term loan and paydown of the Line of Credit, (ii) the repurchase by FelCor of $9.2 million of its common stock between July 1, 2000 and August 31, 2000 funded from its Line of Credit and (iii) the sale of 25 non-strategic hotels identified in the second quarter of 2000. In management's opinion, all material adjustments necessary to reflect the effects of the foregoing transaction have been made. The following unaudited consolidated balance sheet is not necessarily indicative of what the actual financial position would have been assuming such transactions had been completed as of June 30, 2000, nor does it purport to represent the future financial position of FelCor LP. F-20 157 FELCOR LODGING LIMITED PARTNERSHIP PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 (UNAUDITED, IN THOUSANDS)
FELCOR LP HISTORICAL PRO FORMA (A) ADJUSTMENTS TOTAL ---------- ----------- ---------- ASSETS Net investment in hotels...................... $3,796,755 $3,796,755 Investment in unconsolidated entities......... 133,038 133,038 Assets held for sale.......................... 135,647 (135,647)(B) Cash and cash equivalents..................... 50,852 50,852 Due from Lessees.............................. 28,598 28,598 Note receivable from unconsolidated entity.... 7,728 7,728 Deferred expenses, net........................ 17,093 8,929(C) 26,022 Other assets.................................. 7,054 7,054 ---------- --------- ---------- Total assets........................ $4,176,765 $(126,718) $4,050,047 ========== ========= ========== LIABILITIES AND PARTNERS' EQUITY Debt and capital lease obligations............ $1,882,743 $(114,050)(D) $1,768,693 Distributions payable......................... 35,237 35,237 Accrued expenses and other liabilities........ 73,335 73,335 Deferred rent................................. 18,604 18,604 Minority interest in other partnerships....... 50,710 50,710 ---------- --------- ---------- Total liabilities................... 2,060,629 (114,050) 1,946,579 ---------- --------- ---------- Partners' equity: Redeemable units............................ 151,948 151,948 Series A Cumulative Preferred Units......... 150,765 150,765 Series B Redeemable Preferred Units......... 143,750 143,750 Partners' capital........................... 1,669,673 (12,668)(E) 1,657,005 ---------- --------- ---------- Total liabilities and partners' equity............................ $4,176,765 $(126,718) $4,050,047 ========== ========= ==========
See notes to pro forma consolidated balance sheet. F-21 158 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 (UNAUDITED, IN THOUSANDS) (A) Represents the historical consolidated balance sheet of FelCor LP as of June 30, 2000. (B) Represents the pro forma change in assets held for sale to reflect the sale of 25 hotels. (C) Represents the estimated costs of the $400 million senior unsecured debt of $12.4 million which are capitalized and amortized over the term of the debt after write off of unamortized loan costs of $3.4 million associated with the term loan. (D) Represents the pro forma change in debt from, (i) placement of $400 million senior unsecured notes with net proceeds of $388 million used to repay a $374 million term and the balance used to reduce borrowings under the Line of Credit, (ii) the repurchase by FelCor of $9.2 million of its common stock from July 1, 2000 through August 31, 2000 funded from the Line of Credit, and (iii) the net proceeds of the sale of 25 hotels of $136 million, used to repay $5 million in mortgage debt associated with these hotels and $131 million to reduce borrowings under the Line of Credit. (E) Represents the actual repurchase of $9.2 million of FelCor's common stock from July 1, 2000 through August 31, 2000 and the writeoff of unamortized deferred loan costs associated with the $374 million term loan repaid from the proceeds of the senior unsecured debt. F-22 159 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of FelCor Lodging Trust Incorporated In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, partners' capital and cash flows present fairly, in all material respects, the financial position of FelCor Lodging Limited Partnership at December 31, 1999 and 1998, and the consolidated results of operations and cash flows for the years ended December 31, 1999, 1998 and 1997, respectively, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Dallas, Texas February 1, 2000, except as to the information in Notes 18 and 19, for which the date is September 15, 2000. F-23 160 FELCOR LODGING LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 1998 (IN THOUSANDS)
1999 1998 ---------- ---------- ASSETS Investment in hotels, net of accumulated depreciation of $330,555 in 1999 and $178,072 in 1998..................... $4,035,344 $3,955,582 Investment in unconsolidated entities....................... 136,718 140,299 Cash and cash equivalents................................... 36,123 34,692 Due from Lessees............................................ 18,394 18,968 Note receivable from unconsolidated entity.................. 7,760 7,766 Deferred expenses, net of accumulated amortization of $4,491 in 1999 and $2,096 in 1998................................ 15,473 10,041 Other assets................................................ 5,939 8,035 ---------- ---------- Total assets...................................... $4,255,751 $4,175,383 ========== ========== LIABILITIES AND PARTNERS' CAPITAL Debt, net of discount of $1,401 in 1999 and $1,628 in 1998...................................................... $1,833,954 $1,594,734 Distributions payable....................................... 39,657 67,262 Accrued expenses and other liabilities...................... 65,480 57,312 Minority interest in other partnerships..................... 51,671 51,105 ---------- ---------- Total liabilities................................. 1,990,762 1,770,413 ---------- ---------- Commitments and contingencies (Notes 6 and 11) Redeemable units at redemption value........................ 52,338 67,595 Preferred units: Series A Cumulative Preferred Units, 6,050 units issued and outstanding........................................ 151,250 151,250 Series B Redeemable Preferred Units, 58 units issued and outstanding............................................ 143,750 143,750 Partners' Capital........................................... 1,917,651 2,042,375 ---------- ---------- Total liabilities and partners' capital........... $4,255,751 $4,175,383 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-24 161 FELCOR LODGING LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
1999 1998 1997 -------- -------- -------- Revenues: Percentage lease revenue............................... $490,893 $328,035 $169,114 Equity in income from unconsolidated entities.......... 8,484 7,017 6,963 Other revenue.......................................... 4,624 4,565 574 -------- -------- -------- Total revenues............................... 504,001 339,617 176,651 -------- -------- -------- Expenses: General and administrative............................. 9,122 5,254 3,743 Depreciation........................................... 152,948 90,835 50,798 Taxes, insurance and other............................. 59,572 37,158 21,483 Land leases............................................ 17,558 8,130 1,610 Interest expense....................................... 125,435 73,182 28,792 Minority interest in other partnerships................ 2,713 1,121 573 -------- -------- -------- Total expenses............................... 367,348 215,680 106,999 -------- -------- -------- Income before nonrecurring items....................... 136,653 123,937 69,652 Gain on sale of hotels, net............................ 236 477 Extraordinary charge from write off of deferred financing fees....................................... 1,113 3,075 185 -------- -------- -------- Net income............................................. 135,776 121,339 69,467 Preferred distributions................................ 24,735 21,423 11,797 -------- -------- -------- Net income applicable to unitholders................... $111,041 $ 99,916 $ 57,670 ======== ======== ======== Per unit data: Basic: Income applicable to unitholders before extraordinary charge............................ $ 1.59 $ 1.95 $ 1.70 Extraordinary charge.............................. (0.01) (0.06) (0.01) -------- -------- -------- Net income applicable to unitholders.............. $ 1.58 $ 1.89 $ 1.69 ======== ======== ======== Weighted average units outstanding................ 70,372 52,978 34,126 Diluted: Income applicable to unitholders before extraordinary charge............................ $ 1.59 $ 1.93 $ 1.68 Extraordinary charge.............................. (0.02) (0.06) (0.01) -------- -------- -------- Net income applicable to unitholders.............. $ 1.57 $ 1.87 $ 1.67 ======== ======== ======== Weighted average units outstanding................ 70,561 53,323 34,467
The accompanying notes are an integral part of these consolidated financial statements. F-25 162 FELCOR LODGING LIMITED PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN THOUSANDS, EXCEPT PER UNIT DATA) Balance, December 31, 1996.................................. $ 468,247 Contributions............................................. 449,591 Distributions............................................. (90,249) Allocations from redeemable units......................... 710 Net income................................................ 69,467 ---------- Balance, December 31, 1997.................................. 897,766 Contributions............................................. 1,147,739 Distributions............................................. (166,580) Allocations from redeemable units......................... 42,111 Net income................................................ 121,339 ---------- Balance, December 31, 1998.................................. 2,042,375 Contributions............................................. 583 Redemption of units....................................... (98,387) Distributions............................................. (179,185) Allocations from redeemable units......................... 16,489 Net income................................................ 135,776 ---------- Balance..................................................... $1,917,651 ==========
The accompanying notes are an integral part of these consolidated financial statements. F-26 163 FELCOR LODGING LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 (IN THOUSANDS)
1999 1998 1997 ---------- ---------- --------- Cash flows from operating activities: Net income...................................... $ 135,776 $ 121,339 $ 69,467 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of assets....................... (236) (477) Depreciation................................. 152,948 90,835 50,798 Amortization of deferred financing fees and organization costs......................... 1,816 1,985 1,468 Amortization of unearned officers' and directors' compensation.................... 652 830 1,017 Equity in income from unconsolidated entities................................... (8,484) (7,017) (6,963) Extraordinary charge for write off of deferred financing fees.................... 1,113 3,075 185 Minority interest in other partnerships...... 2,713 1,121 573 Changes in assets and liabilities, net of effects of acquisitions: Due from Lessees............................. 574 (3,035) (13,382) Deferred financing fees...................... (9,313) (4,348) (8,825) Other assets................................. (282) (602) (1,175) Accrued expenses and other liabilities....... 5,088 (11,123) 4,315 ---------- ---------- --------- Net cash flow provided by operating activities............................ 282,365 192,583 97,478 ---------- ---------- --------- Cash flows used in investing activities: Acquisition of hotels........................... (10,802) (326,276) (574,100) Acquisition of unconsolidated entities.......... (7,452) (4,230) (65,271) Improvements and additions to hotels............ (222,320) (119,107) (52,700) Note receivable from unconsolidated entity...... (7,766) Bristol interim credit facility................. (120,000) Sale of hotels.................................. 15,476 7,815 Cash distributions from unconsolidated entities..................................... 19,581 19,066 4,211 ---------- ---------- --------- Net cash flow used in investing activities............................ (205,517) (550,498) (687,860) ---------- ---------- --------- Cash flows from financing activities: Proceeds from borrowings........................ 1,034,667 1,013,003 679,144 Repayment of borrowings......................... (804,915) (658,524) (445,900) Proceeds from sale of preferred units........... 139,063 Purchase of treasury stock...................... (98,387) Contributions................................... 8 3,884 448,586 Distributions paid to unitholders............... (180,803) (105,425) (69,901) Dividends paid to preferred unitholders......... (25,987) (16,937) (11,797) ---------- ---------- --------- Net cash flow provided by (used in) financing activities.................. (75,417) 375,064 600,132 ---------- ---------- --------- Net change in cash and cash equivalents........... 1,431 17,149 9,750 Cash and cash equivalents at beginning of years... 34,692 17,543 7,793 ---------- ---------- --------- Cash and cash equivalents at end of years......... $ 36,123 $ 34,692 $ 17,543 ========== ========== ========= Supplemental cash flow information -- interest paid................................... $ 125,085 $ 72,215 $ 21,414 ---------- ---------- ---------
The accompanying notes are an integral part of these consolidated financial statements. F-27 164 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION FelCor Lodging Limited Partnership and its subsidiaries (the "Company") at December 31, 1999, owned interests in 188 hotels with nearly 50,000 rooms and suites (collectively the "Hotels"). The sole general partner of the Company is FelCor Lodging Trust Incorporated ("FelCor"), one of the nation's largest hotel real estate investment trusts, ("REIT"). At December 31, 1999, FelCor owned a greater than 95% equity interest in the Company. The Company owns 100% of the interest in 163 of the Hotels, a 90% or greater interest in entities owning seven hotels, a 60% interest in an entity owning two hotels and 50% interests in separate entities that own 16 hotels. The Company is the owner of the largest number of Embassy Suites(R), Crowne Plaza(R), Holiday Inn(R), and independently owned Doubletree(R) branded hotels in the world. The following table provides a schedule of the Hotels, by brand, operated by each of the Company's Lessees at December 31, 1999:
NOT OPERATED BRAND DJONT BRISTOL UNDER A LEASE TOTAL - ----- ----- ------- ------------- ----- Embassy Suites................................ 58 58 Holiday Inn................................... 43 1 44 Doubletree and Doubletree Guest Suites(R)..... 16(1) 16 Crowne Plaza and Crowne Plaza Suites(R)....... 18 18 Holiday Inn Select(R)......................... 10 10 Sheraton(R) and Sheraton Suites(R)............ 9 1(2) 10 Hampton Inn(R)................................ 9 9 Holiday Inn Express(R)........................ 5 5 Fairfield Inn(R).............................. 5 5 Harvey Hotel(R)............................... 4 4 Independents.................................. 2 1 3 Courtyard by Marriott(R)...................... 2 2 Four Points by Sheraton(R).................... 1 1 Hilton Suites(R).............................. 1 1 Homewood Suites(R)............................ 1 1 Westin(R)..................................... 1 1 -- --- -- --- Total Hotels........................ 85 100 3 188 == === == ===
- ------------ (1) On January 1, 2000, two of these Doubletree Guest Suites hotels were converted to the Embassy Suites brand. (2) On January 1, 2000, a lease on this hotels became effective between the Company and DJONT. The Hotels are located in the United States (35 states) and Canada, with a concentration in California (20 hotels), Florida (18 hotels), Georgia (15 hotels) and Texas (41 hotels). The F-28 165 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) following table provides information regarding the net acquisition and disposition of hotels through December 31, 1999:
NET HOTELS ACQUIRED/ (DISPOSED OF) -------------------- 1994........................................... 7 1995........................................... 13 1996........................................... 23 1997........................................... 30 1998........................................... 120 1999........................................... (5) --- 188 ===
At December 31, 1999, the Company leased 85 of the Hotels to DJONT Operations, L.L.C., a Delaware limited liability company, or a consolidated subsidiary thereof (collectively "DJONT"), and leased 100 of the Hotels to Bristol Hotels & Resorts, or a consolidated subsidiary thereof ("Bristol" and, together with DJONT, the "Lessees"). Three Hotels were operated without a lease. Thomas J. Corcoran, Jr., the President, Chief Executive Officer, and a Director of FelCor, and Hervey A. Feldman, Chairman Emeritus of FelCor, beneficially own a 50% voting common equity interest in DJONT. The remaining 50% nonvoting common equity interest is beneficially owned by the children of Charles N. Mathewson, a director of FelCor and major initial investor in the Company. At December 31, 1999, DJONT had entered into management agreements pursuant to which 72 of the Hotels leased by it were managed by subsidiaries of Hilton Hotels Corporation ("Hilton"), ten were managed by subsidiaries of Starwood Hotels & Resorts Worldwide, Inc. ("Starwood"), and three were managed by two unrelated management companies. Bristol, an independent publicly owned company, at December 31, 1999, leased and managed 100 Hotels and managed one hotel which operated without a lease. Bristol is one of the largest independent hotel operating companies in North America and operates the largest number of Bass Hotels & Resorts-branded hotels in the world. Certain reclassifications have been made to prior period financial information to conform to the current period's presentation with no effect to previously reported net income or shareholder's equity. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation -- The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated. Use of Estimates -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Investment in Hotels -- Hotels are stated at cost and are depreciated using the straight-line method over estimated useful lives ranging from 31 to 40 years for buildings and improvements and three to seven years for furniture, fixtures, and equipment. F-29 166 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company periodically reviews the carrying value of each Hotel to determine if circumstances exist indicating an impairment in the carrying value of the investment in the hotel or that depreciation periods should be modified. If facts or circumstances support the possibility of impairment, the Company will prepare a projection of the undiscounted future cash flows, without interest charges, of the specific hotel and determine if the investment in such hotel is recoverable based on the undiscounted future cash flows. If impairment is indicated, an adjustment will be made to the carrying value of the hotel based on discounted future cash flows. The Company does not believe that there are any factors or circumstances indicating impairment of any of its investment in the Hotels. Maintenance and repairs are charged to the Lessees' operations as incurred; major renewals and betterments by the Company are capitalized. Upon the sale or disposition of a fixed asset, the asset and related accumulated depreciation are removed from the accounts and the related gain or loss is included in operations. Investment in Unconsolidated Entities -- The Company owns a 50% interest in various partnerships or limited liability companies in which the partners jointly make all material decisions concerning the business affairs and operations. The Company also owns a 97% nonvoting interest in an entity. Accordingly, the Company does not control these entities and carries its investment in unconsolidated entities at cost, plus its equity in net earnings, less distributions received since the date of acquisition. Equity in net earnings is adjusted for the straight-line amortization, over a 40-year period, of the difference between the Company's cost and its proportionate share of the underlying net assets at the date of acquisition. Cash and Cash Equivalents -- All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. Deferred Expenses -- Deferred expenses are recorded at cost. Amortization is computed using the interest method over the maturity of the related debt. Revenue Recognition -- Percentage lease revenue is reported as income over the lease term as it becomes receivable from the Lessees according to the provisions of the Percentage Lease agreements. The Lessees are in compliance with their rental obligations under the Percentage Leases. Capitalized Interest -- The Company capitalizes interest and certain other costs relating to hotels undergoing major renovations and redevelopments. Such costs capitalized in 1999 and 1998 were approximately $7.4 million and $5.9 million, respectively. Net Income Per Unit -- Basic earnings per unit have been computed by dividing net income by the weighted average number of units outstanding. Diluted earnings per unit have been computed by dividing net income by the weighted average number of units and equivalents outstanding. Unit equivalents represent units issuable upon exercise of FelCor stock options and unvested officers' restricted FelCor stock grants. At December 31, 1999, 1998, and 1997, the Company's Series A Cumulative Preferred Units, if converted to units, would be antidilutive; accordingly the Series A Cumulative Preferred Units are not assumed to be converted in the computation of diluted earnings per unit. Distributions -- The Company pays regular quarterly distributions on its Units. Additionally, the Company pays regular quarterly distributions on preferred units in accordance with its preferred units distribution requirements. F-30 167 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For 1999 The Company paid distributions of $2.20 per unit, $1.95 per unit of Series A Cumulative Preferred Units ("Series A Preferred Units"), and $2.25 per depositary share evidencing Series B Redeemable Preferred Units ("Series B Preferred Units"). Income Taxes -- No provision for federal income taxes has been reflected in the financial statements because all taxable income or loss, or tax credits are passed through to the partners. 3. BRISTOL MERGER On July 28, 1998, FelCor completed the merger of Bristol Hotel Company's real estate holdings with and into FelCor (the "Merger"). The Merger resulted in the net acquisition of 107 primarily full-service hotels which were contributed to the Company in return for approximately 31.0 million units. A summary of the fair values of the assets and liabilities acquired in the Merger, recorded at the date of acquisition, is as follows (in thousands): Investment in hotels................................. $2,014,250 Investment in unconsolidated entity.................. 16,839 Other assets......................................... 4,151 ---------- 2,035,240 ---------- Common stock issued.................................. 1,146,081 Debt obligations assumed............................. 868,615 Accrued expenses and other liabilities assumed....... 55,297 ---------- 2,069,993 ---------- Total cash received in Merger.............. $ 34,753 ==========
The Merger has been accounted for as a purchase, and, accordingly, the results of operations since the date of acquisition are included in the Company's consolidated statements of operations. 4. INVESTMENT IN HOTELS Investment in hotels at December 31, 1999 and 1998, consist of the following (in thousands):
1999 1998 ---------- ---------- Land.................................................... $ 346,862 $ 328,591 Building and improvements............................... 3,616,269 3,470,854 Furniture, fixtures and equipment....................... 383,931 300,501 Construction in progress................................ 18,837 33,708 ---------- ---------- 4,365,899 4,133,654 Accumulated depreciation................................ (330,555) (178,072) ---------- ---------- $4,035,344 $3,955,582 ========== ==========
5. INVESTMENT IN UNCONSOLIDATED ENTITIES At December 31, 1999, the Company owned 50% interests in separate entities owning 16 hotels, a parcel of undeveloped land, and a condominium management company. The Company F-31 168 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) also owned a 97% nonvoting interest in an entity that is developing condominiums for sale and that owns an annex to a hotel owned by the Company. The Company accounts for its investments in these unconsolidated entities under the equity method. Summarized unaudited combined financial information for 100% of these unconsolidated entities is as follows (in thousands):
DECEMBER 31, ------------------- 1999 1998 -------- -------- Balance sheet information: Investment in hotels..................................... $337,444 $269,881 Non-recourse mortgage debt............................... 254,668 176,755 Equity................................................... 101,120 105,347
YEARS ENDED DECEMBER 31, --------------------------- 1999 1998 1997 ------- ------- ------- Statements of operations information: Total revenues................................... $69,146 $57,006 $54,000 Net income....................................... $21,726 $17,438 $17,044 Net income attributable to the Company........... $10,626 $ 8,719 $ 8,522 Amortization of cost in excess of book value..... (2,142) (1,702) (1,559) ------- ------- ------- Equity in income from unconsolidated entities.... $ 8,484 $ 7,017 $ 6,963 ======= ======= =======
6. DEBT Debt at December 31, 1999 and 1998, consists of the following (in thousands):
DECEMBER 31, ----------------------- COLLATERAL INTEREST RATE MATURITY DATE 1999 1998 ---------- ------------------- --------------- ---------- ---------- Floating Rate Debt: Line of credit.............. (a) LIBOR + 163bp June 2001 $ 351,000 $ 411,000 Senior term loan............ (a) LIBOR + 250bp March 2004 250,000 Term loan................... Unsecured LIBOR + 150bp December 1999 250,000 Mortgage debt............... 3 hotels LIBOR + 200bp February 2003 62,553 Other....................... Unsecured Up to LIBOR + 200bp Various 32,282 34,750 ---------- ---------- Total floating rate debt................ 695,835 695,750 ---------- ---------- Fixed Rate Debt: Line of credit -- swapped... (a) 7.17-7.56% March 2000-2001 313,000 325,000 Publicly-traded term notes..................... (a) 7.38% October 2004 174,377 174,249 Publicly-traded term notes..................... (a) 7.63% October 2007 124,221 124,122 Mortgage debt............... 15 hotels 7.24% November 2022 142,542 145,062 Senior term loan -- swapped................... (a) 8.30% March 2000-2004 125,000 Mortgage debt............... 3 hotels 6.97% December 2002 43,836 Mortgage debt............... 7 hotels 7.54% April 2009 99,075 Mortgage debt............... 6 hotels 7.55% June 2009 74,483 Other....................... 13 hotels 6.96%-7.23% 2000-2005 85,421 86,715 ---------- ---------- Total fixed rate debt................ 1,138,119 898,984 ---------- ---------- Total debt............ $1,833,954 $1,594,734 ========== ==========
- ------------ (a) Collateralized by stock and partnership interests in certain subsidiaries of FelCor. F-32 169 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On March 4, 1999 the Company completed a $63 million first mortgage term loan ("Mortgage Loan"). The Mortgage Loan is collateralized by three hotels, bears interest at 200 basis points over LIBOR, matures in February 2003 and amortizes over 25 years. The proceeds from this loan were used to pay off a $44 million mortgage loan due December 2002 and to acquire ownership of land previously held under ground leases. On April 1, 1999, the Company entered into a $375 million term loan ("the Senior Term Loan") increasing its credit facilities to $1.2 billion, consisting of the Senior Term Loan which matures in March 2004 and an $850 million revolving line of credit ("Line of Credit") which matures in June 2001. The Line of Credit, Senior Term Loan and the Company's publicly traded term notes are collateralized by stock and partnership interests in certain subsidiaries of FelCor. The financial covenants in the Senior Term Loan are consistent with those in the Company's existing Line of Credit. If the Company achieves investment grade credit ratings from the applicable rating agencies, or when the Senior Term Loan is retired, the stock and partnership interest collateral will be released. The proceeds of the Senior Term Loan were used to prepay a $250 million term loan, which was to mature on December 31, 1999, and initially to reduce borrowings under the Company's Line of Credit. Interest payable on borrowings under the credit facilities is variable, determined from a ratings and leverage-based pricing matrix, ranging from 87.5 basis points to 275 basis points above LIBOR (30-day LIBOR at December 31, 1999, was 5.83%). The interest rate spread on the Line of Credit ranged from 150 to 162.5 basis points in 1999. Additionally, the Company is required to pay an unused commitment fee on the Line of Credit which is variable, determined from a ratings-based pricing matrix, ranging from 20 to 30 basis points. In 1999 and 1998, the Company wrote off approximately $1.1 million and $2.5 million, respectively, of deferred financing fees relating to the term loan of $250 million and the previous unsecured credit facility of $550 million, respectively. For the years ended December 31, 1999, 1998, and 1997, the Company paid interest on its unsecured credit facilities at weighted average interest rates of 7.1%, 7.1%, and 7.6%, respectively. At December 31, 1999, the Company had borrowing capacity under its Line of Credit of $186 million. On April 1, 1999, the Company also closed a 10-year, $100 million mortgage loan (the "April 1999 First Mortgage Term Loan"). The April 1999 First Mortgage Term Loan is non-recourse (with certain exceptions), is collateralized by seven Embassy Suites hotels, carries a fixed rate coupon of 7.54%, matures in April 2009 and amortizes over 25 years. The proceeds from this loan were used initially to reduce outstanding borrowings under the Company's Line of Credit. On May 13, 1999, the Company closed a 10-year, $75 million mortgage loan. This loan is non-recourse (with certain exceptions), is collateralized by six Embassy Suites hotels, carries a fixed rate coupon of 7.55%, matures in June 2009 and amortizes over 25 years. The proceeds from this loan were used initially to reduce outstanding borrowings under the Company's Line of Credit. The Line of Credit and the Senior Term Loan contain various affirmative and negative covenants including limitations on total indebtedness, total secured indebtedness, and cash distributions, as well as the obligation to maintain a certain minimum tangible net worth and certain minimum interest and debt service coverage ratios. At December 31, 1999, the Company was in compliance with all such covenants. The Company's other borrowings contain affirmative and negative covenants that are generally equal to or less restrictive than the Line of Credit and Senior Term Loan. Most of the mortgage debt is non-recourse to the Company (with certain exceptions) and contain F-33 170 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) provisions allowing for the substitution of collateral upon satisfaction of certain conditions. Most of the mortgage debt is prepayable; subject, however, to various prepayment, yield maintenance, or defeasance obligations. Future scheduled principal payments on debt obligations at December 31, 1999 are as follows (in thousands):
YEAR - ---- 2000.................................................. $ 42,608 2001.................................................. 684,588 2002.................................................. 9,622 2003.................................................. 90,768 2004.................................................. 559,306 2005 and thereafter................................... 448,463 ---------- 1,835,355 Discount accretion over term.......................... (1,401) ---------- $1,833,954 ==========
To manage the relative mix of its debt between fixed and variable rate instruments, the Company has entered into interest rate swap agreements with six financial institutions. These interest rate swap agreements modify a portion of the interest characteristics of the Company's outstanding debt under its Line of Credit and Senior Term Loan without an exchange of the underlying principal amount and effectively convert variable rate debt to a fixed rate. The fixed rates to be paid, the effective fixed rate, and the variable rate to be received by the Company at December 31, 1999, are summarized in the following table:
EFFECTIVE SWAP RATE RECEIVED SWAP RATE EFFECTIVE (VARIABLE) AT SWAP NOTIONAL AMOUNT PAID (FIXED) FIXED RATE DECEMBER 31, 1999 MATURITY - --------------- ------------ ---------- ----------------- ---------- $113 million.............. 5.9300% 7.5550% 7.7450% March 2000 $ 75 million.............. 5.9375% 7.5625% 7.7450% March 2000 $ 25 million.............. 5.5750% 7.1830% 8.1013% July 2001 $ 25 million.............. 5.5480% 7.1730% 8.1013% July 2001 $ 75 million.............. 5.5550% 7.1800% 8.1013% July 2001 $100 million.............. 5.7955% 8.2960% 8.9763% July 2003 $ 25 million.............. 5.8260% 8.3260% 8.9763% July 2003 - ------------ $438 million ============
The differences to be paid or received by the Company under the terms of the interest rate swap agreements are accrued as interest rates change and recognized as an adjustment to interest expense by the Company, pursuant to the terms of its interest rate agreement, and will have a corresponding effect on its future cash flows. Agreements such as these contain a credit risk in that the counterparties may be unable to meet the terms of the agreement. The Company minimizes that risk by evaluating the creditworthiness of its counterparties, who are limited to major banks and financial institutions, and does not anticipate nonperformance by the counterparties. F-34 171 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107 requires disclosures about the fair value for all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about fair value of financial instruments are based on pertinent information available to management as of December 31, 1999. Considerable judgement is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Management estimates the fair value of (i) accounts receivable, accounts payable and accrued expenses approximate carrying value due to the relatively short maturity of these instruments; (ii) the note receivable approximates carrying value based upon effective borrowing rates for issuance of debt with similar terms and remaining maturities; (iii) the borrowings under the Line of Credit, Senior Term loan and various other mortgage notes approximate carrying value because these borrowings accrue interest at floating interest rates based on market. The estimated fair value of the Company's fixed rate debt of $700 million is $568 million at December 31, 1999, based on current market interest rates estimated by the Company for similar debt with similar maturities. The Company manages its debt portfolio by using interest rate swaps to achieve an overall desired position of fixed and floating rates. The fair value of interest rate hedge contracts is estimated based on quotes from the market makers of these instruments and represents the estimated amounts the Company would expect to receive or pay to terminate the contracts. Credit and market risk exposures are limited to the net interest differentials. The estimated unrealized net gain on these instruments was approximately $6.3 million at December 31, 1999, which represents the amount the Company would receive to terminate the agreements based on current market rates. 8. REDEEMABLE OPERATING PARTNERSHIP UNITS AND PREFERRED UNITS The outstanding units of limited partnership interest in the Company ("Units") are redeemable at the option of the holder for a like number of shares of common stock of FelCor, or cash, or a combination thereof, at the election of FelCor. Due to these redemption rights, these limited partnership units have been excluded from partners' capital and are included in redeemable units and measured at redemption value as of the end of the periods presented. At December 31, 1999 and 1998 there were 2,990,762 and 2,938,933 redeemable units outstanding. The value of the redeemable units are based on the closing market price of FelCor's common stock at the balance sheet date, which at December 31, 1999 and 1998 was $17.50 and $23.00, respectively. Preferred Units FelCor's Board of Directors is authorized to provide for the issuance of up to 20,000,000 shares of Preferred Stock in one or more series, to establish the number of shares in each series, to fix the designation, powers preferences and rights of each such series, and the qualifications, limitations or restrictions thereof. In 1996 FelCor issued 6.1 million shares of its $1.95 Series A Preferred Stock at $25 per share. The Series A Preferred Stock bears an annual dividend equal to the greater of $1.95 per share or the cash distributions declared or paid for the corresponding period on the number of F-35 172 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) shares of Common Stock into which the Series A Preferred Stock is then convertible. Each share of the Series A Preferred Stock is convertible at the shareholder's option to 0.7752 shares of Common Stock, subject to certain adjustments, and may not be redeemed by the Company before April 30, 2001. The proceeds from the Series A Preferred Stock were contributed to the Company in exchange for Series A Preferred Units. The preference on these units are the same as FelCor's Series A Preferred Stock. On May 1, 1998, FelCor issued 5.75 million depositary shares, representing 57,500 shares of 9% Series B Preferred Stock, at $25 per depositary share. The Series B Preferred Stock and the corresponding depositary shares may be called by FelCor at par on or after May 7, 2003, have no stated maturity, sinking fund or mandatory redemption, and are not convertible into any other securities of FelCor. The Series B Preferred Stock has a liquidation preference of $2,500 per share (equivalent to $25 per depositary share) and is entitled to annual dividends at the rate of 9% of the liquidation preference (equivalent to $2.25 annually per depositary share). The proceeds from the Series B Preferred Stock were contributed to the Company in exchange for Series B Preferred Units. The preference on these units are the same as FelCor's Series B Preferred Stock. At December 31, 1999, all distributions then payable on the Series A and Series B Preferred Units had been paid. Treasury Stock Repurchase Program On September 3, 1999, FelCor announced that its Board of Directors had authorized it to repurchase up to $100 million of its outstanding common shares. At December 31, 1999, FelCor had completed the repurchase of approximately 5.8 million common shares at a cost of approximately $98.4 million which has been recorded as a reduction to Partner's Capital as a result of the redemption of units held by FelCor to fund the repurchase. 9. TAXES, INSURANCE AND OTHER Taxes, insurance and other is comprised of the following for the years ended December 31, 1999, 1998, and 1997 (in thousands):
1999 1998 1997 ------- ------- ------- Real estate and personal property taxes............ $52,118 $32,892 $18,976 Property insurance................................. 3,481 2,341 1,627 State franchise taxes and Canadian income tax...... 3,973 1,609 718 Other.............................................. 316 162 ------- ------- ------- Total taxes, insurance, and other........ $59,572 $37,158 $21,483 ======= ======= =======
10. LAND LEASES The Company leases land occupied by certain hotels from third parties under various operating leases. Certain leases contain contingent rent features based on gross revenue at the F-36 173 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) respective hotels. Future minimum lease payments under the Company's land lease obligations at December 31, 1999, are as follows (in thousands):
YEAR - ---- 2000................................................... $ 18,358 2001................................................... 18,346 2002................................................... 17,951 2003................................................... 17,767 2004................................................... 17,703 2005 and thereafter.................................... 265,115 -------- $355,240 ========
11. COMMITMENTS AND RELATED PARTY TRANSACTIONS Commitments The Company is to receive rental income from the Lessees under the Percentage Leases, which expire in 2002 (five hotels), 2003 (three hotels), 2004 (12 hotels), 2005 (19 hotels), 2006 (26 hotels), 2007 (37 hotels), 2008 (54 hotels), and thereafter (15 hotels). The rental income under the Percentage Leases between 14 of the unconsolidated entities, of which the Company owns 50%, is payable by the Lessee to the respective entities and is not included in the following schedule of future lease commitments to the Company. Minimum future rental income (i.e., base rents) payable to the Company under these noncancelable operating leases at December 31, 1999 is as follows (in thousands):
LESSEES ----------------------- YEAR DJONT BRISTOL TOTAL - ---- ---------- ---------- ---------- 2000..................................... $ 140,235 $ 180,055 $ 320,290 2001..................................... 143,609 180,076 323,685 2002..................................... 143,966 180,049 324,015 2003..................................... 130,445 177,302 307,747 2004..................................... 126,885 169,930 296,815 2005 and thereafter...................... 392,499 650,239 1,042,738 ---------- ---------- ---------- $1,077,639 $1,537,651 $2,615,290 ========== ========== ==========
The Percentage Lease revenue is based on a percentage of room and suite revenues, and a varying combination of food and beverage revenues, food and beverage rents, and other revenues of the Hotels. Both the base rent and the threshold suite revenue in each lease computation are subject to adjustments for changes in the Consumer Price Index ("CPI"). The adjustment is calculated at the beginning of each calendar year for the hotels acquired prior to July of the previous year. The adjustment in any lease year may not exceed 7%. The CPI adjustments made in January 2000 ranged from 1.05% to 2.20%, dependent upon the Lessee. The CPI adjustments for 1999 ranged from 0.55% to 1.5%, dependent upon the Lessee, and in 1998 was 0.50%. Under the Percentage Leases, the Company is obligated to pay the costs of real estate and personal property taxes, property insurance, maintenance of underground utilities and structural elements of the Hotels, and to set aside a portion of the hotels' revenues (varying from 4% of room and suite revenue to 3% of total hotel revenue) per month, on a cumulative basis, to fund capital expenditures for the periodic replacement or refurbishment of furniture, fixtures and F-37 174 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) equipment required for the retention of the franchise licenses with respect to the Hotels. Included in cash and cash equivalents at December 31, 1999 and 1998, were cash balances held by the Hotel managers for these capital expenditures of $19.9 million and $14.8 million, respectively. Related Party Transactions The Company's general partner, FelCor, shares its executive offices and certain employees with FelCor, Inc., and DJONT, and each company bears its share of the costs thereof, including an allocated portion of the rent, compensation of certain personnel (other than Mr. Corcoran, whose compensation is borne solely by FelCor), office supplies, telephones, and depreciation of office furniture, fixtures, and equipment. The Company reimburses FelCor for its share of such allocated costs. Any such allocation of shared expenses to FelCor is required to be approved by a majority of FelCor's Independent Directors. During 1999, 1998, and 1997, the Company and FelCor paid approximately $5.7 million (approximately 89.5%), $2.8 million (approximately 63%), and $1.3 million (approximately 38%), respectively, of the allocable expenses under this arrangement. Included in the mortgage debt of the unconsolidated entities is a mortgage loan payable to the Company in the amount of $7.8 million for 1999 and 1998. The note bears a fixed interest rate of 8% per annum with a 30 year amortization, matures on December 31, 2004, and is collateralized by a Mortgage and Assignment of Leases and Rents with respect to the annex of the hotel owned by an entity in which the Company has a 97% nonvoting interest. 12. SUPPLEMENTAL CASH FLOW DISCLOSURE The Company purchased certain assets and assumed certain liabilities in connection with the acquisition of hotels in 1998 and 1997. During 1999 the Company purchased the land related to three hotels, which was previously leased. These purchases were recorded under the purchase method of accounting. The fair values of the acquired assets and liabilities recorded at the date of acquisition are as follows (in thousands):
1999 1998 1997 ------- ---------- -------- Assets acquired............................... $19,776 $2,427,027 $588,053 Liabilities assumed........................... (7,800) (940,906) (5,932) Common Stock and Units issued................. (1,174) (1,152,856) Minority interest contribution................ (6,989) (8,021) ------- ---------- -------- Net cash paid....................... $10,802 $ 326,276 $574,100 ======= ========== ========
Under the Merger Agreement with Bristol Hotel Company, FelCor provided Bristol a $120 million interim credit facility (the "Interim Credit Facility"). At July 28, 1998, the Interim Credit facility was assumed and canceled by FelCor upon completion of the Merger. Approximately $39.7 million, $67.3 million, and $24.7 million of aggregate preferred unit distributions and unit distributions had been declared as of December 31, 1999, 1998, and 1997, respectively. These amounts were paid in the following January of each year. In 1998 the Company entered into a joint venture, in which the Company contributed a hotel with a net book value of $53.9 million for a 60% equity interest in the venture. The Company has consolidated this venture in the financial statements and recorded increases of $34.4 million in investment in hotels and minority interest in other partnerships. F-38 175 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. STOCK BASED COMPENSATION PLANS FelCor sponsors three restricted stock and stock option plans (the "FelCor Plans"). In addition, upon completion of the Merger, FelCor assumed two stock option plans previously sponsored by Bristol Hotel Company (the "Bristol Plans"). FelCor was initially obligated to issue up to 1,271,103 shares of its Common Stock pursuant to the Bristol Plans. No additional options may be awarded under the Bristol Plans. The FelCor Plans and the Bristol Plans are referred to collectively as the "Plans." Upon issuance of any stock, FelCor is obligated to contribute the proceeds to the Company in exchange for a like number of units. Stock Options FelCor is authorized to issue 2,950,000 shares of Common Stock under the FelCor Plans pursuant to awards granted in the form of incentive stock options, non-qualified stock options, and restricted stock. All options have 10-year contractual terms and vest over five equal annual installments (20% per year), beginning in the year following the date of grant. The options outstanding under the Bristol Plans generally vest either in four equal annual installments (25% per year) beginning in the second year following the original date of award, in five equal annual installments (20% per year) beginning in the year following the original date of award, or on a single date that is three to five years following the original date of the date of award. A summary of the status of FelCor's non-qualified stock options under the Plans as of December 31, 1999, 1998, and 1997, and the changes during the years are presented below:
1999 1998 1997 ---------------------- ---------------------- ---------------------- WEIGHTED WEIGHTED WEIGHTED # SHARES OF AVERAGE # SHARES OF AVERAGE # SHARES OF AVERAGE UNDERLYING EXERCISE UNDERLYING EXERCISE UNDERLYING EXERCISE OPTIONS PRICES OPTIONS PRICES OPTIONS PRICES ----------- -------- ----------- -------- ----------- -------- Outstanding at beginning of the year............. 2,540,466 $22.53 1,670,500 $29.96 1,047,500 $25.67 Granted(A)(B).......... 9,750 $22.13 2,445,813 $20.54 752,000 $35.70 Exercised.............. (760) $10.33 (332,915) $11.67 (31,000) $19.11 Forfeited(B)........... (52,683) $32.41 (1,242,932) $31.51 (98,000) $31.56 --------- ---------- --------- Outstanding at end of year.............. 2,496,773 $22.32 2,540,466 $22.53 1,670,500 $29.96 ========= ========== ========= Exercisable at end of year.............. 906,675 $24.58 796,499 $24.64 411,500 $24.42
- ------------ (A) 1998 grants include options covering 1,271,103 shares of Common Stock issuable as a result of the assumption of the Bristol Plans. (B) To enable FelCor to preserve its stock options as a meaningful element of compensation in 1998, existing option holders under the FelCor Plans employed by FelCor on a full-time basis were offered the opportunity to exchange their existing options (having exercise prices ranging from $26.44 to $38.56 per share) for a lesser number of new options having an equal value under the Black-Scholes option pricing model. Twenty-two employees accepted this offer in 1998, surrendering for cancellation existing options covering an aggregate of 1,151,500 shares of Common Stock at a weighted average exercise price of $32.807 per share for new options covering an aggregate of 840,393 shares of Common Stock at an exercise price of $22.125 per share. The new options have the same F-39 176 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) expiration dates and vesting schedules as the options surrendered for cancellation; however, none of the new options were exercisable prior to January 1, 2000.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ----------------------------------- ---------------------- NUMBER WGTD. WGTD NUMBER WGTD. OUTSTANDING AVG. AVG. EXERCISABLE AVG. RANGE OF AT REMAINING EXERCISE AT EXERCISE EXERCISE PRICES 12/31/99 LIFE PRICE 12/31/99 PRICE - --------------- ----------- ---------- -------- ----------- -------- $10.33 to $29.50........... 2,206,819 7.21 $20.80 734,890 $22.21 $30.28 to $36.63........... 289,954 7.63 $33.92 171,785 $34.72 - ---------------- --------- ---- ------ ------- ------ $10.33 to $36.63........... 2,496,773 7.26 $22.32 906,675 $24.58
Restricted Stock A summary of the status of FelCor's restricted stock grants as of December 31, 1999, 1998, and 1997 and the changes during the years are presented below:
1999 1998 1997 ---------------------- ---------------------- ---------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE FAIR MARKET FAIR MARKET FAIR MARKET VALUE AT VALUE AT VALUE AT # SHARES GRANT # SHARES GRANT # SHARES GRANT -------- ----------- -------- ----------- -------- ----------- Outstanding at beginning of the year............ 125,375 $28.97 115,500 $29.03 84,500 $26.04 ------- ------- ------- Granted: With 5-year pro rata vesting.............. 5,000 $21.25 35,000 $35.00 Vest 100% at grant date................. 4,875 $35.63 6,000 $35.00 Vest 100% within 12 months of grant...... 2,500 $36.94 ------- ------ ------- Total granted............ 9,875 $28.35 43,500 $35.11 Forfeited................ (12,500) $30.00 ------- ------- ------- Outstanding at end of year................... 125,375 $28.97 125,375 $28.97 115,500 $29.03 ======= ======= ======= Vested at end of year................ 83,575 $28.35 65,175 $28.26 40,400 $26.60
14. LESSEES All of the Company's percentage lease revenue is derived from the Percentage Leases with the Lessees. Certain information, related to DJONT's financial statements, is as follows (in thousands):
DECEMBER 31, ------------------ 1999 1998 -------- ------- Balance Sheet Information: Cash and cash equivalents................................. $ 20,127 $28,538 Accounts receivable, net.................................. $ 28,601 $27,561 Total assets.............................................. $ 71,659 $63,972 Due to FelCor Lodging Limited Partnership................. $ 22,064 $16,875 Accounts payable.......................................... $ 12,742 $13,508 Shareholders' deficit..................................... $(13,142) $(8,231)
F-40 177 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, ------------------------------ 1999 1998 1997 -------- -------- -------- Statement of Operations Information: Room and suite revenue....................... $649,323 $618,122 $456,614 Percentage lease expenses.................... $307,532 $289,891 $216,990 Net income (loss)............................ $ (4,911) $ 844 $ (2,672)
Certain entities owning interests in DJONT and managers for certain hotels have agreed to make loans to DJONT of up to an aggregate of approximately $17.3 million to the extent necessary to enable DJONT to pay rent and other obligations due under the respective Percentage Leases relating to a total of 38 of the Hotels. No such loans were outstanding at December 31, 1999. DJONT engages third-party managers to operate the Hotels leased by it and generally pays such managers a base management fee based on a percentage of room and suite revenue and an incentive management fee based on DJONT's income before overhead expenses for each hotel. In certain instances, the hotel managers have subordinated fees and are committed to make subordinated loans to DJONT, if needed, to meet its rental and other obligations under the Percentage Leases. Bristol is a publicly traded company whose stock is listed on the New York Stock Exchange under the symbol BH and that files financial statements in accordance with the Securities Exchange Act of 1934, as amended. Bristol serves as both the lessee and manager of the 100 Hotels leased to it by the Company at December 31, 1999, and, as such, is compensated for both roles through the profitability of the Hotels, after meeting their operating expenses and rental obligations under the Percentage Leases. Bristol has entered into an absolute and unconditional guarantee of the obligations of the Bristol Lessees under the Percentage Leases, and is required to maintain a minimum liquid net worth. A portion of this liquid net worth is being satisfied through a letter of credit for the benefit of the Company. This Letter of Credit is subject to periodic reductions upon satisfaction of certain conditions and, at December 31, 1999, totaled $9.1 million. According to Bristol's press release dated February 1, 2000, for the year ended December 31, 1999, and the period from July 28, 1998, through December 31, 1998, Bristol had net income of $8.2 million and $2.6 million, respectively, and at December 31, 1999 and 1998, had stockholders' equity of $43.1 million and $35.4 million, respectively. At December 31, 1999, the Company owned interests in 188 Hotels operating under various brand names. The Hotels generally operate pursuant to franchise license agreements which require the payment of fees based on a percentage of room and suite revenue. These fees are paid by the Lessees. 15. SEGMENT INFORMATION The Company has determined that its reportable segments are those that are consistent with the Company's method of internal reporting, which segments its business by Lessee. The Company's Lessees at December 31, 1999, were DJONT and Bristol. Prior to July 28, 1998 (the date of the Bristol Merger), the Company had only one lessee, DJONT. F-41 178 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following tables present information about the reportable segments for the year ended December 31, 1999 and 1998 (in thousands):
CORPORATE SEGMENT NOT ALLOCABLE CONSOLIDATED DJONT BRISTOL TOTAL TO SEGMENTS TOTAL ---------- ---------- ---------- ------------- ------------ YEAR ENDED DECEMBER 31, 1999 Statement of Operations Information: Revenues: Percentage lease revenue............ $ 256,128 $ 234,765 $ 490,893 $ 490,893 Equity in income from unconsolidated entities.......................... $ 7,725 $ 759 $ 8,484 $ 8,484 Expenses: Depreciation........................ $ 80,969 $ 71,748 $ 152,717 $ 231 $ 152,948 Interest expense.................... $ 125,435 $ 125,435 Income (loss) before nonrecurring items............................... $ 147,868 $ 118,949 $ 266,817 $(130,164) $ 136,653 Gain on sale of hotels................ $ 236 $ 236 Income (loss) before extraordinary change.............................. $ 147,868 $ 118,949 $ 266,817 $(129,928) $ 136,889 Funds from operations: Income (loss) before extraordinary charge............................ $ 147,868 $ 118,949 $ 266,817 $(129,928) $ 136,889 Series B preferred distributions.... (12,937) (12,937) Depreciation........................ 80,969 71,748 152,717 231 152,948 Depreciation for unconsolidated entities.......................... 9,248 747 9,995 9,995 ---------- ---------- ---------- --------- ---------- Funds from operations................. $ 238,085 $ 191,444 $ 429,529 $(142,634) $ 286,895 ========== ========== ========== ========= ========== Weighted average units outstanding(1).................... 75,251 Other Information: Total assets.................. $1,940,247 $2,243,916 $4,184,163 $ 68,555 $4,252,718 Capital expenditures.......... $ 51,587 $ 170,733 $ 222,320 $ 222,320 YEAR ENDED DECEMBER 31, 1998 Statement of Operations Information: Percentage lease revenue.............. $ 237,555 $ 90,480 $ 328,035 $ 328,035 Equity in income from unconsolidated entities............................ $ 6,744 $ 273 $ 7,017 $ 7,017 Expenses: Depreciation........................ $ 71,055 $ 19,619 $ 90,674 $ 161 $ 90,835 Interest expense.................... $ 73,182 $ 73,182 Income before nonrecurring item....... $ 143,736 $ 54,233 $ 197,969 $ (74,032) $ 123,937 Gain on sale of hotels................ $ 477 $ 477 Income (loss) before extraordinary charge.............................. $ 143,736 $ 54,233 $ 197,969 $ (73,555) $ 124,414 Funds from operations: Income (loss) before extraordinary charge............................ $ 143,736 $ 54,233 $ 197,969 $ (73,555) $ 124,414 Series B preferred distributions.... (8,373) (8,373) Depreciation........................ 71,055 19,619 90,674 161 90,835 Depreciation for unconsolidated entities.......................... 10,254 233 10,487 10,487 ---------- ---------- ---------- --------- ---------- Funds from operations................. $ 225,045 $ 74,085 $ 299,130 $ (81,767) $ 217,363 ========== ========== ========== ========= ========== Weighted average units outstanding(1).................... 58,013 Other Information: Total assets.................. $2,022,975 $2,093,328 $4,116,303 $ 59,080 $4,175,383 Capital expenditures.......... $ 65,264 $ 65,839 $ 131,103 $ 131,103
- ------------ (1) Weighted average units outstanding are computed including dilutive FelCor options and unvested stock grants, and assuming conversion of Series A Preferred Units to Units. F-42 179 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth Percentage Lease revenue and investment in hotel assets represented by the following geographical areas as of and for the years ended December 31, (in thousands):
PERCENTAGE LEASE REVENUE INVESTMENT IN HOTEL ASSETS ------------------------- --------------------------- 1999 1998 1999 1998 ----------- ----------- ------------ ------------ California.................... $ 97,283 $ 63,733 $ 698,942 $ 642,965 Texas......................... 94,782 52,220 891,626 854,558 Florida....................... 61,516 45,719 542,298 519,280 Georgia....................... 39,247 23,691 355,519 349,429 Other States.................. 186,248 138,437 1,802,220 1,705,220 Canada........................ 11,817 5,123 75,294 62,202 -------- -------- ---------- ---------- Total............... $490,893 $328,923 $4,365,899 $4,133,654 ======== ======== ========== ==========
16. RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. In June 1999, the FASB issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB 133" which deferred the effective date of FAS 133 for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company believes that, upon implementation, FAS 133 will not have a material impact on the financial statements of the Company. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101") which provides guidance on revenue recognition. SAB 101 is effective for fiscal years beginning after December 15, 1999. SAB 101 requires that a lessor not recognize contingent rental income until annual specified thresholds have been achieved by the lessee. During 1999, the Company's leases had quarterly, rather than annual, specified rental thresholds and the Company recognized contingent rentals earned in each quarter pursuant to the Percentage Lease terms. The Company has reviewed the terms of its Percentage Leases and has determined that the provisions of SAB 101 will not materially impact the Company's revenue recognition on an interim basis in 2000, since a significant majority of the Percentage Leases contain quarterly specified thresholds. SAB 101 will not impact the Company's revenue recognition on an annual basis given the Company maintains only calendar year leases. SAB 101 will have no impact on the Company's interim or annual cash flow from the Lessees, and therefore on its ability to pay distributions. 17. QUARTERLY OPERATING RESULTS (UNAUDITED) The Company's unaudited consolidated quarterly operating data for the years ended December 31, 1999 and 1998 follows (in thousands, except per unit data). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of quarterly results have been reflected in the data. It is also management's opinion, however, that quarterly operating data for hotel enterprises are not indicative of results to be achieved in succeeding quarters or years. In order to obtain a more accurate indication of F-43 180 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) performance, there should be a review of operating results, changes in partner's equity and cash flows for a period of several years.
FIRST SECOND THIRD FOURTH 1999 QUARTER QUARTER QUARTER QUARTER ---- -------- -------- -------- -------- Total revenues............................ $126,917 $135,187 $124,082 $117,815 Income before nonrecurring items.......... $ 38,067 $ 43,454 $ 31,115 $ 24,017 Net income applicable to unitholders...... $ 31,883 $ 36,157 $ 24,931 $ 18,070 Per diluted unit data: Net income applicable to unitholders.... $ 0.45 $ 0.51 $ 0.35 $ 0.26 Weighted average units outstanding...... 70,964 71,338 71,001 68,533
FIRST SECOND THIRD FOURTH 1998 QUARTER QUARTER QUARTER QUARTER ---- ------- ------- -------- -------- Total revenues............................... $57,528 $67,402 $108,599 $106,088 Income before nonrecurring items............. $23,251 $26,944 $ 41,493 $ 32,249 Net income applicable to unitholders......... $19,746 $22,090 $ 32,790 $ 25,290 Per diluted unit data: Net income applicable to unitholders....... $ 0.50 $ 0.55 $ 0.53 $ 0.36 Weighted average units outstanding......... 39,885 39,882 61,913 71,126
18. CONSOLIDATING FINANCIAL INFORMATION Certain of the Company's wholly-owned subsidiaries (FelCor/CSS Holdings, L.P.; FelCor/ CSS Hotels, L.L.C.; FelCor/LAX Hotels L.L.C.; FelCor Eight Hotels, L.L.C.; FelCor/St. Paul Holdings, L.P.; FelCor/LAX Holdings, L.P.; FHAC Nevada Holdings, L.L.C.; FHAC Texas Holdings, L.P., FelCor Omaha Hotel Company, L.L.C., FelCor Country Villa Hotel, L.L.C., FelCor Moline Hotel, L.L.C., FelCor Canada Co. and FelCor Hotel Asset Company, L.L.C., collectively "Subsidiary Guarantors"), together with FelCor and one of its wholly-owned subsidiaries (FelCor Nevada Holdings, L.L.C.), are guarantors of senior debt. The following tables present consolidating information for the Subsidiary Guarantors. F-44 181 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING BALANCE SHEET DECEMBER 31, 1999 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ---------- ------------- ------------ ------------ ASSETS Net investment in hotel properties................... $ 974,642 $1,884,901 $1,175,801 $4,035,344 Equity investment in consolidated entities........ 2,799,824 $(2,799,824) Investment in unconsolidated entities..................... 120,556 16,162 136,718 Cash and cash equivalents...... 3,093 12,418 20,612 36,123 Due from Lessee................ 12,615 5,035 744 18,394 Due (to)/from subsidiary....... (191,148) 219,280 (28,132) Note receivable from unconsolidated entity........ 7,760 7,760 Deferred assets................ 9,842 1,336 4,295 15,473 Other assets................... 3,796 1,834 309 5,939 ---------- ---------- ---------- ----------- ---------- Total assets.......... $3,740,980 $2,140,966 $1,173,629 $(2,799,824) $4,255,751 ========== ========== ========== =========== ========== LIABILITIES AND PARTNERS' CAPITAL Debt........................... $1,371,220 $ 142,530 $ 320,204 $1,833,954 Distributions payable.......... 39,657 39,657 Accrued expenses and other liabilities.................. 65,480 65,480 Minority interest -- other partnerships................. (366) 52,037 51,671 ---------- ---------- ---------- ----------- ---------- Total liabilities..... 1,475,991 142,530 372,241 1,990,762 ---------- ---------- ---------- ----------- ---------- Redeemable units, at redemption value........................ 52,338 52,338 Preferred units................ 295,000 295,000 Partners' capital.............. 1,917,651 1,998,436 801,388 $(2,799,824) 1,917,651 ---------- ---------- ---------- ----------- ---------- Total liabilities and partners' capital... $3,740,980 $2,140,966 $1,173,629 $(2,799,824) $4,255,751 ========== ========== ========== =========== ==========
F-45 182 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING BALANCE SHEET DECEMBER 31, 1998 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ------------- ------------ ------------ ASSETS Net investment in hotel properties................... $1,073,266 $ 1,909,299 $ 973,017 $3,955,582 Equity investment in consolidated entities........ 2,647,693 $(2,647,693) Investment in unconsolidated entities..................... 123,345 16,912 42 140,299 Cash and cash equivalents...... 20,000 4,672 10,020 34,692 Due from Lessee................ 8,248 13,905 (3,185) 18,968 Due (to)/from subsidiary....... (51,291) 47,111 4,180 Note receivable from unconsolidated entity........ 7,766 7,766 Deferred assets................ 9,996 45 10,041 Other assets................... 6,201 1,834 8,035 ---------- ----------- ---------- ----------- ---------- Total assets.......... $3,845,224 $ 1,993,778 $ 984,074 $(2,647,693) $4,175,383 ========== =========== ========== =========== ========== LIABILITIES AND PARTNERS' CAPITAL Debt........................... $1,316,696 $ 48,942 $ 229,096 $1,594,734 Distributions payable.......... 67,262 67,262 Accrued expenses and other liabilities.................. 56,296 192 824 57,312 Minority interest -- other partnerships................. 51,105 51,105 ---------- ----------- ---------- ----------- ---------- Total liabilities..... 1,440,254 49,134 281,025 1,770,413 ---------- ----------- ---------- ----------- ---------- Redeemable units, at redemption value........................ 67,595 67,595 Preferred units................ 295,000 295,000 Partners' capital.............. 2,042,375 1,944,644 703,049 $(2,647,693) 2,042,375 ---------- ----------- ---------- ----------- ---------- Total liabilities and partners' capital............. $3,845,224 $ 1,993,778 $ 984,074 $(2,647,693) $4,175,383 ========== =========== ========== =========== ==========
F-46 183 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED ----------- ---------- ------------- ------------ Revenues: Percent rent..................... $131,706 $228,154 $131,033 $490,893 Equity in income from unconsolidated entities........ 7,725 759 8,484 Other revenue.................... 4,624 4,624 -------- -------- -------- -------- Total revenue........... 144,055 228,913 131,033 504,001 -------- -------- -------- -------- Expenses: General and administrative....... 2,447 4,240 2,435 9,122 Depreciation..................... 43,090 69,665 40,193 152,948 Taxes, insurance and other....... 17,643 39,460 20,027 77,130 Interest expense................. 95,254 9,327 20,854 125,435 Minority interest other partnerships................... 1,099 1,614 2,713 -------- -------- -------- -------- Total expenses.......... 159,533 122,692 85,123 367,348 Net income (loss) before nonrecurring items............. (15,478) 106,221 45,910 136,653 Gain on sale of hotels, net...... 236 236 Extraordinary charge for write off of deferred financing fees........................... 1,113 1,113 -------- -------- -------- -------- Net income (loss)................ (16,355) 106,221 45,910 135,776 Preferred distributions.......... 24,735 24,735 -------- -------- -------- -------- Net income (loss) applicable to unitholders.................... $(41,090) $106,221 $ 45,910 $111,041 ======== ======== ======== ========
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED ----------- ---------- ------------- ------------ Cash flows from operating activities..................... $ 17,555 $183,998 $ 80,812 $ 282,365 Cash flows from (used in)investing activities........ 55,786 (99,074) (162,229) (205,517) Cash flows from (used in) financing activities........... (90,248) (77,178) 92,009 (75,417) -------- -------- --------- --------- Change in cash and cash equivalents.................... (16,907) 7,746 10,592 1,431 Cash and cash equivalents at beginning of period............ 20,000 4,672 10,020 34,692 -------- -------- --------- --------- Cash and equivalents at end of year........................... $ 3,093 $ 12,418 $ 20,612 $ 36,123 ======== ======== ========= =========
F-47 184 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED ----------- ---------- ------------- ------------ Revenues: Percent rent........................... $125,103 $143,977 $58,955 $328,035 Equity in income from unconsolidated entities............................. 6,960 57 7,017 Other revenue.......................... 4,504 61 4,565 -------- -------- ------- -------- Total revenue................ 136,567 144,038 59,012 339,617 -------- -------- ------- -------- Expenses: General and administrative............. 2,117 2,226 911 5,254 Depreciation........................... 36,490 41,021 13,324 90,835 Taxes, insurance and other............. 14,388 23,548 7,352 45,288 Interest expense....................... 62,785 3,076 7,321 73,182 Minority interest other partnerships... 1,121 1,121 -------- -------- ------- -------- Total expenses............... 115,780 69,871 30,029 215,680 Net income before nonrecurring items............................. 20,787 74,167 28,983 123,937 Gain on sale of hotels, net.......... 477 477 Extraordinary charge for write off of deferred financing fees........... 3,075 3,075 -------- -------- ------- -------- Net income........................... 18,189 74,167 28,983 121,339 Preferred distributions................ 21,423 21,423 -------- -------- ------- -------- Net income (loss) applicable to unitholders.......................... $ (3,234) $ 74,167 $28,983 $ 99,916 ======== ======== ======= ========
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED ----------- ---------- ------------- ------------ Cash flows from operating activities......................... $ 34,025 $115,187 $ 43,371 $ 192,583 Cash flows used in investing activities......................... (444,363) (25,753) (80,382) (550,498) Cash flows from (used in) financing activities......................... 412,795 (84,762) 47,031 375,064 --------- -------- -------- --------- Change in cash and cash equivalents........................ 2,457 4,672 10,020 17,149 Cash and cash equivalents at beginning of period................ 17,543 17,543 --------- -------- -------- --------- Cash and equivalents at end of year............................... $ 20,000 $ 4,672 $ 10,020 $ 34,692 ========= ======== ======== =========
F-48 185 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED ----------- ---------- ------------- ------------ Revenues: Percent rent............................ $ 83,528 $ 77,335 $ 8,251 $ 169,114 Equity in income from unconsolidated entities.............................. 6,963 6,963 Other revenue........................... 367 207 574 --------- -------- -------- --------- Total revenue................. 90,858 77,542 8,251 176,651 --------- -------- -------- --------- Expenses: General and administrative.............. 1,848 1,712 183 3,743 Depreciation............................ 22,798 26,094 1,906 50,798 Taxes, insurance and other.............. 11,781 10,661 651 23,093 Interest expense........................ 26,673 2,119 28,792 Minority interest other partnerships.... 573 573 --------- -------- -------- --------- Total expenses................ 63,100 40,586 3,313 106,999 --------- -------- -------- --------- Net income before extraordinary charge................................ 27,758 36,956 4,938 69,652 Extraordinary charge for write off of deferred financing fees............... 185 185 --------- -------- -------- --------- Net income.............................. 27,573 36,956 4,938 69,467 Preferred distributions................. 11,797 11,797 --------- -------- -------- --------- Net income applicable to unitholders.... $ 15,776 $ 36,956 $ 4,938 $ 57,670 ========= ======== ======== =========
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR TOTAL FELCOR L.P. GUARANTORS SUBSIDIARIES CONSOLIDATED ----------- ---------- ------------- ------------ Cash flows from operating activities... $ 57,817 $ 36,598 $ 3,063 $ 97,478 Cash flows used in investing activities........................... (598,467) (16,242) (73,151) (687,860) Cash flows from (used in) financing activities........................... 550,400 (20,356) 70,088 600,132 --------- -------- -------- --------- Change in cash and cash equivalents.... 9,750 9,750 Cash and cash equivalents at beginning of period............................ 7,793 7,793 --------- -------- -------- --------- Cash and equivalents at end of year.... $ 17,543 $ $ $ 17,543 ========= ======== ======== =========
F-49 186 FELCOR LODGING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 19. SUBSEQUENT EVENTS In connection with the efforts of Bass plc to acquire Bristol, as announced on February 28, 2000, a Bass subsidiary (Bass America, Inc.) contributed 4,713,185 outstanding FelCor common shares held by it to the Company in exchange for a like number of units. This exchange will not affect FFO or earnings per unit, although it results in reducing FelCor's percentage ownership in the Company from approximately 95% to approximately 88%. On January 4, 2000, FelCor announced that its Board of Directors had approved a $200 million increase to the existing $100 million stock repurchase program, authorizing FelCor to purchase up to an aggregate of $300 million of its outstanding common shares. Through September 15, 2000, FelCor had repurchased approximately 9.5 million shares of FelCor common stock at an aggregate cost of approximately $167.8 million. On April 26, 2000, the Company closed a 10-year, $145 million First Mortgage Term Loan, which is collateralized by seven Sheraton hotels and carries an 8.73% fixed interest rate. On May 2, 2000, the Company closed $186 million of 10-year, First Mortgage Term Loans which are collateralized by eight Embassy Suites hotels and carry an 8.69% fixed interest rate. The loans are non-recourse, mature in May 2010, and amortize over 25 years. The proceeds of these loans were used to reduce borrowings under its $850 million Line of Credit. The Company has identified 25 hotels that it considers non-strategic and has announced its intention to sell such hotels within the next year. Three of the hotels are leased by DJONT and the other 22 are leased and managed by Bristol. The Company expects gross sales proceeds from these hotels to be approximately $150 million and net proceeds to be approximately $136 million. In connection with the decision to sell these hotels, the Company has recorded, at June 30, 2000, a one-time reserve of $63 million representing the difference between the net book value of these hotels and the estimated net proceeds. The results of operations associated with the assets held for sale, included in the Company's results of operations, for the six months ended June 30, 2000, is $6.1 million. The hotels were depreciated through June 30, 2000. On July 14, the Company entered into a binding sale contract to sell its Embassy Suites hotel, Los Angeles International Airport-North, California (215 suites) for a gross price of approximately $24 million. The Company expects the sale will close in the third quarter of 2000, and result in a gain on sale of approximately $2.5 million. This hotel is not included in the 25 hotels held for sale. On July 21, 2000, FelCor's Independent Directors approved the acquisition of 100% of DJONT effective January 1, 2001. The purchase price is approximately 417,000 units of the Company; no binding agreements have been entered into for this acquisition, and the Company cannot assure that they will successfully complete this transaction. On August 1, 2000, the Company renewed it Line of Credit. The Line of Credit was reduced from $850 million to $600 million and the maturity was extended from July 2001 to August 2003. The effective interest rate ranges from 87.5 basis points to 250 basis points above LIBOR depending on the Company's leverage and corporate rating. On September 15, 2000, the Company completed the private placement of $400 million in aggregate principal amount of its long term senior unsecured notes. The notes bear interest at 9 1/2%, mature in 2008 and are priced at 98.633% to yield 9.75%. The discount on the $400 million senior notes accrete using the straight line method over the maturity of the notes. F-50 187 FELCOR LODGING TRUST INCORPORATED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JUNE 30, DECEMBER 31, 2000 1999 ----------- ------------ (UNAUDITED) ASSETS Investment in hotels, net of accumulated depreciation of $397,735 at June 30, 2000 and $330,555 at December 31, 1999...................................................... $3,796,755 $4,035,344 Investment in unconsolidated entities....................... 133,038 136,718 Assets held for sale........................................ 135,647 Cash and cash equivalents................................... 50,852 36,123 Due from Lessees............................................ 28,598 18,394 Note receivable from unconsolidated entity.................. 7,728 7,760 Deferred expenses, net of accumulated amortization of $6,874 at June 30, 2000 and $4,491 at December 31, 1999.......... 17,093 15,473 Other assets................................................ 7,054 5,939 ---------- ---------- Total assets...................................... $4,176,765 $4,255,751 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Debt, net of discount of $1,288 at June 30, 2000 and $1,401 at December 31, 1999...................................... $1,882,743 $1,833,954 Distributions payable....................................... 35,237 39,657 Accrued expenses and other liabilities...................... 73,335 65,480 Deferred rent............................................... 18,604 Minority interest in Operating Partnership, 7,597 and 2,991 units issued and outstanding at June 30, 2000 and December 31, 1999, respectively.................................... 221,878 90,078 Minority interest in other partnerships..................... 50,710 51,671 ---------- ---------- Total liabilities................................. 2,282,507 2,080,840 ---------- ---------- Commitments and contingencies (Notes 5 and 6) Shareholders' equity: Preferred stock, $.01 par value, 20,000 shares authorized: Series A Cumulative Preferred Stock, 6,031 and 6,050 shares issued and outstanding at June 30, 2000 and December 31, 1999, respectively........................ 150,765 151,250 Series B Redeemable Preferred Stock, 58 shares issued and outstanding............................................ 143,750 143,750 Common stock, $.01 par value, 200,000 shares authorized, 69,412 and 69,291 shares issued, including shares in treasury, at June 30, 2000 and December 31, 1999, respectively.............................................. 694 693 Additional paid-in capital.................................. 2,078,023 2,138,477 Distributions in excess of earnings......................... (206,783) (119,385) ---------- ---------- 2,166,449 2,314,785 Common stock in treasury, at cost, 14,600 shares and 6,976 shares at June 30, 2000 and December 31, 1999, respectively.............................................. (272,191) (139,874) ---------- ---------- Total shareholders' equity........................ 1,894,258 2,174,911 ---------- ---------- Total liabilities and shareholders' equity........ $4,176,765 $4,255,751 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-51 188 FELCOR LODGING TRUST INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED, IN THOUSANDS EXCEPT FOR PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- -------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Revenues: Percentage lease revenue............. $133,286 $131,891 $256,335 $256,882 Equity in income from unconsolidated entities.......................... 3,769 2,591 5,648 3,837 Other revenue........................ 810 705 2,687 1,385 -------- -------- -------- -------- Total revenues............... 137,865 135,187 264,670 262,104 -------- -------- -------- -------- Expenses: Depreciation......................... 41,080 37,737 81,480 74,162 Reserve for assets held for sale..... 63,000 63,000 Interest expense..................... 39,740 30,750 77,644 59,172 Taxes, insurance, and other.......... 17,234 15,425 35,877 32,372 Land leases.......................... 6,151 4,479 11,711 8,485 General and administrative........... 2,713 2,509 6,112 4,753 Minority interest in Operating Partnership....................... (3,403) 1,519 (2,399) 2,839 Minority interest in other partnerships...................... 1,125 833 2,093 1,639 -------- -------- -------- -------- Total expenses............... 167,640 93,252 275,518 183,422 -------- -------- -------- -------- Net income (loss) before nonrecurring items................................ (29,775) 41,935 (10,848) 78,682 Gain on sale of land................... 875 875 Extraordinary charge from write off of deferred financing fees.............. (1,113) (1,113) -------- -------- -------- -------- Net income (loss)...................... (28,900) 40,822 (9,973) 77,569 Preferred dividends.................... 6,174 6,184 12,358 12,368 -------- -------- -------- -------- Net income (loss) applicable to common shareholders......................... $(35,074) $ 34,638 $(22,331) $ 65,201 ======== ======== ======== ======== Per common share data: Basic: Net income (loss) applicable to common shareholders............... $ (0.64) $ 0.51 $ (0.39) $ 0.96 ======== ======== ======== ======== Weighted average common shares outstanding....................... 54,714 68,013 56,930 68,011 Diluted: Net income (loss) applicable to common shareholders............... $ (0.64) $ 0.51 $ (0.39) $ 0.95 ======== ======== ======== ======== Weighted average common shares outstanding....................... 54,945 68,351 57,161 68,347
The accompanying notes are an integral part of these consolidated financial statements. F-52 189 FELCOR LODGING TRUST INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED, IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, --------------------- 2000 1999 --------- --------- Cash flows from operating activities: Net income (loss)......................................... $ (9,973) $ 77,569 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation........................................... 81,480 74,162 Gain on sale of land................................... (875) Reserve for assets held for sale....................... 63,000 Amortization of deferred financing fees................ 2,383 1,303 Accretion of debt...................................... (446) (494) Amortization of unearned officers' and directors' compensation.......................................... 472 350 Equity in income from unconsolidated entities.......... (5,648) (3,837) Extraordinary charge for write off of deferred financing fees........................................ 1,113 Minority interest in Operating Partnership............. (2,399) 2,839 Minority interest in other partnerships................ 2,093 1,639 Changes in assets and liabilities: Due from Lessees....................................... (10,204) (13,356) Deferred expenses...................................... (4,003) (5,538) Other assets........................................... (1,251) (1,140) Deferred rent.......................................... 18,604 Accrued expenses and other liabilities................. 5,510 15,343 --------- --------- Net cash flow provided by operating activities.... 138,743 149,953 --------- --------- Cash flows used in investing activities: Improvements and additions to hotels...................... (41,408) (148,519) Acquisition of hotel assets............................... (10,802) Proceeds from sale of assets.............................. 1,071 15,091 Cash distributions from unconsolidated entities........... 11,708 13,297 --------- --------- Net cash flow used in investing activities........ (28,629) (130,933) --------- --------- Cash flows from financing activities: Proceeds from borrowings.................................. 500,892 744,000 Repayment of borrowings................................... (451,847) (630,899) Purchase of treasury stock................................ (56,733) Buyback of assumed stock options.......................... (1,860) Other distributions....................................... (3,054) Distributions paid to limited partners.................... (5,654) (4,273) Distributions paid to preferred shareholders.............. (12,368) (13,619) Distributions paid to common shareholders................. (64,761) (98,352) --------- --------- Net cash flow used in financing activities........ (95,385) (3,143) --------- --------- Net change in cash and cash equivalents..................... 14,729 15,877 Cash and cash equivalents at beginning of periods........... 36,123 34,692 --------- --------- Cash and cash equivalents at end of periods................. $ 50,852 $ 50,569 ========= ========= Supplemental cash flow information -- Interest paid............................................. $ 73,259 $ 55,549 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-53 190 FELCOR LODGING TRUST INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION FelCor Lodging Trust Incorporated ("FelCor") is one of the nation's largest hotel real estate investment trusts ("REIT"). At June 30, 2000, it owned interests in 188 hotels with nearly 50,000 rooms and suites (collectively the "Hotels") through its greater than 88% equity interest in FelCor Lodging Limited Partnership (the "Operating Partnership"). FelCor, the Operating Partnership, and their subsidiaries are herein referred to, collectively, as the "Company." The Company owns 100% of the interest in 163 of the Hotels, a 90% or greater interest in entities owning seven hotels, a 60% interest in an entity owning two hotels and 50% interests in separate entities that own 16 hotels. The Company is the owner of the largest number of Embassy Suites(R), Crowne Plaza(R), Holiday Inn(R), and independently owned Doubletree(R) branded hotels in the world. At June 30, 2000, the Company leased 86 of the Hotels to DJONT Operations, L.L.C., a Delaware limited liability company, or a consolidated subsidiary thereof (collectively "DJONT"), and leased 100 of the Hotels to Bristol Hotels & Resorts, or a consolidated subsidiary thereof ("Bristol" and, together with DJONT, the "Lessees"). Two Hotels were operated without a lease. The following table provides a schedule of the Hotels, by brand, operated by each of the Company's Lessees at June 30, 2000:
NOT OPERATED BRAND DJONT BRISTOL UNDER A LEASE TOTAL - ----- ----- ------- ------------- ----- Embassy Suites................................ 60 60 Holiday Inn................................... 43 1 44 Crowne Plaza and Crowne Plaza Suites(R)....... 18 18 Doubletree and Doubletree Guest Suites(R)..... 14 14 Holiday Inn Select(R)......................... 10 10 Sheraton(R) and Sheraton Suites(R)............ 10 10 Hampton Inn(R)................................ 9 9 Holiday Inn Express(R)........................ 5 5 Fairfield Inn(R).............................. 5 5 Harvey Hotel(R)............................... 4 4 Independents.................................. 2 1 3 Courtyard by Marriott(R)...................... 2 2 Four Points by Sheraton(R).................... 1 1 Hilton Suites(R).............................. 1 1 Homewood Suites(R)............................ 1 1 Westin(R)..................................... 1 1 -- --- -- --- Total Hotels........................ 86 100 2 188 == === == ===
The Hotels are located in the United States (35 states) and Canada, with a concentration in Texas (41 hotels), California (20 hotels), Florida (18 hotels) and Georgia (15 hotels). Thomas J. Corcoran, Jr., the President, Chief Executive Officer, and a Director of FelCor, and Hervey A. Feldman, Chairman Emeritus of FelCor, beneficially own a 50% voting common equity interest in DJONT. The remaining 50% nonvoting common equity interest is beneficially owned by the children of Charles N. Mathewson, a director of FelCor and major initial investor in the Company. At June 30, 2000, DJONT had entered into management agreements pursuant to which 72 of the Hotels leased by it were managed by subsidiaries of Hilton Hotels Corporation F-54 191 FELCOR LODGING TRUST INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ("Hilton"), 11 were managed by subsidiaries of Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") and three were managed by two unrelated management companies. At June 30, 2000, Bristol, which became a subsidiary of Bass plc ("Bass") by virtue of the merger between Bristol and a subsidiary of Bass on March 31, 2000, leased and managed 100 Hotels and managed and operated one hotel, in which the Company owned a 50% interest, without a lease. Bass is one of the largest hotel operating companies in the world. Certain reclassifications have been made to prior period financial information to conform to the current period's presentation with no effect to previously reported net income or shareholder's equity. The financial information for the three and six months ended June 30, 2000 and 1999, is unaudited but includes all adjustments (consisting only of normal recurring accruals) which the Company considers necessary for a fair presentation of the results for the periods. The financial information should be read in conjunction with the consolidated financial statements for the year ended December 31, 1999, included in the Company's Annual Report on Form 10-K ("Form 10-K"). Operating results for the three and six months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2000. 2. DEFERRED RENT Effective January 2000, Percentage Leases with regard to 68 of the Company's 188 hotels were changed to provide for the computation of rent on an annual, rather than quarterly basis. This should result in no change in annual Percentage Rent or cash flows. In accordance with Staff Accounting Bulletin No. 101 (SAB 101), this change requires that the Company defer Percentage Lease revenue until annual thresholds are exceeded. This deferred rent is expected to be fully earned and recognized as Percentage Lease Revenue by the end of 2000. 3. ASSETS HELD FOR SALE The Company has identified 25 hotels that it considers non-strategic and has announced its intention to sell such hotels within the next year. Three of the hotels are leased by DJONT and the other 22 are leased and managed by Bristol. The Company expects gross sales proceeds from these hotels to be approximately $150 million and net proceeds to be approximately $136 million. In connection with the decision to sell these hotels, FelCor has recorded, at June 30, 2000, a one-time reserve of $63 million representing the difference between the net book value of these hotels and the estimated net proceeds. The results of operations associated with the assets held for sale, included in the Company's results of operations, for the six months ended June 30, 2000, is $6.1 million. The hotels were depreciated through June 30, 2000. 4. INVESTMENT IN UNCONSOLIDATED ENTITIES The Company owned 50% interests in separate entities owning 16 hotels at June 30, 2000, and 15 hotels at June 30, 1999, a parcel of undeveloped land, and a condominium management company. The Company also owned a 97% nonvoting interest in an entity that owns an annex to a hotel owned by the Company and holds a 50% interest in an entity that is developing condominiums for sale. The Company accounts for its investments in these unconsolidated entities under the equity method. F-55 192 FELCOR LODGING TRUST INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Summarized unaudited combined financial information for 100% of these unconsolidated entities is as follows (in thousands):
