EXHIBIT 10.1
CONFIDENTIAL
------------
January 15, 1998
American General Hospitality Operating Partnership, L.P.
0000 XxxXxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxx
American General Hospitality Corporation
0000 XxxXxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxx
Ladies and Gentlemen:
Societe Generale, Southwest Agency ("SocGen"), Bank One, Texas, N.A. ("BOT"),
The Bank of Nova Scotia ("BNS") and Xxxxx Fargo Bank, National Association
("Xxxxx") (collectively, the "Facilitators") are pleased to advise you that each
such institution is willing, subject to the terms and conditions contained in
this Commitment Letter and in the attached Summary of Terms and Conditions (the
"Term Sheet"), to each individually commit a portion (as hereinafter provided)
of a commitment (the "Commitment") toward a $500,000,000 Senior Unsecured
Revolving Credit Facility (the "Senior Facility") and a $100,000,000 Unsecured,
Delayed-Draw Subordinated Non-Revolving Credit Facility (the "Subordinate
Facility"; the Senior Facility and the Subordinate Facility being referred to
herein as the "Facility") in favor of American General Hospitality Operating
Partnership, L.P., a Delaware limited partnership ("Borrower"), a subsidiary of
American General Hospitality Corporation ("Company"), a Delaware corporation,
for the purpose of providing a portion of the purchase price for acquiring
hotels, renovating hotels, refinancing existing indebtedness for acquired
hotels, providing for general corporate purposes and to pay related fees and
expenses of Borrower and Company. Each Facilitator's portion of the Commitment
is as follows:
$500,000,000 $100,000,000
Senior Facility Subordinate Facility
--------------- --------------------
SocGen $150,000,000 $ 28,333,334
BOT $150,000,000 $ 28,333,333
BNS $100,000,000 $ 15,000,000
Xxxxx $100,000,000 $ 28,333,333
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 2
Upon your acceptance of this Commitment Letter, the Facilitators will form a
group of financial institutions (together with the Facilitators, the "Banks")
acceptable to the Facilitators and reasonably acceptable to Borrower and
Company, for which SocGen will act as Arranger, Syndication Agent and
Documentation Agent; BOT will serve as Administration Agent; and BNS and Xxxxx
will serve as Managing Agents. The Administration Agent and the Documentation
Agent are hereinafter referred to as the "Agents". No other titles may be
awarded without the mutual consent of the Agents and Borrower.
The various fees payable to the Facilitators and to the Agents in connection
with the Facility are set forth in a separate fee letter of even date herewith
pertaining to the Facility (the "Fee Letter").
The Term Sheet attached hereto and incorporated herein by this reference, sets
forth certain terms and conditions which will govern the Facility. This
Commitment Letter and the Term Sheet are not meant to be and shall not be
construed as an attempt to define all of the terms and conditions of the
Facility which shall be set forth in the definitive financing agreements.
You agree to reasonably assist and cooperate with the Facilitators in their
syndication effort of the Facility, including, but not limited to promptly
preparing and providing upon their request all information reasonably deemed
necessary by them to complete successfully the syndication of the Facility,
including but not limited to information and projections prepared by you or on
your behalf relating to the transactions contemplated hereby. The Agents
reserve the right to allocate the Commitments offered by the Banks; provided,
however, that if the Agents have reduced their respective Commitments for the
Senior Facility to $125,000,000 and the Agents desire to further allocate
Commitments for the Senior Facility, then any such allocation shall include an
allocation of the Commitments for the Senior Facility of BNS and Xxxxx of not
less than BNS' and Xxxxx' prorata share of the Facilitators' Commitments for the
Senior Facility (after taking into account the Agents previous Commitment
reduction to $125,000,000).
In addition to the conditions to funding or closing set forth in the Term Sheet,
the Commitment is subject to, among other conditions, (i) the negotiation and
execution of a definitive bank credit agreements, security documentation, and
other related documentation for the Facility satisfactory to the Facilitators,
Borrower and Company, (ii) there being from the date of the financial statements
(the "Financial Statements") most recently provided prior to the date hereof no
material adverse change in the reasonable opinion of the Agents in the financial
condition, business, operations, properties or prospects of Borrower or Company,
or the hotels (the "Future Hotels") that the parties currently anticipate will
be acquired by Borrower with a portion of the proceeds from the Facility, and
(iii) at the time of the
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 3
proposed initial funding of the Facility, no injunction or other restraining
order shall have been issued or filed, or a hearing therefor be pending or
noticed with respect to the transactions contemplated hereby.
As you know, we have submitted this Commitment Letter prior to conducting
certain due diligence, including, but not limited to, property inspections of
the Future Hotels to be acquired. Our Commitment is subject to the satisfactory
completion of our due diligence, including but not limited to property
inspections of Future Hotels. In the event that the results of our continuing
due diligence inquiries are, in our reasonable opinion, unsatisfactory, the
Facilitators may, in their sole discretion, suggest alternative financing
structures that insure adequate protection for the Banks. The Facilitators
acknowledge that their due diligence prior to the date of this Commitment Letter
has not revealed any fact or issue which would cause the Facilitators to
terminate their respective Commitments or suggest alternative financing
structures.
