EXHIBIT 10.14
CONFIDENTIAL
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May 21, 1998
CapStar Hotel Company
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Mr. Xxxx Xxxxx
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"), Bankers Trust Company
("BTC") and Xxxxxx Commercial Paper Inc. ("Xxxxxx") (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 and severally commit a portion (as hereinafter provided) of a
commitment (the "Commitment") for the following credit facilities (the
"Facility"):
1. A $1,000,000,000 Senior Revolving and Term Loan Credit Facility (the
"REIT Facility") in favor of MeriStar Hospitality Operating Partnership, L.P.
(the "Borrower"), the operating partnership of MeriStar Hospitality Corporation
(the "REIT"), the anticipated successor by merger (the "Merger") of CapStar
Hotel Company and American General Hospitality Corporation (collectively the
"Companies"), for the purpose of providing a portion of the purchase price for
acquiring hotels, renovating hotels, refinancing existing indebtedness in
connection with the Merger and for acquired hotels, providing for general
corporate purposes and paying related fees and expenses of the Borrower, the
REIT or the Companies in connection with the Merger and the Facility.
2. A $50,000,000 Senior Revolving Credit Facility (the "Op-Co Facility")
in favor of MeriStar H & R Operating Partnership, L.P., the operating
partnership of MeriStar Hotels & Resorts, Inc. (such entities being referred to
collectively herein as the "Op-Co"), the anticipated operating company to be
created in connection with the Merger, for the purpose of providing a portion of
the purchase price for acquiring management agreements, for investing in or
loaning money to hotel owners in connection with obtaining management agreements
from such entities, issuing letters of credit, providing for general corporate
purposes and paying related fees and expenses of the Op-Co in connection with
the Merger and the Facility.
Each Facilitator severally agrees to provide a portion of the Commitment as
follows with each Facilitator severally providing a prorata portion of the
revolving and term portions of the REIT Facility:
REIT Facility Op-Co Facility
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SocGen $333,333,334 $16,666,667
BTC $333,333,333 $16,666,666
Xxxxxx $333,333,333 $16,666,666
Upon your acceptance of this Commitment Letter, the Facilitators will form
a group of financial institutions (together with the Facilitators, the
"Lenders") acceptable to the Facilitators and reasonably acceptable to the
Companies, for which for both the REIT Facility and the Op-Co Facility SocGen,
BTC and Xxxxxx will each act as Arranger; SocGen will act as Administrative
Agent; and BT will act as Syndication Agent. Xxxxxx and a Lender to be agreed
upon by the Companies and the Facilitators will each act as Documentation Agent
for the REIT Facility. Xxxxxx will act as the sole Documentation Agent for the
Op-Co Facility. No other titles may be awarded without the mutual consent of
the Facilitators and the Borrower.
The various fees payable to the Facilitators in connection with the
Facility are set forth in a separate fee letter between the Facilitators and the
Companies of even date herewith pertaining to the Facility (the "Fee Letter").
The various fees payable to the Administrative Agent in connection with the
Facility are set forth in a separate fee letter between the Administrative Agent
and the Companies of even date herewith pertaining to the Facility (the
"Administrative Agent 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.
The Facilitators reserve the right, prior to or after execution of the
definitive credit documentation for this Facility, to jointly syndicate all or
part of their commitments for the Facility to one or more Lenders pursuant to a
syndication to be managed jointly by the
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Facilitators. The Facilitators may commence syndication efforts promptly after
the execution of this letter by you and you agree actively to assist the
Facilitators in achieving a syndication that is satisfactory in all respects to
the Facilitators. Such syndication will be carried out in consultation with you
and will be accomplished by a variety of means, including direct contact during
the syndication process between senior management (including, without
limitation, Xxxx Xxxxxxxx and Xxxxxx Xxxxx) and the proposed syndicate members.
To assist the Facilitators in their syndication efforts, you hereby agree (i) to
provide the Facilitators and other prospective syndicate members upon request
with all information reasonably deemed necessary by the Facilitators to complete
syndication, including but not limited to information and evaluations prepared
by you in connection with the Merger or the Facility, (ii) to assist the
Facilitators, upon request, in the preparation of an Information Memorandum to
be used in connection with the syndication of the Facility, (iii) to make
available from time to time as may be reasonably requested, the senior officers
(including, without limitation, Xxxx Xxxxxxxx and Xxxxxx Xxxxx) and
representatives of the Borrower, the REIT, and Op-Co, from time to time and to
attend and make presentations regarding the business and prospects of the
Borrower, the REIT, Op-Co and their respective subsidiaries at a meeting or
meetings of Lenders or prospective Lenders, and (iv) to use reasonable efforts
to ensure that the syndication efforts benefit from your existing lending
relationships. The Facilitators reserve the right to allocate the Commitments
offered by the Lenders.