JUNE 30, ------------------- 2000 1999 -------- -------- Balance sheet information: Investment in hotels..................................... $339,795 $269,123 Non-recourse mortgage debt............................... $265,874 $196,462 Equity................................................... $ 88,096 $ 93,524
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ----------------- 2000 1999 2000 1999 -------- -------- ------- ------- Statements of Operations Information: Total revenues....................... $21,245 $17,137 $39,173 $31,297 Net income..................................... $ 8,715 $ 6,358 $13,649 $10,078 Net income attributable to the Company......... $ 4,305 $ 3,127 $ 6,719 $ 4,908 Amortization of cost in excess of book value... (536) (536) (1,071) (1,071) ------- ------- ------- ------- Equity in income from unconsolidated entities..................................... $ 3,769 $ 2,591 $ 5,648 $ 3,837 ======= ======= ======= =======
5. DEBT Debt at June 30, 2000, and December 31, 1999, consisted of the following (in thousands):
JUNE 30, DECEMBER 31, COLLATERAL INTEREST RATE MATURITY DATE 2000 1999 ---------------- -------------------- ------------- ---------- ------------ Floating Rate Debt: Line of credit........... (a) LIBOR + 163bp June 2001 $ 285,000 $ 351,000 Senior term loan......... (a) LIBOR + 275bp March 2004 249,000 250,000 Mortgage debt............ 3 hotels LIBOR + 200bp February 2003 62,239 62,553 Other.................... Uncollateralized Up to LIBOR + 200bp Various 11,032 32,282 ---------- ---------- Total floating rate debt............. 607,271 695,835 ---------- ---------- Fixed Rate Debt: Line of credit -- swapped................ (a) 7.18% June 2001 125,000 313,000 Publicly-traded term notes.................. (a) 7.38% October 2004 174,441 174,377 Publicly-traded term notes.................. (a) 7.63% October 2007 124,271 124,221 Mortgage debt............ 15 hotels 7.24% November 2007 141,367 142,542 Senior term loan -- swapped................ (a) 8.56% March 2004 125,000 125,000 Mortgage debt............ 7 hotels 7.54% April 2009 98,354 99,075 Mortgage debt............ 6 hotels 7.55% June 2009 73,946 74,483 Mortgage debt............ 7 hotels 8.73% May 2010 144,865 Mortgage debt............ 8 hotels 8.70% May 2010 185,762 Other.................... 13 hotels 6.96% - 7.23% 2000 - 2005 82,466 85,421 ---------- ---------- Total fixed rate debt............. 1,275,472 1,138,119 ---------- ---------- Total debt......... $1,882,743 $1,833,954 ========== ==========
- ------------ (a) Collateralized by stock and partnership interests in certain subsidiaries of FelCor. F-56 193 FELCOR LODGING TRUST INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Thirty-day LIBOR at June 30, 2000, was 6.649%. A portion of the Company's Line of Credit and Senior Term Loan is matched with interest rate swap agreements which effectively convert the variable rate on the Line of Credit and Senior Term Loan to a fixed rate. The Line of Credit and the Senior Term Loan contain various affirmative and negative covenants including limitations on total indebtedness, total secured indebtedness, and cash distributions, as well as the obligation to maintain certain minimum tangible net worth and certain minimum interest and debt service coverage ratios. At June 30, 2000, the Company was not in default with respect to any such covenants. The Company's other borrowings contain affirmative and negative covenants that are generally equal to or less restrictive than the Line of Credit and Senior Term Loan. Most of the mortgage debt is non-recourse to the Company (with certain exceptions) and contains provisions allowing for the substitution of collateral upon satisfaction of certain conditions. Most of the mortgage debt is prepayable; subject, however, to various prepayment penalties, yield maintenance, or defeasance obligations. On April 26, 2000, the Company closed a 10-year, $145 million First Mortgage Term Loan, which is secured by seven Sheraton hotels and carries an 8.73% fixed interest rate. On May 2, 2000, the Company closed $186 million of 10-year, First Mortgage Term Loans which are secured by eight Embassy Suites hotels and carry an 8.70% fixed interest rate. The loans are non-recourse, mature in May 2010, and amortize over 25 years. The proceeds of these loans were used to reduce borrowings under the Company's $850 million Line of Credit. 6. COMMITMENTS AND RELATED PARTY TRANSACTIONS The Company is to receive rental income from the Lessees under the Percentage Leases which expire in 2003 (six hotels), 2004 (11 hotels), 2005 (18 hotels), 2006 (22 hotels), 2007 (27 hotels), 2008 (44 hotels), and thereafter (19 hotels). The rental income under the Percentage Leases between 15 of the unconsolidated entities, of which the Company owns 50%, is payable by the Lessee to the respective entities and is not included in the schedule of future lease commitments to the Company. Minimum future rental income (i.e., base rents) payable to the Company under these noncancelable operating leases at June 30, 2000, excluding the 25 hotels that have been designated as held for sale, is as follows (in thousands):
LESSEES ----------------------- YEAR DJONT BRISTOL TOTAL - ---- ---------- ---------- ---------- Remainder of 2000........................ $ 72,351 $ 84,402 $ 156,753 2001..................................... 148,009 168,805 316,814 2002..................................... 148,240 168,816 317,056 2003..................................... 137,190 166,123 303,313 2004..................................... 132,584 158,827 291,411 2005 and thereafter...................... 447,848 620,570 1,068,418 ---------- ---------- ---------- $1,086,222 $1,367,543 $2,453,765 ========== ========== ==========
F-57 194 FELCOR LODGING TRUST INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Minimum future rental income (i.e., base rents) payable to the Company under the noncancelable operating leases for the 25 hotels held for sale as of June 30, 2000 is as follows (in thousands):
LESSEES ----------------- YEAR DJONT BRISTOL TOTAL - ---- ------- ------- -------- Remainder of 2000................................ $ 1,575 $ 6,338 $ 7,913 2001............................................. 3,150 12,676 15,826 2002............................................. 3,150 12,676 15,826 2003............................................. 3,150 12,578 15,728 2004............................................. 3,150 12,382 15,532 2005 and thereafter.............................. 4,696 34,255 38,951 ------- ------- -------- $18,871 $90,905 $109,776 ======= ======= ========
Certain entities owning interests in DJONT and managers for certain hotels have agreed to make loans to DJONT of up to an aggregate of approximately $17.3 million to the extent necessary to enable DJONT to pay rent and other obligations due under the respective Percentage Leases relating to a total of 38 of the Hotels. No such loans were outstanding at June 30, 2000. DJONT engages third-party managers to operate the Hotels leased by it and generally pays such managers a base management fee based on a percentage of room and suite revenue and an incentive management fee based on DJONT's income before overhead expenses for each hotel. In certain instances, the hotel managers have subordinated fees and are committed to make subordinated loans to DJONT, if needed, to meet its rental and other obligations under the Percentage Leases. Bristol serves as both the lessee and manager of 100 Hotels leased to it by the Company at June 30, 2000, and, as such, is compensated for both roles through the profitability of the Hotels, after meeting their operating expenses and rental obligations under the Percentage Leases. Bristol has entered into an absolute and unconditional guarantee of the obligations of the Bristol Lessees under the Percentage Leases, and is required to maintain a minimum liquid net worth. A portion of this liquid net worth is being satisfied through a letter of credit for the benefit of the Company. This letter of credit is subject to periodic reductions upon satisfaction of certain conditions and, at June 30, 2000, totaled $9.1 million. 7. SEGMENT INFORMATION The Company has determined that its reportable segments are those that are consistent with the Company's method of internal reporting, which segments its business by Lessee. The Company's Lessees at June 30, 2000, were DJONT and Bristol. F-58 195 FELCOR LODGING TRUST INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following tables present information for the reportable segments for the three and six months ended June 30, 2000 and 1999 for both DJONT and Bristol (in thousands):
CORPORATE SEGMENT NOT ALLOCABLE CONSOLIDATED THREE MONTHS ENDED JUNE 30, 2000 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL - -------------------------------- ------- -------- -------- ------------- ------------ Total revenues.................... $74,338 $ 62,717 $137,055 $ 810 $137,865 Net income (loss)................. $33,193 $(23,785) $ 9,408 $(38,308) $(28,900) Funds from operations............. $68,567 $ 57,197 $125,764 $(44,879) $ 80,885 Weighted average common shares and units outstanding(1)............ 67,232
CORPORATE SEGMENT NOT ALLOCABLE CONSOLIDATED THREE MONTHS ENDED JUNE 30, 1999 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL - -------------------------------- ------- ------- -------- ------------- ------------ Total revenues.................... $72,845 $62,114 $134,959 $ 228 $135,187 Net income (loss)................. $43,252 $33,233 $ 76,485 $(35,663) $ 40,822 Funds from operations............. $65,385 $51,264 $116,649 $(36,266) $ 80,383 Weighted average common shares and units outstanding(1)............ 76,029
CORPORATE SEGMENT NOT ALLOCABLE CONSOLIDATED SIX MONTHS ENDED JUNE 30, 2000 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL - ------------------------------ -------- -------- -------- ------------- ------------ Total revenues................ $142,746 $119,237 $261,983 $ 2,687 $264,670 Net income (loss)............. $ 69,892 $ (1,059) $ 68,833 $(78,806) $ (9,973) Funds from operations......... $132,459 $104,459 $236,918 $(87,538) $149,380 Weighted average common shares and units outstanding(1).... 67,987
CORPORATE SEGMENT NOT ALLOCABLE CONSOLIDATED SIX MONTHS ENDED JUNE 30, 1999 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL - ------------------------------ -------- -------- -------- ------------- ------------ Total revenues................ $146,901 $114,752 $261,653 $ 451 $262,104 Net income (loss)............. $ 87,200 $ 57,795 $144,995 $(67,426) $ 77,569 Funds from operations......... $131,827 $ 92,348 $224,175 $(69,943) $154,232 Weighted average common shares and units outstanding(1).... 76,008
- ------------ (1) Weighted average common shares and units outstanding are computed including dilutive options, unvested stock grants, and assuming conversion of Series A Preferred Stock to Common Stock. 8. TREASURY STOCK REPURCHASE PROGRAM On January 4, 2000, FelCor announced that its Board of Directors had approved a stock repurchase program, authorizing the Company to purchase up to an aggregate of $200 million of its outstanding common shares. During the six months ended June 30, 2000, FelCor had repurchased approximately 3.1 million shares of FelCor common stock for approximately $56.7 million. F-59 196 FELCOR LODGING TRUST INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. BASS STOCK CONTRIBUTION In connection with the efforts of Bass to acquire Bristol, a Bass subsidiary (Bass America, Inc.) contributed 4,713,185 outstanding FelCor common shares held by it to the Operating Partnership in exchange for a like number of units of limited partnership interest on February 28, 2000. This exchange did not affect the Company's FFO or earnings per share, although it resulted in reducing FelCor's percentage ownership in the Operating Partnership from approximately 95% to approximately 88%. The shares were recorded in treasury at $17 per share which represented fair market value on date of exchange ($80.1 million) and increased minority interest in the Operating Partnership for a like amount. 10. BUYBACK OF ASSUMED STOCK OPTIONS In the second quarter of 2000 the Company purchased options covering an aggregate of 349,443 shares of FelCor's Common Stock for approximately $1.9 million. The options were held by employees of Bristol Hotels & Resorts and were issued in substitution for stock options previously granted by Bristol Hotel Company that were outstanding at the time of its merger with FelCor in 1998. The options so purchased and retired had exercise prices ranging from $10.33 to $16.95 per share and the majority of these options were scheduled to vest in the third quarter of 2000. 11. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings (loss) per share for the three and six months ended June 30, 2000 and 1999 (in thousands, except per share data):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE JUNE ------------------ ------------------ 2000 1999 2000 1999 -------- ------- -------- ------- Numerator: Net income (loss) applicable to common shareholders............. $(35,074) $34,638 $(22,331) $65,201 Denominator: Denominator for basic earnings per share -- weighted average shares.......................... 54,714 68,013 56,930 68,011 Effect of diluted securities: Stock options................. 273 271 Restricted shares............. 231 65 231 65 -------- ------- -------- ------- Denominator for diluted earnings per share -- adjusted weighted average shares and assumed conversions..................... 54,945 68,351 57,161 68,347 ======== ======= ======== ======= Earnings (loss) per share data: Basic.............................. $ (0.64) $ 0.51 $ (0.39) $ 0.96 Diluted............................ $ (0.64) $ 0.51 $ (0.39) $ 0.95
The Series A Preferred Shares and most of the options granted are anti-dilutive and not included in the calculation of diluted earnings per share. F-60 197 FELCOR LODGING TRUST INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 12. SUBSEQUENT EVENTS On July 14, FelCor entered into a binding sale contract to sell its Embassy Suites hotel, Los Angeles International Airport-North, California (215 suites) for a gross price of approximately $24 million. The Company expects the sale will close by the end of August 2000, and result in a gain on sale of approximately $3 million, in the third quarter of 2000. This hotel is not included in the 25 hotels held for sale. On July 21, 2000, FelCor's Independent Directors approved the acquisition of 100% of DJONT effective January 1, 2001. The purchase price is approximately 417,000 units of the Operating Partnership. On August 1, 2000, FelCor renewed its Line of Credit. The Line of Credit was reduced from $850 million to $600 million and the maturity was extended from July 2001 to August 2003. The effective interest rate ranges from 87.5 basis points to 250 basis points above LIBOR depending on the Company's leverage and corporate rating. On September 15, 2000, the Company completed the private placement of $400 million in aggregate principal amount of its long-term senior unsecured notes. The notes bear interest at 9 1/2% per annum, mature in 2008, and were priced at 98.633% to yield 9 3/4%. F-61 198 FELCOR LODGING TRUST INCORPORATED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE TWELVE MONTHS ENDED JUNE 30, 2000, AND THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) The following unaudited Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2000, the twelve months ended June 30, 2000, and the year ended December 31, 1999 is based in part upon the Consolidated Statements of Operations of FelCor Lodging Trust Incorporated ("FelCor") for the six months ended June 30, 2000 and the year ended December 31, 1999 included or incorporated by reference herein. The Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2000, the twelve months ended June 30, 2000, and the year ended December 31, 1999 assume that all the following occurred on January 1, 1999: (i) the issuance of $400 million of senior unsecured debt (ii) the completion of the other financing transactions which occurred in 2000, (iii) the repurchase by FelCor of $164.3 million of its common stock through August 31, 2000, and (iv) the sale of 25 non-strategic hotels identified in the second quarter of 2000. In management's opinion, all material adjustments necessary to reflect the effects of the foregoing transactions have been made. The following unaudited pro forma consolidated statements of operations are not necessarily indicative of what the actual results of operations of FelCor would have been assuming such transactions had been completed as of January 1, 1999, nor do they purport to represent the results of operations for future periods. F-62 199 FELCOR LODGING TRUST INCORPORATED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE TWELVE MONTHS ENDED JUNE 30, 2000, AND THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
DEBT TRANSACTIONS AND STOCK REPURCHASE SENIOR FELCOR COMPLETED THROUGH SALE OF UNSECURED HISTORICAL AUGUST 31, 2000 25 HOTELS DEBT PRO FORMA THE SIX MONTHS ENDED JUNE 30, 2000 (A) (B) (C) (D) TOTAL - ---------------------------------- ---------- ----------------- --------- --------- --------- Revenues: Percentage lease revenue......... $256,335 $(11,232) $245,103 Equity in income of unconsolidated entities........ 5,648 5,648 Other revenue.................... 2,687 2,687 -------- -------- -------- Total revenue............. 264,670 (11,232) 253,438 -------- -------- -------- Expenses: General and administrative....... 6,112 -- 6,112 Depreciation..................... 81,480 (3,668) 77,812 Reserve for assets held for sale........................... 63,000 (63,000) Taxes, insurance and other....... 35,877 (1,687) 34,190 Land leases...................... 11,711 (21) 11,690 Interest......................... 77,644 $ 2,350(E) (5,359) $ 2,221(F) 76,856 Minority interest in FelCor Operating Partnership.......... (2,399) 5,696(G) 3,297 Minority interest in other partnerships................... 2,093 2,093 -------- ------- -------- ------- -------- Total expenses............ 275,518 8,046 (73,735) 2,221 212,050 -------- ------- -------- ------- -------- Net income (loss) before nonrecurring item................ (10,848) (8,046) 62,503 (2,221) 41,388 Gain on sale of land............... 875 875 -------- ------- -------- ------- -------- Net income (loss).................. (9,973) (8,046) 62,503 (2,221) 42,263 Preferred dividends................ 12,358 12,358 -------- ------- -------- ------- -------- Net income (loss) applicable to common shareholders.............. $(22,331) $(8,046) $ 62,503 $(2,221) $ 29,905 ======== ======= ======== ======= ======== Diluted per common share data: Net income applicable to common shareholders..................... $ (0.39) $ (0.54) ======== ======== Weighted average common shares outstanding -- diluted........... 57,161 (1,501)(H) 55,660 ======== ======= ========
See notes to pro forma consolidated statements of operations. F-63 200 FELCOR LODGING TRUST INCORPORATED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE TWELVE MONTHS ENDED JUNE 30, 2000, AND THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
DEBT TRANSACTIONS AND STOCK FELCOR FELCOR REPURCHASE SIX MONTHS SIX MONTHS COMPLETED SALE OF SENIOR ENDED ENDED THROUGH 25 UNSECURED THE TWELVE MONTHS ENDED JUNE 30, JUNE 30, DECEMBER 31, AUGUST 31, HOTELS DEBT PRO FORMA 2000 2000(A) 1999(A) 2000(B) (C) (D) TOTAL - -------------------------------- ---------- ------------ ------------- -------- --------- --------- Revenues: Percentage lease revenue..... $256,335 $234,011 $(21,967) $468,379 Equity in income of unconsolidated entities.... 5,648 4,647 10,295 Other revenue................ 2,687 3,239 5,926 -------- -------- -------- -------- ------- -------- Total revenue.......... 264,670 241,897 (21,967) 484,600 -------- -------- -------- -------- ------- -------- Expenses: General and administrative... 6,112 4,369 10,481 Depreciation................. 81,480 78,786 (7,193) 153,073 Reserve for assets held for sale....................... 63,000 (63,000) Taxes, insurance and other... 35,877 27,200 (3,213) 59,864 Land Leases.................. 11,711 9,073 (45) 20,739 Interest..................... 77,644 66,263 $ 10,551(E) (10,556) $ 6,023(F) 149,925 Minority interest in FelCor Operating Partnership...... (2,399) 1,857 5,195(G) 4,653 Minority interest in other partnerships............... 2,093 1,074 3,167 -------- -------- -------- -------- ------- -------- Total expenses......... 275,518 188,622 15,746 (84,007) 6,023 401,902 -------- -------- -------- -------- ------- -------- Net income (loss) before nonrecurring item............ (10,848) 53,275 (15,746) 62,040 (6,023) 82,698 Gain on sale of assets......... 875 236 1,111 -------- -------- -------- -------- ------- -------- Net income (loss).............. (9,973) 53,511 (15,746) 62,040 (6,023) 83,809 Preferred dividends............ 12,358 12,367 24,725 -------- -------- -------- -------- ------- -------- Net income (loss) applicable to common shareholders.......... $(22,331) $ 41,144 $(15,746) $ 62,040 $(6,023) $ 59,084 ======== ======== ======== ======== ======= ======== Diluted per common share data: Net income applicable to common shareholders................. $ (0.39) $ 1.03 ======== ======== Weighted average common shares outstanding -- diluted...................... 57,161 66,803 58(H) 57,219 ======== ======== ======== ========
See notes to pro forma consolidated statements of operations. F-64 201 FELCOR LODGING TRUST INCORPORATED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE TWELVE MONTHS ENDED JUNE 30, 2000, AND THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
DEBT TRANSACTIONS AND STOCK REPURCHASE SENIOR FELCOR COMPLETED THROUGH SALE OF UNSECURED HISTORICAL AUGUST 31, 2000 25 HOTELS DEBT PRO FORMA THE YEAR ENDED DECEMBER 31, 1999 (A) (B) (C) (D) TOTAL - -------------------------------- ---------- ----------------- --------- ----------- --------- Revenues: Percentage lease revenue....... $490,893 $(23,116) $467,777 Equity in income of unconsolidated entities...... 8,484 8,484 Other revenue.................. 4,624 4,624 -------- -------- -------- Total revenue........... 504,001 (23,116) 480,885 -------- -------- -------- Expenses: General and administrative..... 9,122 9,122 Depreciation................... 152,948 (6,765) 146,183 Taxes, insurance and other..... 59,572 (3,256) 56,316 Land Leases.................... 17,558 (42) 17,516 Interest....................... 125,435 $ 16,922(E) (10,145) $ 9,215(F) 141,427 Minority interest in FelCor Operating Partnership........ 4,696 (674)(G) 4,022 Minority interest in other partnerships................. 2,713 2,713 -------- -------- -------- ------- -------- Total expenses.......... 372,044 16,248 (20,208) 9,215 377,299 -------- -------- -------- ------- -------- Net income before nonrecurring item........................... 131,957 (16,248) (2,908) (9,215) 103,586 Gain on sale of assets........... 236 236 -------- -------- -------- ------- -------- Net income....................... 132,193 (16,248) (2,908) (9,215) 103,822 Preferred dividends.............. 24,735 24,735 -------- -------- -------- ------- -------- Net income applicable to common shareholders................... $107,458 $(16,248) $ (2,908) $(9,215) $ 79,087 ======== ======== ======== ======= ======== Diluted per common share data: Net income applicable to common shareholders................... $ 1.59 $ 1.34 ======== ======== Weighted average common shares outstanding -- diluted......... 67,581 (8,655)(H) 58,926 ======== ======== ========
See notes to pro forma consolidated statements of operations. F-65 202 FELCOR LODGING TRUST INCORPORATED NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE TWELVE MONTHS ENDED JUNE 30, 2000, AND THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED) (A) Represents FelCor's historical results of operations, excluding extraordinary charges from the write off of deferred financing fees. (B) Represents adjustment to FelCor's historical results of operations assuming that (i) the debt transactions completed in 2000, which include placement of $330.6 million of mortgage debt and renewal of the Company's Line of Credit and (ii) the $164.3 million repurchase by FelCor of its common stock through August 31, 2000, had occurred as of January 1, 1999. (C) Represents the historical results of operations for the 25 non-strategic hotels that the Company has announced its intent to sell. The reduction in interest expense reflects the repayment of $5 million in mortgage debt, and of $131 million borrowed under our line of credit, from the net proceeds of the sale of the 25 hotels. The interest rate used to calculate the pro forma interest on the Line of Credit during the periods presented is the applicable historical rate under the Line of Credit during the periods. (D) Represents adjustment to FelCor's historical results of operations assuming the completion of the issuance of $400 million of senior unsecured debt. (E) Represents pro forma interest expense based on (i) $330.6 million of mortgage debt borrowed in 2000 and used to pay down the Line of Credit and (ii) $164.3 million of FelCor's common stock repurchased through August 31, 2000. The interest rates used to calculate pro forma interest expense on the mortgage debt borrowed in 2000 are the actual rates for the new mortgage notes, of 8.73% and 8.70%. The rate for the paydown on the Line of Credit is the historical rate on the Line of Credit during the periods presented. The interest rate used to calculate pro forma interest on the $164.3 million stock repurchase is the historical rate on the Line of Credit during the periods presented adjusted to reflect the August 2000 renewal of the Line of Credit. (F) Represents pro forma interest expense on the $400 million of senior unsecured debt after application of net proceeds to repay a $374 million term loan and to reduce borrowings under the Line of Credit. The interest rates used to calculate pro forma interest expense are 9.50% for the senior unsecured debt and historical rates for the term loan and Line of Credit for the periods presented. (G) Represents pro forma adjustment to minority interest in the FelCor Operating Partnership to reflect additional interest expense and the repurchase of FelCor stock. (H) Represents the number of shares of FelCor common stock which had been repurchased through August 31, 2000. F-66 203 FELCOR LODGING TRUST INCORPORATED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 (UNAUDITED) The following unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2000 is based in part on the Consolidated Balance Sheet of FelCor included herein. The Pro Forma Consolidated Balance Sheet assumes that the completion of (i) the $400 million of senior unsecured debt, the subsequent payoff of the $374 million term loan and the reduction of borrowings under the Line of Credit, (ii) the repurchase by FelCor of $9.2 million of its common stock between July 1, 2000 and August 31, 2000 funded from its Line of Credit and (iii) the sale of 25 non-strategic hotels identified in the second quarter of 2000. In management's opinion, all material adjustments necessary to reflect the effects of the foregoing transaction have been made. The following unaudited consolidated balance sheet is not necessarily indicative of what the actual financial position would have been assuming such transaction had been completed as of June 30, 2000, nor does it purport to represent the future financial position of FelCor. F-67 204 FELCOR LODGING TRUST INCORPORATED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 (UNAUDITED, IN THOUSANDS)
FELCOR HISTORICAL PRO FORMA (A) ADJUSTMENTS TOTAL ---------- ----------- ---------- ASSETS Net investment in hotels........................ $3,796,755 $3,796,755 Investment in unconsolidated entities........... 133,038 133,038 Assets held for sale............................ 135,647 $(135,647)(B) Cash and cash equivalents....................... 50,852 50,852 Due from Lessees................................ 28,598 28,598 Note receivable from unconsolidated entity...... 7,728 7,728 Deferred expenses, net.......................... 17,093 8,929(C) 26,022 Other assets.................................... 7,054 7,054 ---------- --------- ---------- Total assets.......................... $4,176,765 $(126,718) $4,050,047 ========== ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY Debt and capital lease obligations.............. $1,882,743 $(114,050)(D) $1,768,693 Distributions payable........................... 35,237 35,237 Accrued expenses and other liabilities.......... 73,335 73,335 Deferred rent................................... 18,604 18,604 Minority interest in Operating Partnership...... 221,878 (281)(E) 221,597 Minority interest in other partnerships......... 50,710 50,710 ---------- --------- ---------- Total liabilities..................... 2,282,507 (114,331) 2,168,176 ---------- --------- ---------- Shareholders' equity: Series A Cumulative Preferred Stock........... 150,765 150,765 Series B Redeemable Preferred Stock........... 143,750 143,750 Common stock.................................. 694 694 Additional paid-in capital.................... 2,078,023 (61)(E) 2,077,962 Distributions in excess of earnings........... (206,783) (3,098)(F) (209,881) Common stock in treasury...................... (272,191) (9,228)(G) (281,419) ---------- --------- ---------- Total liabilities and shareholders' equity.............................. $4,176,765 $(126,718) $4,050,047 ========== ========= ==========
See notes to pro forma consolidated balance sheet. F-68 205 FELCOR LODGING TRUST INCORPORATED NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 (UNAUDITED, IN THOUSANDS) (A) Represents the historical consolidated balance sheet of FelCor as of June 30, 2000. (B) Represents the pro forma change in assets held for sale to reflect the sale of 25 hotels. (C) Represents the estimated costs of the $400 million senior unsecured debt of $12.4 million which are capitalized and amortized over the term of the debt after writeoff of unamortized loan costs of $3.4 million associated with the term loan. (D) Represents the pro forma change in debt from, (i) placement of $400 million senior unsecured notes with net proceeds of $388 million used to repay a $374 million term and the balance used to reduce borrowings under the Line of Credit, (ii) the repurchase by FelCor of $9.2 million of its common stock from July 1, 2000 through August 31, 2000 funded from the Line of Credit, and (iii) the net proceeds of the sale of 25 hotels of $136 million, used to repay $5 million in mortgage debt associated with these hotels and $131 million to reduce borrowings under the Line of Credit. (E) Represents the adjustment to reflect the increase in the minority interest in FelCor LP to 9.93% as a result of the redemption of the partnership units related to the stock repurchased as discussed in (G) below. (F) Represents the writeoff of unamortized loan costs of $3.4 million associated with the term loan repaid net of minority interest. (G) Reflects the shares repurchased by FelCor from July 1, 2000 to August 31, 2000. F-69 206 (This page intentionally left blank) 207 ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE DELIVERED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THIS PROSPECTUS, THE LETTER OF TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE AGENT AS FOLLOWS: BY REGISTERED OR CERTIFIED MAIL, HAND DELIVERY OR OVERNIGHT COURIER: SunTrust Bank Attention: George T. Hogan, Corporate Trust Department 25 Park Place, 24th Floor Atlanta, Georgia 30303-2900 Attention: or SunTrust Bank c/o Harris Trust of New York Attention: Mary Ann Luisi, Corporate Trust Department Wall Street Plaza 88 Pine Street, 19th Floor New York, New York 10005 or BY FACSIMILE: (404) 588-7335 (GA) or (212) 701-7648 (NY) ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE SHOULD BE SENT PROMPTLY BY HAND, OVERNIGHT COURIER, OR REGISTERED OR CERTIFIED MAIL. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS ABOUT THE TRANSACTIONS WE DISCUSSED IN THIS PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS WE INCORPORATE HEREIN BY REFERENCE. IF YOU ARE GIVEN ANY INFORMATION OR REPRESENTATIONS ABOUT THESE MATTERS THAT IS NOT DISCUSSED OR INCORPORATED IN THIS PROSPECTUS, YOU MUST NOT RELY ON THAT INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES ANYWHERE OR TO ANYONE WHERE OR TO WHOM WE ARE NOT PERMITTED TO OFFER OR SELL SECURITIES UNDER APPLICABLE LAW. THE DELIVERY OF THIS PROSPECTUS OFFERED HEREBY DOES NOT, UNDER ANY CIRCUMSTANCES, MEAN THAT THERE HAS NOT BEEN A CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF. IT ALSO DOES NOT MEAN THAT THE INFORMATION IN THIS PROSPECTUS OR IN THE DOCUMENTS WE INCORPORATE HEREIN BY REFERENCE IS CORRECT AFTER THIS DATE. OFFER TO EXCHANGE ALL OUTSTANDING 9 1/2% SENIOR NOTES DUE 2008 FOR REGISTERED 9 1/2% SENIOR NOTES DUE 2008 FELCOR LODGING LIMITED PARTNERSHIP PROSPECTUS OCTOBER , 2000 208 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 6.7 of the Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership (the "Partnership"), as amended (the "Partnership Agreement"), provides that, to the fullest extent permitted by law, but subject to the limitations expressly provided in the Partnership Agreement, FelCor Lodging Trust Incorporated, or its successor or assigns (the "General Partner"), and any person who is or was an officer or director of the General Partner shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities (joint or several), expenses (including, without limitation, legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil or criminal, administrative or investigative, in which any such party may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as (i) the General Partner, or any of its affiliates, (ii) an officer, director, employee, partner, agent or trustee of the General Partner, or any of its affiliates or (iii) a person serving at the request of the Partnership in another entity in a similar capacity; provided, that in each case such party acted in good faith, in a manner which such party believed to be in, or not opposed to, the best interests of the Partnership and, with respect to any criminal proceeding, had no reasonable cause to believe its conduct was unlawful. Any indemnification pursuant to Section 6.7 shall be made only out of the Partnership assets. The Charter of the General Partner, generally, limits the liability of the General Partner's directors and officers to the General Partner 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 the General Partner in which the director was adjudged liable to the General Partner 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 of 1933 ("Securities Act") may be permitted to directors and officers of the General Partner pursuant to the foregoing provisions or otherwise, the General Partner has been advised that, in the opinion of the Securities and Exchange Commission (the "Commission"), such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. The General Partner may purchase director and officer liability insurance for the purpose of providing a source of funds to pay any indemnification described above. ITEM 21. EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 3.1 -- Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership (filed as Exhibit 10.1 to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K/A Amendment No. 1 for the fiscal year ended December 31, 1994 (the "1994 10-K/A") and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 3.2 -- First Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of November 17, 1995 by and among FelCor Lodging Trust Incorporated, Promus Hotels, Inc. and all of the persons or entities who are or shall in the future become of the limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.1 to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 1995 (the "1995 10-K") and incorporated herein by reference). 3.3 -- Second Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of January 9, 1996 between FelCor Lodging Trust Incorporated and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.2 to the 1995 10-K and incorporated herein by reference). 3.4 -- Third Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of January 10, 1996 by and among FelCor Lodging Trust Incorporated, MarRay-LexGreen, Inc. and all of the persons and entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.3 to the 1995 10-K and incorporated herein by reference). 3.5 -- Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of January 10, 1996 by and among FelCor Lodging Trust Incorporated, Piscataway-Centennial Associates Limited Partnership and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.4 to the 1995 10-K and incorporated herein by reference). 3.6 -- Fifth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of May 2, 1996, between FelCor Lodging Trust Incorporated and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership, adopting Addendum No. 2 to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of May 2, 1996 (filed as Exhibit 10.1.5 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended June 30, 1996, and incorporated herein by reference). 3.7 -- Sixth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of September 16, 1996, by and among FelCor Lodging Trust Incorporated, John B. Urbahns, II and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.6 to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 3.8 -- Seventh Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of May 16, 1997, by and among FelCor Lodging Trust Incorporated, PMB Associates, Ltd. and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.7 to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (the "1997 10-K"), and incorporated herein by reference). 3.9 -- Eighth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of February 6, 1998, by and among FelCor Lodging Trust Incorporated, Columbus/Front Ltd. and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.8 to the 1997 10-K and incorporated herein by reference). 3.10 -- Ninth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of May 1, 1998, between FelCor Lodging Trust Incorporated and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership, adopting Addendum No. 3 to Amended and Restated Agreement of Limited Partnership dated as of May 1, 1998 (filed as Exhibit 10.1.9 to FelCor Lodging Trust Incorporated's Form 8-K dated May 29, 1998, and incorporated herein by reference). 3.11 -- Tenth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of June 22, 1998, by and among FelCor Lodging Trust Incorporated, Schenley Hotel Associates, and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.10 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended October 30, 1998, and incorporated herein by reference). 3.12 -- Eleventh Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of July 28, 1998, between FelCor Lodging Trust Incorporated and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership, changing the name of FelCor Suites Limited Partnership to "FelCor Lodging Limited Partnership" (filed as Exhibit 10.1.11 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended October 30, 1998, and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 3.13 -- Twelfth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of December 29, 1998, between FelCor Lodging Trust Incorporated and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership, amending certain provisions of FelCor Lodging Limited Partnership Agreement (filed as Exhibit 10.1.12 to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the "1998 10-K") and incorporated herein by reference). 3.14 -- Thirteenth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of December 31, 1998, by and between FelCor Lodging Trust Incorporated, FelCor Nevada Holdings, L.L.C. and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.13 to the 1998 10-K and incorporated herein by reference). 3.15 -- Fourteenth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of March 1, 1999, by and among FelCor Lodging Trust Incorporated, Huie Properties, Ltd., and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.14 to the 1998 10-K and incorporated herein by reference). 3.16 -- Fifteenth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of October 15, 1999, by and among FelCor Lodging Trust Incorporated, SRS Properties Limited Partnership, and all of the persons and entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.15 to FelCor Lodging Trust Incorporated's Form 10-K for the fiscal year ended December 31, 1999 ("the 1999 10-K") and incorporated herein by reference). 3.17 -- Sixteenth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of February 27, 2000, by and among FelCor Lodging Trust Incorporated, Bass America, Inc., and all of the persons and entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.16 to the 1999 10-K and incorporated herein by reference). 4.1 -- Indenture dated as of April 22, 1996 by and between FelCor Lodging Trust Incorporated and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2 to FelCor Lodging Trust Incorporated's Form 8-K dated May 1, 1996 and incorporated herein by reference). 4.2 -- Indenture dated as of October 1, 1997 by and among FelCor Lodging Limited Partnership, FelCor Lodging Trust Incorporated, the Subsidiary Guarantors named therein and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.1 to FelCor Lodging Limited Partnership's Registration Statement on Form S-4 (file No. 333-39595) and incorporated herein by reference (the "FelCor LP Form S-4")).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.2.1 -- First Amendment to Indenture dated as of February 5, 1998 by and among Registrant, FelCor Lodging Trust Incorporated, the Subsidiary Guarantors named therein and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2 to the FelCor LP Form S-4 and incorporated herein by reference). 4.2.2 -- Second Amendment to Indenture and First Supplemental Indenture dated as of December 30, 1998, by and among FelCor Lodging Limited Partnership, FelCor Lodging Trust Incorporated, the Subsidiary Guarantors named therein and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.7.2 to the 1998 10-K and incorporated herein by reference). 4.2.3 -- Third Amendment to Indenture dated as of March 30, 1999 by and among FelCor Lodging Limited Partnership, FelCor Lodging Trust Incorporated, the Subsidiary Guarantors named therein, who are signatories thereto and SunTrust Bank, Atlanta (filed as Exhibit 4.7.3 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended March 31, 1999 (the "March 1999 10-Q"), and incorporated herein by reference). 4.2.4 -- Second Supplemental Indenture dated as of August 1, 2000 by and among Partnership, the General Partner, the Subsidiary Guarantors named therein, who are signatories thereto, and SunTrust Bank. 4.3 -- Indenture dated as of September 15, 2000, by and among FelCor Lodging Limited Partnership, FelCor Lodging Trust Incorporated, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee. 5.1 -- Opinion of Jenkens & Gilchrist, a Professional Corporation. 10.1 -- Form of Lease Agreement between FelCor Lodging Limited Partnership as Lessor and DJONT Operations, L.L.C. or its subsidiaries ("DJONT") as Lessee (filed as Exhibit 10.2.1 to the 1995 10-K and incorporated herein by reference). 10.1.1 -- Omnibus Lease Amendment Agreement dated as of June 30, 1998 among FelCor Lodging Trust Incorporated, FelCor Lodging Limited Partnership, and DJONT to clarify the meaning of Article III of the lease as represented by the actual course of dealing between lessors and lessees under such leases (filed as Exhibit 10.19 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended June 30, 1998, and incorporated herein by reference). 10.2 -- Form of Lease Agreement between FelCor Lodging Limited Partnership as Lessor and a subsidiary of Bristol Hotels & Resorts ("BHR") as Lessee (the "Bristol Lease Agreement") (filed as Exhibit 10.3 to the 1998 10-K and incorporated herein by reference). 10.2.1 -- Amended and Restated Master Hotel Agreement dated as of July 27, 1998 among FelCor Lodging Limited Partnership, FelCor Lodging Trust Incorporated, BHR and the lessors and lessees named therein (filed as Exhibit 10.17 to FelCor Lodging Trust Incorporated's Form 8-K dated August 10, 1998, and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 10.3 -- Employment Agreement dated as of July 28, 1994 between FelCor Lodging Trust Incorporated and Hervey A. Feldman (filed as Exhibit 10.7 to the 1994 10-K/A and incorporated herein by reference). 10.4 -- Employment Agreement dated as of July 28, 1994 between FelCor Lodging Trust Incorporated and Thomas J. Corcoran, Jr. (filed as Exhibit 10.8 to the 1994 10-K/A and incorporated herein by reference). 10.5 -- Restricted Stock and Stock Option Plan of FelCor Lodging Trust Incorporated (filed as Exhibit 10.9 to the 1994 10-K/A and incorporated herein by reference). 10.6 -- Savings and Investment Plan of FelCor Lodging Trust Incorporated (filed as Exhibit 10.10 to the 1994 10-K/A and incorporated herein by reference). 10.7 -- 1995 Restricted Stock and Stock Option Plan of FelCor Lodging Limited Partnership (filed as Exhibit 10.9.2 to the 1995 10-K and incorporated herein by reference). 10.8 -- Non-Qualified Deferred Compensation Plan, as amended and restated July 1999 (filed as Exhibit 10.9 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended September 30, 1999 (the "September 1999 10-Q") and incorporated herein by reference). 10.9 -- 1998 Restricted Stock and Stock Option Plan (filed as Exhibit 4.2 to FelCor Lodging Trust Incorporated's Registration Statement on Form S-8 (File No. 333-66041) and incorporated herein by reference). 10.10 -- Second Amended and Restated 1995 Equity Incentive Plan (filed as Exhibit 99.1 to FelCor Lodging Trust Incorporated's Post-Effective Amendment on Form S-3 to Form S-4 Registration Statement (File No. 333-50509) (the "FelCor Form S-4") and incorporated herein by reference). 10.11 -- Amended and Restated Stock Option Plan for Non-Employee Directors (filed as Exhibit 99.2 to FelCor Lodging Trust Incorporated's Post-Effective Amendment on Form S-3 to the FelCor Form S-4 and incorporated herein by reference). 10.12 -- Form of Severance Agreement for executive officers and certain key employees of FelCor Lodging Trust Incorporated (filed as Exhibit 10.13 to the 1998 10-K and incorporated herein by reference). 10.13 -- Agreement dated as of April 15, 1995 among FelCor Lodging Trust Incorporated, FelCor Lodging Limited Partnership, FelCor, Inc., Thomas J. Corcoran, Jr. and Hervey A. Feldman relating to purchase of securities (filed as Exhibit 10.15 to FelCor Lodging Trust Incorporated's Registration Statement on Form S-11 (File No. 33-91870) and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 10.14 -- Credit Agreement dated as of February 6, 1996 by and among FelCor Lodging Limited Partnership, as borrower, Holdings and FelCor Lodging Trust Incorporated, as guarantors, and Canadian Imperial Bank of Commerce, as agent (filed as Exhibit 10.30 to FelCor Lodging Trust Incorporated's Form 8-K dated May 1, 1996, and incorporated herein by reference). 10.15 -- Voting and Cooperation Agreement dated as of March 23, 1998 among FelCor Lodging Limited Partnership, Bristol, Bass America Inc., Holiday Corporation and United/Harvey Holdings, L.P. (filed as Exhibit 99.7 to the FelCor Form S-4 and incorporated herein by reference). 10.16 -- Spin-Off Agreement dated as of March 23, 1998 among Bristol, Bristol Hotel Management Corporation and Bristol Hotel and Resorts, Inc., as agreed to by FelCor Lodging Trust Incorporated (filed as Exhibit 99.8 to the FelCor Form S-4 and incorporated herein by reference). 10.17 -- Stockholders' and Registration Rights Agreement dated as of July 27, 1998 by and among FelCor Lodging Trust Incorporated, Bass America, Inc., Holiday Corporation, Bass plc, United/Harvey Investors I, L.P., United/Harvey Investors II, L.P., United/Harvey Investors III, L.P., United/Harvey Investors IV, L.P., and United/ Harvey Investors V, L.P. (filed as Exhibit 10.18 to FelCor Lodging Trust Incorporated's Form 8-K dated August 10, 1998, and incorporated herein by reference). 10.18 -- Fifth Amended and Restated Credit Agreement dated as of August 1, 2000 among FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership, as Borrower, the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent, Chase Securities, Inc., as Joint Lead Arranger, Joint Book Manager and Syndication Agent, and Bankers Trust Company, as Joint Lead Arranger, Joint Book Manager and Documentation Agent, Bank of America, N.A. and Wells Fargo Bank, National Association as Documentation Agents. 10.19 -- Loan Agreement dated as of October 10, 1997 among Bristol Lodging Company, Bristol Lodging Holding Company, Nomura Asset Capital Corporation as administrative agent and collateral agent for Lenders and Bankers Trust Company as co-agent for Lenders (filed as Exhibit 10.10 to the Bristol Hotel Company Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). 10.19.1 -- First Amendment to Loan Agreement and Ancillary Loan Documents made as of May 28, 1999, among FelCor Lodging Company, L.L.C., FelCor Lodging Holding Company, L.L.C. and LaSalle National Bank, as Trustee for Nomura Asset Securities Corporation Commercial Pass-Through Certificates Series 1998-D6, administrative agent and collateral agent (filed as Exhibit 10.19.1 to the 1999 10-K and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 10.20 -- Deed of Trust, Security Agreement, Assignment of Leases and Rents, Fixture Filing and Financing Statement, dated March 1, 1999, by FelCor Hotel Company II, Ltd., as Grantor, to Howard E. Schreiber, Trustee, in trust for the benefit of Bankers Trust Company, as Beneficiary (filed as Exhibit 10.21 to the March 1999 10-Q, and incorporated herein by reference). 10.21.1 -- Loan Agreement, dated April 1, 1999, among FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership as Borrower, and The Lenders Party Thereto and The Chase Manhattan Bank as Administrative Agent and Collateral Agent (filed as Exhibit 10.22.1 to the March 1999 10-Q, and incorporated herein by reference). 10.21.2 -- Guaranty, dated April 1, 1999, made by each of the named Guarantors therein, who are signatories thereto (filed as Exhibit 10.22.2 to the March 1999 10-Q, and incorporated herein by reference). 10.21.3 -- Pledge and Security Agreement, dated April 1, 1999, made by each of the named Pledgors therein, who are signatories thereto, in favor of The Chase Manhattan Bank, as Collateral Agent (filed as Exhibit 10.22.3 to the March 1999 10-Q, and incorporated herein by reference). 10.21.4 -- Second Amendment to Loan Agreement dated as of August 20, 1999, among FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership, as Borrower, the financial institutions party thereto, and The Chase Manhattan Bank, as administrative agent (filed as Exhibit 10.22.4 to the September 1999 10-Q and incorporated herein by reference). 10.21.5 -- Third Amendment to Loan Agreement dated as of December 1, 1999, among FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership, as Borrower, the financial institutions party thereto, and The Chase Manhattan Bank, as Administrative Agent (filed as Exhibit 10.21.4 to the 1999 10-K and incorporated herein by reference). 10.21.6 -- Fourth Amendment to Loan Agreement dated as of August 7, 2000, among FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership, as Borrower, the financial institutions party thereto, and The Chase Manhattan Bank, as Administrative Agent. 10.22 -- Form of Mortgage, Security Agreement and Fixture Filing by and between FelCor/CSS Holdings, L.P. as Mortgagor and The Prudential Insurance Company of America as Mortgagee (filed as Exhibit 10.23 to the March 1999 10-Q, and incorporated herein by reference). 10.22.1 -- Promissory Note dated April 1, 1999, in the original principal amount of $100,000,000 made by FelCor/CSS Holdings, L.P., payable to the order of The Prudential Insurance Company of America (filed as Exhibit 10.23.1 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended June 30, 1999 (the "June 1999 10-Q") and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 10.23.1 -- Form of six separate Promissory Notes each dated May 12, 1999, made by FelCor/MM Holdings, L.P. payable to the order of Massachusetts Mutual Life Insurance Company in the respective original principal amounts of $12,500,000 (Embassy Suites-Dallas Market Center), $14,000,000 (Embassy Suites-Dallas Love Field), $12,450,000 (Embassy Suites-Tempe), $11,550,000 (Embassy Suites-Anaheim), $8,900,000 (Embassy Suites-Palm Desert), $15,600,000 (Embassy Suites-Deerfield Beach) (filed as Exhibit 10.24.1 to the June 1999 10-Q and incorporated herein by reference). 10.23.2 -- Form of Deed of Trust, Security Agreement and Fixture Filing, each dated as of May 12, 1999, from FelCor/MM Holdings, L.P., as Borrower, in favor of Fidelity National Title Insurance Company, as Trustee, and Massachusetts Mutual Life Insurance Company, as Beneficiary, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.24.1, also executed by FelCor/CSS Holdings, L.P. with respect to the Embassy Suites-Anaheim and Embassy Suites-Deerfield Beach, and by FelCor Lodging Limited Partnership with respect to the Embassy Suites-Palm Desert (filed as Exhibit 10.24.2 to the June 1999 10-Q and incorporated herein by reference). 10.24 -- Form Deed of Trust and Security Agreement and Fixture Filing with Assignment of Leases and Rents, each dated as of April 20, 2000, from FelCor/MM S-7 Holdings, L.P., as Mortgagor, in favor of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America, as Mortgagee, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.24.2 (filed as Exhibit 10.24 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended June 30, 2000 (the "June 2000 10-Q"), and incorporated herein by reference). 10.24.1 -- Form of Accommodation Cross-Collateralization Mortgage and Security Agreement, each dated as of April 20, 2000, executed by FelCor/MM S-7 Holdings, L.P., in favor of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America (filed as Exhibit 10.24.1 to the June 2000 10-Q and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 10.24.2 -- Form of fourteen separate Promissory Notes each dated April 20, 2000, each made by FelCor/MM S-7 Holdings, L.P., each separately payable to the order of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America, respectively, in the respective original principal amounts of $13,500,000 (Phoenix (Crescent), Arizona), $13,500,000 (Phoenix (Crescent), Arizona), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $9,000,000 (Atlanta Galleria, Georgia), $9,000,000 (Atlanta Galleria, Georgia), $12,500,000 (Chicago O'Hare Airport, Illinois), $12,500,000 (Chicago O'Hare Airport, Illinois), $3,500,000 (Lexington, Kentucky), $3,500,000 (Lexington, Kentucky), $17,000,000 (Philadelphia Society Hill, Philadelphia), $17,000,000 (Philadelphia Society Hill, Philadelphia), $10,500,000 (South Burlington, Vermont), and, $10,500,000 (South Burlington, Vermont) (filed as Exhibit 10.24.2 to the June 2000 10-Q and incorporated herein by reference). 10.25 -- Form Deed of Trust and Security Agreement, each dated as of May 2, 2000, from each of FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/ CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB Piscataway Hotel, L.L.C., and FelCor/CMB SSF Holdings, L.P., each as Borrower, in favor of The Chase Manhattan Bank, as Beneficiary, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.25.1 (filed as Exhibit 10.25 to the June 2000 10-Q and incorporated herein by reference). 10.25.1 -- Form of eight separate Promissory Notes each dated May 2, 2000, made by FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/ CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB Piscataway Hotel, L.L.C., and FelCor/CMB SSF Holdings, L.P., each separately payable to the order of The Chase Manhattan Bank in the respective original principal amounts of $38,250,000 (Atlanta Buckhead, Georgia), $20,500,000 (Boston Marlborough, Massachusetts), $16,575,000 (Chicago Deerfield, Illinois), $5,338,000 (Corpus Christi, Texas), $25,583,000 (Orlando South, Florida), $32,650,000 (New Orleans, Louisiana), $20,728,000 (Piscataway, New Jersey), and $26,268,000 (South San Francisco, California) (filed as Exhibit 10.25.1 to the June 2000 10-Q and incorporated herein by reference). 10.26 -- Registration Rights Agreement dated as of September 8, 2000 among FelCor Lodging Trust Incorporated, FelCor Lodging Limited Partnership, Deutsche Banc Securities Inc., Chase Securities Inc., Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, Banc One Capital Markets, Inc., Credit Lyonnais Securities (USA) Inc. and Scotia Capital (USA) Inc. 12.1 -- Statement of Computation of Ratios.
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 21.1 -- List of Subsidiaries of the Registrant. 23.1 -- Consent of Jenkens & Gilchrist, a Professional Corporation (included in Exhibit 5.1). 23.2 -- Consent of PricewaterhouseCoopers LLP 24.1 -- Power of Attorney (set forth on signature page). 25.1 -- Statement of Eligibility of SunTrust Bank, as Trustee. 27.1 -- Financial Data Schedule of FelCor Lodging Limited Partnership (Six Months Ended June 30, 2000). 27.2 -- Financial Data Schedule of FelCor Lodging Limited Partnership (Year Ended December 31, 1999). 27.3 -- Financial Data Schedule of FelCor Lodging Trust Incorporated (Six Months Ended June 30, 2000). 27.4 -- Financial Data Schedule of FelCor Lodging Trust Incorporated (Year Ended December 31, 1999). 99.1 -- Form of Letter of Transmittal.
ITEM 22. UNDERTAKINGS. (a) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities 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 whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (b) The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of this Exchange Offer Registration through the date of responding to the request. (c) The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this Exchange Offer Registration Statement when it became effective. II-11 219 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR LODGING LIMITED PARTNERSHIP a Delaware limited partnership (Co-Registrant) By: FelCor Lodging Trust Incorporated its General Partner By: /s/ LAWRENCE D. ROBINSON ------------------------- Lawrence D. Robinson Senior Vice President, Secretary and General Counsel II-12 220 POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- Chairman of the Board and October , 2000 - ----------------------------------------------------- Director Donald J. McNamara /s/ THOMAS J. CORCORAN President and Chief October 2, 2000 - ----------------------------------------------------- Executive Officer and Thomas J. Corcoran Director /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ MELINDA J. BUSH Director October 2, 2000 - ----------------------------------------------------- Melinda J. Bush /s/ RICHARD S. ELLWOOD Director October 2, 2000 - ----------------------------------------------------- Richard S. Ellwood /s/ RICHARD O. JACOBSON Director October 2, 2000 - ----------------------------------------------------- Richard O. Jacobson /s/ CHARLES A. LEDSINGER, JR. Director October 2, 2000 - ----------------------------------------------------- Charles A. Ledsinger, Jr. /s/ ROBERT H. LUTZ, JR. Director October 2, 2000 - ----------------------------------------------------- Robert H. Lutz, Jr. /s/ CHARLES N. MATHEWSON Director October 2, 2000 - ----------------------------------------------------- Charles N. Mathewson /s/ THOMAS A. MCCHRISTY Director October 2, 2000 - ----------------------------------------------------- Thomas A. McChristy /s/ RICHARD C. NORTH Director October 2, 2000 - ----------------------------------------------------- Richard C. North Director October , 2000 - ----------------------------------------------------- Michael D. Rose
II-13 221 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR LODGING TRUST INCORPORATED a Maryland corporation (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ------------------------------------ Lawrence D. Robinson Senior Vice President, Secretary and General Counsel II-14 222 POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- Chairman of the Board and Director October , 2000 - ----------------------------------------------------- Donald J. McNamara /s/ THOMAS J. CORCORAN President and Chief Executive October 2, 2000 - ----------------------------------------------------- Officer and Director Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and Controller October 2, 2000 - ----------------------------------------------------- (Principal Financial Officer and Lester C. Johnson Principal Accounting Officer) /s/ MELINDA J. BUSH Director October 2, 2000 - ----------------------------------------------------- Melinda J. Bush /s/ RICHARD S. ELLWOOD Director October 2, 2000 - ----------------------------------------------------- Richard S. Ellwood /s/ RICHARD O. JACOBSON Director October 2, 2000 - ----------------------------------------------------- Richard O. Jacobson /s/ CHARLES A. LEDSINGER, JR. Director October 2, 2000 - ----------------------------------------------------- Charles A. Ledsinger, Jr. /s/ ROBERT H. LUTZ, JR. Director October 2, 2000 - ----------------------------------------------------- Robert H. Lutz, Jr. /s/ CHARLES N. MATHEWSON Director October 2, 2000 - ----------------------------------------------------- Charles N. Mathewson /s/ THOMAS A. MCCHRISTY Director October 2, 2000 - ----------------------------------------------------- Thomas A. McChristy /s/ RICHARD C. NORTH Director October 2, 2000 - ----------------------------------------------------- Richard C. North Director October , 2000 - ----------------------------------------------------- Michael D. Rose
II-15 223 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR/CSS HOTELS, L.L.C. a Delaware limited liability company (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ---------------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-16 224 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR/LAX HOTELS, L.L.C. a Delaware limited liability company (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ---------------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-17 225 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR/CSS HOLDINGS, L.P. a Delaware limited partnership (Co-Registrant) By: FelCor/CSS Hotels, L.L.C. its general partner By: /s/ LAWRENCE D. ROBINSON ------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-18 226 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR/ST. PAUL HOLDINGS, L.P. a Delaware limited partnership (Co-Registrant) By: FelCor/CSS Hotels, L.L.C. its general partner By: /s/ LAWRENCE D. ROBINSON ------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-19 227 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR/LAX HOLDINGS, L.P. a Delaware limited partnership (Co-Registrant) By: FelCor/LAX Hotels, L.L.C. its general partner By: /s/ LAWRENCE D. ROBINSON ------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-20 228 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR EIGHT HOTELS, L.L.C. a Delaware limited liability company (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ------------------------------------------------ Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and Controller October 2, 2000 - ------------------------------------------------ (Principal Financial Officer Lester C. Johnson and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, Secretary October 2, 2000 - ------------------------------------------------ and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Manager October 2, 2000 - ------------------------------------------------ Thomas L. Wiese
II-21 229 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR HOTEL ASSET COMPANY, L.L.C. a Delaware limited liability company (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ---------------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President, Chief Executive October 2, 2000 - ----------------------------------------------------- Officer and Manager Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-22 230 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR NEVADA HOLDINGS, L.L.C. a Nevada limited liability company (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ---------------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and Controller October 2, 2000 - ----------------------------------------------------- (Principal Financial Lester C. Johnson Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-23 231 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FHAC NEVADA HOLDINGS, L.L.C. a Nevada limited liability company (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ---------------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ THOMAS L. WIESE Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-24 232 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FHAC TEXAS HOLDINGS, L.P. a Texas limited partnership (Co-Registrant) By: FelCor Hotel Asset Company, L.L.C. its general partner By: /s/ LAWRENCE D. ROBINSON ---------------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President, Chief Executive October 2, 2000 - ----------------------------------------------------- Officer and Manager Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-25 233 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR OMAHA HOTEL COMPANY, L.L.C. a Delaware limited liability company (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ---------------------------------- Lawrence D. Robinson Senior Vice President, Secretary, General Counsel and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Vice President and Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-26 234 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR COUNTRY VILLA HOTEL, L.L.C. a Delaware limited liability company (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ---------------------------------- Lawrence D. Robinson Senior Vice President, Secretary, General Counsel and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Vice President and Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-27 235 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR MOLINE HOTEL, L.L.C. a Delaware limited liability company (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ---------------------------------- Lawrence D. Robinson Senior Vice President, Secretary, General Counsel and Manager POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Manager October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and Controller October 2, 2000 - ----------------------------------------------------- (Principal Financial Officer and Lester C. Johnson Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, Secretary October 2, 2000 - ----------------------------------------------------- and Manager Lawrence D. Robinson /s/ THOMAS L. WIESE Vice President and Manager October 2, 2000 - ----------------------------------------------------- Thomas L. Wiese
II-28 236 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on the 2nd day of October, 2000. FELCOR CANADA CO. a Nova Scotia unlimited liability company (Co-Registrant) By: /s/ LAWRENCE D. ROBINSON ---------------------------------- Lawrence D. Robinson Senior Vice President, Secretary and Director POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints each of Thomas J. Corcoran, Jr. and Lawrence D. Robinson, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments (including post-effective amendments) to this Registration Statement, to file the same, together with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices and other documents necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, full power and authority to perform and do each and every act and thing necessary and advisable as fully to all intents and purposes as he might or could perform and do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS J. CORCORAN President and Director October 2, 2000 - ----------------------------------------------------- Thomas J. Corcoran /s/ LESTER C. JOHNSON Vice President and October 2, 2000 - ----------------------------------------------------- Controller (Principal Lester C. Johnson Financial Officer and Principal Accounting Officer) /s/ LAWRENCE D. ROBINSON Senior Vice President, October 2, 2000 - ----------------------------------------------------- Secretary and Director Lawrence D. Robinson
II-29 237 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 3.1 -- Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership (filed as Exhibit 10.1 to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K/A Amendment No. 1 for the fiscal year ended December 31, 1994 (the "1994 10-K/A") and incorporated herein by reference). 3.2 -- First Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of November 17, 1995 by and among FelCor Lodging Trust Incorporated, Promus Hotels, Inc. and all of the persons or entities who are or shall in the future become of the limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.1 to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 1995 (the "1995 10-K") and incorporated herein by reference). 3.3 -- Second Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of January 9, 1996 between FelCor Lodging Trust Incorporated and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.2 to the 1995 10-K and incorporated herein by reference). 3.4 -- Third Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of January 10, 1996 by and among FelCor Lodging Trust Incorporated, MarRay-LexGreen, Inc. and all of the persons and entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.3 to the 1995 10-K and incorporated herein by reference). 3.5 -- Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of January 10, 1996 by and among FelCor Lodging Trust Incorporated, Piscataway-Centennial Associates Limited Partnership and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.4 to the 1995 10-K and incorporated herein by reference). 3.6 -- Fifth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of May 2, 1996, between FelCor Lodging Trust Incorporated and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership, adopting Addendum No. 2 to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of May 2, 1996 (filed as Exhibit 10.1.5 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended June 30, 1996, and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 3.7 -- Sixth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of September 16, 1996, by and among FelCor Lodging Trust Incorporated, John B. Urbahns, II and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.6 to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and incorporated herein by reference). 3.8 -- Seventh Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of May 16, 1997, by and among FelCor Lodging Trust Incorporated, PMB Associates, Ltd. and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.7 to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (the "1997 10-K"), and incorporated herein by reference). 3.9 -- Eighth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of February 6, 1998, by and among FelCor Lodging Trust Incorporated, Columbus/Front Ltd. and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.8 to the 1997 10-K and incorporated herein by reference). 3.10 -- Ninth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of May 1, 1998, between FelCor Lodging Trust Incorporated and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership, adopting Addendum No. 3 to Amended and Restated Agreement of Limited Partnership dated as of May 1, 1998 (filed as Exhibit 10.1.9 to FelCor Lodging Trust Incorporated's Form 8-K dated May 29, 1998, and incorporated herein by reference). 3.11 -- Tenth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of June 22, 1998, by and among FelCor Lodging Trust Incorporated, Schenley Hotel Associates, and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.10 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended October 30, 1998, and incorporated herein by reference). 3.12 -- Eleventh Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of July 28, 1998, between FelCor Lodging Trust Incorporated and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership, changing the name of FelCor Suites Limited Partnership to "FelCor Lodging Limited Partnership" (filed as Exhibit 10.1.11 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended October 30, 1998, and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 3.13 -- Twelfth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of December 29, 1998, between FelCor Lodging Trust Incorporated and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership, amending certain provisions of FelCor Lodging Limited Partnership Agreement (filed as Exhibit 10.1.12 to FelCor Lodging Trust Incorporated's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the "1998 10-K") and incorporated herein by reference). 3.14 -- Thirteenth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of December 31, 1998, by and between FelCor Lodging Trust Incorporated, FelCor Nevada Holdings, L.L.C. and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.13 to the 1998 10-K and incorporated herein by reference). 3.15 -- Fourteenth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of March 1, 1999, by and among FelCor Lodging Trust Incorporated, Huie Properties, Ltd., and all of the persons or entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.14 to the 1998 10-K and incorporated herein by reference). 3.16 -- Fifteenth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of October 15, 1999, by and among FelCor Lodging Trust Incorporated, SRS Properties Limited Partnership, and all of the persons and entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.15 to FelCor Lodging Trust Incorporated's Form 10-K for the fiscal year ended December 31, 1999 ("the 1999 10-K") and incorporated herein by reference). 3.17 -- Sixteenth Amendment to Amended and Restated Agreement of Limited Partnership of FelCor Lodging Limited Partnership dated as of February 27, 2000, by and among FelCor Lodging Trust Incorporated, Bass America, Inc., and all of the persons and entities who are or shall in the future become limited partners of FelCor Lodging Limited Partnership (filed as Exhibit 10.1.16 to the 1999 10-K and incorporated herein by reference). 4.1 -- Indenture dated as of April 22, 1996 by and between FelCor Lodging Trust Incorporated and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2 to FelCor Lodging Trust Incorporated's Form 8-K dated May 1, 1996 and incorporated herein by reference). 4.2 -- Indenture dated as of October 1, 1997 by and among FelCor Lodging Limited Partnership, FelCor Lodging Trust Incorporated, the Subsidiary Guarantors named therein and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.1 to FelCor Lodging Limited Partnership's Registration Statement on Form S-4 (file No. 333-39595) and incorporated herein by reference (the "FelCor LP Form S-4")).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.2.1 -- First Amendment to Indenture dated as of February 5, 1998 by and among Registrant, FelCor Lodging Trust Incorporated, the Subsidiary Guarantors named therein and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.2 to the FelCor LP Form S-4 and incorporated herein by reference). 4.2.2 -- Second Amendment to Indenture and First Supplemental Indenture dated as of December 30, 1998, by and among FelCor Lodging Limited Partnership, FelCor Lodging Trust Incorporated, the Subsidiary Guarantors named therein and SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.7.2 to the 1998 10-K and incorporated herein by reference). 4.2.3 -- Third Amendment to Indenture dated as of March 30, 1999 by and among FelCor Lodging Limited Partnership, FelCor Lodging Trust Incorporated, the Subsidiary Guarantors named therein, who are signatories thereto and SunTrust Bank, Atlanta (filed as Exhibit 4.7.3 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended March 31, 1999 (the "March 1999 10-Q"), and incorporated herein by reference). 4.2.4 -- Second Supplemental Indenture dated as of August 1, 2000 by and among Partnership, the General Partner, the Subsidiary Guarantors named therein, who are signatories thereto, and SunTrust Bank. 4.3 -- Indenture dated as of September 15, 2000, by and among FelCor Lodging Limited Partnership, FelCor Lodging Trust Incorporated, the Subsidiary Guarantors named therein and SunTrust Bank, as Trustee. 5.1 -- Opinion of Jenkens & Gilchrist, a Professional Corporation. 10.1 -- Form of Lease Agreement between FelCor Lodging Limited Partnership as Lessor and DJONT Operations, L.L.C. or its subsidiaries ("DJONT") as Lessee (filed as Exhibit 10.2.1 to the 1995 10-K and incorporated herein by reference). 10.1.1 -- Omnibus Lease Amendment Agreement dated as of June 30, 1998 among FelCor Lodging Trust Incorporated, FelCor Lodging Limited Partnership, and DJONT to clarify the meaning of Article III of the lease as represented by the actual course of dealing between lessors and lessees under such leases (filed as Exhibit 10.19 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended June 30, 1998, and incorporated herein by reference). 10.2 -- Form of Lease Agreement between FelCor Lodging Limited Partnership as Lessor and a subsidiary of Bristol Hotels & Resorts ("BHR") as Lessee (the "Bristol Lease Agreement") (filed as Exhibit 10.3 to the 1998 10-K and incorporated herein by reference). 10.2.1 -- Amended and Restated Master Hotel Agreement dated as of July 27, 1998 among FelCor Lodging Limited Partnership, FelCor Lodging Trust Incorporated, BHR and the lessors and lessees named therein (filed as Exhibit 10.17 to FelCor Lodging Trust Incorporated's Form 8-K dated August 10, 1998, and incorporated herein by reference). 10.3 -- Employment Agreement dated as of July 28, 1994 between FelCor Lodging Trust Incorporated and Hervey A. Feldman (filed as Exhibit 10.7 to the 1994 10-K/A and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 10.4 -- Employment Agreement dated as of July 28, 1994 between FelCor Lodging Trust Incorporated and Thomas J. Corcoran, Jr. (filed as Exhibit 10.8 to the 1994 10-K/A and incorporated herein by reference). 10.5 -- Restricted Stock and Stock Option Plan of FelCor Lodging Trust Incorporated (filed as Exhibit 10.9 to the 1994 10-K/A and incorporated herein by reference). 10.6 -- Savings and Investment Plan of FelCor Lodging Trust Incorporated (filed as Exhibit 10.10 to the 1994 10-K/A and incorporated herein by reference). 10.7 -- 1995 Restricted Stock and Stock Option Plan of FelCor Lodging Limited Partnership (filed as Exhibit 10.9.2 to the 1995 10-K and incorporated herein by reference). 10.8 -- Non-Qualified Deferred Compensation Plan, as amended and restated July 1999 (filed as Exhibit 10.9 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended September 30, 1999 (the "September 1999 10-Q") and incorporated herein by reference). 10.9 -- 1998 Restricted Stock and Stock Option Plan (filed as Exhibit 4.2 to FelCor Lodging Trust Incorporated's Registration Statement on Form S-8 (File No. 333-66041) and incorporated herein by reference). 10.10 -- Second Amended and Restated 1995 Equity Incentive Plan (filed as Exhibit 99.1 to FelCor Lodging Trust Incorporated's Post-Effective Amendment on Form S-3 to Form S-4 Registration Statement (File No. 333-50509) (the "FelCor Form S-4") and incorporated herein by reference). 10.11 -- Amended and Restated Stock Option Plan for Non-Employee Directors (filed as Exhibit 99.2 to FelCor Lodging Trust Incorporated's Post-Effective Amendment on Form S-3 to the FelCor Form S-4 and incorporated herein by reference). 10.12 -- Form of Severance Agreement for executive officers and certain key employees of FelCor Lodging Trust Incorporated (filed as Exhibit 10.13 to the 1998 10-K and incorporated herein by reference). 10.13 -- Agreement dated as of April 15, 1995 among FelCor Lodging Trust Incorporated, FelCor Lodging Limited Partnership, FelCor, Inc., Thomas J. Corcoran, Jr. and Hervey A. Feldman relating to purchase of securities (filed as Exhibit 10.15 to FelCor Lodging Trust Incorporated's Registration Statement on Form S-11 (File No. 33-91870) and incorporated herein by reference). 10.14 -- Credit Agreement dated as of February 6, 1996 by and among FelCor Lodging Limited Partnership, as borrower, Holdings and FelCor Lodging Trust Incorporated, as guarantors, and Canadian Imperial Bank of Commerce, as agent (filed as Exhibit 10.30 to FelCor Lodging Trust Incorporated's Form 8-K dated May 1, 1996, and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 10.15 -- Voting and Cooperation Agreement dated as of March 23, 1998 among FelCor Lodging Limited Partnership, Bristol, Bass America Inc., Holiday Corporation and United/Harvey Holdings, L.P. (filed as Exhibit 99.7 to the FelCor Form S-4 and incorporated herein by reference). 10.16 -- Spin-Off Agreement dated as of March 23, 1998 among Bristol, Bristol Hotel Management Corporation and Bristol Hotel and Resorts, Inc., as agreed to by FelCor Lodging Trust Incorporated (filed as Exhibit 99.8 to the FelCor Form S-4 and incorporated herein by reference). 10.17 -- Stockholders' and Registration Rights Agreement dated as of July 27, 1998 by and among FelCor Lodging Trust Incorporated, Bass America, Inc., Holiday Corporation, Bass plc, United/Harvey Investors I, L.P., United/Harvey Investors II, L.P., United/Harvey Investors III, L.P., United/Harvey Investors IV, L.P., and United/ Harvey Investors V, L.P. (filed as Exhibit 10.18 to FelCor Lodging Trust Incorporated's Form 8-K dated August 10, 1998, and incorporated herein by reference). 10.18 -- Fifth Amended and Restated Credit Agreement dated as of August 1, 2000 among FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership, as Borrower, the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent, Chase Securities, Inc., as Joint Lead Arranger, Joint Book Manager and Syndication Agent, and Bankers Trust Company, as Joint Lead Arranger, Joint Book Manager and Documentation Agent, Bank of America, N.A. and Wells Fargo Bank, National Association as Documentation Agents. 10.19 -- Loan Agreement dated as of October 10, 1997 among Bristol Lodging Company, Bristol Lodging Holding Company, Nomura Asset Capital Corporation as administrative agent and collateral agent for Lenders and Bankers Trust Company as co-agent for Lenders (filed as Exhibit 10.10 to the Bristol Hotel Company Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). 10.19.1 -- First Amendment to Loan Agreement and Ancillary Loan Documents made as of May 28, 1999, among FelCor Lodging Company, L.L.C., FelCor Lodging Holding Company, L.L.C. and LaSalle National Bank, as Trustee for Nomura Asset Securities Corporation Commercial Pass-Through Certificates Series 1998-D6, administrative agent and collateral agent (filed as Exhibit 10.19.1 to the 1999 10-K and incorporated herein by reference). 10.20 -- Deed of Trust, Security Agreement, Assignment of Leases and Rents, Fixture Filing and Financing Statement, dated March 1, 1999, by FelCor Hotel Company II, Ltd., as Grantor, to Howard E. Schreiber, Trustee, in trust for the benefit of Bankers Trust Company, as Beneficiary (filed as Exhibit 10.21 to the March 1999 10-Q, and incorporated herein by reference).
243
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 10.21.1 -- Loan Agreement, dated April 1, 1999, among FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership as Borrower, and The Lenders Party Thereto and The Chase Manhattan Bank as Administrative Agent and Collateral Agent (filed as Exhibit 10.22.1 to the March 1999 10-Q, and incorporated herein by reference). 10.21.2 -- Guaranty, dated April 1, 1999, made by each of the named Guarantors therein, who are signatories thereto (filed as Exhibit 10.22.2 to the March 1999 10-Q, and incorporated herein by reference). 10.21.3 -- Pledge and Security Agreement, dated April 1, 1999, made by each of the named Pledgors therein, who are signatories thereto, in favor of The Chase Manhattan Bank, as Collateral Agent (filed as Exhibit 10.22.3 to the March 1999 10-Q, and incorporated herein by reference). 10.21.4 -- Second Amendment to Loan Agreement dated as of August 20, 1999, among FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership, as Borrower, the financial institutions party thereto, and The Chase Manhattan Bank, as administrative agent (filed as Exhibit 10.22.4 to the September 1999 10-Q and incorporated herein by reference). 10.21.5 -- Third Amendment to Loan Agreement dated as of December 1, 1999, among FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership, as Borrower, the financial institutions party thereto, and The Chase Manhattan Bank, as Administrative Agent (filed as Exhibit 10.21.4 to the 1999 10-K and incorporated herein by reference). 10.21.6 -- Fourth Amendment to Loan Agreement dated as of August 7, 2000, among FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership, as Borrower, the financial institutions party thereto, and The Chase Manhattan Bank, as Administrative Agent. 10.22 -- Form of Mortgage, Security Agreement and Fixture Filing by and between FelCor/CSS Holdings, L.P. as Mortgagor and The Prudential Insurance Company of America as Mortgagee (filed as Exhibit 10.23 to the March 1999 10-Q, and incorporated herein by reference). 10.22.1 -- Promissory Note dated April 1, 1999, in the original principal amount of $100,000,000 made by FelCor/CSS Holdings, L.P., payable to the order of The Prudential Insurance Company of America (filed as Exhibit 10.23.1 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended June 30, 1999 (the "June 1999 10-Q") and incorporated herein by reference). 10.23.1 -- Form of six separate Promissory Notes each dated May 12, 1999, made by FelCor/MM Holdings, L.P. payable to the order of Massachusetts Mutual Life Insurance Company in the respective original principal amounts of $12,500,000 (Embassy Suites-Dallas Market Center), $14,000,000 (Embassy Suites-Dallas Love Field), $12,450,000 (Embassy Suites-Tempe), $11,550,000 (Embassy Suites-Anaheim), $8,900,000 (Embassy Suites-Palm Desert), $15,600,000 (Embassy Suites-Deerfield Beach) (filed as Exhibit 10.24.1 to the June 1999 10-Q and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 10.23.2 -- Form of Deed of Trust, Security Agreement and Fixture Filing, each dated as of May 12, 1999, from FelCor/MM Holdings, L.P., as Borrower, in favor of Fidelity National Title Insurance Company, as Trustee, and Massachusetts Mutual Life Insurance Company, as Beneficiary, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.24.1, also executed by FelCor/CSS Holdings, L.P. with respect to the Embassy Suites-Anaheim and Embassy Suites-Deerfield Beach, and by FelCor Lodging Limited Partnership with respect to the Embassy Suites-Palm Desert (filed as Exhibit 10.24.2 to the June 1999 10-Q and incorporated herein by reference). 10.24 -- Form Deed of Trust and Security Agreement and Fixture Filing with Assignment of Leases and Rents, each dated as of April 20, 2000, from FelCor/MM S-7 Holdings, L.P., as Mortgagor, in favor of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America, as Mortgagee, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.24.2 (filed as Exhibit 10.24 to FelCor Lodging Trust Incorporated's Form 10-Q for the quarter ended June 30, 2000 (the "June 2000 10-Q"), and incorporated herein by reference). 10.24.1 -- Form of Accommodation Cross-Collateralization Mortgage and Security Agreement, each dated as of April 20, 2000, executed by FelCor/MM S-7 Holdings, L.P., in favor of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America (filed as Exhibit 10.24.1 to the June 2000 10-Q and incorporated herein by reference). 10.24.2 -- Form of fourteen separate Promissory Notes each dated April 20, 2000, each made by FelCor/MM S-7 Holdings, L.P., each separately payable to the order of Massachusetts Mutual Life Insurance Company and Teachers Insurance and Annuity Association of America, respectively, in the respective original principal amounts of $13,500,000 (Phoenix (Crescent), Arizona), $13,500,000 (Phoenix (Crescent), Arizona), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $9,000,000 (Atlanta Galleria, Georgia), $9,000,000 (Atlanta Galleria, Georgia), $12,500,000 (Chicago O'Hare Airport, Illinois), $12,500,000 (Chicago O'Hare Airport, Illinois), $3,500,000 (Lexington, Kentucky), $3,500,000 (Lexington, Kentucky), $17,000,000 (Philadelphia Society Hill, Philadelphia), $17,000,000 (Philadelphia Society Hill, Philadelphia), $10,500,000 (South Burlington, Vermont), and, $10,500,000 (South Burlington, Vermont) (filed as Exhibit 10.24.2 to the June 2000 10-Q and incorporated herein by reference).
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 10.25 -- Form Deed of Trust and Security Agreement, each dated as of May 2, 2000, from each of FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/ CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB Piscataway Hotel, L.L.C., and FelCor/CMB SSF Holdings, L.P., each as Borrower, in favor of The Chase Manhattan Bank, as Beneficiary, each covering a separate hotel and securing one of the separate Promissory Notes described in Exhibit 10.25.1 (filed as Exhibit 10.25 to the June 2000 10-Q and incorporated herein by reference). 10.25.1 -- Form of eight separate Promissory Notes each dated May 2, 2000, made by FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C., FelCor/ CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB Piscataway Hotel, L.L.C., and FelCor/CMB SSF Holdings, L.P., each separately payable to the order of The Chase Manhattan Bank in the respective original principal amounts of $38,250,000 (Atlanta Buckhead, Georgia), $20,500,000 (Boston Marlborough, Massachusetts), $16,575,000 (Chicago Deerfield, Illinois), $5,338,000 (Corpus Christi, Texas), $25,583,000 (Orlando South, Florida), $32,650,000 (New Orleans, Louisiana), $20,728,000 (Piscataway, New Jersey), and $26,268,000 (South San Francisco, California) (filed as Exhibit 10.25.1 to the June 2000 10-Q and incorporated herein by reference). 10.26 -- Registration Rights Agreement dated as of September 8, 2000 among FelCor Lodging Trust Incorporated, FelCor Lodging Limited Partnership, Deutsche Banc Securities Inc., Chase Securities Inc., Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, Banc One Capital Markets, Inc., Credit Lyonnais Securities (USA) Inc. and Scotia Capital (USA) Inc. 12.1 -- Statement of Computation of Ratios. 21.1 -- List of Subsidiaries of the Registrant. 23.1 -- Consent of Jenkens & Gilchrist, a Professional Corporation (included in Exhibit 5.1). 23.2 -- Consent of PricewaterhouseCoopers LLP 24.1 -- Power of Attorney (set forth on signature page). 25.1 -- Statement of Eligibility of SunTrust Bank, as Trustee. 27.1 -- Financial Data Schedule of FelCor Lodging Limited Partnership (Six Months Ended June 30, 2000). 27.2 -- Financial Data Schedule of FelCor Lodging Limited Partnership (Year Ended December 31, 1999). 27.3 -- Financial Data Schedule of FelCor Lodging Trust Incorporated (Six Months Ended June 30, 2000). 27.4 -- Financial Data Schedule of FelCor Lodging Trust Incorporated (Year Ended December 31, 1999). 99.1 -- Form of Letter of Transmittal.