Whether or not the transactions contemplated hereby are consummated, Borrower
and Company jointly and severally hereby agree to indemnify and hold harmless
each of the Facilitators and the Agents, and their respective directors,
officers, employees and affiliates (each, an "indemnified person") from and
against any and all losses, claims, damages, liabilities (or actions or other
proceedings commenced or threatened in respect thereof) and expenses that arise
out of, result from or in any way relate to this Commitment Letter, or the
providing or syndication of the Facility, and to reimburse each indemnified
person, upon its demand, for any legal or other expenses incurred in connection
with investigation, defending or participating in any such loss, claim, damage,
liability or action or other proceeding (whether or not such indemnified person
is a party to any action or proceeding out of which any such expenses arise),
other than any of the foregoing claimed by any indemnified person to the extent
incurred by reason of the gross negligence or willful misconduct of such person.
Neither the Facilitators nor the Agents, nor any of their affiliates, shall be
responsible or liable to Borrower, Company, or any other person for any
consequential damages which may be alleged. The obligations contained in this
paragraph will survive the closing of the Facility.
In addition, the Borrower and Company jointly and severally hereby agree to
reimburse the Facilitators and the Agents from time to time upon demand for (a)
the reasonable out-of-pocket costs and expenses of Xxxxxxxxx & Xxxxxxxxx,
L.L.P., special counsel to SocGen and the Agents, (b) the reasonable out-of-
pocket costs and expenses of Xxxxxxx, Xxxxxxx & Xxxxxxx, P.C., special counsel
to BOT, in connection with the Facility, (c) the reasonable syndication costs
(including travel expenses) of the Agents which for SocGen shall not exceed
$40,000 and for BOT shall not exceed $25,000, and (d) the Agent's reasonable
out-of-pocket costs and expenses of the appraisers, hotel consultants, insurance
consultants, environmental consultants and property inspection consultants
engaged by or
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 4
for the Agents in connection with the Future Properties, with all of the costs
and expenses set forth in the clauses (a)-(d) being paid regardless of whether
the credit agreement is executed or the Facility closes.
The terms contained in this Commitment Letter, the Fee Letter and the Term Sheet
are confidential and, except for disclosure to your Board of Directors, officers
and employees, professional advisors retained by you in connection with this
transaction, or as may be required by law, may not be disclosed in whole or in
part to any other person or entity without our prior written consent, except
that, following your acceptance hereof, you may make public disclosure of this
Commitment Letter and may file a copy of this Commitment Letter and the Term
Sheet in any public record in which it is required to be filed, based upon the
advice of your counsel.
Termination. This offer will terminate at 5:00 P.M. Central Time on January 16,
-----------
1998 unless on or before that date you sign and return an enclosed counterpart
of this Commitment Letter and the Fee Letter, and it will expire on the date
which is the earlier of (a) May 1, 1998 or (b) the date 60 days following the
acquisition by Company, Borrower or any of their affiliates of the Future Hotels
which are part of the FSA portfolio if the date of execution of the definitive
documentation for the Facility ("Initial Credit Extension Date") has not
occurred on or before that date. Furthermore, the Facilitators may terminate
this Commitment Letter and their obligations hereunder to provide the Facility
if prior to the Initial Credit Extension Date (a) Borrower or Company shall fail
or refuse to comply in any material respect in a timely manner with any of the
terms or conditions set forth herein, (b) any material adverse change since the
date of this Commitment Letter shall occur with respect to the pool of Future
Hotels, or the business, assets, condition (financial or otherwise) or
operations of Borrower or Company at any time prior to the closing of the
transactions contemplated hereby, (c) Borrower or Company shall be insolvent or
involved as debtor in any arrangement, bankruptcy, reorganization or insolvency
proceeding, or (d) the Facilitators determine that the funding of the Facility
or performance of Borrower's or Company's duties or obligations under this
Commitment Letter (including the Term Sheet), the Fee Letter, or the documents
evidencing or securing the Facility would violate, or be prohibited by,
applicable Federal, State or local law, including usury limitations, or any
applicable rule, order, statute, judgment or decree of any legislative body,
board, court, tribunal, commission, or governmental authority or agency having
jurisdiction over the Facilitators. Furthermore, this Commitment Letter has
been issued to Borrower on the basis of (i) certain information and materials
provided by Borrower or Company to the Facilitators, (ii) all representations,
information, exhibits, data and other material submitted with and in support of
the loan application for the Facility, and (iii) the agreement of Borrower and
Company that hereafter the Agents shall be permitted to conduct due diligence in
a manner satisfactory to the Agents. The Facilitators may terminate this
Commitment Letter and the obligations of the Facilitators hereunder to provide
the Facility if, (i) in the reasonable opinion of the Facilitators, any
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 5
information or documentation submitted to the Facilitators proves to be
inaccurate, incomplete or misleading in any material respect, (ii) Borrower or
Company withholds any information which, in the reasonable opinion of the
Facilitators, is material to the decisions of the Facilitators to provide the
Facility to Borrower, (iii) any of the fees or expenses required to be paid by
Company and Borrower hereunder are not paid when due, or (iv) the ability of the
Facilitators to conduct due diligence in a manner satisfactory to the
Facilitators is, in the reasonable opinion of the Facilitators, hampered in any
material respect. Notwithstanding any termination of this Commitment Letter, the
compensation, reimbursement and indemnification provisions hereof shall survive
any termination hereof.
Borrower and Company hereby represent to the Facilitators that all information,
exhibits, data and other materials submitted with and in support of the
requested Facility or any existing facility are true, correct and complete in
all material respects as of the date hereof. Borrower and Company shall
immediately notify the Agents in the event any information or document provided
to the Agents becomes inaccurate or misleading in any material respect.