Additional Conditions Precedent.
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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 definitive bank credit agreements, security documentation, and
other related documentation for the Facility satisfactory to the Facilitators,
the Borrower, the Op-Co, and the Companies, (ii) at the time of the 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, (iii) there not occurring or
becoming known to us any material adverse change in or affecting the business,
property, assets, liabilities, condition (financial or otherwise) or prospects
of the Borrower, the REIT, Op-Co or their respective subsidiaries, and our not
becoming aware (whether as a result of our due diligence analyses and reviews or
otherwise) after the date hereof of any information with respect to the
business, property, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower, the REIT, Op-Co or their respective subsidiaries, or
which is inconsistent in a material and adverse manner with any such information
or other matter disclosed to us prior to the date hereof which in any case any
Facilitator believes is materially negative information with respect to the
overall business, condition (financial or otherwise) or prospects of the
Borrower, the REIT, or Op-Co, (iv) there not having occurred a material
disruption of or material adverse change in financial, banking or capital market
conditions that, in our reasonable judgment, could materially impair the
syndication of the Facility, (v) our reasonable satisfaction that prior to and
during the syndication of the Facility there shall be no competing bank
financing or equity offering by or on behalf of the Borrower, the REIT, Op-Co or
their respective subsidiaries except for (A) a rights offering to shareholders
of American General Hospitality Corporation pursuant to which
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such shareholders would have the option to purchase shares of stock in the Op-Co
and (B) the exchange of existing convertible debt of CapStar Hotel Company into
its stock, (vi) with respect to the Op-Co Facility only, the Facilitators shall
have received internal credit approval which may be given or withheld in each
Facilitator's sole discretion and (vii) the other conditions set forth herein or
referred to in the Term Sheet.
As you know, we have submitted this Commitment Letter prior to conducting
certain due diligence, including, but not limited to, tax, accounting and legal
due diligence related to the Borrower, the REIT, the Op-Co and the Merger and
due diligence related to the structure, termination provisions and assignability
of the leases and management agreements to which the Op-Co will be a party. In
connection with the failure of any of the Facilitators to receive credit
approval for the Op-Co Facility or following due diligence any Facilitator not
being satisfied with the credit worthiness of Op-Co or with respect to the
structure, termination provisions or assignability of the leases and management
agreements to which the Op-Co will be a party, then any Facilitator may elect to
terminate the Commitment with respect to the Op-Co Facility, but such reasons
for termination shall not in themselves permit the Facilitators to terminate the
Commitment with respect to the REIT Facility. Our Commitment is subject to the
satisfactory completion of our due diligence and our satisfaction with the
results thereof. 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, the
Companies jointly and severally hereby agree to indemnify and hold harmless each
of the Facilitators and the Administrative Agent, 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
as found by a court of competent jurisdiction. Neither the Facilitators nor the
Administrative Agent, nor any of their affiliates, shall be responsible or
liable to the Borrower, the REIT, the Op-Co, the Companies, 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 Companies jointly and severally hereby agree to reimburse
the Facilitators and the Administrative Agent 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 in its capacity as both a Facilitator and
Administrative Agent (subject to the provisions of the Fee Letter), (b) the
reasonable syndication costs (including, but not limited to, the cost of
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commemorative lucites and printing, and distribution expenses) of the
Facilitators, and (c) the Facilitators' and the Administrative Agent's
reasonable out-of-pocket costs and expenses of the insurance consultants,
environmental consultants and property inspection consultants engaged by or for
the Administrative Agent in connection the Facility, with all of the costs and
expenses set forth in the clauses (a)-(c) being paid regardless of whether the
credit agreement is executed or the Facility closes.
The terms contained in this Commitment Letter, the Fee Letter, the
Administrative Agent Fee Letter and the Term Sheet are confidential and, except
for disclosure to your respective 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 or security filing in which it is required to be filed, based upon the
advice of your counsel.
Termination.