EX-4.2.4 2 d80556ex4-2_4.txt 2ND SUPPLEMENTAL INDENTURE DATED 8/1/00 1 EXHIBIT 4.2.4 SECOND SUPPLEMENTAL INDENTURE This Second Supplemental Indenture (this "Agreement") is entered into as of August 1, 2000, by and among (i) FelCor Lodging Limited Partnership, a Delaware limited partnership ("FelCor LP"), (ii) FelCor Lodging Trust Incorporated, a Maryland corporation ("FelCor"), (iii) FelCor/CSS Hotels, L.L.C., a Delaware limited liability company, FelCor/LAX Hotels, L.L.C., a Delaware limited liability company, FelCor/CSS Holdings, L.P., a Delaware limited partnership, FelCor/St. Paul Holdings, L.P., a Delaware limited partnership, FelCor/LAX Holdings, L.P., a Delaware limited partnership, FelCor Eight Hotels, L.L.C., a Delaware limited liability company, FelCor Hotel Asset Company, L.L.C., a Delaware limited liability company, FelCor Nevada Holdings, L.L.C., a Nevada limited liability company, FHAC Nevada Holdings, L.L.C., a Nevada limited liability company, and FHAC Texas Holdings, L.P., a Texas limited partnership, (collectively, the "Subsidiary Guarantors"), (iv) FelCor Country Villa Hotel, L.L.C., a Delaware limited liability company, FelCor Moline Hotel, L.L.C., a Delaware limited liability company, FelCor Omaha Hotel Company, L.L.C., a Delaware limited liability company and FelCor Canada Co., a Nova Scotia unlimited liability company (collectively, the "New Guarantors"), and (v) SunTrust Bank, as Trustee ("Trustee"). WHEREAS, FelCor LP, as Issuer, FelCor and the Subsidiary Guarantors, as Guarantors, and Trustee, as Trustee, entered into that certain Indenture dated as of October 1, 1997, as previously amended by that certain First Amendment to Indenture dated as of February 5, 1998, that certain Second Amendment to Indenture and First Supplemental Indenture dated December 30, 1998 and that certain Third Amendment to Indenture dated March 30, 1999 (collectively, the "Indenture"); and WHEREAS, pursuant to Section 4.07 of the Indenture, the New Guarantors are required to execute and deliver a supplemental indenture to the Indenture providing for a Subsidiary Guaranty (as defined in the Indenture) by such New Guarantor; NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Each of the New Guarantors hereby executes this Agreement as a supplemental indenture to the Indenture for the purpose of providing a guarantee of the Notes, as that term is defined in the Indenture, and of certain of FelCor LP's obligations under the Indenture as set forth therein and agrees to assume and be subject to all of the terms, conditions, waivers and covenants applicable to a Subsidiary Guarantor under the Indenture, including without limitation, those set forth in Article 11 thereof. Upon its execution hereof, each of the New Guarantors hereby acknowledges that it shall be a Subsidiary Guarantor for all purposes as defined and as set forth in the Indenture, effective as of the date hereof. Further, each New Guarantor hereby waives and shall not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, 2 indemnity, or subrogation or any other rights against FelCor LP, FelCor or any other Restricted Subsidiary as a result of any payment by such New Guarantor under its Subsidiary Guaranty. 2. The parties hereto hereby confirm and acknowledge that the Indenture shall continue in full force and effect according to its original terms, except as expressly supplemented hereby. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. FELCOR LODGING LIMITED PARTNERSHIP, a Delaware limited partnership By: FelCor Lodging Trust Incorporated, a Maryland corporation, its general partner By: /s/ LAWRENCE D. ROBINSON --------------------------------------- Lawrence D. Robinson, Senior Vice President FELCOR LODGING TRUST INCORPORATED, a Maryland corporation By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President FELCOR/CSS HOTELS, L.L.C., a Delaware limited liability company By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President -2- 3 FELCOR/LAX HOTELS, L.L.C., a Delaware limited liability company By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President FELCOR/CSS HOLDINGS, L.P., a Delaware limited partnership By: FelCor/CSS Hotels, L.L.C., a Delaware limited liability company, its general partner By: /s/ LAWRENCE D. ROBINSON --------------------------------------- Lawrence D. Robinson, Senior Vice President FELCOR/ST. PAUL HOLDINGS, L.P., a Delaware limited partnership By: FelCor/CSS Hotels, L.L.C., a Delaware limited liability company, its general partner By: /s/ LAWRENCE D. ROBINSON --------------------------------------- Lawrence D. Robinson, Senior Vice President FELCOR/LAX HOLDINGS, L.P., a Delaware limited partnership By: FelCor/LAX Hotels, L.L.C., a Delaware limited liability company, its general partner By: /s/ LAWRENCE D. ROBINSON --------------------------------------- Lawrence D. Robinson, Senior Vice President -3- 4 FELCOR EIGHT HOTELS, L.L.C., a Delaware limited liability company By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President FELCOR HOTEL ASSET COMPANY, L.L.C., a Delaware limited liability company By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President FELCOR NEVADA HOLDINGS, L.L.C., a Nevada limited liability company By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President FHAC NEVADA HOLDINGS, L.L.C., a Nevada limited liability company By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President FHAC TEXAS HOLDINGS, L.P., a Texas limited partnership By: FelCor Hotel Asset Company, L.L.C., a Delaware limited liability company, its general partner By: /s/ LAWRENCE D. ROBINSON --------------------------------------- Lawrence D. Robinson, Senior Vice President -4- 5 FELCOR COUNTRY VILLA HOTEL, L.L.C. a Delaware limited liability company By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President FELCOR MOLINE HOTEL, L.L.C., a Delaware limited liability company By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President FELCOR OMAHA HOTEL COMPANY, L.L.C., a Delaware limited liability company By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President FELCOR CANADA CO., a Nova Scotia unlimited liability company By: /s/ LAWRENCE D. ROBINSON ------------------------------------------- Lawrence D. Robinson, Senior Vice President SUNTRUST BANK, as Trustee By: /s/ GEORGE T. HOGAN ------------------------------------------- Name: George T. Hogan ----------------------------------------- Title: Vice President ---------------------------------------- By: /s/ B. A. DONALDSON ------------------------------------------- Name: B. A. Donaldson ----------------------------------------- Title: Vice President ---------------------------------------- -5- EX-4.3 3 d80556ex4-3.txt INDENTURE DATED 9/15/00 1 EXHIBIT 4.3 ================================================================================ FELCOR LODGING LIMITED PARTNERSHIP, as Issuer FELCOR LODGING TRUST INCORPORATED, FELCOR/CSS HOTELS, L.L.C., FELCOR/LAX HOTELS, L.L.C., FELCOR/CSS HOLDINGS, L.P., FELCOR/ST. PAUL HOLDINGS, L.P., FELCOR/LAX HOLDINGS, L.P., FELCOR EIGHT HOTELS, L.L.C., FELCOR HOTEL ASSET COMPANY L.L.C., FELCOR NEVADA HOLDINGS L.L.C., FHAC NEVADA HOLDINGS, L.L.C., FHAC TEXAS HOLDINGS, L.P., FELCOR OMAHA HOTEL COMPANY, L.L.C., FELCOR COUNTRY VILLA HOTEL, L.L.C., FELCOR MOLINE HOTEL, L.L.C., AND FELCOR CANADA CO., AS GUARANTORS, and SUNTRUST BANK, as Trustee ---------- INDENTURE Dated as of September 15, 2000 ---------- 9 1/2% Senior Notes Due 2008 ================================================================================ 2 CROSS-REFERENCE TABLE
TIA Sections Indenture Sections - ------------ ------------------ Section 310(a)(1)........................................................ 7.10 (a)(2)........................................................ 7.10 (b)........................................................... 7.08 Section 313(c)........................................................... 7.06; 10.02 Section 314(a)........................................................... 4.17; 10.02 (a)(4)........................................................ 4.16; 10.02 (c)(1)........................................................ 10.03 (c)(2)........................................................ 10.03 (e)........................................................... 10.04 Section 315(b)........................................................... 7.05; 10.02 Section 316(a)(1)(A)..................................................... 6.05 (a)(1)(B)..................................................... 6.04 (b)........................................................... 6.07 Section 317(a)(1)........................................................ 6.08 (a)(2)........................................................ 6.09 Section 318(a)........................................................... 10.01 (c)........................................................... 10.01
Note: The Cross-Reference Table shall not for any purpose be deemed to be a part of the Indenture. ii 3 ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE........................................................................1 SECTION 1.01 Definitions........................................................................1 SECTION 1.02 Incorporation by Reference of Trust Indenture Act.................................18 SECTION 1.03 Rules of Construction.............................................................19 ARTICLE 2 NOTES............................................................................................................19 SECTION 2.01 Form and Dating...................................................................19 SECTION 2.02 Restrictive Legends...............................................................20 SECTION 2.03 Execution, Authentication and Denominations.......................................22 SECTION 2.04 Registrar and Paying Agent........................................................23 SECTION 2.05 Paying Agent to Hold Money in Trust...............................................24 SECTION 2.06 Transfer and Exchange.............................................................24 SECTION 2.07 Book-Entry Provisions for Global Notes............................................25 SECTION 2.08 Special Transfer Provisions.......................................................26 SECTION 2.09 Replacement Notes.................................................................29 SECTION 2.10 Outstanding Notes.................................................................30 SECTION 2.11 Temporary Notes...................................................................30 SECTION 2.12 Cancellation......................................................................30 SECTION 2.13 CUSIP Numbers.....................................................................31 SECTION 2.14 Defaulted Interest................................................................31 SECTION 2.15 Issuance of Additional Notes......................................................31 ARTICLE 3 REDEMPTION.......................................................................................................31 SECTION 3.01 Optional Redemption...............................................................31 SECTION 3.02 Notices to Trustee................................................................32 SECTION 3.03 Selection of Notes to Be Redeemed.................................................32 SECTION 3.04 Notice of Redemption..............................................................32 SECTION 3.05 Effect of Notice of Redemption....................................................33 SECTION 3.06 Deposit of Redemption Price.......................................................33 SECTION 3.07 Payment of Notes Called for Redemption............................................33 SECTION 3.08 Notes Redeemed in Part............................................................34 ARTICLE 4 COVENANTS........................................................................................................34 SECTION 4.01 Payment of Notes..................................................................34 SECTION 4.02 Maintenance of Office or Agency...................................................34 SECTION 4.03 Limitation on Indebtedness........................................................35 SECTION 4.04 Limitation on Restricted Payments.................................................37 SECTION 4.05 Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries...........................................................40
iii 4 SECTION 4.06 Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries...........................................................41 SECTION 4.07 Limitation on Issuances of Guarantees by Restricted Subsidiaries..................41 SECTION 4.08 Limitation on Transactions with Affiliates........................................42 SECTION 4.09 Limitation on Liens...............................................................43 SECTION 4.10 Limitation on Asset Sales.........................................................43 SECTION 4.11 Repurchase of Notes upon a Change of Control......................................44 SECTION 4.12 Existence.........................................................................44 SECTION 4.13 Payment of Taxes and Other Claims.................................................44 SECTION 4.14 Maintenance of Properties and Insurance...........................................44 SECTION 4.15 Notice of Defaults................................................................45 SECTION 4.16 Compliance Certificates...........................................................45 SECTION 4.17 Commission Reports and Reports to Holders.........................................46 SECTION 4.18 Waiver of Stay, Extension or Usury Laws...........................................46 SECTION 4.19 Limitation on Sale-Leaseback Transactions.........................................46 SECTION 4.20 Maintenance of Total Unencumbered Assets..........................................47 SECTION 4.21 Investment Grade Rating...........................................................47 ARTICLE 5 SUCCESSOR CORPORATION............................................................................................47 SECTION 5.01 When FelCor or FelCor LP May Merge, Etc...........................................47 SECTION 5.02 Successor Substituted.............................................................47 ARTICLE 6 DEFAULT AND REMEDIES.............................................................................................48 SECTION 6.01 Events of Default.................................................................48 SECTION 6.02 Acceleration......................................................................49 SECTION 6.03 Other Remedies....................................................................49 SECTION 6.04 Waiver of Past Defaults...........................................................50 SECTION 6.05 Control by Majority...............................................................50 SECTION 6.06 Limitation on Suits...............................................................50 SECTION 6.07 Rights of Holders to Receive Payment..............................................51 SECTION 6.08 Collection Suit by Trustee........................................................51 SECTION 6.09 Trustee May File Proofs of Claim..................................................51 SECTION 6.10 Priorities........................................................................51 SECTION 6.11 Undertaking for Costs.............................................................52 SECTION 6.12 Restoration of Rights and Remedies................................................52 SECTION 6.13 Rights and Remedies Cumulative....................................................52 SECTION 6.14 Delay or Omission Not Waiver......................................................52 ARTICLE 7 TRUSTEE..........................................................................................................53 SECTION 7.01 General...........................................................................53
iv 5 SECTION 7.02 Certain Rights of Trustee.........................................................53 SECTION 7.03 Individual Rights of Trustee......................................................54 SECTION 7.04 Trustee's Disclaimer..............................................................54 SECTION 7.05 Notice of Default.................................................................54 SECTION 7.06 Reports by Trustee to Holders.....................................................54 SECTION 7.07 Compensation and Indemnity........................................................54 SECTION 7.08 Replacement of Trustee............................................................56 SECTION 7.09 Successor Trustee by Merger, Etc..................................................56 SECTION 7.10 Eligibility.......................................................................56 SECTION 7.11 Money Held in Trust...............................................................57 SECTION 7.12 Withholding Taxes.................................................................57 ARTICLE 8 DISCHARGE OF INDENTURE...........................................................................................57 SECTION 8.01 Termination of Company's Obligations..............................................57 SECTION 8.02 Defeasance and Discharge of Indenture.............................................58 SECTION 8.03 Defeasance of Certain Obligations.................................................60 SECTION 8.04 Application of Trust Money........................................................61 SECTION 8.05 Repayment to Company..............................................................61 SECTION 8.06 Reinstatement.....................................................................62 ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS..............................................................................62 SECTION 9.01 Without Consent of Holders........................................................62 SECTION 9.02 With Consent of Holders...........................................................63 SECTION 9.03 Revocation and Effect of Consent..................................................64 SECTION 9.04 Notation on or Exchange of Notes..................................................64 SECTION 9.05 Trustee to Sign Amendments, Etc...................................................64 SECTION 9.06 Conformity with Trust Indenture Act...............................................65 ARTICLE 10 MISCELLANEOUS....................................................................................................65 SECTION 10.01 Trust Indenture Act of 1939.......................................................65 SECTION 10.02 Notices...........................................................................65 SECTION 10.03 Certificate and Opinion as to Conditions Precedent................................66 SECTION 10.04 Statements Required in Certificate or Opinion.....................................66 SECTION 10.05 Rules by Trustee, Paying Agent or Registrar.......................................66 SECTION 10.06 Payment Date Other Than a Business Day............................................67 SECTION 10.07 Governing Law.....................................................................67 SECTION 10.08 No Adverse Interpretation of Other Agreements.....................................67 SECTION 10.09 No Recourse Against Others........................................................67 SECTION 10.10 Successors........................................................................67 SECTION 10.11 Duplicate Originals...............................................................67 SECTION 10.12 Separability......................................................................67
v 6 SECTION 10.13 Table of Contents, Headings, Etc..................................................68 ARTICLE 11 GUARANTEE OF THE NOTES...........................................................................................68 SECTION 11.01 Guarantee.........................................................................68 SECTION 11.02 Obligations of Guarantor Unconditional............................................69 SECTION 11.03 Notice to Trustee.................................................................69 SECTION 11.04 This Article Not to Prevent Events of Default.....................................69 SECTION 11.05 Trustee's Compensation Not Prejudiced.............................................69 SECTION 11.06 Payments May Be Paid Prior to Dissolution.........................................69 SECTION 11.07 Release of Guarantee..............................................................69
vi 7 INDENTURE, dated as of September 15, 2000, among FelCor Lodging Limited Partnership ("FelCor LP"), a Delaware limited partnership, FelCor Lodging Trust Incorporated ("FelCor"), a Maryland corporation, FelCor/CSS Hotels, L.L.C., a Delaware limited liability company, FelCor/LAX Hotels, L.L.C., a Delaware limited liability company, FelCor/CSS Holdings, L.P., a Delaware limited partnership, FelCor/St. Paul Holdings, L.P., a Delaware limited partnership, FelCor/LAX Holdings, L.P., a Delaware limited partnership, FelCor Eight Hotels, L.L.C., a Delaware limited liability company, FelCor Hotel Asset Company, L.L.C., a Delaware limited liability company, FelCor Nevada Holdings L.L.C., a Nevada limited liability company, FHAC Nevada Holdings, L.L.C., a Nevada limited liability company, FHAC Texas Holdings, L.P., a Texas limited partnership, FelCor Omaha Hotel Company, L.L.C., a Delaware limited liability company, FelCor Country Villa Hotel, L.L.C., a Delaware limited liability company, FelCor Moline Hotel, L.L.C., a Delaware limited liability company, FelCor Canada Co., a Nova Scotia unlimited liability company, and SunTrust Bank, a Georgia banking corporation (the "Trustee"). RECITALS OF COMPANY FelCor LP has duly authorized the execution and delivery of this Indenture to provide for the issuance initially of up to $400,000,000 aggregate principal amount at maturity of FelCor LP's 9 1/2% Senior Notes Due 2008 (the "Notes") issuable as provided in this Indenture. Each Guarantor has duly authorized the execution and delivery of this Indenture to provide for a guarantee of the Notes and of certain of FelCor LP's obligations hereunder. All things necessary to make this Indenture a valid agreement of FelCor LP and the Guarantors in accordance with its terms, have been done, and FelCor LP and the Guarantors have done all things necessary to make the Notes, when executed by FelCor LP and authenticated and delivered by the Trustee hereunder and duly issued by FelCor LP, the valid obligations of FelCor LP and the Guarantors as hereinafter provided. This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act of 1939, as amended, that are required to be a part of and to govern indentures qualified under the Trust Indenture Act of 1939, as amended. AND THIS INDENTURE FURTHER WITNESSETH For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders, as follows: ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 DEFINITIONS. "Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with an Asset Acquisition from such Person by a Restricted Subsidiary and not incurred by such Person in connection with, or in anticipation of, such Person becoming a Restricted Subsidiary or such Asset Acquisition; provided that Indebtedness of such Person which is redeemed, defeased, retired or otherwise 8 repaid at the time of or immediately upon consummation of the transactions by which such Person becomes a Restricted Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness. "Adjusted Consolidated Net Income" means, for any period, the aggregate net income (or loss) of FelCor, FelCor LP and their respective Restricted Subsidiaries for such period determined on a consolidated basis in conformity with GAAP plus the minority interest in FelCor LP, if applicable; provided that the following items shall be excluded in computing Adjusted Consolidated Net Income (without duplication): (i) the net income of any Person (other than FelCor LP, FelCor or a Restricted Subsidiary), except to the extent of the amount of dividends or other distributions actually paid to FelCor LP, FelCor or any of their respective Restricted Subsidiaries by such Person during such period; (ii) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary; (iii) any gains or losses (on an after-tax basis) attributable to Asset Sales; (iv) for so long as the Notes are not rated Investment Grade, any amount paid or accrued as dividends on Preferred Stock of FelCor LP, FelCor or any Restricted Subsidiary owned by Persons other than FelCor or FelCor LP and any of their respective Restricted Subsidiaries; and (v) all extraordinary gains and extraordinary losses. "Adjusted Consolidated Net Tangible Assets" means the total amount of assets of FelCor LP, FelCor and their respective Restricted Subsidiaries (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of FelCor LP, FelCor and their respective Restricted Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most recent quarterly or annual consolidated balance sheet of FelCor LP or FelCor and their respective Restricted Subsidiaries, prepared in conformity with GAAP and filed with the Commission or provided to the Trustee pursuant to Section 4.17. "Adjusted Total Assets" means, for any Person, the sum of (i) Total Assets for such Person as of the end of the calendar quarter preceding the Transaction Date as set forth on the most recent quarterly or annual consolidated balance sheet of FelCor LP or FelCor and their respective Restricted Subsidiaries, prepared in conformity with GAAP and filed with the Commission or provided to the Trustee pursuant to Section 4.17 and (ii) any increase in Total Assets following the end of such quarter including, without limitation, any increase in Total Assets resulting from the application of the proceeds of any additional Indebtedness. "Affiliate" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. 2 9 "Agent" means any Registrar, Paying Agent, authenticating agent or co-Registrar. "Agent Members" has the meaning provided in Section 2.07(a). "Asset Acquisition" means (i) an investment by FelCor LP or FelCor or any of their respective Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with FelCor LP or FelCor or any of their respective Restricted Subsidiaries; provided that such Person's primary business is related, ancillary, incidental or complementary to the businesses of FelCor LP or FelCor or any of their respective Restricted Subsidiaries on the date of such investment or (ii) an acquisition by FelCor LP or FelCor or any of their respective Restricted Subsidiaries from any other Person that constitutes substantially all of a division or line of business, or one or more hotel properties, of such Person; provided that the property and assets acquired are related, ancillary, incidental or complementary to the businesses of FelCor LP or FelCor or any of their respective Restricted Subsidiaries on the date of such acquisition. "Asset Disposition" means the sale or other disposition by FelCor LP or FelCor or any of their respective Restricted Subsidiaries (other than to FelCor LP, FelCor or another Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of any Restricted Subsidiary or (ii) all or substantially all of the assets that constitute a division or line of business, or one or more hotel properties, of FelCor LP or FelCor or any of their respective Restricted Subsidiaries. "Asset Sale" means any sale, transfer or other disposition (including by way of merger, consolidation or sale-leaseback transaction) in one transaction or a series of related transactions by FelCor LP or FelCor or any of their Restricted Subsidiaries to any Person other than FelCor LP or FelCor or any of their respective Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted Subsidiary other than sales permitted under clause (iv) of Section 4.06, (ii) all or substantially all of the property and assets of an operating unit or business of FelCor LP or FelCor or any of their respective Restricted Subsidiaries or (iii) any other property and assets of FelCor LP or FelCor or any of their respective Restricted Subsidiaries outside the ordinary course of business of FelCor LP or FelCor or such Restricted Subsidiary and, in each case, that is not governed by the provisions of this Indenture applicable to mergers, consolidations and sales of assets of FelCor LP and FelCor; provided that "Asset Sale" shall not include (a) sales or other dispositions of inventory, receivables and other current assets, (b) sales, transfers or other dispositions of assets with a fair market value not in excess of $1 million in any transaction or series of related transactions or (c) sales or other dispositions of assets for consideration at least equal to the fair market value of the assets sold or disposed of, to the extent that the consideration received would satisfy clause (i)(B) of the second sentence of Section 4.10. "Average Life" means at any date of determination with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such debt security and (b) the amount of such principal payment by (ii) the sum of all such principal payments. "Board of Directors" means (i) with respect to FelCor the Board of Directors of FelCor, (ii) with respect to FelCor LP, the Board of Directors of its general partner, and (iii) with respect 3 10 to the Subsidiary Guarantors, the board of directors of its general partner or manager, as the case may be, or, in each case, any committee of such Board of Directors duly authorized to act under this Indenture. "Board Resolution" means a copy of a resolution, certified by the Secretary of such Person to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in The City of New York, or in the city of the Corporate Trust Office of the Trustee, are authorized by law to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participation or other equivalents (however designated, whether voting or non-voting), including partnership interests, whether general or limited, in the equity of such Person, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all Common Stock, Preferred Stock and Units. "Capitalized Lease" means, as applied to any Person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person. "Capitalized Lease Obligations" means the discounted present value of the rental obligations under a Capitalized Lease as reflected on the balance sheet of such Person in accordance with GAAP. "Change of Control" means such time as (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total voting power of the Voting Stock of FelCor or, other than by FelCor, of FelCor LP on a fully diluted basis; (ii) individuals who on the Closing Date constitute the Board of Directors of FelCor (together with any new or replacement directors whose election by the Board of Directors or whose nomination by the Board of Directors for election by FelCor's shareholders was approved by a vote of at least a majority of the members of the Board of Directors then still in office who either were members of the Board of Directors on the Closing Date or whose election or nomination for election was so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office. "Closing Date" means the date on which the Notes are first issued under this Indenture. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the TIA, then the body performing such duties at such time. "Common Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting), which 4 11 have no preference on liquidation or with respect to distributions over any other class of Capital Stock, including partnership interests, whether general or limited, of such Person's equity, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all series and classes of common stock. "Company Order" means a written request or order signed in the name of a Person (i) by its Chairman, a Vice Chairman, its President, a Vice President, manager or similar officer of its general partner and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, manager or similar officer of its general partner and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Consolidated EBITDA" means, for any period, Adjusted Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest Expense, (ii) income taxes (other than income taxes (either positive or negative) attributable to extraordinary and non-recurring gains or losses or sales of assets), (iii) depreciation expense, (iv) amortization expense and (v) all other non-cash items reducing Adjusted Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be, made), less all non-cash items increasing Adjusted Consolidated Net Income, all as determined on a consolidated basis for FelCor LP, FelCor and their respective Restricted Subsidiaries in conformity with GAAP; provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Adjusted Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by FelCor LP or FelCor or any of their respective Restricted Subsidiaries. "Consolidated Interest Expense" means, for any period, without duplication, the aggregate amount of interest expense in respect of Indebtedness (including, without limitation, amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with GAAP; all commissions, discounts and other fees and expenses owed with respect to letters of credit and bankers' acceptance financing; the net costs associated with Interest Rate Agreements and Indebtedness that is Guaranteed or secured by assets of FelCor LP, FelCor or any of their respective Restricted Subsidiaries and all but the principal component of rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be accrued by FelCor LP, FelCor and their respective Restricted Subsidiaries) during such period, all as determined on a consolidated basis (without taking into account Unrestricted Subsidiaries) in conformity with GAAP; excluding (i) the amount of such interest expense of any Restricted Subsidiary if the net income of such Restricted Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income pursuant to clause (ii) of the definition thereof (but only in the same proportion as the net income of such Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated Net Income pursuant to clause (ii) of the definition thereof) and (ii) any premiums, fees and expenses (and any amortization thereof) payable in connection with the offering of the Notes or paid in connection with any other Indebtedness outstanding on June 30, 2000, all as determined 5 12 on a consolidated basis (without taking into account Unrestricted Subsidiaries) in conformity with GAAP. "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date of this Indenture, located at 25 Park Place, 24th Floor, Atlanta, Georgia 30303-2900, Attention: Corporate Trust Administration. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Depositary" shall mean The Depository Trust Company, its nominees, and their respective successors. "Disqualified Stock" means any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of such class or series of Capital Stock, other than Units, at any time prior to the Stated Maturity of the Notes or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Sections 4.10 and 4.11 and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to FelCor LP's repurchase of such Notes as are required to be repurchased pursuant to Sections 4.10 and 4.11. "DJONT" means DJONT Operations, L.L.C., a Delaware limited liability company. "Equity Offering" means a public or private offering of Capital Stock (other than Disqualified Stock) of FelCor or FelCor LP; provided that the proceeds received by FelCor or FelCor LP directly or indirectly from such offering are not less than $50,000,000. "Event of Default" has the meaning provided in Section 6.01. "Excess Proceeds" has the meaning provided in Section 4.10. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means any securities of FelCor LP containing terms identical to the Notes (except that such Exchange Notes shall be registered under the Securities Act) that are issued and exchanged for such Notes pursuant to the Registration Rights Agreement (or, with respect to Notes issued after the Closing Date, pursuant to a registration rights agreement with 6 13 substantially the same terms and conditions as the Registration Rights Agreement) and this Indenture. "Existing Notes" means the 7 3/8% Senior Notes due 2004 issued in the initial aggregate principal amount of $175,000,000 and the 7 5/8% Senior Notes due 2007 issued in the initial aggregate principal amount of $125,000,000. "fair market value" means the price that would be paid in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution. "Funds From Operations" for any period means the consolidated net income of FelCor LP, FelCor and their respective Restricted Subsidiaries for such period in conformity with GAAP excluding gains or losses from debt restructurings which would be extraordinary items in accordance with GAAP and sales of depreciable operating property, plus depreciation of real property (including furniture and equipment) and after adjustments for unconsolidated partnerships and joint ventures plus the minority interest in FelCor LP, if applicable; provided that for purposes of the payment of any dividend or distribution by FelCor LP or FelCor, "Funds From Operations" shall be equal to $80 million plus the amount thereof computed for the period commencing with the first day of the fiscal quarter in which the Closing Date occurs and ending on the last day of the last fiscal quarter preceding the payment of such dividend or distribution. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations contained or referred to in this Indenture shall be computed in conformity with GAAP applied on a consistent basis, except that calculations made for purposes of determining compliance with the terms of the covenants and with other provisions of this Indenture shall be made without giving effect to (i) the amortization of any expenses incurred in connection with the offering of the Notes and (ii) except as otherwise provided, the amortization of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 and 17. "Global Notes" has the meaning provided in Section 2.01. "Government Securities" means direct obligations of, obligations guaranteed by, or participations in pools consisting solely of obligations of or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the option of the issuer thereof. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to 7 14 purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantors" means FelCor and the Subsidiary Guarantors, collectively. "Holder" or "Noteholder" means the registered holder of any Note. "Incur" means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person at any date of determination (without duplication), (i) all indebtedness of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) the face amount of letters of credit or other similar instruments (excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations (other than obligations described in (i) or (ii) above or (v), (vi) or (vii) below) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement), (iv) all unconditional obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables, (v) all Capitalized Lease Obligations, (vi) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise included in this definition or the definition of Consolidated Interest Expense, obligations under Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations of the type described above and, with respect to obligations under any Guarantee, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided that (A) the amount outstanding at any time of any Indebtedness issued with original issue discount shall be deemed to be the face amount with respect to such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at the date of determination in conformity with GAAP, and (B) Indebtedness shall not include any liability for federal, state, local or other taxes. 8 15 "Indenture" means this Indenture as originally executed or as it may be amended or supplemented from time to time by one or more indentures supplemental to this Indenture entered into pursuant to the applicable provisions of this Indenture. "Institutional Accredited Investor" means an institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Interest Coverage Ratio" means, on any Transaction Date, the ratio of (i) the aggregate amount of Consolidated EBITDA for the then most recent four fiscal quarters prior to such Transaction Date for which reports have been filed with the Commission or provided to the Trustee pursuant to Section 4.17 ("Four Quarter Period") to (ii) the aggregate Consolidated Interest Expense during such Four Quarter Period. In making the foregoing calculation, (A) pro forma effect shall be given to any Indebtedness Incurred or repaid (other than in connection with an Asset Acquisition or Asset Disposition) during the period ("Reference Period") commencing on the first day of the Four Quarter Period and ending on the Transaction Date (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such Four Quarter Period unless any portion of such Indebtedness is projected, in the reasonable judgment of the senior management of FelCor LP or FelCor (as evidenced by an Officer's Certificate), to remain outstanding for a period in excess of 12 months from the date of the Incurrence thereof), in each case as if such Indebtedness had been Incurred or repaid on the first day of such Reference Period; (B) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period; (C) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition and any Indebtedness Incurred or repaid in connection with any such Asset Acquisitions or Asset Dispositions) that occur during such Reference Period but subsequent to the end of the related Four Quarter Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and (D) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition and any Indebtedness Incurred or repaid in connection with any such asset acquisitions or asset dispositions) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into FelCor LP or FelCor or any of their respective Restricted Subsidiaries during such Reference Period but subsequent to the end of the related Four Quarter Period and that would have constituted Asset Dispositions or Asset Acquisitions during such Reference Period but subsequent to the end of the related Four Quarter Period had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions and had occurred on the first day of such Reference Period; provided that to the extent that clause (C) or (D) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business, or one 9 16 or more hotel properties, of the Person that is acquired or disposed of to the extent that such financial information is available. "Interest Payment Date" means each semiannual interest payment date on March 15 and September 15, of each year, commencing March 15, 2001. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement with respect to interest rates. "Investment" in any Person means any direct or indirect advance, loan or other extension of credit (including without limitation by way of Guarantee or similar arrangement, but excluding advances to customers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable on the consolidated balance sheet of FelCor LP, FelCor and their respective Restricted Subsidiaries) or capital contribution to (by means of any transfer of cash or other property (tangible or intangible) to others or any payment for property or services solely for the account or use of others, or otherwise), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar instruments issued by, such Person and shall include (i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair market value of the Capital Stock (or any other Investment), held by FelCor LP or FelCor or any of their respective Restricted Subsidiaries of (or in) any Person that has ceased to be a Restricted Subsidiary, including without limitation, by reason of any transaction permitted by clause (iii) of Section 4.06; provided that the fair market value of the Investment remaining in any Person that has ceased to be a Restricted Subsidiary shall be deemed not to exceed the aggregate amount of Investments previously made in such Person valued at the time such Investments were made, less the net reduction of such Investments. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include the fair market value of the assets (net of liabilities (other than liabilities to FelCor LP or FelCor or any of their respective Restricted Subsidiaries)) of any Restricted Subsidiary at the time such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value of the assets (net of liabilities (other than liabilities to FelCor LP or FelCor or any of their respective Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be considered a reduction in outstanding Investments and (iii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer. "Investment Grade" means a rating of the Notes by both S&P and Moody's, each such rating being in one of such agency's four highest generic rating categories that signifies investment grade (i.e. BBB- (or the equivalent) or higher by S&P and Baa3 (or the equivalent) or higher by Moody's); provided, in each case, such ratings are publicly available; provided, further, that in the event Moody's or S&P is no longer in existence for purposes of determining whether the Notes are rated "Investment Grade," such organization may be replaced by a nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) designated by FelCor LP and FelCor, notice of which shall be given to a Responsible Officer of the Trustee. 10 17 "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to give any security interest). "Line of Credit" means the credit facility established pursuant to the Fifth Amended and Restated Credit Agreement dated as of August 1, 2000 among FelCor LP, FelCor, the lenders party thereto, The Chase Manhattan Bank, as Administrative Agent, Chase Securities, Inc., as Joint Lead Arranger, Joint Book Manager and Syndication Agent, Bankers Trust Company, as Joint Lead Arranger, Joint Book Manager and Documentation Agent, Bank of America, N.A., as Documentation Agent, and Wells Fargo Bank, National Association, as Documentation Agent, together with all other agreements, instruments and documents executed or delivered pursuant thereto or in connection therewith, in each case as such agreements, instruments or documents may be amended, supplemented, extended, renewed, replaced or otherwise modified from time to time; provided that, with respect to an agreement providing for the refinancing of Indebtedness under the Line of Credit, such agreement shall be the Line of Credit under this Indenture only if a notice to that effect is delivered by FelCor LP and FelCor to a Responsible Officer of the Trustee. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to FelCor LP or FelCor or any of their respective Restricted Subsidiaries) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of (i) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes actually paid or payable as a result of such Asset Sale by FelCor LP, FelCor and their respective Restricted Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (A) is secured by a Lien on the property or assets sold or (B) is required to be paid as a result of such sale and (iv) amounts reserved by FelCor LP, FelCor and their respective Restricted Subsidiaries against any liabilities associated with such Asset Sale, including without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined on a consolidated basis in conformity with GAAP and (b) with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to FelCor LP or FelCor or any of their respective Restricted Subsidiaries) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorney's fees, accountants's fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of tax paid or payable as a result thereof. 11 18 "Non-U.S. Person" means a person who is not a U.S. person, as defined in Regulation S. "Note Register" has the meaning provided in Section 2.04. "Notes" means any of the securities, as defined in the first paragraph of the recitals hereof, that are authenticated and delivered under this Indenture. For all purposes of this Indenture, the term "Notes" shall include the Notes initially issued on the Closing Date, any other Notes issued after the Closing Date under this Indenture and any Exchange Notes. For purposes of this Indenture, all Notes shall vote together as one series of Notes under this Indenture. "Offer to Purchase" means an offer to purchase Notes by FelCor LP, from the Holders commenced by mailing a notice to the Trustee and each Holder stating: (i) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) ("Payment Date"); (iii) that any Note not tendered will continue to accrue interest pursuant to its terms; (iv) that, unless FelCor LP defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; (v) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Payment Date; (vi) that Holders will be entitled to withdraw their election if the Payment Agent receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. On the Payment Date, FelCor LP shall (i) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; and (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and shall promptly thereafter deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officers' Certificate specifying the Notes or portions thereof accepted for payment by FelCor LP. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of any Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. FelCor LP shall publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. FelCor LP shall comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that FelCor LP is required to repurchase Notes pursuant to an Offer to Purchase. 12 19 "Officer" means, with respect to any Person, (i) the Chairman of the Board, the President, any Vice President, the Chief Financial Officer, and (ii) the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant Secretary or Person holding a similar position at the general partner or manager of such Person. "Officers' Certificate" means a certificate signed by one Officer listed in clause (i) of the definition thereof and one Officer listed in clause (ii) of the definition thereof. Each Officers' Certificate (other than certificates provided pursuant to TIA Section 314(a)(4)) shall include the statements provided for in TIA Section 314(e). "Offshore Global Note" has the meaning provided in Section 2.01. "Offshore Physical Notes" has the meaning provided in Section 2.01. "Offshore Notes Exchange Date" has the meaning provided in Section 2.01. "Opinion of Counsel" means a written opinion signed by legal counsel who may be an employee of or counsel to FelCor or FelCor LP. Each such Opinion of Counsel shall include the statements provided for in TIA Section 314(e). "Paying Agent" has the meaning provided in Section 2.04, except that, for the purposes of Article Eight, the Paying Agent shall not be FelCor LP, a Subsidiary of FelCor LP, any Guarantor or an Affiliate of any of them. The term "Paying Agent" includes any additional Paying Agent. "Permanent Offshore Global Note" has the meaning provided in Section 2.01. "Permitted Investment" means (i) an Investment in FelCor LP or FelCor or any of their Restricted Subsidiaries or a Person which will, upon the making of such Investment, become a Restricted Subsidiary or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, FelCor LP or FelCor or any of their Restricted Subsidiaries; provided that such person's primary business is related, ancillary, incidental or complementary to the businesses of FelCor LP or FelCor or any of their respective Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash Investments; (iii) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; and (iv) stock, obligations or securities received in satisfaction of judgments. "Physical Notes" has the meaning provided in Section 2.01. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participation or other equivalents (however designated, whether voting or non-voting), which have a preference on liquidation or with respect to distributions over any other class of Capital Stock, including preferred partnership interests, whether general or limited, or such Person's preferred or preference stock, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all series and classes of such preferred or preference stock. 13 20 "Private Placement Legend" means the legend initially set forth on the Notes in the form set forth in Section 2.02. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Ratings Downgrade" means a rating of the Notes (1) by S&P and Moody's lower than, in the case of S&P, BB- and, in the case of Moody's, Ba3, provided in each case such ratings are publicly available or (2) by S&P or Moody's lower than, in the case of S&P, BB- or, in the case of Moody's , Ba3, provided that in any such case such rating is the only rating publicly available. "Redemption Date", when used with respect to any Note to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Note to be redeemed, means the price at which such Note is to be redeemed pursuant to this Indenture. "Registrar" has the meaning provided in Section 2.04. "Registration Rights Agreement" means the Registration Rights Agreement, dated September 8, 2000, among FelCor LP, FelCor, Deutsche Banc Securities Inc., Chase Securities Inc., Morgan Stanley & Co. Incorporated, Banc of America Securities L.L.C., Banc One Capital Markets, Inc., Credit Lyonnais Securities (USA) Inc., Scotia Capital (USA) Inc. and certain permitted assigns specified therein. "Registration Statement" means the Registration Statement as defined and described in the Registration Rights Agreement. "Regular Record Date" for the interest payable on any Interest Payment Date means the March 1 or September 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Regulation S" means Regulation S under the Securities Act. "Responsible Officer", when used with respect to the Trustee, means the chairman or any vice chairman of the board of directors, the chairman or any vice chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means any Subsidiary of FelCor LP or FelCor other than an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act. 14 21 "Securities Act" means the Securities Act of 1933, as amended. "Secured Indebtedness" means any Indebtedness secured by a Lien upon the property of FelCor LP or FelCor or any of their respective Restricted Subsidiaries, other than Indebtedness secured by a Stock Pledge to the extent such Indebtedness does not exceed 50% of Adjusted Total Assets. "Senior Indebtedness" means the following obligations of FelCor LP or FelCor or any of their respective Restricted Subsidiaries, whether outstanding on the Closing Date or thereafter Incurred: (i) all Indebtedness and all other monetary obligations (including expenses fees and other monetary obligations) of FelCor LP and FelCor under the Line of Credit; (ii) all Indebtedness and all other monetary obligations of FelCor LP or FelCor or any of their respective Restricted Subsidiaries (other than the Notes), including principal and interest on such Indebtedness, unless such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued is expressly subordinated in right of payment to the Notes; and (iii) Subsidiary Debt. Senior Indebtedness will also include interest accruing subsequent to events of bankruptcy of FelCor LP and FelCor and their respective Restricted Subsidiaries at the rate provided for the document governing such Senior Indebtedness, whether or not such interest is an allowed claim enforceable against the debtor in a bankruptcy case under bankruptcy law. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means, at any date of determination, any Restricted Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal year of FelCor LP and FelCor, accounted for more than 10% of the consolidated revenues of FelCor LP, FelCor and their respective Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of FelCor LP, FelCor and their respective Restricted Subsidiaries, all as set forth on the most recently available consolidated financial statements thereof for such fiscal year. "S&P" means Standard & Poor's Ratings Services and its successors. "Specified Date" means any Redemption Date, Change of Control Payment Date, Excess Proceeds Payment Date or any date on which the Notes first become due and payable after an Event of Default. "Stated Maturity" means, (i) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable and (ii) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable. "Stock Pledge" means a first priority security interest in the equity interests of subsidiaries of FelCor and/or FelCor LP. 15 22 "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person and the accounts of which would be consolidated with those of such Person in its consolidated financial statements in accordance with GAAP, if such statements were prepared as of such date. "Subsidiary Debt" means all unsecured Indebtedness of which a Restricted Subsidiary is the primary obligor. "Subsidiary Guarantee" means a Guarantee by each Subsidiary Guarantor for payment of the Notes by such Subsidiary Guarantor. The Subsidiary Guarantee will be an unsecured senior obligation of each Subsidiary Guarantor and will be unconditional regardless of the enforceability of the Notes and this Indenture. Notwithstanding the foregoing, each Subsidiary Guarantee by a Subsidiary Guarantor shall provide by its terms that it shall be automatically and unconditionally released and discharged upon any sale, exchange or transfer, to any Person not an Affiliate of FelCor LP or FelCor, of all of the Capital Stock owned by FelCor LP, FelCor and their respective Restricted Subsidiaries in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not then prohibited by this Indenture). "Subsidiary Guarantor" means each of (i) FelCor/CSS Hotels, L.L.C., a Delaware limited liability company, (ii) FelCor/LAX Hotels, L.L.C., a Delaware limited liability company, (iii) FelCor/CSS Holdings, L.P., a Delaware limited partnership, (iv) FelCor/St. Paul Holdings, L.P., a Delaware limited partnership, (v) FelCor/LAX Holdings, L.P., a Delaware limited partnership, (vi) FelCor Eight Hotels, L.L.C., a Delaware limited liability company (vii) FelCor Hotel Asset Company, L.L.C., a Delaware limited liability company, (viii) FelCor Nevada Holding Company, (ix) FHAC Nevada Holdings, L.L.C., a Nevada limited liability company, (x) FHAC Texas Holdings, L.P., a Texas limited partnership, (xi) FelCor Omaha Hotel Company, L.L.C., a Delaware limited liability company, (xii) FelCor Country Villa Hotel, L.L.C., a Delaware limited liability company, (xiii) FelCor Moline Hotel, L.L.C., a Delaware limited liability company, (xiv) FelCor Canada Co., a Nova Scotia unlimited liability company, and (xv) each other Restricted Subsidiary that executes a Subsidiary Guarantee in compliance with Section 4.07. "Temporary Cash Investment" means any of the following: (i) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally guaranteed by the United States of America or any agency thereof, (ii) time deposits accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50 million and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of FelCor LP or FelCor) organized and in existence under the laws of the United States of America, any state thereof with a rating at 16 23 the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P, and (v) securities with maturities of six months or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or Moody's. "Temporary Offshore Global Note" has the meaning provided in Section 2.01. "TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended (15 U.S. Code Section 77aaa-77bbb), as in effect on the date this Indenture was executed, except as provided in Section 9.06. "Total Assets" means the sum of (i) Undepreciated Real Estate Assets and (ii) all other assets of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis determined in conformity with GAAP (but excluding intangibles and accounts receivables). "Total Unencumbered Assets" as of any date means the sum of (i) those Undepreciated Real Estate Assets not securing any portion of Secured Indebtedness and (ii) all other assets (but excluding intangibles and accounts receivable) of FelCor LP, FelCor and their respective Restricted Subsidiaries not securing any portion of Secured Indebtedness determined on a consolidated basis in accordance with GAAP. "Trade Payables" means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services. "Transaction Date" means, with the respect to the Incurrence of any Indebtedness by FelCor LP or FelCor or any of their respective Restricted Subsidiaries, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "Trustee" means the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the provisions of Article Seven of this Indenture and thereafter means such successor. "Undepreciated Real Estate Assets" means, as of any date, the cost (being the original cost to FelCor LP or FelCor or any of their respective Restricted Subsidiaries plus capital improvements) of real estate assets of FelCor LP, FelCor and their Restricted Subsidiaries on such date, before depreciation and amortization of such real estate assets, determined on a consolidated basis in conformity with GAAP. "United States Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended and as codified in Title 11 of the United States Code, as amended from time to time hereafter, or any successor federal bankruptcy law. "U.S. Global Note" has the meaning provided in Section 2.01. 17 24 "U.S. Physical Notes" has the meaning provided in Section 2.01. "Units" means the limited partnership units of FelCor LP, that by their terms are redeemable at the option of the holder thereof and that, if so redeemed, at the election of FelCor are redeemable for cash or Common Stock of FelCor. "Unrestricted Subsidiary" means (i) any Subsidiary of FelCor LP or FelCor that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of FelCor LP or FelCor) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, FelCor LP or FelCor or any of their respective Restricted Subsidiaries; provided that (A) any Guarantee by FelCor LP or FelCor or any of their respective Restricted Subsidiaries of any Indebtedness of the Subsidiary being so designated shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by FelCor LP or FelCor or such Restricted Subsidiary (or all, if applicable) at the time of such designation, (B) either (I) the Subsidiary to be so designated has total assets of $1,000 or less or (II) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.04 and (C) if applicable, the Incurrence of Indebtedness and the Investment referred to in clause (A) of this proviso would be permitted under Sections 4.03 and 4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (i) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such designation; and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately after such designation would, if Incurred at such time, have been permitted to be Incurred (and shall be deemed to have been Incurred) for all purposes of this Indenture. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "Unsecured Indebtedness" means any Indebtedness of FelCor LP or FelCor or any of their respective Restricted Subsidiaries that is not Secured Indebtedness. "Voting Stock" means with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. "Wholly Owned" means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director's qualifying shares or Investments by individuals mandated by applicable law) by such Person or one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: 18 25 "indenture notes" means the Notes; "indenture note holder" means a Holder or a Noteholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means FelCor LP, the Guarantors or any other obligor on the Notes. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a rule of the Commission and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03 RULES OF CONSTRUCTION. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and words in the plural include the singular; (v) provisions apply to successive events and transactions; (vi) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (vii) all ratios and computations based on GAAP contained in this Indenture shall be computed in accordance with the definition of GAAP set forth in Section 1.01; and (viii) all references to Sections or Articles refer to Sections or Articles of this Indenture unless otherwise indicated. ARTICLE 2. NOTES SECTION 2.01 FORM AND DATING. The Notes and the Trustee's certificate of authentication shall be substantially in the form annexed hereto as Exhibit A with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange agreements to which FelCor LP or the Guarantors are subject or usage. FelCor LP shall approve the form of the Notes and any notation, legend or endorsement on the Notes. Each Note shall be dated the date of its authentication. 19 26 The terms and provisions contained in the form of the Notes annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a part of this Indenture. To the extent applicable, FelCor LP, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent global Notes in registered form, substantially in the form set forth in Exhibit A (collectively, the "U.S. Global Notes"), deposited with the Trustee, as custodian for the Depositary, duly executed by FelCor LP and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the U.S. Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Notes offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of one or more temporary global Notes in registered form substantially in the form set forth in Exhibit A (the "Temporary Offshore Global Notes") deposited with the Trustee, as custodian for the Depositary, duly executed by FelCor LP and authenticated by the Trustee as hereinafter provided. At any time following 40 days from the initial issuance of a series of notes (the "Offshore Notes Exchange Date"), upon receipt by the Trustee and FelCor LP of a certificate substantially in the form of Exhibit B hereto, one or more permanent global Notes in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Global Notes"; and together with the Temporary Offshore Global Notes, the "Offshore Global Notes") duly executed by FelCor LP and authenticated by the Trustee as hereinafter provided shall be deposited with the Trustee, as custodian for the Depositary, and the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Temporary Offshore Global Notes in an amount equal to the principal amount of the beneficial interest in the Temporary Offshore Global Notes transferred. Notes offered and sold in reliance on Regulation D under the Securities Act shall be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Exhibit A (the "U.S. Physical Notes"). Notes issued pursuant to Section 2.07 in exchange for interests in the Offshore Global Note shall be in the form of permanent certificated Notes in registered form substantially in the form set forth in Exhibit A (the "Offshore Physical Notes"). The Offshore Physical Notes and U.S. Physical Notes are sometimes collectively herein referred to as the "Physical Notes". The U.S. Global Notes and the Offshore Global Notes are sometimes referred to herein as the "Global Notes". The definitive Notes shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Notes may be listed, all as determined by the Officers executing such Notes, as evidenced by their execution of such Notes. SECTION 2.02 RESTRICTIVE LEGENDS. Unless and until a Note is exchanged for an Exchange Note or sold in connection with an effective Registration pursuant to the Registration 20 27 Rights Agreement, the U.S. Global Notes, Temporary Offshore Global Notes and each U.S. Physical Note shall bear the following legend on the face thereof: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT AFTER ORIGINAL ISSUANCE OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO FELCOR OR FELCOR LP OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES AT THE TIME OF TRANSFER OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO FELCOR AND FELCOR LP THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT AFTER ORIGINAL ISSUANCE OF THIS NOTE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND FELCOR AND FELCOR LP SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO 21 28 CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. Each Global Note, whether or not an Exchange Note, shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO FELCOR LP OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.08 OF THE INDENTURE. SECTION 2.03 EXECUTION, AUTHENTICATION AND DENOMINATIONS. The Notes shall be executed by two Officers of FelCor, as general partner of FelCor LP. The signature of any of these Officers on the Notes may be by facsimile or manual signature in the name and on behalf of FelCor or FelCor LP, as the case may be. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee or authenticating agent authenticates the Note, the Note shall be valid nevertheless. A Note shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. 22 29 At any time and from time to time after the execution of this Indenture, the Trustee or an authenticating agent shall upon receipt of a Company Order authenticate for original issue Notes in the aggregate principal amount specified in such Company Order; provided that the Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of FelCor LP in connection with such authentication of Notes. Such Company Order shall specify the amount of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and in case of an issuance of Notes pursuant to Section 2.15, shall certify that such issuance is in compliance with Article Four. The Trustee may appoint an authenticating agent to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such authenticating agent. An authenticating agent has the same rights as an Agent to deal with FelCor LP or an Affiliate of FelCor LP. The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 in principal amount at maturity and any integral multiple of $1,000 in excess thereof. SECTION 2.04 REGISTRAR AND PAYING AGENT. FelCor LP shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (the "Registrar"), an office or agency where Notes may be presented for payment (the "Paying Agent") and an office or agency where notices and demands to or upon FelCor LP in respect of the Notes and this Indenture may be served, which shall be in the Borough of Manhattan, The City of New York. FelCor LP shall cause the Registrar to keep a register of the Notes and of their transfer and exchange (the "Note Register"). FelCor LP may have one or more co-Registrars and one or more additional Paying Agents. FelCor LP shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. FelCor LP shall give prompt written notice to the Trustee of the name and address of any such Agent and any change in the address of such Agent. If FelCor LP fails to maintain a Registrar, Paying Agent and/or agent for service of notices and demands, the Trustee shall act as such Registrar, Paying Agent and/or agent for service of notices and demands. FelCor LP may remove any Agent upon written notice to such Agent and the Trustee; provided that no such removal shall become effective until (i) the acceptance of an appointment by a successor Agent to such Agent as evidenced by an appropriate agency agreement entered into by FelCor LP and such successor Agent and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as such Agent until the appointment of a successor Agent in accordance with clause (i) of this proviso. Except with respect to Article 8, FelCor, FelCor LP, any Subsidiary of FelCor or FelCor LP, or any Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar, and/or agent for service of notice and demands. FelCor LP initially appoints the Trustee as Registrar, Paying Agent, authenticating agent and agent for service of notice and demands. If, at any time, the Trustee is not the Registrar, the Registrar shall make available to the Trustee on or before each Interest Payment Date and at such 23 30 other times as the Trustee may reasonably request, the names and addresses of the Holders as they appear in the Note Register. SECTION 2.05 PAYING AGENT TO HOLD MONEY IN TRUST. Not later than each due date of the principal, premium, if any, and interest on any Notes, FelCor LP shall deposit with the Paying Agent money in immediately available funds sufficient to pay such principal, premium, if any, and interest so becoming due; provided that if the Trustee is then serving as Paying Agent, FelCor LP agrees to use its reasonable best efforts to deposit or otherwise transfer such funds to the Trustee by no later than 11:00 a.m., Atlanta, Georgia time on the applicable due date. FelCor LP shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, and interest on the Notes (whether such money has been paid to it by FelCor LP or any other obligor on the Notes), and such Paying Agent shall promptly notify the Trustee of any default by FelCor LP (or any other obligor on the Notes) in making any such payment. FelCor LP at any time may require a Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed, and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. Upon doing so, the Paying Agent shall have no further liability for the money so paid over to the Trustee. If FelCor, FelCor LP or any Subsidiary of FelCor or FelCor LP or any Affiliate of any of them acts as Paying Agent, it will, on or before each due date of any principal of, premium, if any, or interest on the Notes, segregate and hold in a separate trust fund for the benefit of the Holders a sum of money sufficient to pay such principal, premium, if any, or interest so becoming due until such sum of money shall be paid to such Holders or otherwise disposed of as provided in this Indenture, and will promptly notify the Trustee of its action or failure to act. SECTION 2.06 TRANSFER AND EXCHANGE. The Notes are issuable only in registered form. A Holder may transfer a Note only by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Indenture. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Registrar in the Note Register. Prior to the registration of any transfer by a Holder as provided herein, FelCor LP, the Guarantors, the Trustee, and any agent of FelCor LP shall treat the person in whose name the Note is registered as the owner thereof for all purposes whether or not the Note shall be overdue, and neither FelCor LP, the Guarantors, the Trustee, nor any such agent shall be affected by notice to the contrary. Furthermore, any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent) and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry. When Notes are presented to the Registrar or a co-Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations (including an exchange of Notes for Exchange Notes), the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met; provided that no exchanges of Notes for Exchange Notes shall occur until a Registration Statement shall have been declared effective by the Commission and that any Notes that are exchanged for Exchange Notes shall be cancelled by the Trustee. To permit registrations of transfers and exchanges, 24 31 FelCor LP shall execute and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange or redemption of the Notes, but FelCor LP may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other similar governmental charge payable upon exchanges pursuant to Section 2.11, 3.08 or 9.04). The Registrar shall not be required (i) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Notes selected for redemption under Section 3.03 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. SECTION 2.07 BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES. (a) The U.S. Global Note and Offshore Global Note initially shall (i) be registered in the name of the Depositary for such Global Notes or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 2.02. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its custodian, or under the Global Note, and the Depositary may be treated by FelCor LP, the Guarantors, the Trustee and any agent of FelCor LP, the Guarantors, or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent FelCor LP, the Guarantors, the Trustee or any agent of FelCor LP, the Guarantors, or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Note. (b) Transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 2.08. In addition, U.S. Physical Notes and Offshore Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in the U.S. Global Note or the Offshore Global Note, respectively, if (i) the Depositary notifies FelCor LP that it is unwilling or unable to continue as Depositary for the U.S. Global Note or the Offshore Global Note, as the case may be, and a successor depositary is not appointed by FelCor LP within 90 days of such notice, (ii) an Event of Default has occurred and is continuing and the Registrar has received a request therefor from the Depositary or (iii) in accordance with the rules and procedures of the Depositary and the provisions of Section 2.08. (c) Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of an interest in the other Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in the other Global Note and, accordingly, 25 32 will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest. (d) In connection with any transfer of a portion of the beneficial interests in the U.S. Global Note or Permanent Offshore Global Note to beneficial owners pursuant to paragraph (b) of this Section, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the U.S. Global Note or Permanent Offshore Global Note in an amount equal to the principal amount of the beneficial interest in the U.S. Global Note or Permanent Offshore Global Note to be transferred, and FelCor LP shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Notes or Offshore Physical Notes, as the case may be, of like tenor and amount. (e) In connection with the transfer of the entire U.S. Global Note or Offshore Global Note to beneficial owners pursuant to paragraph (b) of this Section, the U.S. Global Note or Offshore Global Note, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and FelCor LP shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the U.S. Global Note or Offshore Global Note, as the case may be, an equal aggregate principal amount of U.S. Physical Notes or Offshore Physical Notes, as the case may be, of authorized denominations. (f) Any U.S. Physical Note delivered in exchange for an interest in the U.S. Global Note pursuant to paragraph (b), (d) or (e) of this Section shall, except as otherwise provided by paragraph (f) of Section 2.08, bear the legend regarding transfer restrictions applicable to the U.S. Physical Note set forth in Section 2.02. (g) Any Offshore Physical Note delivered in exchange for an interest in the Temporary Offshore Global Note pursuant to paragraph (b), (d) or (e) of this Section shall, except as otherwise provided by paragraph (f) of Section 2.08, bear the legend regarding transfer restrictions applicable to the Offshore Physical Note set forth in Section 2.02. (h) The registered holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.08 SPECIAL TRANSFER PROVISIONS. Unless and until a Note is exchanged for an Exchange Note or sold in connection with an effective Registration Statement pursuant to the Registration Rights Agreement, the following provisions shall apply: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of a Note to any Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons): (1) The Registrar shall register the transfer of any Note, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is two years after the original issuance of the Notes or (y) the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit C hereto and, if such transfer is with respect to an aggregate principal amount of Notes at the time of transfer of less than 26 33 $100,000, an opinion of counsel acceptable to FelCor and FelCor LP that such transfer is in compliance with the Securities Act. (2) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Note, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (1) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount at maturity of the U.S. Global Note in an amount equal to the principal amount at maturity of the beneficial interest in the U.S. Global Note to be transferred, and FelCor LP shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Certificates of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a U.S. Physical Note or an interest in the U.S. Global Note to a QIB (excluding Non-U.S. Persons): (i) If the Note to be transferred consists of (x) U.S. Physical Notes, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised FelCor LP and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised FelCor LP and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding FelCor LP and the Guarantors as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A or (y) an interest in the U.S. Global Note, the transfer of such interest may be effected only through the book entry system maintained by the Depositary. (ii) If the proposed transferee is an Agent Member, and the Note to be transferred consists of U.S. Physical Notes, upon receipt by the Registrar of the documents referred to in clause (i) and instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount at maturity of the U.S. Global Note in an amount equal to the principal amount at maturity of the U.S. Physical Notes, to be transferred, and the Trustee shall cancel the U.S. Physical Note so transferred. (c) Transfers of Interests in the Temporary Offshore Global Note. The following provisions shall apply with respect to registration of any proposed transfer of interests in the Temporary Offshore Global Note: (i) The Registrar shall register the transfer of any Note (x) if the proposed transferee is a Non-U.S. Person and the proposed transferor has delivered to the Registrar a 27 34 certificate substantially in the form of Exhibit D hereto or (y) if the proposed transferee is a QIB and the proposed transferor has checked the box provided for on the form of Note stating, or has otherwise advised FelCor LP and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised FelCor LP and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding FelCor LP and the Guarantors as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) If the proposed transferee is an Agent Member, upon receipt by the Registrar of the documents referred to in clause (i)(y) above and instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount at maturity of the U.S. Global Note, in an amount equal to the principal amount at maturity of the Temporary Offshore Global Note to be transferred, and the Trustee shall decrease the amount of the Temporary Offshore Global Note in such an amount. (d) Transfers of Interests in the Permanent Offshore Global Note or Unlegended Offshore Physical Notes. The following provisions shall apply with respect to any transfer of interests in the Permanent Offshore Global Note or unlegended Offshore Physical Notes. The Registrar shall register the transfer of any such Note without requiring any additional certification. (e) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any transfer of a Note to a Non-U.S. Person: (i) Prior to 40 days from the initial issuance of a series of notes, the Registrar shall register any proposed transfer of a Note to a Non-U.S. Person upon receipt of a certificate substantially in the form of Exhibit D hereto from the proposed transferor. On and after 40 days from the initial issuance of a series of notes, the Registrar shall register any proposed transfer to any Non-U.S. Person if the Note to be transferred is a U.S. Physical Note or an interest in the U.S. Global Note, upon receipt of a certificate substantially in the form of Exhibit D from the proposed transferor. (ii) (a) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Note, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount at maturity of the U.S. Global Note in an amount equal to the principal amount at maturity of the beneficial interest in the U.S. Global Note to be transferred, and (b) if the proposed transferee is an Agent Member, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's 28 35 procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount at maturity of the Offshore Global Note in an amount equal to the principal amount at maturity of the U.S. Physical Notes or the U.S. Global Note, as the case may be, to be transferred, and the Trustee shall cancel the U.S. Physical Note, if any, so transferred or decrease the amount of the U.S. Global Note. (f) Private Placement Legend. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless either (i) the circumstances contemplated by the second sentence of the fourth paragraph of Section 2.01 or paragraphs (a)(i)(x) or (e)(ii) of this Section 2.08 exist or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to FelCor and FelCor LP and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (g) General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall not register a transfer of any Note unless such transfer complies with the restrictions on transfer of such Note set forth in this Indenture. In connection with any transfer of Notes, each Holder agrees by its acceptance of the Notes to furnish the Registrar or FelCor LP such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine (but may rely on a determination made by FelCor LP with respect to) the sufficiency of any such certifications, legal opinions or other information. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.07 or this Section 2.08. FelCor LP shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. SECTION 2.09 REPLACEMENT NOTES. If a mutilated Note is surrendered to the Trustee or if the Holder claims that the Note has been lost, destroyed or wrongfully taken, FelCor LP shall issue and the Trustee shall authenticate a replacement Note of like tenor and amount and bearing a number not contemporaneously outstanding; provided that the requirements of this Section 2.09 are met. If required by the Trustee or FelCor LP, an indemnity bond must be furnished that is sufficient in the judgment of both the Trustee and FelCor LP to protect FelCor LP, the Guarantors, the Trustee or any Agent from any loss that any of them may suffer if a Note is replaced. FelCor LP may charge such Holder for its expenses and the expenses of the Trustee in replacing a Note. In case any such mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, FelCor LP in its discretion may pay such Note instead of issuing a new Note in replacement thereof. 29 36 Every replacement Note is an additional obligation of FelCor LP and shall be entitled to the benefits of this Indenture. SECTION 2.10 OUTSTANDING NOTES. Notes outstanding at any time are all Notes that have been authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.10 as not outstanding. If a Note is replaced pursuant to Section 2.09, it ceases to be outstanding unless and until the Trustee and FelCor LP receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser. If the Paying Agent (other than FelCor, FelCor LP or an Affiliate of FelCor or FelCor LP) holds on the maturity date money sufficient to pay Notes payable on that date, then on and after that date such Notes cease to be outstanding and interest on them shall cease to accrue. A Note does not cease to be outstanding because FelCor or FelCor LP or one of their Affiliates holds such Note; provided that, in determining whether the Holders of the requisite principal amount of the outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by FelCor, FelCor LP, the Guarantors or any other obligor upon the Notes or any Affiliate of FelCor LP or the Guarantors or of such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Trustee knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not FelCor LP or the Guarantors or any other obligor upon the Notes or any Affiliate of FelCor LP or the Guarantors or of such other obligor. SECTION 2.11 TEMPORARY NOTES. Until definitive Notes are ready for delivery, FelCor LP may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have insertions, substitutions, omissions and other variations determined to be appropriate by the Officers executing the temporary Notes, as evidenced by their execution of such temporary Notes. If temporary Notes are issued, FelCor LP will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of FelCor LP designated for such purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes FelCor LP shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall be entitled to the same benefits under this Indenture as definitive Notes. SECTION 2.12 CANCELLATION. FelCor LP at any time may deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which FelCor LP may have acquired in any manner whatsoever, and may deliver to the Trustee for cancellation any Notes previously authenticated hereunder which FelCor LP has not issued and sold. The 30 37 Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee shall cancel all Notes surrendered for transfer, exchange, payment or cancellation in accordance with its normal procedure. SECTION 2.13 CUSIP NUMBERS. FelCor LP in issuing the Notes may use "CUSIP," "CINS" or "ISIN" numbers (if then generally in use), and the Trustee shall use CUSIP, CINS or ISIN numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders; provided that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange and that reliance may be placed only on the other identification numbers printed on the Notes. SECTION 2.14 DEFAULTED INTEREST. If FelCor LP or the Guarantors default in a payment of interest on the Notes, FelCor LP or the Guarantors shall pay, or shall deposit with the Paying Agent money in immediately available funds sufficient to pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date. A special record date, as used in this Section 2.14 with respect to the payment of any defaulted interest, shall mean the 15th day next preceding the date fixed by FelCor LP for the payment of defaulted interest, whether or not such day is a Business Day. At least 15 days before the subsequent special record date, FelCor LP shall mail to each Holder and to the Trustee a notice that states the subsequent special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.15 ISSUANCE OF ADDITIONAL NOTES. FelCor LP may, subject to compliance with Article Four of this Indenture, issue additional Notes under this Indenture. The Notes issued on the Closing Date and any additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture. ARTICLE 3. REDEMPTION SECTION 3.01 OPTIONAL REDEMPTION. (a) Except as provided in Section 3.01(b), FelCor LP may not redeem any of the Notes prior to September 15, 2004. The Notes may be redeemed at the option of FelCor LP, in whole or in part, at any time, and from time to time, on or after September 15, 2004, upon not less than 30 days' nor more than 60 days' notice, at the following Redemption Prices (expressed as percentages of the principal amount thereof) plus accrued and unpaid interest thereon, if any, to the Redemption Date, if redeemed during the 12-month period commencing September 15 of the year set forth below:
YEAR REDEMPTION PRICE ---- ---------------- 2004.......................................................... 104.750% 2005.......................................................... 103.167% 2006.......................................................... 101.583% 2007 and thereafter........................................... 100.000%
31 38 (b) Notwithstanding the foregoing, at any time, or from time to time, on or prior to September 15 , 2003, FelCor LP may, at its option, use the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the principal amount of the Notes issued under this Indenture at a Redemption Price of 109.50% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the Redemption Date; provided that (i) at least 65% of the aggregate principal amount of the Notes issued under this Indenture remains outstanding immediately after such redemption; and (ii) FelCor LP makes such redemption no later than 90 days after the consummation of any such Equity Offering. SECTION 3.02 NOTICES TO TRUSTEE. If FelCor LP elects to redeem Notes pursuant to Section 3.01, it shall notify the Trustee in writing of the Redemption Date and the principal amount of Notes to be redeemed in an Officers' Certificate at least 45 days before the Redemption Date (unless a shorter period shall be satisfactory to the Trustee). SECTION 3.03 SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed in compliance with the requirements, as certified to it by FelCor LP, of the principal national securities exchange, if any, on which the Notes are listed or, on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem fair and appropriate; provided that no Notes of $1,000 in principal amount at maturity shall be redeemed in part. Notwithstanding the foregoing, if less than all the Notes are to be redeemed with the proceeds of an Equity Offering, the Trustee shall select the Notes to be redeemed on a pro rata basis or on as nearly a pro rata basis as practicable (subject to the procedures of the Depositary) unless such method is otherwise prohibited. The Trustee shall make the selection from the Notes outstanding and not previously called for redemption. Notes in denominations of $1,000 in principal amount at maturity may only be redeemed in whole. The Trustee may select for redemption portions (equal to $1,000 in principal amount at maturity or any integral multiple thereof) of Notes that have denominations larger than $1,000 in principal amount at maturity. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify FelCor LP and the Registrar promptly in writing of the Notes or portions of Notes to be called for redemption. SECTION 3.04 NOTICE OF REDEMPTION. With respect to any redemption of Notes pursuant to Section 3.01, at least 30 days but not more than 60 days before a Redemption Date, FelCor LP shall mail a notice of redemption by first class mail to each Holder whose Notes are to be redeemed. The notice shall identify the Notes to be redeemed and shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the name and address of the Paying Agent; 32 39 (iv) that Notes called for redemption must be surrendered to the Paying Agent in order to collect the Redemption Price; (v) that, unless FelCor LP defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders is to receive payment of the Redemption Price plus accrued interest to the Redemption Date upon surrender of the Notes to the Paying Agent; (vi) that, if any Note is being redeemed in part, the portion of the principal amount (equal to $1,000 in principal amount at maturity or any integral multiple thereof) of such Note to be redeemed and that, on and after the Redemption Date, upon surrender of such Note, a new Note or Notes in principal amount at maturity equal to the unredeemed portion thereof will be reissued; and (vii) that, if any Note contains a CUSIP, CINS or ISIN number as provided in Section 2.13, no representation is being made as to the correctness of the CUSIP, CINS or ISIN number either as printed on the Notes or as contained in the notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes. At FelCor LP's request (which request may be revoked by FelCor LP at any time prior to the time at which the Trustee shall have given such notice to the Holders), made in writing to the Trustee at least 45 days (or such shorter period as shall be satisfactory to the Trustee) before a Redemption Date, the Trustee shall give the notice of redemption in the name and at the expense of FelCor LP. If, however, FelCor LP gives such notice to the Holders, FelCor LP shall concurrently deliver to the Trustee an Officers' Certificate stating that such notice has been given. SECTION 3.05 EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender of any Notes to the Paying Agent, such Notes shall be paid at the Redemption Price, plus accrued interest, if any, to the Redemption Date. Notice of redemption shall be deemed to be given when mailed, whether or not the Holder receives the notice. In any event, failure to give such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of Notes held by Holders to whom such notice was properly given. SECTION 3.06 DEPOSIT OF REDEMPTION PRICE. On or prior to any Redemption Date, FelCor LP shall deposit with the Paying Agent (or, if FelCor LP is acting as its own Paying Agent, shall segregate and hold in trust as provided in Section 2.05) money sufficient to pay the Redemption Price of and accrued interest on all Notes to be redeemed on that date other than Notes or portions thereof called for redemption on that date that have been delivered by FelCor LP to the Trustee for cancellation. SECTION 3.07 PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of redemption has been given in the manner provided above, the Notes or portion of Notes specified in such notice to be redeemed shall become due and payable on the Redemption Date at the Redemption Price stated therein, together with accrued interest to such Redemption Date, and on and after such 33 40 date (unless FelCor LP shall default in the payment of such Notes at the Redemption Price and accrued interest to the Redemption Date, in which case the principal, until paid, shall bear interest from the Redemption Date at the rate prescribed in the Notes), such Notes shall cease to accrue interest. Upon surrender of any Note for redemption in accordance with a notice of redemption, such Note shall be paid and redeemed by FelCor LP at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders registered as such at the close of business on the relevant Regular Record Date. SECTION 3.08 NOTES REDEEMED IN PART. Upon surrender of any Note that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Note equal in principal amount to the unredeemed portion of such surrendered Note. ARTICLE 4. COVENANTS SECTION 4.01 PAYMENT OF NOTES. FelCor LP shall pay the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than FelCor LP, a Subsidiary of FelCor LP, a Guarantor or any Affiliate of any of them) holds on that date money designated for and sufficient to pay the installment. If FelCor LP, any Subsidiary of FelCor LP, a Guarantor or any Affiliate of any of them, acts as Paying Agent, an installment of principal, premium, if any, or interest shall be considered paid on the due date if the entity acting as Paying Agent complies with the last sentence of Section 2.05. As provided in Section 6.09, upon any bankruptcy or reorganization procedure relative to FelCor LP or any Guarantor, the Trustee shall serve as the Paying Agent and conversion agent, if any, for the Notes. FelCor LP shall pay interest on overdue principal, premium, if any, and interest on overdue installments of interest, to the extent lawful, at the rate per annum specified in the Notes. SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY. FelCor LP shall maintain in the Borough of Manhattan, The City of New York an office or agency where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon FelCor LP in respect of the Notes and this Indenture may be served. FelCor LP will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time FelCor LP shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 10.02. FelCor LP may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve FelCor LP of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. FelCor LP shall give prompt written 34 41 notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. FelCor LP hereby initially designates SunTrust Bank c/o Harris Trust Company of New York, 88 Pine Street, 19th Floor, New York, New York 10005, as agent for FelCor LP, located in the Borough of Manhattan, The City of New York as such office of FelCor LP in accordance with Section 2.04. SECTION 4.03 LIMITATION ON INDEBTEDNESS. (a) Neither FelCor LP nor FelCor shall, and neither FelCor LP nor FelCor shall permit any of their respective Restricted Subsidiaries to, Incur any Indebtedness if, immediately after giving effect to the Incurrence of such additional Indebtedness, the aggregate principal amount of all outstanding Indebtedness of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis determined in accordance with GAAP is greater than 60% of Adjusted Total Assets. (b) Neither FelCor LP nor FelCor shall, and neither FelCor LP nor FelCor shall permit any of their respective Restricted Subsidiaries to, Incur any Subsidiary Debt or any Secured Indebtedness if, immediately after giving effect to the Incurrence of such additional Subsidiary Debt or Secured Indebtedness, the aggregate principal amount of all outstanding Subsidiary Debt and Secured Indebtedness of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis is greater than 45% of Adjusted Total Assets. (c) Neither FelCor LP nor FelCor shall, and neither FelCor LP nor FelCor shall permit any of their respective Restricted Subsidiaries to, Incur any Indebtedness (other than the Existing Notes, the Subsidiary Guarantees relating to the Existing Notes and other Indebtedness existing on the Closing Date); provided that FelCor LP or FelCor or any of their respective Restricted Subsidiaries may Incur Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis would be greater than 2.0 to 1. (d) Notwithstanding paragraphs (a), (b) or (c) of this Section 4.03, FelCor LP or FelCor or any of their respective Restricted Subsidiaries (except as specified below) may Incur each and all of the following: (i) Indebtedness outstanding under the Line of Credit at any time in an aggregate principal amount not to exceed $700 million less any amount of such Indebtedness permanently repaid as provided under Section 4.10; (ii) Indebtedness owed (A) to FelCor LP or FelCor evidenced by an unsubordinated promissory note or (B) to any Restricted Subsidiary; provided that any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to FelCor LP or FelCor or any other Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (ii); 35 42 (iii) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, outstanding Indebtedness (other than Indebtedness Incurred under clause (i), (ii), (iv) or (vi) of this paragraph) and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is pari passu with or subordinated in right of payment to, the Notes shall only be permitted under this clause (iii) if (A) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is pari passu with or is expressly made subordinate in right of payment to the remaining Notes, (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes and (C) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; and provided further that in no event may Indebtedness of FelCor LP or FelCor that is pari passu with or subordinated in right of payment to the Notes be refinanced by means of any Indebtedness of any Restricted Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A) in respect of performance, surety or appeal bonds provided in the ordinary course of business, (B) under Currency Agreements and Interest Rate Agreements; provided that such agreements (1) are designed solely to protect FelCor LP or FelCor or any of their respective Restricted Subsidiaries against fluctuations in foreign currency exchange rates or interest rates and (2) do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder, and (C) arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of FelCor LP or FelCor or any of their respective Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis in connection with such disposition; (v) Indebtedness of FelCor LP or FelCor, to the extent the net proceeds thereof are promptly (A) used to purchase Notes tendered in an Offer to Purchase made as a result of a Change in Control or (B) deposited to defease the Notes in accordance with Section 8.02 or 8.03; or 36 43 (vi) Guarantees of the Notes and the Existing Notes and Guarantees of Indebtedness of FelCor LP or FelCor by any of their respective Restricted Subsidiaries provided the guarantee of such Indebtedness is permitted by and made in accordance with Section 4.07. (e) Notwithstanding any other provision of this Section 4.03, the maximum amount of Indebtedness that FelCor LP or FelCor or any of their respective Restricted Subsidiaries may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded, with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies. (f) For purposes of determining any particular amount of Indebtedness under this Section 4.03, (1) Indebtedness Incurred under the Line of Credit on or prior to the Closing Date shall be treated as Incurred pursuant to clause (i) of paragraph (d) of this Section 4.03, (2) Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (3) any Liens granted pursuant to the equal and ratable provisions referred to in Section 4.09 shall not be treated as Indebtedness. For purposes of determining compliance with Section 4.03, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses (other than Indebtedness referred to in clause (2) of the preceding sentence), each of FelCor LP and FelCor, in its sole discretion, shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses; provided that FelCor LP and FelCor must classify such item of Indebtedness in an identical fashion. SECTION 4.04 LIMITATION ON RESTRICTED PAYMENTS. Neither FelCor LP nor FelCor shall, and neither FelCor LP nor FelCor shall permit any of their respective Restricted Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make any distribution on or with respect to its Capital Stock (other than (x) dividends or distributions payable solely in shares of its Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to acquire shares of such Capital Stock and (y) pro rata dividends or distributions on Common Stock of FelCor LP or any Restricted Subsidiary held by minority stockholders) held by Persons other than FelCor LP or FelCor or any of their respective Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock of (A) FelCor LP, FelCor or an Unrestricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by any Person other than FelCor LP or FelCor or any of their respective Restricted Subsidiaries unless in connection with such purchase the Unrestricted Subsidiary is designated as a Restricted Subsidiary or (B) a Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by an Affiliate of FelCor LP or FelCor (other than a Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such holder) of 5% or more of the Capital Stock of FelCor LP or FelCor, (iii) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness of FelCor LP or FelCor that is subordinated in right of payment to the Notes or (iv) make an Investment, other than a Permitted Investment, in any Person (such payments or any other actions described in clauses (i) through (iv) above being collectively "Restricted Payments") if, at the time of, and after giving effect to, the proposed Restricted Payment: (A) a Default or Event of Default shall have occurred 37 44 and be continuing, (B) FelCor LP or FelCor could not Incur at least $1.00 of Indebtedness under paragraphs (a), (b) and (c) of Section 4.03 or (C) the aggregate amount of all Restricted Payments (the amount, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) made after the Closing Date shall exceed the sum of (1) 95% of the aggregate amount of the Funds From Operations (or, if the Funds From Operations is a loss, minus 100% of the amount of such loss) (determined by excluding income resulting from transfers of assets by FelCor LP or FelCor or any of their respective Restricted Subsidiaries to an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter in which the Closing Date occurs and ending on the last day of the last fiscal quarter preceding the Transaction Date for which reports have been filed with the Commission or provided to the Trustee pursuant to Section 4.17 plus (2) the aggregate Net Cash Proceeds received by FelCor LP or FelCor after the Closing Date from the issuance and sale permitted by this Indenture of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of FelCor LP or FelCor, including an issuance or sale permitted by this Indenture of Indebtedness of FelCor LP or FelCor for cash subsequent to the Closing Date upon the conversion of such Indebtedness into Capital Stock (other than Disqualified Stock) of FelCor LP or FelCor, or from the issuance to a Person who is not a Subsidiary of FelCor LP or FelCor of any options, warrants or other rights to acquire Capital Stock of FelCor LP or FelCor (in each case, exclusive of any Disqualified Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated Maturity of the Notes), plus (3) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in any Person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to FelCor LP or FelCor or any of their respective Restricted Subsidiaries or from the Net Cash Proceeds from the sale of any such Investment (except, in each case, to the extent any such payment or proceeds are included in the calculation of Funds From Operations) or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments") not to exceed, in each case, the amount of Investments previously made by FelCor LP, FelCor and their respective Restricted Subsidiaries in such Person or Unrestricted Subsidiary, plus (4) the purchase price of noncash tangible assets acquired in exchange for an issuance of Capital Stock (other than Disqualified Stock) of FelCor LP or FelCor subsequent to the Closing Date. Notwithstanding the foregoing, FelCor LP or FelCor may declare or pay any dividend or make any distribution that is necessary to maintain FelCor's status as a REIT under the Code if (1) the aggregate principal amount of all outstanding Indebtedness of FelCor LP or FelCor on a consolidated basis at such time is less than 60% of Adjusted Total Assets and (2) no Default or Event of Default shall have occurred and be continuing. The foregoing provisions of this Section 4.04 shall not be violated by reason of: (i) the payment of any dividend within 60 days after the date of declaration thereof if, at said date of declaration, such payment would comply with the foregoing paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the Notes including 38 45 premium, if any, and accrued and unpaid interest, with the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of paragraph (d) of Section 4.03; (iii) the repurchase, redemption or other acquisition of Capital Stock of FelCor LP or FelCor or an Unrestricted Subsidiary (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the proceeds of a substantially concurrent issuance of, shares of Capital Stock (other than Disqualified Stock) of FelCor LP or FelCor (or options, warrants or other rights to acquire such Capital Stock); (iv) the making of any principal payment on, or the repurchase, redemption, retirement, defeasance or other acquisition for value of, Indebtedness of FelCor LP or FelCor which is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of, a substantially concurrent issuance of, shares of the Capital Stock (other than Disqualified Stock) of FelCor LP or FelCor (or options, warrants or other rights to acquire such Capital Stock); (v) payments or distributions, to dissenting stockholders pursuant to applicable law pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of the Indenture applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of FelCor LP or FelCor; or (vi) Investments in any Person or Persons in an aggregate amount not to exceed $150 million; or (vii) Restricted Payments in an aggregate amount not to exceed $200 million, provided that at the time of, and after giving effect to, the proposed Restricted Payment FelCor LP and FelCor could have incurred at least $1.00 of Indebtedness under paragraphs (a), (b) and (c) of Section 4.03; provided that, except in the case of clauses (i) and (iii), no Default or Event of Default shall have occurred and be continuing or occur as a direct consequence of the actions or payments set forth therein. Each Restricted Payment permitted pursuant to this paragraph (other than the Restricted Payment referred to in clause (ii) of this paragraph, an exchange of Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) or (iv) of this paragraph, or an Investment referred to in clause (vi) of this paragraph or a Restricted Payment referred to in clause (vii) of this paragraph), and the Net Cash Proceeds from any issuance of Capital Stock referred to in clauses (iii) and (iv), shall be included in calculating whether the conditions of clause (C) of the first paragraph of this Section 4.04 have been met with respect to any subsequent Restricted Payments. Notwithstanding anything to the contrary contained in this Section 4.04, except in the case of clauses (iii) and (v) of the immediately preceding paragraph, in no case shall FelCor LP, FelCor or any of their respective Restricted Subsidiaries, directly or indirectly, purchase, redeem or otherwise acquire any Capital Stock unless at the time of, and after giving effect to, such proposed Restricted Payment, the ratio of Indebtedness to Consolidated EBITDA of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis would be equal to or less than 4.85 to 1. 