The Commitment Letter, the Fee Letter, and the Term Sheet shall be governed by,
and construed in accordance with, the internal laws of the State of Texas
without reference to principles of conflict of law. ALL PARTIES TO THIS
COMMITMENT LETTER AGREEMENT IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING ARISING OUT OF THIS COMMITMENT LETTER, THE FEE LETTER AND
THE TERM SHEET OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. IN THE EVENT
OF LITIGATION, THIS COMMITMENT LETTER MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
This Commitment Letter, the Fee Letter and the Term Sheet shall not be
assignable by any party hereto without the prior written consent of the other
parties hereto except for the syndication of the Facility to the Banks and may
not be amended or any provision hereof or thereof waived or modified except by
an instrument in writing signed by each of the parties hereto.
This Commitment Letter, the Fee Letter, and the Term Sheet constitute the entire
agreement among the parties pertaining to the subject matter hereof and thereof
and supersede all prior and contemporaneous agreements, understandings,
representations or other arrangements, whether express or implied, written or
oral, of the parties in connection therewith, including without limitation the
Work Letter dated January 8, 1998, by and between the same parties hereto,
except to the extent expressly incorporated or specifically referred to herein
or therein.
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 6
Please indicate your acceptance of this Commitment Letter by signing and
returning the five duplicate copies hereof, whereupon this Commitment Letter
will constitute a binding agreement between the parties hereto. Upon your
delivery to us of the signed copies of this Commitment Letter and the Fee Letter
and payment of the initial installment of the fees as set forth in the Fee
Letter, this Commitment Letter shall become a binding agreement under laws of
the State of Texas as of the date so accepted. This Commitment Letter and the
Fee Letter may be executed in multiple counterparts, each of which shall be an
original, but all of which shall constitute but one Commitment Letter and Fee
Letter.
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 7
We are pleased to have this opportunity and look forward to working with you.
Very truly yours,
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ XXXXXX X. DAY
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Xxxxxx X. Day
Vice President
BANK ONE, TEXAS, N.A.
By: /s/ XXXXX XXXXXX
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Xxxxx Xxxxxx
Assistant Vice President
THE BANK OF NOVA SCOTIA
By: /s/ XXXX XXXXXXXXX
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Xxxx Xxxxxxxxx
Relationship Manager
XXXXX FARGO BANK, NATIONAL ASSOCIATION
By: /s/ XXXXX XXXXXX
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Xxxxx XxXxxx
Vice President
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 8
Accepted and Agreed to:
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
By: AGH GP, Inc., its general partner
By: /s/ XXXXXXX X. XXXX
------------------------------------------
Xxxxxxx X. Xxxx
Executive Vice President
AMERICAN GENERAL HOSPITALITY CORPORATION
By: /s/ XXXXXXX X. XXXX
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Xxxxxxx X. Xxxx
Executive Vice President
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
$100 MILLION UNSECURED, DELAYED-DRAW
SUBORDINATED DEBT FACILITY ("SUB DEBT")
Borrower: American General Hospitality Operating
Partnership, L.P.
Term: The maturity date shall be 90 days following
the maturity date of the $500 million facility
("Facility").
Other Indebtedness: So long as the Company's leverage exceeds 50%,
any portion of the Sub Debt is outstanding or
should the Lenders be committed to fund under
the Sub Debt, the Borrower may not incur any
other indebtedness except for the Facility, the
Sub Debt and individual property indebtedness
not to exceed $70 million in aggregate.
Interest Rate: The Interest Rate shall be determined based
upon the Senior Unsecured Debt Facility pricing
grid. However, in no event shall the Sub Debt
Interest Rate be less than the ABR Spread +
37.5 bps or the Libor Spread + 187.5 bps.
Funding Termination Date: The Borrower shall not be eligible to draw
under the Sub Debt after September 30, 1998.
Repayment Provisions: So long as the Borrower is in full compliance
with the Facility, the Borrower will be
required to use all proceeds obtained from
equity offerings and asset sales to reduce any
associated debt and the Senior Unsecured debt .
The Borrower may not use asset sale proceeds to
acquire any assets other than those which the
Borrower has publicly announced (as of
12/31/97) and the Olivier House located in New
Orleans, LA. Any reductions of the Sub-Debt
shall be deemed permanent reductions of the
Sub-Debt.
Other Terms and Conditions: With the exception of the Borrowing Base and
those terms outlined herein, the terms and
conditions of the Facility and the Sub Debt
shall be consistent.
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
$500 Million
SENIOR UNSECURED DEBT FACILITY (THE "FACILITY")
Borrower: American General Hospitality Operating
Partnership, L.P. (the "Borrower").
Arranger, Documentation Societe Generale, Southwest Agency ("SG").
Agent and Syndication
Agent:
Administrative Agent: Bank One, Texas, NA ("BOT").
Lenders: A syndicate of lending institutions in addition
to SG and BOT.
Requisite Lenders: Lenders comprising 51% of the Facility Amount.
Facility Amount: $500 million revolving credit facility (the
"Facility") which will include a letter of
credit sub-limit of up to $60 million. The Co-
Lenders will have risk participations in any
letters of credit provided by BOT in accordance
with their pro rata portions of the Facility.
Purpose: To fund investments in existing and additional
acquisition hotel properties and for general
working capital purposes.
Interest Rate: The interest rate on the principal balance
outstanding shall be 30-day, 60-day, or 90-day
LIBOR or Adjusted Base Rate ("ABR") (at the
Borrower's option) plus the applicable rate of
interest as summarized below, payable monthly
in arrears.
-----------------------------------------------
Leverage Ratio ABR LIBOR Unused
Spread Spread Commit.