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This offer will terminate at 5:00 P.M. Eastern Time on May 21, 1998 unless
on or before that date you sign and return an enclosed counterpart of this
Commitment Letter, the Fee Letter and the Administrative Agent Fee Letter, and
it will expire on July 31, 1998 if the date of execution of the definitive
documentation for the Facility satisfactory in all respects to the Facilitators
("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) the Companies 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) a condition precedent set forth in clause (iii) or (iv) of the Additional
Conditions Precedent section of this Commitment Letter is not satisfied prior to
the closing of the transactions contemplated hereby, (c) the Borrower, the REIT,
the Op-Co or the Companies 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 the
Borrower's, the REIT's, the Op-Co's or the Companies's duties or obligations
under this Commitment Letter (including the Term Sheet), the Fee Letter, the
Administrative Agent 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 the Companies on the
basis of (i) certain information and materials provided by the Companies 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 the Companies that hereafter the Facilitators shall
be permitted to conduct due diligence in a manner satisfactory to the
Facilitators. 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,
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any information or documentation submitted to the Facilitators proves to be
inaccurate, incomplete or misleading in any material respect, (ii) the Companies
withhold any information which, in the reasonable opinion of the Facilitators,
is material to the decisions of the Facilitators to provide the Facility to the
Borrower and the Op-Co, (iii) any of the fees or expenses required to be paid by
the Companies, the Op-Co or the 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, rendered impracticable in any material respect. Notwithstanding
any termination of this Commitment Letter, the compensation, reimbursement and
indemnification provisions hereof shall survive any termination hereof.
The Companies 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. The Companies shall immediately
notify the Facilitators in the event any information or document provided to the
Facilitators becomes inaccurate or misleading in any material respect.
The Commitment Letter, the Fee Letter, the Administrative Agent 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 IRREVOCABLY WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING ARISING OUT OF THIS COMMITMENT LETTER,
THE FEE LETTER, THE ADMINISTRATIVE AGENT 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, the Administrative Agent 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 Lenders 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, the Administrative Agent 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, except to the extent expressly incorporated or
specifically referred to herein or therein.
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, the Fee Letter
and the Administrative Agent Fee Letter and payment of
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the initial installment of the fees as set forth in the Fee Letter, the
Administrative Agent 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, the Fee Letter and the Administrative Agent 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, Fee Letter and the
Administrative Agent Fee Letter.
We are pleased to have this opportunity and look forward to working with
you.
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Signature Page of Commitment Letter
Very truly yours,
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Xxxxxx X. Day
-----------------
Name: Xxxxxx X. Day
Title: Director
BANKERS TRUST COMPANY
By: /s/ Xxxxxxxxx Xxxxxxx
---------------------
Name: Xxxxxxxxx Xxxxxxx
Title: Managing Director
XXXXXX COMMERCIAL PAPER INC.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Authorized Signatory
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Signature Page of Commitment Letter
Accepted and Agreed to:
CAPSTAR HOTEL COMPANY
By: /s/ Xxxx Xxxxx
--------------
Name: Xxxx Xxxxx
Title: Chief Financial Officer
AMERICAN GENERAL HOSPITALITY CORPORATION
By: /s/ Xxxxxxx X. Xxxx
-------------------
Name: Xxxxxxx X. Xxxx
Title: Chief Financial Officer
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MERISTAR HOSPITALITY CORPORATION SG
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
$1.0 BILLION SENIOR SECURED CREDIT FACILITIES SUMMARY OF TERMS & CONDITIONS
Borrower: MeriStar Hospitality Operating Partnership, L.P.
(the "Borrower" or "MeriStar OP").
Guarantors: MeriStar Hospitality Corporation ("MeriStar" or
the "Company"), the successor company created by
the merger (the "Merger") of CapStar Hotel Company
and American General Hospitality Corporation, and
such affiliates of the Borrower as may be
designated by the Arrangers, shall be Guarantors.
Borrower will not be required to guaranty OpCo's
(as hereinafter defined) debt, or vice-versa.
Lenders: A syndicate of lending institutions (the
"Lenders") with Societe Generale, Southwest Agency
("SG"), BT Alex. Xxxxx Incorporated and Xxxxxx
Brothers, Inc. as Arrangers.
Facility Amounts: Total of $1.0 billion in Senior Secured Credit
Facilities (the "Credit Facilities") comprised of:
(a) a $600 million revolving credit facility (the
"Revolving Credit Facility"), with a $100
million sub-limit for the issuance of Letters
of Credit ("L/C's"); and
(b) a $400 million term loan facility (the "Term
Loan Facility").