39 46 SECTION 4.05 LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. Neither FelCor LP nor FelCor shall, and neither FelCor LP nor FelCor shall permit any of their respective Restricted Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions permitted by applicable law on any Capital Stock of such Restricted Subsidiary owned by FelCor LP or FelCor or any of their respective Restricted Subsidiaries, (ii) pay any Indebtedness owed to FelCor LP, FelCor or any other Restricted Subsidiary, (iii) make loans or advances to FelCor LP, FelCor or any other Restricted Subsidiary or (iv) transfer its property or assets to FelCor LP, FelCor or any other Restricted Subsidiary. The foregoing provisions shall not restrict any encumbrances or restrictions: (i) existing on the Closing Date in the Indenture, the Line of Credit, and any other agreement in effect on the Closing Date to the extent listed on Schedule A to this Indenture, and any extensions, refinancings, renewals or replacements of such agreements; provided that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced; (ii) existing under or by reason of applicable law; (iii) existing with respect to any Person or the property or assets of such Person acquired by FelCor LP, FelCor or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired; (iv) in the case of clause (iv) of the first paragraph of this Section 4.05, (A) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, (B) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of FelCor LP, FelCor or any Restricted Subsidiary not otherwise prohibited by this Indenture or (C) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of FelCor LP, FelCor or any Restricted Subsidiary in any manner material to FelCor LP, FelCor and their respective Restricted Subsidiaries taken as a whole; (v) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary; or (vi) contained in the terms of any Indebtedness or any agreement pursuant to which such Indebtedness was issued if (A) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant contained in 40 47 such Indebtedness or agreement, (B) the encumbrance or restriction is not materially more disadvantageous to the Holders of the Notes than is customary in comparable financings (as determined by FelCor LP and FelCor) and (C) each of FelCor LP and FelCor determines that any such encumbrance or restriction will not materially affect such Persons' ability to make principal or interest payments on the Notes. Nothing contained in this Section 4.05 shall prevent FelCor LP, FelCor or any Restricted Subsidiary from (1) creating, incurring, assuming or suffering to exist any Liens otherwise permitted in Section 4.09 or (2) restricting the sale or other disposition of property or assets of FelCor LP or FelCor or any of their respective Restricted Subsidiaries that secure Indebtedness of FelCor LP, FelCor or any of their respective Restricted Subsidiaries. SECTION 4.06 LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. Neither FelCor LP nor FelCor shall sell, and neither FelCor LP nor FelCor shall permit any of their respective Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except (i) to FelCor LP, FelCor or a Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying shares or sales to individuals of shares of Restricted Subsidiaries, to the extent required by applicable law or to the extent necessary to obtain local liquor licenses; (iii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under Section 4.04 if made on the date of such issuance or sale or (iv) sales of not greater than 20% of the Capital Stock of a newly-created Restricted Subsidiary made in connection with, or in contemplation of, the acquisition or development by such Restricted Subsidiary of one or more properties to any Person that is, or is an Affiliate of, the entity that provides, franchise, management or other services, as the case may be, to one or more properties owned by such Restricted Subsidiary. SECTION 4.07 LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES. Neither FelCor LP nor FelCor shall permit any of their respective Restricted Subsidiaries, directly or indirectly, to Guarantee any Indebtedness of FelCor LP or FelCor which is pari passu with or subordinate in right of payment to the Notes ("Guaranteed Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a Subsidiary Guarantee by such Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against FelCor LP, FelCor or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee; provided that this Section 4.07 shall not be applicable to any Guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not Incurred in connection with, or in contemplation of, such person becoming a Restricted Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the Notes, then the Guarantee of such Guaranteed Indebtedness shall be pari passu with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to the Notes, then the Guarantee of such Guarantee Indebtedness shall be subordinated to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes. 41 48 Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted Subsidiary may provide by its terms that it shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer, to any Person not an Affiliate of FelCor LP or FelCor, of all of Capital Stock held by FelCor LP, FelCor and their respective Restricted Subsidiaries in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by this Indenture) or (ii) the release or discharge of the Guarantee which resulted in the creation of such Subsidiary Guarantee, except a discharge or release by or as a result of payment under such Guarantee. SECTION 4.08 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Neither FelCor LP nor FelCor shall, and neither FelCor LP nor FelCor shall permit any of their respective Restricted Subsidiaries to, directly or indirectly, enter into, renew or extend any transaction (including, without limitations, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of FelCor LP or FelCor or with any Affiliate of FelCor LP or FelCor or any of their respective Restricted Subsidiaries, except upon fair and reasonable terms no less favorable to FelCor LP, FelCor or such Restricted Subsidiary than could be obtained, at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a Person that is not such a holder or an Affiliate. The foregoing limitation shall not limit, and shall not apply to: (i) transactions (A) approved by a majority of the independent directors of FelCor or (B) for which FelCor LP, FelCor or any Restricted Subsidiary delivers to the Trustee a written opinion of a nationally recognized investment banking firm stating that the transaction is fair to FelCor LP, FelCor or such Restricted Subsidiary from a financial point of view; (ii) any transaction solely between FelCor LP or FelCor and any of their respective Wholly Owned Restricted Subsidiaries or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of reasonable and customary fees and expenses to directors of FelCor who are not employees of FelCor; (iv) any payments or other transactions pursuant to any tax-sharing agreement between FelCor LP or FelCor and any other Person with which FelCor LP or FelCor files a consolidated tax return or with which FelCor LP or FelCor is part of a consolidated group for tax purposes; or (v) any Restricted Payments not prohibited by Section 4.04. Notwithstanding the foregoing, any transaction or series of related transactions covered by the first paragraph of this Section 4.08 and not covered by clauses (ii) through (v) of this paragraph, (a) the aggregate amount of which exceeds $2 million in value or relates to the leasing of one or more hotel properties to DJONT, must be approved or determined to be fair in the manner provided for in clause (i)(A) or (B) above and (b) the aggregate amount of which 42 49 exceeds $5 million in value, must be determined to be fair in the manner provided for in clause (i)(B) above. SECTION 4.09 LIMITATION ON LIENS. Neither FelCor LP nor FelCor shall secure any Indebtedness under the Line of Credit by a Lien unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with the Indebtedness under the Line of Credit for so long as the Indebtedness under the Line of Credit is secured by such Lien. SECTION 4.10 LIMITATION ON ASSET SALES. Neither FelCor LP nor FelCor shall, and neither FelCor LP or FelCor shall permit any of their respective Restricted Subsidiaries to, consummate any Asset Sale, unless (i) the consideration received by FelCor LP, FelCor or such Restricted Subsidiary is at least equal to the fair market value of the assets sold or disposed of and (ii) at least 75% of the consideration received consists of cash or Temporary Cash Investments; provided, with respect to the sale of one or more hotel properties that up to 75% of the consideration may consist of indebtedness of the purchaser of such hotel properties; provided, further, that such indebtedness is secured by a first priority Lien on the hotel property or properties sold. In the event and to the extent that the Net Cash Proceeds received by FelCor LP, FelCor or such Restricted Subsidiary from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the date closest to the commencement of such 12-month period for which a consolidated balance sheet of FelCor LP, FelCor and their respective Restricted Subsidiaries has been filed with the Commission or provided to the Trustee pursuant to Section 4.17), then FelCor LP or FelCor shall or shall cause the relevant Restricted Subsidiary to (i) within twelve months after the date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently reduce Senior Indebtedness of FelCor LP, FelCor, or any Restricted Subsidiary or Indebtedness of any other Restricted Subsidiary, in each case owing to a Person other than FelCor LP, FelCor or any of their respective Restricted Subsidiaries or (B) invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a Restricted Subsidiary having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, FelCor LP or FelCor or any of their respective Restricted Subsidiaries existing on the date of such investment and (ii) apply (no later than the end of the 12-month period referred to in clause (i)) such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided in the following paragraph of this Section 4.10. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (i) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not previously subject to an Offer to Purchase pursuant to this Section 4.10 totals at least $10 million, FelCor LP shall commence, not later than the fifteenth Business Day of such month, and consummate an Offer to Purchase from the Holders on a pro rata basis an aggregate principal amount of Notes equal to the Excess Proceeds on such date, at a purchase price equal to 100% of 43 50 the principal amount of the Notes, plus, in each case, accrued interest (if any) to the Payment Date. SECTION 4.11 REPURCHASE OF NOTES UPON A CHANGE OF CONTROL. FelCor LP shall commence, within 30 days of the occurrence of a Change of Control, and consummate an Offer to Purchase for all Notes then outstanding, at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the Payment Date. SECTION 4.12 EXISTENCE. Subject to Articles Four and Five of this Indenture, FelCor LP and the Guarantors shall do or cause to be done all things necessary to preserve and keep in full force and effect their existence and the existence of each Restricted Subsidiary in accordance with the respective organizational documents of FelCor LP, the Guarantors and each Restricted Subsidiary and the rights (whether pursuant to charter, partnership certificate, agreement, statute or otherwise), material licenses and franchises of FelCor LP, the Guarantors and each Restricted Subsidiary; provided that neither FelCor nor FelCor LP shall be required to preserve any such right, license or franchise, or the existence of any Restricted Subsidiary or Subsidiary Guarantor, if the maintenance or preservation thereof is no longer desirable in the conduct of the business of FelCor LP, the Guarantors and their Restricted Subsidiaries taken as a whole. SECTION 4.13 PAYMENT OF TAXES AND OTHER CLAIMS. FelCor and FelCor LP shall pay or discharge and shall cause each of their respective Restricted Subsidiaries to pay or discharge, or cause to be paid or discharged, before the same shall become delinquent (i) all material taxes, assessments and governmental charges levied or imposed upon (a) FelCor and FelCor LP or any such Restricted Subsidiary, (b) the income or profits of any such Restricted Subsidiary which is a corporation or (c) the property of FelCor, FelCor LP or any such Restricted Subsidiaries and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a lien upon the property of FelCor, FelCor LP or any such Restricted Subsidiary; provided that FelCor and FelCor LP shall not be required to pay or discharge, or cause to be paid or discharged, any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established. SECTION 4.14 MAINTENANCE OF PROPERTIES AND INSURANCE. FelCor and FelCor LP shall cause all properties used or useful in the conduct of their business or the business of any of their Restricted Subsidiaries, to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of FelCor or FelCor LP may be necessary so that the business carried on in connection therewith may be properly conducted at all times; provided that nothing in this Section 4.14 shall prevent FelCor, FelCor LP or any such Restricted Subsidiary from discontinuing the use, operation or maintenance of any of such properties or disposing of any of them, if such discontinuance or disposal is, in the judgment of FelCor, FelCor LP, desirable in the conduct of the business of FelCor, FelCor LP or such Restricted Subsidiary. Each of FelCor and FelCor LP shall provide or cause to be provided, for itself and its Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like 44 51 properties, with reputable insurers or with the government of the United States of America, or an agency or instrumentality thereof, in such amounts, with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry in which FelCor, FelCor LP or such Restricted Subsidiary, as the case may be, is then conducting business. SECTION 4.15 NOTICE OF DEFAULTS. In the event that FelCor LP becomes aware of any Default or Event of Default, FelCor LP, promptly after it becomes aware thereof, shall give written notice thereof to the Trustee. SECTION 4.16 COMPLIANCE CERTIFICATES. (a) FelCor and FelCor LP shall deliver to the Trustee, within 45 days after the end of each fiscal quarter (90 days after the end of the last fiscal quarter of each year), an Officers' Certificate stating whether or not the signers know of any Default or Event of Default that occurred during such fiscal quarter. In the case of the Officers' Certificate delivered within 90 days of the end of FelCor's and FelCor LP's fiscal year, such certificate shall contain a certification from the principal executive officer, principal financial officer or principal accounting officer that a review has been conducted of the activities of FelCor and FelCor LP and their Restricted Subsidiaries and FelCor's and FelCor LP's and their Restricted Subsidiaries' performance under this Indenture and that, to the knowledge of such Officers, FelCor and FelCor LP have complied with all conditions and covenants under this Indenture. For purposes of this Section 4.16, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. If they do know of such a Default or Event of Default, the certificate shall describe any such Default or Event of Default and its status. The first certificate to be delivered pursuant to this Section 4.16(a) shall be for the first fiscal quarter beginning after the execution of this Indenture. (b) So long as (and to the extent) not prohibited by the then current recommendations of the American Institute of Certified Public Accountants, FelCor and FelCor LP shall deliver to the Trustee, within 90 days after the end of FelCor's and FelCor LP's fiscal year, a certificate signed by FelCor's and FelCor LP's independent certified public accountants stating (i) that their audit examination has included a review of the terms of this Indenture and the Notes as they relate to accounting matters, (ii) that they have read the most recent Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of this Section 4.16 and (iii) whether, in connection with their audit examination, anything came to their attention that caused them to believe that FelCor and FelCor LP were not in compliance with any of the terms, covenants, provisions or conditions of Article Four and Section 5.01 of this Indenture as they pertain to accounting matters and, if any Default or Event of Default has come to their attention, specifying the nature and period of existence thereof; provided that such independent certified public accountants shall not be liable in respect of such statement by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit examination conducted in accordance with generally accepted auditing standards in effect at the date of such examination. (c) Within 90 days of the end of each of FelCor and FelCor LP's fiscal years, FelCor and FelCor LP shall deliver to the Trustee a list of all Significant Subsidiaries. The Trustee shall have no duty with respect to any such list except to keep it on file and available for inspection by the Holders. 45 52 SECTION 4.17 COMMISSION REPORTS AND REPORTS TO HOLDERS. At all times from and after the date of this Indenture, whether or not FelCor or FelCor LP is then required to file reports with the Commission, FelCor and FelCor LP shall file with the Commission all such reports and other information as they would be required to file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if they were subject thereto; provided that, if filing such documents by FelCor LP or FelCor with the Commission is not permitted under Exchange Act, FelCor LP or FelCor shall provide such documents to the Trustee and upon written request supply copies of such documents to any prospective Holder; provided, further, that if the rules and regulations of the Commission permit FelCor LP and FelCor to file combined reports or information pursuant to the Exchange Act, FelCor LP and FelCor may file combined reports and information. FelCor LP and FelCor shall supply the Trustee and each Holder or shall supply to the Trustee for forwarding to each such Holder, without cost to such Holder, copies of such reports and other information. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including FelCor or FelCor LP's compliance with any of their covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). In addition, upon the request of any Holder or any prospective purchaser of the Notes designated by a Holder, FelCor LP shall supply to such Holder or such prospective purchaser the information required under Rule 144A under the Securities Act. FelCor LP also shall comply with the other provisions of TIA Section 314(a). SECTION 4.18 WAIVER OF STAY, EXTENSION OR USURY LAWS. FelCor LP covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive FelCor LP from paying all or any portion of the principal of, premium, if any, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) FelCor LP hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.19 LIMITATION ON SALE-LEASEBACK TRANSACTIONS. Neither FelCor LP nor FelCor shall, and neither FelCor LP nor FelCor shall permit any of their respective Restricted Subsidiaries to, enter into any sale-leaseback transaction involving any of its assets or properties whether now owned or hereafter acquired, whereby any of them sells or transfers such assets or properties and then or thereafter leases such assets or properties or any substantial part thereof. The foregoing restriction shall not apply to any sale-leaseback transaction if (i) the lease is for a period, including renewal rights, of not in excess of three years; (ii) the lease secures or relates to industrial revenue or pollution control bonds; (iii) the transaction is solely between FelCor LP or FelCor and any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted Subsidiaries; or (iv) FelCor LP or FelCor or any of their respective Restricted Subsidiaries, within 12 months after the sale or transfer of any assets or properties is completed, applies an amount not less than the net proceeds received from such sale in accordance with clause (A) or (B) of the first paragraph of Section 4.10. 46 53 SECTION 4.20 MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. FelCor LP, FelCor and their respective Restricted Subsidiaries shall maintain Total Unencumbered Assets of not less than 150% of the aggregate outstanding principal amount of the Unsecured Indebtedness of FelCor LP, FelCor and their respective Restricted Subsidiaries on a consolidated basis. SECTION 4.21 INVESTMENT GRADE RATING. Notwithstanding anything to the contrary in this Indenture, Sections 4.04, 4.05, 4.06, 4.07, 4.08, 4.09 and 4.19 shall not be applicable in the event, and only for so long as, the Notes are rated Investment Grade and no Default or Event of Default has occurred and is continuing. ARTICLE 5. SUCCESSOR CORPORATION SECTION 5.01 WHEN FELCOR OR FELCOR LP MAY MERGE, ETC. Neither FelCor LP nor FelCor shall merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into FelCor LP or FelCor unless: (i) FelCor LP or FelCor shall be the continuing Person, or the Person (if other than FelCor LP or FelCor) formed by such consolidation or into which FelCor LP or FelCor is merged or that acquired or leased such property and assets of FelCor LP or FelCor shall be an entity organized and validly existing under the laws of the United States of America or any state or jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, all of the obligations of FelCor LP or FelCor on the Notes and under the Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction on a pro forma basis FelCor LP or FelCor, or any Person becoming the successor obligor of the Notes, as the case may be, could Incur at least $1.00 of Indebtedness under paragraphs (a), (b) and (c) of Section 4.03; provided that this clause (iii) shall not apply to a consolidation or merger with or into a Wholly Owned Restricted Subsidiary with a positive net worth; provided that, in connection with any such merger or consolidation, no consideration (other than Capital Stock (other than Disqualified Stock) in the surviving Person or FelCor LP or FelCor) shall be issued or distributed to the holders of Capital Stock of FelCor LP or FelCor; and (iv) FelCor LP or FelCor delivers to the Trustee an Officers' Certificate (attaching the arithmetic computations to demonstrate compliance with clause (iii)) and an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this Section 5.01 and that all conditions precedent provided for herein relating to such transaction have been complied with; provided that clause (iii) above shall not apply if, in the good faith determination of the Board of Directors of FelCor LP or FelCor, whose determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the state of domicile of FelCor LP or FelCor; and provided, further, that any such transaction shall not have as one of its purposes the evasion of the foregoing limitations. SECTION 5.02 SUCCESSOR SUBSTITUTED. Upon any consolidation or merger, or any sale, conveyance, transfer, lease or other disposition of all or substantially all of the property and assets of FelCor LP in accordance with Section 5.01 of this Indenture, the successor Person formed by such consolidation or into which FelCor LP is merged or to which such sale, 47 54 conveyance, transfer, lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, FelCor LP under this Indenture with the same effect as if such successor Person had been named as FelCor LP herein and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Notes; provided that FelCor LP shall not be released from its obligation to pay the principal of, premium, if any, or interest on the Notes in the case of a lease of all or substantially all of its property and assets. ARTICLE 6. DEFAULT AND REMEDIES SECTION 6.01 EVENTS OF DEFAULT. An "Event of Default" shall occur with respect to this Indenture if: (a) default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) default in the performance or breach of the provisions of this Indenture applicable to mergers, consolidations and transfers of all or substantially all of the assets of FelCor LP and FelCor or the failure by FelCor LP to make or consummate an Offer to Purchase in accordance with Section 4.10 or Section 4.11; (d) FelCor LP or FelCor defaults in the performance of or breaches any other covenant or agreement of FelCor LP or FelCor in this Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes; (e) there occurs with respect to any issue or issues of Indebtedness of FelCor LP or FelCor or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists as of the date hereof or shall hereafter be created, (i) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (ii) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not covered by insurance) (i) shall be rendered against FelCor LP or FelCor or any Significant Subsidiary and shall not be paid or discharged, and (ii) there shall be any period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during 48 55 which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (i) relief in respect of FelCor LP or FelCor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of FelCor LP or FelCor or any Significant Subsidiary or for all or substantially all of the property and assets of FelCor LP or FelCor or any Significant Subsidiary or (iii) the winding up or liquidation of the affairs of FelCor LP or FelCor or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (h) FelCor LP or FelCor or any Significant Subsidiary (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under such law, (ii) consents to the appointment of or - -taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of FelCor LP or FelCor or Significant Subsidiary or for all or substantially all of the property and assets of FelCor LP or FelCor or any Significant Subsidiary or (iii) effects any general assignment for the benefit of its creditors. SECTION 6.02 ACCELERATION. If an Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 that occurs with respect to FelCor LP or FelCor) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes, then outstanding, by written notice to FelCor LP and FelCor (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and accrued interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued interest shall be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (e) of Section 6.01 has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to such clause (e) shall be remedied or cured by FelCor LP, FelCor or the relevant Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event or Default specified in clause (g) or (h) of Section 6.01 occurs with respect to FelCor LP or FelCor, the principal of, premium, if any, and accrued interest on the Notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the outstanding Notes by written notice to FelCor LP, FelCor and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. SECTION 6.03 OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the 49 56 payment of principal of, premium, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. SECTION 6.04 WAIVER OF PAST DEFAULTS. Subject to Sections 6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount of the outstanding Notes, by notice to the Trustee, may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of, premium, if any, or interest on any Note as specified in clause (a) or (b) of Section 6.01 or in respect of a covenant or provision of this Indenture which cannot be modified or amended without the consent of the holder of each outstanding Note affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 6.05 CONTROL BY MAJORITY. The Holders of at least a majority in aggregate principal amount at maturity of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders of Notes. SECTION 6.06 LIMITATION ON SUITS. A Holder may not institute any proceeding, judicial or otherwise, with respect to this Indenture or the Notes, or for the appointment of a receiver or trustee, or for any other remedy hereunder unless: (1) such Holder has previously given the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount at maturity of outstanding Notes shall have made a written request to the Trustee institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered the Trustee indemnity reasonably satisfactory to the Trustee against any costs, liabilities or expenses to be incurred in compliance with such request; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity and has failed to institute any such proceeding; and (5) during such 60-day period, the Holders of a majority in aggregate principal amount at maturity of the outstanding Notes do not give the Trustee a direction that is inconsistent with such written request. 50 57 (6) For purposes of Section 6.05 and this Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any determination of whether the Holders of the required aggregate principal amount of outstanding Notes have concurred in any request or direction of the Trustee to pursue any remedy available to the Trustee or the Holders with respect to this Indenture or the Notes or otherwise under the law. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, shall not be impaired or affected without the consent of such Holder. SECTION 6.08 COLLECTION SUIT BY TRUSTEE. If an Event of Default in payment of principal, premium or interest specified in clause (a), (b) or (c) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against FelCor LP, the Guarantors or any other obligor of the Notes for the whole amount of principal, premium, if any, and accrued interest remaining unpaid, together with interest on overdue principal, premium, if any, and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate specified in the Notes, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07) and the Holders allowed in any judicial proceedings relative to FelCor LP (or any other obligor of the Notes), its creditors or its property and shall be entitled and empowered to collect and receive any monies, securities or other property payable or deliverable upon conversion or exchange of the Notes or upon any such claims and to distribute the same, and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 PRIORITIES. If the Trustee collects any money pursuant to this Article Six, it shall pay out the money in the following order: 51 58 First: to the Trustee for all amounts due under Section 7.07; Second: to Holders for amounts then due and unpaid for principal of, premium, if any, and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal, premium, if any, and interest, respectively; and Third: to FelCor LP or any other obligors of the Notes, as their interests may appear, or as a court of competent jurisdiction may direct. The Trustee, upon prior written notice to FelCor LP, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11 UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of the suit, and the court may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 of this Indenture, or a suit by Holders of more than 10% in principal amount of the outstanding Notes. SECTION 6.12 RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then, and in every such case, subject to any determination in such proceeding, FelCor LP, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of FelCor LP, the Guarantors, Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 6.13 RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or wrongfully taken Notes in Section 2.09, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.14 DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article Six or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. 52 59 ARTICLE 7. TRUSTEE SECTION 7.01 GENERAL. The duties and responsibilities of the Trustee shall be as provided by the TIA and as set forth herein. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Trustee shall not be required to give any bond or surety with respect to the performance of its duties or the exercise of its powers under this Indenture. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article Seven. SECTION 7.02 CERTAIN RIGHTS OF TRUSTEE. Subject to TIA Sections 315(a) through (d): (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document; (2) before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 10.04. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion; (3) the Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care; (4) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (5) the Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers or for any action it takes or omits to take in accordance with the direction of the Holders of a majority in principal amount at maturity of the outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; provided that the Trustee's conduct does not constitute gross negligence or bad faith; (6) whenever in the administration of this Indenture the Trustee shall deem it desirable that a making be proved or established prior to taking, suffering or omitting any 53 60 action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate; and (7) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of FelCor LP personally or by agent or attorney. SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with FelCor LP, the Guarantors, or their Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to TIA Sections 310(b) and 311. SECTION 7.04 TRUSTEE'S DISCLAIMER. The Trustee (i) makes no representation as to the validity or adequacy of this Indenture or the Notes, (ii) shall not be accountable for FelCor LP's use or application of the proceeds from the Notes, (iii) shall not be responsible for any statement in the Notes other than its certificate of authentication and (iv) shall have no responsibility for any information or statements contained in any offering or other disclosure documents prepared in connection with the offering and the sale of the Notes other than the information provided by the Trustee to FelCor or FelCor LP. SECTION 7.05 NOTICE OF DEFAULT. If any Default or any Event of Default occurs and is continuing and if such Default or Event of Default is known to a Responsible Officer of the Trustee, the Trustee shall mail to each Holder in the manner and to the extent provided in TIA Section 313(c) notice of the Default or Event of Default within 45 days after it occurs, unless such Default or Event of Default has been cured; provided, however, that, except in the case of a default in the payment of the principal of, premium, if any, or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders. SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May 15, beginning with May 15, 2001, the Trustee shall mail to each Holder as provided in TIA Section 313(c) a brief report dated as of such May 15 but only if required by TIA Section 313(a). SECTION 7.07 COMPENSATION AND INDEMNITY. FelCor LP shall pay to the Trustee such compensation as shall be agreed upon in writing for its services. The compensation of the Trustee shall not be limited by any law on compensation of a trustee of an express trust. FelCor LP shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses and advances incurred or made by the Trustee. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. 54 61 Felcor LP shall indemnify the Trustee and its officers, directors, employees and agents and save Trustee and its officers, directors, employees and agents harmless from and against any and all Claims (as hereinafter defined) and Losses (as hereinafter defined) which may be incurred by Trustee or any of such officers, directors, employees or agents as a result of Claims asserted against Trustee or any of such officers, directors, employees or agents as a result of or in connection with Trustee's capacity as such under this Indenture by any person or entity. For the purposes hereof, the term "Claims" shall mean all claims, lawsuits, causes of action or other legal actions and proceedings of whatever nature brought against (whether by way of direct action, counterclaim, cross action or impleader) Trustee or any such officer, director, employee or agent, even if groundless, false or fraudulent, so long as the claim, lawsuit, cause of action or other legal action or proceeding is alleged or determined, directly or indirectly, to arise out of, result from, relate to or be based upon, in whole or in part: (a) the acts or omissions of Felcor LP or any Guarantor, (b) the appointment of Trustee as trustee under this Indenture, or (c) the performance by Trustee of its powers and duties under this Indenture; and the term "Losses" shall mean losses, costs, damages, expenses, judgements and liabilities of whatever nature (including but not limited to attorneys', accountants' and other professionals' fees, litigation and court costs and expenses and amounts paid in settlement), directly or indirectly resulting from, arising out of or relating to one or more Claims. Upon the written request of Trustee or any such officer, director, employee or agent (each referred to hereinafter as an "Indemnified Party"), Felcor LP shall assume the investigation and defense of any Claim, including the employment of counsel acceptable to the applicable Indemnified Party and the payment of all expenses related thereto and notwithstanding any such assumption, the Indemnified Party shall have the right, and Felcor LP shall pay the cost and expense thereof, to employ separate counsel with respect to any such Claim and participate in the investigation and defense thereof in the event that such Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to such Indemnified Party which are different from or additional to those available to Felcor LP. Felcor LP hereby agrees that the indemnifications and protections afforded Trustee in this section shall survive the termination of this Indenture. Notwithstanding the foregoing, no indemnification shall be available hereunder to the extent that a court of competent jurisdiction determines in a non-appealable order that the Loss or Claim for which such indemnification is sought was directly caused by the negligence or bad faith of the Indemnified Party. To secure FelCor LP's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal of, premium, if any, and interest on particular Notes. If the Trustee incurs expenses or renders services after the occurrence of an Event of Default specified in clause (g) or (h) of Section 6.01, the expenses and the compensation for the services will be intended to constitute expenses of administration under Title 11 of the United States Bankruptcy Code or any applicable federal or state law for the relief of debtors. The provisions of this Section shall survive the termination of this Indenture. 55 62 SECTION 7.08 REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign at any time by so notifying FelCor LP in writing at least 30 days prior to the date of the proposed resignation. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee with the consent of FelCor LP. FelCor LP may at any time remove the Trustee, by Company Order given at least 30 days prior to the date of the proposed removal. If the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, FelCor LP shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by FelCor LP. If the successor Trustee does not deliver its written acceptance required by the next succeeding paragraph of this Section 7.08 within 30 days after notice is given by FelCor LP or the Trustee, as the case may be, of such resignation or removal, the retiring Trustee, FelCor LP or the Holders of a majority in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to FelCor LP. Immediately after the delivery of such written acceptance, subject to the lien provided in Section 7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, (ii) the resignation or removal of the retiring Trustee shall become effective and (iii) the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder. If the Trustee is no longer eligible under Section 7.10, any Holder who satisfies the requirements of TIA Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. FelCor LP shall give notice of any resignation and any removal of the Trustee and each appointment of a successor Trustee to all Holders. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, FelCor LP's obligation under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee herein. SECTION 7.10 ELIGIBILITY. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus of at least $25,000,000 as set forth in its most recent published annual report of condition. 56 63 SECTION 7.11 MONEY HELD IN TRUST. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with FelCor LP. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law and except for money held in trust under Article Eight of this Indenture. SECTION 7.12 WITHHOLDING TAXES. The Trustee, as agent for FelCor LP, shall exclude and withhold from each payment of principal and interest and other amounts due hereunder or under the Notes any and all withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Notes, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the holders of the Notes, that it will file any necessary withholding tax returns or statements when due. FelCor LP or the Trustee shall, as promptly as possible after the payment of the taxes described above, deliver to each holder of a Note appropriate documentation showing the payment thereof, together with such additional documentary evidence as such holders may reasonably request from time to time. ARTICLE 8. DISCHARGE OF INDENTURE SECTION 8.01 TERMINATION OF COMPANY'S OBLIGATIONS. Except as otherwise provided in this Section 8.01, FelCor LP may terminate its obligations under the Notes and this Indenture if: (1) all Notes previously authenticated and delivered (other than destroyed, lost or stolen Notes that have been replaced or Notes that are paid pursuant to Section 4.01 or Notes for whose payment money or securities have theretofore been held in trust and thereafter repaid to FelCor LP, as provided in Section 8.05) have been delivered to the Trustee for cancellation and FelCor LP has paid all sums payable by it hereunder; or (2) (A) the Notes mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (B) the Company irrevocably deposits in trust with the Trustee during such one-year period, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds solely for the benefit of the Holders for that purpose, money or U.S. Government Obligations sufficient (in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee), without consideration of any reinvestment of any interest thereon, to pay principal, premium, if, any, and interest on the Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, (C) no Default or Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit, (D) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which FelCor or FelCor LP is a party or by which they are bound and (E) FelCor and FelCor LP have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent 57 64 provided for herein relating to the satisfaction and discharge of this Indenture have been complied with. With respect to the foregoing clause (i), FelCor LP's obligations under Section 7.07 shall survive. With respect to the foregoing clause (ii), FelCor LP's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes are no longer outstanding. Thereafter, only FelCor LP's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of FelCor LP's obligations under the Notes and this Indenture except for those surviving obligations specified above. SECTION 8.02 DEFEASANCE AND DISCHARGE OF INDENTURE. FelCor LP and the Guarantors will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes or any Guarantee pursuant to Article 11 on the 123rd day after the date of the deposit referred to in clause (A) of this Section 8.02, and the provisions of this Indenture will no longer be in effect with respect to the Notes, and the Trustee, at the expense of FelCor LP, shall execute proper instruments acknowledging the same; provided that the following conditions shall have been satisfied: (A) with reference to this Section 8.02, FelCor LP has deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10 of this Indenture) and conveyed all right, title and interest for the benefit of the Holders, under the terms of a trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, premium, if any, and interest, if any, on the Notes, and dedicated solely to, the benefit of the Holders, in and to (1) money in an amount, (2) U.S. Government Obligations that, through the payment of interest, premium, if any, and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (A), money in an amount or (3) a combination thereof in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, the principal of, premium, if any, and accrued interest on the outstanding Notes at the Stated Maturity of such principal or interest; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal, premium, if any, and interest with respect to the Notes; (B) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which FelCor LP, FelCor or any of their respective Restricted Subsidiaries is a party or by which FelCor LP, FelCor or any of their respective Restricted Subsidiaries is a party or by which FelCor LP is bound; 58 65 (C) immediately after giving effect to such deposit on a pro forma basis, no Default or Event of Default shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after such date of deposit; (D) FelCor LP shall have delivered to the Trustee (1) either (x) a ruling directed to the Trustee received from the Internal Revenue Service to the effect that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of FelCor LP's exercise of its option under this Section 8.02 and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised or (y) an Opinion of Counsel to the same effect as the ruling described in clause (x) above accompanied by a ruling to that effect published by the Internal Revenue Service, unless there has been a change in the applicable federal income tax law since the date of this Indenture such that a ruling from the Internal Revenue Service is no longer required and (2) an Opinion of Counsel to the effect that (x) the creation of the defeasance trust does not violate the Investment Company Act of 1940 and (y) after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the United States Bankruptcy Code, after one year following the deposit), the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against FelCor LP or a Guarantor under either such statute, and either (I) the trust funds will no longer remain the property of FelCor LP or a Guarantor (and therefore will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (II) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of FelCor LP or a Guarantor, (a) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to the Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise except for the effect of Section 552(b) of the United States Bankruptcy Code on interest on the trust funds accruing after the commencement of a case under such statute and (b) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding; (E) if the Notes are then listed on a national securities exchange, FelCor LP shall have delivered to the Trustee an Opinion of Counsel to the effect that such deposit defeasance and discharge will not cause the Notes to be delisted; and (F) FelCor LP has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02 have been complied with. Notwithstanding the foregoing, prior to the end of the 123-day (or one year) period referred to in clause (D)(2)(y) of this Section 8.02, none of FelCor LP's obligations under this Indenture shall be discharged. Subsequent to the end of such 123-day (or one year) period with respect to this Section 8.02, FelCor LP's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 shall survive until the Notes are no 59 66 longer outstanding. Thereafter, only FelCor LP's obligations in Sections 7.07, 8.05 and 8.06 shall survive. If and when a ruling from the Internal Revenue Service or an Opinion of Counsel referred to in clause (D)(1) of this Section 8.02 is able to be provided specifically without regard to, and not in reliance upon, the continuance of FelCor LP's obligations under Section 4.01, then FelCor LP's obligations under such Section 4.01 shall cease upon delivery to the Trustee of such ruling or Opinion of Counsel and compliance with the other conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of FelCor LP's obligations under the Notes and this Indenture except for those surviving obligations in the immediately preceding paragraph. SECTION 8.03 DEFEASANCE OF CERTAIN OBLIGATIONS. FelCor LP may omit to comply with any term, provision or condition set forth in clause (iii) under Section 5.01 and Sections 4.03 through 4.17 and Sections 4.19 and 4.20, clauses (c) and (d) under Section 6.01 with respect to such clause (iii) under Section 5.01 and Sections 4.03 through 4.17 and Sections 4.19 and 4.20, and clauses (e) and (f) under Section 6.01 shall be deemed not to be Events of Default, in each case with respect to the outstanding Notes if: (i) with reference to this Section 8.03, FelCor LP has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10) and conveyed all right, title and interest to the Trustee for the benefit of the Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, premium, if any, and interest, if any, on the Notes, and dedicated solely to, the benefit of the Holders, in and to (A) money in an amount, (B) U.S. Government Obligations that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (i), money in an amount or (C) a combination thereof in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, the principal of, premium, if any, and interest on the outstanding Notes on the Stated Maturity of such principal or interest; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal, premium, if any, and interest with respect to the Notes; (ii) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which FelCor LP, FelCor or any of their Restricted Subsidiaries is a party or by which FelCor LP, FelCor or any of their Restricted Subsidiaries is bound; (iii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit; 60 67 (iv) FelCor LP has delivered to the Trustee an Opinion of Counsel to the effect that (A) the creation of the defeasance trust does not violate the Investment Company Act of 1940, (B) the Holders have a valid first-priority security interest in the trust funds, (C) the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred and (D) after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the United States Bankruptcy Code, after one year following the deposit), the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against FelCor LP under either such statute, and either (1) the trust funds will no longer remain the property of FelCor LP or a Guarantor (and therefore will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (2) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of FelCor LP or a Guarantor, (x) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to the Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise (except for the effect of Section 552(b) of the United States Bankruptcy Code on interest on the trust funds accruing after the commencement of a case under such statute), (y) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding and (z) no property, rights in property or other interests granted to the Trustee or the Holders in exchange for, or with respect to, such trust funds will be subject to any prior rights of holders of other Indebtedness of FelCor LP, FelCor or any of their Subsidiaries; (v) if the Notes are then listed on a national securities exchange, FelCor LP shall have delivered to the Trustee an Opinion of Counsel to the effect that such deposit defeasance and discharge will not cause the Notes to be delisted; and (vi) FelCor LP has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.03 have been complied with. SECTION 8.04 APPLICATION OF TRUST MONEY. Subject to Section 8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the case may be, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with the Notes and this Indenture to the payment of principal of, premium, if any, and interest on the Notes; but such money need not be segregated from other funds except to the extent required by law. SECTION 8.05 REPAYMENT TO COMPANY. Subject to Sections 7.07, 8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to FelCor LP upon request set forth in an Officers' Certificate any excess money held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to 61 68 FelCor LP upon request any money held by them for the payment of principal, premium, if any, or interest that remains unclaimed for two years; provided that the Trustee or such Paying Agent before being required to make any payment may cause to be published at the expense of FelCor LP once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money at such Holder's address (as set forth in the Note Register) notice that such money remains unclaimed and that after a date specified therein (which shall be at least 30 days from the date of such publication or mailing) any unclaimed balance of such money then remaining will be repaid to FelCor LP. After payment to FelCor LP, Holders entitled to such money must look to FelCor LP for payment as general creditors unless an applicable law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. SECTION 8.06 REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, FelCor LP's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the case may be; provided that, if FelCor LP has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, FelCor LP shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01 WITHOUT CONSENT OF HOLDERS. FelCor, FelCor LP and the Subsidiary Guarantors when authorized by a resolution of their Board of Directors, and the Trustee may amend or supplement this Indenture or the Notes without notice to or the consent of any Holder: (1) to cure any ambiguity, defect or inconsistency in this Indenture; provided that such amendments or supplements shall not adversely affect the interests of the Holders in any material respect; (2) to comply with Section 4.07 or Article Five; (3) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA; (4) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee; (5) to secure or Guarantee the Notes; or 62 69 (6) to make any change that, in the good faith opinion of the Board of Directors as evidenced by a Board Resolution, does not materially and adversely affect the rights of any Holder. SECTION 9.02 WITH CONSENT OF HOLDERS. Subject to Sections 6.04 and 6.07 and without prior notice to the Holders, FelCor, FelCor LP and the Subsidiary Guarantors, when authorized by their Board of Directors (as evidenced by a Board Resolution), and the Trustee may amend this Indenture and the Notes with the written consent of the Holders of a majority in aggregate principal amount at maturity of the Notes then outstanding, and the Holders of a majority in aggregate principal amount at maturity of the Notes then outstanding by written notice to the Trustee may waive future compliance by FelCor or FelCor LP with any provision of this Indenture or the Notes. Notwithstanding the provisions of this Section 9.02, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.04, may not: (i) change the Stated Maturity of the principal of, or any installment of interest on, any Note, (ii) reduce the principal amount of, or premium, if any, or interest on, any Note, (iii) change the place of payment of principal of, or premium, if any, or interest on, any Note or adversely affect any right of repayment at the option of any Holder of any Note, (iv) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the Redemption Date) of any Note, (v) reduce the percentage of outstanding Notes, the consent of whose Holders is necessary to modify or amend this Indenture, (vi) waive a Default in the payment of principal of, premium, if any, or interest on the Notes, (vii) voluntarily release a Guarantor of the Notes, (viii) modify any of the provisions of this Section 9.02, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby, or (ix) reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of this Indenture or for waiver of certain defaults. 63 70 It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, FelCor LP shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. FelCor LP shall mail supplemental indentures to Holders upon request. Any failure of FelCor LP to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. SECTION 9.03 REVOCATION AND EFFECT OF CONSENT. Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the Note of the consenting Holder, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note or portion of its Note. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver shall become effective on receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the outstanding Notes. FelCor LP may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then, notwithstanding the last two sentences of the immediately preceding paragraph, those persons who were Holders at such record date (or their duly designated proxies) and only those persons shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it is of the type described in any of clauses (i) through (ix) of Section 9.02. In case of an amendment or waiver of the type described in clauses (i) through (ix) of Section 9.02, the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder of a Note that evidences the same indebtedness as the Note of the consenting Holder. SECTION 9.04 NOTATION ON OR EXCHANGE OF NOTES. If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder and the Trustee may place an appropriate notation on any Note thereafter authenticated. Alternatively, if FelCor LP or the Trustee so determines, FelCor LP in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. SECTION 9.05 TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture. Subject to the preceding sentence, the Trustee shall 64 71 sign such amendment, supplement or waiver if the same does not adversely affect the rights of the Trustee. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 9.06 CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article Nine shall conform to the requirements of the TIA as then in effect. ARTICLE 10. MISCELLANEOUS SECTION 10.01 TRUST INDENTURE ACT OF 1939. Prior to the effectiveness of the Registration Statement, this Indenture shall incorporate and be governed by the provisions of the TIA that are required to be part of and to govern indentures qualified under the TIA. After the effectiveness of the Registration Statement, this Indenture shall be subject to the provisions of the TIA that are required to be a part of this Indenture and shall, to the extent applicable, be governed by such provisions. SECTION 10.02 NOTICES. Any notice or communication shall be sufficiently given if in writing and delivered in person or mailed by first class mail addressed as follows: if to FelCor, FelCor LP or any Subsidiary Guarantor: c/o FelCor Lodging Trust Incorporated 545 East John Carpenter Freeway Suite 1300 Irving, Texas 75062 Attention: General Counsel if to the Trustee: SunTrust Bank 25 Park Place, 24th Floor Atlanta, Georgia 30303-2900 Attention: Corporate Trust Department FelCor, FelCor LP or a Subsidiary Guarantor or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Holder shall be mailed to him at his address as it appears on the Note Register by first class mail and shall be sufficiently given to him if so mailed within the time prescribed. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee and each Agent at the same time. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. Except for a notice to the Trustee, which is deemed 65 72 given only when received, and except as otherwise provided in this Indenture, if a notice or communication is mailed in the manner provided in this Section 10.02, it is duly given, whether or not the addressee receives it. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 10.03 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by FelCor LP to the Trustee to take any action under this Indenture, FelCor LP shall furnish to the Trustee: (i) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (ii) an Opinion of Counsel stating that, in the opinion of such Counsel, all such conditions precedent have been complied with. SECTION 10.04 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each person signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (iii) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with; provided, however, that, with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 10.05 RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. 66 73 SECTION 10.06 PAYMENT DATE OTHER THAN A BUSINESS DAY. If an Interest Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity of any Note shall not be a Business Day, then payment of principal of, premium, if any, or interest on such Note, as the case may be, need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Payment Date, or Redemption Date, or at the Stated Maturity or date of maturity of such Note; provided that no interest shall accrue for the period from and after such Interest Payment Date, Payment Date, Redemption Date, Stated Maturity or date of maturity, as the case may be. SECTION 10.07 GOVERNING LAW. The laws of the State of New York shall govern this Indenture and the Notes. The Trustee, FelCor LP and the Holders agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Indenture or the Notes. Notwithstanding the foregoing, the situs of the trusts created hereunder shall be deemed to be the Corporate Trust Office at which location the trusts shall be administered. SECTION 10.08 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of FelCor LP, the Guarantors or any Subsidiary of any such Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 10.09 NO RECOURSE AGAINST OTHERS. No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of FelCor LP or the Guarantors contained in this Indenture, or in any of the Notes, or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator or against any past, present or future limited partner, stockholder, other equity holder (other than a general partner), officer, director, employee or controlling person, as such, of FelCor LP, FelCor or the Subsidiary Guarantors or of any successor Person, either directly or through FelCor LP or any successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Notes. SECTION 10.10 SUCCESSORS. All agreements of FelCor LP, FelCor or the Subsidiary Guarantors in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 10.11 DUPLICATE ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 10.12 SEPARABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 67 74 SECTION 10.13 TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms and provisions hereof. ARTICLE 11. GUARANTEE OF THE NOTES SECTION 11.01 GUARANTEE. Subject to the provisions of this Article Eleven, each Guarantor, jointly and severally, hereby unconditionally guarantees to each Holder and to the Trustee on behalf of the Holders: (i) the due and punctual payment of the principal of, premium if any, on and interest on the Notes, when and as the same shall become due and payable, whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on the overdue principal of and interest, if any, on the Notes, to the extent lawful, and the due and punctual performance of all other obligations of FelCor LP to the Holders or the Trustee, all in accordance with the terms of such Note and this Indenture and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at stated maturity, by acceleration, redemption or otherwise. Each Guarantor hereby waives diligence, presentment, filing of claims with a court in the event of merger or bankruptcy of FelCor LP, any right to require a proceeding first against FelCor LP, the benefit of discussion, protest or notice with respect to any such Note or the debt evidenced thereby and all demands whatsoever (except as specified above), and covenants that this Article Eleven will not be discharged as to any such Note except by payment in full of the principal thereof and interest thereon and as provided in Sections 8.01 and 8.02. The maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of this Article Eleven. In the event of any declaration of acceleration of such obligations as provided in Article Eleven, such obligations (whether or not due and payable) shall become due and payable immediately by the Guarantor for the purpose of this Article Eleven. In addition, without limiting the foregoing provisions, upon the effectiveness of an acceleration under Article Six, the Trustee shall promptly make a demand for payment on the Notes under the Guarantees provided for in this Article Eleven. Each Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against performance or enforcement of such Guarantor's obligations under this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Holders against FelCor LP, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from FelCor LP, directly or indirectly, in cash or other property or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and the principal of, premium if any, and accrued interest on the Notes shall not have been paid in full, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders, and shall immediately be paid to the Trustee for the benefit of the Holders to be credited and applied upon the principal of, premium, if any, and accrued interest on the Notes. Each Guarantor acknowledges that it will receive direct and indirect benefits from the issuance of the Notes 68 75 pursuant to this Indenture and that the waiver set forth in this paragraph is knowingly made in contemplation of such benefits. The Guarantee set forth in this Section 11.01 shall not be valid or become obligatory for any purpose with respect to a Note until the certificate of authentication on such Note shall have been signed by or on behalf of the Trustee. SECTION 11.02 OBLIGATIONS OF GUARANTOR UNCONDITIONAL. Nothing contained in this Article Eleven or elsewhere in this Indenture or in the Notes is intended to or shall impair, as among each Guarantor and the holders of the Notes, the obligation of each Guarantor, which is absolute and unconditional, upon failure by FelCor LP, to pay to the holders of the Notes and principal of, premium, if any, and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Notes and creditors of each Guarantor, nor shall anything herein or therein prevent the holder of any Note or the Trustee on their behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture. Without limiting the generality of the foregoing, nothing contained in this Article Eleven will restrict the right of the Trustee or the holders of the Notes to take any action to declare the Guarantees to be due and payable prior to the stated maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder. SECTION 11.03 NOTICE TO TRUSTEE. Each Guarantor shall give prompt written notice to the Trustee of any fact known to such Guarantor which would prohibit the making of any payment to or by the Trustee in respect of the Guarantee pursuant to the provisions of this Article Eleven. SECTION 11.04 THIS ARTICLE NOT TO PREVENT EVENTS OF DEFAULT. The failure to make a payment on account of principal, of premium, if any, or interest on the Notes by reason of any provision of this Article Eleven will not be construed as preventing the occurrence of an Event of Default. SECTION 11.05 TRUSTEE'S COMPENSATION NOT PREJUDICED. Nothing in this Article Eleven will apply to amounts due to the Trustee pursuant to other sections in the Indenture. SECTION 11.06 PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION. Nothing contained in this Article Eleven or elsewhere in this Indenture shall prevent (i) a Guarantor from making payments of principal of, premium if any, and interest on the Notes, or from depositing with the Trustee any monies for such payments or (ii) the application by the Trustee of any monies deposited with it for the purpose of making such payments of principal of, premium, if any, and interest on the Notes to the holders entitled thereto, each Guarantor shall give prompt written notice to the Trustee of any dissolution, winding up, liquidation or reorganization of such Guarantor. SECTION 11.07 RELEASE OF GUARANTEE. The Guarantee provided pursuant to this Article 11 by each Subsidiary Guarantor shall be automatically and unconditionally released and discharged upon any sale, exchange or transfer, to any Person not an Affiliate of FelCor LP or FelCor, of all of the Capital Stock owned by FelCor LP, FelCor and their respective Restricted Subsidiaries in, or all or substantially all the assets of such Subsidiary Guarantor; provided such transfer is permitted by this Indenture. 69 76 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. FELCOR LODGING LIMITED PARTNERSHIP By: FELCOR LODGING TRUST INCORPORATED, General Partner By: /s/ LAWRENCE D. ROBINSON ----------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR LODGING TRUST INCORPORATED By: /s/ LAWRENCE D. ROBINSON ----------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel SUNTRUST BANK, as Trustee By: /s/ GEORGE T. HOGAN ----------------------------------- Name: George T. Hogan Title: Vice President FELCOR/CSS HOTELS, L.L.C. By: /s/ LAWRENCE D. ROBINSON ----------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR/LAX HOTELS, L.L.C. By: /s/ LAWRENCE D. ROBINSON ----------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel 70 77 FELCOR/CSS HOLDINGS, L.P. By: FELCOR/CSS HOTELS, L.L.C., General Partner By: /s/ LAWRENCE D. ROBINSON -------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR/ST. PAUL HOLDINGS, L.P. By: FELCOR/CSS HOTELS, L.L.C., General Partner By: /s/ LAWRENCE D. ROBINSON -------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR/LAX HOLDINGS, L.P. By: FELCOR/LAX HOTELS, L.L.C., General Partner By: /s/ LAWRENCE D. ROBINSON -------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel 71 78 FELCOR EIGHT HOTELS, L.L.C. By: /s/ LAWRENCE D. ROBINSON ------------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR HOTEL ASSET COMPANY, L.L.C. By: /s/ LAWRENCE D. ROBINSON ------------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR NEVADA HOLDINGS L.L.C. By: /s/ LAWRENCE D. ROBINSON ------------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FHAC NEVADA HOLDINGS, L.L.C. By: /s/ LAWRENCE D. ROBINSON ------------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FHAC TEXAS HOLDINGS, L.P. By: FELCOR HOTEL ASSET COMPANY, L.L.C., General Partner By: /s/ LAWRENCE D. ROBINSON ----------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel 72 79 FELCOR OMAHA HOTEL COMPANY, L.L.C. By: /s/ LAWRENCE D. ROBINSON ------------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR COUNTRY VILLA HOTEL, L.L.C. By: /s/ LAWRENCE D. ROBINSON ------------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR MOLINE HOTEL, L.L.C. By: /s/ LAWRENCE D. ROBINSON ------------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR CANADA CO. By: /s/ LAWRENCE D. ROBINSON ------------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel 73 80 SCHEDULE A A-1 81 EXHIBIT A [FACE OF NOTE] 9 1/2% Senior Note Due 2008 [CUSIP] __________ No. _________ $__________ FELCOR LODGING LIMITED PARTNERSHIP, a Delaware limited partnership ("FelCor LP"), which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to CEDE & Co., or its registered assigns, the principal sum of ___________ ($_________) on September 15, 2008. Interest Payment Dates: March 15 and September 15, commencing March 15, 2001. Regular Record Dates: March 1 and September 1. Notwithstanding anything to the contrary in this Note or in the Indenture (as hereinafter defined), upon the occurrence of, and during the continuance of, a Ratings Downgrade, this Note will bear interest at an annual rate of 9.50% plus 0.50%. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, FelCor LP has caused this Note to be signed manually or by facsimile by its duly authorized officers. FELCOR LODGING LIMITED PARTNERSHIP BY: FELCOR LODGING TRUST INCORPORATED, General Partner By: --------------------------- Name: Title: By: --------------------------- Name: Title: A-2 82 (Trustee's Certificate of Authentication) This is one of the 9 1/2% Senior Notes Due 2008 described in the within-mentioned Indenture. Date: SUNTRUST BANK, as Trustee By: ------------------------------ Authorized Signatory A-3 83 [REVERSE SIDE OF NOTE] FELCOR LODGING LIMITED PARTNERSHIP 9 1/2% Senior Note Due 2008 1. Principal and Interest. FelCor LP will pay the principal of this Note on September 15, 2008. FelCor LP promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate per annum shown above. Notwithstanding anything to the contrary in this Note or in the Indenture, upon the occurrence of, and during the continuance of, a Ratings Downgrade, this Note will bear interest at the rate per annum shown above plus 0.50%. Interest will be payable semiannually (to the holders of record of the Notes at the close of business on March 1 or September 1 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing March 15, 2001. If an exchange offer registered under the Securities Act is not consummated and a shelf registration statement under the Securities Act with respect to resales of the Notes is not declared effective by the Commission, on or before March 14, 2001 in accordance with the terms of the Registration Rights Agreement dated September 8, 2000 among FelCor LP, FelCor, Deutsche Banc Securities Inc., Chase Securities Inc., Morgan Stanley & Co. Incorporated, Banc of America Securities L.L.C., Banc One Capital Markets, Inc., Credit Lyonnais Securities (USA) Inc., and Scotia Capital (USA) Inc., and interest due on the Notes will accrue, at an annual rate of 0.5% plus the interest rate specified on the face hereof, until the exchange offer is consummated or the shelf registration statement is declared effective. The Holder of this Note is entitled to the benefits of such Registration Rights Agreement. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 15, 2000; provided that, if there is no existing default in the payment of interest and this Note is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. FelCor LP shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at a rate per annum that is 2% in excess of the rate otherwise payable. 2. Method of Payment. FelCor LP will pay interest (except defaulted interest) on the principal amount of the Notes as provided above on each March 15 and September 15 to the persons who are Holders (as reflected in the Note Register at the close of business on such March 1 and September 1 immediately preceding the Interest Payment Date), in each case, even if the Note is canceled on A-4 84 registration of transfer or registration of exchange after such record date; provided that, with respect to the payment of principal, FelCor LP will make payment to the Holder that surrenders this Note to a Paying Agent on or after September 15, 2008. FelCor LP will pay principal, premium, if any, and as provided above, interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, FelCor LP may pay principal, premium, if any, and interest by its check payable in such money. It may mail an interest check to a Holder's registered address (as reflected in the Note Register). If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. 3. Paying Agent and Registrar. Initially, the Trustee will act as authenticating agent, Paying Agent and Registrar. FelCor LP may change any authenticating agent, Paying Agent or Registrar without notice. FelCor LP, any Subsidiary or any Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar. 4. Indenture; Limitations. FelCor LP issued the Notes under an Indenture dated as of September 15, 2000 (the "Indenture"), among FelCor LP, FelCor, the Subsidiary Guarantors and SunTrust Bank (the "Trustee"). Capitalized terms herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control. The Notes are general unsecured obligations of FelCor LP. 5. Redemption. Except as provided below, FelCor LP may not redeem any of the Notes prior to September 15, 2004. The Notes may be redeemed at the option of FelCor LP, in whole or in part, at any time and from time to time on or after September 15, 2004, upon not less than 30 days' nor more than 60 days' notice, at the following Redemption Prices (expressed as percentages of the principal amount thereof) plus accrued and unpaid interest thereon, if any, to the Redemption Date, if redeemed during the 12-month period commencing September 15 of the year set forth below:
YEAR REDEMPTION PRICE ---- ---------------- 2004........................................ 104.750% 2005........................................ 103.167% 2006........................................ 101.583% 2007 and thereafter......................... 100.000%
A-5 85 Notwithstanding the foregoing, at any time, or from time to time, on or prior to September 15, 2003, FelCor LP may, at its option, use the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the principal amount of the Notes issued under this Indenture at a Redemption Price of 109.50% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the Redemption Date; provided that (i) at least 65% of the aggregate principal amount of the Notes issued under this Indenture remains outstanding immediately after such redemption; and (ii) FelCor LP makes such redemption no later 90 days after the consummation of any such Equity Offering. Notice of any optional redemption will be mailed at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its last address as it appears in the Note Register. Notes in original principal amount greater than $1,000 may be redeemed in part. On and after the Redemption Date, interest ceases to accrue on Notes or portions thereof called for redemption, unless FelCor LP defaults in the payment of the amount due upon redemption. 6. Repurchase upon Change in Control. Upon the occurrence of any Change of Control, each Holder shall have the right to require the repurchase of its Notes by FelCor LP in cash pursuant to the offer described in the Indenture at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (the "Change of Control Payment"). A notice of such Change of Control will be mailed within 30 days after any Change of Control occurs to each Holder at his last address as it appears in the Note Register. Notes in original denominations larger than $1,000 may be sold to FelCor LP in part. On and after the Change of Control Payment Date, interest ceases to accrue on Notes or portions of Notes surrendered for purchase by FelCor LP, unless FelCor LP defaults in the payment of the Change of Control Payment. 7. Denominations; Transfer; Exchange. The Notes are in registered form without coupons in denominations of $1,000 of principal amount at maturity and multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Notes selected for redemption. Also, it need not register the transfer or exchange of any Notes for a period of 15 days before a selection of Notes to be redeemed is made. 8. Persons Deemed Owners. A Holder shall be treated as the owner of a Note for all purposes. A-6 86 9. Unclaimed Money. If money for the payment of principal, premium, if any, or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to FelCor LP at its request. After that, Holders entitled to the money must look to FelCor LP for payment, unless an abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 10. Discharge Prior to Redemption or Maturity. If FelCor LP deposits with the Trustee money or U.S. Government Obligations sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes (a) to redemption or maturity, FelCor LP will be discharged from the Indenture and the Notes, except in certain circumstances for certain sections thereof, and (b) to the Stated Maturity, FelCor LP will be discharged from certain covenants set forth in the Indenture. 11. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not materially and adversely affect the rights of any Holder. 12. Restrictive Covenants. The Indenture imposes certain limitations on the ability of FelCor, FelCor LP and their respective Restricted Subsidiaries, among other things, to Incur additional Indebtedness, make Restricted Payments, use the proceeds from Asset Sales, engage in transactions with Affiliates or merge, consolidate or transfer substantially all of their assets. Within 45 days after the end of each fiscal quarter (90 days after the end of the last fiscal quarter of each year), FelCor and FelCor LP must report to the Trustee on compliance with such limitations. 13. Successor Persons. When a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor person will be released from those obligations. 14. Defaults and Remedies. The following events constitute "Events of Default" under the Indenture: (a) default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; A-7 87 (b) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) default in the performance or breach of the provisions of the Indenture applicable to mergers, consolidations and transfers of all or substantially all of the assets of FelCor LP and FelCor or the failure by FelCor LP to make or consummate an Offer to Purchase in accordance with Section 4.10 or Section 4.11; (d) FelCor LP or FelCor defaults in the performance of or breaches any other covenant or agreement of FelCor LP or FelCor in the Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes; (e) there occurs with respect to any issue or issues of Indebtedness of FelCor LP or FelCor or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (i) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (ii) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not covered by insurance) (i) shall be rendered against FelCor LP or FelCor or any Significant Subsidiary and shall not be paid or discharged, and (ii) there shall be any period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (i) relief in respect of FelCor LP or FelCor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of FelCor LP or FelCor or any Significant Subsidiary or for all or substantially all of the property and assets of FelCor LP or FelCor or any Significant Subsidiary or (iii) the winding up or liquidation of the affairs of FelCor LP or FelCor or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (h) FelCor LP or FelCor or any Significant Subsidiary (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, A-8 88 sequestrator or similar official of FelCor LP or FelCor or Significant Subsidiary or for all or substantially all of the property and assets of FelCor LP or FelCor or any Significant Subsidiary or (iii) effects any general assignment for the benefit of its creditors. If an Event of Default (other than an Event of Default described in subparagraphs (g) or (h) above that occurs with respect to FelCor LP or FelCor) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Notes may declare all the Notes to be due and payable. If an Event of Default described in subparagraphs (g) or (h) above occurs with respect to FelCor LP or FelCor, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of at least a majority in principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. 15. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from and perform services for FelCor LP or its Affiliates and may otherwise deal with FelCor LP or its Affiliates as if it were not the Trustee. 16. No Recourse Against Others. No incorporator or any past, present or future limited partner, shareholder, other equity holder, officer, director, employee or controlling person as such, of FelCor LP or of any successor Person shall have any liability for any obligations of FelCor LP under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 17. Authentication. This Note shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on the other side of this Note. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act). FelCor LP will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to FelCor Suites Limited Partnership, 545 East John Carpenter Freeway, Suite 1300, Irving, Texas 75062 or at such other address provided for in the Indenture. A-9 89 19. Guarantee. Repayment of principal and interest on the Notes is guaranteed on a senior basis by the Guarantors pursuant to Article Eleven of the Indenture. A-10 90 [FORM OF TRANSFER NOTICE] FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. - ---------------------------------- __________________________________________ (Please print or typewrite name and address including zip code of assignee) the within Note and all rights thereunder, hereby irrevocably constituting _______ ___________________________________ and appointing _______________________ attorney to transfer said Note on the books of FelCor LP with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL NOTES OTHER THAN EXCHANGE NOTES, PERMANENT OFFSHORE GLOBAL NOTES AND OFFSHORE PHYSICAL NOTES] In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date the shelf registration statement with respect to resales of the Notes is declared effective or (ii) two years after the original issuance of the Notes, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Note is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. or [ ] (b) this Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture. A-11 91 If none of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.08 of the Indenture shall have been satisfied. Date: --------------------- ------------------------------------------ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding FelCor LP as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: --------------------- ------------------------------------------ NOTICE: To be executed by an executive officer A-12 92 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by FelCor LP pursuant to Section 4.10 or Section 4.11 of the Indenture, check the Box: [_] If you wish to have a portion of this Note purchased by FelCor LP pursuant to Section 4.10 or Section 4.11 of the Indenture, state the amount (in principal amount at maturity): $___________________. Date: ------------ Your Signature: --------------------------------------------------------------- (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ---------------------------- A-13 93 EXHIBIT B FORM OF CERTIFICATE -----------, ----- FelCor Lodging Limited Partnership 545 East John Carpenter Freeway Suite 1300 Irving, Texas 75062 FelCor Lodging Trust Incorporated 545 East John Carpenter Freeway Suite 1300 Irving, Texas 75062 SunTrust Bank 25 Park Place, 24th Floor Atlanta, Georgia 30303-2900 Attention: Corporate Trust Department Re: FelCor Lodging Limited Partnership ("FelCor LP") 9 1/2% Senior Notes Due 2008 (the "Notes") Dear Sirs: This letter relates to U.S. $____________ principal amount at maturity of Notes represented by a Note (the "Legended Note") which bears a legend outlining restrictions upon transfer of such Legended Note. Pursuant to Section 2.01 of the Indenture (the "Indenture") dated as of September 15, 2000 relating to the Notes, we hereby certify that we are (or we will hold such securities on behalf of) a person outside the United States to whom the Notes could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933, as amended. Accordingly, you are hereby requested to exchange the legended certificate for an unlegended certificate representing an identical principal amount at maturity of Notes, all in the manner provided for in the Indenture. You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [NAME OF HOLDER] By: ---------------------- Authorized Signature B-1 94 EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB ACCREDITED INVESTORS -------------, -- FelCor Lodging Limited Partnership 545 East John Carpenter Freeway Suite 1300 Irving, Texas 75062 FelCor Lodging Trust Incorporated 545 East John Carpenter Freeway Suite 1300 Irving, Texas 75062 SunTrust Bank 25 Park Place, 24th Floor Atlanta, Georgia 30303-2900 Attention: Corporate Trust Department Re: FelCor Lodging Limited Partnership ("FelCor LP") 9 1/2% Senior Notes Due 2008 (the "Notes") Dear Sirs: In connection with our proposed purchase of $____________ aggregate principal amount at maturity of the Notes, we confirm that: 1. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture dated as of September 15, 2000, relating to the Notes (the "Indenture") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Notes, we will do so only (A) to FelCor, FelCor LP or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you a signed letter substantially in the form of this letter, and, if this letter relates to a proposed transfer in respect of an aggregate principal amount of Notes less than $100,000, an opinion of counsel acceptable to FelCor and FelCor LP that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the exemption from C-1 95 registration provided by Rule 144 under the Securities Act (if available), or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 3. We understand that, on any proposed resale of any Notes, we will be required to furnish to you such certifications, legal opinions and other information as you may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [NAME OF TRANSFEREE] By: --------------------------- Authorized Signature A-2 96 EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S -----------, ---- FelCor Lodging Limited Partnership 545 East John Carpenter Freeway Suite 1300 Irving, Texas 75062 FelCor Lodging Trust Incorporated 545 East John Carpenter Freeway Suite 1300 Irving, Texas 75062 SunTrust Bank 25 Park Place, 24th Floor Atlanta, Georgia 30303-2900 Attention: Corporate Trust Department Re: FelCor Lodging Limited Partnership ("FelCor LP") 9 1/2% Senior Notes Due 2008 (the "Notes") Dear Sirs: In connection with our proposed sale of U.S.$________ aggregate principal amount at maturity of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States; (3) no directed selling efforts have been made by us in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. D-1 97 You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [NAME OF TRANSFEROR] By: --------------------------- Authorized Signature D-2 EX-5.1 4 d80556ex5-1.txt OPINION/CONSENT OF JENKENS & GILCHRIST 1 Exhibit 5.1 October 6, 2000 FelCor Lodging Limited Partnership c/o FelCor Lodging Trust Incorporated 545 E. John Carpenter Frwy., Suite 1300 Irving, Texas 75062-3933 Re: Registration Statement on Form S-4; $400,000,000 Aggregate Principal Amount of 9 1/2% Senior Notes Due 2008 Dear Ladies and Gentlemen: In connection with the registration of $400,000,000 aggregate principal amount of 9 1/2% Senior Notes Due 2008 (the "Notes") by FelCor Lodging Limited Partnership ("FelCor LP") under the Securities Act of 1933, as amended (the "Act"), on Form S-4 filed with the Securities and Exchange Commission on October 6, 2000 (the "Registration Statement"), and the concurrent registration of guarantees (the "Guarantees") of the Notes by FelCor Lodging Trust Incorporated ("FelCor") and the following subsidiaries of FelCor and FelCor LP: FelCor/CSS Hotels, L.L.C., FelCor/LAX Hotels, L.L.C., FelCor Eight Hotels, L.L.C., FelCor/CSS Holdings, L.P., FelCor/St. Paul Holdings, L.P., FelCor/LAX Holdings, L.P., FelCor Hotel Asset Company, L.L.C., FelCor Nevada Holdings, L.L.C., FHAC Nevada Holdings, L.L.C., FHAC Texas Holdings, L.P., FelCor Omaha Hotel Company, L.L.C., FelCor Moline Hotel, L.L.C., FelCor Country Villa Hotel, L.L.C., and FelCor Canada Co. (collectively, the "Subsidiary Guarantors" and, together with FelCor, the "Guarantors"), you have requested our opinion with respect to the matters set forth below. The Notes and Guarantees will be issued pursuant to an indenture (the "Indenture") among FelCor LP, FelCor, the Subsidiary Guarantors and SunTrust Bank, as trustee (the "Trustee"). In our capacity as your special counsel in connection with such registration, we are familiar with the proceedings taken and proposed to be taken by FelCor LP, FelCor, and the Subsidiary Guarantors in connection with the authorization and issuance of the Notes and Guarantees, and, for the purposes of this opinion, have assumed such proceedings will be timely completed in the manner presently proposed. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. 2 FelCor Lodging Limited Partnership October 6, 2000 Page 2 We are opining herein as to the effect on the subject transaction only of the internal laws of the State of Texas and the Delaware General Corporation Law, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any other local agencies within any state. Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof: 1. When executed and delivered by or on behalf of FelCor LP and authenticated by the Trustee in accordance with the terms of the Indenture, the Notes will constitute valid and binding obligations of FelCor LP, enforceable against FelCor LP in accordance with their terms. 2. When executed and delivered by or on behalf of the Guarantors, the Guarantees will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms. The opinions rendered in paragraphs 1 and 2 above relating to the enforceability of the Notes and Guarantees are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors generally; (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought; and (iii) we express no opinion concerning the enforceability of any waivers or rights or defenses or indemnification provisions of the Indenture where such waivers or provisions are contrary to public policy. To the extent that the obligations of FelCor LP, FelCor and the Subsidiary Guarantors under the Indenture may be dependant upon such matters, we assume for purposes of this opinion that the Trustee is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Trustee is duly qualified to engage in the activities contemplated by the Indenture; that the Indenture has been duly authorized, executed and delivered by the Trustee and constitutes the legally valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms; that the Trustee is in compliance, generally and with respect to acting as a trustee under the Indenture, with all applicable laws and regulations; and that the Trustee has the requisite organizational and legal power and authority to perform its obligations under the Indenture. 3 FelCor Lodging Limited Partnership October 6, 2000 Page 3 We hereby consent to the filing of this Opinion as Exhibit 5.1 to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Registration Statement and in the Prospectus included therein. In giving such consent, we do not admit that we come within the category of persons whose consent is required by Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, JENKENS & GILCHRIST, A Professional Corporation /s/ Robert W. Dockery ---------------------------------- By: Robert W. Dockery EX-10.18 5 d80556ex10-18.txt 5TH AMENDED/RESTATED CREDIT AGREEMENT - 8/1/00 1 EXHIBIT 10.18 ================================================================================ U.S. $600,000,000 FIFTH AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 1, 2000 Among FELCOR LODGING TRUST INCORPORATED and FELCOR LODGING LIMITED PARTNERSHIP as Borrower, THE LENDERS PARTY HERETO and THE CHASE MANHATTAN BANK, as Administrative Agent ================================================================================ CHASE SECURITIES INC., as Joint Lead Arranger, Joint Book Manager and Syndication Agent BANKERS TRUST COMPANY, as Joint Lead Arranger, Joint Book Manager and Documentation Agent BANK OF AMERICA, N.A., as Documentation Agent and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Co-Documentation Agent 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS...............................2 1.1. Defined Terms.....................................................2 1.2. Computation of Time Periods......................................33 1.3. Accounting Terms.................................................33 1.4. Certain Terms....................................................33 ARTICLE II AMOUNTS AND TERMS OF THE LOANS AND LETTERS OF CREDIT..........33 2.1. The Revolving Credit Loans.......................................33 2.2. Making the Revolving Credit Loans................................33 2.3. Fees ..........................................................35 2.4. Reduction and Termination of the Commitments.....................36 2.5. Repayment........................................................36 2.6. Prepayments......................................................36 2.7. Conversion/Continuation Option...................................37 2.8. Interest.........................................................38 2.9. Interest Rate Determination and Protection.......................38 2.10. Increased Costs..................................................39 2.11. Illegality.......................................................39 2.12. Capital Adequacy.................................................40 2.13. Payments and Computations........................................40 2.14. Taxes 42 2.15. Sharing of Payments, Etc.........................................43 2.16. Swing Advances...................................................44 2.17. Letters of Credit................................................45 2.18. Letter of Credit Requests........................................46 2.19. Letter of Credit Participations..................................47 2.20. Agreement to Repay Letter of Credit Drawings.....................48 2.21. Additional Revolving Credit Commitments..........................49 2.22. Extension of the Final Maturity Date.............................51 ARTICLE III CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT AND OF LENDING AND OF ISSUANCE OF LETTERS OF CREDIT..........................51 3.1. Conditions Precedent to Effectiveness of this Agreement, to Initial Revolving Credit Loans and Letters of Credit..........51 3.2. Additional Conditions Precedent to Effectiveness of this Agreement, to Initial Revolving Credit Loans and Letters of Credit........................................................53 3.3. Conditions Precedent to Each Revolving Credit Loan and Letter of Credit.....................................................54
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Page ---- ARTICLE IV REPRESENTATIONS AND WARRANTIES.................................55 4.1. Existence; Compliance with Law....................................55 4.2. Power: Authorization, Enforceable Obligations.....................56 4.3. Taxes ...........................................................56 4.4. Full Disclosure...................................................57 4.5. Financial Matters.................................................57 4.6. Litigation........................................................58 4.7. Margin Regulations................................................58 4.8. Ownership of Borrower and DJONT; Subsidiaries.....................58 4.9. ERISA 59 4.10. Indebtedness......................................................60 4.11. Restricted Payments...............................................60 4.12. No Burdensome Restrictions; No Defaults...........................60 4.13. Investments.......................................................60 4.14. Government Regulation.............................................60 4.15. Insurance.........................................................61 4.16. Labor Matters.....................................................61 4.17. Force Majeure.....................................................61 4.18. Use of Proceeds...................................................62 4.19. Environmental Protection..........................................62 4.20. Contractual Obligations Concerning Assets.........................63 4.21. Intellectual Property.............................................64 4.22. Title ............................................................64 4.23. Status as REIT....................................................65 4.24. Operator: Compliance with Law.....................................66 4.25. Operating Leases, Licenses and Management Agreement...............66 4.26. FF&E Reserves.....................................................66 ARTICLE V FINANCIAL COVENANTS............................................67 5.1. Unsecured Interest Expense Coverage...............................67 5.2. Fixed Charge Coverage Ratio.......................................67 5.3. Maintenance of Tangible Net Worth.................................67 5.4. Limitations on Total Indebtedness.................................67 5.5. Limitations on Total Secured Indebtedness.........................67 5.6. Adjusted NOI and Hotels...........................................67 5.7. Limitations on Recourse Secured Indebtedness......................67 ARTICLE VI AFFIRMATIVE COVENANTS..........................................68 6.1. Compliance with Laws, Etc.........................................68 6.2. Conduct of Business...............................................68 6.3. Payment of Taxes, Etc.............................................68 6.4. Maintenance of Insurance..........................................68 6.5. Preservation of Existence, Etc....................................69 6.6. Access ...........................................................69
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Page ---- 6.7. Keeping of Books..................................................69 6.8. Maintenance of Properties, Etc....................................69 6.9. Performance and Compliance with Other Covenants...................69 6.10. Application of Proceeds...........................................69 6.11. Financial Statements..............................................69 6.12. Reporting Requirements............................................71 6.13. Leases and Operating Leases; Management Agreements and Licenses........................................................73 6.14. Intentionally Omitted.............................................74 6.15. Employee Plans....................................................74 6.16. Intentionally Omitted.............................................74 6.17. Fiscal Year.......................................................74 6.18. Environmental Matters.............................................74 6.19. REIT Requirements.................................................75 6.20. Maintenance of FF&E Reserves......................................75 6.21. Intentionally deleted.............................................75 6.22. Further Assurances................................................75 6.23. Unencumbered Hotel Properties/Financial Covenant Imbalance........75 6.24. Hotel Documents...................................................76 ARTICLE VII NEGATIVE COVENANTS.............................................76 7.1. Restrictions on Wholly-Owned Subsidiaries.........................76 7.2. Operation/Ownership of Hotels.....................................77 7.3. Lease Obligations.................................................77 7.4. Restricted Payments...............................................77 7.5. Mergers, Stock Issuances, Asset Sales, Etc........................78 7.6. Restrictions on Construction/Budget Hotels........................78 7.7. Change in Nature of Business or in Capital Structure..............79 7.8. Modification of Material Agreements...............................79 7.9. Accounting Changes................................................79 7.10. Transactions with Affiliates......................................79 7.11. Adverse or Speculative Transactions...............................80 7.12. Environmental Matters.............................................80 7.13. Joint Enterprises.................................................80 7.14. Intentionally Omitted.............................................80 7.15. ERISA Plan Assets.................................................80 7.16. Limitation on Liens...............................................80 ARTICLE VIII EVENTS OF DEFAULT..............................................80 8.1. Events of Default.................................................80 8.2. Remedies..........................................................82 8.3. Actions in Respect of Letters of Credit...........................83 ARTICLE IX THE ADMINISTRATIVE AGENT.......................................84 9.1. Authorization and Action..........................................84
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Page ---- 9.2. Administrative Agent's Reliance, Etc..............................85 9.3. Chase and Affiliates..............................................85 9.4. Lender Credit Decision............................................85 9.5. Indemnification...................................................86 9.6. Successor Agent...................................................86 9.7. Duties of Other Agents............................................87 ARTICLE X MISCELLANEOUS..................................................87 10.1. Amendments, Etc..................................................87 10.2. Notices, Etc.....................................................88 10.3. No Waiver, Remedies..............................................88 10.4. Costs; Expenses; Indemnities.....................................89 10.5. Right of Set-off.................................................90 10.6. Binding Effect...................................................90 10.7. Assignments and Participations...................................91 10.8. Governing Law; Severability......................................94 10.9. Submission to Jurisdiction: Service of Process...................94 10.10. Section Titles...................................................94 10.11. Execution in Counterparts........................................94 10.12. Entire Agreement.................................................94 10.13. Confidentiality..................................................95 10.14. WAIVER OF JURY TRIAL.............................................95 10.15. Joint and Several Obligations....................................95
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SCHEDULES Schedule I - Commitments Schedule II - Applicable Lending Offices and Addresses for Notices Schedule III - Operating Lessees Schedule IV - Permitted Transferees Schedule V - Qualified Leases Schedule 2.17 - Existing Letters of Credit Schedule 4.8 - Subsidiaries and Unconsolidated Entities Schedule 4.10 - Existing Indebtedness Schedule 4.13 - Existing Investments Schedule 4.19 - Environmental Protection Schedule 4.22(a) - Owned Real Estate Schedule 4.22(b) - Leased Real Estate EXHIBITS Exhibit A - Form of Revolving Credit Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Notice of Conversion or Continuation Exhibit D - Form(s) of Opinion(s) of Counsel for the Loan Parties Exhibit E - Form of Assignment and Acceptance Exhibit F - Form of Letter of Credit Request Exhibit G - Form of Compliance Certificate Exhibit H - Form of Operating Lease Exhibit I - Form of Subsidiary Guaranty Exhibit J - Form of Additional Revolving Credit Commitment Agreement Exhibit K - Pledge Agreement Exhibit L - Form of Officers' Certificate Exhibit M - Form of Solvency Certificate Exhibit N - Form of Closing Certificate
7 FIFTH AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 1, 2000, among FELCOR LODGING TRUST INCORPORATED (f/k/a Felcor Suite Hotels, Inc.), a Maryland corporation ("FelCor") and FELCOR LODGING LIMITED PARTNERSHIP (f/k/a Felcor Suites Limited Partnership), a Delaware limited partnership ("FelCor LP" and collectively with FelCor, the "Borrower"), the financial institutions listed from time to time on the signature pages hereof (each individually a "Lender" and collectively the "Lenders") and THE CHASE MANHATTAN BANK ("Chase"), as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). WITNESSETH: ----------- WHEREAS, pursuant to that certain Revolving Credit Agreement dated as of September 30, 1996, among the Borrower, the financial institutions listed on the signature pages thereof, the Administrative Agent and Wells Fargo Bank, National Association ("Wells Fargo") as documentation agent (as amended, modified or supplemented to, but not including, the effective date of the Amended Revolving Credit Agreement referred to below, the "Original Revolving Credit Agreement"), the lenders party thereto agreed to make to the Borrower revolving credit advances of up to $250,000,000 in aggregate principal amount outstanding at any one time, for the purposes and upon the terms and subject to the conditions set forth therein; WHEREAS, pursuant to that certain Amended and Restated Revolving Credit Agreement dated as of October 18, 1996, among the Borrower, the lenders party thereto, the Administrative Agent and Wells Fargo as documentation agent (as amended, modified or supplemented to, but not including, the effective date of the Second Amended Revolving Credit Agreement referred to below, the "Amended Revolving Credit Agreement") the terms and provisions of the Original Revolving Credit Agreement were amended and restated as more particularly set forth therein; WHEREAS, pursuant to that certain Second Amended and Restated Revolving Credit Agreement dated as of March 10, 1997, among the Borrower, the lenders party thereto, the Administrative Agent and Wells Fargo as documentation agent (as amended, modified or supplemented to, but not including, the effective date of the Third Amended Revolving Credit Agreement referred to below, the "Second Amended Revolving Credit Agreement") the terms and provisions of the Amended Revolving Credit Agreement were amended and restated as more particularly set forth therein; WHEREAS, pursuant to that certain Third Amended and Restated Revolving Credit Agreement dated as of August 14, 1997, among the Borrower, the lenders party thereto, the Administrative Agent and Wells Fargo as documentation agent (as amended, modified or supplemented to, but not including, the effective date of the Fourth Amended Revolving Credit Agreement referred to below, the "Third Amended Revolving Credit Agreement") the terms and provisions of the Second Amended Revolving Credit Agreement were amended and restated as more particularly set forth therein; 8 WHEREAS, pursuant to that certain Fourth Amended and Restated Credit Agreement, dated as of July 1, 1998, among the Borrower, the lenders party thereto, the Administrative Agent, Bankers Trust Company, Bank of America, N.A. and Wells Fargo, National Association, as Documentation Agents (as amended, modified or supplemented to, but not including, the Restatement Effective Date, the "Fourth Amended Revolving Credit Agreement"), the lenders thereunder agreed to increase the maximum revolving credit amount to $850,000,000 (the "Previous Maximum Revolving Credit Amount"), to make $250,000,000 of term loans (the "Previous Term Loans") and to amend and restate certain terms and provisions of the Third Amended Revolving Credit Agreement as more particularly set forth therein; and WHEREAS, the Previous Term Loans have been repaid in full, the parties hereto now wish to amend and restate the Fourth Amended Revolving Credit Agreement (i) to provide Available Credit to the Borrower in the aggregate principal amount of $600,000,000 (subject to increase as provided herein) and (ii) to amend and restate the Fourth Amended Revolving Credit Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the parties hereto hereby agree that the aforementioned recitals are true and correct and hereby incorporated herein and that the Fourth Amended Revolving Credit Agreement is hereby amended and restated in its entirety so that all of the terms and conditions contained in this Agreement shall supersede and control the terms and conditions of the Fourth Amended Revolving Credit Agreement. ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms. As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Additional Revolving Credit Lender" has the meaning specified in Section 2.21(b). "Additional Revolving Credit Commitment" means, for each Lender, any commitment to make Revolving Credit Loans provided by such Lender pursuant to Section 2.21, in such amount as agreed to by such Lender in the respective Additional Revolving Credit Commitment Agreement; provided that on the Additional Revolving Credit Commitment Date upon which an Additional Revolving Credit Commitment of any Lender becomes effective, such Additional Revolving Credit Commitment of such Lender shall be added to (and thereafter become a part of) the Revolving Credit Commitment of such Lender for all purposes of this Agreement as contemplated by Section 2.21. "Additional Revolving Credit Commitment Agreement" means a Revolving Credit Commitment Agreement substantially in the form of Exhibit J (appropriately completed). -2- 9 "Additional Revolving Credit Commitment Date" means each date upon which an Additional Revolving Credit Commitment under an Additional Revolving Credit Commitment Agreement becomes effective as provided in Section 2.21(b)(i). "Adjusted EBITDA" means, for any Person for any period, EBITDA of such Person for such period less the FF&E Reserve for such Person. "Adjusted Funds From Operations" means, for any Person, for any period, Net Income (Loss) of such Person for such period plus (a) the sum of the following amounts of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss): (i) depreciation expense, (ii) amortization expense and other non-cash charges with respect to their real estate assets for such period, (iii) losses from Asset Sales, losses resulting from restructuring of Indebtedness and other extraordinary losses, and (iv) minority interests attributable to FelCor LP's partnership units; less (b) the sum of the following amounts of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss): (i) gains from Asset Sales, gains resulting from restructuring of Indebtedness and other extraordinary gains, and (ii) the applicable share of Net Income (Loss) of such Person's Unconsolidated Entities; plus (c) such Person's Pro Rata Share of Adjusted Funds From Operations of such Person's Unconsolidated Entities. "Adjusted NOI" means, with respect to any Hotel owned or leased by the Borrower or any of its Subsidiaries, Eligible Joint Ventures or Unconsolidated Entities, for any period, the Net Operating Income for such Hotel for such period less the FF&E Reserve for such Hotel for such period. "Administrative Agent" has the meaning specified in the preamble to this Agreement, and shall include any successor to the Administrative Agent appointed pursuant to Section 9.6. "Affiliate" means, to any Person, any Subsidiary of such Person and any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person and includes each executive officer, director, trustee, limited liability company manager or general partner of such Person, and each Person who is the beneficial owner of 10% or more of any class of voting Stock of such Person. For the purposes of this definition, "control" means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" means this Fifth Amended and Restated Credit Agreement, together with all Exhibits and Schedules attached hereto and as the same may be further amended, supplemented or otherwise modified from time to time. "Allerton Hotel" means that certain Hotel located in Chicago Illinois and commonly known as the Allerton Hotel. -3- 10 "Alternative Currency" means any lawful currency of a country where a Hotel is located, other than Dollars, which is freely transferable and convertible into Dollars. "Alternative Currency Contract" means a currency swap agreement, currency cap agreement, currency collar agreement or forward currency agreement entered into to provide protection against fluctuations in an Alternative Currency. "Amended Revolving Credit Agreement" has the meaning specified in the recitals to this Agreement. "Applicable Lending Office" means, with respect to each Lender, its Domestic Lending Office in the case of a Base Rate Loan and its Eurodollar Lending Office in the case of a Eurodollar Rate Loan. "Applicable Margin" means, with respect to each Revolving Credit Loan, the applicable percentage per annum set forth below based upon (i) with respect to Level I through IV Status, the Status then in effect and (ii) with respect to Level V through X Status, the Status in effect on the most recent Applicable Margin Reset Date, it being understood that the Applicable Margin for (i) Base Rate Loans and Swing Advances shall be the percentage set forth under the column "Base Rate Loans", (ii) Eurodollar Rate Loans shall be the percentage set forth under the column "Eurodollar Rate Loans", and (iii) the Commitment Fee shall be the percentage set forth under the column "Commitment Fee":
Base Rate Eurodollar Rate Commitment Loans Loans Fee ----- ----- --- Level I Status 0.0% .875% 0.125% Level II Status 0.0% 1.000% 0.150% Level III Status 0.0% 1.125% 0.150% Level IV Status 0.0% 1.250% 0.200% Level V Status 0.0% 1.375% 0.200% Level VI Status 0.250% 1.750% 0.250% Level VII Status 0.375% 1.875% 0.250% Level VIII Status 0.500% 2.000% 0.300% Level IX Status 0.625% 2.125% 0.375% Level X Status 1.000% 2.500% 0.500%