(bps) (bps) Fee (bps)
-----------------------------------------------
<25% 0 140.0 20
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>25% <35% 0 150.0 20
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>35% <40% 12.5 162.5 25
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>40% <50% 25.0 175.0 30
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>50% <55% 37.5 187.5 30
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>55% <60% 50.0 200.0 30
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The Leverage Ratio shall be calculated as Total
Liabilities (as further defined herein) divided
by (Aggregate Value of the Company's hotels)
(as further defined herein) and will be
recalculated as of the end of each calendar
quarter with any corresponding change in
interest rate options becoming effective on the
45th day following the end of the calendar
quarter.
Should American General Hospitality
Corporation's (the "Company's") Leverage Ratio
be below 50% and its senior unsecured debt
ratings with either Standard & Poor's ("S&P")
or Xxxxx'x correspond to any of the ratings
described below, the interest rate options that
correspond to such rating shall apply in lieu
of the interest rate options described above.
2
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S&P Rating Xxxxx'x ABR LIBOR Unused Comm.
Rating Spread Spread Fee (bps)
(bps) (bps)
-----------------------------------------------
A- or A3 or 0.0 100.0 12.5
higher higher
-----------------------------------------------
BBB+ Baa1 0.0 112.5 15.0
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BBB Baa2 0.0 125.0 15.0
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BBB- Baa3 0.0 137.5 20.0
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The interest rate and Unused Commitment Fee
will be based on the actual ratings or written
preliminary or "shadow" ratings of S&P and
Xxxxx'x and will be adjusted from time to time
to reflect any change in the ratings. If the
ratings are not equivalent, the higher rating
will apply. If the ratings are two or more
levels apart, the interest rate and Unused
Commitment Fee will be based on the rating
which is one level below the higher rating.
ABR will be the higher of (i) the Prime
commercial lending rate (the "Prime Rate") as
publicly announced by BOT to be in effect from
time to time and (ii) the Federal Funds Rate
(as published by the Federal Reserve Bank of
New York) plus 0.50%.
Letter of Credit Fees: 1.50% per annum payable monthly in advance
which will be paid to the Co-Lenders in
accordance with their pro rata portions of the
Letter of Credit and a $500.00 per Letter of
Credit issuance fee payable to BOT. Letter of
Credit Fees shall be based on a 360-day year.
Interest Calculation: Interest on LIBOR borrowings will be calculated
on the basis of the actual number of days
elapsed over a 360-day year. Interest on ABR
borrowings will be calculated on the basis of
the actual number of days elapsed over a 365-
day year.
Term: A three-year facility.
Recourse Obligation and Borrower's obligation in respect of the
Guaranty of Payment: Facility shall constitute the full personal
recourse obligations of Borrower. In addition,
the Company and each subsidiary of the Borrower
(except for those entities which only own
properties which secure permitted Secured
Recourse Indebtedness and Secured Non-Recourse
Indebtedness) will provide a joint and several
guarantee of payment for all obligations under
the Facility and the landlord's obligations
under the Percentage Lease Agreements. Any
subsidiary entity which has secured debt cannot
own unencumbered assets.
Any partner of the Borrower shall have the
right to severally assume any portion of the
Facility indebtedness by executing and
delivering to the Lenders an assumption of
liability agreement reasonably acceptable to
the Lenders.
Environmental Indemnification: Borrower and Company will provide a joint and
several indemnification agreement.
3
Advances: Advances under the Facility are permitted
provided that:
(a) No defaults exist under the Facility as
evidenced by a compliance certificate and
current calculation of the Borrowing Base;
(b) All affirmative and negative covenants and
representations and warranties shall be
complied with both before and after the making
of each advance under the Facility; and
(c) The Borrower is limited to five LIBOR
tranches and advances are limited to three
times per month, with an exception for advances
made for acquisition purposes.
Optional Loan Prepayments: Paydowns of the Facility shall be in the
minimum amount of $1,000,000 and in increments
of $100,000. All prepayments of LIBOR
borrowings will be subject to payment by the
Borrower of LIBOR contract breakage costs.
Borrowing Base: The availability under the Facility shall be
subject to a Borrowing Base. Such Borrowing
Base shall consist solely of unencumbered hotel
properties. Each hotel property within the
Borrowing Base, shall, at all times, meet all
of the following criteria:
(a) No associated mortgage or other liens
(including springing liens), material
subleases, stock pledges, negative pledges, or
pledges of ownership interests;
(b)100%-owned by the Borrower (or a 99% owned
subsidiary) or owned by an entity in which the
Borrower has at least a 90% equity interest and
is the managing general partner or equivalent
for the entity ("Joint Venture Properties") and
leased to AGH Leasing, L.P., Twin Towers
Leasing, L.P., Prime Hospitality, Corp. (or one
of its affiliates) or a third-party lessee. No
more than 20% of the Aggregate Value of the
Borrowing Base may be attributable to Joint
Venture Properties. The Aggregate Value of
Joint Venture Properties shall be based upon
the Borrower's percentage ownership therein.
Any third-party lessee except as provided above
shall also be subject to approval by the Agents
pursuant to a lease agreement acceptable to the
Agents;
(c) Free from all material structural and title
defects and environmentally hazardous
materials, all as verified by current
structural, title, and environmental reports
acceptable to the Agents;
(d) Fully operational or undergoing active
renovation/remodeling (subject to the
limitation on the maximum number of out-of-
service rooms as provided in item (ii) on the
following page);
(e) Located in the United States of America and
not more than 20% of the Borrowing Base hotels
shall be located in any one state; with the
exception of Florida for which not more than
35% of the Borrowing Base hotels shall be
located.