The Lenders will have risk participations in any
L/C's in accordance with their pro rata portions
of the Revolving Credit Facility. The Term Loan
Facility will be fully funded at closing.
Purpose: To refinance existing indebtedness in conjunction
with the Merger, fund investments in existing and
additional acquisition hotel properties, and for
general working capital purposes.
Maturities/Term: Revolving Credit Facility: Three years from
closing, with two, one-year extension options
subject to payment of a .125% extension fee in
conjunction with the election of each extension.
Term Loan Facility: Five years from closing.
Mandatory At any time that the Leverage Ratio (as defined
Prepayments and below and calculated on a pro forma basis before
Commitment an after giving effect to the issuance thereof) is
Reductions: greater than 4.5x, following amounts shall be
applied to prepay first the Revolving Credit
Facility and then the Term Loan Facility:
a) 100% of the net proceeds of any incurrence of
indebtedness after the closing date by the
Company or any of its subsidiaries or
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MERISTAR HOSPITALITY CORPORATION SG
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affiliates, subject to certain customary
exceptions to be agreed upon; and
b) 100% of the net proceeds of any sale or other
disposition (including as a result of casualty
or condemnation) by the Company or any of its
subsidiaries or affiliates of any assets,
except for (i) the sale or other disposition
of up to $250,000,000 of the Company's assets
so long as the net proceeds therefrom are
reinvested in Hospitality/Leisure-Related
Businesses (as defined below) within 12 months
and (ii) certain other customary exceptions
(including capacity for reinvestment) to be
agreed upon.
With respect to the Term Loan Facility, mandatory
prepayments may not be re-borrowed.
Optional Prepayments Credit Facilities loans may be prepaid and
and Commitment commitments may be reduced by the Borrower in
Reductions: minimum amounts to be agreed upon. Optional
prepayments of the Term Loan Facility may not be
re-borrowed.
Security: The Credit Facilities will be secured by a
perfected first priority security interest in all
capital stock, partnership interests and limited
liability company interests owned by the Borrower
and each Guarantor except that of subsidiaries
liable for third-party debt until such time as the
Company achieves an investment grade rating from
both Standard & Poor's ("S&P") and Xxxxx'x.
Amortization: Revolving Credit Facility: None.
Term Loan Facility: None during years one through
three and 10% per annum (in equal quarterly
installments) during years four and five.
Interest Rate and The monthly per annum interest rates applicable to
Unused Commitment the Credit Facilities and quarterly Unused
Fee: Commitment Fees applicable to the Revolving Credit
Facility (all payable in arrears) will be
determined based on the quarterly recalculation of
the Leverage Ratio (defined below) and set for the
quarter following each such quarterly test as
described on the following page:
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MERISTAR HOSPITALITY CORPORATION SG
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REVOLVING CREDIT FACILITY & TERM LOAN FACILITY
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ABR LIBOR UNUSED COMMT.
LEVEL LEVERAGE RATIO SPREAD SPREAD FEE
(BPS)* (BPS)* (BPS)
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V less than 3.0x 0 125.0 20
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VI greater than 3.0x less than 3.5x 0 132.5 20
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VII greater than 3.5xless than 4.0x 0 140.0 20
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VIII greater than 4.0x less than 4.5x 12.5 150.0 25
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IX greater than 4.5x less than 5.0x 20.0 165.0 25
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X greater than 5.0 30.0 187.5 25
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* Initial pricing will be Level IX for the first 120 days.
Pricing thereafter will adjust within five days of delivery of
financial reports.
The Leverage Ratio shall mean the ratio at the end of any
trailing four quarter period of (x) Total Liabilities (as
hereinafter defined) to (y) EBITDA (as hereinafter defined),
adjusted for acquisitions and dispositions for the relevant test
period.
Should the Company's Leverage Ratio be below 4.5x 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 with respect
to the Revolving Credit Facility and Term Loan Facility shall
apply in lieu of the interest rate options described above.
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LEVEL S&P XXXXX'X ABR LIBOR UNUSED
RATING RATING SPREAD SPREAD COMM.
(BPS) (BPS) FEE (BPS)
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I A- or A3 or 0.0 100.0 12.5
higher higher
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II BBB+ Baa1 0.0 112.5 15.0
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III BBB Baa2 0.0 117.0 15.0
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IV BBB- Baa3 0.0 122.5 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
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MERISTAR HOSPITALITY CORPORATION SG
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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 SG 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%.