"Applicable Margin Reset Date" means the 45th day following the end of the most recent Fiscal Quarter. "Asset Sale" means any sale, conveyance, transfer, assignment, lease or other disposition (including, without limitation, by merger or consolidation, and by condemnation, eminent domain, loss, damage, or destruction, and whether by operation of law or otherwise) by the Borrower or any of its Subsidiaries to any Person (other than to Borrower or any of its Subsidiaries) of any Stock of any of its Subsidiaries, any Stock Equivalents of any of its Subsidiaries or any Hotel, but excluding Operating Leases. -4- 11 "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit E. "Available Credit" means, at any time, an amount equal to the then effective Revolving Credit Commitments of the Lenders less the sum of (x) the aggregate of the outstanding principal amount of the Revolving Credit Loans at such time and (y) the Letter of Credit Outstandings. "Base Rate" means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum, shall be equal at all times to the higher of: (a) the rate of interest announced publicly by Chase at its principal office, from time to time, as Chase's base rate; and (b) the sum (adjusted to the nearest 1/8 of one percent or, if there is no nearest 1/8 of one percent, to the next higher 1/8 of one percent) of (i) 1/2 of one percent per annum plus (ii) the Federal Funds Rate. "Base Rate Loan" means any outstanding principal amount of the Revolving Credit Loans of any Lender that bears interest with reference to the Base Rate, other than Swing Advances. "Bass" shall mean Bass Hotels and Resorts, a Delaware corporation, or any Person controlled by Bass Hotels and Resorts which is a Manager. "Borrower" has the meaning specified in the preamble to this Agreement. "Borrower's Investment" means, with respect to any Hotel, the Borrower's or any of its Subsidiaries' investment in such Hotel (including all investments constituting, evidencing or secured by an interest in property, whether tangible or intangible and whether real, personal or mixed, that is used or intended for use in, or in any manner connected with or relating to, the ownership or leasing of such Hotel, specifically including, without limitation, investments in Subsidiaries and Unconsolidated Entities owning or leasing Hotels), at cost, on a consolidated basis, provided that in determining the cost of such investments, there shall be included (i) the amount of all cash paid and the value (as determined by the Board of Directors of FelCor for purposes of such investment) of any other property transferred therefor by the Borrower or its Subsidiary, (ii) the amount of all indebtedness and other obligations assumed or incurred by the Borrower or its Subsidiary or to which the Borrower or its Subsidiary takes subject, and (iii) the value (as determined by the Board of Directors of FelCor for the purposes of such investment) of all equity securities of which the issuer is an entity that is, or upon such investment will be, included within the Borrower or its Subsidiary and which are issued (otherwise than for cash) to, or retained by, any person other than the Borrower or its Subsidiary in connection with such investment. For purposes of this definition only "indebtedness" of the Borrower or its Subsidiary shall mean the consolidated liabilities of the Borrower and its Subsidiaries for borrowed money (including all notes payable and drafts accepted representing extensions of credit) and all obliga- -5- 12 tions evidenced by bonds, debentures, notes or other similar instruments on which interest charges are customarily paid, including obligations under Capitalized Leases. "Borrowing" means a borrowing consisting of Revolving Credit Loans made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments. "Business Day" means a day of the year on which banks are not required or authorized to close in New York City and California and, if the applicable Business Day relates to a Eurodollar Rate Loan, a day on which dealings are also carried on in the London interbank market. "Capital Expenditures" means, for any Person for any period, the aggregate of all expenditures by such Person and its Subsidiaries, except interest capitalized during construction, during such period for property, plant or equipment, including, without limitation, renewals, improvements, replacements and capitalized repairs, that would be reflected as additions to property, plant or equipment on a consolidated balance sheet of such Person and its Subsidiaries prepared in conformity with GAAP. For the purpose of this definition, the purchase price of equipment which is acquired simultaneously with the trade-in of existing equipment owned by such Person or any of its Subsidiaries or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment being traded in at such time or the amount of such proceeds, as the case may be. "Capitalized Lease" means, as to any Person, any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in conformity with GAAP. "Capitalized Lease Obligations" means, as to any Person, the. capitalized amount of all obligations of such Person or any of its Subsidiaries under Capitalized Leases, as determined on a consolidated basis in conformity with GAAP. "Cash" shall mean coin or currency of the United States of America or immediately available federal funds. "Cash Equivalents" means (i) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States government or any agency thereof, (ii) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers' acceptances of any commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000 having maturities of one year or less from the date of acquisition, and (iii) commercial paper of an issuer rated at least "A-I" by S&P or "P- 1" by Moody's, or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments. "Chase" has the meaning specified in the preamble to this Agreement. -6- 13 "Code" means the Internal Revenue Code of 1986 (or any successor legislation thereto), as amended from time to time. "Commitment Fee" has the meaning specified in Section 2.3(a). "Compliance Certificate" has the meaning specified in Section 3.1(j) hereof. "Contingent Obligation" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Indebtedness or Contractual Obligation of another Person, if the purpose or intent of such Person in incurring the Contingent Obligation is to provide assurance to the obligee of such Indebtedness or Contractual Obligation that such Indebtedness or Contractual Obligation will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Indebtedness or Contractual Obligation will be protected (in whole or in part) against loss in respect thereof. Contingent Obligations of a Person include, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of an obligation of another Person (including, in the case of any Guarantor, its obligations under its Subsidiary Guaranty), and (b) any liability of such Person for an obligation of another Person through any agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of a loan, advance, stock purchase, capital contribution or otherwise), (ii) to maintain the solvency or any balance sheet item, level of income or financial condition of another Person, (iii) to make take-or-pay or similar payments, if required, regardless of non-performance by any other party or parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such obligation or to assure the holder of such obligation against loss, or (v) to supply funds to or in any other manner invest in such other Person (including, without limitation, to pay for property or services irrespective of whether such property is received or such services are rendered), if in the case of any agreement described under subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary purpose or intent thereof is as described in the preceding sentence. Anything herein to the contrary notwithstanding, no agreement entered into by the Borrower or any of its Subsidiaries or Unconsolidated Entities with respect to its acquisition of any direct or indirect, interest in any Hotel shall, prior to the satisfaction in full of all conditions precedent to the obligations of such Person pursuant to the agreement, be deemed or construed to constitute a "Contingent Obligation" or "Indebtedness" of such Person hereunder, provided that pursuant to any such agreement, the Borrower or its Subsidiary or Unconsolidated Entity is not liable or responsible for, and does not assume any, development or construction risks. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported. "Continuing Lender" means each Existing Lender with a Revolving Credit Commitment under the Agreement. "Contractual Obligation" of any Person means any obligation, agreement, undertaking or similar provision of any security issued by such Person or of any agreement (including, without limitation, any management or franchise agreement), undertaking, contract, lease, -7- 14 indenture, mortgage, deed of trust or other instrument (excluding a Loan Document) to which such Person is a party or by which it or any of its property is bound or to which any of its properties is subject. "Default" means any event which with the passing of time or the giving of notice or both would become an Event of Default. "Disqualified Stock" shall mean any class or series of Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Final Maturity Date of the Revolving Credit Loans (other than in exchange for other equity securities which do not constitute Disqualified Stock), (ii) redeemable at the option of the holder of such class or series of Stock at any time prior to the Final Maturity Date of the Revolving Credit Loans (other than in exchange for other securities which do not constitute Disqualified Stock), or (iii) convertible into or exchangeable for Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled maturity prior to the Final Maturity Date of the Revolving Credit Loans. "DJONT" means DJONT Operations, L.L.C., a Delaware limited liability company. "DOL" means the United States Department of Labor, or any successor thereto. "Dollars" and the sign "$" each mean the lawful money of the United States of America. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule II or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Drawing" shall have the meaning provided in Section 2.20(a). "EBITDA" means, for any Person for any period, the Net Income (Loss) of such Person for such period taken as a single accounting period, plus (a) the sum of the following amounts of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss): (i) depreciation expense, (ii) amortization expense and other non-cash charges, (iii) interest expense, (iv) income tax expense, (v) extraordinary losses (and other losses on Asset Sales not otherwise included in extraordinary losses determined on a consolidated basis in conformity with GAAP), and (vi) minority interests attributable to FelCor LP's partnership units, less (b) the sum of the following amounts of such Person and its Subsidiaries determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss): (i) extraordinary gains (and in the case of the Borrower, other gains on Asset Sales not otherwise included in extraordinary gains determined on a consolidated basis in conformity with GAAP), (ii) the applicable share of Net Income (Loss) of such Person's Unconsolidated Entities, (iii) cash payments made with respect to any non-cash charge which was added back to Net Operating -8- 15 Income to determine EBITDA for any prior period; plus (c) such Person's Pro Rata Share of EBITDA of such Person's Unconsolidated Entities. "Eligible Assignee" means (i) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the OECD, or a political subdivision of any such country, and having total assets in excess of $5,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD or the Cayman Islands; (iii) the central bank of any country which is a member of the OECD; (iv) a mutual fund or an insurance company organized under the laws of the United States, or any State thereof and having total assets in excess of $5,000,000,000; (v) any Lender; (vi) any Affiliate of any Lender; (vii) any person that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender; (viii) any Person other than an Affiliate of a Loan Party; and (ix) only with respect to any Lender that is a fund that invests in bank loans, any other fund or trust entity that invests in bank loans and is advised by or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor, in each case ((i) through (ix) above) acceptable (a) to the Administrative Agent, and (b) provided no Default or Event of Default exists, to the Borrower, which acceptance will not be unreasonably withheld, conditioned or delayed. "Eligible Joint Venture" means any joint venture, corporation, partnership or other business entity in which the Borrower (i) owns directly or indirectly a JV% of at least 50% and (ii) is (or owns directly or indirectly a majority of the voting Stock of and controls) the managing general partner or equivalent thereof for such entity and (iii) Borrower alone controls such managing general partner or equivalent. For the purposes of this definition, "control" means the possession of the power to direct or cause the direction of management and policies of such Person (including without limitation the power to authorize the sale or encumbrance of the assets of such Person), whether through the ownership of voting securities, by contract or otherwise. "Environmental Claim" means any accusation, allegation, notice of violation, action, claim, Environmental Lien, demand, abatement or other Order or direction (conditional or otherwise) by any Governmental Authority or any other Person for personal injury (including sickness, disease or death), tangible or intangible property damage, damage to the environment, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restriction, resulting from or based upon (i) the existence, or the continuation of the existence, of a Release (including, without limitation, sudden or non-sudden accidental or non- accidental Releases) of, or exposure to, any Hazardous Material or other nuisance (to the extent the same relates to any Hazardous Materials), or other Release in, into or onto the environment (including, without limitation, the air, soil, surface water or groundwater) at, in, by, from or related to any property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures or any activities or operations thereof; (ii) the environmental aspects of the transportation, storage, treatment or disposal of Hazardous Materials in connection with any property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures or their operations or facilities; or (iii) the violation. or alleged violation, of any Environmental Laws, -9- 16 Orders or Environmental Permits of or from any Governmental Authority relating to environmental matters connected with any property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures. "Environmental Laws" means any applicable federal, state, local or foreign law (including common law), statute, code, ordinance, rule, regulation or other requirement having the force or effect of law relating to the environment, natural resources, or public or employee health and safety and includes, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq., the Toxic* Substances Control Act, 15 U.S.C. Section 2601 et seq., the Clean Air Act, 42 U.S.C. 7401 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq. (to the extent the same relates to any Hazardous Materials), and the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq., as such laws have been amended or supplemented, and the regulations promulgated pursuant thereto, and all analogous state and local statutes. "Environmental Liabilities and Costs" means, as to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including, without limitation, all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any other Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, including, without limitation, any thereof arising under any Environmental Law, Environmental Permit, order or agreement with any Governmental Authority or other Person, and which relate to any environmental, health or safety condition, or a Release or threatened Release, and result from the past, present or future operations of, or ownership of property by, such Person or any of its Subsidiaries or Eligible Joint Ventures. "Environmental Lien" means any Lien in favor of any Governmental Authority arising under any Environmental Law. "Environmental Permit" means any Permit required under any applicable Environmental Laws or Order and all supporting documents associated therewith. "ERISA" means the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control or treated as a single employer with any Loan Party within the meaning of Section 414 (b), (c), (m) or (o) of the Code. "ERISA Event" means (i) an event described in Sections 4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA with respect to a Pension Plan; (ii) the withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in -10- 17 which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of any Loan Party or any ERISA Affiliate from any Multiemployer Plan or the insolvency of any Multiemployer Plan; (iv) the filing of a notice of intent to terminate a Pension Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (v) the institution of proceedings by the PBGC to terminate or appoint a trustee to administer a Pension Plan or Multiemployer Plan; (vi) the failure to make any required contribution to a Pension Plan; (vii) any other event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (viii) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA; (ix) a prohibited transaction (as described in Code Section 4975 or ERISA Section 406) shall occur with respect to any Plan; or (x) any Loan Party or ERISA Affiliate shall request a minimum funding waiver from the IRS with respect to any Pension Plan. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" below its name on Schedule II (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Eurodollar Rate" means, for any Interest Period, an interest rate per annum equal to the rate per annum obtained by multiplying (a) a rate per annum equal to the rate for U.S. dollar deposits with maturities comparable to such Interest Period which appears on Telerate Page 3750 as of 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, provided, however, that if such rate does not appear on Telerate Page 3750, the "Eurodollar Rate" applicable to a particular Interest Period shall mean a rate per annum equal to the rate at which U.S. dollar deposits in an amount approximately equal to the Principal Balance (or the portion thereof which will bear interest at a rate determined by reference to the Eurodollar Rate during the Interest Period to which such Eurodollar Rate is applicable in accordance with the provisions hereof), and with maturities comparable to the last day of the Interest Period with respect to which such Eurodollar Rate is applicable, are offered in immediately available funds in the London Interbank Market to the London office of Chase by leading banks in the Eurodollar market at 11:00 a.m., London time, two (2) Business Days prior to the commencement of the Interest Period to which such Eurodollar Rate is applicable, by (b) a fraction (expressed as a decimal) the numerator of which shall be the number one and the denominator of which shall be the number one minus the Eurodollar Rate Reserve Percentage for such Interest Period. "Eurodollar Rate Loan" means any outstanding principal amount of the Revolving Credit Loans of any Lender that, for an Interest Period, bears interest at a rate determined with reference to the Eurodollar Rate. "Eurodollar Rate Reserve Percentage" for any Interest Period means the aggregate reserve percentages (expressed as a decimal) from time to time established by the Board of Governors of the Federal Reserve System of the United States and any other banking authority to which any of the Lenders are now or hereafter subject, including, but not limited to any reserve -11- 18 on Eurocurrency Liabilities as defined in Regulation D of the Board of Governors of the Federal Reserve System of the United States at the ratios provided in such Regulation from time to time, it being agreed that any portion of the Principal Balance bearing interest at a rate determined by reference to the Eurodollar Rate shall be deemed to constitute Eurocurrency Liabilities, as defined by such Regulation, and it being further agreed that such Eurocurrency Liabilities shall be deemed to be subject to such reserve requirements without benefit of or credit for prorations, exceptions or offsets that may be available to any of the Lenders from time to time under such Regulation and irrespective of whether such Lender actually maintains all or any portion of such reserve. "Excluded Taxable REIT Subsidiary" means any Taxable REIT Subsidiary that is not a Specified Taxable REIT Subsidiary. "Existing Credit Facility" means the credit facilities provided for in the Fourth Amended Revolving Credit Agreement. "Existing Guarantors" means (i) FelCor/CSS Hotels, L.L.C., a Delaware limited liability company, (ii) FelCor/LAX Hotels, L.L.C., a Delaware limited liability company, (iii) FelCor/CSS Holdings, L.P., a Delaware limited partnership, (iv) FelCor/St. Paul Holdings, L.P., a Delaware limited partnership, (v) FelCor/LAX Holdings, L.P., a Delaware limited partnership, (vi) FelCor Eight Hotels L.L.C., a Delaware limited liability company, (vii) FelCor Hotel Asset Company, L.L.C., a Delaware limited liability company, (viii) FelCor Nevada Holdings, L.L.C., a Nevada limited liability company, (ix) FHAC Nevada Holdings, L.L.C., a Nevada limited liability company, (x) FHAC Texas Holdings, L.P., a Texas limited partnership; (xi) FelCor Omaha Hotel Company, L.L.C, (xii) FelCor Country Villa Hotel, L.L.C., (xiii) FelCor Moline Hotel, L.L.C. and (xiv) FelCor Canada Co. "Existing Lender" means each Lender which was a Lender under, and as defined in, the Existing Credit Facility. "Existing Letter of Credit" has the meaning specified in Section 2.17. "Existing Loans" means all Revolving Credit Loans outstanding under the Existing Credit Facility. "Extension Effective Date" has the meaning specified in Section 2.22. "Extension Fee" shall have the meaning specified in Section 2.22. "Event of Default" has the meaning specified in Section 8.1. "Facing Fee" has the meaning specified in Section 2.3(c). "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding -12- 19 Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "FelCor" has the meaning specified in the preamble of this Agreement. "FelCor LP" has the meaning specified in the preamble of this Agreement. "FF&E Reserve" means, for any Person and its Subsidiaries determined on a consolidated basis in accordance with GAAP (or with respect to any Hotel) for any period, a reserve equal to four percent (4%) of Room Revenues from any Hotel owned by such Person or its Subsidiary (or from such Hotel), for such Period (unless such Person is contractually obligated to reserve a greater percentage of Room Revenues, in which case such Person shall be required to reserve such greater amount with respect to such Hotel), plus, for any Person, such Person's Pro Rata Share of any FF&E Reserve for any Hotel owned by such Person's Unconsolidated Entities. "Final Maturity Date" means August 1, 2003; provided that the "Final Maturity Date" may be extended to March 31, 2004 pursuant to and in accordance with the terms of Section 2.22. "Financial Covenant Imbalance" shall have the meaning set forth in Section 2.6(c). "Fiscal Quarter" means each of the three month periods ending on March 31, June 30, September 30 and December 31. "Fiscal Year" means the twelve month period ending on December 31. "Fixed Charges" means, for any Person for any period, (a) Gross Interest Expense for such period plus (b) the aggregate amount of scheduled principal payments on the Total Indebtedness of such Person (excluding optional prepayments and scheduled principal payments in respect of any such Total Indebtedness which is payable in a single installment at final maturity) required to be made during such period plus (c) dividends required to be paid by such Person (and its Subsidiaries determined on a consolidated basis in conformity with GAAP) in connection with preferred Stock issued by such Person (including such Person's Pro Rata Share of such dividends required to be paid by such Person's Unconsolidated Entities, but excluding dividends on Qualified Preferred Stock). "Fourth Amended Revolving Credit Agreement" has the meaning specified in the recitals of this Agreement. "Free Cash Flow" means, for any Person for any period, the Adjusted Funds From Operations for such period less (a) the aggregate FF&E Reserve for such Person and its Subsidiaries for such period, and (b) the aggregate amount of scheduled principal payments on the Total Indebtedness of such Person (excluding optional prepayments and scheduled principal -13- 20 payments in respect of any such Indebtedness which is payable in a single installment at final maturity) required to be made during such period. "First Amendment to the Pledge Agreement" means the First Amendment, dated as of August 1, 2000, to the Pledge Agreement. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination except that, for purposes of Articles V and VII, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the audited financial statements referred to in Section 4.5. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity duly exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Gross Interest Expense" means, for any Person for any period, the sum of (a) the total interest expense in respect of all Indebtedness (excluding all Contingent Obligations) of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP, plus capitalized interest of such Person and its Subsidiaries, plus (b) such Person's Pro Rata Share of Gross Interest Expense of such Person's Unconsolidated Entities. "Guarantor" means the Existing Guarantors and each direct and indirect wholly owned Subsidiary of the Borrower formed or acquired after the date hereof, provided, however, a wholly owned Subsidiary of the Borrower which is formed or acquired after the date hereof shall only be required to be a Guarantor if such Subsidiary is a Required Guarantor. "Hazardous Material" means any substance, material or waste which is regulated by any Governmental Authority of the United States as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "contaminant," "toxic waste," "toxic substance" or words of similar meaning or import under any provision of Environmental Law, which includes, but is not limited to, petroleum, petroleum products, asbestos, urea formaldehyde and polychlorinated biphenyls. "Hilton" means Hilton Hotels Corporation, a Delaware corporation, or any Person controlled by Hilton Hotels Corporation that is a Manager. "Hotel" means any Real Estate or Lease comprising an operating facility offering hotel or other lodging services, or offering food and beverage or associated retail services (so long as (i) such facility was acquired together with and is operated in conjunction with, an -14- 21 operating facility which offers hotel or other lodging services and (ii) such facility is in immediate proximity with an operating facility which offers hotel or other lodging services). "Hotel Documents" means, with respect to any Hotel, the following documents: (i) A description of such Hotel, such description to include the age, location and number of rooms or suites of such Hotel; (ii) Details of the Borrower's Investment in such Hotel and, if available (or able to be reasonably obtained), details of the Adjusted NOI of such Hotel for the prior four (4) Fiscal Quarters; (iii) A copy of the most recent ALTA Owner's Policy of Title Insurance (or commitment to issue such a policy to the Person owning or to own such Hotel) relating to such Hotel showing the identity of the fee titleholder thereto and all matters of record as of its date; (iv) Copies of each of the Operating Lease, Management Agreement and License relating to such Hotel; (v) Copies of all engineering, mechanical, structural and maintenance studies performed by third party consultants with respect to such Hotel; (vi) A "Phase I" environmental assessment of such Hotel prepared by an environmental engineering firm acceptable to the Administrative Agent, and any additional environmental studies or assessments available to the Borrower performed with respect to such Hotel; (vii) If such Hotel is owned pursuant to a Qualified Lease, a copy of such Lease together with all and any amendments thereto or modifications thereof; and (viii) Such other information as the Administrative Agent may reasonably request in order to evaluate the Hotel. "Improvements" has the meaning specified in Section 4.22(c). "Indebtedness" of any Person means, without duplication, the principal amount of (i) all indebtedness of such Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured) or for the deferred purchase price of property or services, (ii) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments (including, in the case of the Borrower, the Revolving Credit Loans outstanding), (iii) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (iv) all Capitalized Lease Obligations of such Person, (v) all Contingent Obligations of such Person, (vi) all obligations of such Person to purchase, redeem, retire, -15- 22 defease or otherwise acquire for value (other than for other equity securities) any Stock or Stock Equivalents of such Person, valued, in the case of mandatorily redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (vii) all Indebtedness referred to in clause (i), (ii), (iii), (iv), (v) or (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and general intangibles) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (viii) all liabilities of such Person under Title IV of ERISA. "Indemnified Matters" has the meaning specified in Section 10.4(b). "Indemnitees" has the meaning specified in Section 10.4. "Indenture" means that certain Indenture dated as of October 1, 1997, as amended to date and as same may be amended, modified, or supplemented from time to time, among FelCor Suites Limited Partnership (predecessor in interest to FelCor LP) as issuer, various Borrower affiliates as guarantors, and SunTrust Bank, Atlanta, as trustee providing for the initial issuance of up to $175,000,000 aggregate principal amount of 73/8% senior notes due 2004 and $125,000,000 aggregate principal amount of 75/8% senior notes due 2007. "Interest Period" means, in the case of any Eurodollar Rate Loan, (i) initially, the period commencing on the date such Eurodollar Rate Loan is made or on the date of conversion of a Base Rate Loan to such Eurodollar Rate Loan and ending one, two, three, six, nine (to the extent available) or twelve (to the extent available) months thereafter, as selected by the Borrower in its Notice of Borrowing or Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.2 or 2.7, and (ii) thereafter, if such Eurodollar Rate Loan is continued, in whole or in part, as a Eurodollar Rate Loan pursuant to Section 2.7, a period commencing on the last day of the immediately preceding Interest Period therefor and ending one, two, three, six, nine (to the extent available) or twelve (to the extent available) months thereafter, as selected by the Borrower in its Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.7; provided, however, that: (A) if any Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless the result of such extension would be to extend such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (B) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (C) the Borrower may not select any Interest Period which ends after the Final Maturity Date; -16- 23 (D) Intentionally Omitted. (E) the Borrower may not select any Interest Period in respect of Revolving Credit Loans having an aggregate principal amount of less than $5,000,000; and (F) there shall be outstanding at any one time no more than fifteen (15) Interest Periods in the aggregate. "Interest Rate Contracts" means interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate insurance, and other agreements or arrangements designed to provide protection against fluctuations in interest rates. "Investment" means, with respect to any Person, (a) any loan or advance to any other Person, (b) the ownership, purchase or other acquisition of, any Stock, Stock Equivalents, other equity interest, obligations or other securities of, (i) any other Person, (ii) all or substantially all of the assets of any other Person, or (iii) all or substantially all of the assets constituting the business of a division, branch or other unit operation of any other Person, or (c) any joint venture or partnership with, or any capital contribution to, or other investment in, any other Person. "IRS" means the Internal Revenue Service, or any successor thereto. "Issuing Lender" means Chase. "Joint Enterprise" means with respect to any Person, any joint venture, corporation, partnership or other business entity which is not (directly or indirectly) owned 100% by such Person. "Joint Venture Hotel" means any Hotel owned by an Eligible Joint Venture. "JV%" means, with respect to any Eligible Joint Venture, the percentage ownership interest of Borrower in such Eligible Joint Venture. "L/C Cash Collateral Account" has the meaning specified in Section 8.3 hereof. "L/C Supportable Obligations" means (i) obligations of the Borrower, or any of its wholly-owned Subsidiaries incurred in the ordinary course of business with respect to insurance obligations and workers' compensation, surety bonds and other similar statutory obligations (ii) earnest money or performance obligations in respect of acquisitions permitted pursuant to the terms of this Agreement and (iii) such other obligations of the Borrower, or any of its wholly-owned Subsidiaries as are permitted to exist pursuant to the terms of this Agreement. "Lease" means, with respect to the Borrower or any of its Subsidiaries or Unconsolidated Entities, any leasehold estate in real property owned by the Borrower or such Subsidiary or Unconsolidated Entity, as lessee, as such may be amended, supplemented or otherwise modified from time to time to the extent permitted by this Agreement. -17- 24 "Legal Proceedings" means any judicial, administrative or arbitral actions, suits, proceedings (public or private) or governmental proceedings. "Lender" has the meaning specified in the preamble to this Agreement. "Lender Reply Period" has the meaning specified in Section 10.1(d). "Letter of Credit" has the meaning specified in Section 2.17(a). "Letter of Credit Fee" has the meaning specified in Section 2.3(b). "Letter of Credit Outstandings" means, at any time, the sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the amount of all Unpaid Drawings. "Letter of Credit Request" has the meaning specified in Section 2.18(a). "Leverage Ratio" means, at any date, a fraction (expressed as a percentage) the numerator of which is Total Indebtedness, on such date, and the denominator of which is Total Value, on such date. "License" means either (x) an agreement in favor of either the Borrower or the Operating Lessee as licensee, permitting the use of hotel system trademarks, trade names and any related rights in connection with the ownership or operation of any Hotel or (y) a Management Agreement, provided the Manager under such Management Agreement owns the rights to hotel system trademarks, trade names and any related rights in connection with the ownership or operation of any Hotel. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever intended to assure payment of any Indebtedness or other obligation, including, without limitation, any conditional sale or other title retention agreement, the interest of a lessor under a Capitalized Lease Obligation, any financing lease having substantially the same economic effect as any of the foregoing, and the filing, under the Uniform Commercial Code or comparable law of any jurisdiction, of any financing statement naming the owner of the asset to which such Lien relates as debtor. "Loan Agreement" means the Loan Agreement, dated as of April 1, 1999, among the Borrower, the financial institutions party thereto from time to time, and The Chase Manhattan Bank, as Administrative Agent and Collateral Agent, as such Loan Agreement may be amended, modified or supplemented from time to time. "Loan Documents" means, collectively, this Agreement, the Revolving Credit Notes, the Subsidiary Guaranty, the Pledge Agreement and each certificate, agreement or document executed by a Loan Party and delivered to the Administrative Agent or any Lender in connection with or pursuant to any of the foregoing. -18- 25 "Loan Party" means each of the Borrower and each Subsidiary of the Borrower that is a party to a Loan Document. "Majority Lenders" means, at any time, Lenders holding an amount greater than 50% of the then aggregate unpaid principal amount of Revolving Credit Loans (excluding Revolving Credit Loans held by Non-Funding Lenders) or, if no such Revolving Credit Loans are then outstanding, Lenders having an amount greater than 50% of the Revolving Credit Commitments of all Lenders (excluding Non-Funding Lenders). "Management Agreement" means an agreement relating to the operation and/or management of any Hotel. "Manager" means Hilton, Bass, Sheraton, Meristar Hospitality Corporation, Coastal Hotel Group, Inc., or such other manager as shall be reasonably approved by the Borrower and the Administrative Agent (such consent not to be unreasonably withheld or delayed) and engaged as manager under the Management Agreement. "Material Adverse Change" means a material adverse change in any of (i) the condition (financial or otherwise), business, performance, prospects, operations or properties of (A) either entity which comprises the Borrower or (B) the Borrower and its Subsidiaries taken as one enterprise, (ii) the legality, validity or enforceability of any Loan Document, or any material Operating Lease or the Operating Leases taken as a whole, (iii) the ability of the Borrower or its Significant Subsidiaries to repay the Obligations or to perform its obligations under any Loan Document, (iv) the ability of (x) any Operating Lessee to perform its obligations under any material Operating Lease or (y) DJONT or Bass (so long as neither DJONT nor Bass is a wholly-owned Subsidiary of the Borrower) to perform its obligations under their respective Operating Leases taken as a whole, or (v) the rights and remedies of the Lenders or the Administrative Agent under the Loan Documents. "Material Adverse Effect" means an effect that results in or causes, or has a reasonable likelihood of resulting in or causing, a Material Adverse Change. "Minimum Tangible Net Worth" means, with respect to the Borrower, at any time, the sum of (a) $1,500,000,000; plus (b) 50% of the aggregate net proceeds received by the Borrower or any of its Subsidiaries after June 30, 2000 in connection with any offering of Stock or Stock Equivalents of the Borrower and its Subsidiaries taken as a whole. "Moody's" means Moody's Investor Service Inc. "Multiemployer Plan" means, as of any applicable date, a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, and to which any Loan Party, any of its Subsidiaries or any ERISA Affiliate is making, is obligated to make, or within the six-year period ending at such date, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. -19- 26 "Net Income (Loss)" means, for any Person for any period, the aggregate of net income (or loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis in conformity with GAAP. "Net Operating Income" means, with respect to any Hotel, for any period, the sum of the following (without duplication) (a) all gross income, revenues, receipts and all other consideration received by the owner of such Hotel from the operation thereof, including, without limitation, base rent, percentage and similar rentals, late charges and interest payments, but excluding extraordinary income and, until earned, security deposits, prepaid rents and other refundable receipts, minus (b) all expenses incurred by the owner of such Hotel during such period in the operation of such Hotel, including, without limitation, real estate taxes, personal property taxes, maintenance and repair costs of a non-capital nature for the structural portions of such Hotel and premiums payable for insurance on or with respect to such Hotels, but excluding extraordinary expenses. "Non-Funding Lender" has the meaning specified in Section 2.13(f). "Non-Recourse Indebtedness" of any Person means all Indebtedness of such Person with respect to which recourse for payment is limited to specific assets encumbered by a Lien securing such Indebtedness; provided, however, that personal recourse of a holder of Indebtedness against any obligor with respect thereto for fraud, misrepresentation, misapplication of cash, waste and other circumstances customarily excluded from non-recourse provisions in non-recourse financing of real estate shall not, by itself, prevent any Indebtedness from being characterized as Non-Recourse Indebtedness, provided further that if a personal recourse claim is made in connection therewith, such claim shall not constitute Non-Recourse Indebtedness for the purposes of this Agreement. "Notice of Borrowing" has the meaning specified in Section 2.2(a). "Notice of Conversion or Continuation" has the meaning specified in Section 2.7(b) hereof. "Obligations" means the Revolving Credit Loans, the obligation to pay Unpaid Drawings and all other advances, debts, liabilities, obligations, covenants and duties owing by the Borrower to the Administrative Agent, any Lender, the Issuing Lender, any Affiliate of any of them or any Indemnitee, of every type and description, present or future, arising under this Agreement or under any other Loan Document, whether direct or indirect (including, without limitation, those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term "Obligations" includes, without limitation, all interest, charges, expenses, fees, attorneys' fees and disbursements and any other sum then payable by the Borrower under this Agreement or any other Loan Document. "OECD" means the Organization for Economic Cooperation and Development. "Operating Lease" means a lease or sublease relating to any Hotel, between the Borrower or any of its Subsidiaries or Eligible Joint Ventures or Unconsolidated Entities, as -20- 27 lessor, and an Operating Lessee, as lessee, substantially in a form as approved by Administrative Agent. "Operating Lessee" means either (x) DJONT or its Subsidiary (provided DJONT owns at least 50% of the voting Stock in such Subsidiary and maintains voting control over such Subsidiary), or (y) any entity listed on Schedule III attached hereto, each as lessee under an Operating Lease. "Operator" means the Operating Lessee and/or the Manager or both (as the case may be) responsible for the operation and management of any Hotel. "Order" means any order, injunction, judgment, decree, ruling, assessment or arbitration award. "Original Revolving Credit Agreement" has the meaning specified in the recitals to this Agreement. "Other Taxes" has the meaning specified in Section 2.14(b). "Participant" has the meaning specified in Section 2.19(a). "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Pension Plan" means a plan, other than a Multiemployer Plan, which is covered by Title IV of ERISA or Code Section 412 and which any Loan Party, any of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "Permit" means any permit, approval, authorization, license, variance, registration, permission or consent required from a Governmental Authority under an applicable Requirement of Law. "Permitted Covenant" means (i) any periodic reporting covenant, (ii) any covenant restricting payments by the Borrower with respect to any securities of the Borrower which are junior to the Qualified Preferred Stock, (iii) any covenant the default of which can only result in an increase in the amount of any redemption price, or dividend rate, (iv) any covenant the default of which gives rise only to rights or remedies which are subject to subordination terms reasonably acceptable to the Administrative Agent, (v) any covenant providing board membership or observance rights with respect to the Borrower's board of directors and (vi) any other covenant that does not adversely affect the interests of the Lenders (as reasonably determined by the Administrative Agent). "Permitted Liens" means, collectively, (a) Liens arising by operation of law in favor of materialmen, mechanics, warehousemen, carriers, lessors or other similar Persons incurred by the Borrower or any of its Subsidiaries or Eligible Joint Ventures in the ordinary course of business which secure its obligations to such Person; provided, however, that (i) the -21- 28 Borrower or such Subsidiary or Eligible Joint Venture is not in default with respect to such payment obligation to such Person, or (ii) the Borrower or such Subsidiary or Eligible Joint Venture is in good faith and by appropriate proceedings diligently contesting such obligation and adequate provision is made for the payment thereof; (b) Liens (excluding Environmental Liens) securing taxes, assessments or governmental charges or levies; provided, however, that neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures is in default in respect of any payment obligation with respect thereto unless the Borrower or such Subsidiary or Eligible Joint Venture is in good faith and by appropriate proceedings diligently contesting such obligation and adequate provision is made for the payment thereof; (c) zoning restrictions, subleases, licenses or concessions for restaurants, bars, gift shops, antennas, communications equipment and similar agreements entered into in the ordinary course of such Person's business in connection with the ownership and operation of a hotel; and easements, licenses, reservations, restrictions on the use of real property or minor irregularities incident thereto which do not in the aggregate materially detract from the value or use of the property or assets of the Borrower or any of its Subsidiaries or Eligible Joint Venture or impair, in any material manner, the use of such property for the purposes for which such property is held by the Borrower or any such Subsidiary or Eligible Joint Venture; and (d) Liens secured by collateral similar in type to the collateral securing the Pledge Agreement (but not the Collateral, as defined in and pledged under the Pledge Agreement) and securing on an equal and ratable basis the Revolving Credit Loans and any other Indebtedness. "Permitted Transferee" shall be those entities named on Schedule IV. "Person" means an individual, partnership, corporation (including, without limitation, a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a Governmental Authority. "Plan" means an employee benefit plan, as defined in Section 3(3) of ERISA, which any Loan Party or any of its Subsidiaries maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "Pledge Agreement" means that certain Pledge and Security Agreement dated as of April 1, 1999 (a copy of which is attached hereto as Exhibit K), entered into in connection with the Loan Agreement, in which interests in certain entities of or affiliated with the Borrower are pledged under certain circumstances as collateral for, inter alia, the Revolving Credit Loans, as such Pledge Agreement may be amended, modified or supplemented from time to time (including, without limitation, pursuant to the First Amendment to the Pledge Agreement). "Previous Maximum Revolving Credit Amount" has the meaning specified in the recitals to this Agreement. "Previous Term Loans" has the meaning specified in the recitals to this Agreement. "Principal Balance" means, collectively, the outstanding principal balances of the Revolving Credit Notes from time to time. -22- 29 "Projections" means those financial projections covering the fiscal years ending in 2000 through 2004, inclusive, delivered to the Lenders by the Borrower. "Pro Rata Share" means, for any Person, with respect to such Person's Unconsolidated Entities (or Subsidiaries), the percentage ownership interest of such Person in such Unconsolidated Entity (or Subsidiary), provided that, in the event that such Person is the general partner of such Unconsolidated Entity (or Subsidiary), such Person's Pro Rata Share with respect to such Unconsolidated Entity (or Subsidiary) shall be the percentage of the general partner interests owned by such Person in such Unconsolidated Entity (or Subsidiary) with respect to any Indebtedness for which recourse may be made against any general partner of such Unconsolidated Entity (or Subsidiary). "Purchasing Lender" has the meaning specified in Section 2.15. "Qualified Lease" means any Lease (a) which is a direct ground lease granted by the fee owner of real property, (b) which may be transferred and/or assigned without the consent of the lessor (or as to which the Lease expressly provides that (i) such Lease may be transferred and/or assigned with the consent of the lessor and (ii) such consent shall not be unreasonably withheld or delayed), (c) which has a remaining term (including any renewal terms exercisable at the sole option of the lessee) of at least 35 years, (d) under which no material default has occurred and is continuing, (e) with respect to which a security interest may be granted without the consent of the lessor (or as to which the Lease expressly provides that (i) a security interest in such lease may be granted with the consent of the lessor and (ii) such consent shall not be unreasonably withheld or delayed), and (f) which contains lender protection provisions reasonably acceptable to the Administrative Agent. Notwithstanding the foregoing, Qualified Lease shall in any event include each of the Leases described on Schedule V (which Schedule includes (i) all leases existing as of the Restatement Effective Date which satisfy the criteria set forth above and (ii) all leases deemed to be Qualified Leases pursuant to Section 10.1(a)(x) of this Agreement prior to the Restatement Effective Date). "Qualified Preferred Stock" means any preferred stock of either entity comprising the Borrower, so long as the terms of any such preferred stock (i) do not contain any mandatory put, redemption, repayment, sinking fund or other similar provision occurring before August 1, 2006, (ii) expressly provide that (x) dividends on such preferred stock are only payable if dividends are concurrently paid on the Borrower's common stock and (y) no remedies are available to the holders of such preferred stock as a result of the failure to pay dividends other than the election of up to two directors of the Borrower, (iii) do not contain any covenants other than any Permitted Covenant and (iv) do not grant the holders thereof any voting rights except for (x) voting rights required to be granted to such holders under applicable law, (y) limited customary voting rights on fundamental matters such as mergers, consolidations, sales of substantial assets, or liquidations involving the Borrower and (z) limited customary voting rights to elect not more than two directors during any period when dividends are in arrears. "Ratable Portion" or "ratably" means, except as otherwise specifically provided herein, with respect to any Lender, the quotient obtained by dividing the Revolving Credit Commitment of such Lender by the Revolving Credit Commitments of all Lenders and that -23- 30 payments of principal of the Revolving Credit Loans and interest thereon shall be made pro rata in accordance with the respective unpaid principal amounts of the Revolving Credit Loans held by the Lenders. "Real Estate" means all of those plots, pieces or parcels of land now owned or hereafter acquired by the Borrower or any of its Subsidiaries or Unconsolidated Entities (the "Land"), including, without limitation, those listed on Schedule 4.22(a), together with the right, title and interest of the Borrower or such Subsidiary or Unconsolidated Entity, if any, in and to the streets, the land lying in the bed of any streets, roads or avenues, opened or proposed, in front of, adjoining or abutting the Land to the center line thereof, the air space and development rights pertaining to the Land and the right to use such air space and development rights, all rights of way, privileges, liberties, tenements, hereditaments, and appurtenances belonging or in any way appertaining thereto, all fixtures, all easements now or hereafter benefiting the Land and all royalties and rights appertaining to the use and enjoyment of the Land, including, without limitation, all alley, vault, drainage, mineral, water, oil and gas rights, together with all of the buildings and other improvements now or hereafter erected on the Land, and any fixtures appurtenant thereto. "Recourse Indebtedness" of any Person means the sum of the following: (A) all Indebtedness of such Person and its Subsidiaries determined on a consolidated basis in conformity with GAAP as to which recourse for payment is not limited to the specific assets encumbered by a Lien, provided, however, that personal recourse of a holder of Indebtedness against (i) any Subsidiary (or Unconsolidated Entity) of the Borrower formed specifically for the limited purpose of owning specific assets which secure Indebtedness which does not exceed 65% of the value of the assets owned by such Subsidiary (or Unconsolidated Entity) or (ii) any obligor with respect thereto for fraud, misrepresentation, misapplication of cash, waste and other circumstances customarily excluded from non-recourse provisions in non-recourse financing of real estate, shall not, by itself, cause any Indebtedness to be characterized as Recourse Indebtedness, provided further, that if a personal recourse claim is made in connection therewith, such claim shall constitute Recourse Indebtedness for the purposes of this Agreement; plus (B) such Person's Pro Rata Share of Recourse Indebtedness of such Person's Unconsolidated Entities. "Recourse Secured Indebtedness" of any Person means the sum of the following: (A) all Indebtedness of such Person and its Subsidiaries determined on a consolidated basis in conformity with GAAP (x) which is secured by a Lien (other than a Permitted Lien or in connection with the Pledge Agreement) and (y) as to which recourse for payment is not limited to the specific assets encumbered by such Lien, provided, however, that personal recourse of a holder of Indebtedness against (i) any Subsidiary (or Unconsolidated Entity) of Borrower formed specifically for the limited purpose of owning specific assets which secure Indebtedness which does not exceed 65% of the value of the assets owned by such Subsidiary (or Unconsolidated Entity) or (ii) any obligor with respect thereto for fraud, misrepresentation, misapplication of cash, waste and other circumstances customarily excluded from non-recourse provisions in non-recourse financing of real estate, shall not, by itself, cause any Indebtedness to be characterized as Recourse Secured Indebtedness, provided further, that if a personal recourse claim is made in connection therewith, such claim shall constitute Recourse Secured Indebtedness for the -24- 31 purposes of this Agreement; plus (B) such Person's Pro Rata Share of Recourse Secured Indebtedness of such Person's Unconsolidated Entities. "Refurbishment Hotel" shall mean Hotels, designated by Borrower, which (i) will experience or are experiencing a disruption in hotel operations due to refurbishment and (ii) are continuously operating with at least 65% of its rooms in service at all times. Any given Hotel may only be characterized as a Refurbishment Hotel for a maximum of six consecutive Fiscal Quarters provided, however, that the requirement of continuous operation shall not apply with respect to the Allerton Hotel or any other Hotel approved by the Administrative Agent (each, a "Specified Refurbishment Hotel"). "Register" has the meaning specified in Section 10.7. "Release" means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the indoor or outdoor environment or into or out of any property. "Remedial Action" means all actions, including without limitation any Capital Expenditures, required or necessary to (i) clean up, remove, treat or in any other way address any Hazardous Material or other substance in the indoor or outdoor environment, (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material or other substance so it does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (iii) perform pre-remedial studies and investigations or post- remedial monitoring and care, or (iv) bring facilities on any property owned or leased by the Borrower or any of its Subsidiaries into compliance with all Environmental Laws and Environmental Permits. "Reporting Operating Lessee" means any Operating Lessee (other than a wholly-owned Subsidiary of the Borrower) which is a party to Operating Leases which in the aggregate provide at least 25% of Borrower's consolidated Operating Lease revenue. "Requested Operating Lessee" means each Operating Lessee (other than a wholly-owned Subsidiary of the Borrower) which is a party to Operating Leases which in the aggregate provide at least 10% of Borrower's consolidated Operating Lease revenue provided such Operating Lessee has been designated by the Administrative Agent as a Requested Operating Lessee. "Required Guarantor" means any direct or indirect wholly-owned Subsidiary of the Borrower which is formed after the date hereof, provided, the value of the assets of such Subsidiary plus the value of the assets of such Person's Subsidiaries' exceed 2% of Total Value, provided, further, that in the event the aggregate value of the assets of all wholly-owned Subsidiaries which are not Guarantors exceed 2% of Total Value then each direct or indirect wholly-owned Subsidiary formed thereafter shall be deemed a Required Guarantor. Notwithstanding the above, (a) any direct or indirect wholly-owned Subsidiary of the Borrower, whether existing on the date hereof or formed after the date hereof, that is determined at any time to be a Specified Taxable REIT Subsidiary shall be deemed to be a Required Guarantor, (b) any -25- 32 direct or indirect wholly-owned Subsidiary of the Borrower, whether existing on the date hereof or formed after the date hereof, that is determined at any time to be an Excluded Taxable REIT Subsidiary shall be deemed not to be a Required Guarantor and (c) any Special Purpose Subsidiary, whether existing on the date hereof or formed after the date hereof, shall be deemed not to be a Required Guarantor, provided that in the event that the aggregate Indebtedness of all Special Purpose Subsidiaries which are not Guarantors exceeds 25% of Total Value then each Special Purpose Subsidiary formed thereafter shall be deemed a Required Guarantor. "Requirement of Law" means, as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and all federal, state and local laws, rules and regulations, including, without limitation, federal, state or local securities, antitrust and licensing laws, all food, health and safety laws, and all applicable trade laws and requirements, including, without limitation, all disclosure requirements of Environmental Laws, ERISA and all orders, judgments, decrees or other determinations of any Governmental Authority or arbitrator, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" means, with respect to any Person, any of the principal executive officers or general partners of such Person. "Restatement Effective Date" has the meaning specified in Section 3.1. "Restricted Payments" has the meaning specified in Section 7.4. "Revolving Credit Commitment" means, as to each Lender, the commitment of such Lender to make Revolving Credit Loans to the Borrower pursuant to Section 2.1 in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender's name on Schedule I under the caption "Revolving Credit Commitment", as such amount may be reduced or increased pursuant to this Agreement, and "Revolving Credit Commitments" means the aggregate Revolving Credit Commitments of all Lenders. "Revolving Credit Loan" or "Revolving Credit Loans" means the revolving credit loan or loans made or to be made by a Lender (or Lenders) to the Borrower pursuant to Article II. "Revolving Credit Note" means a promissory note of the Borrower payable to the order of any Lender in a stated principal amount equal to the amount of such Lender's Revolving Credit Commitment as originally in effect, in substantially the form of Exhibit A, evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the Revolving Credit Loans made by such Lender and "Revolving Credit Notes" means, collectively the Revolving Credit Notes. "Room Revenues" means Net Rooms Department Revenue (as defined in the Uniform System of Accounts for the Lodging Industry). "S&P" means Standard & Poor's Ratings Services Group and its successors. -26- 33 "Second Amended Revolving Credit Agreement" has the meaning specified in the recitals to this Agreement. "Settlement Date" has the meaning specified in Section 2.16(d). "Sheraton" means Sheraton Operating Corporation or any Person controlled by Starwood Hotels & Resorts Worldwide, Inc. (or its successors or assigns) that is a Manager. "Significant Subsidiary" means, at any date of determination, (i) any Subsidiary of the Borrower which, or (ii) any group of Subsidiaries of the Borrower which when aggregated, at such date, directly or indirectly own(s) or lease(s) one or more Hotels having an aggregate value (calculated on the basis of the Borrower's Investment therein) in excess of 3% of Total Value at such time. "Solvent" means, with respect to any Person, that the value of the assets of such Person (at fair value) is, on the date of determination, greater than the total amount of liabilities (including, without limitation, contingent and unliquidated liabilities) of such Person as of such date and that, as of such date, such Person is able to pay all liabilities of such Person as such liabilities mature and does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Special Purpose Subsidiary" means any direct or indirect wholly-owned Subsidiary of the Borrower (i) formed solely in connection with a securitization or similar financing, (ii) whose assets are subject to Liens securing Indebtedness incurred in connection with such securitization or similar financing, and (iii) that is otherwise restricted in its ability to incur any Indebtedness or engage in any business activities other than with respect to such securitization or similar financing. "Specified Refurbishment Hotel" has the meaning specified in the definition of Refurbishment Hotel. "Specified Taxable REIT Subsidiary" means any Taxable REIT Subsidiary that either (i) is an Operating Lessee or (ii) owns or operates one or more Hotels. "Stated Amount" of each Letter of Credit means, at any time, the maximum amount available to be drawn thereunder (in each case determined without regard to whether any conditions to drawing could then be met). "Status" means the existence of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status, Level VI Status, Level VII Status, Level VIII Status, Level IX Status or Level X Status, as the case may be. As used in this definition: -27- 34 "Level I Status" exists on any date if, on such date, either Borrower has a long-term senior unsecured actual debt rating of A- or better by S&P and A3 or better by Moody's Investor Service, Inc. ("Moody's"); "Level II Status" exists on any date if, on such date, either Borrower has a long-term senior unsecured actual debt rating of BBB+ by S&P and Baa1 by Moody's; "Level III Status" exists on any date if, on such date, either Borrower has a long-term senior unsecured actual debt rating of BBB by S&P and Baa2 by Moody's; "Level IV Status" exists on any date if, on such date, either Borrower has a long-term senior unsecured debt rating of BBB- by S&P and Baa3 by Moody's; "Level V Status" exists on any date if, on such date (y) none of Level I Status through Level IV Status exists and (z) the Leverage Ratio is less than 25%; "Level VI Status" exists on any date if, on such date (y) none of Level I Status through Level IV Status exists and (z) the Leverage Ratio is equal to or greater than 25% but less than 35%; "Level VII Status" exists on any date if, on such date (y) none of Level I Status through Level IV Status exists and (z) the Leverage Ratio is equal to or greater than 35% but less than 40% "Level VIII Status" exists on any date if, on such date (y) none of Level I Status through Level IV Status exists and (z) the Leverage Ratio is equal to or greater than 40% but less than 45%; "Level IX Status" exists on any date if, on such date (y) none of the Level I Status through Level IV Status exists and (z) the Leverage Ratio is equal to or greater than 45% but less than 50%. "Level X Status" exists on any date if, on such date (y) none of Level I Status through Level IV Status exists and (z) the Leverage Ratio is equal to or greater than 50% but less than 55%. If S&P and/or Moody's shall cease to issue ratings of debt securities of real estate investment trusts generally, then the Administrative Agent and the Borrower shall negotiate in good faith to agree upon a substitute rating agency or agencies (and to correlate the system of ratings of each substitute rating agency with that of the rating agency for which it is substituting) and (a) until such substitute rating agency or agencies are agreed upon, Status shall be determined on the basis of the rating assigned by the other rating agency (or, if both S&P and Moody's shall have so ceased to issue such ratings, on the basis of the Status in effect immediately prior thereto) and (b) after such substitute rating agency or agencies are agreed upon, Status shall be determined on the basis of the rating assigned by the other rating agency and such substitute rating agency or the two substitute rating agencies, as the case may be. If the long term senior unsecured -28- 35 actual debt ratings of either Borrower by S&P and Moody's are not equivalent, the higher rating will apply for the purposes of determining Status. If the long term senior unsecured actual debt ratings of either Borrower by S&P and Moody's are two or more Levels apart, the rating one Level below the higher rating will apply for the purposes of determining Status. "Stock" means shares of capital stock, beneficial or partnership interests, participations or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity, whether voting or non-voting, and includes, without limitation, common stock, preferred stock, partnership interests and limited liability company interests. "Stock Equivalents" means all securities (other than Stock) convertible into or exchangeable for Stock and all warrants, options or other rights to purchase or subscribe for any stock, whether or not presently convertible, exchangeable or exercisable. "Subsidiary" means, with respect to any Person (other than FelCor LP with respect to FelCor), at any date, any corporation, partnership or other business entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements in accordance with GAAP, if such statements were prepared as of such date. "Subsidiary Guaranty" means a guaranty, in substantially the form of Exhibit I, executed by each Guarantor, as such guaranty may be amended, supplemented or otherwise modified from time to time. "Super Majority Lenders" means, at any time, Lenders holding at least 66-2/3% of the then aggregate unpaid principal amount of Revolving Credit Loans (excluding Revolving Credit Loans held by Non-Funding Lenders) or, if no such Revolving Credit Loans are then outstanding, Lenders having at least 66-2/3 % of the Revolving Credit Commitments of all Lenders (excluding Non-Funding Lenders). "Swing Advance" has the meaning set forth in Section 2.16. "Swing Advance Bank" means Chase. "Tangible Net Worth" means, with respect to the Borrower at any date, (a) the sum of (i) the total shareholders' equity of FelCor, and (ii) the book value of all partnership interests in FelCor LP owned by Persons other than FelCor; minus (b) the sum of all intangible assets of FelCor, each as shown on the consolidated balance sheet of FelCor as of such date. "Tax Affiliate" means, as to any Person, (i) any Subsidiary of such Person, and (ii) any Affiliate of such Person with which such Person files or is eligible to file consolidated, combined or unitary tax returns. "Tax Return" has the meaning specified in Section 4.3. -29- 36 "Taxable REIT Subsidiary" means any direct or indirect wholly-owned Subsidiary of the Borrower that qualifies as a taxable REIT subsidiary under Section 856(l) of the Code. "Taxes" has the meaning specified in Section 2.14(a). "Telerate Page 3750" means the display designated as "Page 3750" on the Associated Press-Dow Jones Telerate Service (or such other page as may replace Page 3750 on the Associated Press-Dow Jones Telerate Service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association interest settlement rates for U.S. Dollar deposits). Any Eurodollar Rate determined on the basis of the rate displayed on Telerate Page 3750 in accordance with the provisions hereof shall be subject to corrections, if any, made in such rate and displayed by the Associated Press-Dow Jones Telerate Service within one hour of the time when such rate is first displayed by such Service. "Term Loans" shall mean all loans outstanding under the Loan Agreement, dated as of April 1, 1999, among the Borrower, the lenders party hereto, and the Administrative Agent, as amended, modified or supplemented from time to time. "Termination Date" means the earlier of (i) the Final Maturity Date, and (ii) the date of termination in whole of the Revolving Credit Commitments pursuant to Section 2.4 or 8.2. "Third Amended Revolving Credit Agreement" has the meaning specified in the recitals to this Agreement. "Total Indebtedness" of any Person means the sum of the following (without duplication): (a) all Indebtedness of such Person and its Subsidiaries determined on a consolidated basis in conformity with GAAP, plus (b) such Person's Pro Rata Share of Indebtedness of such Person's Unconsolidated Entities, provided, however, Indebtedness of a Person's Subsidiary shall only be included in the calculation of Total Indebtedness to the extent of the greater of (x) such Person's Pro Rata Share of such Indebtedness and (y) the amount of such Indebtedness guaranteed by such Person. "Total Secured Indebtedness" of any Person means any Total Indebtedness of such Person for which the obligations thereunder are secured by a pledge of or other encumbrance (other than a Permitted Lien or in connection with the Pledge Agreement) on any assets of such Person or its Subsidiaries or Unconsolidated Entities. "Total Value" means the sum of: (A) for Hotels owned or leased pursuant to a Qualified Lease (including newly acquired Hotels and Hotels to be immediately acquired using the proceeds of any Revolving Credit Loans), other than Hotels described in clause (B) below, Adjusted NOI on a consolidated basis from such Hotels for the preceding four (4) Fiscal Quarters divided by ten percent (10%); plus -30- 37 (B) for Hotels owned or leased pursuant to a Qualified Lease by Borrower (or any Subsidiary or Unconsolidated Entity of Borrower) (x) for less than four (4) fiscal Quarters and for which the Borrower (or any Subsidiary or Unconsolidated Entity of Borrower) does not have, or is not able to reasonably obtain, trailing four quarter audited financial information or (y) which the Borrower has designated as a Refurbishment Hotel, in each such case 95% of the Borrower's Investment in such Hotels (provided that if the Allerton Hotel is designated as a Refurbishment Hotel, then such Hotel (together with any other Specified Refurbishment Hotel) shall be valued at 85% of the Borrower's Investment in such Hotel); plus (C) the sum of $15,000,000, being the agreed aggregate sum of the Borrower's investment at cost in (x) certain vacant land at the Kingston Plantation Hotel in Myrtle Beach, South Carolina, and (y) Promus/FCH Condominium Company, L.L.C.; plus (D) unencumbered Cash or Cash Equivalents held by the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) plus the Borrower's Pro Rata Share of unencumbered Cash or Cash Equivalents held by the Borrower's Unconsolidated Entities; provided, however, that in the case of (A) above, Adjusted NOI with respect to a Hotel shall only be included in the calculation of Total Value if such Hotel is, as at the date of such calculation, owned or leased by Borrower, its Subsidiary or its Unconsolidated Entity but only to the extent (i) in the case of Adjusted NOI attributable to the Borrower's Subsidiaries, financial statements prepared in accordance with GAAP would consolidate such Subsidiary with the Borrower and (ii) in the case of Adjusted NOI attributable to the Borrower's Unconsolidated Entities, of the Borrower's Pro Rata Share of such Adjusted NOI, and provided further, in the case of (B) above, the Borrower's Investment with respect to a Hotel shall only be included in the calculation of Total Value if such Hotel is, as of the date of such calculation, owned by the Borrower, its Subsidiary or Unconsolidated Entity. Notwithstanding the foregoing, in no event shall more than 20% of Total Value be attributable to Refurbishment Hotels which are valued at 95% (or 85% in the case of the Allerton Hotel or any other Specified Refurbishment Hotel) of Borrower's Investment. "Unconsolidated Entity" means, with respect to any Person, at any date, any other Person in whom such Person holds an Investment, which Investment is accounted for in the financial statements of such Person on an equity basis of accounting and whose financial results would not be consolidated under GAAP with the financial results of such Person on the consolidated financial statements of such Person, if such statements were prepared as of such date. "Unencumbered" means, with respect to any Hotel, at any date of determination, the circumstance that such Hotel on such date: (a) is not subject to any Liens (including restrictions on transferability or assignability) of any kind (including any such Lien or restriction imposed by (i) any agreement governing Indebtedness, and (ii) the organizational documents of the Borrower -31- 38 or any of its Subsidiaries or Eligible Joint Ventures, but excluding Permitted Liens and, in the case of any Qualified Lease (to the extent permitted by the definition thereof), restrictions on transferability or assignability in respect of such Lease); (b) is not subject to any agreement (including (i) any agreement governing Indebtedness, and (ii) if applicable, the organizational documents of the Borrower or any of its Subsidiaries or Eligible Joint Ventures) which prohibits or limits the ability of the Borrower or any of its Subsidiaries or Eligible Joint Ventures to create, incur, assume or suffer to exist any Lien upon such Hotel, other than Permitted Liens (excluding any agreement or organizational document (x) which limits generally the amount of Indebtedness which may be incurred by the Borrower or its Subsidiaries or Eligible Joint Ventures or (y) which requires the consent of partners (or the equivalent) in such Eligible Joint Venture (other than the Borrower or its wholly owned Subsidiaries) to create, incur, assume or suffer to exist any Lien upon such Hotel); and (c) is not subject to any agreement (including any agreement governing Indebtedness) which entitles any Person to the benefit of any Lien (other than Permitted Liens) on such Hotel, or would entitle any Person to the benefit of any such Lien upon the occurrence of any contingency (other than pursuant to an "equal and ratable" clause contained in any agreement governing Indebtedness). For the purposes of this Agreement, any Joint Venture Hotel or Hotel owned by the Borrower, or a Subsidiary of the Borrower shall not be deemed to be Unencumbered unless both (i) such Hotel and (ii) all Stock owned directly or indirectly by either FelCor or FelCor LP in the entity that owns such Hotel is Unencumbered (other than by a Permitted Lien or in connection with the Pledge Agreement). "Unencumbered Hotel Property" means, collectively, (a) such of the Hotels owned or leased by the Borrower or any of its direct or indirect wholly-owned Subsidiaries, and (b) such of the Joint Venture Hotels, as in each case shall meet at any time and from time to time, each of the following minimum criteria: (a) such Hotel is Unencumbered; (b) such Hotel is free of all material structural and title defects and other material adverse matters; (c) such Hotel is, as of the date upon which such Hotel is included as an Unencumbered Hotel Property and as of the end of each succeeding Fiscal Quarter, (i) in compliance, in all material respects, with all applicable Environmental Laws, and (ii) not subject to any material Environmental Liabilities and Costs, in each case as initially verified by a written report of an environmental consultant reasonably acceptable to the Administrative Agent; -32- 39 (d) such Hotel is (i) owned in fee simple by, or (ii) leased pursuant to a Qualified Lease in favor of, the Borrower or its direct or indirect wholly-owned Subsidiary or an Eligible Joint Venture; provided that, if a Joint Venture Hotel is owned by an Eligible Joint Venture which owns more than a single Hotel, such Joint Venture Hotel shall only be an Unencumbered Hotel Property if it satisfies all of the requirements set forth in subparagraphs (a) through (d) above and all other Hotels owned by such Eligible Joint Venture satisfy the conditions set forth in subparagraphs (a) and (c) above, provided further, that the parties acknowledge and agree that the Embassy Suites Hotel located at Los Angeles Airport, CA is subject to a mortgage in favor of FelCor LP but the Administrative Agent has agreed, as a one time waiver only, to accept such Hotel as Unencumbered (for purposes of clause (a) above) provided that such Hotel shall cease to be Unencumbered (for purposes of clause (a) above), inter alia, in the event that FelCor LP assigns its mortgage to any other Person. "Unencumbered NOI" means Adjusted NOI from each Unencumbered Hotel Property, provided, that (i) only Borrower's JV% of Adjusted NOI generated by any Joint Venture Hotel shall be included in Unencumbered NOI and (ii) in no event shall more than 25% of Unencumbered NOI be attributable to Unencumbered Hotel Properties leased pursuant to Qualified Leases. "Unpaid Drawing" has the meaning specified in Section 2.20(a). "Unsecured Indebtedness" of any Person means any Indebtedness of such Person not required to be included in the computation of Total Secured Indebtedness of such Person. "Unsecured Interest Expense" means, for any Person for any period, the greater of (I) the sum of (a) the total interest expense in respect of all Unsecured Indebtedness of such Person (excluding, on an annual basis, up to $3,000,000 of noncash expense which is attributable to the amortization of costs and expenses incurred in connection with the incurrence of such Indebtedness) and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP, plus capitalized interest of such Person and its Subsidiaries in respect of Unsecured Indebtedness, plus (b) such Person's Pro Rata Share of Unsecured Interest Expense of such Person's Unconsolidated Entities and (II) 7.5% of the sum of (a) the average outstanding balance of all Unsecured Indebtedness of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP plus (b) such Person's Pro Rata Share of Unsecured Indebtedness of such Person's Unconsolidated Entities for such period. 1.2. Computation of Time Periods. In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including". 1.3. Accounting Terms. All accounting terms not specifically defined herein shall be construed in conformity with GAAP and all accounting determinations required to be -33- 40 made pursuant hereto shall, unless expressly otherwise provided herein, be made in conformity with GAAP. 1.4. Certain Terms. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole, and not to any particular Article, Section, subsection or clause in this Agreement. References herein to an Exhibit, Schedule, Article, Section, subsection or clause refer to the appropriate Exhibit or Schedule to, or Article, Section, subsection or clause in this Agreement. ARTICLE II AMOUNTS AND TERMS OF THE LOANS AND LETTERS OF CREDIT 2.1. The Revolving Credit Loans. On the terms and subject to the conditions contained in this Agreement (including, on and after the initial Additional Revolving Credit Commitment Date, Section 2.21), each Lender severally agrees to make loans (each a "Revolving Credit Loan") to the Borrower from time to time on any Business Day during the period from the Restatement Effective Date until (but not including) the Termination Date in an aggregate amount not to exceed at any time outstanding such Lender's Revolving Credit Commitment; provided, however, that at no time shall any Lender be obligated to make a Revolving Credit Loan in excess of such Lender's Ratable Portion of the Available Credit. Within the limits of each Lender's Revolving Credit Commitment, amounts prepaid pursuant to Section 2.6(b) may be reborrowed under this Section 2.1. The Revolving Credit Loans of each Lender shall be evidenced by the Revolving Credit Note to the order of such Lender. 2.2. Making the Revolving Credit Loans. (a) Each Borrowing shall be made on notice, given by the Borrower to the Administrative Agent not later than (i) 11:00 A.M. (New York City time) on the third (3rd) Business Day prior to the date of the proposed Borrowing in the case of Eurodollar Rate Loans, and (ii) 11:00 A.M. (New York City time) on the Business Day prior to the date of the proposed Borrowing in the case of Base Rate Loans. Each such notice (a "Notice of Borrowing") shall be in substantially the form of Exhibit B, specifying therein (i) the date of such proposed Borrowing, (ii) the aggregate amount of such proposed Borrowing, (iii) the amount thereof, if any, requested to be Eurodollar Rate Loans, and (iv) the initial Interest Period for any such Eurodollar Rate Loans. The Revolving Credit Loans shall be made as Base Rate Loans unless (subject to Section 2.11) the Notice of Borrowing specifies that all or a pro rata portion thereof shall be Eurodollar Rate Loans; provided, however, that the aggregate of the Eurodollar Rate Loans for each Interest Period must be in an amount of not less than $5,000,000 or an integral multiple of $500,000 in excess thereof. (b) The Administrative Agent shall give to each Lender prompt notice of the Administrative Agent's receipt of a Notice of Borrowing and, if Eurodollar Rate Loans are properly requested in such Notice of Borrowing, the applicable interest rate under Section 2.8, and each Lender's Ratable Portion of the proposed Borrowing. Each Lender shall, before 12:00 Noon (New York City time) on the date of the proposed Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 10.2, in immediately available funds, such Lender's Ratable Portion of such proposed -34- 41 Borrowing. By 12:00 Noon (New York City time) in the case of Eurodollar Rate Loans and Base Rate Loans, on the date specified by the Borrower in the Notice of Borrowing, subject to fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address; provided that in the event that the Administrative Agent shall have received notice from a Lender prior to the date of any proposed Borrowing that such Lender will not make available to the Administrative Agent such Lender's Ratable Portion of such Borrowing, the Administrative Agent shall be under no obligation to fund such Lender's Ratable Portion of such Borrowing amended, supplemented or otherwise modified from time to time to the extent permitted by this Agreement. (c) Each Base Rate Loan shall be in an aggregate amount of not less than $1,000,000 or an integral multiple of $100,000 in excess thereof. (d) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any proposed Borrowing which the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Loans, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such proposed Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including, without limitation, loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund any Eurodollar Rate Loan to be made by such Lender as part of such proposed Borrowing when such Eurodollar Rate Loan, as a result of such failure, is not made on such date. (e) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any proposed Borrowing that such Lender will not make available to the Administrative Agent such Lender's Ratable Portion of such Borrowing, the Administrative Agent may assume that such Lender has made such Ratable Portion available to the Administrative Agent on the date of such Borrowing in accordance with this Section 2.2 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such Ratable Portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to the Revolving Credit Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Revolving Credit Loan as part of such Borrowing for purposes of this Agreement. If the Borrower shall repay to the Administrative Agent such corresponding amount, such payment shall not relieve such Lender of any obligation it may have to the Borrower hereunder. (f) The failure of any Lender to make the Revolving Credit Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Revolving Credit Loan on the date of such Borrowing, but no Lender shall -35- 42 be responsible for the failure of any other Lender to make the Revolving Credit Loan to be made by such other Lender on the date of any Borrowing. 2.3. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender, a commitment fee (the "Commitment Fee") equal to the Applicable Margin then in effect for the Commitment Fee times the average daily unused portion of such Lender's Revolving Credit Commitment, from the date hereof until the Termination Date. The Commitment Fee shall be payable in arrears with respect to each full and partial calendar quarter on (i) the last Business Day of each calendar quarter during the term of such Lender's Revolving Credit Commitment, commencing September 30, 2000, (ii) the date of any reduction of the Revolving Credit Commitments pursuant to Section 2.4 and (iii) the Termination Date. For purposes of this Section 2.3, Swing Advances shall be included as part of the unused portion of the Revolving Credit Commitments. (b) The Borrower agrees to pay to the Administrative Agent for distribution to each Lender (based on its respective Ratable Portion) a fee in respect of each Letter of Credit issued hereunder (the "Letter of Credit Fee"), for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate per annum equal to the Applicable Margin then in effect for Revolving Credit Loans maintained as Eurodollar Rate Loans on the daily average Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be payable in arrears with respect to each calendar quarter on (i) the last Business Day of each calendar quarter in which any Letter of Credit is outstanding, (ii) the date on which no Letters of Credit remain outstanding and (iii) the Termination Date. (c) The Borrower agrees to pay to the Issuing Lender, for its own account, a facing fee in respect of each Letter of Credit issued by it hereunder (the "Facing Fee") for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate per annum equal to 0.125 % of the daily average Stated Amount of such Letter of Credit. Accrued Facing Fees shall be payable in arrears with respect to each calendar quarter on (i) the last Business Day of each calendar quarter in which such Letter of Credit is outstanding, (ii) the date upon which such Letter of Credit has been terminated in accordance with its terms and (iii) the Termination Date. (d) The Borrower shall pay, upon each Drawing under, issuance of, or amendment to, any Letter of Credit, such amount as shall at the time of such event be the administrative charge which the Issuing Lender is generally imposing in connection with such occurrence with respect to letters of credit. (e) The Borrower has agreed to pay to Chase additional fees, the amount and dates of payment of which are embodied in a separate agreement between the Borrower and Chase. 2.4. Reduction and Termination of the Commitments. The Borrower may, upon at least three Business Days' prior notice to the Administrative Agent, terminate in whole or reduce ratably in part the unused portions of the respective Revolving Credit Commitments of -36- 43 the Lenders; provided, however, that each partial reduction shall be in the aggregate amount of not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof. 2.5. Repayment. The Borrower shall repay the entire unpaid principal amount of the Revolving Credit Loans on the Termination Date. 2.6. Prepayments. (a) The Borrower shall have no right to prepay the principal amount of any Revolving Credit Loan other than as provided in this Section 2.6. (b) The Borrower may, upon at least two (2) Business Days' prior notice to the Administrative Agent, stating the proposed date and aggregate principal amount of the prepayment, prepay the outstanding principal amount of the Revolving Credit Loans in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that any prepayment of any Eurodollar Rate Loan made other than on the last day of an Interest Period for such Revolving Credit Loan shall be subject to payment by the Borrower to the Administrative Agent of any costs, fees or expenses incurred by any Lender in connection with such prepayment including, without limitation, any costs to unwind any Eurodollar Rate contracts; and, provided further, that each partial prepayment shall be in an aggregate principal amount not less than $3,000,000 or integral multiples of $100,000 in excess thereof. Upon the giving of such notice of prepayment, the principal amount of the Revolving Credit Loans specified to be prepaid shall become due and payable on the date specified for such prepayment. (c) If at any time the Borrower shall not be in compliance with the covenant contained in Section 5.1 hereof, (a "Financial Covenant Imbalance"), the Borrower shall prepay the Revolving Credit Loans then outstanding in an amount necessary to cure such Financial Covenant Imbalance, together with accrued interest as follows: (i) in the event that the Financial Covenant Imbalance is due to (A) any sale, conveyance, transfer, assignment or other disposition of an Unencumbered Hotel Property, (B) a financing secured by a Hotel or (C) a Drawing, the prepayment shall be made within one (1) Business Day of such event occurring; (ii) in the event that the Financial Covenant Imbalance is due to any (A) condemnation or taking by eminent domain of an Unencumbered Hotel Property, or (B) loss, damage or destruction by casualty to any Hotel, the prepayment shall be made within one (1) Business Day after receipt by the Borrower or its Subsidiary or Eligible Joint Venture of the condemnation award or insurance proceeds relating to such event; (iii) INTENTIONALLY DELETED; or (iv) in the event that the Financial Covenant Imbalance is due to a determination by the Administrative Agent, after review of the applicable Hotel Documents, that an Unencumbered Hotel Property, represented by Borrower in a Compliance Certificate to be an Unencumbered Hotel Property, fails to meet (and never actually met) the requirements for Unencumbered Hotel Properties set forth herein, the prepayment shall be -37- 44 made within 5 Business Days of the Administrative Agent notifying Borrower of such Hotel's failure to meet the Unencumbered Hotel Property requirements. (d) If at any time the aggregate principal amount of Revolving Credit Loans outstanding at such time exceeds the Revolving Credit Commitments at such time, the Borrower shall forthwith prepay the Revolving Credit Loans then outstanding in an amount equal to such excess, together with accrued interest. 2.7. Conversion/Continuation Option. (a) Swing Advances shall be automatically converted to Base Rate Loans on the Business Day following the date of borrowing thereof. (b) The Borrower may elect (i) at any time to convert Base Rate Loans or any portion thereof to Eurodollar Rate Loans, (ii) at any time to convert Swing Advances or any portion thereof to Base Rate Loans or Eurodollar Rate Loans, or (iii) at the end of any Interest Period with respect thereto, to convert Eurodollar Rate Loans or any portion thereof into Base Rate Loans, or to continue such Eurodollar Rate Loans or any portion thereof for an additional Interest Period; provided, however, that the aggregate of the Eurodollar Rate Loans for each Interest Period therefor must be in the amount of $5,000,000 or an integral multiple of $500,000 in excess thereof. Each conversion or continuation shall be allocated among the Revolving Credit Loans of all Lenders in accordance with their Ratable Portion. Each such election shall be in substantially the form of Exhibit C hereto (a "Notice of Conversion or Continuation") and shall be made by giving the Administrative Agent at least three (3) Business Days' prior written notice thereof specifying (A) the amount and type of conversion or continuation, (B) in the case of a conversion to or a continuation of Eurodollar Rate Loans, the Interest Period therefor, and (C) in the case of a conversion, the date of conversion (which date shall be a Business Day and, if a conversion from Eurodollar Rate Loans, shall also be the last day of the Interest Period therefor). The Administrative Agent shall promptly notify each Lender of its receipt of a Notice of Conversion or Continuation and of the contents thereof and such Lender's Ratable Portion of the Revolving Credit Loans to be converted. Notwithstanding the foregoing, no conversion in whole or in part of Base Rate Loans or Swing Advances to Eurodollar Rate Loans, and no continuation in whole or in part of Eurodollar Rate Loans upon the expiration of any Interest Period therefor, shall be permitted at any time at which a Default or an Event of Default shall have occurred and be continuing. If, within the time period required under the terms of this Section 2.7, the Administrative Agent does not receive a Notice of Conversion or Continuation from the Borrower containing a permitted election to continue any Eurodollar Rate Loans for an additional Interest Period or to convert any such Revolving Credit Loans, then, upon the expiration of the Interest Period therefor, such Revolving Credit Loans will be automatically converted to Base Rate Loans. Each Notice of Conversion or Continuation shall be irrevocable. 2.8. Interest. (a) The Borrower shall pay interest on the unpaid principal amount of each Revolving Credit Loan from the date thereof until the principal amount thereof shall be paid in full, at the following rates per annum: (i) For Base Rate Loans and Swing Advances, at a rate per annum equal at all times to the Base Rate in effect from time to time plus the Applicable Margin, payable -38- 45 monthly on the first day of each month, on the Termination Date and on the date any Base Rate Loan is converted or paid in full. (ii) For Eurodollar Rate Loans, at a rate per annum equal at all times during the applicable Interest Period for each Eurodollar Rate Loan to the sum of the Eurodollar Rate for such Interest Period plus the Applicable Margin in effect on the most recent Applicable Margin Reset Date, payable on the last day of such Interest Period, on the Termination Date and, if such Interest Period has a duration of more than three months, on the last day of each calendar quarter during such Interest Period commencing on September 30, 2000. (b) If the principal indebtedness of the Revolving Credit Loans is declared immediately due and payable by the Administrative Agent pursuant to the provisions of this Agreement or any other Loan Document, or if the Revolving Credit Loans are not paid in full on the Termination Date, the Borrower shall thereafter, unless and until such date, if any, as the Super Majority Lenders may elect, in their sole and absolute discretion, to waive, in writing, all or any portion of such default rate interest, pay interest on the principal sum then remaining unpaid from the date of such declaration or the Termination Date, as the case may be, until the date on which the principal sum then outstanding is paid in full (whether before or after judgment), at a rate per annum (calculated for the actual number of days elapsed on the basis of a 360-day year) equal to the greater, on a daily basis, of (x) 13% or (y) 4% plus the Base Rate, provided, however, that such interest rate shall in no event exceed the maximum interest rate which the Borrower may by law pay. 2.9. Interest Rate Determination and Protection. (a) The Eurodollar Rate for each Interest Period for Eurodollar Rate Loans shall be determined by the Administrative Agent two (2) Business Days before the first day of such Interest Period. (b) The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.8(a) or (b). (c) If, with respect to Eurodollar Rate Loans, the Majority Lenders in good faith notify the Administrative Agent that the Eurodollar Rate for any Interest Period therefor will not adequately reflect the cost to such Majority Lenders of making such Revolving Credit Loans or funding or maintaining their respective Eurodollar Rate Loans for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate Loan will automatically, on the last day of the then existing Interest Period therefor, convert into a Base Rate Loan; and (ii) the obligations of the Lenders to make Eurodollar Rate Loans or to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended until the Administrative Agent shall notify the Borrower that such Lenders have determined that the circumstances causing such suspension no longer exist. -39- 46 2.10. Increased Costs. If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation (other than any change by way of imposition or increase of reserve requirements included in determining the Eurodollar Rate Reserve Percentage) or (ii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Eurodollar Rate Loans, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. If the Borrower so notifies the Administrative Agent within five Business Days after any Lender notifies the Borrower of any increased cost pursuant to the foregoing provisions of this Section 2.10, the Borrower may either (A) prepay in full all Eurodollar Rate Loans of such Lender then outstanding in accordance with Section 2.6(b) and, additionally, reimburse such Lender for such increased cost in accordance with this Section 2.10 or (B) convert all Eurodollar Rate Loans of all Lenders then outstanding into Base Rate Loans in accordance with Section 2.7 and, additionally, reimburse such Lender for such increased cost in accordance with this Section 2.10. 2.11. Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to make Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate Loans, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) the obligation of such Lender to make or to continue Eurodollar Rate Loans and to convert Base Rate Loans into Eurodollar Rate Loans shall terminate and (ii) the Borrower shall forthwith prepay in full all Eurodollar Rate Loans of such Lender then outstanding, together with interest accrued thereon, unless the Borrower, within five Business Days of such notice and demand, converts all Eurodollar Rate Loans of all Lenders then outstanding into Base Rate Loans. 2.12. Capital Adequacy. If (i) the introduction of or any change in or in the interpretation of any law or regulation, (ii) compliance with any law or regulation, or (iii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by any Lender or any corporation controlling any Lender and such Lender reasonably determines that such amount is based upon the existence of such Lender's Revolving Credit Commitments, Letters of Credit or Revolving Credit Loans and its other commitments, letters of credit or loans of this type, then, upon demand by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's Revolving Credit Commitments, Revolving Credit Loans, Letter of Credit Outstandings or commitments to issue Letters of Credit. A certificate as to such amounts -40- 47 submitted to the Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes absent manifest error. 2.13. Payments and Computations. (a) The Borrower shall make each payment hereunder and under the Revolving Credit Notes not later than 11:00 A.M. (New York City time) on the day when due, in Dollars, to the Administrative Agent at its address referred to in Section 10.2 in immediately available funds without set-off or counterclaim. The Administrative Agent will promptly thereafter cause to be distributed immediately available funds relating to the payment of principal or interest or fees (other than amounts payable pursuant to Section 2.10, 2.11, 2.12, 2.14 or 2.16) to the Lenders, in accordance with their respective Ratable Portions, for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. To the extent the foregoing payments are received by the Administrative Agent prior to 11:00 A.M. (New York City time) and are not distributed to the Lenders on the same day, the Administrative Agent shall pay to each Lender in addition to the amount distributed to such Lender, interest thereon, for each day from the date such amount is received by the Administrative Agent until the date such amount is distributed to such Lender, at the Federal Funds Rate. Payment received by the Administrative Agent after 11:00 A.M. (New York City time) shall be deemed to be received on the next Business Day. (b) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or under any Revolving Credit Loan held by such Lender, to charge from time to time against any or all of the Borrower's accounts with such Lender any amount so due. (c) All computations of interest based on the Base Rate, the Eurodollar Rate or the Federal Funds Rate and of fees shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest and fees are payable. Each determination by the Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Revolving Credit Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fee, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of any Eurodollar Rate Loan to be made in the next calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due hereunder to the Lenders that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due -41- 48 date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate. (f) If any Lender (a "Non-Funding Lender") has (x) failed to make a Revolving Credit Loan required to be made by it hereunder, and the Administrative Agent has determined that such Lender is not likely to make such Revolving Credit Loan, (y) given notice to the Borrower or the Administrative Agent that it will not make, or that it has disaffirmed or repudiated any obligation to make, Revolving Credit Loans, in each case by reason of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 or otherwise or (z) failed to comply with its obligations pursuant to Section 2.19(c), (i) such Non-Funding Lender shall lose any and all voting rights hereunder, and (ii) any payment made on account of the principal of the Revolving Credit Loans outstanding or Unpaid Drawings shall be made as follows: (A) in the case of any such payment made on any date when and to the extent that, in the determination of the Administrative Agent, the Borrower would be able, under the terms and conditions hereof, to reborrow the amount of such payment under the Revolving Loan Commitments and to satisfy any applicable conditions precedent set forth in Article III to such reborrowing, such payment shall be made on account of the outstanding Revolving Credit Loans or Unpaid Drawings held by the Lenders other than the Non-Funding Lender pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans or Unpaid Drawings of such Lenders; (B) otherwise, such payment shall be made on account of the outstanding Revolving Credit Loans or Unpaid Drawings held by the Lenders pro rata according to the respective outstanding principal amounts of such Revolving Credit Loans or Unpaid Drawings; and (C) any payment made on account of interest on the Revolving Credit Loans or Unpaid Drawings shall be made pro rata according to the respective amounts of accrued and unpaid interest due and payable on the Revolving Credit Loans or Unpaid Drawings with respect to which such payment is being made. 2.14. Taxes. (a) Any and all payments by the Borrower under each Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities (excluding, in the case of such Lender or the Administrative Agent, taxes -42- 49 imposed by reason of any failure of such Lender or the Administrative Agent, if such Lender or the Administrative Agent is entitled at such time to a total or partial exemption from withholding that is required to be evidenced by a United States Internal Revenue Service Form W-8BEN (with respect to an income tax treaty) or W-8ECI or any successor or additional form (including but not limited to Form W-8BEN (with respect to the portfolio interest exemption), to deliver to the Administrative Agent or the Borrower, from time to time as required pursuant to Section 2.14(f), such Form W-8BEN (with respect to an income tax treaty) or W-8ECI (as applicable) or any successor or additional form (including but not limited to Form W-8BEN (with respect to the portfolio interest exemption), pursuant to Section 2.14(f) being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including, without limitation, deductions applicable to additional sums payable under this Section 2.14) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (iv) the Borrower shall deliver to the Administrative Agent evidence of such payment to the relevant taxation or other authority. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any political subdivision thereof or any applicable foreign jurisdiction which arise from any payment made under any Loan Document or from the execution, delivery or registration of, or otherwise with respect to, any Loan Document (collectively, "Other Taxes"). (c) The Borrower will indemnify each Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.14) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including, without limitation, for penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes or Other Taxes, the Borrower will furnish to the Administrative Agent, at its address referred to in Section 10.2, the original or a certified copy of a receipt evidencing payment thereof. (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.14 shall survive the payment in full of the Obligations. (f) Prior to the Restatement Effective Date in the case of each Lender that is a signatory hereto, and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender in the case of each other Lender and from time to time thereafter, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any -43- 50 material respect, each Lender organized under the laws of a jurisdiction outside the United States that is entitled to an exemption from United States withholding tax, or that is subject to such tax at a reduced rate under an applicable tax treaty, shall provide the Administrative Agent and the Borrower with two accurate and complete original signed copies of IRS Form W-8ECI or Form W-8BEN (with respect to an income tax treaty) or other applicable form (including but not limited to Form W-8BEN (with respect to the portfolio exemption), certificate or document prescribed by the IRS certifying as to such Lender's entitlement to such exemption or reduced rate with respect to all payments to be made to such Lender hereunder and under the Revolving Credit Notes. Unless the Borrower and the Administrative Agent have received forms or other documents pursuant to this Section 2.14(f) indicating that payments hereunder or under any Revolving Credit Note are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender organized under the laws of a jurisdiction outside the United States. (g) Any Lender claiming any additional amounts payable pursuant to this Section 2.14 shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. 2.15. Sharing of Payments, Etc. If any Lender (other than the Swing Advance Bank or the Issuing Lender) shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set off or otherwise) on account of Revolving Credit Loans made by it (other than pursuant to Section 2.12 or 2.14), and there is either (x) any Swing Advance outstanding in respect of which the Swing Advance Bank has not received payment in full from the Lenders pursuant to Section 2.16(d) or (e) or (y) any Unpaid Drawing in respect of which the Issuing Lender has not received payment in full from the Lenders pursuant to Section 2.19 or 2.20, such Lender (a "Purchasing Lender") shall purchase a participation in all such Swing Advances or Unpaid Drawings, as applicable, in an amount equal to the lesser of such payment and the amount of such Swing Advances or Unpaid Drawings, as applicable, for which the Swing Advance Bank or Issuing Lender has not so received payment in full. If, after giving effect to the foregoing, any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Revolving Credit Loans made by it (other than pursuant to Sections 2.12 or 2.14) in excess of its Ratable Portion of payments on account of the Revolving Credit Loans obtained by all the Lenders, such Purchasing Lender shall forthwith purchase from the other Lenders such participations in their Revolving Credit Loans as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them. 2.16. Swing Advances. (a) The Swing Advance Bank, on the terms and subject to the conditions contained in this Agreement, shall make advances (each a "Swing Advance") to the Borrower from time to time on any Business Day during the period from the date hereof until the day preceding the Termination Date in an aggregate amount not to exceed at any time outstanding the lesser of (i) $15,000,000, and (ii) the Available Credit; provided that the Swing -44- 51 Advance Bank shall not be requested to make a Swing Advance to refinance an outstanding Swing Advance. Within the limits set forth above, Swing Advances repaid may be reborrowed under this Section 2.16. (b) Each Swing Advance shall be made upon a Notice of Borrowing for a Swing Advance being given by the Borrower to the Swing Advance Bank by no later than 11:00 A.M. (New York City time) on the Business Day of the proposed Swing Advance. Upon fulfillment of the applicable conditions set forth in Article III, the Swing Advance Bank will make each Swing Advance available to the Borrower at the Administrative Agent's address no later than 2:00 P.M. (New York City time) on the date notice is received as aforesaid. All Swing Advances shall bear interest at the same rate, and be payable on the same basis, as Base Rate Loans and shall be converted to Base Rate Loans pursuant to Section 2.7(a). (c) Each Swing Advance shall be in an aggregate amount of not less than $1,000,000 or an integral multiple of $100,000 in excess thereof. (d) The Administrative Agent shall give to each Lender prompt notice of the Administrative Agent's receipt of a Notice of Borrowing for a Swing Advance and each Lender's Ratable Portion thereof. Each Lender shall before 12:00 Noon (New York City time) on the next Business Day (the "Settlement Date") make available to the Administrative Agent, in immediately available funds, the amount of its Ratable Portion of the principal amount of such Swing Advance. Upon such payment by a Lender, such Lender shall be deemed to have made a Revolving Credit Loan to the Borrower in the amount of such payment. The Administrative Agent shall use such funds to repay the Swing Advance to the Swing Advance Bank. To the extent that any Lender fails to make such payment to the Swing Advance Bank, the Borrower shall repay such Swing Advance, on demand and, in any event, on the Termination Date. (e) During the continuance of a Default under Section 8.1(e), each Lender shall acquire, without recourse or warranty, an undivided participation in each Swing Advance otherwise required to be repaid by such Lender pursuant to the preceding paragraph, which participation shall be in a principal amount equal to such Lender's Ratable Portion of such Swing Advance, by paying to the Swing Advance Bank on the date on which such Lender would otherwise have been required to make a payment in respect of such Swing Advance pursuant to the preceding paragraph, in immediately available funds, an amount equal to such Lender's Ratable Portion of such Swing Advance. If such amount is not in fact made available to the Swing Advance Bank on the date when the Swing Advance would otherwise be required to be made pursuant to the preceding paragraph, the Swing Advance Bank shall be entitled to recover such amount on demand from that Lender together with interest accrued from such date at the Federal Funds Rate. From and after the date on which any Lender purchases an undivided participation interest in a Swing Advance pursuant to this paragraph (e), the Swing Advance Bank shall promptly distribute to such Lender such Lender's Ratable Portion of all payments of principal and of interest on such Swing Advance, other than those received from a Lender pursuant to this Section 2.16. If any payment made by or on behalf of the Borrower and received by the Swing Advance Bank with respect to any Swing Advance is rescinded or must otherwise be returned by the Swing Advance Bank for any reason and the Swing Advance Bank has made a payment to the Administrative Agent, on account thereof, each Lender shall, upon notice to the -45- 52 Swing Advance Bank, forthwith pay over to the Swing Advance Bank an amount equal to such Lender's pro rata share of the payment so rescinded or returned based on the respective amounts paid in respect thereof to the Lenders pursuant to the preceding paragraph (d). 2.17. Letters of Credit. (a) Subject to and upon the terms and conditions herein set forth, the Borrower may request that the Issuing Lender issue, at any time and from time to time on and after the Restatement Effective Date and prior to the Termination Date, for the account of the Borrower and for the benefit of any holder (or any trustee, agent or other similar representative for any such holders) of L/C Supportable Obligations of the Borrower, an irrevocable standby letter of credit, in a form customarily used by the Issuing Lender or in such other form as has been approved by the Issuing Lender in its discretion (each such standby letter of credit, a "Letter of Credit") in support of such L/C Supportable Obligations. Schedule 2.17 contains a description of all letters of credit issued by the Issuing Lender pursuant to the Existing Credit Facility and which remain outstanding on the Restatement Effective Date. Each such letter of credit, including any extension thereof (each an "Existing Letter of Credit") shall constitute a "Letter of Credit" for all purposes of this Agreement and shall be deemed issued for the account of the Borrower for purposes of Sections 2.3(b), 2.3(c) and 2.19(a) on the Restatement Effective Date. (b) Subject to the terms and conditions contained herein, the Issuing Lender hereby agrees that it will, at any time and from time to time on or after the Restatement Effective Date and prior to the Termination Date, following its receipt of the respective Letter of Credit Request, issue for the account of the Borrower one or more Letters of Credit in support of such L/C Supportable Obligations of the Borrower as are permitted to remain outstanding without giving rise to a Default or Event of Default hereunder, provided that the Issuing Lender shall be under no obligation to issue any Letter of Credit if at the time of such issuance: (i) any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain the Issuing Lender from issuing such Letter of Credit or any requirement of law applicable to the Issuing Lender or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Lender with respect to such Letter of Credit any restriction or reserve or capital requirement (for which the Issuing Lender is not otherwise compensated) not in effect on the date hereof, or any unreimbursed loss, cost or expense which was not applicable, or known to the Issuing Lender as of the date hereof and which the Issuing Lender in good faith deems material to it; or (ii) the Issuing Lender shall have received notice from any Lender prior to the issuance of such Letter of Credit of the type described in the second sentence of Section 2.18(b). (c) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of -46- 53 Credit), would exceed $75,000,000, (ii) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) and the aggregate principal amount of all Revolving Credit Loans then outstanding, would exceed the Revolving Credit Commitments at such time, (iii) each Letter of Credit shall be denominated in Dollars, (iv) each Letter of Credit shall by its terms terminate on or before the earlier of (A) the date which occurs 12 months after the date of the issuance thereof (although any such Letter of Credit may be automatically extendable for successive periods of up to 12 months, but not beyond the tenth Business Day prior to the Termination Date, on terms acceptable to the Issuing Lender) and (B) the tenth Business Day prior to the Termination Date, (v) the Stated Amount of each Letter of Credit upon issuance shall be not less than $100,000 or such lesser amount as is acceptable to the Issuing Lender. 2.18. Letter of Credit Requests. (a) Whenever the Borrower desires that a Letter of Credit be issued for its account, the Borrower shall give the Administrative Agent and the Issuing Lender at least five Business Days' (or such shorter period as is acceptable to the Issuing Lender) written notice thereof. Each notice shall be in the form of Exhibit F (each a "Letter of Credit Request"). (b) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, Section 2.17(c). Unless the Issuing Lender has received notice from any Lender before it issues a Letter of Credit that one or more of the conditions specified in Article III, are not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.17(c), then the Issuing Lender may issue the requested Letter of Credit for the account of the Borrower in accordance with the Issuing Lender's usual and customary practices. Upon the issuance of any Letter of Credit, the Issuing Lender shall promptly notify each Lender of such issuance and such notice shall be accompanied by a copy of the issued Letter of Credit. 