(f) No more than 20% of the Borrowing Base
hotels may be limited service or extended stay;
4
(g) With the exception of the Radisson Twin
Towers -Orlando, Florida; Crowne Plaza -
Xxxxxxxx, New Jersey; Doubletree - Clearwater,
Florida; Courtyard by Marriott - Lake Buena
Vista, Florida; and the Holiday Inn X'Xxxx -
Xxxxxxxx, Illinois, no investment (acquisition
cost plus capital improvements) in any single
property may exceed $50,000,000 unless
otherwise approved by the Requisite Lenders in
their sole and absolute discretion; and
(h) Except for Ramada Inn - Danbury, CT, the
Ramada Inn - Elmsford, NY and as further
provided for herein, subject to a franchise
agreement from a national hotel franchise
company approved by the Agents in their
reasonable discretion; for new properties, as
hereinafter defined, the Borrower shall have a
period of twelve months from the date of
acquisition to commence the operation of the
property under a franchise agreement that is
permitted hereunder, and during said twelve
month period the property shall not be excluded
from the Borrowing Base because of the
provisions of this paragraph (h).
(i) Further, the Borrowing Base, in the
aggregate, shall at times meet all of the
following criteria:
(i) For any property located within the
State of California, or in any other
location deemed by an appropriate agency
of the United States Government to have
above average seismic risk activity,
earthquake insurance must be provided in
an amount not less than the amount of
the maximum probable loss pursuant to a
seismic engineer's maximum probable loss
report deemed satisfactory to the
Agents. The aggregate amount of coverage
and the deductibles may be modified at
the request of the Borrower based upon
industry standards, subject to the
approval of the Agents;
(ii) Not more than 15% of the total
number of rooms within the properties
comprising the Borrowing Base shall be
out of service at any one time;
(iii) Properties under ground leases may
not comprise more than 22.5% of the
Borrower's Hotel Investments at Cost or
22.5% of the Borrower's total room count
of those properties within the Borrowing
Base.
5
The Borrower shall furnish the Lenders notice
that it intends to designate a hotel property
as a qualifying unencumbered property. Such
notice shall include a current title report,
applicable structural (including ADA) and
environmental reports, a brief description of
the property (to include its age, location,
occupancy statistics, and, as they may be
available, an operating statement and REVPar
analysis for the last fiscal year (and prior
fiscal year if available) and most recently
completed fiscal quarter period). The Borrower
shall also furnish a certification to the
Lenders that such property individually, and
the Borrowing Base in its entirety, complies
with all of the Borrowing Base provisions set
forth as paragraphs (a) through (i) in the
section of this Summary of Terms and Conditions
titled Borrowing Base.
Qualifying properties shall be permitted to be
added or deleted from the Borrowing Base on a
monthly basis with prior notice provided to the
Administrative Agent not less than 10 business
days prior to such addition or deletion and a
new Borrowing Base availability calculation may
be performed and submitted by the Borrower. In
connection with a permitted deletion, the
applicable subsidiary shall be released from
its guaranty in connection with such subsidiary
property being pledged to secure permitted
Secured Indebtedness. If such calculation
results in a reduction to Maximum Availability,
the then Maximum Availability calculation shall
be immediately effective.
The Lenders shall reserve the right to remove
such property, following reasonable discretion
and notice, from the Borrowing Base at any time
upon their determination that such property
does not satisfy the Borrowing Base criteria.
Availability: The maximum availability ("Maximum
Availability") under the Facility shall be
equal to the lesser of the following amounts:
THE FACILITY AMOUNT:
(a) $500,000,000
THE LEVERAGE TEST AMOUNT:
(b) An amount equal to 50% of the Aggregate
Value of the Borrowing Base pool, less all
other consolidated unsecured indebtedness of
the Company. However, subordinate unsecured
indebtedness in an amount up to $125 million
("Sub Debt") shall not be deducted from the
Aggregate Value of the Borrowing Base until
December 31, 1998 so long as the Sub Debt is
expressly subordinate to the Facility.
Aggregate Value is defined and computed as
follows:
6
(i) For Borrowing Base properties owned by the
Borrower and/or its subsidiaries/affiliates for
at least four consecutive fiscal quarters
("Seasoned Properties"), Aggregate Value shall
equal the sums of the trailing four quarter NOI
less a capital expenditure reserve equal to 4%
of gross room revenues ("Adjusted EBITDA"),
divided by a capitalization rate of 10.00%,
plus
(ii) For Borrowing Base properties owned by the
Borrower and/or its subsidiaries/affiliates for
less than four consecutive fiscal quarters
("New Properties"), Aggregate Value shall be
equal to the Borrower's investment in each
hotel property at its cost, provided, however,
that if the Borrower commences renovation of a
New Property within 180 days of its acquisition
thereof and completes such renovation with 18
months of its acquisition thereof, such
property shall constitute a New Property until
the end of the sixth fiscal quarter from the
date of acquisition, and
THE CASH FLOW TEST AMOUNT:
(c) An amount equal to the Borrowing Base
Adjusted EBITDA multiplied by a factor of 5,
less all other consolidated unsecured
indebtedness of the Borrower. However,
subordinate unsecured indebtedness in an amount
up to $125 million ("Sub Debt") shall not be
deducted from the Aggregate Value of the
Borrowing Base until December 31, 1998 so long
as the Sub Debt is expressly subordinate to the
Facility and the outstanding Facility amount
plus the outstanding Sub Debt amount shall not
exceed $625 million. Borrowing Base Adjusted
EBITDA shall equal the sum of the following:
(i) For Seasoned Properties, the sum of the
trailing four quarter Adjusted EBITDA; plus
(ii) For New Properties, the sum of the most
recent four quarter Adjusted EBITDA; provided,
however, that for the quarterly period(s) when
each New Property was not owned by the
Borrower, the actual net operating income less
4% of gross room revenues, shall be used in
lieu of Adjusted EBITDA. Unless otherwise
required, Maximum Availability may be
calculated prior to each advance under the
Facility and, in any case, on a quarterly
basis. If, at any time, the outstanding balance
under the Facility (including outstanding
Letters of Credit) exceeds the Maximum
Availability ("Imbalance"), the Borrower,
shall, within five business days (or 30 days if
the Imbalance resulted from an event other than
(i) the sale or disposition of a property, or
(ii) any other removal of a property from the
Borrowing Base pool), add additional qualifying
properties to the Borrowing Base or repay a
portion of the Facility sufficient to maintain
or reduce the outstanding balance (including
outstanding Letters of Credit) to not greater
than the Maximum Availability. Failure to repay
the amount owed within such required period
shall be deemed an event of default.