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.
LIBOR Options: One, two, three, or six months with maturities not to extend
beyond the Credit Facilities' maturity date.
Letter of Credit An L/C fee in an amount equal to the then current LIBOR
Fees: Spread with respect to the Revolving Credit Facility,
payable quarterly in arrears which will be paid to the
Lenders in accordance with their pro-rata portion of the
L/C. L/C Fees shall be based on a 360-day year.
Letter of Credit 0.0625% per annum, payable quarterly in arrears for the
Facing Fee: account of the L/C issuer, on the average daily undrawn
amount of issued L/C's.
Drawings Under Any drawing under issued L/C's shall be deemed to constitute
Letters of an advance under the Revolving Credit Facility and shall be
Credit: subject to all terms thereof.
Environmental Borrower and Guarantors will provide a joint and several
Indemnification: indemnification agreement.
Advances: Advances under the Credit Facilities are permitted provided
that:
(a) No defaults exist under the Credit Facilities as
evidenced by a compliance certificate;
(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 Credit Facilities; and
(c) The Borrower is limited to eight LIBOR tranches, and
advances are limited to four times per month, with an
exception for advances made for acquisition purposes.
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MERISTAR HOSPITALITY CORPORATION SG
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Swing Line: To be provided by SG under mutually acceptable terms and
conditions.
Financial It is understood that the Borrower and the Guarantors own, or
Covenants: may acquire, interests in certain joint venture properties.
Accordingly, unless specified otherwise, the various
definitions referring to EBITDA and Indebtedness used in the
following covenants are intended to include such entities'
pro rata interests in such joint ventures; provided that if
the interest owned by the Borrower or any Guarantor in such
joint venture is less than 20% of the total equity ownership,
such joint venture shall be excluded and the pro rata portion
of EBITDA shall be included only to the extent actually
received by the Borrower or such Guarantor.
Financial covenants and other covenants shall be calculated
based on the combined audited annual financial statements
(and Company prepared quarterly financial statements) of the
Company, the Borrower, the other Guarantors, and their
respective subsidiaries, adjusted as described herein to
reflect such entities' pro rata interests in joint ventures.
Compliance with covenants shall be certified by the Borrower
and calculated no less frequently than quarterly.
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 75% of the Company's Net Worth at closing
("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. The value of unvalued MeriStar OP units will be
included as Tangible Net Worth.
(B) LIMITATION ON TOTAL LIABILITIES (LEVERAGE RATIO)
At no time shall Total Liabilities to EBITDA exceed 5.5x
initially, with a step-down to 5.0x after 12 months from
closing and a further step-down to 4.5x after 24 months from
closing.
Total Liabilities shall be defined as recourse and
non-recourse mortgage debt, letters of credit, unsecured
debt, capitalized lease obligations, guarantees on
indebtedness, subordinated debt, interest rate hedge
obligations, and unfunded direct or contingent obligations
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MERISTAR HOSPITALITY CORPORATION SG
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of the Company and its subsidiaries. Total Liabilities shall
include, without duplication, (i) 100% of 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, accruals, ground leases, non-capital commitments
(i.e. operating leases), and minority interests.
EBITDA is defined as net income, plus (a) the sum of (i)
depreciation expense, (ii) amortization expense and other
non-cash charges, (iii) interest expense, (iv) income tax
expense and (v) losses on sales or other dispositions, less
(b) gains on sales and other dispositions to the extent
included in the determination of such net income. EBITDA and
Total Liabilities shall be adjusted immediately concurrent
with acquisitions and dispositions. The initial borrowing
calculation to be based on June 30, 1998 pro forma trailing
12 month EBITDA.
For a period of up to 120 days after closing, the Company's
convertible debt will be considered as equity, subject to a
balance sheet adjustment for the incurrence of additional
debt should it be required in conjunction with the
conversion. Thereafter, the convertible debt will be
considered as debt until such time as the convertible debt is
converted or exchanged.
(C) LIMITATION ON SECURED INDEBTEDNESS
Ratio of Total Outstanding Secured Indebtedness to EBITDA not
to exceed 2.75x initially with a step-down to 2.5x after 12
months from closing. Furthermore, properties collateralizing
Outstanding Secured Indebtedness may not account for more
than 40% of the Company's EBITDA initially, with a step-down
to 30% after 12 months from closing.