2.19. Letter of Credit Participations. (a) Immediately upon the issuance by the Issuing Lender of any Letter of Credit, the Issuing Lender shall be deemed to have sold and transferred to each Lender, other than the Issuing Lender (each such Lender, in its capacity under Section 2.19, a "Participant"), and each such Participant shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Lender, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's Ratable Portion, in such Letter of Credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto (excluding the Facing Fee), and any security therefor or guaranty pertaining thereto. Upon any change in the Revolving Credit Commitments of the Lenders, it is hereby agreed that, with respect to any outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.19 to reflect the new Ratable Portions of the Lenders. (b) In determining whether to pay under any Letter of Credit, the Issuing Lender shall have no obligation relative to the other Lenders other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that -47- 54 they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Issuing Lender under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Issuing Lender any resulting liability to the Borrower or any Lender. (c) In the event that the Issuing Lender makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to the Issuing Lender pursuant to Section 2.20(a), the Issuing Lender shall promptly notify the Administrative Agent, which shall promptly notify each Participant, of such failure, and each Participant shall promptly and unconditionally pay to the Issuing Lender the amount of such Participant's Ratable Portion of such unreimbursed payment in Dollars and same day funds. If the Administrative Agent so notifies any Participant prior to 11: 00 A.M. (New York time) on any Business Day, such Participant shall make available such funds to the Issuing Lender on such Business Day. If and to the extent such Participant shall not have so made its Ratable Portion of the amount of such payment available to the Issuing Lender, such Participant agrees to pay to the Issuing Lender, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Issuing Lender at the overnight Federal Funds Rate. The failure of any Participant to make available to the Issuing Lender its Ratable Portion of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to the Issuing Lender its Ratable Portion of any payment under such Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Issuing Lender such other Participant's Ratable Portion of any such payment. (d) Whenever the Issuing Lender receives a payment of a reimbursement obligation as to which it has received any payments from the Participants pursuant to clause (c) above, the Issuing Lender shall forward such payment to the Administrative Agent, which in turn shall distribute such funds to each Participant in accordance with the terms of Section 2.13. (e) Upon the request of any Participant, the Issuing Lender shall furnish to such Participant copies of any Letter of Credit issued by it and such other documentation as may reasonably be requested by such Participant. (f) The obligations of the Participants to make payments to the Issuing Lender with respect to Letters of Credit issued by it shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (ii) the existence of any claim, setoff, defense or other right which the Borrower or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, the Issuing Lender, any Participant, or any -48- 55 other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; or (v) the occurrence of any Default or Event of Default. 2.20. Agreement to Repay Letter of Credit Drawings. (a) The Borrower hereby agrees to reimburse the Issuing Lender, by making payment to the Administrative Agent in accordance with the terms of the first sentence of Section 2.13, for any drawing (each, a "Drawing") made by it under any Letter of Credit (each such Drawing until reimbursed, an "Unpaid Drawing"), no later than three (3) Business Days after the date of such Drawing, with interest on the amount of such Drawing, to the extent not reimbursed prior to 11: 00 A.M. (New York time) on the date of such Drawing, from and including the date of such Drawing to but excluding the date the Issuing Lender was reimbursed by the Borrower therefor at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Margin for Revolving Credit Loans maintained as Base Rate Loans, provided, however, to the extent such amounts are not reimbursed prior to 11:00 A.M. (New York time) on the third Business Day following such Drawing, interest shall thereafter accrue on the amount (and until reimbursed by the Borrower) at a rate per annum which shall be the Base Rate in effect from time to time plus 4%, in each such case, with interest to be payable on demand. The Issuing Lender shall give the Borrower prompt written notice of each Drawing under any Letter of Credit, provided that the failure to give any such notice shall in no way affect, impair or diminish the Borrower's obligations hereunder. (b) The obligations of the Borrower under this Section 2.20 to reimburse the Issuing Lender with respect to Drawings (including interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any Lender (including in its capacity as the Issuing Lender or as a Participant), or any nonapplication or misapplication by the beneficiary of the proceeds of such Drawing, the Issuing Lender's only obligation to the Borrower being to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Issuing Lender under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Issuing Lender any resulting liability to the Borrower. -49- 56 2.21. Additional Revolving Credit Commitments. (a) The Borrower shall have the right, at any time and from time to time and upon at least 30 days prior written notice to the Administrative Agent, to request on one or more occasions that one or more Lenders (and/or one or more other Persons which will become Lenders as provided below) provide Additional Revolving Credit Commitments and, subject to the applicable terms and conditions contained in this Agreement and the relevant Additional Revolving Loan Commitment Agreement, make Revolving Credit Loans pursuant to Section 2.1, it being understood and agreed, however, that (i) no Lender shall be obligated to provide an Additional Revolving Credit Commitment as a result of any request by the Borrower, (ii) until such time, if any, as (x) such Lender has agreed in its sole discretion to provide an Additional Revolving Credit Commitment and executed and delivered to the Administrative Agent an Additional Revolving Credit Commitment Agreement in respect thereof as provided in Section 2.21(b) and (y) such other conditions set forth in Section 2.21(b) shall have been satisfied, such Lender shall not be obligated to fund any Revolving Credit Loans, or participate in any Letters of Credit, in excess of the amounts provided for in Section 2.1 or 2.19, as the case may be, before giving effect to such Additional Revolving Loan Commitments provided pursuant to this Section 2.21, (iii) any Lender (or, in the circumstances contemplated by clause (vii) below, any other Person which will qualify as an Eligible Assignee) may so provide an Additional Revolving Credit Commitment without the consent of any other Lender (it being understood and agreed that the consent of the Administrative Agent and the Issuing Lender (such consent not to be unreasonably withheld or delayed) shall be required if any such Additional Revolving Credit Commitments are to be provided by a Person which is not already a Lender), (iv) each provision of Additional Revolving Credit Commitments on a given date pursuant to this Section 2.21 shall be in a minimum aggregate amount (for all Lenders (including, in the circumstances contemplated by clause (vii) below, Eligible Assignees who will become Lenders)) of at least $25,000,000, (v) the aggregate amount of all Additional Revolving Credit Commitments permitted to be provided pursuant to this Section 2.21 shall not exceed $250,000,000, (vi) the up-front fees payable to any Lender providing an Additional Revolving Credit Commitment shall be as set forth in the relevant Additional Revolving Loan Commitment Agreement, (vii) if, after the Borrower has requested the then existing Lenders to provide Additional Revolving Credit Commitments pursuant to this Section 2.21 on the terms to be applicable thereto, the Borrower has not received Additional Revolving Credit Commitments in an aggregate amount equal to that amount of the Additional Revolving Credit Commitments which the Borrower desires to obtain pursuant to such request (as set forth in the notice provided by the Borrower to the Administrative Agent as provided above), then the Borrower may request Additional Revolving Credit Commitments from Persons which would qualify as Eligible Assignees hereunder in aggregate amount equal to such deficiency on terms which are no more favorable to such Eligible Assignee in any respect than the terms offered to the Lenders, provided that any such Additional Revolving Credit Commitments provided by any such Eligible Assignee which is not already a Lender shall be in a minimum amount (for such Eligible Assignee) of at least $10,000,000, and (viii) all actions taken by the Borrower pursuant to this Section 2.21(a) shall be done in coordination with the Administrative Agent. (b) At the time of any provision of Additional Revolving Credit Commitments pursuant to this Section 2.21, (i) the Borrower, the Administrative Agent and each such Lender or other Eligible Assignee which agrees to provide an Additional Revolving Credit Commitment -50- 57 (each, an "Additional Revolving Credit Lender") shall execute and deliver to the Administrative Agent an Additional Revolving Credit Commitment Agreement substantially in the form of Exhibit J, subject to such modifications in form and substance reasonably satisfactory to the Administrative Agent as may be necessary or appropriate (with the effectiveness of such Additional Revolving Credit Lender's Additional Revolving Credit Commitment to occur upon delivery of such Additional Revolving Credit Commitment Agreement to the Administrative Agent, the payment of any fees required in connection therewith and the satisfaction of the other conditions in this Section 2.21(b) to the reasonable satisfaction of the Administrative Agent), and (ii) the Borrower shall, in coordination with the Administrative Agent, repay all outstanding Revolving Credit Loans of the Lenders, and incur additional Revolving Credit Loans from other Lenders in each case so that the Lenders participate in each Borrowing of Revolving Credit Loans pro rata on the basis of their respective Revolving Credit Commitments (after giving effect to any increase in the Revolving Credit Commitments pursuant to this Section 2.21) and with the Borrower being obligated to pay the respective Lenders the costs (if any) of the type referred to in Section 10.4(c) in connection with any such repayment and/or Borrowing and (iv) the Borrower shall deliver to the Administrative Agent an opinion, in form and substance reasonably satisfactory to the Administrative Agent, from counsel to the Borrower reasonably satisfactory to the Administrative Agent and dated such date, covering such matters similar to those set forth in the opinion of counsel delivered to the Administrative Agent on the Restatement Effective Date pursuant to Section 3.1 and such other matters as the Administrative Agent may reasonably request. The Administrative Agent shall promptly notify each Lender as to the occurrence of each Additional Revolving Credit Commitment Date, and (w) on each such date, the Revolving Credit Commitments under, and for all purposes of, this Agreement shall be increased by the aggregate amount of such Additional Revolving Credit Commitments, (x) on each such date Schedule I shall be deemed modified to reflect the revised Revolving Credit Commitments of the affected Lenders, (y) upon surrender of any old Revolving Credit Notes by the respective Additional Revolving Credit Lender (or, if lost, a standard lost note indemnity in form and substance reasonably satisfactory to the Borrower), to the extent requested by any Additional Revolving Credit Lender, a new Revolving Credit Note will be issued, at the Borrower's expense, to such Additional Revolving Credit Lender to the extent needed to reflect the revised Revolving Credit Commitment of such Lender and (z) on such date with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations by the Lenders in such Letters of Credit and Unpaid Drawings to reflect the new Ratable Portions of the Lenders. 2.22. Extension of the Final Maturity Date. The Borrower may at any time prior to May 31, 2003 extend the Final Maturity Date from July 31, 2003 to March 31, 2004, subject to the following terms and conditions: (i) the Borrower shall send a written notice indicating its intention to extend the Final Maturity Date to the Administrative Agent and each Lender, which notice (a) must be so delivered no later than May 20, 2003 and (b) shall specify the date of effectiveness of such extension (the "Extension Effective Date") (which Extension Effective Date shall be no earlier than 10 days following the delivery of the notice referred to above, but no later than May 31, 2003), (ii) the Borrower shall deliver to the Administrative Agent a certificate signed by a Responsible Officer of the Borrower stating that no Default or Event of Default has occurred and is continuing as of the Extension Effective Date, and (iii) the Borrower shall pay to -51- 58 each Lender on the Extension Effective Date an extension fee (the "Extension Fee") equal to 0.1875% of such Lender's Revolving Credit Commitment as of the Extension Effective Date. If the Borrower complies with the provisions of clauses (i), (ii) and (iii) of the immediately preceding sentence, then as of the Extension Effective Date the Final Maturity Date shall automatically be extended to March 31, 2004. No more than one extension of the Final Maturity Date shall be made pursuant to this Section 2.21. ARTICLE III CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT AND OF LENDING AND OF ISSUANCE OF LETTERS OF CREDIT 3.1. Conditions Precedent to Effectiveness of this Agreement, to Initial Revolving Credit Loans and Letters of Credit. The effectiveness of this Agreement and the obligation of each Lender to make its initial Revolving Credit Loan hereunder and the obligation of the Issuing Lender to issue a Letter of Credit hereunder is subject to satisfaction of the conditions precedent that the Administrative Agent shall have received counterparts of this Agreement duly executed by each Borrower, each Lender and the Administrative Agent, together with the following, each dated the Restatement Effective Date (hereinafter defined) unless otherwise indicated, in form and substance satisfactory to the Administrative Agent and (except for the Revolving Credit Notes) in sufficient copies for each Lender (the date of satisfaction of the conditions precedent set forth in this Section 3.1 and in Section 3.2 being the "Restatement Effective Date"): (a) The Revolving Credit Notes to the order of the Lenders, respectively. (b) A certificate of the Secretary or an Assistant Secretary of each Loan Party (or, as applicable, of such Loan Party's partners), in substantially the form of Exhibit L, certifying (i) the resolutions of its Board of Trustees or Directors, as appropriate, approving each Loan Document to which it is a party, (ii) all documents evidencing other necessary trust, partnership or corporate action, as appropriate, and required governmental and third party approvals, licenses and consents with respect to each Loan Document to which it is a party and the transactions contemplated thereby and (iii) the names and true signatures of each of its officers who has been authorized to execute and deliver any Loan Document or other document required hereunder to be executed and delivered by or on behalf of such Person. (c) A copy of the declaration of trust or articles or certificate of incorporation or partnership agreement or certificate of partnership, as appropriate, of each Loan Party certified as of a recent date by the Secretary of State of the state of formation of such Loan Party, together with certificates of such official attesting to the good standing of each such Loan Party. (d) Favorable opinion(s) of counsel to the Loan Parties, in substantially the form(s) of Exhibit D, and as to such other matters as any Lender through the Administrative Agent may reasonably request. -52- 59 (e) A certificate of the chief financial officer or treasurer of the Borrower in substantially the form of Exhibit M, stating that the Borrower is Solvent after giving effect to the initial Revolving Credit Loans, the application of the proceeds thereof in accordance with Section 6.10 and the payment of all estimated legal, accounting and other fees related hereto and thereto. (f) Evidence that the insurance required by Section 6.4 is in full force and effect. (g) Such additional documents, information and materials as any Lender, through the Administrative Agent, may reasonably request. (h) A closing certificate, in substantially the form of Exhibit N, signed by a Responsible Officer of the Borrower, stating that the following statements are true and correct on the Restatement Effective Date: (i) The statements set forth in Section 3.3 are true after giving effect to the Revolving Credit Loans being made on the Restatement Effective Date. (ii) All costs and accrued and unpaid fees and expenses (including, without limitation, legal fees and expenses) required to be paid to the Lenders on or before the Restatement Effective Date, including, without limitation, those referred to in Sections 2.3 and 10.4, to the extent then due and payable, have been paid. (iii) All necessary governmental and third party approvals required to be obtained by any Loan Party in connection with the transactions contemplated hereby have been obtained and remain in effect, and all applicable waiting periods have expired without any action being taken by any competent authority which restrains, prevents, impedes, delays or imposes materially adverse conditions upon any of the transactions contemplated hereby. (iv) There exists no judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon any of the transactions contemplated hereby. (v) There exists no claim, action, suit, investigation or proceeding (including, without limitation, shareholder or derivative litigation) pending or, to the knowledge of the Borrower, threatened in any court or before any arbitrator or Governmental Authority which relates to the Loan Documents or the financing hereunder or which, if adversely determined, would have a Material Adverse Effect. (vi) There has been no Material Adverse Change since December 31, 1999 in the corporate, capital or legal structure of the Borrower or any of its Subsidiaries without the consent of the Administrative Agent. (vii) The Borrower's Tangible Net Worth is not less than the Minimum Tangible Net Worth. -53- 60 (i) The Administrative Agent's reasonable satisfaction with the form and substance of each Operating Lease. (j) A Compliance Certificate, executed by the Chief Financial Officer or Treasurer of the Borrower substantially in the form attached as Exhibit G hereto (a "Compliance Certificate"), and if requested by the Administrative Agent, together with copies (to the extent not already delivered) of the Hotel Documents in respect of each Hotel indicated by Administrative Agent. (k) The Subsidiary Guaranty, duly executed by the Guarantors party thereto, which Subsidiary Guaranty shall be in full force and effect. (l) The Pledge Agreement, duly executed by the parties thereto, which Pledge Agreement shall be in full force and effect. (m) The First Amendment to the Pledge Agreement, duly executed by the parties thereto, which First Amendment to the Pledge Agreement shall be in full force and effect. 3.2. Additional Conditions Precedent to Effectiveness of this Agreement, to Initial Revolving Credit Loans and Letters of Credit. The effectiveness of this Agreement, the obligation of each Lender to make its initial Revolving Credit Loan hereunder and the obligation of the Issuing Lender to issue Letters of Credit hereunder is subject to the further conditions precedent that: (a) No Lender or the Issuing Lender in its sole judgment exercised reasonably shall have determined (i) that there has been any Material Adverse Change since December 31, 1999 or (ii) that there has occurred any adverse change which such Lender deems material in the financial markets generally, since December 31, 1999 or (iii) that there is any claim, action, suit, investigation, litigation or proceeding (including, without limitation, shareholder or derivative litigation) pending or threatened in any court or before any arbitrator or Governmental Authority which, if adversely determined, would have a Material Adverse Effect; and nothing shall have occurred since December 31, 1999 which, in the judgment of any Lender, has had a Material Adverse Effect. (b) Each Lender and the Issuing Lender shall be satisfied, in its sole judgment, exercised reasonably, with the corporate, capital, legal and management structure of the Borrower and its Subsidiaries, and shall be satisfied, in its sole judgment exercised reasonably, with the nature and status of all Contractual Obligations, securities, labor, tax, ERISA, employee benefit, environmental, health and safety matters, in each case, involving or affecting the Borrower or any of its Subsidiaries. (c) On the Restatement Effective Date and concurrently with the initial incurrence of Revolving Credit Loans and issuance of Letters of Credit hereunder, (i) all Existing Loans shall have been repaid in full in cash, together with accrued but unpaid interest thereon and (ii) there shall have been paid in cash in full all accrued but unpaid fees under, and as defined in, the Existing Credit Facility (including, without limitation, -54- 61 commitment fees, letter of credit fees and facing fees) accrued but unpaid prior to but excluding the Restatement Effective Date and all other amounts, costs and expenses (including, without limitation, breakage costs, if any, with respect to outstanding Eurodollar Rate Loans under and as defined in the Existing Credit Facility) then owing to any of the Existing Lenders and/or the Administrative Agent, as administrative agent under the Existing Credit Facility, in each case to the satisfaction of the Administrative Agent or the Original Lenders, as the case may be, regardless of whether or not such amounts would otherwise be due and payable at such time pursuant to the terms of the Existing Credit Facility and (iii) all outstanding Notes (as defined in the Existing Credit Facility) issued by the Borrower to the Original Lenders under the Existing Credit Facility shall be deemed canceled. 3.3. Conditions Precedent to Each Revolving Credit Loan and Letter of Credit. The obligation of each Lender to make any Revolving Credit Loan (including any Revolving Credit Loan being made by such Lender on the Restatement Effective Date) and the obligation of the Issuing Lender to issue a Letter of Credit shall be subject to the further conditions precedent that: (a) The following statements shall be true on the date of such Revolving Credit Loan or issuance, before and after giving effect thereto and to the application of the proceeds therefrom (and the acceptance by the Borrower of the proceeds of such Revolving Credit Loan or such Letter of Credit shall constitute a representation and warranty by the Borrower that on the date of such Revolving Credit Loan or issuance such statements are true): (i) The representations and warranties of the Borrower contained in Article IV and of each Loan Party in the other Loan Documents are correct on and as of such date as though made on and as of such date (it being understood and agreed that any representation or warranty which by its terms is made on a specified date shall be required to be true and correct only as of such specified date); and (ii) No Default or Event of Default exists or will result from the Revolving Credit Loans being made or the Letters of Credit being issued on such date. (b) The making of the Revolving Credit Loans or the issuance of the Letters of Credit on such date does not violate any Requirement of Law and is not enjoined, temporarily, preliminarily or permanently. (c) The Administrative Agent shall have received a Compliance Certificate, executed by a Responsible Officer of the Borrower, satisfactory to the Administrative Agent, and if requested by the Administrative Agent, together with copies (to the extent not already delivered) of the Hotel Documents in respect of each Hotel indicated by Administrative Agent. -55- 62 (d) The Administrative Agent shall have received such additional documents, information and materials as any Lender, through the Administrative Agent, may reasonably request. ARTICLE IV REPRESENTATIONS AND WARRANTIES To induce the Lenders and the Administrative Agent to enter into this Agreement, the Borrower represents and warrants to the Lenders and the Administrative Agent that on and after the Restatement Effective Date: 4.1. Existence; Compliance with Law. Each Loan Party and each of its Subsidiaries and Eligible Joint Ventures (i) is a real estate investment trust or a corporation, limited liability company or limited partnership, as specified herein, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; (ii) is duly qualified as a foreign corporation, limited liability company or limited partnership and in good standing under the laws of each jurisdiction where such qualification is necessary, except for failures which in the aggregate have no Material Adverse Effect; (iii) has all requisite corporate, limited liability company or partnership power and authority and the legal right to own, pledge and mortgage its properties, to lease (as lessee) the properties that it leases as lessee, to lease or sublease (as lessor) the properties it owns and/or leases (as lessee) and to conduct its business as now or currently proposed to be conducted; (iv) is in compliance with its declaration of trust or certificate of or formation and by-laws, regulations or partnership agreement, as appropriate; (v) is in compliance with all other applicable Requirements of Law except for such non-compliances as in the aggregate have no Material Adverse Effect; and (vi) has all necessary licenses, permits, consents or approvals from or by, has made all necessary filings with, and has given all necessary notices to, each Governmental Authority having jurisdiction, to the extent required for such ownership, leasing and conduct, except for licenses, permits, consents or approvals which can be obtained by the taking of ministerial action to secure the grant or transfer thereof or failures which in the aggregate have no Material Adverse Effect. 4.2. Power: Authorization, Enforceable Obligations. (a) The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party and the consummation of the transactions related to the financing contemplated hereby: (i) are within such Loan Party's corporate, partnership or trust powers, as appropriate; (ii) have been duly authorized by all necessary corporate, partnership or trust action, as appropriate, including, without limitation, the consent of stockholders and general and/or limited partners where required; (iii) do not and will not (A) contravene any Loan Party's or any of its Subsidiaries' or Eligible Joint Ventures' respective declaration of trust, certificate of incorporation or formation or by-laws, regulations, partnership agreement or other comparable -56- 63 governing documents, (B) violate any other applicable Requirement of Law (including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System), or any order or decree of any Governmental Authority or arbitrator, (C) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any material Contractual Obligation of any Loan Party or any of its Subsidiaries or Eligible Joint Ventures, or (D) result in the creation or imposition of any Lien upon any of the property of any Loan Party or any of its Subsidiaries or Eligible Joint Ventures; and (iv) do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person, other than those which have been obtained or made and copies of which have been or will be delivered to the Administrative Agent pursuant to Section 3. 1, and each of which on the Restatement Effective Date will be in full force and effect. (b) This Agreement has been, and each of the other Loan Documents has been, or will have been upon delivery thereof pursuant to Section 3.1, duly executed and delivered by each Loan Party thereto. This Agreement is, and the other Loan Documents are or will be, when delivered hereunder, the legal, valid and binding obligation of each Loan Party thereto, enforceable against it in accordance with its terms except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting the enforcement of creditor's rights and remedies generally. 4.3. Taxes. All federal, state, local and foreign tax returns, reports and statements (collectively, the "Tax Returns") required to be filed by the Borrower or any of its Tax Affiliates have been filed, except in the case of any such state, local or foreign tax return where such failure to file will not have a Material Adverse Effect, with the appropriate governmental agencies in all jurisdictions in which such Tax Returns, are required to be filed, all such Tax Returns are true and correct in all material respects, and all taxes, charges and other impositions due and payable have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof, except where contested in good faith and by appropriate proceedings if (i) adequate reserves therefor have been established on the books of the Borrower or such Tax Affiliate in conformity with GAAP and (ii) all such non-payments in the aggregate have no Material Adverse Effect. Proper and accurate amounts have been withheld by the Borrower and each of its respective Tax Affiliates from their respective employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authorities. None of the Borrower or any of its Tax Affiliates has (i) executed or filed with the IRS any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any charges; (ii) agreed or been requested to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; or (iii) any obligation under any written tax sharing agreement. -57- 64 4.4. Full Disclosure. No written statement prepared or furnished by or on behalf of any Loan Party or any of its Affiliates in connection with any of the Loan Documents or the consummation of the transactions contemplated thereby, and no financial statement delivered pursuant hereto or thereto, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading. 4.5. Financial Matters. (a) The consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 1999, and the related consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, audited by PricewaterhouseCoopers, L.L.P. and the consolidated balance sheets of the Borrower and its Subsidiaries as at December 31, 1999, and the related consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for the twelve months then ended, certified by the chief financial officer or treasurer of the Borrower, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheets as at December 31, 1999, and said statements of income, retained earnings and cash flows for the twelve months then ended, to year-end audit adjustments, the consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the consolidated results of the operations of the Borrower and its Subsidiaries for the period ended on such dates, all in conformity with GAAP. (b) Since December 31, 1999, there has been no Material Adverse Change and there have been no events or developments that in the aggregate have had a Material Adverse Effect. (c) Neither the Borrower nor any of its Subsidiaries had at December 31, 1999 any material obligation, contingent liability or liability for taxes, long-term leases or unusual forward or long-term commitment which is not reflected in the balance sheet at such date referred to in subsection (a) above or in the notes thereto. (d) The Projections that have been delivered to each Lender, were prepared on the basis of the assumptions expressed therein, which assumptions the Borrower believed to be reasonable based on the information available to the Borrower at the time so furnished and on the Restatement Effective Date. (e) The Borrower is, and on a consolidated basis the Borrower and its Subsidiaries are, Solvent. 4.6. Litigation. There are no pending or, to the knowledge of the Borrower, threatened actions, investigations or proceedings affecting the Borrower, any of its Subsidiaries or Eligible Joint Ventures, or (to the best knowledge of the Borrower) any Operating Lessee or any of their respective properties or revenues before any court, Governmental Authority or arbitrator, other than those that in the aggregate, if adversely determined, would have no Material Adverse Effect. The performance of any action by (a) any Loan Party required or contemplated by any of the Loan Documents or (b) any Operator required or contemplated by any Operating Lease or Management Agreement is not, to the best knowledge of the Borrower, restrained or enjoined (either temporarily, preliminarily or permanently), and, to the best knowledge of the -58- 65 Borrower, no material adverse condition has been imposed by any Governmental Authority or arbitrator upon any of the foregoing transactions contemplated by the aforementioned documents. 4.7. Margin Regulations. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Borrowing will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. 4.8. Ownership of Borrower and DJONT; Subsidiaries. (a) The authorized capital stock of FelCor consists of (i) as of the date hereof 200,000,000 shares of common stock, $.01 par value per share, of which 54,789,452 shares are issued and outstanding as of May 31, 2000, and (ii) as of the date hereof 20,000,000 shares of preferred stock, $.01 par value per share, of which 6,050,000 shares, designated as $1.95 Series A Cumulative Convertible Preferred Stock, $25.00 per share liquidation preference, and 57,500 shares designated as 9% Series B Cumulative Redeemable Preferred Stock, $2,500.00 per share liquidation preference (and represented by 5,750,000 Depository Shares, each representing a 1/100 interest such preferred stock) are outstanding as of May 31, 2000. All of the outstanding capital stock of FelCor has been validly issued, is fully paid and non-assessable. (b) FelCor is the sole general partner of FelCor LP and, as of the date hereof, owns directly or indirectly at least 88% of the partnership interests of FelCor LP free and clear of all Liens. (c) There are no outstanding classes of voting membership interests of DJONT other than the Class A membership interests. As of the date hereof Hervey A. Feldman and Thomas J. Corcoran, Jr. own, beneficially, all of the voting Class A membership interests in DJONT, free and clear of all Liens. (d) Set forth on Schedule 4.8 hereto is a complete and accurate list showing, as of the Restatement Effective Date, all Subsidiaries and Unconsolidated Entities of the Borrower and, as to each such Subsidiary and Unconsolidated Entity, the jurisdiction of its formation and the percentage of the outstanding Stock of each class owned (directly or indirectly) by the Borrower. No Stock of any Subsidiary or Unconsolidated Entity of the Borrower is subject to any outstanding option, warrant, right of conversion or purchase or any similar right other than certain rights of first refusal contained in partnership agreements to which the Borrower or a Subsidiary is a party. All of the outstanding capital Stock of each such Subsidiary and Unconsolidated Entity owned by the Borrower has been validly issued, is fully paid and (except for partnership interests) non- assessable, and all outstanding capital Stock of its Subsidiaries and Unconsolidated Entities owned by the Borrower is free and clear of all Liens, other than Liens created under the Pledge Agreement. Neither the Borrower nor any such Subsidiary or Unconsolidated Entity is a party to, or has knowledge of, any agreement restricting the transfer or hypothecation of any shares of Stock of any such Subsidiary or Unconsolidated Entity, other than those imposed by Requirements of Law, or the Loan Documents; provided that mortgage loan agreements executed by certain Subsidiaries or Eligible Joint Ventures may contain such restrictions. -59- 66 4.9. ERISA. (a) There are no Multiemployer Plans. (b) Each Plan and any related trust intended to qualify under Code Section 401 or 501 has been determined by the IRS to be so qualified and to the best knowledge of the Borrower nothing has occurred which would cause the loss of such qualification. (c) None of the Borrower, any of its Subsidiaries or any ERISA Affiliate, with respect to any Pension Plan, has failed to make any contribution or pay any amount due as required by Section 412 of the Code or Section 302 of ERISA or the terms of any such plan, and all required contributions and benefits have been paid in accordance with the provisions of each such plan. (d) There are no pending or, to the knowledge of the Borrower, threatened claims, actions or proceedings (other than claims for benefits in the normal course), relating to any Plan other than those that in the aggregate, if adversely determined, would have no Material Adverse Effect. (e) No Pension Plan has any unfunded accrued benefit liabilities, as determined by using reasonable actuarial assumptions utilized by such plan's actuary for funding purposes. Within the last five years none of the Borrower, any of its Subsidiaries or any ERISA Affiliate has caused a Pension Plan with any such liabilities to be transferred outside of its "controlled group" (within the meaning of Section 4001(a)(14) of ERISA). (f) No Plan provides for continuing health, disability, accident or death benefits or coverage for any participant or his or her beneficiary after such participant's termination of employment (except as may be required by Section 4980B of the Code and at the sole expense of the participant or the beneficiary) which would result in the aggregate under all Plans in a liability in an amount which would have a Material Adverse Effect. (g) None of the assets of any of the Loan Parties are subject to Title I of ERISA because they consist of "plan assets" within the meaning of DOL Regulation Section 2510.3-101 by reason of an equity investment in any of the Loan Parties. 4.10. Indebtedness. Except as disclosed on Schedule 4.10, as of the date hereof, none of the Borrower or any of its Subsidiaries or Unconsolidated Entities has any Indebtedness. 4.11. Restricted Payments. From and after the Restatement Effective Date, the Borrower has not declared or made any Restricted Payments (other than those permitted pursuant to Section 7.4). 4.12. No Burdensome Restrictions; No Defaults. (a) No Loan Party nor any of its Subsidiaries or Eligible Joint Ventures (i) is a party to any Contractual Obligation the compliance with which would have a Material Adverse Effect or the performance of which by any thereof, either unconditionally or upon the happening of an event, will result in the creation of a Lien on the property or assets of any such Loan Party or its Subsidiaries, or (ii) is subject to any charter or corporate restriction which has a Material Adverse Effect. -60- 67 (b) No Loan Party or Subsidiary or Eligible Joint Venture of any Loan Party is in default under or with respect to any Contractual Obligation owed by it and, to the knowledge of the Borrower, no other party is in default under or with respect to any Contractual Obligation owed to any Loan Party or to any Subsidiary or Eligible Joint Venture of a Loan Party, other than (i) those defaults which in the aggregate have no Material Adverse Effect and (ii) those defaults arising as a result of the Borrower's failure to comply with Section 7.1(c) of the Loan Agreement. (c) No Event of Default or Default has occurred and is continuing, other than pursuant to Section 8.1(d) arising as a result of the Borrower's failure to comply with Section 7.1(c) of the Loan Agreement. (d) There is no Requirement of Law the compliance with which by any Loan Party would have a Material Adverse Effect. (e) As of the date hereof, no Subsidiary or Eligible Joint Venture of the Borrower is subject to any Contractual Obligation (other than as set forth in the governing documents thereof) restricting or limiting its ability to transfer its assets to the Borrower or to declare or make any dividend payment or other distribution on account of any shares of any class of its Stock or its ability to purchase, redeem, or otherwise acquire for value or make any payment in respect of any such shares or any shareholder rights; provided that mortgage loan agreements executed by certain subsidiaries or Eligible Joint Ventures may contain such restrictions. 4.13. Investments. Except as disclosed on Schedule 4.8 or 4.13, the Borrower and its Subsidiaries considered as a single enterprise, is not engaged in any joint venture or partnership with any other Person nor does it maintain any Investment, as of the date hereof. 4.14. Government Regulation. Neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment ", as such terms are defined in the Investment Company Act of 1940, as amended, or subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or any other federal or state statute or regulation such that its ability to incur Indebtedness is limited, or its ability to consummate the transactions contemplated hereby or by any other Loan Document, or the exercise by the Administrative Agent or any Lender of rights and remedies hereunder or thereunder, is impaired. The making of the Revolving Credit Loans by the Lenders, the application of the proceeds and repayment thereof by the Borrower and the consummation of the transactions contemplated by the Loan Documents will not cause the Borrower or any of its Subsidiaries or Eligible Joint Ventures to violate any provision of any of the foregoing or any rule, regulation or order issued by the Securities and Exchange Commission thereunder. 4.15. Insurance. All policies of insurance of any kind or nature owned by or issued to or for the benefit of any Loan Party or any of its Subsidiaries or Eligible Joint Ventures, or issued in respect of any real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures including, without limitation, policies of life, fire, theft, -61- 68 product liability, public liability, property damage, other casualty, employee fidelity, workers' compensation and employee health and welfare insurance, are in full force and effect and are of a nature and provide such coverage as is sufficient and as is customarily carried by companies of the size and character of such Person. No Loan Party or any of its Subsidiaries or Eligible Joint Ventures has been refused insurance for which it applied or had any policy of insurance terminated (other than at its request). 4.16. Labor Matters. (a) There are no strikes, work stoppages, slowdowns or lockouts pending or threatened against or involving the Borrower or its Subsidiaries or their respective Hotels, other than those which in the aggregate have no Material Adverse Effect. (b) There are no unfair labor practice charges, arbitrations or grievances pending against or involving, or to the knowledge of the Borrower threatened against or involving the Borrower or its Subsidiaries or Eligible Joint Ventures, other than those which, in the aggregate, if resolved adversely to the Borrower or such Subsidiary or Eligible Joint Venture, would have no Material Adverse Effect. (c) As of the Restatement Effective Date, neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures are parties to, or have any obligations under, any collective bargaining agreement. (d) There is no organizing activity involving the Borrower or any of its Subsidiaries or Eligible Joint Ventures pending or, to the Borrower's knowledge, threatened by any labor union or group of employees, other than those which in the aggregate have no Material Adverse Effect. There are no representation proceedings pending or, to the Borrower's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of the Borrower or any of its Subsidiaries or Eligible Joint Ventures have made a pending demand for recognition, other than those which in the aggregate have no Material Adverse Effect. 4.17. Force Majeure. Neither the business nor the properties of any Loan Party or any of their respective Subsidiaries or Eligible Joint Ventures are currently suffering from the effects of any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), other than those which in the aggregate have no Material Adverse Effect. 4.18. Use of Proceeds. The proceeds of the Revolving Credit Loans will be used by the Borrower solely as follows: (a) subject to the limitations set forth herein, to fund any direct or indirect investment in existing Hotels, in Hotels and/or interests in Hotels which are to be acquired by the Borrower or any of its Subsidiaries, and for the payment of related transaction costs, fees and expenses and (b) for general corporate or working capital purposes or for Letters of Credit. 4.19. Environmental Protection. Except as disclosed on Schedule 4.19 (and the Borrower represents and warrants to the Lenders and the Administrative Agent that the matters -62- 69 disclosed in the reports identified on Schedule 4.19 would not reasonably be expected to have a Material Adverse Effect): (a) to the best knowledge of Borrower and its Subsidiaries, all real property leased or owned by the Borrower or any of its Subsidiaries or Eligible Joint Ventures is free from contamination by any Hazardous Material which could reasonably be expected to subject the Borrower or any of its Subsidiaries to Environmental Liabilities and Costs of $5,000,000 or more; (b) the operations of the Borrower and each of its Subsidiaries or Eligible Joint Ventures, and the operations at any real property leased or owned by the Borrower or any of its Subsidiaries or Eligible Joint Ventures are in material compliance in all respects with all applicable Environmental Laws; (c) neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures have liabilities with respect to Hazardous Materials and, to the best knowledge of the Borrower and its Subsidiaries, no facts or circumstances exist which could give rise to liabilities with respect to Hazardous Materials which could reasonably be expected to subject the Borrower or any of its Subsidiaries to Environmental Liabilities and Costs of $5,000,000 or more; (d) (i) the Borrower and its Subsidiaries and Eligible Joint Ventures and all real property owned or leased by the Borrower or its Subsidiaries and Eligible Joint Ventures have all Environmental Permits necessary for the operations at such real property and are in material compliance with such Environmental Permits, (ii) there are no Legal Proceedings pending nor, to the best knowledge of the Borrower and its Subsidiaries, threatened to revoke, or alleging the violation of, such Environmental Permits, and (iii) neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures or to the best knowledge of the Borrower and its Subsidiaries the Operators have received any notice from any source to the effect that there is lacking any Environmental Permit required in connection with the current use or operation of any property leased or owned by the Borrower or any of its Subsidiaries or Eligible Joint Ventures; (e) neither the Borrower's nor any of its Subsidiaries' or Eligible Joint Ventures' current facilities and operations, nor, to the best knowledge of the Borrower and its Subsidiaries, any Operator, any predecessor of the Borrower or any of its Subsidiaries or Eligible Joint Ventures, nor any of the Borrower's or its Subsidiaries' or Eligible Joint Ventures' past facilities and operations, nor to the best knowledge of the Borrower and its Subsidiaries, any owner of premises leased or operated by the Borrower and its Subsidiaries and Eligible Joint Ventures, are subject to any outstanding written Order or Contractual Obligation, including Environmental Liens, with any Governmental Authority or other Person, or to any federal, state, local, foreign or territorial investigation respecting (i) Environmental Laws, (ii) Remedial Action, (iii) any Environmental Claim, or (iv) the Release or threatened Release of any Hazardous Material; -63- 70 (f) neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures or, to the best knowledge of the Borrower and its Subsidiaries, Operators are subject to any pending Legal Proceeding alleging the violation of any Environmental Law with respect to a Hotel nor, to the best knowledge of the Borrower and its Subsidiaries, are any such proceedings threatened; (g) neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures nor, to the best knowledge of the Borrower and its Subsidiaries, any Operators or predecessor of the Borrower or any of its Subsidiaries or Eligible Joint Ventures, nor to the best knowledge of the Borrower and its Subsidiaries any owner of premises leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, have filed any notice under federal, state or local, territorial or foreign law indicating past or present treatment, storage, or disposal of or reporting a Release of Hazardous Material into the environment; (h) none of the operations of the Borrower or any of its Subsidiaries or Eligible Joint Ventures or, to the best knowledge of the Borrower and its Subsidiaries, of any Operators or predecessor of the Borrower or any of its Subsidiaries or Eligible Joint Ventures, or, to the best knowledge of the Borrower and its Subsidiaries, of any owner of premises leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, involve or previously involved the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Part 261.3 (in effect as of the date of this Agreement) or any state, local, territorial or foreign equivalent; and (i) there is not now, nor to the best knowledge of the Borrower and its Subsidiaries, has there been in the past, on, in or under any real property leased or owned by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, to the best knowledge of the Borrower and its Subsidiaries or any of their predecessors (i) any underground storage tanks or surface tanks, dikes or impoundments (other than for surface water), (ii) any friable asbestos-containing materials, (iii) any polychlorinated biphenyls, or (iv) any radioactive substances other than naturally occurring radioactive material. 4.20. Contractual Obligations Concerning Assets. As of the date hereof, neither the Borrower nor any of its Subsidiaries owns or holds, or is obligated under or a party to, any option, right of first refusal, or other contractual right to purchase or acquire, or any Contractual Obligation to effect an Asset Sale of, any Hotel owned or leased by the Borrower or any of its Subsidiaries, except those that in the aggregate would not have a Material Adverse Effect whether or not exercised. 4.21. Intellectual Property. The Loan Parties and its Subsidiaries and Eligible Joint Ventures or the Operating Lessee own or license or otherwise have the right to use all material licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, copyright applications, franchises, authorizations and other intellectual property rights that are necessary for the operations of their respective businesses, without infringement upon or conflict with the rights of any other Person with respect thereto, including, without limitation, the Licenses and all trade names associated with any private label brands of any Loan Party or any of its Subsidiaries or Eligible Joint Ventures. To -64- 71 the best knowledge of the Borrower, no material slogan or other advertising device, product, process, method, substance, part or component, or other material now employed, or now contemplated to be employed, by any Loan Party or any of their respective Subsidiaries or Eligible Joint Ventures or the Operating Lessee infringes upon or conflicts with any rights owned by any other Person, and no claim or litigation regarding any of the foregoing is pending or threatened. 4.22. Title. (a) Each Loan Party and their respective Subsidiaries and Eligible Joint Ventures own good and marketable fee simple absolute title to all of the Real Estate purported to be owned by them, which Real Estate is at the date hereof described in Schedule 4.22(a), and good and marketable title to, or valid leasehold interests in, all other properties and assets purported to be leased by any Loan Party or any of their respective Subsidiaries or Eligible Joint Ventures, including, without limitation, valid leasehold interests pursuant to the Leases and all property reflected in the balance sheet referred to in Section 4.5(a). Each Loan Party and its respective Subsidiaries or Eligible Joint Ventures received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and have duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Loan Party's and their respective Subsidiaries' or Eligible Joint Ventures' right, title and interest in and to all such property except for such documents or actions the failure to obtain or accomplish which would not have a Material Adverse Effect. (b) All material real property leased at the date hereof by the Borrower or any of their respective Subsidiaries or Eligible Joint Ventures is listed on Schedule 4.22(b). Each of such leases is valid and enforceable in accordance with its terms and is in full force and effect. The Borrower has delivered to the Administrative Agent true and complete copies of each of such leases and all documents affecting the rights or obligations of the Borrower or any of its Subsidiaries or Eligible Joint Ventures which is a party thereto, including, without limitation, any non-disturbance and recognition agreements, subordination agreements, attornment agreements and agreements regarding the term or rental of any of the leases. None of the Borrower or any of its respective Subsidiaries or Eligible Joint Ventures nor, to the knowledge of the Borrower, any other party to any such lease is in default of its obligations thereunder or has delivered or received any notice of default under any such lease, nor has any event occurred which, with the giving of notice, the passage of time or both, would constitute a default under any such lease, except for defaults which in the aggregate have no Material Adverse Effect. (c) All components of all improvements included within the Hotels owned or leased, as lessee, by any Loan Party or Eligible Joint Venture (collectively, "Improvements"), including, without limitation, the roofs and structural elements thereof and the heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water, paving and parking equipment, systems and facilities included therein, are in good working order and repair, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. All water, gas, electrical, steam, compressed air, telecommunication, sanitary and storm sewage lines and systems and other similar systems serving the Hotels owned or leased by any Loan Party or any of their respective Subsidiaries or Eligible Joint Ventures are installed and operating and are sufficient to enable the real property owned or leased by any Loan Party and their respective Subsidiaries or Eligible Joint Ventures to continue to be used and oper -65- 72 - -ated in the manner currently being used and operated, and no Loan Party or any of its Subsidiaries or Eligible Joint Ventures has any knowledge of any factor or condition that reasonably could be expected to result in the termination or material impairment of the furnishing thereof. No Improvement or portion thereof is dependent for its access, operation or utility on any land, building or other Improvement not included in the real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures other than for access provided pursuant to a recorded easement or other right of way establishing the right of such access. (d) All Permits required to have been issued or appropriate to enable all real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures to be lawfully occupied and used for all of the purposes for which they are currently occupied and used have been lawfully issued and are in full force and effect, other than those which in the aggregate have no Material Adverse Effect. (e) No Loan Party or any of its Subsidiaries or Eligible Joint Ventures has received any notice, or has any knowledge, of any pending, threatened or contemplated condemnation proceeding affecting any real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures or any part thereof, or any proposed termination or impairment of any parking at any such owned or leased real property or of any sale or other disposition of any real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures or any part thereof in lieu of condemnation, which in the aggregate, are reasonably likely to have a Material Adverse Effect. (f) Except for events or conditions not reasonably likely to have, in the aggregate, a Material Adverse Effect, (i) no portion of any real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures has suffered any material damage by fire or other casualty loss which has not heretofore been completely repaired and restored to its condition prior to such casualty, and (ii) no portion of any real property owned or leased by any Loan Party or any of its Subsidiaries or Eligible Joint Ventures is located in a special flood hazard area as designated by any Federal Governmental Authorities. 4.23. Status as REIT. The Borrower is organized in conformity with the requirements for qualification as an equity-oriented real estate investment trust under the Code. Borrower has met all of the requirements for qualification as an equity-oriented real estate investment trust under the Code for its Fiscal Year ended December 31, 1999. The Borrower is in a position to qualify for its current Fiscal Year as a real estate investment trust under the Code and its proposed methods of operation will enable it to so qualify. 4.24. Operator: Compliance with Law. To the best knowledge of the Borrower and its Subsidiaries, each Operator (i) has full power and authority and the legal right to own, lease (or sublease), manage and operate (as applicable) the properties it operates and to conduct the business in which it is currently engaged with respect to any real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, (ii) is duly qualified or licensed and is in good standing under the laws of each jurisdiction where its ownership, lease (or sublease), management or operation of any real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures requires such qualification, and (iii) is in -66- 73 compliance with all Requirements of Law applicable to the real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, or applicable to the operation or management thereof except to the extent that the failure to comply therewith is not reasonably likely to have, in the aggregate, a Material Adverse Effect. 4.25. Operating Leases, Licenses and Management Agreement. (a) Each of the Hotels (i) is leased to an Operating Lessee under an Operating Lease, (ii) is the subject of a License, and (iii) is managed and operated for the Operating Lessee pursuant to a Management Agreement, except to the extent that the aggregate value of any Hotels owned or leased by the Borrower (directly or indirectly) which are not leased to an Operating Lessee, managed by a Manager, and operated pursuant to and with the benefit of a License does not exceed 10% of Total Value. (b) Each of the Operating Leases, Licenses and Management Agreements in respect of the Hotels (i) is in full force and effect, (ii) is a legally valid and binding obligation of each of the parties thereto, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect, and (iii) has not been modified, amended or supplemented in any material or adverse way. Neither the Borrower nor any of its Subsidiaries or Eligible Joint Ventures has collected any rents becoming due under any Operating Lease more than 30 days in advance. All rent and other sums and charges payable by any Operating Lessee under each Operating Lease to which it is a party are current, no notice of default or termination under any such Operating Lease is outstanding, no termination event or condition or uncured default on the part of the Operating Lessee exists under any Operating Lease, and no event of default has occurred which, with the giving of notice or the lapse of time or both, would constitute such a default or termination event or condition or uncured default on the part of the Borrower or its Subsidiaries or Eligible Joint Ventures or the Operators (as the case may be), subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. As to all of the Leases, Borrower and each of its Subsidiaries or Eligible Joint Ventures has performed all of its repair and maintenance obligations (if any) and, to the best knowledge and belief of Borrower, each Operating Lessee under each Operating Lease to which it is a party has performed all of its repair and maintenance obligations, subject to such exceptions which are not reasonably likely to have, in the aggregate, a Material Adverse Effect. 4.26. FF&E Reserves. An FF&E Reserve has been established in respect of each of the Hotels and the Borrower or its Subsidiaries or Eligible Joint Ventures have made any contributions to such FF&E Reserve as required by the terms of the Operating Lease and/or the Management Agreement relating thereto. ARTICLE V FINANCIAL COVENANTS As long as any of the Obligations or Revolving Credit Commitments remain outstanding, unless the requisite Lenders specified in Section 10.1 otherwise consent in writing, the Borrower agrees with the Lenders and the Administrative Agent that: -67- 74 5.1. Unsecured Interest Expense Coverage. The Borrower shall maintain at the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending on June 30, 2000, a ratio of (a) Unencumbered NOI to (b) Unsecured Interest Expense, in each case determined on the basis of the four (4) Fiscal Quarters ending on the date of determination, of not less than 2.25:1.0. 5.2. Fixed Charge Coverage Ratio. The Borrower shall maintain at the end of each Fiscal Quarter commencing with the Fiscal Quarter ending on June 30, 2000, a ratio of (a) Adjusted EBITDA to (b) Fixed Charges, in each case determined on the basis of the four (4) Fiscal Quarters ending on the date of determination, of not less than 1.75:1.0. 5.3. Maintenance of Tangible Net Worth. The Borrower shall maintain during each Fiscal Quarter a Tangible Net Worth of not less than the Minimum Tangible Net Worth. 5.4. Limitations on Total Indebtedness. The Borrower shall not, during each Fiscal Quarter on a consolidated basis, permit the Total Indebtedness (including, without limitation, the Obligations and all Capitalized Lease Obligations) of the Borrower for borrowed money to exceed 55% of Total Value. 5.5. Limitations on Total Secured Indebtedness. The Borrower shall not, during each Fiscal Quarter on a consolidated basis, permit the Total Secured Indebtedness (including, without limitation, secured Obligations and Capitalized Lease Obligations) of the Borrower, to exceed 25% of Total Value. 5.6. Adjusted NOI and Hotels. The Borrower shall ensure that at the end of each Fiscal Quarter commencing with the Fiscal Quarter ending on June 30, 2000 at least 50% of the aggregate Adjusted NOI generated by all Hotels during the preceding four (4) Fiscal Quarters shall be generated by Hotels wholly owned or leased by the Borrower or its wholly owned Subsidiaries, provided that, for Hotels owned or leased for less than four (4) Fiscal Quarters only the Adjusted NOI generated by such Hotels since the date of acquisition of such Hotel shall be included in calculating such aggregate Adjusted NOI. 5.7. Limitations on Recourse Secured Indebtedness. The Borrower shall not, during each Fiscal Quarter on a consolidated basis, permit the Recourse Secured Indebtedness (including, without limitation, secured Obligations and Capitalized Lease Obligations) of the Borrower, to exceed the lesser of (x) 7.5% of Total Value and (y) $200,000,000. ARTICLE VI AFFIRMATIVE COVENANTS As long as any of the Obligations or the Revolving Loan Commitments remain outstanding, unless the Majority Lenders otherwise consent in writing, the Borrower agrees with the Lenders and the Administrative Agent that: 6.1. Compliance with Laws, Etc. The Borrower shall comply, and shall cause each of its Subsidiaries and Eligible Joint Ventures to comply, in all material respects with all -68- 75 Requirements of Law, Contractual Obligations, commitments, instruments, licenses, permits and franchises, including, without limitation, all Permits; provided, however, that the Borrower shall not be deemed in default of this Section 6.1 if all such non-compliances in the aggregate have no Material Adverse Effect. 6.2. Conduct of Business. The Borrower shall (a) conduct, and shall cause each of its Subsidiaries and Eligible Joint Ventures to conduct, its business in the ordinary course and consistent with past practice; (b) use, and cause each of its Subsidiaries and Eligible Joint Ventures to use, its reasonable efforts, in the ordinary course and consistent with past practice, to (i) preserve its business and the goodwill and business of the customers, advertisers, suppliers and others having business relations with the Borrower or any of its Subsidiaries or Eligible Joint Ventures, and (ii) keep available the services and goodwill of its present employees; (c) preserve, and cause each of its Subsidiaries and Eligible Joint Ventures to preserve, all registered patents, trademarks, trade names, copyrights and service marks with respect to its business; and (d) perform and observe, and cause each of its Subsidiaries and Eligible Joint Ventures to perform and observe, all the terms, covenants and conditions required to be performed and observed by it under its Contractual Obligations (including, without limitation, to pay all rent and other charges payable under any lease and all debts and other obligations as the same become due), and do, and cause its Subsidiaries and Eligible Joint Ventures to do, all things necessary to preserve and to keep unimpaired its rights under such Contractual Obligations; provided, however, that, in the case of each of clauses (a) through (d), the Borrower shall not be deemed in default of this Section 6.2 if all such failures in the aggregate have no Material Adverse Effect. 6.3. Payment of Taxes, Etc. The Borrower shall pay and discharge, and shall cause each of its Subsidiaries and Eligible Joint Ventures, as appropriate, to pay and discharge, before the same shall become delinquent, all lawful governmental claims, taxes, assessments, charges and levies, except where contested in good faith, by proper proceedings, if adequate reserves therefor have been established on the books of the Borrower or the appropriate Subsidiary or Eligible Joint Venture in conformity with GAAP; provided, however, that the Borrower shall not be deemed in default of this Section 6.3 if all such non-payments in the aggregate have no Material Adverse Effect. 6.4. Maintenance of Insurance. The Borrower shall maintain, and shall cause each of its Subsidiaries and Eligible Joint Ventures to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks (including, without limitation, fire, extended coverage, vandalism, malicious mischief, public liability, product liability, and business interruption) as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary or Eligible Joint Venture engages in business or owns properties. The Borrower will furnish to the Lenders from time to time such information as may be requested as to such insurance. 6.5. Preservation of Existence, Etc. The Borrower shall preserve and maintain, and shall cause each of its Subsidiaries and Eligible Joint Ventures to preserve and maintain, its corporate or partnership existence, rights (charter and statutory) and franchises, except as permitted under Section 7.5. -69- 76 6.6. Access. The Borrower shall, at any reasonable time and from time to time, permit the Administrative Agent or any of the Lenders, or any agents or representatives thereof, at the expense of the Lenders (but such expense to be reimbursed by the Borrower in the event that any of the following reveal a material Default by the Borrower), to (a) examine and make copies of and abstracts from the records and books of account of the Borrower and each of its Subsidiaries and Eligible Joint Ventures, (b) visit the properties of the Borrower and each of its Subsidiaries and Eligible Joint Ventures, (c) discuss the affairs, finances and accounts of the Borrower and each of its Subsidiaries and Eligible Joint Ventures with any of their respective officers or directors, and (d) communicate directly with the Borrower's independent certified public accountants. 6.7. Keeping of Books. The Borrower shall keep, and shall cause each of its Subsidiaries and Eligible Joint Ventures to keep, proper books of record and account, in which proper entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary or Eligible Joint Venture. 6.8. Maintenance of Properties, Etc. The Borrower shall maintain and preserve, and shall cause each of its Subsidiaries and Eligible Joint Ventures to maintain and preserve, (i) all of its properties which are used or useful or necessary in the conduct of its business in good working order and condition, and (ii) all rights, permits, licenses, approvals and privileges (including, without limitation, all Permits) which are used or useful or necessary in the conduct of its business; provided, however, that the Borrower shall not be deemed in default of this Section 6.8 if all such failures in the aggregate have no Material Adverse Effect. 6.9. Performance and Compliance with Other Covenants. The Borrower shall perform and comply with, and shall cause each of its Subsidiaries and Eligible Joint Ventures to perform and comply with, each of the covenants and agreements set forth in each Contractual Obligation to which it or any of its Subsidiaries or Eligible Joint Ventures is a party; provided, however, that the Borrower shall not be deemed in default of this Section 6.9 if all such failures in the aggregate have no Material Adverse Effect. 6.10. Application of Proceeds. The Borrower shall use the entire amount of the proceeds of the Revolving Credit Loans as provided in Section 4.18. 6.11. Financial Statements. The Borrower shall furnish to the Lenders: (a) as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, consolidated balance sheets of the Borrower and its Subsidiaries and the Reporting Operating Lessees and any Requested Operating Lessee as of the end of such quarter and consolidated statements of income, retained earnings and cash flow of the Borrower and its Subsidiaries and the Reporting Operating Lessees and any Requested Operating Lessee for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, all prepared in conformity with GAAP and certified by the chief financial officer or the treasurer of the Borrower or the chief financial officer of the Reporting Operating Lessees or a Requested Operating Lessee, as appropriate, as fairly presenting the financial condition and results of operations of the Borrower and its -70- 77 Subsidiaries and the Reporting Operating Lessees and any Requested Operating Lessee at such date and for such period, together with (i) a certificate of said officer stating that no Default or Event of Default has occurred and is continuing or, if a Default or an Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which the Borrower, any Reporting Operating Lessees or any Requested Operating Lessee, as appropriate, proposes to take with-respect thereto, (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by the Borrower or any Reporting Operating Lessee or any Requested Operating Lessee, as appropriate, in determining compliance with all financial covenants contained herein, and (iii) a written discussion and analysis by the management of the Borrower or any Reporting Operating Lessee or any Requested Operating Lessee, as appropriate, of the financial statements furnished in respect of such Fiscal Quarter, provided, however, that for purposes of this subparagraph (a) of this paragraph 6.11 only, "Reporting Operating Lessees" and "Requested Operating Lessee" shall not include Bass; (b) as soon as available and in any event within 90 days after the end of each Fiscal Year, consolidated balance sheets of the Borrower and its Subsidiaries and the Reporting Operating Lessees as of the end of such year and consolidated statements of income, retained earnings and cash flow of the Borrower and its Subsidiaries and the Reporting Operating Lessees for such Fiscal Year, all prepared in conformity with GAAP and certified, in the case of such consolidated financial statements, in a manner reasonably acceptable to the Administrative Agent without qualification as to the scope of the audit by PricewaterhouseCoopers L.L.P. or other independent public accountants of recognized national standing together with (i) a schedule in form satisfactory to the Administrative Agent of the computations used by the Borrower in determining, as of the end of such Fiscal Year, the Borrower's or a Reporting Operating Lessee's, as appropriate, compliance with all financial covenants contained herein, and (ii) a written discussion and analysis by the management of the Borrower or any Reporting Operating Lessee, as appropriate, of the financial statements furnished in respect of such Fiscal Year, provided, however, that for purposes of this subparagraph (b) of this paragraph 6.11 only, "Reporting Operating Lessees" shall not include Bass; and (c) promptly after the same are received by the Borrower, a copy of each management letter provided to the Borrower by its independent certified public accountants which refers in whole or in part to any inadequacy, defect, problem, qualification or other lack of fully satisfactory accounting controls utilized by the Borrower or any of its Subsidiaries. (d) within 45 days after the end of each Fiscal Quarter, a Compliance Certificate as of the end of such Fiscal Quarter, executed by the Chief Financial Officer or Treasurer of the Borrower and if requested by the Administrative Agent, together with copies (to the extent not already delivered) of the Hotel Documents in respect of each Hotel indicated by Administrative Agent. 6.12. Reporting Requirements. The Borrower shall furnish to the Lenders: (a) prior to any Asset Sale generating proceeds in excess of 10% of the Total Value of the Borrower, a notice (i) describing the assets being sold, (ii) stating the estimated Asset Sale proceeds in respect of such Asset Sale and (iii) accompanied by a Compliance -71- 78 Certificate and a certificate of the Chief Financial Officer or the Treasurer of the Borrower stating that before and after giving effect to such Asset Sale, the Borrower shall be in compliance with all of its covenants set forth in the Loan Documents and that no Default or Event of Default will result from such Asset Sale. (b) as soon as available and in any event within 90 days after the end of each Fiscal Year (or earlier if approved earlier by the Board of Directors of the Borrower), an annual budget of the Borrower and its Subsidiaries for the succeeding Fiscal Year, displaying on a quarterly basis anticipated balance sheets, forecasted Capital Expenditures, working capital requirements, revenues, net income, cash flow and EBITDA, all on a consolidated basis; (c) promptly and in any event within 30 days after the Borrower, any of its Subsidiaries or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a written statement of the Chief Financial Officer or Treasurer or other appropriate officer of the Borrower describing such ERISA Event or waiver request and the action, if any, which the Borrower, its Subsidiaries and ERISA Affiliates propose to take with respect thereto and a copy of any notice filed by or with the PBGC or the IRS pertaining thereto; (d) promptly and in any event within 10 days after receipt thereof, a copy of any adverse notice, determination letter, ruling or opinion the Borrower, any of its Subsidiaries or any ERISA Affiliate receives from the PBGC, DOL or IRS with respect to any Plan, other than those which, in the aggregate, do not have any reasonable likelihood of resulting in a Material Adverse Change; (e) promptly after the commencement thereof, notice of all actions, suits and proceedings before any domestic or foreign Governmental Authority or arbitrator, affecting the Borrower or any of its Subsidiaries, except those which in the aggregate, if adversely determined, would have no Material Adverse Effect; (f) promptly and in any event within two Business Days after the Borrower becomes aware of the existence of (i) any Default or Event of Default, (ii) any breach or non-performance of, or any default under, any Operating Lease, Management Agreement or any Contractual Obligation which is material to the business, prospects, operations or financial condition of the Borrower and its Subsidiaries taken as one enterprise, or (iii) any Material Adverse Change or any event, development or other circumstance which has any reasonable likelihood of causing or resulting in a Material Adverse Change, telephonic or telecopied notice in reasonable detail specifying the nature of the Default, Event of Default, breach, non-performance, default, event, development or circumstance, including, without limitation, the anticipated effect thereof, which notice shall be promptly confirmed in writing within five days; (g) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to its security holders generally, and copies of all reports and registration statements which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange or the National Association of Securities Dealers, Inc.; -72- 79 (h) promptly upon the request of any Lender, through the Administrative Agent, copies of all federal tax returns and reports filed by the Borrower or any of its Subsidiaries in respect of taxes measured by income (excluding sales, use and like taxes); (i) promptly and in any event within ten days of the Borrower or any Subsidiary learning of any of the following, written notice to the Administrative Agent of any of the following: (i) the Release or threatened Release of any Hazardous Material on or from any property owned or leased by the Borrower of any of its Subsidiaries or Eligible Joint Ventures and any written order, notice, permit, application or other written communication or report received by the Borrower, any of its Subsidiaries or Eligible Joint Ventures in connection with or relating to any such Release or threatened Release, unless such Release or threatened Release is not reasonably likely to subject the Borrower or any of its Subsidiaries to Environmental Liabilities and Costs of $5,000,000 or more; (ii) any notice or claim to the effect that the Borrower, any of its Subsidiaries or any Eligible Joint Ventures is or may be liable to any Person as a result of the Release or threatened Release of any Hazardous Material into the environment; (iii) receipt by the Borrower, any of its Subsidiaries or Eligible Joint Ventures or any Operator of notification that any real or personal property of the Borrower or any of its Subsidiaries is subject to an Environmental Lien; (iv) any Remedial Action taken by the Borrower or any of its Subsidiaries or Eligible Joint Ventures or any other Person on their behalf in response to any Hazardous Material on, under or about any real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures, unless such Remedial Action is not reasonably likely to subject the Borrower or any of its Subsidiaries or Eligible Joint Ventures to Environmental Liabilities and Costs of $5,000,000 or more; (v) receipt by the Borrower or any of its Subsidiaries or Eligible Joint Ventures of any notice of violation of, or knowledge by the Borrower or any of its Subsidiaries or any Eligible Joint Ventures that there exists a condition which may result in a violation by the Borrower or any of its Subsidiaries or Eligible Joint Ventures of, any Environmental Law, unless such violation is not reasonably likely to subject the Borrower or any of its Subsidiaries to Environmental Liabilities and Costs of $5,000,000 or more; (vi) any proposed Capital Expenditure by the Borrower or any of its Subsidiaries or Eligible Joint Ventures intended or designed to implement any existing or additional Remedial Action, unless such expenditures are not reasonably likely to exceed $5,000,000; (vii) the commencement of any judicial or administrative proceeding or investigation alleging a material violation of any Environmental Law; or -73- 80 (viii) any proposed acquisition of stock, assets or real property, or any proposed leasing of property by the Borrower, or any of its Subsidiaries or Eligible Joint Ventures, unless such action is not reasonably likely to subject the Borrower and its Subsidiaries to Environmental Liabilities and Costs to the Borrower in excess of $5,000,000; (j) promptly, such additional financial and other information respecting the financial or other condition of the Borrower or any of its Subsidiaries or Eligible Joint Ventures or the Operating Lessee or the status or condition of any real property owned or leased by the Borrower or its Subsidiaries or Eligible Joint Ventures, or the operation thereof which the Borrower is entitled to or can otherwise reasonably obtain, as the Administrative Agent from time to time reasonably requests; and (k) upon written request by any Lender through the Administrative Agent, a report providing an update of the status of any Environmental Claim, Remedial Action or any other issue identified in any notice or report required pursuant to this Section 6.12. 6.13. Leases and Operating Leases; Management Agreements and Licenses. (a) If requested by Administrative Agent, the Borrower shall provide the Administrative Agent, within 30 days of such request, with a copy of each Qualified Lease and each Operating Lease (to the extent not already delivered). The Borrower shall, and shall cause each of its Subsidiaries and Eligible Joint Ventures to, (i) comply in all material respects with all of their respective obligations under all of their respective Leases and Operating Leases now or hereafter held respectively by them with respect to real property, including, without limitation, the Leases set forth in Schedule 4.22(b); (ii) not modify, amend, cancel, extend or otherwise change in any materially adverse manner any of the terms, covenants or conditions of any such Leases or Operating Leases; (iii) not assign any Leases or sublet any portion of the premises if such assignment or sublet would have a Material Adverse Effect; (iv) provide the Administrative Agent with a copy of each notice of default under any Lease or Operating Lease received by the Borrower or any Subsidiary or Eligible Joint Venture of the Borrower immediately upon receipt thereof and deliver to the Administrative Agent a copy of each notice of default sent by the Borrower or any Subsidiary or Eligible Joint Venture of the Borrower under any Lease or Operating Lease simultaneously with its delivery of such notice under such Lease or Operating Lease except to the extent that such defaults, in the aggregate, would not have a Material Adverse Effect; (v) notify the Administrative Agent, not later than 30 days prior to the date of the expiration of the term of any Qualified Lease, of the Borrower's or any Subsidiary or Eligible Joint Venture of the Borrower's intention either to renew or to not renew any such Qualified Lease, and, if the Borrower or any Subsidiary or Eligible Joint Venture of the Borrower intends to renew such Qualified Lease, the terms and conditions of such renewal; and (vi) maintain each Operating Lease in full force and effect and enforce the obligations of the Operating Lessee thereunder, in a timely manner except to the extent that the failure to do so, in the aggregate, would not have a Material Adverse Effect. Notwithstanding the foregoing, this Section 6.13 shall not apply to (i) Operating Leases with wholly-owned Subsidiaries of the Borrower and (ii) Operating Lessees that are wholly-owned Subsidiaries of the Borrower. (b) The Borrower shall take all actions and do all things within its power or control necessary or required to cause each Operating Lessee to (i) keep, observe, comply with -74- 81 and perform all of the terms, provisions, covenants and undertakings on its part required by each Operating Lease, each License, each sublease and Management Agreement relating to any Hotel, and (ii) to enforce the provisions of each License and each Management Agreement, if the failure to comply or enforce such agreements would be reasonably likely, in the aggregate, to have a Material Adverse Effect; provided that this Section 6.13 shall not apply to (i) Operating Leases with wholly-owned Subsidiaries of the Borrower and (ii) Operating Lessees that are wholly-owned Subsidiaries. 6.14. Intentionally Omitted. 6.15. Employee Plans. For each Plan and any related trust hereafter adopted or maintained by a Loan Party or any of its ERISA Affiliates intended to qualify under Code Section 125, 401 or 501, the Borrower shall (i) seek, and cause such of its ERISA Affiliates to seek, and receive determination letters from the IRS to the effect that such plan is so qualified; and (ii) cause such plan to be so qualified. 6.16. Intentionally Omitted. 6.17. Fiscal Year. The Borrower shall maintain as its Fiscal Year the twelve month period ending on December 31 of each year. 6.18. Environmental Matters. (a) The Borrower shall comply and shall cause each of its Subsidiaries and Eligible Joint Ventures and each property owned or leased by such parties to comply in all material respects with all applicable Environmental Laws currently or hereafter in effect. (b) If the Administrative Agent or Lenders at any time have a reasonable basis to believe that there may be a material violation of any Environmental Law by the Borrower or any of its Subsidiaries and Eligible Joint Ventures or any Operator related to any real property owned or leased by the Borrower or any of its Subsidiaries and Eligible Joint Ventures, or real property adjacent to such real property, then the Borrower agrees, upon request from the Administrative Agent, to provide the Administrative Agent, at the Borrower's expense, with such reports, certificates, engineering studies or other written material or data as the Administrative Agent or Lenders may reasonably require so as to reasonably satisfy the Administrative Agent and Lenders that the Borrower or such Subsidiary, Eligible Joint Venture or real property owned or leased by them is in material compliance with all applicable Environmental Laws. Furthermore, Administrative Agent shall have the right to inspect during normal business hours any real property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures if at any time Administrative Agent or Lenders have a reasonable basis to believe that there may be such a material violation of Environmental Law. (c) The Borrower shall, and shall cause each of its Subsidiaries and Eligible Joint Ventures and each Operating Lessee to, take such Remedial Action or other action as required by Environmental Laws, as any Governmental Authority requires, except to the extent contested in good faith and by proper proceedings, or as is appropriate and consistent with good business practice. -75- 82 6.19. REIT Requirements. The Borrower shall operate its business at all times so as to satisfy all requirements necessary to qualify as an equity-oriented real estate investment trust under Sections 856 through 860 of the Code. The Borrower will maintain adequate records so as to comply with all record-keeping requirements relating to the qualification of the Borrower as an equity-oriented real estate investment trust as required by the Code and applicable regulations of the Department of the Treasury promulgated thereunder and will properly prepare and timely file with the IRS all returns and reports required thereby. The Borrower will request from its shareholders all shareholder information required by the Code and applicable regulations of the Department of Treasury promulgated thereunder. 6.20. Maintenance of FF&E Reserves. The Borrower shall cause to be maintained the FF&E Reserves pursuant to the terms of the Operating Leases. 6.21. Intentionally deleted. 6.22. Further Assurances. At any time upon the request of the Administrative Agent, the Borrower will, promptly and at its expense, execute, acknowledge and deliver such further documents and do such other acts and things as the Administrative Agent may reasonably request to evidence the Revolving Credit Loans made hereunder and interest thereon in accordance with the terms of this Agreement. 6.23. Unencumbered Hotel Properties/Financial Covenant Imbalance. (a) The Borrower shall promptly notify the Administrative Agent in writing in the event that at any time the Borrower or any of its Subsidiaries receives or otherwise gains knowledge that (i) any Hotel included in the calculation of a prior Compliance Certificate as an Unencumbered Hotel Property, ceases, for any reason whatsoever, to be an Unencumbered Hotel Property or (ii) a Financial Covenant Imbalance exists, and the amount of the Revolving Credit Loans which must be repaid to cure such Financial Covenant Imbalance. (b) The Administrative Agent, at the expense of the Lenders, which expense shall not exceed $10,000 without the consent of the Majority Lenders (but such expense to be reimbursed by the Borrower in the event that a Hotel fails to meet requirements for an Unencumbered Hotel Property in any material respect) may make physical and other verifications of any Hotels included as Unencumbered Hotel Properties in any reasonable manner and through any medium that the Administrative Agent considers advisable, and the Borrower shall furnish all such assistance and information as the Administrative Agent may require in connection therewith. 6.24. Hotel Documents. Within 30 days of the Administrative Agent's request, Borrower shall deliver to the Administrative Agent Hotel Documents (to the extent not already delivered) for any Hotel indicated by Administrative Agent. -76- 83 ARTICLE VII NEGATIVE COVENANTS As long as any of the Obligations or any of the Revolving Credit Commitments remain outstanding, without the written consent of the Administrative Agent, the Borrower agrees with the Lenders and the Administrative Agent that: 7.1. Restrictions on Wholly-Owned Subsidiaries. (a) The Borrower shall not create or acquire any direct or indirect wholly-owned Subsidiary after the Restatement Effective Date unless (i) if such Subsidiary is a Required Guarantor, concurrently with the creation or acquisition thereof, such Subsidiary executes and delivers to the Administrative Agent a Subsidiary Guaranty or (ii) if such Subsidiary is not a Required Guarantor, the organizational documents and agreement of limited partnership (or equivalent) of such Subsidiary provide that such Subsidiary shall not incur any Indebtedness (other than (A) intercompany Indebtedness owed to Borrower and (B) Indebtedness which is either (x) Non-Recourse Indebtedness or (y) recourse to such Subsidiary provided such Indebtedness (I) does not exceed 65% of the value of such Subsidiary's assets which secures such Indebtedness and (II) is secured by all of the Hotels owned by such Subsidiary). (b) No wholly-owned Subsidiary which is acquired or created after the Restatement Effective Date may (i) incur any Indebtedness (other than (A) intercompany Indebtedness owed to the Borrower and (B) Indebtedness which is either (x) Non-Recourse Indebtedness or (y) recourse to such Subsidiary provided such Indebtedness (I) does not exceed 65% of the value of such Subsidiary's assets which secures such Indebtedness and (II) is secured by all of the Hotels owned by such Subsidiary) or (ii) be subject to any contractual restriction on such Subsidiary's ability to declare or pay dividends or distribute cash or other assets to Borrower or any of its Subsidiaries. (c) The Borrower shall not permit any direct or indirect wholly-owned Subsidiary (other than an Excluded Taxable REIT Subsidiary and Special Purpose Subsidiary) to own assets (including the assets of such Person's Subsidiaries) the value of which exceed 2% of Total Value unless such Subsidiary executes and delivers to the Administrative Agent a Subsidiary Guaranty, provided, that in the event the aggregate value of the assets of all wholly-owned Subsidiaries (other than Excluded Taxable REIT Subsidiaries and Special Purpose Subsidiaries) which are not Guarantors exceed 2% of Total Value then Borrower shall not permit any direct or indirect wholly-owned Subsidiary formed thereafter (other than an Excluded Taxable REIT Subsidiary and Special Purpose Subsidiary) to own assets (including the assets of such Person's Subsidiaries) unless such Subsidiary executes and delivers to the Administrative Agent a Subsidiary Guaranty; provided further that in the event that the aggregate Indebtedness of all Special Purpose Subsidiaries which are not Guarantors exceeds 25% of Total Value then the Borrower shall not permit any Special Purpose Subsidiary formed thereafter to own assets unless such Special Purpose Subsidiary executes and delivers to the Administrative Agent a Subsidiary Guaranty. -77- 84 7.2. Operation/Ownership of Hotels. (a) The Borrower shall not own or lease (directly or indirectly) any Hotels which are not (i) leased to an Operating Lessee pursuant to an Operating Lease within 90 days of Borrower's (or a Subsidiary's) acquisition of such Hotel, (ii) managed pursuant to a Management Agreement and (iii) operated pursuant to and with the benefit of a License, except to the extent that the aggregate value of any Hotels owned or leased by the Borrower (directly or indirectly) which are not leased to an Operating Lessee, managed by a Manager, and operated pursuant to and with the benefit of a License does not exceed 10% of Total Value. (b) The aggregate value of any Hotels owned or leased by the Borrower (directly or indirectly) which are not operated under a nationally recognized brand may not exceed 10% of Total Value. 7.3. Lease Obligations. (a) The Borrower shall not create or suffer to exist, or permit any of its Subsidiaries or Eligible Joint Ventures to create or suffer to exist, any obligations as lessee for the rental or hire of real or personal property of any kind under other leases or agreements to lease entered into otherwise than in the ordinary course of business. (b) The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to, become or remain liable as lessee or guarantor or other surety with respect to any lease, whether an operating lease or a Capitalized Lease, of any property (whether real or personal or mixed), whether now owned or hereafter acquired, which (i) the Borrower or any of its Subsidiaries or Eligible Joint Ventures has sold or transferred or is to sell or transfer to any other Person, or (ii) the Borrower or any of its Subsidiaries or Eligible Joint Ventures intends to use for substantially the same purposes as any other property which has been or is to be sold or transferred by that entity to any other Person in connection with such lease. 7.4. Restricted Payments. The Borrower, unless otherwise required in order to maintain FelCor's status as a real estate investment trust in accordance with the written advice of independent counsel to the Borrower, shall not, and shall not permit its Subsidiaries to declare or authorize any dividend payment or other distribution (such dividend or distribution shall be deemed made when so declared or authorized) of assets, properties, cash, rights, obligations or securities (other than distributions of Stock or Stock Equivalents, exclusive of Disqualified Stock) on account or in respect of any of its Stock or Stock Equivalents or any payment (whether in Disqualified Stock, Indebtedness, cash or other assets), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Stock or Stock Equivalents (collectively, "Restricted Payments"); provided, that, notwithstanding the foregoing, (i) any Subsidiary may make Restricted Payments, directly or indirectly, to the Borrower or any Guarantor; (ii) any non-wholly owned Subsidiary of the Borrower may make Restricted Payments to the holders of its Stock or Stock Equivalents generally, so long as the Borrower or its respective Subsidiary which owns the Stock or Stock Equivalents in the Subsidiary paying such Restricted Payments receives at least its proportionate share thereof (based upon its relative economic holding of equity interest in the Subsidiary paying such Restricted Payments and taking into account the relative preferences, if any, of the various classes of equity interests in such Subsidiary or the terms of any agreements applicable thereto), and (iii) the Borrower or any Subsidiary may make payments to purchase Stock or Stock -78- 85 Equivalents of any non-wholly owned Subsidiary. In addition, in any Fiscal Quarter the Borrower may make Restricted Payments which, when added to Restricted Payments made during the immediately preceding three consecutive Fiscal Quarters, do not exceed an aggregate amount equal to the lesser of 85% of the consolidated Adjusted Funds From Operations and 100% of the Free Cash Flow of the Borrower in each case for the immediately preceding four consecutive Fiscal Quarters; provided, further, that in addition to the Restricted Payments permitted above, the Borrower may purchase, redeem or acquire Stock or Stock Equivalents of the Borrower for an aggregate purchase price not to exceed $275,000,000 from and after August 20, 1999 through the end of the term of the Revolving Credit Loans (including any extension thereof) plus net proceeds (including the fair market value of any property received) of any issuance of Stock or Stock Equivalents (other than Disqualified Stock) of the Borrower subsequent to June 30, 1999. 7.5. Mergers, Stock Issuances, Asset Sales, Etc. (a) The Borrower shall not sell, convey, transfer, lease or otherwise dispose of all or substantially all of its assets or properties, and shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to, (i) merge with any Person, or (ii) consolidate with any Person, unless the Borrower or its Subsidiary or Eligible Joint Venture is the surviving or resulting entity and, following such merger or consolidation, no Default or Event of Default shall have occurred. (b) The Borrower shall not and shall not permit any of its Subsidiaries or Eligible Joint Ventures to effect, enter into, consummate or suffer to exist any Asset Sale(s) of any Hotel(s) generating proceeds aggregating more than 25% of the value of the Hotels owned by the Borrower, its Subsidiaries and Eligible Joint Ventures as of the Restatement Effective Date. (c) The Borrower shall not sell or otherwise dispose of, or factor at maturity or collection, or permit any of its Subsidiaries or Eligible Joint Ventures to sell or otherwise dispose of, or factor at maturity or collection, any accounts receivables. 7.6. Restrictions on Construction/Budget Hotels. (a) The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to (i) engage in the construction of new hotels (provided that nothing herein shall prohibit expansions to existing Hotels) or (ii) enter into any commitments or agreements to purchase any Hotels under, or to be under, original construction (provided that nothing herein shall limit commitments or agreements for expansions to existing Hotels), pursuant to which (A) such Persons' obligations, in the aggregate, exceed the lesser of (x) 15% of the Total Value of the Borrower as of the end of the Fiscal Quarter immediately preceding the date of any such commitment or agreement and (y) $200,000,000, or (B) any such Person is or may be liable for, or otherwise assumes, any risks relating to the development or construction (but not operation) of such Hotel, whether by way of providing any guaranties of completion, payment of any construction loans, payment of construction cost overruns, or otherwise. (b) Other than the Borrower's (or its Subsidiary's or Unconsolidated Entity's) investments in budget hotels, limited service hotels or extended stay hotels which are in existence as of the Restatement Effective Date, the Borrower's investments (direct or indirect) in -79- 86 any budget hotels, limited service hotels or extended stay hotels, shall not exceed, in the aggregate, 10% of Total Value. 7.7. Change in Nature of Business or in Capital Structure. (a) The Borrower shall not make, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to make, any material change in the nature or conduct of its business as carried on at the Restatement Effective Date. (b) The Borrower shall not make, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to make, any change in its capital structure (including, without limitation, in the terms of its outstanding Stock) or amend its declaration of trust, certificate of incorporation or by-laws or other equivalent documents other than for changes or amendments which in the aggregate have no Material Adverse Effect. 7.8. Modification of Material Agreements. The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures to, alter, amend, modify, rescind, terminate, supplement or waive any of their respective rights under, or fail to comply in all material respects with, any of its material Contractual Obligations unless approved by the Administrative Agent, which approval shall not be unreasonably withheld, conditioned or delayed; provided, however, that, with respect to any such failure to comply with any Contractual Obligation, the Borrower shall not be deemed in default of this Section 7.8 if all such failures in the aggregate would have no Material Adverse Effect; and provided, further, that in the event of any breach or event of default by a Person other than the Borrower or any of its Subsidiaries or Eligible Joint Ventures, the Borrower shall promptly notify the Administrative Agent of any such breach or event of default and take all such action as may be reasonably necessary in order to endeavor to avoid having such breach or event of default have a Material Adverse Effect. 7.9. Accounting Changes. The Borrower shall not make, nor permit any of its Subsidiaries to make, any change in accounting treatment and reporting practices or tax reporting treatment, except as required by GAAP or law and disclosed to the Lenders and the Administrative Agent. 7.10. Transactions with Affiliates. The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures, to enter into any transaction or series of related transactions, including, without limitation, any Asset Sale or the rendering of any service, with any Affiliate (other than among the Borrower and its wholly-owned Subsidiaries) unless (a) no Default or Event of Default would occur as a result thereof, and (b) such transaction is (i) in the ordinary course of the Borrower's or such Subsidiary's or Eligible Joint Venture's business, and (ii) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary or Eligible Joint Venture, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. 7.11. Adverse or Speculative Transactions. The Borrower shall not and shall not permit any of its Subsidiaries or Eligible Joint Ventures to engage in any transaction involving contracts for commodity options or futures contracts other than Interest Rate Contracts and Alternative Currency Contracts. -80- 87 7.12. Environmental Matters. (a) The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures or any Operating Lessee, or, to the extent reasonably practicable, any other Person to dispose of any Hazardous Material by placing it in or on the ground or waters of any property owned or leased by the Borrower or any of its Subsidiaries or Eligible Joint Ventures. (b) The Borrower shall not, and shall not permit any of its Subsidiaries or Eligible Joint Ventures, or, to the extent practicable, authorize any other Person to, dispose or to arrange for the disposal of any Hazardous Material on behalf of the Borrower or any of its Subsidiaries or Eligible Joint Ventures except in material compliance with all applicable Environmental Laws currently and hereinafter in effect. 7.13. Joint Enterprises. Other than investments in (x) Joint Enterprises in existence as of the Restatement Effective Date and (y) Eligible Entities, the Borrower's investments (direct or indirect) in Joint Enterprises shall not exceed, in the aggregate, 15% of Total Value. 7.14. Intentionally Omitted. 7.15. ERISA Plan Assets. The Borrower shall not and shall not permit any of its Subsidiaries to have any of their assets become subject to Title I of ERISA because they constitute "plan assets" within the meaning of the DOL Regulation Section 2510.3-101 and by reason of an investment in the Borrower or any Subsidiary. 7.16. Limitation on Liens. The Borrower shall not, and shall not permit any of its Subsidiaries to secure any Indebtedness by a Lien on Stock owned by the Borrower or any of its Subsidiaries unless contemporaneously therewith effective provision is made to secure the Obligations equally and ratably with such Indebtedness for so long as such Indebtedness is secured by such Lien. ARTICLE VIII EVENTS OF DEFAULT 8.1. Events of Default. Each of the following events shall be an Event of Default: (a) The Borrower shall fail to pay any principal (including, without limitation, mandatory prepayments of principal) of, or interest on, any Revolving Credit Loan, any Unpaid Drawing, any fee, any other amount due hereunder or under the other Loan Documents or other of the Obligations when the same becomes due and payable; or (b) Any representation or warranty made or deemed made by any Loan Party in any Loan Document or by any Loan Party (or any of its officers) in connection with any Revolving Credit Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or -81- 88 (c) Any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in this Agreement or in any other Loan Document if such failure shall remain unremedied for thirty days after the earlier of the date on which (A) a Responsible Officer of the Borrower becomes aware of such failure or (B) written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or (d) Any Loan Party or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any Recourse Indebtedness of such Loan Party or Subsidiary having a principal amount of $10,000,000 or more (excluding Indebtedness evidenced by the Revolving Credit Notes and any Non-Recourse Indebtedness), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall become or be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), or any Loan Party or any of its Subsidiaries shall be required to repurchase or offer to repurchase such Indebtedness, prior to the stated maturity thereof; or (e) The Borrower or any of its Significant Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors, or any proceeding shall be instituted by or against the Borrower or any of its Significant Subsidiaries seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a custodian, receiver, trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceedings instituted against the Borrower or any of its Significant Subsidiaries (but not instituted by it), either such proceedings shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceedings shall occur; or the Borrower or any of its Significant Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess of $10,000,000 to the extent not fully covered by insurance shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order, or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) An ERISA Event shall occur which, in the reasonable determination of the Majority Lenders, has a reasonable possibility of a liability, deficiency or waiver request of the Borrower or any ERISA Affiliate, whether or not assessed, exceeding $5,000,000; or (h) The Borrower or any of its Subsidiaries shall have entered into any consent or settlement decree or agreement or similar arrangement with a Governmental Authority or any judgment, order, decree or similar action shall have been entered against the Borrower or any of -82- 89 its Subsidiaries, in each case based on or arising from the violation of or pursuant to any Environmental Law, or the generation, storage, transportation, treatment, disposal or Release of any Hazardous Material and, in connection with all the foregoing, the Borrower and its Subsidiaries are likely to incur Environmental Liabilities and Costs in excess of $5,000,000; or (i) There shall occur a Material Adverse Change or an event which is reasonably likely to have a Material Adverse Effect; or (j) FelCor shall cease, for any reason, to maintain its status as an equity-oriented real estate investment trust under Sections 856 through 860 of the Code; or (k) FelCor shall cease at any time to be the sole general partner of FelCor LP; or (l) INTENTIONALLY DELETED (m) Hervey A. Feldman or Thomas J. Corcoran, Jr. shall sell, transfer or encumber (otherwise than to (i) members of their respective families, (ii) entities controlled by them, (iii) trusts for the benefit of any of the foregoing or (iv) a Permitted Transferee) their voting Class A membership interest in DJONT; or (n) INTENTIONALLY DELETED (o) Any provision of any Subsidiary Guaranty shall for any reason cease to be valid and binding on any Loan Party party thereto, or any Loan Party shall so state in writing; or (p) At any time when any Term Loans are outstanding, any provision of the Pledge Agreement shall for any reason cease to be valid and binding on any Loan Party thereto, or any Loan Party shall so state in writing. 8.2. Remedies. (a) If there shall occur and be continuing any Event of Default, the Administrative Agent (i) shall at the request, or may with the consent, of the Majority Lenders by notice to the Borrower, declare the obligation of each Lender to make Revolving Credit Loans and the Issuing Lender to issue a Letter of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Majority Lenders by notice to the Borrower, declare the Revolving Credit Loans, all interest thereon and all other amounts and Obligations payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts and Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that upon the occurrence of the Event of Default specified in subparagraph 8.1(e) above, (A) the obligation of each Lender to make Revolving Credit Loans and of the Issuing Lender to issue Letters of Credit shall automatically be terminated and (B) the Revolving Credit Loans, all such interest and all such amounts and Obligations shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. In addition to the remedies set forth above, the Administrative Agent may exercise any remedies provided by applicable law. -83- 90 (b) If the Administrative Agent exercises any rights or remedies pursuant to subparagraph 8.2(a), the Administrative Agent shall not, without the consent of the Majority Lenders, rescind the exercise of said rights or remedies. 8.3. Actions in Respect of Letters of Credit. (a) Upon the Termination Date, the Borrower shall pay to the Administrative Agent in immediately available funds at the Administrative Agent's office, for deposit in a special non-interest-bearing cash collateral account (the "L/C Cash Collateral Account") to be maintained with and in the name of the Administrative Agent on behalf of the Lenders at such place as shall be designated by the Administrative Agent, an amount equal to all Letter of Credit Outstandings. (b) The Borrower hereby pledges, and grants to the Administrative Agent a Lien on all of its right, title and interest in and to all funds held in the L/C Cash Collateral Account from time to time, and all proceeds thereof, as security for the payment of all amounts due and to become due from the Borrower to the Lenders and the Issuing Lender. (c) The Administrative Agent may, from time to time after funds are deposited in the L/C Cash Collateral Account, apply funds then held in the L/C Cash Collateral Account to the payment of any amounts, in such order as the Administrative Agent may elect, as shall have become or shall become due and payable by the Borrower to the Issuing Lender or Lenders in respect of the Letter of Credit Outstandings. (d) Neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the L/C Cash Collateral Account. The Borrower agrees that it will not (i) sell or otherwise dispose of any interest in the L/C Cash Collateral Account or any funds held therein or (ii) create or permit to exist any Lien upon or with respect to the L/C Cash Collateral Account or any funds held therein, except as provided in or contemplated by this Agreement. (e) The Administrative Agent may also exercise, in its sole discretion, in respect of the L/C Cash Collateral Account, in addition to the other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of New York at that time, and the Administrative Agent may, without notice except as specified below, sell the L/C Cash Collateral Account or any part thereof in one or more sales, at public or private sale, at any of the Administrative Agent's offices or elsewhere, for cash, or credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable. The Borrower agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of the L/C Cash Collateral Account, regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. -84- 91 (f) Any cash held in the L/C Cash Collateral Account, and all cash proceeds received by the Administrative Agent in respect of any sale of, collection from or other realization upon all or any part of the L/C Cash Collateral Account, may, in the discretion of the Administrative Agent, then or at any time thereafter be applied (after all payments provided for in Section 8.3(c), the expiration of all outstanding Letters of Credit and the payment of any amounts payable pursuant to Section 10.4) in whole or in part by the Administrative Agent against all or any part of the other Obligations in such order as the Administrative Agent shall elect. Any surplus of such cash or cash proceeds held by the Administrative Agent and remaining after the indefeasible cash payment in full of all of the Obligations shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive such surplus. ARTICLE IX THE ADMINISTRATIVE AGENT 9.1. Authorization and Action. (a) Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Without limitation of the foregoing, each Lender hereby authorizes the Administrative Agent to execute and deliver, and to perform its obligations under, each of the Loan Documents to which the Administrative Agent is a party, and to exercise all rights, powers and remedies that the Administrative Agent may have under such Loan Documents. (b) As to any matters not expressly provided for by this Agreement and the other Loan Documents (including, without limitation, enforcement or collection of the Revolving Credit Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Revolving Credit Notes; provided, however, that the Administrative Agent shall not be required to take any action which the Administrative Agent in good faith believes exposes it to personal liability or is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of (a) each notice and, (b) to the extent the Administrative Agent grants any consents, approvals, disapprovals or waivers to the Borrower pursuant to the directions of the Majority Lenders or all of the Lenders as required hereunder, notice of such consent, approval, disapproval or waiver, given to it by, or by it to, any Loan Party pursuant to the terms of this Agreement or the other Loan Documents. 