7
Covenants: Company covenants shall include but not be
limited to the following:
(A) MINIMUM TANGIBLE NET WORTH
Tangible Net Worth, as defined below, shall at
all times equal or exceed $450 million
("Minimum Net Worth"). Minimum Net Worth shall
be adjusted upwards by 75% of the net cash
proceeds or value derived from the subsequent
issuance of equity securities, or 75% of the
value of any operating partnership units issued
to acquire properties.
Tangible Net Worth is defined as the tangible
net worth of the Company as calculated on a
GAAP basis plus Minority Interest.
(B) LIMITATION ON TOTAL LIABILITIES
At no time shall the Total Liabilities (as
defined below) of the Company exceed the lesser
of:
(i) the sum of
(a) for Seasoned Properties, 6.0 times the sum
of the trailing four quarter Adjusted EBITDA
for the quarters ended March 31, 1998, June 30,
1998, September 30, 1998 and 5.0 for each
quarter thereafter; plus
(b) for New Properties, 60% of the Company's
(or its subsidiary's)investment in such hotel
properties at its cost for the quarters ended
March 31, 1998, June 30, 1998, September 30,
1998 and 50% for each quarter thereafter, or
(ii) 60% of the Company's (or its subsidiary's)
hotel investments at cost (as defined below)
for the quarters ended March 31, 1998, and June
30, 1998, September 30, 1998 and 50% for each
quarter thereafter.
Total Liabilities shall be defined as recourse
and non-recourse mortgage debt, letters of
credit, unsecured debt, capitalized lease
obligations (excluding ground leases),
guarantees on indebtedness, subordinated debt,
and unfunded direct obligations of the Company
or any of its subsidiaries. Total Liabilities
shall include, without duplication, (i) 100% of
the consolidated recourse liability of the
Company under (a) guarantees of indebtedness,
or (b) loans where the Company or any of its
subsidiaries is liable for debt as general
partner and (ii) the Company's share of non-
recourse debt in unconsolidated affiliates.
Total liabilities shall exclude ordinary trade
payables and accruals and minority interests.
Hotel Investments at Cost shall be defined as
investments in hotel properties as presented on
the financial statements of the Company prior
to accumulated depreciation plus $10,420,273
(representing the value of operating
partnership units issued to primary
contributors at the initial public offering
plus such additional similar amounts relating
to the purchase of the Courtyard by Marriott -
Durham, North Carolina and the Holiday Inn -
Madison, Wisconsin).
8
(C) CASH FLOW COVERAGE
On a quarterly basis, the Company shall
maintain a minimum ratio of actual Adjusted
EBITDA to actual Interest Expense of not less
than 2.15 for the quarters ended during 1998
and 2.50:1.00 for each quarter thereafter.
Interest Expense is defined to have the meaning
of actual interest expense incurred by the
Company on all debt whether it is accrued,
paid, or capitalized.
On a quarterly basis, the Company shall also
maintain a minimum ratio of actual Adjusted
EBITDA to Debt Service of not less than
2.00:1.00. Debt Service is defined to have the
meaning of the sum of (i) actual consolidated
Interest Expense plus (ii) scheduled principal
amortization on all debt obligations of the
Company, excluding any balloon payments.
The Cash Flow Coverage covenants shall be
subject to adjustment as provided within the
Conversion to Secured Facility provisions
described herein.
(D) DISTRIBUTIONS
Distributions shall not exceed 90% of funds
from operations ("FFO") or 100% of Free Cash
Flow (adjusted FFO less a capital expenditure
reserve equal to 4% of gross room revenues),
calculated quarterly based on the immediately
preceding completed four quarters, or an amount
required to maintain the general partner's
status as a real estate investment trust under
the provisions of the Internal Revenue Code.
FFO shall be defined as the Company's net
income (or loss) calculated in accordance with
GAAP, excluding gains (or losses) from debt
restructuring and sales of property, plus
depreciation and amortization of real estate
assets and after adjustments for unconsolidated
partnerships and joint ventures.
(E) LIMITATION ON OTHER UNSECURED DEBT
The Company or any of its subsidiaries shall
not be permitted to incur any other unsecured
borrowings in excess of the subject Facility
(excluding accounts payables) in excess of
$30,000,000 in the aggregate. However, the
Borrower may incur Sub Debt consistent with the
provisions herein so long as the Sub Debt is
expressly subordinate to the Facility. and the
outstanding Facility amount plus the
outstanding Sub Debt amount shall not exceed
$625 million.