Total Outstanding Secured Indebtedness is defined as total
consolidated debt of the Company and its subsidiaries (on a
combined basis) outstanding as of the test date (other than
debt outstanding under the Credit Facilities) which is
secured or collateralized by any asset of the Company, the
Borrower or any other Guarantor.
(D) LIMITATION ON RECOURSE SECURED INDEBTEDNESS
Those properties collateralizing outstanding Recourse Secured
Indebtedness may not account for more than 20% of the
Company's EBITDA.
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Recourse Secured Indebtedness is defined as Total Outstanding
Secured Indebtedness, all or a portion of which the Company,
the Borrower or any other Guarantor guarantees or for which
recourse can be made against the Company, the Borrower or
such Guarantor, other than for customary carve-outs in
non-recourse financings.
(E) ASSET FINANCING RESTRICTIONS
Individual assets may not be separately financed if (i) such
financing would result in a violation of any Credit
Facilities' covenants, or (ii) the loan-to-value ratio for
such financing exceeds 70% on a property or aggregate pool
basis with respect to non-recourse financings, and the
loan-to-value ratio for such financing exceeds no more than
65% with respect to recourse financings. Furthermore, the
Borrower's subsidiaries may incur tax-advantaged,
non-recourse mortgage financing in foreign countries in an
aggregate amount up to $100 million provided that the
loan-to-value ratio does not exceed 65%.
(F) MINIMUM INTEREST COVERAGE RATIO
Ratio of EBITDA to Total Interest Expense not to be less than
2.20x (tested using trailing four quarters' results) until
June 30, 1999 at which time the ratio shall be increased to
2.50x.
Total Interest Expense is defined as interest expense on
Total Liabilities (accrued, paid and capitalized during the
relevant period).
(G) MINIMUM FIXED CHARGE COVERAGE RATIO
Ratio of Adjusted EBITDA to Fixed Charges not to be less than
1.85x (tested using trailing four quarters' results) until
June 30, 1999 at which time the ratio shall be increased to
2.00x.
Fixed Charges is defined as the sum of Total Interest
Expense, plus scheduled principal amortization on Total
Liabilities (excluding balloon payments due at maturity),
plus preferred stock dividends.
Adjusted EBITDA is defined as EBITDA less a 4% FF&E reserve
based on gross hotel operating revenues.
(H) DISTRIBUTIONS
Distributions shall not exceed the lesser of 90% of funds
from operations ("FFO") or 100% of Free Cash Flow (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
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MERISTAR HOSPITALITY CORPORATION SG
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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 and after adjustments for
unconsolidated partnerships and joint ventures.
(I) PERMITTED INVESTMENTS
The Company shall at all times continue to operate in
Hospitality/Leisure-Related Businesses defined as full
service, extended-stay and limited service hotels, subject to
the limitations outlined below. Unless related to a hotel
property, investments in golf course properties will be
prohibited. In addition, investments in gaming properties
will be prohibited.
Any other business activities shall be strictly incidental
thereto and shall be further limited as follows:
-- No more than 15% of the Company's hotel properties will be
comprised of non-franchised hotels;
-- Properties under ground leases may not comprise more than
20% of the Company's total assets or 20% of the Company's
total room count;
-- Acquired hotels must be located in the United States;
provided that no more than 15% of the Company's hotels may
be located in approved foreign countries (to be
determined); Furthermore, foreign owned hotels may be
separately financed so long as the loan-to-cost ratio does
not exceed 65%; and
-- No more than 20% of the Company's hotels may be limited
service or extended stay.
In addition, 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 shall not limit the Company's investments in cash
and cash equivalents, investments in United Stated Treasury
or Agency obligations, and other similar investments.
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MERISTAR HOSPITALITY CORPORATION SG
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Land Holdings: Not more than $100,000,000 (at
any one time) in the aggregate
based on cost.
Stock Holdings: None, except as received in
settlement of liabilities
created in the ordinary course
of business plus investments
not to exceed $100,000,000 in
total.
Mortgages: None, other than loans
encumbering properties
previously owned or to be
acquired, provided that the
aggregate amount of such loans
shall not exceed $200,000,000.
Partnership/JV's: Not to exceed $250,000,000 in
total.
Development and Expansion Not to exceed $200,000,000 in
of Existing Properties: total at any one time.