9.2. Administrative Agent's Reliance, Etc. Neither the Administrative Agent, nor any of its Affiliates or any of the respective directors, officers, agents or employees of the Administrative Agent or any such Affiliate shall be liable for any action taken or omitted to be taken by it, him, her or them under or in connection with this Agreement or the other Loan Documents, except for its, his, her or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent (i) may treat the payee of -85- 92 any Revolving Credit Note as the holder thereof until such note has been assigned in accordance with Section 10.7; (ii) may rely on the Register to the extent set forth in Section 10.7(c); (iii) may consult with legal counsel (including, without limitation, counsel to the Borrower or any other Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iv) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents; (v) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any of the other Loan Documents on the part of the Borrower or any other Loan Party or to inspect the property (including, without limitation, the books and records) of the Borrower or any other Loan Party; (vi) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (vii) shall incur no liability under or in respect of this Agreement or any of the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, cable, telex or facsimile transmission) believed by it to be genuine and signed or sent by the proper party or parties. 9.3. Chase and Affiliates. With respect to its Revolving Credit Commitments, the Revolving Credit Loans made by it and each Revolving Credit Note issued to it, and Letters of Credit issued by it, Chase shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Chase in its individual capacity. Chase and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower or any other Loan Party or any of their respective Subsidiaries and any Person who may do business with or own securities of the Borrower or any other Loan Party or any of their respective Subsidiaries, all as if Chase were not the Administrative Agent and without any duty to account therefor to the Lenders. 9.4. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Article IV and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and other Loan Documents. 9.5. Indemnification. The Lenders agree to indemnify the Issuing Lender, the Administrative Agent and their Affiliates, and their respective directors, officers, employees, agents and advisors (to the extent not reimbursed by the Borrower or other Loan Parties), ratably according to the respective principal amounts of the Revolving Credit Notes then held by each of them (or if no Revolving Credit Notes are at the time outstanding, ratably according to the respective amounts of the aggregate of their Revolving Credit Commitments), from and against -86- 93 any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements (including, without limitation, fees and disbursements of legal counsel) of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against, the Administrative Agent in any way relating to or arising out of this Agreement or the other Loan Documents or any action taken or omitted by the Administrative Agent under this Agreement or the other Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's or such Affiliate's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including, without limitation, fees and disbursements of legal counsel) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of its rights or responsibilities under, this Agreement or the other Loan Documents, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower or another Loan Party. 9.6. Successor Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed by the Super Majority Lenders in the event that the Administrative Agent commits a willful breach of, or is grossly negligent in the performance of, its material obligations hereunder. Furthermore, in the event that at any time the Administrative Agent assigns its entire interest as a Lender hereunder to an Eligible Assignee as permitted by Section 10.7 hereof, which Eligible Assignee is not an Affiliate of the Administrative Agent, then the Administrative Agent shall resign as Administrative Agent. Upon any such resignation or removal (which shall be effective upon such date as a successor Agent accepts its appointment), the Majority Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Super Majority Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof, having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. 9.7. Duties of Other Agents. None of Chase Securities Inc. in its capacity as Joint Lead Arranger, Joint Book Manager and Syndication Agent, Bankers Trust Company in its capacity as Joint Lead Arranger, Joint Book Manager and Documentation Agent, Bank of America, N.A. in its capacity as Documentation Agent or Wells Fargo Bank, National -87- 94 Association, as Co-Documentation Agent, shall have any duties or responsibilities hereunder in its representative capacity as such. ARTICLE X MISCELLANEOUS 10.1. Amendments, Etc. (a) No amendment or waiver of any provision of this Agreement nor consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, (x) the Administrative Agent shall have the right to waive or depart from any of the requirements or criteria contained in the definition of Qualified Lease and (y) subject to Sections 10.1(b) and (c) below, the Administrative Agent shall have the right to make non-material waivers of non-economic provisions of this Agreement or consent to non-material departures therefrom. The parties hereto agree that any non-material waiver of any provision of this Agreement or any other Loan Document shall be effective upon the execution by the party so charged of a written agreement to such effect. (b) Notwithstanding anything set forth in subparagraph (a) above, no amendment, waiver or consent shall, unless in writing and signed by all the Lenders do any of the following: (i) waive any of the conditions specified in Article III except as otherwise provided therein; (ii) increase the Revolving Credit Commitments of the Lenders or subject the Lenders to any additional obligations; (iii) reduce the principal of, or interest on, the Revolving Credit Loans or any fees or other amounts payable hereunder; (iv) waive or postpone any date fixed for any payment of principal of, or interest on, the Revolving Credit Loans or any fees or other amounts payable hereunder; (v) change the percentage of the Revolving Credit Commitments, the aggregate unpaid principal amount of the Revolving Credit Loans, or the number of Lenders which shall be required for the Lenders or any of them to take any action hereunder; (vi) change the definitions of Available Credit, Majority Lenders or Super Majority Lenders (provided that the foregoing shall not include changes in any defined terms used in such definitions), (vii) release any Loan Party from its obligations under any Revolving Credit Note or any Subsidiary Guaranty, or (viii) amend this Section 10.1; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or the other Loan Documents. (c) Notwithstanding anything set forth in subparagraph (a) above, no amendment, waiver or consent shall, (x) unless in writing and signed by the Super Majority Lenders do any of the following: (i) waive or amend any of the covenants specified in Sections 5.1, 5.2, 5.3, 5.4 or 5.5, (ii) change the definitions of Unencumbered Hotel Property or Eligible Joint Venture (provided that the foregoing shall not include changes in any defined terms used in such definitions), (iii) waive payment of any default rate interest pursuant to Section 2.8(b), or (iv) remove the Administrative Agent for a willful breach of, or gross negligence in the performance of, its material obligations hereunder pursuant to Section 9.6 or (y) unless in writing -88- 95 and signed by the Majority Lenders change the definitions of Adjusted NOI or Unencumbered NOI (provided that the foregoing shall not include changes in any defined terms used in such definitions). (d) Each Lender shall reply promptly, but in any event within ten (10) Business Days of receipt by such Lender of a request for consent, approval, disapproval or waiver, from the Administrative Agent (the "Lender Reply Period"). Unless a Lender shall give written notice to the Administrative Agent that it objects to consenting, approving, disapproving or waiving any matter as requested by the Administrative Agent (together with a written explanation of the reasons behind such objection) within the Lender Reply Period, such Lender shall be deemed to have consented, approved, disapproved or waived such matters as specified in the Administrative Agent's request. 10.2. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including, without limitation, telegraphic, telex, telecopy or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered by hand, if to the Borrower, at its address at 545 East John Carpenter Freeway, Suite 1300, Irving, Texas 75062 (telecopy number: 972-444-4949) (telephone number: 972-444-4900), Attention: Treasurer, with a copy to Attention: General Counsel; if to any Lender, at its Domestic Lending Office specified opposite its name on Schedule II; and if to the Administrative Agent, at its address at 270 Park Avenue, 31st Floor, New York, New York 10017 (telecopy number: 212-622-3513) (telephone number: 212-270-9538), Attention Alan Breindel with a copy to One Chase Manhattan Plaza, 8th Floor, New York, New York 10081 (telecopy number: 212-552-5701) (telephone number: 212-552-7684), Attention Christina Gould; or, as to the Borrower or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied, cabled or delivered, be effective when deposited in the mails, delivered to the telegraph company, confirmed by telex answerback, telecopied with confirmation of receipt, delivered to the cable company or delivered by hand to the addressee or its agent, respectively, except that notices and communications to the Administrative Agent pursuant to Article II or IX shall not be effective until received by the Administrative Agent. 10.3. No Waiver, Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Revolving Credit Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 10.4. Costs; Expenses; Indemnities. (a) The Borrower agrees to pay on demand (i) all costs and expenses of the Administrative Agent and its respective Affiliates in connection with the preparation, execution, delivery, administration, syndication, modification and amendment of this Agreement, each of the other Loan Documents and each of the other documents to be delivered hereunder and thereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel, accountants, appraisers, consultants or -89- 96 industry experts retained by the Administrative Agent with respect thereto and, as to the Administrative Agent, with respect to advising it as to its rights and responsibilities under this Agreement and the other Loan Documents, and (ii) all costs and expenses of the Administrative Agent or any of the Lenders (including, without limitation, the fees and out-of-pocket expenses of counsel, accountants, appraisers, consultants or industry experts retained by the Administrative Agent or any Lender) in connection with the restructuring or enforcement (whether through negotiation, legal proceedings or otherwise) of this Agreement and the other Loan Documents. (b) The Borrower agrees to indemnify and hold harmless the Administrative Agent, each Lender and the Issuing Lender and their respective Affiliates, and the directors, officers, employees, agents, attorneys, consultants and advisors of or to any of the foregoing (including, without limitation, those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Article III) (each of the foregoing being an "Indemnitee") from and against any and all claims, damages, liabilities, obligations, losses, penalties, actions, judgments, suits, costs, disbursements and expenses of any kind or nature (including, without limitation, fees and disbursements of counsel to any such Indemnitee and experts, engineers and consultants and the costs of investigation and feasibility studies) which may be imposed on, incurred by or asserted against any such Indemnitee in connection with or arising out of any investigation, litigation or proceeding, whether or not any such Indemnitee is a party thereto, whether direct, indirect, or consequential and whether based on any federal, state or local law or other statutory regulation, securities or commercial law or regulation, or under common law or in equity, or on contract, tort or otherwise, in any manner relating to or arising out of or based upon or attributable to this Agreement, any other Loan Document, any document delivered hereunder or thereunder, any Obligation, or any act, event or transaction related or attendant to any thereof, including, without limitation, (i) arising from any misrepresentation or breach of warranty under Section 4.18 or any Environmental Claim or any Environmental Lien or any Remedial Action arising out of or based upon anything relating to real property owned or leased by the Borrower or any of its Subsidiaries (collectively, the "Indemnified Matters"); provided, however, that the Borrower shall not have any obligation under this Section 10.4(b) to an Indemnitee with respect to any Indemnified Matter caused by or resulting from the gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction in a final non-appealable judgment or order. (c) If any Lender receives any payment of principal of, or is subject to a conversion of, any Eurodollar Rate Loan other than on the last day of an Interest Period relating to such Loan, as a result of any payment or conversion made by the Borrower or acceleration of the maturity of the Revolving Credit Notes pursuant to Section 8.2 or for any other reason, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), to the extent not previously paid to such Lender pursuant to any other provision hereof, pay to the Administrative Agent for the account of such Lender all amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or conversion, including, without limitation, any loss (including, without limitation, loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain such Revolving Credit Loan. -90- 97 (d) The Borrower shall indemnify the Administrative Agent, the Lenders and the Issuing Lender for, and hold the Administrative Agent, the Lenders and the Issuing Lender harmless from and against, any and all claims for brokerage commissions, fees and other compensation made against the Administrative Agent and the Lenders for any broker, finder or consultant with respect to any agreement, arrangement or understanding made by or on behalf of any Loan Party or any of its Subsidiaries in connection with the transactions contemplated by this Agreement. (e) The Borrower agrees that any indemnification or other protection provided to any Indemnitee pursuant to this Agreement (including, without limitation, pursuant to this Section 10.4) or any other Loan Document shall (i) survive payment of the Obligations and (ii) inure to the benefit of any Person who was at any time an Indemnitee under this Agreement or any other Loan Document. 10.5. Right of Set-off. Upon the occurrence and during the continuance of any Event of Default each Lender and the Issuing Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the Obligations now or hereafter existing whether or not such Lender shall have made any demand under this Agreement or any Note or any other Loan Document and although such Obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to the other rights and remedies (including, without limitation, other rights of set-off) which such Lender may have. 10.6. Binding Effect. (a) This Agreement shall become effective as of the Restatement Effective Date and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, each Lender and the Issuing Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. (b) Notwithstanding anything in this Agreement appearing to the contrary, this Agreement is executed as an amendment and restatement of the Fourth Amended Revolving Credit Agreement, and is intended by the parties as a modification, amendment, renewal and extension (but not as a novation) thereof and of the indebtedness evidenced thereby, in order to renew and extend such indebtedness pursuant to this Agreement. 10.7. Assignments and Participations. (a) Each Lender and the Issuing Lender may sell, transfer, negotiate or assign to one or more other Lenders or Eligible Assignees all or a portion of its Revolving Credit Commitment, commitment to issue Letters of Credit, the Revolving Credit Loans and Letter of Credit Outstandings owing to it and the Revolving Credit Notes held by it and a commensurate portion of its rights and obligations hereunder and under the other Loan Documents; provided, however, that (i) the aggregate amount of the Revolving Credit Commitments, Revolving Credit Loans and Letter of Credit Outstandings being assigned -91- 98 pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than the assignor's entire interest, except (x) with the consent of the Borrower and the Administrative Agent, or (y) during the continuance of an Event of Default, or (z) a Lender may assign a portion of its Revolving Credit Commitment, Revolving Credit Loans and Letter of Credit Outstandings to another existing Lender or Lenders only, provided that the aggregate amount of the Revolving Credit Commitment, Revolving Credit Loans and Letter of Credit Outstandings retained by the assignor shall in no event be less than $10,000,000, and (ii) each assignee hereunder shall also be an Eligible Assignee. The parties to each assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording, an Assignment and Acceptance, together with the Revolving Credit Notes (or an Affidavit of Loss and Indemnity with respect to such Revolving Credit Notes satisfactory to the Administrative Agent) subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (A) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to such assignee pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and thereunder, and (B) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except those which survive the payment in full of the Obligations) and be released from its obligations under the Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any of the statements, warranties or representations made in or in connection with this Agreement or any other Loan Document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under this Agreement or any other Loan Document or of any other instrument or document furnished pursuant hereto or thereto; (iii) such assigning Lender confirms that it has delivered to the assignee and the assignee confirms that it has received a copy of this Agreement and each of the Loan Documents together with a copy of the most recent financial statements delivered by the Borrower to the Lenders pursuant to each of the clauses of Section 6.11 (or if no such statements have been delivered, the financial statements referred to in Section 4.5 of this Agreement) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not -92- 99 taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender and if such assignor was the Issuing Lender, of the Issuing Lender. (c) The Administrative Agent shall maintain at its address referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Revolving Credit Commitments of and principal amount of the Revolving Credit Loans and Letters of Credit Outstandings owing to each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Loan Parties, the Administrative Agent, the Issuing Lender and the Lenders may treat each Person whose name is recorded in the Register as a Lender for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, the Administrative Agent, the Issuing Lender or any Lender at any reasonable time and from time to time upon reasonable prior notice. The Administrative Agent shall supply to the Borrower promptly after any amendment thereto, a copy of the amended Register. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender or Issuing Lender and an assignee representing that it is an Eligible Assignee, together with the Revolving Credit Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent, in exchange for such surrendered Revolving Credit Notes, new Revolving Credit Notes to the order of such Eligible Assignee in an amount equal to the Revolving Credit Commitments assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained Revolving Credit Commitments hereunder, new Revolving Credit Notes to the order of the assigning Lender in an amount equal to the Commitments retained by it hereunder. Such new Revolving Credit Notes shall be dated the same date as the surrendered Revolving Credit Notes and be in substantially the form of Exhibit A hereto. (e) In addition to the other assignment rights provided in this Section 10.7, each Lender may assign, as collateral or otherwise, any of its rights under this Agreement (including, without limitation, rights to payments of principal or interest on the Revolving Credit Loans) to any Federal Reserve Bank without notice to or consent of the Borrower or the Administrative Agent; provided, however, that no such assignment shall release the assigning Lender from any of its obligations hereunder. The terms and conditions of any such assignment and the documentation evidencing such assignment shall be in form and substance satisfactory to the assigning Lender and the assignee Federal Reserve Bank. -93- 100 (f) Each Lender may sell participations to one or more banks or other Persons in or to all or a portion of its rights and obligations under the Loan Documents (including, without limitation, all or a portion of its Revolving Credit Commitment, the Revolving Credit Loans and Letters of Credit Outstandings owing to it and the Revolving Credit Notes held by it). The terms of such participation shall not, in any event, require the participant's consent to any amendments, waivers or other modifications of any provision of any Loan Documents, the consent to any departure by any Loan Party therefrom, or to the exercising or refraining from exercising any powers or rights which such Lender may have under or in respect of the Loan Documents (including, without limitation, the right to enforce the obligations of the Loan Parties), except if any such amendment, waiver or other modification or consent would reduce the amount, or postpone any date fixed for, any amount (whether of principal, interest or fees) payable to such participant under the Loan Documents, to which such participant would otherwise be entitled under such participation. In the event of the sale of any participation by any Lender, (i) such Lender's obligations under the Loan Documents (including, without limitation, its Revolving Credit Commitment) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of such Revolving Credit Notes and Obligations for all purposes of this Agreement, and; (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. (g) Each participant shall be entitled to the benefits of Sections 2.10, 2.12, 2.14 and 10.4 as if it were a Lender; provided, however, that anything herein to the contrary notwithstanding, the Borrower shall not, at any time, be obligated to pay to any assignee or participant of any interest of any Lender, under Section 2.10, 2.12, 2.14 or 10.4, any sum in excess of the sum which if the Borrower would not at the time of such assignment have been obligated to pay to such assignor Lender any such amount in respect of such interest had such assignment not been effected or had such participation not been sold. (h) Notwithstanding the foregoing provisions of this Section 10.7, the aggregate Revolving Credit Commitments and Revolving Credit Loans of (i) Chase shall be at least equal to that of any other Lender, (ii) Bankers Trust Company shall be at least equal to that of any other Lender (other than Chase), (iii) Bank of America, N.A. shall be at least equal to that of any other Lender (other than Chase) and (iv) Wells Fargo Bank, National Association shall be at least equal to that of any other Lender (other than Chase); provided that, (i) if an Event of Default exists, Chase, Bankers Trust Company, Bank of America, N.A. and/or Wells Fargo Bank, National Association may assign all or any portion of their respective Commitments and Revolving Credit Loans and (ii) if Chase ceases to be Administrative Agent for any reason, Chase may assign all or any portion of its respective Revolving Credit Commitment and Revolving Credit Loans. 10.8. Governing Law; Severability. This Agreement and the Revolving Credit Notes and the rights and obligations of the parties hereto and thereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this agreement shall be prohibited by or -94- 101 invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 10.9. Submission to Jurisdiction: Service of Process. (a) Any legal action or proceeding with respect to this Agreement or the Revolving Credit Notes or any document related thereto may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, the Borrower hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. (b) The Borrower irrevocably consents to the service of process of any of the aforesaid courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Borrower at its address provided herein. (c) Nothing contained in this Section 10.9 shall affect the right of the Administrative Agent, any Lender or any holder of a Revolving Credit Note to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction. 10.10. Section Titles. The Section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 10.11. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 10.12. Entire Agreement. This Agreement, together with all of the other Loan Documents and all certificates and documents delivered hereunder or thereunder, and the agreements referred to in Section 2.3(b) embody the entire agreement of the parties and supersede all prior agreements and understandings relating to the subject matter hereof. 10.13. Confidentiality. Each Lender and the Administrative Agent agrees to keep information obtained by it pursuant hereto and the other Loan Documents confidential and agrees that it will only use such information in connection with the transactions contemplated by this Agreement and not disclose any of such information other than (i) to such Lender's or the Administrative Agent's, as the case may be, Affiliates, employees, representatives and agents who are or are expected to be involved in the evaluation of such information in connection with the transactions contemplated by this Agreement and who are advised of the confidential nature of such information, (ii) to the extent such information presently is or hereafter becomes available to such Lender or the Administrative Agent, as the case may be, on a nonconfidential -95- 102 basis from a source other than the Borrower, (iii) to the extent disclosure is required by law, regulation or judicial order or requested or required by bank regulators or auditors, or (iv) to assignees or participants or potential assignees or participants who agree to be bound by the provisions of this sentence. 10.14. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY HERETO. 10.15. Joint and Several Obligations. Unless the context clearly indicates otherwise each covenant, agreement, undertaking, condition or other matter stated herein as a covenant, agreement, undertaking or matter involving the Borrower shall be jointly and severally binding upon each of the parties comprising Borrower. -96- 103 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. FELCOR LODGING TRUST INCORPORATED By: /s/ ANDREW J. WELCH ------------------------------- Name: Andrew J. Welch Title: Vice President & Treasurer FELCOR LODGING LIMITED PARTNERSHIP By: FelCor Lodging Trust Incorporated, its general partner By: /s/ ANDREW J. WELCH ------------------------------- Name: Andrew J. Welch Title: Vice President & Treasurer THE CHASE MANHATTAN BANK, individually and as Administrative Agent By: /s/ ALAN BREINDEL ------------------------------- Name: Alan Breindel Title: Managing Director [SIGNATURES CONTINUE ON FOLLOWING PAGE] 104 BANKERS TRUST COMPANY, individually and as Documentation Agent By: /s/ LAURA S. BURWICK --------------------------------- Name: Laura S. Burwick Title: Principal [SIGNATURES CONTINUE ON FOLLOWING PAGE] 105 BANK OF AMERICA, N.A., individually and as Documentation Agent By: /s/ LESA BUTLER ------------------------------------- Name: Lesa Butler Title: Principal [SIGNATURES CONTINUE ON FOLLOWING PAGE] 106 WELLS FARGO BANK, NATIONAL ASSOCIATION, individually and as Co-Documentation Agent By: /s/ J. KENT HOWARD ------------------------------------- Name: J. Kent Howard Title: Senior Vice President REMAINDER OF SIGNATURE PAGES INTENTIONALLY OMITTED 107 Schedule I COMMITMENTS
LENDER REVOLVING CREDIT COMMITMENT ------ --------------------------- The Chase Manhattan Bank $ 87,500,000 Bankers Trust Company $ 75,000,000 Bank of America, N.A $ 75,000,000 Wells Fargo Bank, National Association $ 75,000,000 The Bank of Nova Scotia $ 50,000,000 Banc One, N.A $ 50,000,000 Credit Lyonnais New York Branch $ 50,000,000 Fleet National Bank $ 35,000,000 Bank of Montreal $ 25,000,000 PNC Bank, N.A $ 25,000,000 Erste Bank $ 15,000,000 Hua Nan Commercial Bank Ltd., New York Agency $ 13,500,000 Chang Hwa Commercial Bank Ltd., New York Branch $ 12,000,000 Citizens Bank of Massachusetts $ 12,000,000 $600,000,000
108 Schedule II APPLICABLE LENDING OFFICES AND ADDRESSES FOR NOTICES
LENDER DOMESTIC LENDING OFFICE AND ADDRESS EURODOLLAR LENDING OFFICE FOR NOTICES ------ ----------------------------------- -------------------------- The Chase Manhattan Bank 1 Chase Manhattan Plaza 1 Chase Manhattan Plaza 8th Floor 8th Floor New York, NY 10081 New York, NY 10081 Attn: Christina Gould Attn: Christina Gould Telecopy: (212) 552-5701 Telecopy: (212) 552-5701 Phone: (212) 552-7684 Phone: (212) 552-7684 Bank One, N.A. One Bank One Plaza One Bank One Plaza Chicago, Illinois 60670-0374 Chicago, Illinois 60670-0374 contact: Ken Nelson contact: Ken Nelson phone: (312) 732-6403 phone: (312) 732-6403 fax: (312) 732-1117 fax: (312) 732-1117 Bank of Montreal 111 West Monroe 111 West Monroe Chicago, Illinois 60603 Chicago, Illinois 60603 contact: Victor Prieto contact: Victor Prieto phone: (312) 293-8112 phone: (312) 293-8112 fax: (312) 293-5830 fax: (312) 293-5830 The Bank of Nova Scotia Real Estate Banking 600 Peachtree Street, N.E. One Liberty Plaza Suite 2700 New York, NY 10006 Atlanta, GA 30308 contact: Bruce Ferguson contact: Craig Subryan phone: (212) 225-5158 fax: (404) 888-8998 fax: (212) 225-5166 Bank of America, N.A. 901 Main, 51st Floor 901 Main, 51st Floor Dallas, TX 75202 Dallas, TX 75202 contact: Lesa J. Butler contact: Lesa J. Butler phone: (214) 209-1506 phone: (214) 209-1506 fax: (214) 209-0085 fax: (214) 209-0085 Chang Hwa Commercial One World Trade Center, 32nd Floor One World Trade Center, 32nd Floor Bank Ltd., New York New York, NY 10048 New York, NY 10048 Branch Contact: Peter Lien Contact: Peter Lien phone: (212) 390-7040 phone: (212) 390-7040 fax: (212) 390-7063 fax: (212) 390-7063
109 Schedule II Page 2
LENDER DOMESTIC LENDING OFFICE AND ADDRESS EURODOLLAR LENDING OFFICE FOR NOTICES ------ ----------------------------------- -------------------------- Citizens Bank of 1 Citizens Plaza 1 Citizens Plaza Massachusets Providence, RI 02903-1339 Providence, RI 02903-1339 contact: Lawrence Hershoff contact: Lawrence Hershoff phone: (401) 456-7448 phone: (401) 456-7448 fax: (401) 282-4485 fax: (401) 282-4485 Credit Lyonnais New 1301 Avenue of the Americas 1301 Avenue of the Americas York Branch New York, NY 10019 New York, NY 10019 contact: Bruno de Floor contact: Bruno de Floor phone: (212) 261-3234 phone: (212) 261-3234 fax: (212) 261-7532 fax: (212) 261-7532 Bankers Trust Company 130 Liberty Street 130 Liberty Street Mail Stop 2257 Mail Stop 2257 New York, NY 10006 New York, NY 10006 contact: Wendy Williams contact: Wendy Williams phone: (212) 250-4854 phone: (212) 250-4854 fax: (212) 250-7351 fax: (212) 250-7351 Erste Bank 280 Park Avenue 280 Park Avenue West Building West Building New York, NY 10017 New York, NY 10017 contact: Paul Judicke contact: Paul Judicke phone: (212) 984-5634 phone: (212) 984-5634 fax: (212) 984-5627 fax: (212) 984-5627 Fleet National Bank 115 Perimeter Center Place, Suite 500 115 Perimeter Center Place, Suite 500 Atlanta, Georgia 30346 Atlanta, Georgia 30346 contact: Jeanette Streander contact: Jeanette Streander phone: (770) 390-6550 phone: (770) 390-6550 fax: (770) 390-8434 fax: (770) 390-8434 Hua Nan Commercial Bank Two World Trade Center, Suite 2846 Two World Trade Center, Suite 2846 Ltd., New York Agency New York, NY 10048 New York, NY 10048 contact: Jeng Fang Geeng contact: Jeng Fang Geeng phone: (212) 488-2330 phone: (212) 488-2330 fax: (212) 912-1050 fax: (212) 912-1050
110 Schedule II Page 3
LENDER DOMESTIC LENDING OFFICE AND ADDRESS EURODOLLAR LENDING OFFICE FOR NOTICES ------ ----------------------------------- -------------------------- PNC Bank, N.A. One PNC Plaza One PNC Plaza Mail Stop: P1-POPP-19-2 Mail Stop: P1-POPP-19-2 249 Fifth Avenue 249 Fifth Avenue Pittsburgh, PA 15222-2707 Pittsburgh, PA 15222-2707 contact: Jan Dotchin contact: Jan Dotchin phone: (412) 762-3986 phone: (412) 762-3986 fax: (412) 768-5754 fax: (412) 768-5754 Wells Fargo Bank, 5400 LBJ Freeway 2120 East Park Place, Suite 100 National Association Dallas, TX 75240 El Segundo, CA 90245 contact: Kent Howard contact: Match Fundings Administrator phone: (972) 364-1030 fax: (310) 335-1014 fax: (972) 386-4723
EX-10.21.6 6 d80556ex10-21_6.txt 4TH AMENDMENT TO LOAN AGREEMENT DATED 8/7/00 1 EXHIBIT 10.21.6 FOURTH AMENDMENT to LOAN AGREEMENT FOURTH AMENDMENT TO THE LOAN AGREEMENT (this "Amendment"), dated as of August 7, 2000, among FELCOR LODGING TRUST INCORPORATED, a Maryland corporation ("FelCor"), FELCOR LODGING LIMITED PARTNERSHIP, a Delaware limited partnership ("FelCor LP" and collectively with FelCor, the "Borrower"), the financial institutions listed on the signature pages hereof (each individually a "Lender" and collectively the "Lenders"), and THE CHASE MANHATTAN BANK ("Chase"), as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). All capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Loan Agreement referred to below. WITNESSETH: WHEREAS, the Borrower is party to that certain Loan Agreement, dated as of April 1, 1999, among the Borrower, the financial institutions party thereto, and the Administrative Agent, which provides for the making of term loans to the Borrower in the aggregate principal amount of $375,000,000 (as amended, modified or supplemented through, but not including, the date hereof, the "Loan Agreement"); and WHEREAS, the parties hereto wish to amend the Loan Agreement as herein provided, subject to and on the terms and conditions set forth herein; NOW, THEREFORE, it is agreed: 1. Amendments. (a) The definition of the term "Adjusted Funds from Operations" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting the phrase "of such Person and its Subsidiaries" appearing in clause (a)(ii), clause (a)(iii) and clause (b)(i) thereof. (b) The definition of the term "Credit Agreement" contained in Section 1.1 of the Loan Agreement is hereby amended to read in its entirety as follows: "Credit Agreement" means that certain Fifth Amended and Restated Credit Agreement, dated as of August 1, 2000, as may be amended, modified or supplemented from time to time, among FelCor Lodging Trust Incorporated, FelCor Lodging Limited Partnership, those certain lending institutions included as signatories thereto, and Chase, as administrative agent, for indebtedness of up to $1.1 billion. (c) The definition of the term "Disqualified Stock" contained in Section 1.1 of the Loan Agreement is hereby amended by (i) inserting the parenthetical "(other than in exchange 2 for other equity securities which do not constitute Disqualified Stock)" immediately following the phrase "Maturity Date of the Loans" at the end of clause (i) thereof and (ii) inserting the parenthetical "(other than in exchange for other equity securities which do not constitute Disqualified Stock)" immediately following the phrase "Maturity Date of the Loans" at the end of clause (ii) thereof. (d) The definition of the term "Eligible Assignee" contained in Section 1.1 of the Loan Agreement is hereby amended by (i) deleting the phrase "corporation organized under the laws of the United States, or any State thereof, and having total assets in excess of $3,000,000,000 appearing at the end of clause (iii) thereof; (ii) deleting the phrase ", in each case" contained in clause (iv) therein and inserting the word "and" in lieu thereof; (iii) redesignating clause (vii) and clause (viii) as clause (viii) and clause (ix) respectively; (iv) deleting the parenthetical "(vii)" contained in the parenthetical therein and inserting the parenthetical "(ix)" in lieu thereof; and (v) inserting the following new clause (vii) therein: "(vii) any person that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender;" (e) The definition of the term "Fixed Charges" contained in Section 1.1 of the Loan Agreement is hereby amended by inserting the phrase "but excluding dividends on Qualified Preferred Stock" immediately following the phrase "Unconsolidated Entities" contained in the parenthetical appearing in clause (c) thereof. (f) The definition of the term "Hotel" contained in Section 1.1 of the Loan Agreement is hereby amended by inserting the following phrase immediately prior to the final period thereof: ", or offering food and beverage or associated retail services (so long as (i) such facility was acquired together with and is operated in conjunction with, an operating facility which offers hotel or other lodging services and (ii) such facility is in immediate proximity with an operating facility which offers hotel or other lodging services)". (g) The definition of the term "Initial Guarantors" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting the word "and" appearing immediately before clause (x) thereof and inserting the following phrase immediately prior to the final period thereof: "; (xi) FelCor Omaha Hotel Company, L.L.C., (xii) FelCor Country Villa Hotel, L.L.C., (xiii) FelCor Moline Hotel, L.L.C., and (xiv) FelCor Canada Co." (h) The definition of the term "Leases" contained in Section 1.1 of the Loan Agreement is hereby amended by (i) deleting the term "Leases" contained therein and inserting the term "Lease" in lieu thereof, (ii) deleting the phrase "Eligible Joint Ventures, all of those" contained therein and inserting the phrase "Unconsolidated Entities, any" in lieu thereof, (iii) deleting the word "estates" contained therein and inserting the word "estate" in lieu thereof, and (iv) deleting the term "Eligible Joint Venture" contained therein immediately following the phrase "such Subsidiary or" and inserting the term "Unconsolidated Entity" in lieu thereof. -2- 3 (i) The definition of the term "Manager" contained in Section 1.1 of the Loan Agreement is hereby amended by (i) deleting the name "Promus" contained therein and inserting the names "Hilton, Bass" in lieu thereof (ii) deleting the name "Bristol" contained therein and (iii) deleting the phrase "by the Operating Lessee," contained therein. (j) The definition of the term "Material Adverse Change" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting the name "Bristol" contained in clause (iv)(y) therein and inserting the phrase "Bass (so long as neither DJONT nor Bass is a wholly-owned Subsidiary of the Borrower)" in lieu thereof. (k) The definition of the term "Minimum Tangible Net Worth" contained in Section 1.1 of the Loan Agreement is hereby amended by (i) deleting the amount "$858,000,000" contained therein and inserting the amount $1,500,000,000 in lieu thereof and (ii) deleting the date "March 31, 1998" appearing therein and inserting the date "June 30, 2000" in lieu thereof. (l) The definition of the term "Net Operating Income" contained in Section 1.1 of the Loan Agreement is hereby amended by (i) deleting the phrase "lessor under the Operating Lease for such Hotel" contained in clause (a) therein and inserting the phrase "owner of such Hotel from the operation thereof" in lieu thereof, (ii) deleting the phrase "pursuant to its obligations as lessor under the Operating Lease for" contained in clause (b) therein and inserting the phrase "in the operation of" in lieu thereof , (iii) deleting the words "required to be carried by the lessor" contained in clause (b) therein and (iv) deleting the phrase "pursuant to the Operating Lease therefor" contained in clause (b) therein. (m) The definition of the term "Real Estate" contained in Section 1.1 of the Loan Agreement is hereby amended by (i) deleting the term "Eligible Joint Ventures" appearing immediately following the phrase "of its Subsidiaries or" therein and inserting the term "Unconsolidated Entities" in lieu thereof and (ii) deleting the term "Eligible Joint Venture" appearing immediately following the phrase "or such Subsidiary or" therein and inserting the term "Unconsolidated Entity" in lieu thereof. (n) The definition of the term "Refurbishment Hotel" contained in Section 1.1 of the Loan Agreement is hereby amended by (i) deleting the word "or" appearing in the last line therein and inserting a comma in lieu thereof and (ii) inserting the phrase "or any other Hotel approved by the Administrative Agent (each, a "Specified Refurbishment Hotel")" immediately prior to the final period thereof. (o) The definition of the term "Reporting Operating Lessee" contained in Section 1.1 of the Loan Agreement is hereby amended by inserting the parenthetical "(other than a wholly-owned Subsidiary of the Borrower)" immediately following the term "Operating Lessee" therein. (p) The definition of the term "Requested Operating Lessee" contained in Section 1.1 of the Loan Agreement is hereby amended by inserting the parenthetical "(other than a wholly-owned Subsidiary of the Borrower)" immediately following the term "Operating Lessee" therein. -3- 4 (q) The definition of the term "Required Guarantor" contained in Section 1.1 of the Loan Agreement is hereby amended to read in its entirety as follows: "Required Guarantor" means any direct or indirect wholly-owned Subsidiary of the Borrower which is formed after the date hereof, provided, the value of the assets of such Subsidiary plus the value of the assets of such Person's Subsidiaries' exceed 2% of Total Value, provided, further, that in the event the aggregate value of the assets of all wholly-owned Subsidiaries which are not Guarantors exceed 2% of Total Value then each direct or indirect wholly-owned Subsidiary formed thereafter shall be deemed a Required Guarantor. Notwithstanding the above, (a) any direct or indirect wholly-owned Subsidiary of the Borrower, whether existing on the date hereof or formed after the date hereof, that is determined at any time to be a Specified Taxable REIT Subsidiary shall be deemed to be a Required Guarantor, (b) any direct or indirect wholly-owned Subsidiary of the Borrower, whether existing on the date hereof or formed after the date hereof, that is determined at any time to be an Excluded Taxable REIT Subsidiary shall be deemed not to be a Required Guarantor and (c) any Special Purpose Subsidiary, whether existing on the date hereof or formed after the date hereof, shall be deemed not to be a Required Guarantor, provided that in the event that the aggregate Indebtedness of all Special Purpose Subsidiaries which are not Guarantors exceeds 25% of Total Value then each Special Purpose Subsidiary formed thereafter shall be deemed a Required Guarantor. (r) The definition of "Room Revenues" contained in Section 1.1 of the Loan Agreement is hereby amended to read in its entirety as follows: "Room Revenues" means Net Rooms Department Revenue (as defined in the Uniform System of Accounts for the Lodging Industry). (s) The definition of "Stock" contained in Section 1.1 of the Loan Agreement is hereby amended by (i) inserting the phrase ", partnership, limited liability company" after the word "corporation" contained in the second line therein and (ii) inserting the phrase "partnership interests" immediately prior to the phrase "and limited liability company interests" contained in the last line thereof. (t) The definition of "Total Value" appearing in Section 1.1 of the Loan Agreement is hereby amended by (i) deleting the phrase "or less than four (4) fiscal Quarters and (x)" appearing in clause (B) therein and inserting in lieu thereof the phrase "(x) for less than four (4) fiscal Quarters and", (ii) inserting the parenthetical "(together with any other Specified Refurbishment Hotel)" immediately following the phrase "then such Hotel" appearing in clause (B) therein, (iii) deleting the name "the Myrtle Beach Condo Management Company" appearing in clause (C) therein and inserting the name "Promus/FCH Condominium Company, L.L.C." in lieu thereof, and (iv) inserting the phrase "or any other Specified Refurbishment Hotel" in the last parenthetical contained therein immediately following the term "Allerton Hotel". (u) The definition of "Unencumbered" appearing in Section 1.1 of the Loan Agreement is hereby amended by deleting the phrase "in the case of an Eligible Joint Venture which is not an Eligible Entity," appearing immediately after the parenthetical "(y)" in clause (b) therein. -4- 5 (v) Section 1.1 of the Loan Agreement is hereby amended by inserting therein the following new definitions in their appropriate alphabetical order: "Bass" means Bass Hotels and Resorts, a Delaware corporation, or any Person controlled by Bass Hotels and Resorts which is a Manager. "Excluded Taxable REIT Subsidiary" means any Taxable REIT Subsidiary that is not a Specified Taxable REIT Subsidiary. "Hilton" means Hilton Hotels Corporation, a Delaware corporation, or any Person controlled by Hilton Hotels Corporation that is a Manager. "Permitted Covenant" means (i) any periodic reporting covenant, (ii) any covenant restricting payments by the Borrower with respect to any securities of the Borrower which are junior to the Qualified Preferred Stock, (iii) any covenant the default of which can only result in an increase in the amount of any redemption price, or dividend rate, (iv) any covenant the default of which gives rise only to rights or remedies which are subject to subordination terms reasonably acceptable to the Administrative Agent, (v) any covenant providing board membership or observance rights with respect to the Borrower's board of directors and (vi) any other covenant that does not adversely affect the interests of the Lenders (as reasonably determined by the Administrative Agent). "Qualified Preferred Stock" means any preferred stock of either entity comprising the Borrower, so long as the terms of any such preferred stock (i) do not contain any mandatory put, redemption, repayment, sinking fund or other similar provision occurring before August 1, 2006, (ii) expressly provide that (x) dividends on such preferred stock are only payable if dividends are concurrently paid on the Borrower's common stock and (y) no remedies are available to the holders of such preferred stock as a result of the failure to pay dividends other than the election of up to two directors of the Borrower, (iii) do not contain any covenants other than any Permitted Covenant and (iv) do not grant the holders thereof any voting rights except for (x) voting rights required to be granted to such holders under applicable law, (y) limited customary voting rights on fundamental matters such as mergers, consolidations, sales of substantial assets, or liquidations involving the Borrower and (z) limited customary voting rights to elect not more than two directors during any period when dividends are in arrears. "Recourse Indebtedness" of any Person means the sum of the following: (A) all Indebtedness of such Person and its Subsidiaries determined on a consolidated basis in conformity with GAAP as to which recourse for payment is not limited to the specific assets encumbered by such a Lien, provided, however, that personal recourse of a holder of Indebtedness against (i) any Subsidiary (or Unconsolidated Entity) of Borrower formed specifically for the limited purpose of owning specific assets which secure Indebtedness which does not exceed 65% of the value of the assets owned by such Subsidiary (or Unconsolidated Entity) or (ii) any obligor with respect thereto for fraud, misrepresentation, misapplication of cash, waste and other circumstances customarily excluded from non-recourse provisions in non-recourse financing of real estate, shall not, by itself, cause any Indebtedness to be characterized as Recourse Indebtedness, provided further, that if a personal recourse claim is made in connection therewith, such claim shall constitute Recourse Indebtedness for the purposes of this Agreement; plus (B) -5- 6 such Person's Pro Rata Share of Recourse Indebtedness of such Person's Unconsolidated Entities. "Special Purpose Subsidiary" means any direct or indirect wholly-owned Subsidiary of the Borrower (i) formed solely in connection with a securitization or similar financing, (ii) whose assets are subject to Liens securing Indebtedness incurred in connection with such securitization or similar financing, and (iii) that is otherwise restricted in its ability to incur any Indebtedness or engage in any business activities other than with respect to such securitization or similar financing. "Specified Refurbishment Hotel" has the meaning specified in the definition of Refurbishment Hotel. "Specified Taxable REIT Subsidiary" means any Taxable REIT Subsidiary that either (i) is an Operating Lessee or (ii) owns or operates one or more Hotels. "Taxable REIT Subsidiary" means any direct or indirect wholly-owned Subsidiary of the Borrower that qualifies as a taxable REIT subsidiary under Section 856(l) of the Code. (w) The definitions of the terms "Bristol," "Bristol Distribution," "Eligible Entity" and "Promus" contained in Section 1.1 of the Loan Agreement are hereby deleted in their entirety. (x) Section 4.3 of the Loan Agreement is hereby amended by inserting the following phrase immediately after the phrase "Tax Affiliates have been filed" contained therein: ", except in the case of any such state, local or foreign tax return where such failure to file will not have a Material Adverse Effect, (y) Section 4.8(d) of the Loan Agreement is hereby amended by (i) inserting the phrase ", other than Liens created under the Pledge Agreement" immediately following the phrase "is free and clear of all Liens" contained therein and (ii) deleting the last proviso contained therein and inserting the following proviso in lieu thereof: "provided that mortgage loan agreements executed by certain Subsidiaries or Eligible Joint Ventures may contain such restrictions" (z) Section 4.12(e) of the Loan Agreement is hereby amended by inserting the following proviso immediately prior to the period thereof: ", provided that mortgage loan agreements executed by certain Subsidiaries or Eligible Joint Ventures may contain such restrictions" (aa) Section 6.4 of the Loan Agreement is hereby amended by inserting the phrase "engages in business or owns properties" immediately prior to the period in the penultimate sentence thereof. (bb) Section 6.11(a) of the Loan Agreement is hereby amended by (i) inserting the phrase "or the treasurer" immediately following the term "chief financial officer" appearing -6- 7 therein and (ii) deleting the name "Bristol" appearing therein and inserting the name "Bass" in lieu thereof. (cc) Section 6.11(b) of the Loan Agreement is hereby amended by (i) deleting the name "Bristol" appearing therein and (ii) inserting the name "Bass" in lieu thereof. (dd) Section 6.12(a) of the Loan Agreement is hereby amended by (i) deleting the word "Sales" appearing therein and inserting the word "Sale" in lieu thereof and (ii) inserting the phrase "or the Treasurer" immediately following the title "Chief Financial Officer" therein. (ee) Section 6.12(c) of the Loan Agreement is hereby amended by inserting the phrase "Treasurer" immediately following the phrase "Chief Financial Officer or" appearing therein. (ff) Section 6.12(i) of the Loan Agreement is hereby amended by inserting the word "material" immediately prior to the word "violation" in clause (vii) thereof. (gg) Section 6.13(a) of the Loan Agreement is hereby amended by inserting the following sentence at the end thereof: "Notwithstanding the foregoing, this Section 6.13 shall not apply to (i) Operating Leases with wholly-owned Subsidiaries of the Borrower and (ii) Operating Lessees that are wholly-owned Subsidiaries of the Borrower." (hh) Section 6.13(b) of the Loan Agreement is hereby amended by inserting the following proviso immediately prior to the period thereof: "; provided that this Section 6.13 shall not apply to (i) Operating Leases with wholly-owned Subsidiaries of the Borrower and (ii) Operating Lessees that are wholly-owned Subsidiaries". (ii) Section 7.1(c) of the Loan Agreement is hereby amended to read in its entirety as follows: "(c) The Borrower shall not permit any direct or indirect wholly-owned Subsidiary (other than an Excluded Taxable REIT Subsidiary and Special Purpose Subsidiary) to own assets (including the assets of such Person's Subsidiaries) the value of which exceed 2% of Total Value unless such Subsidiary executes and delivers to the Administrative Agent a Subsidiary Guaranty, provided, that in the event the aggregate value of the assets of all wholly-owned Subsidiaries (other than Excluded Taxable REIT Subsidiaries and Special Purpose Subsidiaries) which are not Guarantors exceed 2% of Total Value then Borrower shall not permit any direct or indirect wholly-owned Subsidiary formed thereafter (other than an Excluded Taxable REIT Subsidiary and Special Purpose Subsidiary) to own assets (including the assets of such Person's Subsidiaries) unless such Subsidiary executes and delivers to the Administrative Agent a Subsidiary Guaranty; provided further that in the event that the aggregate Indebtedness of all Special Purpose Subsidiaries which are not Guarantors exceeds 25% of Total Value then the Borrower shall not permit any Special Purpose Subsidiary formed thereafter to -7- 8 own assets unless such Special Purpose Subsidiary executes and delivers to the Administrative Agent a Subsidiary Guaranty. (jj) Section 7.4 of the Loan Agreement is hereby amended by deleting the phrase ""the Bristol Distribution" contained therein. (kk) Section 7.6(a) of the Loan Agreement is hereby amended by (i) deleting the amount "$400,000,000" appearing in clause (y) therein and (ii) inserting the amount "$200,000,000" in lieu thereof. (ll) Section 8.1 of the Loan Agreement is hereby amended by (i) deleting the word "or" contained at the end of clause (l) thereof, (ii) deleting the period appearing at the end of clause (m) thereof and inserting "; or" in lieu thereof and (iii) inserting therein immediately following clause (m) thereof the following new clause (n): "(n) At any time when any Term Loans are outstanding, any provision of the Pledge Agreement shall for any reason cease to be valid and binding on any Loan Party thereto, or any Loan Party shall so state in writing." (mm) Section 10.2 of the Loan Agreement is hereby amended by (i) deleting the address "380 Madison Avenue,, 11th Floor and inserting the address "270 Park Avenue", 31st Floor" in lieu thereof, (ii) deleting the telecopy number "212-622-3580" contained therein and inserting the telecopy number "212-622-3513"in lieu thereof, (iii) deleting the telephone number "212-622-3419" contained therein and inserting the telephone number "212-270-9538"in lieu thereof, (iv) deleting the telephone number "212-552-7469" and inserting the telephone number "212-552-7684" in lieu thereof and (v) deleting the name "Thierry LeJouam" contained therein and inserting the name "Christina Gould" in lieu thereof. (nn) Schedule IV of the Loan Agreement is hereby amended by inserting "FelCor Lodging Trust Incorporated" and "FelCor Lodging Limited Partnership" as Permitted Transferees. 2. Miscellaneous. (a) The Loan Agreement and other Loan Documents (as defined in the Loan Agreement) are in full force and effect without default thereunder by the Borrower (after giving effect to this Amendment) and all of the representations and warranties contained the Loan Agreement and the other Loan Documents are hereby restated as if the same were made as of the Amendment Effective Date (it being understood and agreed that any representation or warranty which by its terms is made on a specified date shall be required to be true and correct only as of such specified date). (b) If there shall be any inconsistencies between the terms, covenants, conditions and provisions set forth in the Loan Agreement, and the terms, covenants, conditions and provisions set forth in this Amendment, then the terms, covenants, conditions and provisions of this Amendment shall prevail. Whenever possible, the provisions of this Amendment shall be deemed supplemental to and not in derogation of the terms of the Loan Agreement and any documents relating thereto. -8- 9 (c) Each party hereto confirms and ratifies all of the terms and provisions of the Loan Agreement as amended by this Amendment, the Pledge Agreement and the Guaranties. Except as expressly amended hereby, all of the terms of the Loan Agreement shall remain in full force and effect. (d) This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Loan Agreement or any other Loan Document. (e) This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Administrative Agent. (f) Each party hereto represents, warrants and covenants that such party (and the undersigned representative of such party) has the full power, authority and legal right to execute this Amendment and to keep and observe all the terms of this Amendment and the Loan Agreement on such party's part to be observed and performed. (g) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. (h) This Amendment shall become effective on the date (the "Amendment Effective Date") when (i) the Borrower and the Majority Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile transmission) the same to the Administrative Agent at a notice office satisfactory to the Administrative Agent. (i) The Borrower hereby agrees to pay each Lender which delivers an executed copy of this Amendment (by hard copy or facsimile) to the Administrative Agent by no later than 12:00 (Noon) (New York time) on Monday, August 14, 2000, a fee (the "Amendment Fee") in an amount equal to $5,000, which Amendment Fee shall be due and payable on the first Business Day following the date on which the Majority Lenders shall have executed and delivered this Amendment; provided that to the extent that Lenders are affiliated, such Amendment Fee shall be due and payable to such affiliated Lenders as a group, to be shared among such affiliated Lenders as such affiliated Lenders may determine. (j) From and after the Amendment Effective Date, all references in the Loan Agreement and each of the Loan Documents to the Loan Agreement shall be deemed to be references to the Loan Agreement as amended hereby. * * * -9- 10 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. FELCOR LODGING TRUST INCORPORATED, a Maryland corporation By: /s/ LAWRENCE D. ROBINSON ----------------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR LODGING LIMITED PARTNERSHIP, a Delaware limited partnership By: FELCOR LODGING TRUST INCORPORATED, a Maryland corporation, its sole general partner By: /s/ LAWRENCE D. ROBINSON ----------------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel THE CHASE MANHATTAN BANK, as Administrative Agent By: /s/ ALAN BREINDEL ----------------------------------------- Name: Alan Breindel Title: Managing Director 11 [REMAINDER OF SIGNATURE PAGES INTENTIONALLY OMITTED] EX-10.26 7 d80556ex10-26.txt REGISTRATION RIGHTS AGREEMENT DATED 9/8/00 1 EXHIBIT 10.26 REGISTRATION RIGHTS AGREEMENT Dated September 8, 2000 AMONG FELCOR LODGING LIMITED PARTNERSHIP, FELCOR LODGING TRUST INCORPORATED. and DEUTSCHE BANC SECURITIES INC. CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED BANC OF AMERICA SECURITIES LLC BANC ONE CAPITAL MARKETS, INC. CREDIT LYONNAIS SECURITIES (USA) INC. SCOTIA CAPITAL (USA) INC. 2 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into September 8, 2000, between FELCOR LODGING LIMITED PARTNERSHIP, a Delaware limited partnership (the "Operating Partnership"), FELCOR LODGING TRUST INCORPORATED, a Maryland corporation ("FelCor" and, together with the Operating Partnership, the "Company"), and DEUTSCHE BANC SECURITIES INC., CHASE SECURITIES INC., MORGAN STANLEY & CO. INCORPORATED, BANC OF AMERICA SECURITIES LLC, BANC ONE CAPITAL MARKETS, INC., CREDIT LYONNAIS SECURITIES (USA) INC. AND SCOTIA CAPITAL (USA) INC. (the "Placement Agents"). This Agreement is made pursuant to the Placement Agreement dated the date hereof, between the Operating Partnership, FelCor and the Placement Agents (the "Placement Agreement"), which provides for the sale by the Operating Partnership to the Placement Agents of $400,000,000 aggregate principal amount of 9 1/2% Senior Notes Due 2008 of the Operating Partnership (the "Notes") to be issued pursuant to the Indenture (as defined below). The Notes will be guaranteed by FelCor and the Subsidiary Guarantors (as defined herein) so long as they are obligors on other indebtedness of FelCor and the Operating Partnership which is pari passu with or subordinated to the Notes. In order to induce the Placement Agents to enter into the Placement Agreement, the Company has agreed to provide to the Placement Agents and their direct and indirect transferees the registration rights with respect to the Notes set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Placement Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Closing Date" shall mean the Closing Date as defined in the Placement Agreement. "Company" shall have the meaning set forth in the preamble to this Agreement and shall also include the Company's successors. "Exchange Notes" shall mean Notes issued by Operating Partnership under the Indenture containing terms identical to the Notes (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Notes or, if no such interest has been paid, from September 15, 2000, (ii) the Exchange Notes will not contain restrictions on transfer and 3 (iii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated) and to be offered to Holders of Notes in exchange for Notes pursuant to the Exchange Offer. "Exchange Offer" shall mean the exchange offer by the Company of Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof. "Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Holder" shall mean the Placement Agents, for so long as they own any Registrable Notes, and each of their successors, assigns and direct and indirect transferees who become registered owners of Registrable Notes under the Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Holder" shall include Participating Broker-Dealers (as defined in Section 4(a)). "Indenture" shall mean the Indenture relating to the Notes dated as of September 15, 2000 between the Operating Partnership, FelCor, the Subsidiary Guarantors and SunTrust Bank, as trustee, and as the same may be amended from time to time in accordance with the terms thereof. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Notes; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Company or any of its affiliates (as such term is defined in Rule 405 under the 1933 Act) (other than the Placement Agents or subsequent holders of Registrable Notes if such subsequent holders are deemed to be such affiliates solely by reason of their holding of such Registrable Notes) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount. "Notes" shall have the meaning set forth in the second paragraph of this Agreement. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Placement Agents" shall have the meaning set forth in the preamble to this Agreement. "Placement Agreement" shall have the meaning set forth in the preamble to this Agreement. 2 4 "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Notes covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Notes or Registrable Notes), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Company and, in the case of a Shelf Registration Statement, the reasonable fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders and which counsel may also be counsel for the Placement Agents) and (viii) the fees and disbursements of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, but excluding fees and expenses of counsel to the underwriters (other than reasonable fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Notes by a Holder. "Registrable Notes" shall mean the Notes other than the Exchanges Notes; provided, however, that the Notes shall cease to be Registrable Notes (i) when a Registration Statement with respect to such Notes shall have been declared effective under the 1933 Act and such Notes shall have been disposed of pursuant to such Registration Statement, (ii) when such Notes have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the 1933 Act or (iii) when such Notes shall have ceased to be outstanding. "Registration Statement" shall mean any registration statement of FelCor and the Operating Partnership that covers any of the Exchange Notes or Registrable Notes pursuant to the provisions of this Agreement and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. 3 5 "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Notes (but no other Notes unless approved by the Holders whose Registrable Notes are covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Subsidiary Guarantors" shall mean each of (i) FelCor/CSS Hotels, L.L.C., a Delaware limited liability company, (ii) FelCor/LAX Hotels, L.L.C., a Delaware limited liability company, (iii) FelCor/CSS Holdings, L.P., a Delaware limited partnership, (iv) FelCor/St. Paul Holdings, L.P., a Delaware limited partnership, (v) FelCor/LAX Holdings, L.P., a Delaware limited partnership, (vi) FelCor Eight Hotels, L.L.C., a Delaware limited liability company, (vii) FelCor Hotel Asset Company, L.L.C., a Delaware limited liability company, (viii) FelCor Nevada Holdings L.L.C., a Nevada limited liability company, (ix) FHAC Nevada Holdings, L.L.C., a Nevada limited liability company, (x) FHAC Texas Holdings, L.P., a Texas limited partnership, (xi) FelCor Omaha Hotel Company, L.L.C., a Delaware limited liability company, (xii) FelCor Country Villa Hotel, L.L.C., a Delaware limited liability company, (xiii) FelCor Moline Hotel, L.L.C., a Delaware limited liability company, (xiv) FelCor Canada Co., a Nova Scotia unlimited liability company and each other entity that becomes a Subsidiary Guarantor in accordance with the terms of the Indenture. "Trustee" shall mean the trustee with respect to the Notes under the Indenture. "Underwritten Registration" or "Underwritten Offering" shall mean a registration in which Registrable Notes are sold to an Underwriter (as hereinafter defined) for reoffering to the public. 2. Registration Under The 1933 Act. (a) To the extent not prohibited by any applicable law or applicable interpretation of the Staff of the SEC, the Company shall cause to be filed after the Closing Date an Exchange Offer Registration Statement covering the offer by the Company to the Holders to exchange all of the Registrable Notes for Exchange Notes, use its best efforts to have such Registration Statement declared effective by the SEC, and to have such Exchange Offer Registration Statement remain effective until the closing of the Exchange Offer. The Company shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement has been declared effective by the SEC and use its best efforts to have the Exchange Offer consummated not later than 180 days after the Closing Date. The Company shall commence the Exchange Offer by mailing the related exchange offer Prospectus and accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law: (i) that the Exchange Offer is being made pursuant to this Registration Rights Agreement and that all Registrable Notes validly tendered will be accepted for exchange; 4 6 (ii) the dates of acceptance for exchange (which shall be a period of at least 20 business days from the date such notice is mailed) (the "Exchange Dates"); (iii) that any Registrable Note not tendered will remain outstanding and continue to accrue interest in accordance with the terms of the Notes, but will not retain any rights under this Registration Rights Agreement; (iv) that Holders electing to have a Registrable Note exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Note, together with the enclosed letters of transmittal, to the institution and at the address located in the Borough of Manhattan, The City of New York, specified in the notice prior to the close of business on the last Exchange Date; and (v) that Holders will be entitled to withdraw their election, not later than the close of business on the last Exchange Date, by sending to the institution and at the address located in the Borough of Manhattan, The City of New York, specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Notes delivered for exchange and a statement that such Holder is withdrawing his election to have such Notes exchanged. As soon as practicable after the last Exchange Date, the Company shall: (i) accept for exchange Registrable Notes or portions thereof tendered and not validly withdrawn pursuant to the Exchange Offer; and (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Notes or portions thereof so accepted for exchange by the Company and issue, and cause the Trustee to promptly authenticate and mail to each Holder, an Exchange Note equal in principal amount to the principal amount of the Registrable Notes surrendered by such Holder. The Company shall use its best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the 1933 Act, the 1934 Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the Staff of the SEC. The Company shall inform the Placement Agents, if requested by the Placement Agents, of the names and addresses of the Holders to whom the Exchange Offer is made, and the Placement Agents shall have the right, subject to applicable law, to contact such Holders and otherwise facilitate the tender of Registrable Notes in the Exchange Offer. (b) In the event that (i) the Company determines that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be consummated as soon as practicable after the last Exchange Date because it would violate applicable law or the applicable interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any other reason consummated on or prior to March 14, 2001, or (iii) in the opinion of counsel for the Placement 5 7 Agents a Registration Statement must be filed and a Prospectus must be delivered by the Placement Agents in connection with any offering or sale of Registrable Notes, the Company shall cause to be filed as soon as practicable after such determination, date or notice of such opinion of counsel is given to the Company, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Notes and use its best efforts to have such Shelf Registration Statement declared effective by the SEC. In the event the Company is required to file a Shelf Registration Statement solely as a result of the matters referred to in clause (iii) of the preceding sentence, the Company shall file and use its best efforts to have declared effective by the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Notes and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Notes held by such Placement Agent after completion of the Exchange Offer. The Company agrees to use its best efforts to keep the Shelf Registration Statement continuously effective until the expiration of the period referred to in Rule 144(k) with respect to all Registrable Notes covered by the Shelf Registration Statement or such shorter period that will terminate when all of the Registrable Notes covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement. The Company further agrees to supplement or amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registration or if reasonably requested by a Holder with respect to information relating to such Holder, and to use its best efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon as thereafter practicable. The Company agrees to furnish to the Holders of Registrable Notes copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) or Section 2(b). Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Notes pursuant to the Shelf Registration Statement. (d) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that, if, after it has been declared effective, the offering of Registrable Notes pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Notes pursuant to such Registration Statement may legally resume. As provided for in the Indenture, in the event that the Exchange Offer is not consummated, and if a Shelf Registration Statement is required hereby, the Shelf Registration Statement is not declared effective on or prior to March 14, 2001, the interest rate on the Notes (and the Exchange Notes) will increase by 0.5% per annum until the Exchange Offer is consummated or a Shelf Registration Statement is declared effective. 6 8 (e) Without limiting the remedies available to the Placement Agents and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Placement Agents or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Placement Agents or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2(a) and Section 2(b) hereof. 3. Registration Procedures. In connection with the obligations of the Company with respect to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the Company shall as expeditiously as possible: (a) prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (x) shall be selected by the Company and (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Notes by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; to keep each Prospectus current during the period described under Section 4(3) and Rule 174 under the 1933 Act that is applicable to transactions by brokers or dealers with respect to the Registrable Notes or Exchanges Notes; (c) in the case of a Shelf Registration, furnish to each Holder of Registrable Notes, to counsel for the Placement Agents, to counsel for the Holders and to each Underwriter of an Underwritten Offering of Registrable Notes, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or Underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Notes; and the Company consents to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Notes and any such Underwriters in connection with the offering and sale of the Registrable Notes covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law; (d) use its reasonable best efforts to register or qualify the Registrable Notes under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Notes covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with such Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc. and do any and all other acts and things which may be reasonably 7 9 necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Notes owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a broker or dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process or (iii) subject itself to taxation in any such jurisdiction that it is already not so subject; (e) in the case of a Shelf Registration, notify each Holder of Registrable Notes, counsel for the Holders and counsel for the Placement Agents promptly and, if requested by any such Holder or counsel, confirm such advice in writing (i) when such Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to such Registration Statement and Prospectus or for additional information after such Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of such Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of such Registration Statement and the closing of any sale of Registrable Notes covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects or if the Company receives any notification with respect to the suspension of the qualification of the Registrable Notes for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective such that such Registration Statement or the related Prospectus contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make statements therein not misleading and (vi) of any determination by the Company that a post-effective amendment to such Registration Statement would be appropriate; (f) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order; (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Notes, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Notes to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold and not bearing any restrictive legends and enable such Registrable Notes to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders may reasonably request at least one business day prior to the closing of any sale of Registrable Notes; (i) in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) or (vi) hereof, use its best efforts to prepare and file with the SEC a 8 10 supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company agrees to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus upon receipt of such notice until the Company has amended or supplemented the Prospectus to correct such misstatement or omission; (j) a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Placement Agents and their counsel, upon request, (and, in the case of a Shelf Registration Statement, the Holders and their counsel) and make such of the representatives of the Company as shall be reasonably requested by the Placement Agents or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) available for discussion of such document, and shall not at any time file or make any amendment to the Registration Statement, any Prospectus or any amendment of or supplement to a Registration Statement or a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Placement Agents and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) shall not have previously been advised and furnished a copy or to which the Placement Agents or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) shall reasonably object; (k) cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the registration of the Exchanges Notes or Registrable Notes, as the case may be, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use its reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner; (l) in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Notes, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all financial and other records, pertinent documents and properties of the Company, and cause the respective officers, directors and employees of the Company to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; (m) in the case of a Shelf Registration, use its best efforts to cause all Registrable Notes to be listed on any securities exchange or any automated quotation system on which 9 11 similar securities issued by FelCor or the Operating Partnership are then listed if requested by the Majority Holders, to the extent such Registrable Notes satisfy applicable listing requirements; (n) use its best efforts to cause the Exchange Notes or Registrable Notes, as the case may be, to be rated by two nationally recognized statistical rating organizations (as such term is defined in Rule 436(g)(2) under the 1933 Act); (o) if reasonably requested by any Holder of Registrable Notes covered by a Registration Statement in order to accurately reflect information regarding such Holder or such Holder's plan of distribution as required by such Registration Statement, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such required information with respect to such Holder as such Holder reasonably requests to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Company has received notification of the matters to be incorporated in such filing; and (p) in the case of a Shelf Registration, use its reasonable best efforts to enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority of the Registrable Notes being sold) in order to expedite or facilitate the disposition of such Registrable Notes including, but not limited to, an Underwritten Offering and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Notes with respect to the business of the Company and its subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in Underwritten Offerings (but in no event more onerous to the Company than those contained in the Placement Agreement), and confirm the same if and when requested, (ii) obtain opinions of counsel to the Company (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Notes covering the matters customarily covered in opinions requested in Underwritten Offerings (but in no event more onerous to the Company than those opinions required in the Placement Agreement), (iii) obtain "cold comfort" letters from the independent certified public accountants of FelCor and the Operating Partnership (and, if necessary, any other certified public accountant of any subsidiary of the Company, or of any business acquired by the Company for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Notes, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with Underwritten Offerings, and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Notes being sold or the Underwriters, and which are customarily delivered in Underwritten Offerings, to evidence the continued validity of the representations and warranties of the Company made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement. In the case of a Shelf Registration Statement, the Company may require each Holder of Registrable Notes to furnish to the Company such information regarding the Holder and the 10 12 proposed distribution by such Holder of such Registrable Notes as the Company may from time to time reasonably request in writing. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e)(v) or (vi) hereof, such Holder will forthwith discontinue disposition of Registrable Notes pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Notes current at the time of receipt of such notice. The Company may suspend the availability of any Shelf Registration Statement for not more than two times during any 365 day period and any such suspensions may not exceed 30 days for each suspension. If the Company shall give any such notice to suspend the disposition of Registrable Notes pursuant to a Registration Statement, the Company shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Company shall have made available to the Holders copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Holders of Registrable Notes covered by a Shelf Registration Statement who desire to do so may sell such Registrable Notes in an Underwritten Offering; provided that the Company shall be required to use its best efforts to make an Underwritten Offering only upon the request of Holders of at least 25% of the Registrable Notes outstanding at the time such request is delivered to the Company. In the case of any Underwritten Offering, the Company shall (x) provide written notice to the Holders of all Registrable Notes of such Underwritten Offering at least 30 days prior to the filing of a prospectus for such Underwritten Offering, (y) specify a date, which shall be no earlier than 10 days following the date of such notice, by which each such Holder must inform the Company of its intent to participate in such Underwritten Offering and (z) include reasonable procedures that are customary to underwritten offerings of the type contemplated herein that such Holder must follow in order to participate in such Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (the "Underwriters") that will administer the offering will be selected by the Majority Holders of the Registrable Notes included in such offering and shall be approved by the Company, which approval shall not be unreasonably withheld. 4. Participation of Broker-Dealers In Exchange Offer. (a) The Staff of the SEC has taken the position that any broker-dealer that receives Exchange Notes for its own account in the Exchange Offer in exchange for Notes that were acquired by such broker-dealer as a result of market-making or other trading activities (a "Participating Broker-Dealer"), may be deemed to be an "underwriter" within the meaning of the 1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchanges Notes. The Company understands that it is the Staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the 11 13 Exchange Notes, without naming the Participating Broker-Dealers or specifying the amount of Exchange Notes owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the 1933 Act in connection with resales of Exchange Notes for their own accounts, so long as the Prospectus otherwise meets the requirements of the 1933 Act. (b) In light of the above, notwithstanding the other provisions of this Agreement, the Company agrees that the provisions of this Agreement as they relate to a Shelf Registration shall also apply to an Exchange Offer Registration to the extent, and with such reasonable modifications thereto as may be, reasonably requested by the Placement Agents or by one or more Participating Broker-Dealers, in each case as provided in clause (ii) below, in order to expedite or facilitate the disposition of any Exchange Notes by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above; provided that: (i) the Company shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(i), for a period exceeding 180 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement) and Participating Broker-Dealers shall not be authorized by the Company to deliver and shall not deliver such Prospectus after such period in connection with the resales contemplated by this Section 4; and (ii) the application of the Shelf Registration procedures set forth in Section 3 of this Agreement to an Exchange Offer Registration, to the extent not required by the positions of the Staff of the SEC or the 1933 Act and the rules and regulations thereunder, will be in conformity with the reasonable request to the Company by the Placement Agents or with the reasonable request in writing to the Company by one or more broker-dealers who certify to the Placement Agents and the Company in writing that they anticipate that they will be Participating Broker-Dealers; and provided further that, in connection with such application of the Shelf Registration procedures set forth in Section 3 to an Exchange Offer Registration, the Company shall be obligated (x) to deal only with one entity representing the Participating Broker-Dealers, which shall be Deutsche Banc Securities Inc. unless it elects not to act as such representative, (y) to pay the fees and expenses of only one counsel representing the Participating Broker-Dealers, which shall be counsel to the Placement Agents unless such counsel elects not to so act and (z) to cause to be delivered only one, if any, "cold comfort" letter with respect to the Prospectus in the form existing on the last Exchange Date and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (i) above. (c) The Placement Agents shall have no liability to the Company or any Holder with respect to any request that it may make pursuant to Section 4(b) above. 5. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless the Placement Agents, each Holder and each person, if any, who controls any Placement Agent or any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common control with, or is controlled by, any Placement 12 14 Agent or any Holder, from and against all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by any Placement Agent, any Holder or any such controlling or affiliated person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Exchange Notes or Registrable Notes were registered under the 1933 Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Placement Agents or any Holder furnished to the Company in writing by the Placement Agents or any selling Holder expressly for use therein. In connection with any Underwritten Offering permitted by Section 3, the Company will also indemnify the Underwriters, if any, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Placement Agents and the other selling Holders, and each of their respective directors, officers who sign the Registration Statement and each person, if any, who controls the Company, any Placement Agent and any other selling Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Company to the Placement Agents and the Holders, but only with reference to information relating to such Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or (iii) the indemnifying 13 15 party does not, within a reasonable period of time after request of such indemnified party, retain counsel to represent such indemnified party. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (A) the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for the Placement Agents and all persons, if any, who control any Placement Agent within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, (B) the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors and officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (C) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Holders and all persons, if any, who control any Holders within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In such case involving the Placement Agents and persons who control the Placement Agent, such firm shall be designated in writing by Deutsche Banc Securities Inc. In such case involving the Holders and such persons who control Holders, such firm shall be designated in writing by the Majority Holders. In all other cases, such firm shall be designated by the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party for such fees and expenses of counsel in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 5 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company and the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or 14 16 omission. The Holders' respective obligations to contribute pursuant to this Section 5(d) are several in proportion to the respective number of Registrable Notes of such Holder that were registered pursuant to a Registration Statement. (e) The Company and each Holder agree that it would not be just or equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5, no Holder shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which Registrable Notes were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Placement Agents, any Holder or any person controlling any Placement Agent or any Holder, or by or on behalf of the Company, its officers or directors or any person controlling the Company, (iii) acceptance of any of the Exchange Notes and (iv) any sale of Registrable Notes pursuant to a Shelf Registration Statement. 6. Miscellaneous. (a) No Inconsistent Agreements. The Company has not entered into, and on or after the date of this Agreement will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's other issued and outstanding securities under any such agreements. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Notes affected by such amendment, modification, supplement, waiver or consent; provided, however, that no amendment, modification, supplement, waiver or consents to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Notes unless consented to in writing by such Holder. 15 17 (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6(c), which address initially is, with respect to the Placement Agents, the address set forth in the Placement Agreement; and (ii) if to the Company, initially at the Company's address set forth in the Placement Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Trustee, at the address specified in the Indenture. (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Notes in violation of the terms of the Placement Agreement. If any transferee of any Holder shall acquire Registrable Notes, in any manner, whether by operation of law or otherwise, such Registrable Notes shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Notes such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such person shall be entitled to receive the benefits hereof. The Placement Agents (in their capacity as Placement Agents) shall have no liability or obligation to the Company with respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the obligations of such Holder under this Agreement. (e) Purchases and Sales of Notes. The Company shall not, and shall use its best efforts to cause its affiliates (as defined in Rule 405 under the 1933 Act) not to, purchase and then resell or otherwise transfer any Notes other than Notes acquired and cancelled. (f) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Placement Agents, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. 16 18 (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 17 19 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. FELCOR LODGING TRUST INCORPORATED By: /s/ LAWRENCE D. ROBINSON ------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel FELCOR LODGING LIMITED PARTNERSHIP By: /s/ LAWRENCE D. ROBINSON ------------------------------- Name: Lawrence D. Robinson Title: Senior Vice President & General Counsel Confirmed and accepted as of the date first above written: DEUTSCHE BANC SECURITIES INC. CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED BANC OF AMERICA SECURITIES LLC BANC ONE CAPITAL MARKETS, INC. CREDIT LYONNAIS SECURITIES (USA) INC. SCOTIA CAPITAL (USA) INC. By: DEUTSCHE BANC SECURITIES INC. By: /s/ JON MEHLMAN ------------------------------- Name: Jon Mehlman Title: Director 18 EX-12.1 8 d80556ex12-1.txt STATEMENT OF COMPUTATION OF RATIOS 1 EXHIBIT 12.1 Ratio of Earnings to Combined Fixed Charges and Preferred Dividends
Year Ended December 31, ----------------------------------------------------------------- 1995 1996 1997 1998 1999 (in thousands except ratios) Fixed Charges: Interest expensed $ 2,004 $ 9,803 $ 28,792 $ 73,182 $ 125,435 Capitalized interest -- 1,330 1,019 4,542 5,249 Amortized premiums and discounts related to debt 396 952 Amortized capitalized expense related to debt -- 20 35 50 544 Preference security dividends -- 7,734 11,797 21,423 24,735 --------- --------- --------- --------- --------- Fixed charges $ 2,004 $ 18,887 $ 41,643 $ 99,593 $ 156,916 ========= ========= ========= ========= ========= Earnings: Income from continuing operations $ 15,322 $ 48,881 $ 69,652 $ 124,414 $ 136,889 Income from equity investees (2,010) (6,963) (7,017) (8,484) Fixed charges 2,004 18,887 41,643 99,593 156,916 Amortization of capitalized interest -- 20 35 50 544 Distributed income of equity investees 1,954 4,211 7,017 8,484 Less: Capitalized Interest -- (1,330) (1,019) (4,542) (5,249) Earnings $ 17,326 $ 66,402 $ 107,559 $ 219,515 $ 289,099 ========= ========= ========= ========= ========= Ratio of Earnings to Combined Fixed Charges and Preferred Dividends 8.6% 3.5% 2.6% 2.2% 1.8% Pro Forma (Unaudited) Six Months Ended ------------------------------------ June 30, Twelve Months Six Months (Unaudited) Year ended Ended Ended ----------------------- December 3 June 30, June 30, 1999 2000 12/31/99 2000 2000 (in thousands except ratios) Fixed Charges: Interest expensed $ 59,172 $ 77,644 $ 141,427 $ 149,925 $ 76,856 Capitalized interest 3,234 497 5,249 2,512 497 Amortized premiums and discounts related to debt 494 446 952 904 446 Amortized capitalized expense related to debt 374 586 544 426 229 Preference security dividends 13,987 18,551 24,725 24,725 12,358 --------- --------- --------- --------- --------- Fixed charges $ 77,261 $ 97,724 $ 172,897 $ 178,492 $ 90,386 ========= ========= ========= ========= ========= Earnings: Income from continuing operations $ 81,521 $ (12,372) $ 107,844 $ 88,462 $ 45,560 Income from equity investees (6,429) (6,190) (8,633) (6,779) (6,190) Fixed charges 77,261 97,724 172,897 178,492 90,386 Amortization of capitalized interest 374 586 544 426 229 Distributed income of equity investees 6,429 6,190 8,633 8,394 6,190 Less: Capitalized Interest (3,234) (497) (5,249) (2,512) (497) Earnings $ 155,922 $ 85,441 $ 276,036 $ 266,483 $ 135,678 ========= ========= ========= ========= ========= Ratio of Earnings to Combined Fixed Charges and Preferred Dividends 2.0% 0.9% 1.6% 1.5% 1.5%
Ratio of earnings to combined fixed charges and preferred stock 2000 Reformated EX-21.1 9 d80556ex21-1.txt SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 SUBSIDIARIES OF FELCOR LODGING LIMITED PARTNERSHIP (as of 8/30/00) The following lists all of the subsidiaries of FelCor Lodging Limited Partnership by name, state of organization and type of entity.
STATE AND FORM OF NAME ORGANIZATION FelCor/CSS Hotels, L.L.C. Delaware; Limited Liability Company FelCor/CSS Holdings, L.P. Delaware; Limited Partnership FelCor/St. Paul Holdings, L.P. Delaware; Limited Partnership FelCor/Charlotte Hotel, L.L.C. Delaware; Limited Liability Company FelCor/Indianapolis Hotel, L.L.C. Delaware; Limited Liability Company E.S. Charlotte Limited Partnership Minnesota; Limited Partnership E.S. North, an Indiana Limited Partnership Indiana; Limited Partnership FCH/PSH, L.P. Pennsylvania; Limited Partnership FelCor Lodging Holding Company, L.L.C. Delaware; Limited Liability Company FelCor Lodging Company, L.L.C. Delaware; Limited Liability Company FelCor Hotel Operating Company, L.L.C. Delaware; Limited Liability Company FelCor Pennsylvania Company, L.L.C. Delaware; Limited Liability Company FelCor Hospitality Holding Company, L.L.C. Delaware; Limited Liability Company FelCor Hospitality Company, L.L.C. Delaware; Limited Liability Company FelCor Hotel Asset Company, L.L.C. Delaware; Limited Liability Company FHAC Nevada Holdings, L.L.C. Nevada; Limited Liability Company FHAC Texas Holdings, L.P. Texas; Limited Partnership FelCor HHCL Company, L.L.C. Delaware; Limited Liability Company FelCor Hotels GenPar, L.L.C. Delaware; Limited Liability Company FelCor Hotels LimPar, L.L.C. Delaware; Limited Liability Company HHHC GenPar, L.P. Delaware; Limited Partnership FelCor Hotel Company, Ltd. Texas; Limited Partnership FelCor Hotels GenPar II, L.L.C. Delaware; Limited Liability Company
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STATE AND FORM OF NAME ORGANIZATION FelCor Hotel Company II, Ltd. Texas; Limited Partnership FelCor Chat-Lem, L.L.C. Delaware; Limited Liability Company HI Chat-Lem/Iowa - New Orleans Venture Louisiana; General Partnership FelCor Philadelphia Center, L.L.C. Delaware; Limited Liability Company FelCor Marshall Motels, L.L.C. Delaware; Limited Liability Company Center City Hotel Associates Pennsylvania; Limited Partnership FelCor Hotels Financing II, L.L.C. Delaware; Limited Liability Company FelCor Hotels Financing I, L.L.C. Delaware; Limited Liability Company FelCor Hotels Investments I, Ltd. Texas; Limited Partnership FelCor Hotels Investments II, Ltd. Texas; Limited Partnership FelCor Salt Lake, L.L.C. Delaware; Limited Liability Company FelCor St. Louis Company, L.L.C. Delaware; Limited Liability Company FelCor Canada Holding GP, L.L.C. Delaware; Limited Liability Company FelCor Canada Holding, L.P. Delaware; Limited Partnership FelCor Canada Co. Nova Scotia; Unlimited Liability Company FelCor Omaha Hotel Company, L.L.C. Delaware; Limited Liability Company FelCor Country Villa Hotel, L.L.C. Delaware; Limited Liability Company FelCor Moline Hotel, L.L.C. Delaware; Limited Liability Company FelCor Eight Hotels, L.L.C. Delaware; Limited Liability Company EPT Meadowlands Limited Partnership Delaware; Limited Partnership EPT Kansas City Limited Partnership Delaware; Limited Partnership EPT San Antonio Limited Partnership Delaware; Limited Partnership EPT Austin Limited Partnership Delaware; Limited Partnership EPT Overland Park Limited Partnership Delaware; Limited Partnership EPT Atlanta - Perimeter Center Limited Partnership Delaware; Limited Partnership EPT Raleigh Limited Partnership Delaware; Limited Partnership EPT Covina Limited Partnership Delaware; Limited Partnership Promus/FCH Condominium Company, L.L.C. Delaware; Limited Liability Company
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STATE AND FORM OF NAME ORGANIZATION Promus/FCH Development Company, L.L.C. Delaware; Limited Liability Company Promus/FelCor San Antonio Venture Texas; General Partnership Promus/FelCor Parsippany Venture New Jersey; General Partnership MHV Joint Venture Texas; General Partnership Promus/FelCor Lombard Venture Illinois; General Partnership Promus/FelCor Hotels, L.L.C. Delaware; Limited Liability Company Kingston Plantation Development Delaware; Corporation Corporation Promus/FelCor Manager, Inc. Delaware; Corporation FelCor/New Orleans Annex, L.L.C. Delaware; Limited Liability Company Brighton at Kingston Plantation, L.L.C. Delaware; Limited Liability Company FCH/DT Hotels, L.L.C. Delaware; Limited Liability Company FCH/DT Holdings, L.P. Delaware; Limited Partnership FCH/DT BWI Holdings, L.P. Delaware; Limited Partnership FelCor/LAX Hotels, L.L.C. Delaware; Limited Liability Company FelCor/LAX Holdings, L.P. Delaware; Limited Partnership Los Angeles International Airport Hotel Texas; Limited Partnership Associates, a Texas limited partnership Park Central Joint Venture Texas; General Partnership FelCor Airport Utilities, L.L.C. Delaware; Limited Liability Company FelCor/MM Hotels, L.L.C. Delaware; Limited Liability Company FelCor/MM Holdings, L.P. Delaware; Limited Partnership Tysons Corner Hotel Company, L.L.C. Delaware; Limited Liability Company FelCor/MM S-7 Hotels, L.L.C. Delaware; Limited Liability Company FelCor/MM S-7 Holdings, L.P. Delaware; Limited Partnership FelCor/CMB Buckhead Hotel, L.L.C. Delaware; Limited Liability Company FelCor/CMB Corpus Hotel, L.L.C. Delaware; Limited Liability Company FelCor/CMB Corpus Holdings, L.P. Delaware; Limited Partnership FelCor/CMB Deerfield Hotel, L.L.C. Delaware; Limited Liability Company FelCor/CMB Marlborough Hotel, L.L.C. Delaware; Limited Liability Company
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STATE AND FORM OF NAME ORGANIZATION FelCor/CMB New Orleans Hotel, L.L.C. Delaware; Limited Liability Company FelCor/CMB Orsouth Hotel, L.L.C. Delaware; Limited Liability Company FelCor/CMB Orsouth Holdings, L.P. Delaware; Limited Partnership FelCor/CMB Piscataway Hotel, L.L.C. Delaware; Limited Liability Company FelCor/CMB SSF Hotel, L.L.C. Delaware; Limited Liability Company FelCor/CMB SSF Holdings, L.P. Delaware; Limited Partnership
-4- EX-23.2 10 d80556ex23-2.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-4 of FelCor Lodging Limited Partnership of our report dated February 1, 2000, except as to the information in Notes 18 and 19, for which the date is September 15, 2000, relating to the financial statements of FelCor Lodging Limited Partnership which appears in such Registration Statement. We also consent to the incorporation by reference in this Registration Statement of our reports dated (i) February 1, 2000, relating to the Financial Statement Schedule of FelCor Lodging Limited Partnership which appears in FelCor Lodging Limited Partnership's Annual Report on Form 10-K for the year ended December 31, 1999, (ii) February 1, 2000, except as to the information in Note 19, for which the date is March 15, 2000, relating to the financial statements and Financial Statement Schedule of FelCor Lodging Trust Incorporated which appears in FelCor Lodging Trust Incorporated's Annual Report on Form 10-K for the year ended December 31, 1999 and (iii) March 20, 2000, relating to the financial statements of DJONT Operations, L.L.C., which appear in the FelCor Lodging Trust Incorporated Annual Report on Form 10-K for the year ended December 31, 1999. We also consent to the incorporation by reference in this Registration Statement of our report dated February 1, 2000, except as to the information in Note 19, for which the date is September 15, 2000 relating to the financial statements of the FelCor Lodging Trust Incorporated, which appears in the Current Report on Form 8-K dated October 4, 2000. We also consent to the references to us under the headings "Experts," "Summary Historical and Pro Forma Financial Information" and "Selected Historical and Pro Forma Financial Information" in such Registration Statement. PricewaterhouseCoopers LLP Dallas, Texas October 4, 2000 EX-25.1 11 d80556ex25-1.txt FORM T-1 STATEMENT OF ELIGIBILITY OF TRUSTEE 1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ---------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ____ ---------- SUNTRUST BANK (Exact name of trustee as specified in its charter) 58-0466330 (I.R.S. employer identification no.) 1 PARK PLACE, N.E. ATLANTA, GEORGIA 30303 (Address of principal executive offices) (Zip Code) ---------- GEORGE T. HOGAN SUNTRUST BANK 25 PARK PLACE, 24TH FLOOR ATLANTA, GEORGIA 30303-2900 (404) 588-7591 (Name, address and telephone number of agent for service) FELCOR LODGING LIMITED PARTNERSHIP FELCOR LODGING TRUST INCORPORATED FELCOR/CSS HOTELS, L.L.C. FELCOR/LAX HOTELS, L.L.C. FELCOR EIGHT HOTELS, L.L.C. FELCOR/CSS HOLDINGS, L.P. FELCOR/ST. PAUL HOLDINGS, L.P. FELCOR/LAX HOLDINGS, L.P. FELCOR HOTEL ASSET COMPANY, L.L.C. FHAC TEXAS HOLDINGS, L.P. FELCOR OMAHA HOTEL COMPANY, L.L.C. FELCOR MOLINE HOTEL, L.L.C. FELCOR COUNTRY VILLA HOTEL, L.L.C. FELCOR CANADA CO. (Exact name of co-obligor as specified in its charter) 2 DELAWARE 75-2564994 MARYLAND 72-2541756 DELAWARE 75-2624290 DELAWARE 75-2647535 DELAWARE 75-2582006 DELAWARE 75-2620463 DELAWARE 75-2624292 DELAWARE 75-2624293 DELAWARE 75-2770156 TEXAS 75-2797670 DELAWARE 75-2769826 DELAWARE 75-2771084 DELAWARE 75-2771072 NOVA SCOTIA, CANADA 75-2773637 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 545 E. JOHN CARPENTER FRWY. SUITE 1300 IRVING, TEXAS 75062 (Address of principal executive offices) (Zip Code) ---------- FELCOR NEVADA HOLDINGS, L.L.C. FHAC NEVADA HOLDINGS, L.L.C. (Exact name of co-obligor as specified in its charter) NEVADA 74-2906947 NEVADA 74-2906949 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 101 CONVENTION CENTER DRIVE SUITE 850 LAS VEGAS, NEVADA 89109 (Address of principal executive offices) (Zip Code) ---------- 9 1/2% SENIOR NOTES DUE 2008 GUARANTEES OF SENIOR NOTES(1) (Title of the indenture securities) (1) The following co-obligors have guaranteed the notes issued by FelCor Lodging Limited Partnership: FelCor Lodging Trust Incorporated; FelCor/CSS Hotels, L.L.C.; Felcor/LAX Hotels, L.L.C.; FelCor/LAX Holdings, L.P.; FelCor Eight Hotels, L.L.C.; FelCor/CSS Holdings, L.P.; FelCor/St. Paul Holdings, L.P.; FelCor Hotel Asset Company, L.L.C.; FHAC Texas Holdings, L.P.; FelCor Omaha Hotel Company, L.L.C.; FelCor Moline Hotel, L.L.C.; FelCor Country Villa Hotel, L.L.C.; FelCor Canada Co.; FelCor Nevada Holdings, L.L.C. and FHAC Nevada Holdings, L.L.C. - -------------------------------------------------------------------------------- 3 1. General information. (a) Name and address of each examining or supervising authority to which it is subject. DEPARTMENT OF BANKING AND FINANCE STATE OF GEORGIA ATLANTA, GEORGIA FEDERAL RESERVE BANK OF ATLANTA 104 MARIETTA STREET, N.W. ATLANTA, GEORGIA FEDERAL DEPOSIT INSURANCE CORPORATION WASHINGTON, D.C. (b) Whether it is authorized to exercise corporate trust powers. YES. 2. Affiliations with obligor. NONE. 3. Voting Securities of the Trustee. NOT APPLICABLE. 4. Trusteeships under Other Indentures. NOT APPLICABLE. 5. Interlocking Directorates and Similar Relationships with the Obligor or Underwriters. NOT APPLICABLE. 6. Voting Securities of the Trustee Owned by the Obligor or its Officials. NOT APPLICABLE. 7. Voting Securities of the Trustee Owned by Underwriters or their Officials. NOT APPLICABLE. 8. Securities of the Obligor Owned or Held by the Trustee. NOT APPLICABLE. 4 9. Securities of Underwriters Owned or held by the Trustee. NOT APPLICABLE. 10. Ownership or Holdings by the Trustee of Voting Securities of Certain Affiliates or Security Holders of the Obligor. NOT APPLICABLE. 11. Ownership or Holdings by the Trustee of any Securities or a Person Owning 50 Percent or More of the Voting Securities of the Obligor. NOT APPLICABLE. 12. Indebtedness of the Obligor to the Trustee. NOT APPLICABLE. 13. Defaults by the Obligor. (a) Whether there is or has been a default with respect to the securities under this indenture. THERE IS NOT AND HAS NOT BEEN ANY SUCH DEFAULT. (b) If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, or is trustee for more than one outstanding series of securities under the indenture, state whether there has been a default under any such indenture or series. THERE HAS NOT BEEN ANY SUCH DEFAULT. 14. Affiliations with the Underwriters. NOT APPLICABLE. 15. Foreign Trustee. NOT APPLICABLE. -2- 5 16. List of Exhibits. The additional exhibits listed below are filed herewith; exhibits, if any, identified in parentheses are on file with the Commission and are incorporated herein by reference as exhibits hereto pursuant to Rule 7a-29 under the Trust Indenture Act of 1939, as amended, and Rule 24 of the Commission's Rules of Practice. Exhibit Number 1 A copy of the Articles of Amendment and Restated Articles of Incorporation as now in effect. (Exhibit 1 to Form T-1, Registration No. 333-32106.) 2 A copy of the certificate of authority of the Trustee to commence business. (Included in Exhibit 1.) 3 A copy of the authorization of the Trustee to exercise trust powers. (Included in Exhibit 1.) 4 By-laws of the Trustee. (Included in Exhibit 4 to Form T-1, Registration No. 333-32106.) 5 Not applicable. 6 Consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended. 7 Latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority as of the close of business on June 30, 2000. 8 Not applicable. 9 Not applicable. -3- 6 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the trustee, SunTrust Bank, a banking corporation organized and existing under the laws of the State of Georgia, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Atlanta and the State of Georgia, on the 6th day of October, 2000 SunTrust Bank By: /s/ George T. Hogan ----------------------- Vice President 7 EXHIBIT 6 TO FORM T-1 CONSENT OF TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939 in connection with the proposed issuance of FelCor Lodging Limited Partnership, et al, 9 1/2% Senior Notes due 2008 and Guarantees of Senior Notes to be issued under the Indenture, SunTrust Bank hereby consents that reports of examination by Federal, State, Territorial or district authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. SUNTRUST BANK By: /s/ George T. Hogan ------------------------------ Vice President 8 EXHIBIT 7 FORM T-1 LATEST REPORT OF CONDITION OF SUNTRUST BANK 9 SunTrust Bank, Atlanta FFIEC 031 1 PARK PLACE, N.E. Consolidated Report of Income ATLANTA, GA 30303 for the period Certificate Number: 867 January 1, 2000 - June 30, 2000 CONSOLIDATED REPORT OF INCOME FOR THE PERIOD JANUARY 1, 2000 - JUNE 30, 2000 ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE BASIS IN THOUSANDS OF DOLLARS. SCHEDULE RI - INCOME STATEMENT
DOLLAR AMOUNTS IN THOUSANDS 1. INTEREST INCOME: 1.a. INTEREST AND FEE INCOME ON LOANS: 1.a.1. IN DOMESTIC OFFICES: 1.a.1.a. Loans secured by real estate 1,244,442 1.a.1.b. Loans to depository institutions 4,941 1.a.1.c. Loans to finance agricultural production and other loans to farmers 7,501 1.a.1.d. Commercial and industrial loans 876,441 1.a.1.e. Acceptances of other banks 248 1.A.1.f. LOANS TO INDIVIDUALS FOR HOUSEHOLD, FAMILY, AND OTHER PERSONAL EXPENDITURES: 1.a.1.f.1. Credit cards and related plans 8,804 1.a.1.f.2. Other 372,531 1.a.1.g. Loans to foreign governments and official institutions 798 1.a.1.h. OBLIGATIONS (OTHER THAN SECURITIES AND LEASES) OF STATES AND POLITICAL SUBDIVISIONS IN THE U.S.: 1.a.1.h.1. Taxable obligations 13,341 1.a.1.h.2. Tax-exempt obligations 26,281 1.a.1.i. All other loans in domestic offices 84,176 1.a.2. In foreign offices, Edge and Agreement subsidiaries, and IBFs 0 1.b. INCOME FROM LEASE FINANCING RECEIVABLES: 1.b.1. Taxable leases 72,580 1.b.2. Tax-exempt leases 3,682 1.c. INTEREST INCOME ON BALANCES DUE FROM DEPOSITORY INSTITUTIONS: 1.c.1. In domestic offices 654 1.c.2. In foreign offices, Edge and Agreement subsidiaries, and IBFs 222 1.d. INTEREST AND DIVIDEND INCOME ON SECURITIES: 1.d.1. U.S. Treasury securities and U.S. Government agency obligations (INCLUDING MORTGAGE-BACKED SECURITIES ISSUED OR GUARANTEED BY FNMA, FHLMC, OR GNMA) 313,717 1.d.2. SECURITIES ISSUED BY STATES AND POLITICAL SUBDIVISIONS IN THE U.S.: 1.d.2.a. Taxable securities 3,993 1.d.2.b. Tax-exempt securities 8,506 1.d.3. Other domestic debt securities (INCLUDING MORTGAGE-BACKED SECURITIES NOT ISSUED OR GUARANTEED BY FNMA, FHLMC, OR GNMA) 105,877 1.d.4. Foreign debt securities 111 1.d.5. Equity securities (including investments in mutual funds) 24,257 1.e. Interest income from trading assets 1,857 1.f. Interest income on federal funds sold and securities purchased under agreements to resell 75,831 1.g. Total interest income (sum of items 1.a through 1.f) 3,240,791
-1- 10
YEAR-TO-DATE 2. INTEREST EXPENSE: 2.a. INTEREST ON DEPOSITS: 2.a.1. INTEREST ON DEPOSITS IN DOMESTIC OFFICES: 2.a.1.a. Transaction accounts (NOW accounts, ATS accounts, and telephone and preauthorized transfer accounts) 11,306 2.a.1.b. NONTRANSACTION ACCOUNTS: 2.a.1.b.1. Money market deposit accounts (MMDAs) 290,541 2.a.1.b.2. Other savings deposits 108,863 2.a.1.b.3. Time deposits of $100,000 or more 191,191 2.a.1.b.4. Time deposits of less than $100,000 245,988 2.a.2. Interest on deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs 298,919 2.b. Expense of federal funds purchased and securities sold under agreements to repurchase 329,596 2.c. Interest on demand notes issued to the U.S. Treasury, trading liabilities, and other borrowed money 142,799 2.d. Not applicable 2.e. Interest on subordinated notes and debentures 38,446 2.f. Total interest expense (sum of items 2.a through 2.e) 1,657,649 3. Net interest income (item 1.g minus 2.f) 1,583,142 4. PROVISIONS: 4.a. Provision for credit losses 48,034 4.b. Provision for allocated transfer risk 0 5. NONINTEREST INCOME: 5.a. Income from fiduciary activities 243,233 5.b. Service charges on deposit accounts in domestic offices 223,858 5.c. Trading revenue (must equal Schedule RI, sum of Memorandum items 8.a through 8.d) 8,699 5.d.-e. NOT APPLICABLE 5.f. OTHER NONINTEREST INCOME: 5.f.1. Other fee income 337,431 5.f.2. All other noninterest income 46,651 5.g. Total noninterest income (sum of items 5.a through 5.f) 859,872 6.a. Realized gains (losses) on held-to-maturity securities 0 6.b. Realized gains (losses) on available-for-sale securities (2,601) 7. NONINTEREST EXPENSE: 7.a. Salaries and employee benefits 703,616 7.b. Expenses of premises and fixed assets (net of rental income) (excluding 194,707 salaries and employment benefits and mortgage interest) 7.c. Other noninterest expense 480,048 7.d. Total noninterest expense (sum of 7.a Through 7.c) 1,378,371 8. Income (loss) before income taxes and extraordinary items and other 1,014,008 adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) 9. Applicable income taxes (on item 8) 357,820 10. Income (loss) before extraordinary items and other adjustments (item 8 minus 9) 656,188 11. Extraordinary items and other adjustments, net of income taxes 0 12. Net income (loss) (sum of items 10 and 11) 656,188
-2- 11 MEMORANDA
YEAR-TO-DATE DOLLAR AMOUNTS IN THOUSANDS 1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after August 7, 1986, that is not deductible for federal income tax purposes 5,053 2. Income from the sale and servicing of mutual funds and annuities in domestic offices (included in Schedule RI, item 8) 67,939 3.-4. NOT APPLICABLE NUMBER 5. Number of full-time equivalent employees at end of current period (round to the nearest whole number) 26,314 6. NOT APPLICABLE 7. If the reporting bank has restated its balance sheet as a result of applying push down accounting this calendar year, report the date of the bank's acquisition (For example, a bank acquired on June 1, 1998, would report 19980601.) 0 8. TRADING REVENUE (FROM CASH INSTRUMENTS AND OFF-BALANCE SHEET DERIVATIVE INSTRUMENTS) (SUM OF MEMORANDUM ITEMS 8.a THROUGH 8.d MUST EQUAL SCHEDULE RI, ITEM 5.c): 8.a. Interest rate exposures 77 8.b. Foreign exchange exposures 8,622 8.c. Equity security and index exposures 0 8.d. Commodity and other exposures 0 9. IMPACT ON INCOME OF OFF-BALANCE SHEET DERIVATIVES HELD FOR PURPOSES OTHER THAN TRADING: 9.a. Net increase (decrease) to interest income (1,166) 9.b. Net (increase) decrease to interest expense 1,101 9.c. Other (noninterest) allocations 0 10. Credit losses on off-balance sheet derivatives (see instructions) 0 YES/NO 11. Does the reporting bank have a Subchapter S election in effect for federal income tax purposes for the current tax year? No 12. Deferred portion of total applicable income taxes included in Schedule RI, items 9 and 11 (to be reported with the December Report of Income) N/A
-3- 12 SunTrust Bank FFIEC 031 1 PARK PLACE, N.E. Consolidated Report of Income ATLANTA, GA 30303 for the period Certificate Number: 867 January 1, 2000-June 30, 2000 SCHEDULE RI-A--CHANGES IN EQUITY CAPITAL Indicate decreases and losses in parentheses.