(F) LIMITATION ON SECURED INDEBTEDNESS
Provided the Company is otherwise in compliance
with its covenants:
(i) Secured Recourse Indebtedness
Consolidated Secured Recourse Indebtedness of
the Company shall not exceed the lesser of:
(A) The sum of
9
(1) for Seasoned Properties, 2.00
times the sum of trailing four
quarter Adjusted EBITDA; plus,
(2) for New Properties, 20% of the
Company's investment in such hotel
properties, at its cost, or
(B) 15% of the Company's Hotel
Investments at Cost.
(ii) Secured Non-Recourse Indebtedness
Consolidated Secured Non-Recourse Indebtedness
of the Company shall not exceed the lesser of:
(A) The sum of
(1) for Seasoned Properties, 3.00
times the sum of trailing four
quarter Adjusted EBITDA; plus,
(2) for New Properties, 30% of the
Company's investment in such hotel
properties, at its cost, or
(B) 30% of the Company's Hotel
Investments at Cost.
Consolidated Secured Recourse Indebtedness
and Consolidated Secured Non-Recourse
Indebtedness shall not exceed 30% of the
Company's Hotel Investments at cost.
Furthermore, the Company shall use
reasonable efforts to structure its non-
recourse financings with a single purpose
entity which only owns that hotel securing
such financing which such single-purpose
entity to be wholly-owned by the Borrower,
Company or Joint Venture Properties.
(G) PERMITTED INVESTMENTS
The Borrower shall at all times continue to
operate as an owner and lessor of hotel
properties that meet the criteria described in
the Borrowing Base provisions subject to the
Borrower's ability to incur permitted
Indebtedness. Any other business activities
shall be strictly incidental thereto and shall
be further limited as follows:
Investment, loan and advance limitations.
Specifically, unimproved land holdings
(excluding land that is either under
development or planned for commencement of
development within twelve months from the date
it was acquired), stock holdings, mortgages,
investments in unconsolidated partnerships and
joint ventures, and non-hotel assets will be
limited to the levels described below. This
paragraph (g), shall not limit the Company's
investments in cash and cash equivalents,
investments in United Stated Treasury or Agency
obligations, and other similar investments.
Land Holdings: Not more than $20,000,000
(at any one time) in the
aggregate based on cost.
10
Stock Holdings: None, except as received in
settlement of liabilities
created in the ordinary
course of business plus
investments not to exceed
$25,000,000 in total. The
Borrower will be ineligible
from purchasing any
securities should the
Company's Leverage Ratio
exceed 50%.
Mortgages: None, other than loans
encumbering properties
previously owned or to be
acquired, provided that the
aggregate amount of such
loans shall not exceed 5% of
Hotel Investments at Cost
(such properties shall also
be excluded from admission
into the Borrowing Base).
Partnership/JV's: Any partnership or joint
venture interests in excess
of an aggregate $50,000,000
shall require Requisite
Lender approval
Non-Hotel With the exception of the
Property Assets: office portion of the
Houston Marriott, not more
than 5% of total assets
(other than properties that
the Borrower intends to
convert into hotel
properties where (i) the
Borrower notifies the
Administrative Agent of such
intent within 90 days after
the Borrower's acquisition
of such properties, and (ii)
the Borrower commences
construction of such
conversion within 12 months
after the Borrower's
acquisition of such
properties).
Development: The Borrower may engage in
room expansion of existing
hotels or development of new
hotels so long as the total
cost of such expansion and
new development does not
exceed $75,000,000 for the
combined room expansion and
new development hotels at
any one time.
(h) Adjusted EBITDA generated by the office
portion of the Marriott (Houston, TX) mixed-use
property and the retail portion of the St.
Tropez (Las Vegas, NV) property shall be
treated as Adjusted EBITDA.
(i) No more than 15% of the Company's Hotel
Investments at Cost will be comprised of non-
franchised hotels.
11
(j) The management agreement(s) and hotel lease
agreement(s) shall be subject to Agents' review
and approval, subordinate to the subject
Facility, structured with the intent that the
combined maximum fees may not exceed 6% based
upon the acquisition pro forma EBITDA
projection and cancelable at no cost upon 30
days notice at any point following a monetary
default. The Prime Hospitality Corp. leases,
however, shall not be subordinate to the
Facility nor cancelable following a monetary
default under the Facility.
(k) Other covenants and defaults which would be
customary for a transaction of this nature and
size.
Other Covenants: (a) Acquired hotels must be located in the
United States and under a franchise commitment
from an acceptable national chain or must
convert to a franchise agreement within 12
months of acquisition and be consistent with
the criteria as set forth within the Borrowing
Base provisions. Ramada-branded properties
contained within the Prime portfolio (excluding
Ramada Inn - Danbury, CT and Ramada Inn -
Elmsford, NY) must be converted to an
Acceptable Brand (in accordance with approved
brands pursuant to the Existing $300 million
Facility) within 18 months from the date of
acquisition and the Company may have up to $100
million (based upon acquisition cost) in other
hotels at any one time which must be rebranded
within 18 months.
(b) Properties under ground leases may not
comprise more than 22.5% of the Company's Hotel
Investments at Cost (as defined herein) or
22.5% of the Company's total room count.
(c) Limitations on mergers, consolidations,
sales of assets and acquisitions.