Lessee: To be acceptable to the
Administrative Agent.
Single Property Investments: No investment in any single
property to exceed $75 million
unless approved by the Lenders.
Other covenants and defaults which would be customary for a
transaction of this nature and size.
Other Covenants: (a) Loans to MeriStar H & R Operating Partnership, L.P.
("OpCo") shall not exceed the lesser of 5.5 times OpCo
EBITDA or $75 million. OpCo's interest rate will be at
least equal to the Borrower's underlying interest rate.
The Company's interest income shall be included in the
Company's EBITDA.
(b) Limitations on mergers, consolidations, sales of assets
and acquisitions.
(c) Insurance coverages at a level and provided by a carrier
satisfactory to the Administrative Agent.
(d) No property owned by the Company, the Borrower, or any
of its affiliates may be leased to any entity other than
OpCo, Twin Towers Leasing, L.P., Prime Hospitality Corp.
(or one of its
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MERISTAR HOSPITALITY CORPORATION SG
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affiliates) or a third-party lessee acceptable to
the Administrative Agent.
Financial The Borrower shall be obligated to provide to the Lenders:
Reporting:
(a) Delivery of the Company's annual audited financial
statements (within 95 days of fiscal year end) and
reports including an officer's certificate to demonstrate
compliance with the covenants of the Credit Facilities
and the covenants of the Company's public debt issue(s),
if any.
(b) Delivery of quarterly financial statements (within 50
days of fiscal quarter end with the exception of fiscal
year end). Quarterly statements may be internally
prepared but not required to be audited or reviewed by a
third-party accounting firm. Along with the quarterly and
annual financial statements, the Borrower shall provide a
summary report on its properties that details EBITDA for
the trailing four quarters by quarter and in sum total.
(c) 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 Lenders 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.
(d) Copies of any filing with the Securities and Exchange
Commission within 10 business days of such filing.
(e) Copies of any written information provided to
shareholders.
(f) Such other information as the Arranger shall reasonably
require.
Management Either (i) Xxxx X. Xxxxxxxx or (ii) Xxxxxx X. Xxxxx shall be
Restrictions: required at all times to be the chairman and chief executive
officer of the Company.
Representations Usual and customary for this type of financing, including but
and Warranties: not limited to the following:
(a) Valid existence and qualification, including REIT
qualification and tax status;
(b) Governmental authorization;
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MERISTAR HOSPITALITY CORPORATION SG
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(c) No contravention of laws or contracts;
(d) Financial information is true and correct;
(e) No material environmental matters;
(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;
(l) No defaults or Event of Default (defined herein) under
the Credit Facilities or franchise agreements; and
(m) The Merger has been consummated in compliance with all
laws.
Events of Usual and customary for credit facilities of this size, type
Default: 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 Credit Facilities' 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.;
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MERISTAR HOSPITALITY CORPORATION SG
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(f) Restrictions on change of control at the Company
and OpCo; and
(g) Cross defaults on recourse and non-recourse
indebtedness of not more than $5,000,000 and
$20,000,000, respectively, as to the acceleration
of any maturity date, and $5,000,000 and
$20,000,000 respectively.
Other Conditions: a) Within 90 days from closing, interest rate
protection will be required on at least 30% of the
Company's total outstanding indebtedness;
b) The Merger has been consummated in compliance with
all laws and acceptable to the Lenders; and
c) Obtaining the necessary bank votes to amend and
restate the existing credit facility.
Governing Law: The laws of the State of Texas for the credit agreement
and other documents; for collateral documents local law
will apply.
Waiver of Jury Required.
Trial and Consent to
Texas Jurisdiction:
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MERISTAR HOSPITALITY CORPORATION SG
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MERISTAR H & R OPERATING PARTNERSHIP, L.P.
$50 MILLION REVOLVING CREDIT FACILITY
SUMMARY OF TERMS & CONDITIONS
Borrower: MeriStar H & R Operating Partnership, L.P.
("Borrower").
Arrangers: Societe Generale, Southwest Agency ("SG"), BT Alex.
Xxxxx Incorporated and Xxxxxx Brothers, Inc.
Lenders: A syndicate of lending institutions acceptable to SG.
Guarantors: MeriStar Hotels & Resorts, Inc. ("OpCo" or "Company")
and all existing and future direct and indirect
subsidiaries of the Borrower.