DOLLAR AMOUNTS IN THOUSANDS 1. Total equity capital originally reported in the December 31, 1999, Reports of Condition and Income 2,523,983 2. Equity capital adjustments from amended Reports of Income, net 0 3. Amended balance end of previous calendar year (sum of items 1 and 2) 2,523,983 4. Net income (loss) (must equal Schedule RI, item 12) 656,188 5. Sale, conversion, acquisition, or retirement of capital stock, net 0 6. Changes incident to business combinations, net 5,686,366 7. LESS: Cash dividends declared on preferred stock 0 8. LESS: Cash dividends declared on common stock 702,634 9. Cumulative effect of changes in accounting principles from prior years (see instructions for this schedule) 0 10. Corrections of material accounting errors from prior years (see instructions for this schedule) 0 11.a. Change in net unrealized holding gains (losses) on available-for-sale securities (63,869) 11.b. CHANGE IN ACCUMULATED NET GAINS (LOSSES) ON CASH FLOW HEDGES. 0 12. Foreign currency translation adjustments 0 13. Other transactions with parent holding company (not included in items 5, 7, or 8 above) (30,889) 14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, item 28) 8,069,145
-4- 13 SunTrust Bank FFIEC 031 1 PARK PLACE, N.E. Consolidated Report of Income ATLANTA, GA 30303 for the period Certificate Number: 867 January 1, 2000 - June 30, 2000 SCHEDULE RI-B--CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES AND CHANGES IN ALLOWANCE FOR CREDIT LOSSES PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES PART I EXCLUDES CHARGE-OFFS AND RECOVERIES THROUGH THE ALLOCATED TRANSFER RISK RESERVE.
(Column A) (Column B) Charge-offs Recoveries Calendar-year-to-date DOLLAR AMOUNTS IN THOUSANDS 1. LOANS SECURED BY REAL ESTATE: 1.a. To U.S. addressees (domicile) 5,695 3,473 1.b. To non-U.S. addressees (domicile) 0 0 2. LOANS TO DEPOSITORY INSTITUTIONS AND ACCEPTANCES OF OTHER BANKS: 2.a. To U.S. banks and other U.S. depository institutions 0 0 2.b. To foreign banks 0 0 3. Loans to finance agricultural production and other loans to farmers 0 0 4. COMMERCIAL AND INDUSTRIAL LOANS: 4.a. To U.S. addressees (domicile) 33,448 6,800 4.b. To non-U.S. addressees (domicile) 0 39 5. LOANS TO INDIVIDUALS FOR HOUSEHOLD, FAMILY, AND OTHER PERSONAL EXPENDITURES: 5.a. Credit cards and related plans 1,669 725 5.b. Other (includes single payment, installment, and all student loans) 25,875 13,093 6. Loans to foreign governments and official institutions 0 0 7. All other loans 3,409 1,285 8. LEASE FINANCING RECEIVABLES: 8.a. Of U.S. addressees (domicile) 1,456 286 8.b. Of non-U.S. addressees (domicile) 0 0 9. Total (sum of items 1 through 8) 71,552 25,701
-5- 14 MEMORANDA
(Column A) (Column B) Charge-offs Recoveries Calendar-year-to-date DOLLAR AMOUNTS IN THOUSANDS 1.-3. NOT APPLICABLE 4. Loans to finance commercial real estate, construction, and land development activities (NOT SECURED BY REAL ESTATE) included in Schedule RI-B, part I, items 4 and 7, above 0 0 5. LOANS SECURED BY REAL ESTATE IN DOMESTIC OFFICES (INCLUDED IN SCHEDULE RI-B, PART I, ITEM 1, ABOVE): 5.a. Construction and land development 113 0 5.b. Secured by farmland 0 0 5.c. SECURED BY 1-4 FAMILY RESIDENTIAL PROPERTIES: 5.c.1. Revolving, open-end loans secured by 1-4 family residential properties and extended under lines of credit 949 2,182 5.c.2. All other loans secured by 1-4 family residential properties 3,388 951 5.d. Secured by multifamily (5 or more) residential properties 0 0 5.e. Secured by nonfarm nonresidential properties 1,245 340
PART S IN ALLOWANCE FOR CREDIT LOSSES
DOLLAR AMOUNTS IN THOUSANDS 1. Balance originally reported in the December 31, 1999, Reports of Condition and Income 123,398 2. Recoveries (must equal or exceed part I, item 9, column B above) 25,701 3. LESS: Charge-offs (must equal or exceed part I, item 9, column A above) 71,552 4. Provision for credit losses (must equal Schedule RI, item 4.a) 48,034 5. Adjustments (see instructions for this schedule) 729,639 6. Balance end of current period (sum of items 1 through 5) (must equal or exceed Schedule RC, item 4.b) 855,220
-6- 15 SunTrust Bank FFIEC 031 1 PARK PLACE, N.E. Consolidated Report of Income ATLANTA, GA 30303 for the period Certificate Number: 867 January 1, 2000 - June 30, 2000 SCHEDULE RI-D--INCOME FROM INTERNATIONAL OPERATIONS FOR ALL BANKS WITH FOREIGN OFFICES, EDGE OR AGREEMENT SUBSIDIARIES, OR IBFS WHERE INTERNATIONAL OPERATIONS ACCOUNT FOR MORE THAN 10 PERCENT OF TOTAL REVENUES, TOTAL ASSETS, OR NET INCOME. PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
YEAR-TO-DATE DOLLAR AMOUNTS IN THOUSANDS 1. INTEREST INCOME AND EXPENSE BOOKED AT FOREIGN OFFICES, EDGE AND AGREEMENT SUBSIDIARIES, AND IBFS: 1.a. Interest income booked 0 1.b. Interest expense booked 0 1.c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs (item 1.a minus 1.b) 0 2. ADJUSTMENTS FOR BOOKING LOCATION OF INTERNATIONAL OPERATIONS: 2.a. Net interest income attributable to international operations booked at domestic offices 0 2.b. Net interest income attributable to domestic business booked at foreign offices 0 2.c. Net booking location adjustment (item 2.a minus 2.b) 0 3. NONINTEREST INCOME AND EXPENSE ATTRIBUTABLE TO INTERNATIONAL OPERATIONS: 3.a. Noninterest income attributable to international operations 0 3.b. Provision for loan and lease losses attributable to international operations 0 3.c. Other noninterest expense attributable to international operations 0 3.d. Net noninterest income (expense) attributable to international operations (item 3.a minus 3.b and 3.c) 0 4. Estimated pretax income attributable to international operations before capital allocation adjustment (sum of items 1.c, 2.c, and 3.d) 0 5. Adjustment to pretax income for internal allocations to international operations to reflect the effects of equity capital on overall bank funding costs 0 6. Estimated pretax income attributable to international operations after capital allocation adjustment (sum of items 4 and 5) 0 7. Income taxes attributable to income from international operations as estimated in item 6 0 8. Estimated net income attributable to international operations (item 6 minus 7) 0
MEMORANDA
DOLLAR AMOUNTS IN THOUSANDS 1. Intracompany interest income included in item 1.a above 0 2. Intracompany interest expense included in 1.b above 0
PART II. SUPPLEMENTARY DETAILS ON INCOME FROM INTERNATIONAL OPERATIONS REQUIRED BY THE DEPARTMENTS OF COMMERCE AND TREASURY FOR PURPOSES OF THE U.S. INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS
YEAR-TO-DATE DOLLAR AMOUNTS IN THOUSANDS 1. Interest income booked at IBFs 0 2. Interest expense booked at IBFs 0 3. NONINTEREST INCOME ATTRIBUTABLE TO INTERNATIONAL OPERATIONS BOOKED AT DOMESTIC OFFICES (EXCLUDING IBFS): 3.a. Gains (losses) and extraordinary items 0 3.b. Fees and other noninterest income 0 4. Provision for loan and lease losses attributable to international operations booked at domestic offices (excluding IBFs) 0 5. Other noninterest expense attributable to international operations booked at domestic offices (excluding IBFs) 0
-7- 16 SunTrust Bank FFIEC 031 1 PARK PLACE, N.E. Consolidated Report of Income ATLANTA, GA 30303 for the period Certificate Number: 867 January 1, 2000 - June 30, 2000 SCHEDULE RI-E--EXPLANATIONS SCHEDULE RI-E IS TO BE COMPLETED EACH QUARTER ON A CALENDAR YEAR-TO-DATE BASIS. Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
YEAR-TO-DATE DOLLAR AMOUNTS IN THOUSANDS 1. ALL OTHER NONINTEREST INCOME (FROM SCHEDULE RI, ITEM 5.f.(2)) REPORT AMOUNTS THAT EXCEED 10% OF SCHEDULE RI, ITEM 5.f.(2): 1.a. Net gains (losses) on other real estate owned 0 1.b. Net gains (losses) on sales of loans 0 1.c. Net gains (losses) on sales of premises and fixed assets 0 Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, item 5.f.(2): 1.d. SALE OF ORIG SVC RIGHTS 8,256 1.e. SALE OF CUSTOMER CHECKS 13,214 1.f. 8,622 2. OTHER NONINTEREST EXPENSE (FROM SCHEDULE RI, ITEM 7.c): 2.a. Amortization expense of intangible assets 11,002 REPORT AMOUNTS THAT EXCEED 10% OF SCHEDULE RI, ITEM 7.c: 2.b. Net (gains) losses on other real estate owned 0 2.c. Net (gains) losses on sales of loans 0 2.d. Net (gains) losses on sales of premises and fixed assets 0 Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, item 7.c: 2.e. 0 2.f. 0 2.g. 0 3. EXTRAORDINARY ITEMS AND OTHER ADJUSTMENTS AND APPLICABLE INCOME TAX EFFECT (FROM SCHEDULE RI, ITEM 11) (ITEMIZE AND DESCRIBE ALL EXTRAORDINARY ITEMS AND OTHER ADJUSTMENTS): 3.a.1. 0 3.a.2. Applicable income tax effect 0 3.b.1. 0 3.b.2. Applicable income tax effect 0 3.c.1. 0 3.c.2. Applicable income tax effect 0 4. EQUITY CAPITAL ADJUSTMENTS FROM AMENDED REPORTS OF INCOME (FROM SCHEDULE RI-A, ITEM 2) (ITEMIZE AND DESCRIBE ALL ADJUSTMENTS): 4.a. 0 4.b. 0 5. CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES FROM PRIOR YEARS (FROM SCHEDULE RI-A, ITEM 9) (ITEMIZE AND DESCRIBE ALL CHANGES IN ACCOUNTING PRINCIPLES): 5.a. 0 5.b. 0 6. CORRECTIONS OF MATERIAL ACCOUNTING ERRORS FROM PRIOR YEARS (FROM SCHEDULE RI-A, ITEM 10) (ITEMIZE AND DESCRIBE ALL CORRECTIONS): 6.a. 0 6.b. 0 7. OTHER TRANSACTIONS WITH PARENT HOLDING COMPANY (FROM SCHEDULE RI-A, ITEM 13) (ITEMIZE AND DESCRIBE ALL SUCH TRANSACTIONS): 7.a. MERGER ST PARENT INTO SUNTRUST BANK 1/00 (30,889) 7.b. 0 8. ADJUSTMENTS TO ALLOWANCE FOR CREDIT LOSSES (FROM SCHEDULE RI-B, PART II, ITEM 5) (ITEMIZE AND DESCRIBE ALL ADJUSTMENTS): 8.a. MERGER ST PARENT INTO SUNTRUST BANK 1/00 729,639 8.b. 0 9. OTHER EXPLANATIONS (THE SPACE BELOW IS PROVIDED FOR THE BANK TO BRIEFLY DESCRIBE, AT ITS OPTION, ANY OTHER SIGNIFICANT ITEMS AFFECTING THE REPORT OF INCOME): No Comment
-8- 17 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA , GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 2000 ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE QUARTER. SCHEDULE RC--BALANCE SHEET
DOLLAR AMOUNTS IN THOUSANDS ASSETS 1. CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS (FROM SCHEDULE RC-A): 1.a. Noninterest-bearing balances and currency and coin 3,558,361 1.b. Interest-bearing balances 17,246 2. SECURITIES: 2.a. Held-to-maturity securities (from Schedule RC-B, column A) 0 2.b. Available-for-sale securities (from Schedule RC-B, column D) 15,075,833 3. Federal funds sold and securities purchased under agreements to resell 2,546,167 4. LOANS AND LEASE FINANCING RECEIVABLES: 4.a. Loans and leases, net of unearned income (from Schedule RC-C) 72,659,542 4.b. LESS: Allowance for loan and lease losses 855,220 4.c. LESS: Allocated transfer risk reserve 0 4.d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c) 71,804,322 5. Trading assets (from Schedule RC-D) 143,815 6. Premises and fixed assets (including capitalized leases) 1,281,989 7. Other real estate owned (from Schedule RC-M) 35,989 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) 0 9. Customers' liability to this bank on acceptances outstanding 168,835 10. Intangible assets (from Schedule RC-M) 581,254 11. Other assets (from Schedule RC-F) 1,772,511 12. Total assets (sum of items 1 through 11) 96,986,322
-9- 18 LIABILITIES 13. DEPOSITS: 13.a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) 57,796,821 13.a.1. Noninterest-bearing 11,446,978 13.a.2. Interest-bearing 46,349,843 13.b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II) 11,528,832 13.b.1. Noninterest-bearing 0 13.b.2. Interest-bearing 11,528,832 14. Federal funds purchased and securities sold under agreements to repurchase 11,129,477 15.a. Demand notes issued to the U.S. Treasury 1 15.b. Trading liabilities (from Schedule RC-D) 0 16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): 16.a. With a remaining maturity of one year or less 1,277,333 16.b. With a remaining maturity of more than one year through three years 2,509,678 16.c. With a remaining maturity of more than three years 1,412,939 17. NOT APPLICABLE 18. Bank's liability on acceptances executed and outstanding 168,835 19. Subordinated notes and debentures 1,068,000 20. Other liabilities (from Schedule RC-G) 2,025,261 21. Total liabilities (sum of lines 13 through 20) 88,917,177 22. NOT APPLICABLE EQUITY CAPITAL 23. Perpetual preferred stock and related surplus 0 24. Common stock 21,600 25. Surplus (exclude all surplus related to preferred stock) 2,545,484 26.a. Undivided profits and capital reserves 4,811,305 26.b. Net unrealized holding gains (losses) on available-for-sale securities 690,756 26.c. ACCUMULATED NET GAINS (LOSSES) ON CASH FLOW HEDGES 0 27. Cumulative foreign currency translation adjustments 0 28. Total equity capital (sum of items 23 through 27) 8,069,145 29. Total liabilities and equity capital (sum of items 21 and 28) 96,986,322
-10- 19 MEMORANDUM TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
NUMBER 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external auditors as of any date during 1999 N/A 1= Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2= Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3= Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4= Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5= Review of the bank's financial statements by external auditors 6= Compilation of the bank's financial statements by external auditors 7= Other audit procedures (excluding tax preparation work) 8= No external audit work
-11- 20 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-A--CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS EXCLUDE ASSETS HELD FOR TRADING.
(Column A) (Column B) Consolidated Domestic Bank Offices DOLLAR AMOUNTS IN THOUSANDS 1. CASH ITEMS IN PROCESS OF COLLECTION, UNPOSTED DEBITS, AND CURRENCY AND COIN: 3,455,309 1.a. Cash items in process of collection and unposted debits 2,719,524 1.b. Currency and coin 735,785 2. BALANCES DUE FROM DEPOSITORY INSTITUTIONS IN THE U.S.: 110,314 2.a. U.S. branches and agencies of foreign banks (including their IBFs) 0 2.b. Other commercial banks in the U.S. and other depository institutions in the U.S. (including their IBFs) 110,314 3. BALANCES DUE FROM BANKS IN FOREIGN COUNTRIES AND FOREIGN CENTRAL BANKS: 9,984 3.a. Foreign branches of other U.S. banks 0 3.b. Other banks in foreign countries and foreign central banks 9,984 4. BALANCES DUE FROM FEDERAL RESERVE BANKS 0 0 5. TOTAL (SUM OF ITEMS 1 THROUGH 4) (TOTAL OF COLUMN A MUST EQUAL SCHEDULE RC, SUM OF ITEMS 1.a AND 1.b) 3,575,607 3,575,607
MEMORANDUM
DOLLAR AMOUNTS IN THOUSANDS 1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, column B above 92,929
-12- 21 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-B--SECURITIES EXCLUDE ASSETS HELD FOR TRADING.
Held-to-maturity (Column A) Available-for-sale A) Amortized (Column B) (Column C) (Column D) DOLLAR AMOUNTS IN THOUSANDS Cost Fair Value Amortized Cost Fair Value 1. U.S.Treasury securities 0 0 362,129 361,938 2. U.S. GOVERNMENT AGENCY OBLIGATIONS (EXCLUDE MORTGAGE-BACKED SECURITIES): 2.a. Issued by U.S. Government agencies 0 0 0 0 2.b. Issued by U.S. Government-sponsored agencies 0 0 2,291,855 2,238,766 3. Securities issued by states and political subdivisions in the U.S.: 3.a. General obligations 0 0 246,604 249,335 3.b. Revenue obligations 0 0 138,753 134,097 3.c. Industrial development and similar obligations 0 0 29,600 29,600 4. MORTGAGE-BACKED SECURITIES(MBS): 4.a. Pass-through securities: 4.a.1. Guaranteed by GNMA 0 0 477,217 470,699 4.a.2. Issued by FNMA and FHLMC 0 0 1,912,115 1,850,632 4.a.3. Other pass-through securities 0 0 531 531 4.b. OTHER MORTGAGE-BACKED SECURITIES (INCLUDE CMOS, REMICS, AND STRIPPED MBS): 4.b.1. Issued or guaranteed by FNMA, FHLMC, or GNMA 0 0 4,563,756 4,436,090 4.b.2. Collateralized by MBS issued or guaranteed by FNMA, FHLMC, or GNMA 0 0 0 0 4.b.3. All other mortgage-backed securities 0 0 47,808 47,808 5. Other debt securities: 5.a. Other domestic debt securities 0 0 3,216,382 3,142,310 5.b. Foreign debt securities 0 0 3,175 3,175 6. EQUITY SECURITIES: 6.a. Investments in mutual funds and other equity securities with readily determinable fair values 287,890 1,745,218 6.b. All other equity securities 365,634 365,634 7. Total (sum of items 1 through 6) (total of column A must equal Schedule RC, item 2.a) (total of column D must equal Schedule RC, item 2.b) 0 0 13,943,449 15,075,833
-13- 22 MEMORANDUM
DOLLAR AMOUNTS IN THOUSANDS 1. Pledged securities 10,387,468 2. MATURITY AND REPRICING DATA FOR DEBT SECURITIES (EXCLUDING THOSE IN NONACCRUAL STATUS): 2.a. SECURITIES ISSUED BY THE U.S.TREASURY, U.S.GOVERNMENT AGENCIES, AND STATES AND POLITICAL SUBDIVISIONS IN THE U.S.; OTHER NON-MORTGAGE DEBT SECURITIES; AND MORTGAGE PASS-THROUGH SECURITIES OTHER THAN THOSE BACKED BY CLOSED-END FIRST LIEN 1-4 FAMILY RESIDENTIAL MORTGAGES WITH A REMAINING MATURITY OR REPRICING FREQUENCY OF: 2.a.1. Three months or less 157,376 2.a.2. Over three months through 12 months 250,515 2.a.3. Over one year through three years 789,757 2.a.4. Over three years through five years 3,537,364 2.a.5. Over five years through 15 years 837,106 2.a.6. Over 15 years 609,355 2.b. MORTGAGE PASS-THROUGH SECURITIES BACKED BY CLOSED-END FIRST LIEN 1-4 FAMILY RESIDENTIAL MORTGAGES WITH A REMAINING MATURITY OR REPRICING FREQUENCY OF: 2.b.1. Three months or less 314,355 2.b.2. Over three months through 12 months 457,784 2.b.3. Over one year through three years 195,174 2.b.4. Over three years through five years 210,239 2.b.5. Over five years through 15 years 981,253 2.b.6. Over 15 years 140,805 2.c. OTHER MORTGAGE-BACKED SECURITIES (INCLUDE CMOS, REMICS, AND STRIPPED MBS; EXCLUDE MORTGAGE PASS-THROUGH SECURITIES) WITH AN EXPECTED AVERAGE LIFE OF: 2.c.1. Three years or less 1,621,933 2.c.2. Over three years 2,861,965 2.d. Debt securities with a REMAINING MATURITY of one year or less (included in Memorandum items 2.a through 2.c above) 387,927 3.-6. NOT APPLICABLE 7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or trading securities during the calendar year-to-date (report the amortized cost at date of sale or transfer) 0 8. NOT APPLICABLE 9. STRUCTURED NOTES (INCLUDED IN THE HELD-TO-MATURITY AND AVAILABLE-FOR-SALE ACCOUNTS IN SCHEDULE RC-B, ITEMS 2,3, AND 5): 9.a. Amortized cost 1,707 9.b. Fair value 1,634
-14- 23 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES PART I. LOANS AND LEASES Do not deduct the allowance for loan and lease losses from amounts reported in this schedule. Report total loans and leases, net of unearned income. Exclude assets held for trading and commercial paper.
(Column A) (Column B) Consolidated Bank Domestic Offices DOLLAR AMOUNTS IN THOUSANDS 1. Loans secured by real estate 33,064,251 1.a. Construction and land development 2,768,862 1.b. Secured by farmland (including farm residential and other improvements) 198,291 1.c. SECURED BY 1-4 FAMILY RESIDENTIAL PROPERTIES: 1.c.1. Revolving, open-end loans secured by 1-4 family residential properties and extended under lines of credit 2,068,024 1.c.2. ALL OTHER LOANS SECURED BY 1-4 FAMILY RESIDENTIAL PROPERTIES: 1.c.2.a. Secured by first liens 18,819,724 1.c.2.b. Secured by junior liens 1,408,346 1.d. Secured by multifamily (5 or more) residential properties 473,671 1.e. Secured by nonfarm nonresidential properties 7,327,333 2. LOANS TO DEPOSITORY INSTITUTIONS: 2.a. To commercial banks in the U.S. 101,063 2.a.1. To U.S. branches and agencies of foreign banks 59 2.a.2. To other commercial banks in the U.S. 101,004 2.b. To other depository institutions in the U.S. 0 0 2.c. To banks in foreign countries 51,135 2.c.1. To foreign branches of other U.S. banks 0 2.c.2. To other banks in foreign countries 51,135 3. Loans to finance agricultural production and other loans to farmers 173,499 173,499 4. Commercial and industrial loans: 4.a. To U.S. addressees (domicile) 23,645,379 23,645,379 4.b. To non-U.S. addressees (domicile) 347180 347,180 5. ACCEPTANCES OF OTHER BANKS: 5.a. Of U.S. banks 0 0 5.b. Of foreign banks 0 0 6. Loans to individuals for household, family, and other personal expenditures (i.e., consumer loans) (includes purchased paper) 9,188,095 6.a. Credit cards and related plans (includes check credit and other revolving credit plans) 142,289 6.b. Other (includes single payment, installment, and all student loans) 9,045,807 7. Loans to foreign governments and official institutions (including foreign central banks) 22,679 22,679 8. Obligations (other than securities and leases) of states and political subdivisions in the U.S. 1,050,123 1,050,123 9. Other loans 2,719,047 9.a. Loans for purchasing or carrying securities (secured and unsecured) 745,592 9.b. All other loans (exclude consumer loans) 1,973,455 10. Lease financing receivables (net of unearned income) 2,297,090 10.a. Of U.S. addressees (domicile) 2,297,090 10.b. Of non-U.S. addressees (domicile) 0 11. LESS: Any unearned income on loans reflected in items 1-9 above 0 0 12. Total loans and leases, net of unearned income (sum of items 1 through 10 minus item 11) (total of column A must equal Schedule RC, item 4.a) 72,659,542 72,659,542
-15- 24 MEMORANDA
DOLLAR AMOUNTS IN THOUSANDS 1. NOT APPLICABLE 2. LOANS AND LEASES RESTRUCTURED AND IN COMPLIANCE WITH MODIFIED TERMS (INCLUDED IN SCHEDULE RC-C, PART I, ABOVE AND NOT REPORTED AS PAST DUE OR NONACCRUAL IN SCHEDULE RC-N, MEMORANDUM ITEM 1): 2.a. LOANS SECURED BY REAL ESTATE: 2.a.1. To U.S. addressees (domicile) 14,919 2.a.2. To non-U.S. addressees (domicile) 0 2.b. All other loans and all lease financing receivables (exclude loans to individuals for household, family, and other personal expenditures) 0 2.c. Commercial and industrial loans to and lease financing receivables of non-U.S. addressees (domicile) included in Memorandum item 2.b above 0 3. MATURITY AND REPRICING DATA FOR LOANS AND LEASES (EXCLUDING THOSE IN NONACCRUAL STATUS): 3.a. CLOSED-END LOANS SECURED BY FIRST LIENS ON 1-4 FAMILY RESIDENTIAL PROPERTIES IN DOMESTIC OFFICES (REPORTED IN SCHEDULE RC-C, PART I, ITEM 1.c.(2)(a), COLUMN B) WITH A REMAINING MATURITY OR REPRICING FREQUENCY OF: 3.a.1. Three months or less 225,370 3.a.2. Over three months through 12 months 3,587,855 3.a.3. Over one year through three years 1,661,821 3.a.4. Over three years through five years 6,592,964 3.a.5. Over five years through 15 years 3,761,468 3.a.6. Over 15 years 2,916,237 3.b. ALL LOANS AND LEASES (REPORTED IN SCHEDULE RC-C, PART I, ITEMS 1 THROUGH 10, COLUMN A) EXCLUDING CLOSED-END LOANS SECURED BY FIRST LIENS ON 1-4 FAMILY RESIDENTIAL PROPERTIES IN DOMESTIC OFFICES (REPORTED IN SCHEDULE RC-C, PART I, ITEM 1.c.(2)(a), COLUMN B) WITH A REMAINING MATURITY OR REPRICING FREQUENCY OF: 3.b.1. Three months or less 25,904,919 3.b.2. Over three months through 12 months 4,115,941 3.b.3. Over one year through three years 6,783,503 3.b.4. Over three years through five years 9,628,981 3.b.5. Over five years through 15 years 5,753,679 3.b.6. Over 15 years 1,446,274 3.c. Loans and leases (reported in Schedule RC-C, part I, items 1 through 10) with a REMAINING MATURITY of one year or less 14,923,731 3.d. Loans secured by nonfarm nonresidential properties in domestic offices (reported in Schedule RC-C, part I, item 1.e, column B) with a REMAINING MATURITY of over five years 2,847,184 3.e. Commercial and industrial loans (reported in Schedule RC-C, part I, item 4, column A) with a REMAINING MATURITY of over three years 8,772,050 4. Loans to finance commercial real estate, construction, and land development activities (NOT SECURED BY REAL ESTATE) included in Schedule RC-C, part I, items 4 and 9, column A, page RC-6 1,105,675 5. Loans and leases held for sale (included in Schedule RC-C, part I, page RC-6) 1,345,694 6. Adjustable rate closed-end loans secured by first liens on 1-4 family residential properties in domestic offices (included in Schedule RC-C, part I, item 1.c.(2)(a), column B, page RC-6) 11,426,398
-16- 25 PART II. LOANS TO SMALL BUSINESSES AND SMALL FARMS SCHEDULE RC-C, PART II IS TO BE COMPLETED ONLY WITH THE JUNE REPORT OF CONDITION. Report the number and amount currently outstanding as of June 30 of business loans with "original amounts" of $1,000,000 or less and farm loans with "original amounts" of $500,000 or less. The following guidelines should be used to determine the "original amount" of a loan: (1) For loans drawn down under lines of credit or loan commitments, the "original amount" of the loan is the size of the line of credit or loan commitment when the line of credit or loan commitment was MOST RECENTLY approved, extended, or renewed prior to the report date. However, if the amount currently outstanding as of the report date exceeds this size, the "original amount" is the amount currently outstanding on the report date. (2) For loan participations and syndications, the "original amount" of the loan participation or syndication is the entire amount of the credit originated by the lead lender. (3) For all other loans, the "original amount" is the total amount of the loan at origination or the amount currently outstanding as of the report date, whichever is larger. LOANS TO SMALL BUSINESSES
YES/NO 1. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume of your bank's "Loans secured by nonfarm nonresidential properties" in domestic offices reported in Schedule RC-C, part I, item 1.e, column B, AND all or substantially all of the dollar volume of your bank's "Commercial and industrial loans to U.S. addressees" in domestic offices reported in Schedule RC-C, part I, item 4.a, column B, have ORIGINAL AMOUNTS of $100,000 or less (If your bank has no loans outstanding in BOTH of these two loan categories, place an "X" in the box marked "NO.") NO If Yes, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5. If NO and your bank has loans outstanding in either loan category, skip items 2.a and 2.b, complete items 3 and 4 below, and go to item 5. If NO and your bank has no loans outstanding in both categories, skip items 2 through 4, and go to item 5.
NUMBER OF LOANS 2. Report the total NUMBER of loans CURRENTLY OUTSTANDING for each of the following Schedule RC-C, part I, loan categories: 2.a. "Loans secured by nonfarm nonresidential properties" in domestic offices reported in Schedule RC-C, part I, item 1.e, column B (Note: Item 1.e, column B, divided by the number of loans should NOT exceed $100,000.) 0 2.b. "Commercial and industrial loans to U.S. addressees" in domestic offices reported in Schedule RC-C, part I, item 4.a, column B (Note: Item 4.a., column B, divided by the number of loans should NOT exceed $100,000.) 0
-17- 26
(Column B) Amount (Column A) Currently Number of Loans Outstanding DOLLAR AMOUNTS IN THOUSANDS 3. NUMBER AND AMOUNT CURRENTLY OUTSTANDING OF "LOANS SECURED BY NONFARM NONRESIDENTIAL PROPERTIES" IN DOMESTIC OFFICES REPORTED IN SCHEDULE RC-C, PART I, ITEM 1.e, COLUMN B (SUM OF ITEMS 3.a THROUGH 3.c MUST BE LESS THAN OR EQUAL TO SCHEDULE RC-C, PART I, ITEM 1.e, COLUMN B): 3.a. With ORIGINAL AMOUNTS of $100,000 or less 5,551 242,107 3.b. With ORIGINAL AMOUNTS of more than $100,000 through $250,000 5,211 712,313 3.c. With ORIGINAL AMOUNTS of more than $250,000 through $1,000,000 5,426 2,220,791 4. Number and amount CURRENTLY OUTSTANDING of "Commercial and industrial loans to U.S. addressees" in domestic offices reported in Schedule RC-C, part I, item 4.a, column B (sum of items 4.a through 4.c must be less than or equal to Schedule RC-C, part I, item 4.a, column B): 4.a. With ORIGINAL AMOUNTS of $100,000 or less 37,385 761,529 4.b. With ORIGINAL AMOUNTS of more than $100,000 through $250,000 4,767 527,989 4.c. With ORIGINAL AMOUNTS of more than $250,000 through $1,000,000 4,056 1,291,488
-18- 27 AGRICULTURAL LOANS TO SMALL FARMS
YES/NO 5. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume of your bank's "Loans secured by farmland (including farm residential and other improvements)" in domestic offices reported in Schedule RC-C, part I, item 1.b, column B, AND all or substantially all of the dollar volume of your bank's "Loans to finance agricultural production and other loans to farmers" in domestic offices reported in Schedule RC-C, part I, item 3, column B, have ORIGINAL AMOUNTS of $100,000 or less (If your bank has no loans outstanding in BOTH of these two loan categories, place an "X" in the box marked "NO.") NO If YES, complete items 6.a and 6.b below and do not complete items 7 and 8. If NO and your bank has loans outstanding in either category, skip items 6.a and 6.b and complete items 7 and 8 below. If NO and your bank has no loans outstanding in both loan categories, do not complete items 6 through 8.
Number of Loans 6. REPORT THE TOTAL NUMBER OF LOANS CURRENTLY OUTSTANDING FOR EACH OF THE FOLLOWING SCHEDULE RC-C, PART I, LOAN CATEGORIES: 6.a. "Loans secured by farmland (including farm residential and other improvements)" in domestic offices reported in Schedule RC-C, part I, item 1.b, column B (Note: Item 1.b, column B, divided by the number of loans should NOT exceed $100,000.) 0 6.b. "Loans to finance agricultural production and other loans to farmers" in domestic offices reported in Schedule RC-C, part I, item 3, column B (Note: Item 3, column B, divided by the number of loans should NOT exceed $100,000.) 0
(Column B) Amount (Column A) Currently Number of Loans Outstanding DOLLAR AMOUNTS IN THOUSANDS 7. NUMBER AND AMOUNT CURRENTLY OUTSTANDING OF "LOANS SECURED BY FARMLAND (INCLUDING FARM RESIDENTIAL AND OTHER IMPROVEMENTS)" IN DOMESTIC OFFICES REPORTED IN SCHEDULE RC-C, PART I, ITEM 1.b, COLUMN B (SUM OF ITEMS 7.a THROUGH 7.c MUST BE LESS THAN OR EQUAL TO SCHEDULE RC-C, PART I, ITEM 1.b, COLUMN B): 7.a. With ORIGINAL AMOUNTS of $100,00 or less 452 15,843 7.b. With ORIGINAL AMOUNTS of more than $100,000 through $250,000 220 28,706 7.c. With ORIGINAL AMOUNTS of more than $250,000 through $500,000 130 37,136 8. NUMBER AND AMOUNT CURRENTLY OUTSTANDING OF "LOANS TO FINANCE AGRICULTURAL PRODUCTION AND OTHER LOANS TO FARMERS" IN DOMESTIC OFFICES REPORTED IN SCHEDULE RC-C, PART I, ITEM, 3, COLUMN B (SUM OF ITEMS 8.a THROUGH 8.c MUST BE LESS THAN OR EQUAL TO SCHEDULE RC-C, PART 1, ITEM 3, COLUMN B): 8.a. With ORIGINAL AMOUNTS of $100,000 or less 863 15,659 8.b. With ORIGINAL AMOUNTS of more than $100,000 through $250,000 99 10,821 8.c. With ORIGINAL AMOUNTS of more than $250,000 through $500,000 96 14,799
-19- 28 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-D--TRADING ASSETS AND LIABILITIES Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
DOLLAR AMOUNTS IN THOUSANDS ASSETS 1. U.S.Treasury securities in domestic offices 0 2. U.S.Government agency obligations in domestic offices (exclude mortgage-backed securities) 0 3. Securities issued by states and political subdivisions in the U.S. in domestic offices 5,520 4. MORTGAGE-BACKED SECURITIES (MBS) IN DOMESTIC OFFICES: 4.a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA 0 4.b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA (include CMOs, REMICs, and stripped MBS) 0 4.c. All other mortgage-backed securities 0 5. Other debt securities in domestic offices 0 6.-8. Not applicable 9. Other trading assets in domestic offices 138,295 10. Trading assets in foreign offices 0 11. REVALUATION GAINS ON INTEREST RATE, FOREIGN EXCHANGE RATE, AND OTHER COMMODITY AND EQUITY CONTRACTS: 11.a. In domestic offices 0 11.b. In foreign offices 0 12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) 143,815 LIABILITIES 13. Liability for short positions 0 14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity contracts 0 15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) 0
-20- 29 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-E--DEPOSIT LIABILITIES PART I. DEPOSITS IN DOMESTIC OFFICES
Transaction Nontransaction Accounts Accounts (Column A) (Column B) (Column C) Total transaction Memo: Total Total accounts (including demand deposits nontransaction total demand (included in accounts deposits) column A) (including MMDAs) DOLLAR AMOUNTS IN THOUSANDS DEPOSITS OF: 1. Individuals, partnerships, and corporations 11,619,230 10,703,185 44,224,049 2. U.S. Government 20,052 20,052 0 3. States and political subdivisions in the U.S. 1,002,461 304,269 511,557 4. Commercial banks in the U.S. 244,283 244,283 0 5. Other depository institutions in the U.S. 55,689 55,689 0 6. Banks in foreign countries 67,207 67,207 0 7. Foreign governments and official institutions (including foreign central banks) 0 0 0 8. Certified and official checks 52,293 52,293 9. Total (sum of items 1 through 8) (sum of columns A and C must equal Schedule RC, item 13.a) 13,061,215 11,446,978 44,735,606
-21- 30 MEMORANDA
DOLLAR AMOUNTS IN THOUSANDS 1. SELECTED COMPONENTS OF TOTAL DEPOSITS (I.E., SUM OF ITEM 9, COLUMNS A AND C): 1.a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts 2,231,819 1.b. Total brokered deposits 2,617,000 1.c. FULLY INSURED BROKERED DEPOSITS (INCLUDED IN MEMORANDUM ITEM 1.b ABOVE): 1.c.1. Issued in denominations of less than $100,000 0 1.c.2. Issued EITHER in denominations of $100,000 OR in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 0 1.d. MATURITY DATA FOR BROKERED DEPOSITS: 1.d.1. Brokered deposits issued in denominations of less than $100,000 with a remaining maturity of one year or less (included in Memorandum item 1.c.(1) above) 0 1.d.2. Brokered deposits issued in denominations of $100,000 or more with a remaining maturity of one year or less (included in Memorandum item 1.b above) 2,617,000 1.e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. reported in item 3 above which are secured or collateralized as required under state law) (TO BE COMPLETED FOR THE DECEMBER REPORT ONLY) N/A 2. COMPONENTS OF TOTAL NONTRANSACTION ACCOUNTS (SUM OF MEMORANDUM ITEMS 2.a THROUGH 2.c MUST EQUAL ITEM 9, COLUMN C ABOVE): 2.a. SAVINGS DEPOSITS: 2.a.1. Money market deposit accounts (MMDAs) 21,359,148 2.a.2. Other savings deposits (excludes MMDAs) 6,381,169 2.b. Total time deposits of less than $100,000 10,058,696 2.c. Total time deposits of $100,000 or more 6,936,593 3. All NOW accounts (included in column A above) 1,614,237 4. NOT APPLICABLE 5. MATURITY AND REPRICING DATA FOR TIME DEPOSITS OF LESS THAN $100,000: 5.a. TIME DEPOSITS OF LESS THAN $100,000 WITH A REMAINING MATURITY OR REPRICING FREQUENCY OF: 5.a.1. Three months or less 2,472,749 5.a.2. Over three months through 12 months 4,948,896 5.a.3. Over one year through three years 2,297,614 5.a.4. Over three years 339,437 5.b. Time deposits of less than $100,000 with a REMAINING MATURITY of one year or less (included in Memorandum items 5.a.(1) through 5.a.(4) above) 7,420,890 6. MATURITY AND REPRICING DATA FOR TIME DEPOSITS OF $100,000 OR MORE: 6.a. TIME DEPOSITS OF $100,000 OR MORE WITH A REMAINING MATURITY OR REPRICING FREQUENCY OF: 6.a.1. Three months or less 1,665,973 6.a.2. Over three months through 12 months 4,528,262 6.a.3. Over one year through three years 641,869 6.a.4. Over three years 100,489 6.b. Time deposits of $100,000 or more with a REMAINING MATURITY of one year or less (included in Memorandum items 6.a.(1) through 6.a.(4) above) 6,011,662
PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND AGREEMENT SUBSIDIARIES AND IBFS)
DOLLAR AMOUNTS IN THOUSANDS DEPOSITS OF: 1. Individuals, partnerships, and corporations 11,356,903 2. U.S. banks (including IBFs and foreign branches of U.S. banks) 0 3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs) 171,929 4. Foreign governments and official institutions (including foreign central banks) 0 5. Certified and official checks 0 6. All other deposits 0 7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) 11,528,832
MEMORANDUM
DOLLAR AMOUNTS IN THOUSANDS 1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 11,528,831 above)
-22- 31 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-F--OTHER ASSETS
DOLLAR AMOUNTS IN THOUSANDS 1. Income earned, not collected on loans 432,142 2. Net deferred tax assets 0 3. INTEREST-ONLY STRIPS RECEIVABLE (NOT IN THE FORM OF A SECURITY) ON: 3.a. Mortgage loans 0 3.b. Other financial assets 0 4. Other (itemize and describe amounts that exceed 25% of this item) 1,340,369 4.a. 0 4.b. 0 4.c. 0 5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) 1,772,511
MEMORANDUM
DOLLAR AMOUNTS IN THOUSANDS 1. Deferred tax assets disallowed for regulatory capital purposes 0
-23- 32 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-G--OTHER LIABILITIES
DOLLAR AMOUNTS IN THOUSANDS 1.a. Interest accrued and unpaid on deposits in domestic offices 140,834 1.b. Other expenses accrued and unpaid (includes accrued income taxes payable) 359,391 2. Net deferred tax liabilities 492,903 3. Minority interest in consolidated subsidiaries 66,493 4. Other (itemize and describe amounts that exceed 25% of this item) 965,640 4.a. A/P FACTORING 404,156 4.b. 0 4.c. 0 5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) 2,025,261
-24- 33 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES
Domestic Offices DOLLAR AMOUNTS IN THOUSANDS 1. Customers' liability to this bank on acceptances outstanding 168,835 2. Bank's liability on acceptances executed and outstanding 168,835 3. Federal funds sold and securities purchased under agreements to resell 2,546,167 4. Federal funds purchased and securities sold under agreements to repurchase 11,129,477 5. Other borrowed money 5,199,950 EITHER 6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs 0 OR 7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs 11,532,786 8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) 96,986,322 9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs) 77,384,391
IN ITEMS 10-17, REPORT THE AMORTIZED (HISTORICAL) COST OF BOTH HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES IN DOMESTIC OFFICES. 10. U.S.Treasury securities 362,129 11. U.S. Government agency obligations (exclude mortgage-backed securities) 2,291,855 12. Securities issued by states and political subdivisions in the U.S. 414,957 13. MORTGAGE-BACKED SECURITIES (MBS): 13.a. PASS-THROUGH SECURITIES 13.a.1. Issued or guaranteed by FNMA, FHLMC, or GNMA 2,389,332 13.a.2. Other pass-through securities 531 13.b. OTHER MORTGAGE-BACKED SECURITIES (INCLUDE CMOS, REMICS, AND STRIPPED MBS): 13.b.1. Issued or guaranteed by FNMA,FHLMC, or GNMA 4,563,756 13.b.2. All other mortgage-backed securities 47,808 14. Other domestic debt securities 3,216,382 15. Foreign debt securities 3,175 16. EQUITY SECURITIES: 16.a. Investments in mutual funds and other equity securities with readily determinable fair values 287,890 16.b. All other equity securities 365,634 17. Total amortized (historical) cost of both held-to-maturity and available-for-sale securities (sum of items 10 through 16) 13,943,449
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
DOLLAR AMOUNTS IN THOUSANDS EITHER 1. Net due from the IBF of the domestic offices of the reporting bank 0 OR 2. Net due to the IBF of the domestic offices of the reporting bank 51,614
-25- 34 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-I--SELECTED ASSETS AND LIABILITIES OF IBFS TO BE COMPLETED ONLY BY BANKS WITH IBFS AND OTHER "FOREIGN" OFFICES.
DOLLAR AMOUNTS IN THOUSANDS 1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) 0 2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, column A) 0 3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) 0 4. Total IBF liabilities (component of Schedule RC, item 21) 51,614 5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, part II, items 2 and 3) 51,596 6. Other IBF deposit liabilities (component of Schedule RC-E, part II. items 1, 4, 5, and 6) 0
-26- 35 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-K--QUARTERLY AVERAGES
DOLLAR AMOUNTS IN THOUSANDS ASSETS 1. Interest-bearing balances due from depository institutions 19,269 2. U.S.Treasury securities and U.S.Government agency obligations (INCLUDING MORTGAGE-BACKED SECURITIES ISSUED OR GUARANTEED BY FNMA, FHLMC, OR GNMA) 9,774,441 3. Securities issued by states and political subdivisions in the U.S. 421,935 4.a. Other debt securities (INCLUDING MORTGAGE-BACKED SECURITIES NOT ISSUED OR GUARANTEED BY FNMA, FHLMC, OR GNMA) 3,239,619 4.b. Equity securities (includes investments in mutual funds and Federal Reserve stock) 446,093 5. Federal funds sold and securities purchased under agreements to resell 2,602,087 6. LOANS: 6.a. LOANS IN DOMESTIC OFFICES: 6.a.1. Total loans 68,663,484 6.a.2. Loans secured by real estate 32,146,808 6.a.3. Loans to finance agricultural production and other loans to farmers 173,789 6.a.4. Commercial and industrial loans 25,026,955 6.a.5. Loans to individuals for household, family, and other personal expenditures 9,446,892 6.b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs 0 7. Trading assets 128,399 8. Lease financing receivables (net of unearned income) 2,222,436 9. Total assets 93,393,466 LIABILITIES 10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, and telephone and preauthorized transfer accounts) (exclude demand deposits) 1,492,306 11. NONTRANSACTION ACCOUNTS IN DOMESTIC OFFICES: 11.a. Money market deposit accounts (MMDAs) 21,791,275 11.b. Other savings deposits 6,529,034 11.c. Time deposits of $100,000 or more 6,462,377 11.d. Time deposits of less than $100,000 9,943,085 12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs 10,523,547 13. Federal funds purchased and securities sold under agreements to repurchase 11,244,560 14. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases) 5,914,842
-27- 36 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-L--OFF-BALANCE SHEET ITEMS Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk.
DOLLAR AMOUNTS IN THOUSANDS 1. UNUSED COMMITMENTS: 1.a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home equity lines 1,558,238 1.b. Credit card lines 9 1.c. COMMERCIAL REAL ESTATE, CONSTRUCTION, AND LAND DEVELOPMENT: 1.c.1. Commitments to fund loans secured by real estate 1,869,153 1.c.2. Commitments to fund loans not secured by real estate 1,185,542 1.d. Securities underwriting 0 1.e. Other unused commitments 40,785,764 2. Financial standby letters of credit and foreign office guarantees 6,433,226 2.a. Amount of financial standby letters of credit conveyed to others 796,620 3. Performance standby letters of credit and foreign office guarantees 542,589 3.a. Amount of performance standby letters of credit conveyed to others 5,547 4. Commercial and similar letters of credit 136,025 5. Participations in acceptances (as described in the instructions) conveyed to others by the reporting bank 0 6. Participations in acceptances (as described in the instructions) acquired by the reporting (nonaccepting) bank 62 7. Securities borrowed 0 8. Securities lent (including customers' securities lent where the customer is indemnified against loss by the reporting bank) 144,722 9. FINANCIAL ASSETS TRANSFERRED WITH RECOURSE THAT HAVE BEEN TREATED AS SOLD FOR CALL REPORT PURPOSES: 9.a. FIRST LIEN 1--4 FAMILY RESIDENTIAL MORTGAGE LOANS: 9.a.1. Outstanding principal balance of mortgages transferred as of the report date 163,818 9.a.2. Amount of recourse exposure on these mortgages as of the report date 1,848 9.b. OTHER FINANCIAL ASSETS (EXCLUDING SMALL BUSINESS OBLIGATIONS REPORTED IN ITEM 9.c): 9.b.1. Outstanding principal balance of assets transferred as of the report date 247,892 9.b.2. Amount of recourse exposure on these assets as of the report date 247,892 9.c. SMALL BUSINESS OBLIGATIONS TRANSFERRED WITH RECOURSE UNDER SECTION 208 OF THE RIEGLE COMMUNITY DEVELOPMENT AND REGULATORY IMPROVEMENT ACT OF 1994: 9.c.1. Outstanding principal balance of small business obligations transferred as of the report date 0 9.c.2. Amount of retained recourse on these obligations as of the report date 0 10. NOTIONAL AMOUNT OF CREDIT DERIVATIVES: 10.a. Credit derivatives on which the reporting bank is the guarantor 0 10.b. Credit derivatives on which the reporting bank is the beneficiary 0 11. Spot foreign exchange contracts 144,910 12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 1,520,303 12.a. 1,520,303 12.b. 0 12.c. 0 12.d. 0 13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 0 13.a. 0 13.b. 0 13.c. 0 13.d. 0
-28- 37
(Column B) (Column C) (Column D) (Column A) Foreign Equity Commodity Off-balance Sheet Interest Rate Exchange Derivative and Other Derivatives Position Indicators Contracts Contracts Contracts Contracts DOLLAR AMOUNTS IN THOUSANDS 14. GROSS AMOUNTS (E.G., NOTIONAL AMOUNTS) (FOR EACH COLUMN, SUM OF ITEMS 14.a THROUGH 14.e MUST EQUAL SUM OF ITEMS 15, 16.a, AND 16.b): 14.a. Futures Contracts 1,402,000 0 0 0 14.b. Forward contracts 1,844,250 1,906,759 0 0 14.c. EXCHANGE-TRADED OPTION CONTRACTS: 14.c.1. Written options 0 0 0 0 14.c.2. Purchased options 0 0 0 0 14.d. OVER-THE-COUNTER OPTION CONTRACTS: 14.d.1. Written options 2,712,797 15,331 286,666 0 14.d.2. Purchased options 3,163,265 15,331 286,666 0 14.e. Swaps 21,659,581 163,881 53,546 20,000 15. Total gross notional amount of derivative contracts held for trading 0 0 0 0 16. GROSS NOTIONAL AMOUNT OF DERIVATIVE CONTRACTS HELD FOR PURPOSES OTHER THAN TRADING: 16.a. Contracts marked to market 27,286,558 2,067,356 626,878 20,000 16.b. Contracts not marked to market 3,495,335 33,946 0 0 16.c. Interest rate swaps where the bank has agreed to pay a fixed rate 10,419,791 17. GROSS FAIR VALUES OF DERIVATIVE CONTRACTS: 17.a. CONTRACTS HELD FOR TRADING: 17.a.1. Gross positive fair value 0 0 0 0 17.a.2. Gross negative fair value 0 0 0 0 17.b. CONTRACTS HELD FOR PURPOSES OTHER THAN TRADING THAT ARE MARKED TO MARKET: 17.b.1. Gross positive fair value 349,629 30,845 64,037 351 17.b.2. Gross negative fair value 317,789 19,291 58,316 732 17.c. CONTRACTS HELD FOR PURPOSES OTHER THAN TRADING THAT ARE NOT MARKED TO MARKET: 17.c.1. Gross positive fair value 16,280 2,636 0 0 17.c.2. Gross negative fair value 17,338 0 0 0
-29- 38 MEMORANDA
DOLLAR AMOUNTS IN THOUSANDS 1.-2. NOT APPLICABLE 3. Unused commitments with an original maturity exceeding one year that are reported in Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments that are fee paid or otherwise legally binding) 26,765,322 3.a. Participations in commitments with an original maturity exceeding one year conveyed to others 1,020,767 4. To be completed only by banks with $1 billion or more in total assets: 23,982 Standby letters of credit and foreign office guarantees (both financial and performance) issued to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above 5. LOANS TO INDIVIDUALS FOR HOUSEHOLD, FAMILY, OR OTHER PERSONAL EXPENDITURES THAT HAVE BEEN SECURITIZED AND SOLD (WITH SERVICING RETAINED), AMOUNTS OUTSTANDING BY TYPE OF LOAN: 5.a. Loans to purchase private passenger automobiles (TO BE COMPLETED FOR THE SEPTEMBER REPORT ONLY) N/A 5.b. Credit cards and related plans (TO BE COMPLETED QUARTERLY) 0 5.c. All other consumer credit (including mobile home loans) (TO BE COMPLETED FOR THE SEPTEMBER REPORT ONLY) N/A
-30- 39 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-M--MEMORANDA
DOLLAR AMOUNTS IN THOUSANDS 1. EXTENSIONS OF CREDIT BY THE REPORTING BANK TO ITS EXECUTIVE OFFICERS, DIRECTORS, PRINCIPAL SHAREHOLDERS, AND THEIR RELATED INTERESTS AS OF THE REPORT DATE: 1.a. Aggregate amount of all extensions of credit to all executive officers, directors, principal shareholders, and their related interests 974,100 1.b. Number of executive officers, directors, and principal shareholders to whom the amount of all extensions of credit by the reporting bank (including extensions of credit to related interests) equals or exceeds the lesser of $500,000 or 5 percent of total capital as defined for this purpose in agency regulations 8 2. Federal funds sold and securities purchased under agreements to resell with U.S. branches and agencies of FOREIGN BANKS (included in Schedule RC, item 3) 0 3. Not applicable 4. OUTSTANDING PRINCIPAL BALANCE OF 1-4 FAMILY RESIDENTIAL MORTGAGE LOANS SERVICED FOR OTHERS (INCLUDE BOTH RETAINED SERVICING AND PURCHASED SERVICING): 4.a. Mortgages serviced under a GNMA contract 3,155,471 4.b. MORTGAGES SERVICED UNDER A FHLMC CONTRACT: 4.b.1. Serviced with recourse to servicer 16,021 4.b.2. Serviced without recourse to servicer 7,308,430 4.c. MORTGAGES SERVICED UNDER A FNMA CONTRACT 4.c.1. Serviced under a regular option contract 42,584 4.c.2. Serviced under a special option contract 9,149,630 4.d. Mortgages serviced under other servicing contracts 20,269,519 5. TO BE COMPLETED ONLY BY BANKS WITH $1 BILLION OR MORE IN TOTAL ASSETS: CUSTOMERS' LIABILITY TO THIS BANK ON ACCEPTANCES OUTSTANDING (SUM OF ITEMS 5.a AND 5.b MUST EQUAL SCHEDULE RC, ITEM 9): 5.a. U.S. addressees (domicile) 168,835 5.b. Non-U.S. addressees (domicile) 0 6. INTANGIBLE ASSETS: 6.a. MORTGAGE SERVICING ASSETS 287,169 6.a.1. Estimated fair value of mortgage servicing assets 396,548 6.b. OTHER IDENTIFIABLE INTANGIBLE ASSETS:
-31- 40 6.b.1. PURCHASED CREDIT CARD RELATIONSHIPS AND NONMORTGAGE SERVICING ASSETS 0 6.b.2. All other identifiable intangible assets 24,306 6.c. Goodwill 269,779 6.d. Total (sum of items 6.a, 6.b.(1), 6.b.(2), and 6.c) (must equal Schedule RC, item 10) 581,254 6.e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or are otherwise qualifying for regulatory capital purposes 0 7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to redeem the debt 0 8.a. OTHER REAL ESTATE OWNED: 8.a.1. Direct and indirect investments in real estate ventures 0 8.a.2. ALL OTHER REAL ESTATE OWNED: 8.a.2.a. Construction and land development in domestic offices 4,058 8.a.2.b. Farmland in domestic offices 0 8.a.2.c. 1-4 family residential properties in domestic offices 16,290 8.a.2.d. Multifamily (5 or more) residential properties in domestic offices 0 8.a.2.e. Nonfarm nonresidential properties in domestic offices 15,641 8.a.2.f. In Foreign Offices 0 8.a.3. Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) 35,989 8.b. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED COMPANIES: 8.b.1. Direct and indirect investments in real estate ventures 0 8.b.2. All other investments in unconsolidated subsidiaries and associated companies 0 8.b.3. Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) 0 9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, item 23, "Perpetual preferred stock and related surplus" 0 10. MUTUAL FUND AND ANNUITY SALES DURING THE QUARTER (INCLUDE PROPRIETARY, PRIVATE LABEL, AND THIRD PARTY PRODUCTS): 10.a. Money market funds 1,983,486 10.b. Equity securities funds 185,818 10.c. Debt securities funds 36,484 10.d. Other mutual funds 63,677 10.e. Annuities 133,081 10.f. Sales of proprietary mutual funds and annuities (included in items 10.a through 10.e above) 2,049,476 11. Net unamortized realized deferred gains (losses) on off-balance sheet derivative contracts included in assets and liabilities reported in Schedule RC 0 12. Amount of assets netted against nondeposit liabilities and deposits in foreign offices (other than insured branches in Puerto Rico and U.S. territories and possessions) on the balance sheet (Schedule RC) in accordance with generally accepted accounting principles 0 13. Outstanding principal balance of loans other than 1-4 family residential mortgage loans that are serviced for others (to be completed if this balance is more than $10 million and exceeds ten percent of total assets) 0
MEMORANDUM
DOLLAR AMOUNTS IN THOUSANDS 1. Reciprocal holdings of banking organizations' capital instruments (TO BE COMPLETED FOR THE DECEMBER REPORT ONLY) N/A
-32- 41 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES, AND OTHER ASSETS The FFIEC regards the information reported in all of Memorandum item 1, in items 1 through 10, column A, and in Memorandum items 2 through 4, column A, as confidential.
(Column B) Past Due 90 days or more and still (Column C) accruing Nonaccrual DOLLAR AMOUNTS IN THOUSANDS 1. LOANS SECURED BY REAL ESTATE: 1.a. To U.S. addressees (domicile) 16,504 116,772 1.b. To non-U.S. addressees (domicile) 0 124 2. LOANS TO DEPOSITORY INSTITUTIONS AND ACCEPTANCES OF OTHER BANKS: 2.a. To U.S. banks and other U.S. depository institutions 0 0 2.b. To foreign banks 0 2,615 3. Loans to finance agricultural production and other loans to farmers 725 1,627 4. COMMERCIAL AND INDUSTRIAL LOANS: 4.a. To U.S. addressees (domicile) 61,002 127,527 4.b. To non-U.S. addressees (domicile) 0 1,542 5. LOANS TO INDIVIDUALS FOR HOUSEHOLD, FAMILY, AND OTHER PERSONAL EXPENDITURES: 5.a. Credit cards and related plans 123 399 5.b. Other (includes single payment, installment, and all student loans) 102,637 28,068 6. Loans to foreign governments and official institutions 70 6 7. All other loans 2,059 1,765 8. LEASE FINANCING RECEIVABLES: 8.a. Of U.S. addressees (domicile) 9,756 85 8.b. Of non-U.S. addressees (domicile) 0 0 9. Debt securities and other assets (exclude other real estate owned and other repossessed assets) 0 0 Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in items 1 through 8. 10. Loans and leases reported in items 1 through 8 above which are wholly or partially guaranteed by the U.S. Government 103,803 2,804 10.a. Guaranteed portion of loans and leases included in item 10 above 103,795 2,243
-33- 42 MEMORANDA
(Column B) Past Due 90 days or more and still (Column C) accruing Nonaccrual DOLLAR AMOUNTS IN THOUSANDS 2. Loans to finance commercial real estate, construction, and land development activities (NOT SECURED BY REAL ESTATE) included in Schedule RC-N, items 4 and 7 above 0 1,200 3. LOANS SECURED BY REAL ESTATE IN DOMESTIC OFFICES (INCLUDED IN SCHEDULE RC-N, ITEM 1, ABOVE): 3.a. Construction and land development 1,515 10,203 3.b. Secured by farmland 364 337 3.C. SECURED BY 1-4 FAMILY RESIDENTIAL PROPERTIES: 3.c.1. Revolving, open-end loans secured by 1-4 family residential properties and extended under lines of credit 1,675 1,716 3.c.2. All other loans secured by 1-4 family residential properties 8,581 74,009 3.d. Secured by multifamily (5 or more) residential properties 0 616 3.e. Secured by nonfarm nonresidential properties 4,369 30,015
(Column B) Past Due 90 days or more 4. INTEREST RATE, FOREIGN EXCHANGE RATE, AND OTHER COMMODITY AND EQUITY CONTRACTS: 4.a. Book value of amounts carried as assets 0 4.b. Replacement cost of contracts with a positive replacement cost 0
-34- 43 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA, GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE AND FICO ASSESSMENTS
DOLLAR AMOUNTS IN THOUSANDS 1. UNPOSTED DEBITS (SEE INSTRUCTIONS): 1.a. Actual amount of all unposted debits: 0 OR 1.b. SEPARATE AMOUNT OF ALL UNPOSTED DEBITS: 1.b.1. Actual amount of unposted debits to demand deposits 0 1.b.2. Actual amount on unposted debits to time and savings deposits 0 2. UNPOSTED CREDITS (SEE INSTRUCTIONS): 2.a. Actual amount of all unposted credits 0 OR 2.b. SEPARATE AMOUNT OF UNPOSTED CREDITS: 2.b.1. Actual amount of unposted credits to demand deposits 0 2.b.2. Actual amount on unposted credits to time and savings deposits 0 3. Uninvested trust funds (cash) held in bank's own trust department (not included in total deposits in domestic offices) 0 4. DEPOSITS OF CONSOLIDATED SUBSIDIARIES IN DOMESTIC OFFICES AND IN INSURED BRANCHES IN PUERTO RICO AND U.S. TERRITORIES AND POSSESSIONS (NOT INCLUDED IN TOTAL DEPOSITS): 4.a. Demand deposits of consolidated subsidiaries 0 4.b. Time and savings deposits of consolidated subsidiaries 0 4.c. Interest accrued and unpaid on deposits of consolidated subsidiaries 0 5. DEPOSITS IN INSURED BRANCHES IN PUERTO RICO AND U.S. TERRITORIES AND POSSESSIONS: 5.a. Demand deposits in insured branches (included in Schedule RC-E, part II) 0 5.b. Time and savings deposits in insured branches (included in Schedule RC-E, part II) 0 5.c. Interest accrued and unpaid on deposits in insured branches (included in Schedule RC-G, item 1.b) 0 6. RESERVE BALANCES ACTUALLY PASSED THROUGH TO THE FEDERAL RESERVE BY THE REPORTING BANK ON BEHALF OF ITS RESPONDENT DEPOSITORY INSTITUTIONS THAT ARE ALSO REFLECTED AS DEPOSIT LIABILITIES OF THE REPORTING BANK:
-35- 44 6.a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5, column B) 0 6.b. Amount reflected in time and savings deposits (included in Schedule RC-E, Part I, item 4 or 5, column A or C, but not column B) 0 7. UNAMORTIZED PREMIUMS AND DISCOUNTS ON TIME AND SAVINGS DEPOSITS: 7.a. Unamortized premiums 0 7.b. Unamortized discounts 0 8. TO BE COMPLETED BY BANKS WITH "OAKAR DEPOSITS." 8.a. DEPOSITS PURCHASED OR ACQUIRED FROM OTHER FDIC-INSURED INSTITUTIONS DURING THE QUARTER (EXCLUDE DEPOSITS PURCHASED OR ACQUIRED FROM FOREIGN OFFICES OTHER THAN INSURED BRANCHES IN PUERTO RICO AND U.S. TERRITORIES AND POSSESSIONS): 8.a.1. Total deposits purchased or acquired from other FDIC-insured institutions during the quarter 0 8.a.2. Amount of purchased or acquired deposits reported in item 8.a.(1) above attributable to a secondary fund (i.e., BIF members report deposits attributable to SAIF; SAIF members report deposits attributable to BIF) 0 8.b. Total deposits sold or transferred to other FDIC-insured institutions during the quarter (exclude sales or transfers by the reporting bank of deposits in foreign offices other than insured branches in Puerto Rico and U.S. territories and possessions) 0 9. DEPOSITS IN LIFELINE ACCOUNTS 10. Benefit-responsive "Depository Institution Investment Contracts" (included in total deposits in domestic offices) 0 11. ADJUSTMENTS TO DEMAND DEPOSITS IN DOMESTIC OFFICES AND IN INSURED BRANCHES IN PUERTO RICO AND U.S. TERRITORIES AND POSSESSIONS REPORTED IN SCHEDULE RC-E FOR CERTAIN RECIPROCAL DEMAND BALANCES: 11.a. Amount by which demand deposits would be reduced if the reporting bank's reciprocal demand balances with the domestic offices of U.S. banks and savings associations and insured branches in Puerto Rico and U.S. territories and possessions that were reported on a gross basis in Schedule RC-E had been reported on a net basis 0 11.b. Amount by which demand deposits would be increased if the reporting bank's reciprocal demand balances with foreign banks and foreign offices of other U.S. banks (other than insured branches in Puerto Rico and U.S. territories and possessions) that were reported on a net basis in Schedule RC-E had been reported on a gross basis 0 11.c. Amount by which demand deposits would be reduced if cash items in process of collection were included in the calculation of the reporting bank's net reciprocal demand balances with the domestic offices of U.S. banks and savings associations and insured branches in Puerto Rico and U.S. territories and possessions in Schedule RC-E 0 12. AMOUNT OF ASSETS NETTED AGAINST DEPOSIT LIABILITIES IN DOMESTIC OFFICES AND IN INSURED BRANCHES IN PUERTO RICO AND U.S. TERRITORIES AND POSSESSIONS ON THE BALANCE SHEET (SCHEDULE RC) IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (EXCLUDE AMOUNTS RELATED TO RECIPROCAL DEMAND BALANCES): 12.a. Amount of assets netted against demand deposits 0 12.b. Amount of assets netted against time and savings deposits 0
-36- 45 MEMORANDA (TO BE COMPLETED EACH QUARTER EXCEPT AS NOTED)
DOLLAR AMOUNTS IN THOUSANDS 1. TOTAL DEPOSITS IN DOMESTIC OFFICES OF THE BANK (SUM OF MEMORANDUM ITEMS 1.a.(1) AND 1.b.(1) MUST EQUAL SCHEDULE RC, ITEM 13.a): 1.a. DEPOSIT ACCOUNTS OF $100,000 OR LESS: 1.a.1. Amount of deposit accounts of $100,000 or less 34,824,188 NUMBER 1.a.2. Number of deposit accounts of $100,000 or less (TO BE COMPLETED FOR THE JUNE REPORT ONLY) 4,529,509 1.b. Deposit accounts of more than $100,000: 1.b.1. Amount of deposit accounts of more than $100,000 22,972,633 NUMBER 1.b.2. Number of deposit accounts of more than $100,000 70,974 2. ESTIMATED AMOUNT OF UNINSURED DEPOSITS IN DOMESTIC OFFICES OF THE BANK: 2.a. An estimate of your bank's uninsured deposits can be determined by multiplying the number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2) above by $100,000 and subtracting the result from the amount of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(1) above. YES/NO Indicate in the appropriate box at the right whether your bank has a method or procedure for determining a better estimate of uninsured deposits than the estimate NO described above 2.b. If the box marked YES has been checked, report the estimate of uninsured deposits determined by using your bank's method or procedure 0 3. Has the reporting institution been consolidated with a parent bank or savings association in that parent bank's or parent savings association's Call Report or Thrift Financial Report? If so, report the legal title and FDIC Certificate Number of the parent bank or parent savings association: FDIC CERT NO. 0
-37- 46 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA , GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SCHEDULE RC-R--REGULATORY CAPITAL This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1999, must complete items 2 through 9 and Memoranda items 1 and 2. BANKS WITH ASSETS OF LESS THAN $1 BILLION MUST COMPLETE ITEMS 1 THROUGH 3 BELOW OR SCHEDULE RC-R IN ITS ENTIRETY, DEPENDING ON THEIR RESPONSE TO ITEM 1 BELOW. 1. TEST FOR DETERMINING THE EXTENT TO WHICH SCHEDULE RC-R MUST BE COMPLETED. TO YES/NO BE COMPLETED ONLY BY BANKS WITH TOTAL ASSETS OF LESS THAN $1 BILLION. N/A Indicate in the appropriate box at the right whether the bank has total capital greater than or equal to eight percent of adjusted total assets For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions). If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked NO has been checked, the bank must complete the remainder of this schedule. A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight percent or that the bank is not in compliance with the risk-based capital guidelines.
NOTE: ALL BANKS ARE REQUIRED TO COMPLETE ITEMS 2 AND 3 BELOW. SEE OPTIONAL WORKSHEET FOR ITEMS 3.a THROUGH 3.f.
DOLLAR AMOUNTS IN THOUSANDS 2. PORTION OF QUALIFYING LIMITED-LIFE CAPITAL INSTRUMENTS (ORIGINAL WEIGHTED AVERAGE MATURITY OF AT LEAST FIVE YEARS) THAT IS INCLUDIBLE IN TIER 2 CAPITAL: 2.a. Subordinated debt and intermediate term preferred stock 900,000 2.b. Other limited-life capital instruments 0 3. AMOUNTS USED IN CALCULATING REGULATORY CAPITAL RATIOS (REPORT AMOUNTS DETERMINED BY THE BANK FOR ITS OWN INTERNAL REGULATORY CAPITAL ANALYSES CONSISTENT WITH APPLICABLE CAPITAL STANDARDS): 3.a.1. Tier 1 capital 7,150,797 3.a.2. Tier 2 capital 2,411,057 3.a.3. Tier 3 capital 0 3.b. Total risk-based capital 9,561,854 3.c. Excess allowance for loan and lease losses (amount that exceeds 1.25% of gross 0 risk-weighted assets) 3.d.1. Net risk-weighted assets (gross risk-weighted assets, INCLUDING MARKET RISK EQUIVALENT ASSETS, less excess allowance reported in item 3.c above and all other deductions) 92,024,548 3.d.2. Market risk equivalent assets (INCLUDED IN ITEM 3.d.(1) ABOVE) 0 3.e. Maximum contractual dollar amount of recourse exposure in low level recourse transactions (to be completed only if the bank uses the "direct reduction method" to report these transactions in Schedule RC-R) 1,585 3.f. "Average total assets" (quarterly average reported in Schedule RC-K, item 9, less all assets deducted from Tier 1 capital) 93,099,381
-38- 47
ITEMS 4-9 AND MEMORANDA ITEMS 1 AND 2 ARE (Column A) (Column B) TO BE COMPLETED BY BANKS THAT ANSWERED NO Assets Credit TO ITEM 1 ABOVE AND BY BANKS WITH TOTAL Recorded Equivalent ASSETS OF $1 BILLION OR MORE. on the Amount of Balance Off- Sheet Balance Sheet Items 4. ASSETS AND CREDIT EQUIVALENT AMOUNTS OF OFF-BALANCE SHEET ITEMS ASSIGNED TO THE ZERO PERCENT RISK CATEGORY: 4.a. Assets recorded on the balance sheet 1,783,179 4.b. Credit equivalent amount of off-balance sheet items 0 5. ASSETS AND CREDIT EQUIVALENT AMOUNTS OF OFF-BALANCE SHEET ITEMS ASSIGNED TO THE 20 PERCENT RISK CATEGORY: 5.a. Assets recorded on the balance sheet 16,620,162 5.b. Credit equivalent amount of off-balance sheet items 1,666,091 6. ASSETS AND CREDIT EQUIVALENT AMOUNTS OF OFF-BALANCE SHEET ITEMS ASSIGNED TO THE 50 PERCENT RISK CATEGORY: 6.a. Assets recorded on the balance sheet 19,885,534 6.b. Credit equivalent amount of off-balance sheet items 1,644,206 7. ASSETS AND CREDIT EQUIVALENT AMOUNTS OF OFF-BALANCE SHEET ITEMS ASSIGNED TO THE 100 PERCENT RISK CATEGORY: 7.a. Assets recorded on the balance sheet 58,126,198 7.b. Credit equivalent amount of off-balance sheet items 18,820,392 8. On-balance sheet asset values excluded from and deducted in the calculation of the risk-based capital ratio 1,426,469 9. Total assets recorded on the balance sheet (sum of items 4.a, 5.a, 6.a, 7.a, and 8, column A) (must equal Schedule RC, item 12 plus items 4.b and 4.c) 97,841,542
-39- 48 MEMORANDA DOLLAR AMOUNTS IN THOUSANDS 1. Current credit exposure across all off-balance sheet derivative contracts covered by the risk-based capital standards 463,778
With a remaining maturity of (Column B) Notional principal amounts of off-balance (Column A) Over one year (Column C) 2. Sheet derivative contracts: One year or through five Over five less years years 2.a. Interest rate contracts 5,956,907 13,912,220 6,797,969 2.b. Foreign exchange contracts 1,584,188 368,955 0 2.c. Gold contracts 0 0 0 2.d. Other precious metals contracts 0 0 0 2.e. Other commodity contracts 0 20,000 0 2.f. Equity derivative contracts 40,756 299,456 0
-40- 49 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA , GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 SPECIAL REPORT - LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date) The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of the Report of Condition. With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of credit to their executive officers made SINCE THE DATE OF THE PREVIOUS REPORT OF CONDITION. Data regarding individual loans or other extensions of credit are not required. If no such loans or other extensions of credit were made during the period, insert "none" against subitem (a). (Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.) SEE SECTIONS 215.2 AND 215.3 OF TITLE 12 OF THE CODE OF FEDERAL REGULATIONS (FEDERAL RESERVE BOARD REGULATION O) FOR THE DEFINITIONS OF "EXECUTIVE OFFICER" AND "EXTENSION OF CREDIT," RESPECTIVELY. EXCLUDE LOANS AND OTHER EXTENSIONS OF CREDIT TO DIRECTORS AND PRINCIPAL SHAREHOLDERS WHO ARE NOT EXECUTIVE OFFICERS. a. Number of loans made to executive officers since the previous Call Report date 0 b. Total dollar amount of above loans (in thousands of dollars) 0 c. Range of interest charged on above loans (example: 9 3/4% = 9.75) 0.00% 0.00%
-41- 50 SunTrust Bank 1 PARK PLACE, N.E. FFIEC 031 ATLANTA , GA 30303 Consolidated Report of Condition Certificate Number: 867 for June 30, 2000 OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS REPORTED IN THE REPORTS OF CONDITION AND INCOME The management of the reporting bank may, if it wishes, submit a brief narrative statement on the amounts reported in the Reports of Condition and Income. This optional statement will be made available to the public, along with the publicly available data in the Reports of Condition and Income, in response to any request for individual bank report data. However, the information reported in column A and in all of memorandum item 1 of Schedule RC-N is regarded as confidential and will not be released to the public. BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a statement may check the "No comment" box below and should make no entries of any kind in the space provided for the narrative statement; i.e., DO NOT enter in this space such phrases as "No statement," "Not applicable," "N/A," "No comment," and "None". The optional statement must be entered on this sheet. The statement should not exceed 100 words. Further, regardless of the number of words, the statement must not exceed 750 characters, including punctuation, indentation, and standard spacing between words and sentences. If any submission should exceed 750 characters, as defined, it will be truncated at 750 characters with no notice to the submitting bank and the truncated statement will appear as the bank's statement both on agency computerized records and in computer-file releases to the public. All information furnished by the bank in the narrative statement must be accurate and not misleading. Appropriate efforts shall be taken by the submitting bank to ensure the statement's accuracy. The statement must be signed, in the space provided below, by a senior officer of the bank who thereby attests to its accuracy. If, subsequent to the original submission, material changes are submitted for the data reported in the Reports of Condition and Income, the existing narrative statement will be deleted from the files, and from disclosure; the bank, at its option, may replace it with a statement, under signature, appropriate to the amended data. The optional narrative statement will appear in agency records and in release to the public exactly as submitted (or amended as described in the preceding paragraph) by the management of the bank (except for the truncation of statements exceeding the 750-character limit described above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE REPORTING BANK. No Comment BANK MANAGEMENT STATEMENT (PLEASE PRINT OR TYPE CLEARLY): -42- EX-27.1 12 d80556ex27-1.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FELCOR LODGING LIMITED PARTNERSHIP JUNE 30, 2000 10-Q. 0001048789 FELCOR LODGING LIMITED PARTNERSHIP 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 50,852 0 36,326 0 0 87,178 4,194,490 397,735 4,176,765 127,176 1,882,743 0 295,000 0 1,813,707 4,176,765 0 264,670 0 0 0 0 77,644 (12,372) 0 (12,372) 0 0 0 (12,372) (0.39) (0.39)
EX-27.2 13 d80556ex27-2.txt RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FELCOR LODGING LIMITED PARTNERSHIP 10K FOR DECEMBER 31, 1999. 0001048789 FELCOR LODGING LIMITED PARTNERSHIP 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 36,123 0 26,154 0 0 62,277 4,365,899 330,555 4,255,751 105,137 1,833,954 0 295,000 0 1,969,989 4,255,751 0 504,001 0 0 0 0 125,435 136,653 0 136,653 0 1,113 0 135,776 1.58 1.57
EX-27.3 14 d80556ex27-3.txt RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FELCOR LODGING TRUST INCORPORATED JUNE 30, 2000 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 0000923603 FELCOR LODGING TRUST INCORPORATED 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 50,852 0 36,326 0 0 87,178 4,194,490 397,735 4,176,765 127,176 1,882,743 0 295,000 694 1,598,564 4,176,765 0 264,670 0 0 0 0 77,644 (9,973) 0 (9,973) 0 0 0 (9,972) (0.39) (0.39)
EX-27.4 15 d80556ex27-4.txt RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FELCOR LODGING TRUST INCORPORATED 10K DATED 12/31/99 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10K. 0000923603 FELCOR LODGING TRUST INCORPORATED 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 36,123 0 26,154 0 0 62,277 4,365,899 330,555 4,255,751 105,137 1,833,954 0 295,000 693 1,879,218 4,255,751 0 504,001 0 0 0 0 125,435 131,957 0 131,957 0 1,113 0 131,080 1.57 1.57
EX-99.1 16 d80556ex99-1.txt FORM OF LETTER OF TRANSMITTAL 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL OFFER FOR ALL OUTSTANDING PRIVATELY PLACED 9 1/2% SENIOR NOTES DUE 2008 IN EXCHANGE FOR REGISTERED 9 1/2% SENIOR NOTES DUE 2008 OF FELCOR LODGING LIMITED PARTNERSHIP THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000 (AS SUCH DATE MAY BE EXTENDED, BUT SHALL NOT BE LATER THAN , 2000) THE EXCHANGE AGENT IS SUNTRUST BANK, WHOSE MAILING ADDRESS, FACSIMILE NUMBER AND TELEPHONE NUMBER ARE AS FOLLOWS: By Registered or Certified By Facsimile: Mail, Hand Delivery or Overnight Delivery: (404) 588-7335(GA) SunTrust Bank (212) 701-7648(NY) Attention: George T. Hogan, Corporate Trust Department 25 Park Place, 24th Floor Atlanta, GA 30303-2900 (404) 588-7335 or SunTrust Bank c/o Harris Trust of New York Attention: Mary Ann Luisi, Corporate Trust Department Wall Street Plaza 88 Pine Street, 19th Floor New York, NY 10005 (212) 701-7673
- -------------------------------------------------------------------------------- DESCRIPTION OF SECURITIES TENDERED - ---------------------------------------------------------------------------------------------------------- NAME AND ADDRESS OF REGISTERED HOLDER PRINCIPAL AS IT APPEARS ON THE PRIVATELY PLACED CERTIFICATE NUMBER(S) AMOUNT OF 9 1/2% SENIOR NOTES OF OLD NOTES OLD NOTES DUE 2008 ("OLD NOTES") TRANSMITTED TRANSMITTED - ---------------------------------------------------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- --------------------------------------------------------------
- -------------------------------------------------------------------------------- NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. 2 Ladies and Gentlemen: 1. The undersigned hereby agrees to exchange the aggregate principal amount of privately placed 9 1/2% Senior Notes Due 2008 (the "Old Notes") for a like principal amount of registered 9 1/2% Senior Notes Due 2008 (the "New Notes") of FelCor Lodging Limited Partnership, a Delaware limited partnership (the "Company"), upon the terms and subject to the conditions contained in the Registration Statement on Form S-4, as amended (the "Registration Statement"), filed by the Company with the Securities and Exchange Commission (the "Commission") and the accompanying Prospectus dated October , 2000 included therein (the "Prospectus"), receipt of each of which is hereby acknowledged. 2. The undersigned hereby acknowledges and agrees that the New Notes will bear interest at a rate equal to 9 1/2% per annum. Interest on the New Notes is payable semiannually, commencing March 15, 2001, on March 15 and September 15 of each year (each, an "Interest Payment Date") and shall accrue from September 15, 2000 or from the most recent Interest Payment Date with respect to the Old Notes to which interest was paid or duly provided for. Accordingly, the undersigned will forego accrued but unpaid interest on his, her or its Old Notes that are exchanged for New Notes from September 15, 2000, but will receive such interest under the New Notes. The New Notes will mature on September 15, 2008. 3. The undersigned hereby represents and warrants that he, she or it has full authority to tender the Old Notes described above. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the exchange of the Old Notes. 4. The undersigned understands that the tender of the Old Notes pursuant to all of the procedures set forth in the Prospectus will constitute an agreement between the undersigned and the Company upon the terms and conditions set forth in the Prospectus. 5. The undersigned hereby represents and warrants that the undersigned is not an affiliate of the Company or of any of the Guarantors (as defined in the Prospectus), that the undersigned is acquiring the New Notes in the ordinary course of the business of the undersigned and that the undersigned is not engaged in, and does not intend to engage in, a distribution of the New Notes. 6. If the undersigned is a broker-dealer (i) it hereby represents and warrants that it acquired the Old Notes for its own account as a result of market-making activities or other trading activities, (ii) it hereby acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act of 1933, as amended (the "Securities Act"), in connection with any resale of the New Notes received hereby and (iii) such broker-dealer has not entered into any arrangement or understanding with the Company or any affiliate of the Company to distribute the New Notes. The acknowledgment contained in the foregoing sentence shall not be deemed an admission that the undersigned is an "underwriter" within the meaning of the Securities Act. 7. Any obligation of the undersigned hereunder shall be binding upon the successors, assigns, executors, administrators, trustees in bankruptcy and legal and personal representatives of the undersigned. 1 3 SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS (SEE INSTRUCTION 1) To be completed ONLY IF the New Notes are to be issued in the name of someone other than the undersigned or are to be sent to someone other than the undersigned or to the undersigned at an address other than that provided above. Issue to: Name - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Mail to: Name - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) SIGNATURE - -------------------------------------------------------------------------------- (NAME OF REGISTERED HOLDER) By: - -------------------------------------------------------------------------------- Name: Title: Date: - -------------------------------------------------------------------------------- (Must be signed by registered holder exactly as name appears on the Old Notes. If signature is by trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3.) Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Telephone No. - -------------------------------------------------------------------------------- Taxpayer Identification No.: - -------------------------------------------------------------------------------- Signature Guaranteed By: - -------------------------------------------------------------------------------- (SEE INSTRUCTION 1) Title: Name of Institution: Address: Date: PLEASE READ THE INSTRUCTIONS BELOW, WHICH FORM A PART OF THIS LETTER OF TRANSMITTAL. 2 4 INSTRUCTIONS 1. Guarantee of Signatures. Signatures on this Letter of Transmittal must be guaranteed by a firm that is a member of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company having an office in the United States which is a member of a recognized Medallion Signature Program approved by the Securities Transfer Association, Inc. (an "Eligible Institution") unless (i) the "Special Issuance and Delivery Instructions" above have not been completed or (ii) the Old Notes described above are tendered for the account of an Eligible Institution. 2. Delivery of Letter of Transmittal and Old Notes. The Old Notes, together with a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), should be mailed or delivered to the Exchange Agent at the address set forth above. The method of delivery of Old Notes and other documents is at the election and risk of the respective holder. If delivery is by mail, registered mail (with return receipt), properly insured, is suggested. 3. Guaranteed Delivery Procedures. Registered holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, or (ii) who cannot deliver their Old Notes, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the registered holder of the Old Notes, the certificate number or numbers of such Old Note(s) and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Old Notes and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) Such properly completed and executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) representing all tendered Old Notes in proper form for transfer and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to registered holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. 4. Signatures on Letter of Transmittal, Bond Powers and Endorsements. If this Letter of Transmittal is signed by a person other than a registered holder of any Old Notes, such Old Notes must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear on the Old Notes. If this Letter of Transmittal or any Old Notes or bond power is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such person should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company or their authority to so act must be submitted. 5. Exchange of Old Notes Only. Only the above-described Old Notes may be exchanged for New Notes pursuant to the Exchange Offer. 3 5 6. Miscellaneous. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old Notes will be resolved by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any or all tenders that are not in proper form or the acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any irregularities or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding. Unless waived, any irregularities in connection with tenders or consents must be cured within such time as the Company shall determine. Neither the Company nor the Exchange Agent shall be under any duty to give notification of defects in such tenders or shall incur liabilities for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holder thereof. IMPORTANT TAX INFORMATION Under current Federal income tax law, a holder of Old Notes (an "Old Noteholder"), whose tendered Old Notes are accepted for payment generally is required to provide the Exchange Agent (as agent for the payer) with his or her correct taxpayer identification number ("TIN") on Form W-9, attached hereto. If such Old Noteholder is an individual, the TIN is his or her social security number. If the Exchange Agent is not provided with the correct TIN, the Old Noteholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such Old Noteholders with respect to New Notes exchanged pursuant to the Offer may be subject to backup withholding. Certain Old Noteholders (including, among others, all corporations and certain foreign individuals) may not be subject to these backup withholding and reporting requirements. Exempt Old Noteholders should indicate their exempt status on the Form W-9. In order for a foreign individual to qualify as an exempt recipient, that Old Noteholder must submit a properly completed Internal Revenue Service Form W-8, signed under penalties of perjury, attesting to his or her exempt status. Such statements can be obtained from the Exchange Agent. See the Form W-9 for additional instructions. If backup withholding applies, the Exchange Agent is required to withhold 31 percent of any such payments made to the Old Noteholder. Backup withholding is not an additional tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. PURPOSE OF FORM W-9 To prevent backup withholding on payments that are made to an Old Noteholder with respect to Old Notes exchanged pursuant to the Exchange Offer, each Old Noteholder is required to notify the Exchange Agent of his, her or its correct TIN by completing the Form W-9 below certifying the TIN provided on such form is correct (or that such Old Noteholder is awaiting a TIN) and that (1) the Old Noteholder has not been notified by the Internal Revenue Service that he, she or it is subject to backup withholding as a result of a failure to report all interest or dividends or (2) the Internal Revenue Service has notified the Old Noteholder that he, she or it is no longer subject to backup withholding. 4 6 WHAT NUMBER TO GIVE THE EXCHANGE AGENT The Old Noteholder is required to give the Exchange Agent the social security number or employer identification number of the record owner of the Old Notes. If the Old Notes are in more than one name or are not in the name of the actual owner, consult the enclosed Form W-9 for additional guidelines on which number to report. 5 -----END PRIVACY-ENHANCED MESSAGE-----