(d) Insurance coverages at a level and provided
by a carrier satisfactory to the Agents.
(e) No property owned by the Borrower may be
leased to any other entity other than AGH
Leasing, L.P., Twin Towers Leasing, L.P., Prime
Hospitality Corp. (or one of its affiliates) or
a third-party lessee acceptable to the Agents.
(f) No asset owned by the Borrower may be
separately financed if:
(i) Such financing would cause a breach of
any of the above covenants, or
(ii) The loan-to-cost ratio for such
financing exceeds 70% on a property or
aggregate pool basis with respect to non-
recourse financing, and not more than 65%
with respect to recourse financing.
(g) So long as the Borrower is in compliance
with all terms and conditions of the Facility,
it may use proceeds from equity offerings and
asset sales to reduce the Sub Debt.
Financial Reporting: The Borrower shall be obligated to provide to
the Administrative Agent the following:
12
(a) Delivery of the Company's annual (within 95
days of fiscal year end) and quarterly
financial statements (within 50 days of fiscal
quarter end with the exception of fiscal year
end) and reports including an officer's
certificate to demonstrate compliance with the
covenants of the Facility and the covenants of
the Company's public debt issue(s), if any.
(b) A detailed listing of assets and book
values on a quarterly basis and identified as
to unencumbered pool properties and other
properties.
(c) A certificate of compliance on a quarterly
basis which details the specific assets,
including historical cost, which make up the
pool of unencumbered assets.
(d) Along with the quarterly and annual
financial statements, the Borrower shall
provide a summary report on the unencumbered
asset pool properties that details Adjusted
EBITDA for the trailing four quarters by
quarter and in sum total.
(e) Prior to the commencement of a fiscal year,
the Company shall provide a projected operating
budget for the next fiscal year. Concurrent
with the delivery of the quarterly financial
statements and the annual financial statements,
the Borrower shall notify the Administrative
Agent of any material changes (excluding
changes resulting from the acquisition of new
hotels) that have been made to the operating
budget of the then current fiscal year.
(f) Copies of any filing with the Securities
and Exchange Commission within 10 business days
of such filing.
(g) Copies of any written information provided
to shareholders.
(h) Such other information as the Agents shall
reasonably require.
Management/Ownership Xxxxx Xxxxx shall be required at all times to
Restrictions: be the president/chief executive officer of
American General Hospitality Corporation and
Xxxxxxx Xxxx shall be required at all times to
be the chief financial officer of American
General Hospitality Corporation. Minimum stock
ownership requirements for Xx. Xxxxx and Xx.
Xxxx.
Representations and & Usual and customary for this type of Facility,
Warranties: including but not limited to the following:
(a) Valid existence and qualification,
including REIT qualification and tax status;
(b) Governmental authorization;
(c) No contravention of laws or contracts;
(d) Financial information is true and correct;
(e) No material environmental matters;
13
(f) Compliance with laws and regulations,
including zoning, fire safety and building
requirements, ERISA, ADA, environmental and
REIT laws;
(g) Maintenance of required licenses and
permits with respect to the properties;
(h) No material litigation, casualty or
condemnation proceedings pending;
(i) Payment of taxes when due;
(j) Full disclosure; good title; no other
liens;
(k) Properties are in good condition and
repair, no deferred maintenance which is not
being timely addressed; and
(l) No defaults or Event of Default (defined
herein) under the Facility or franchise
agreements.
Events of Default: Usual and customary for credit facilities for
this size, type and purpose, including, without
limitation:
(a) Non-payment when due of any payment of
principal in respect of any of the loans;
(b) Non-payment within five days of the due
date of any interest payable under the Facility
documents provided that such late payment
within five days shall not occur more than
twice per year;
(c) Default in the performance or observance of
any covenants for more than 30 days after
notice;
(d) If the Company shall not qualify for tax
treatment under Sections 856-860, inclusive, of
the Internal Revenue Code;
(e) Restrictions on mergers, acquisitions,
distributions, joint ventures, etc.; and
(f) Restrictions on change of control at either
the Company or the Borrower. Xxxxx Xxxxx and
Xxx Xxxx shall at all times be required to be
the president/chief executive officer and chief
financial officer, respectively, of American
General Hospitality, Inc. and any affiliated
tenants. Minimum stock ownership requirements
in American General Hospitality, Inc. and any
affiliated tenants to be established for Xx.
Xxxxx and Xxxxx Xxxxx.
Other Conditions: (a) Limitations on recourse and non-recourse
indebtedness of not more than $0 and
$20,000,000, respectively, as to the
acceleration of any maturity date, and
$1,000,000 and $20,000,000, respectively, as to
the occurrence of any default or event of
default.
(b) Located in the United States of America and
not more than 20% of the Company hotels shall
be located in any one state with the exception
of Florida for which no more than 35% of the
Company hotels may be located.
(c) No more than 20% of the Company hotels may
be limited service or extended stay;
Governing Law: The law of the State of Texas for the credit
agreement and other Facility documents; for
collateral documents local law will apply.
14
Waiver of Jury Trial and Required.
Consent to Texas
Jurisdiction:
This DISCUSSION TERM SHEET is being provided solely for discussion purposes and
is exclusively intended to communicate the general business terms and financing
parameters being considered by the Agents. Neither this outline nor the
participation in discussions is to be construed to be a commitment to enter into
or approve any financing, or a commitment to grant or extend any financing
accommodations. The Agents may terminate financing discussions at any time, in
its sole discretion, without notice and liability of any kind.
15