Facility Amount: $50 million revolving credit facility ("Facility"). Up
to $10 million in letters of credit may be issued. The
co-lenders will have risk participations in any letter
of credit in accordance with their pro-rata share of
the Facility. Letters of Credit will be provided by SG
or another Lender acceptable to SG and the Borrower.
Term/Maturity Date: 3 years from closing.
Use of Proceeds: To finance a) the acquisition of management contracts,
b) the issuance of letters of credit c) the Company's
general working capital needs, and d) the Company's
debt and equity investments necessary to obtain
managment contracts.
Amortization: None.
Recourse: Full recourse to the Borrower and Guarantors.
Security: Perfected first-lien security interest in all existing
and future assets of the Borrower and its underlying
subsidiaries including without limitation all
management contracts and leases to the extent
assignable.
Interest Rate & Unused Interest payments will be made on a monthly basis
Commitment Fee: while the Unused Commitment Fee will be made on a
quarterly basis. Interest payments will be based on the
applicable interest rate outlined below plus LIBOR or
the Adjusted Base Rate ("ABR") (at the Borrower's
option):
--------------------------------------
ABR SPREAD LIBOR SPREAD UNUSED FEE
(BPS) (BPS) (BPS)
--------------------------------------
37.5 187.5 .25
--------------------------------------
Interest Calculation: Interest on LIBOR based loans will be calculated on the
basis of the actual number of days elapsed over a 360-
day year. Interest on ABR
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MERISTAR HOSPITALITY CORPORATION SG
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based loans will be calculated on the basis of the
actual number of days elapsed over 365-day year.
LIBOR Options: One, two, three, or six months with maturities not to
extend beyond the Facility's maturity date.
Yield Maintenance: Usual and customary provisions for increased capital
costs, capital adequacy, protection, withholding, other
taxes and illegality.
Letter of Credit Fees: A letter of credit fee in an amount equal to the then
current LIBOR spread payable quarterly in arrears on
the average daily undrawn amount of issued letters of
credit will be paid to the Co-Lenders in accordance
with their pro rata portion of the Letters of Credit.
Letter of Credit Facing 0.0625% per annum, payable quarterly in arrears,
Fee: for the account of the Letter of Credit issuer, on the
average daily undrawn amount of issued letters of
credit.
Advances: Advances under the Facility are permitted provided
that:
i) No default exists;
ii) All representations and warranties are true, both
before and after each advance under the Facility;
iii) The Borrower is limited to three LIBOR contracts,
and advances are limited to two per month, with
an exception for advances made for acquisition
purposes.
Financial Covenants: Company financial covenants shall be calculated
quarterly based on trailing 12-month data, shall
include:
I. LEVERAGE RATIO
At no time shall the ratio of Total Liabilities to
Consolidated EBITDA exceed 5.5x initially, with a step-
down to 5.0x at December 31, 1998, 4.5x at June 30,
1999 and 4.0x at June 30, 2000. In addition, at no time
shall the ratio of Senior Indebtedness to Consolidated
EBITDA exceed 4.0x initially, with a step-down to 3.5x
after 12 months. Consolidated EBITDA will initially be
based upon the pro forma EBITDA for the 12 months ended
June 30, 1998. This calculation shall be made on a pro
forma basis with adjustments for acquisitions and
dispositions.
Consolidated EBITDA is defined as net income, plus (a)
-------------------
the sum of (i) depreciation expense, (ii) amortization
expense and other non-cash
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MERISTAR HOSPITALITY CORPORATION SG
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charges, (iii) interest expense, (iv) income tax
expense and (v) losses on sales or other dispositions,
less (b) gains on sales and other dispositions to the
extent included in the determination of such net
income. Total Liabilities shall be defined as recourse
-----------------
and non-recourse mortgage debt, letters of credit,
unsecured debt, capitalized lease obligations,
guarantees on indebtedness, subordinated debt, interest
rate hedge obligations, and unfunded direct or
contingent obligations of the Company and its
subsidiaries. Total Liabilities shall include, without
duplication, (i) 100% of 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, accruals, and minority
interests.
Senior Indebtedness shall be defined as Total
-------------------
Liabilities less subordinated debt.
II. LIMITATION ON OTHER INDEBTEDNESS
The Company and its subsidiaries shall not incur other
indebtedness in excess of $5 million in the aggregate.
The Company and its subsidiaries shall not incur
subordinated debt in excess of $50 million in the
aggregate (subject to satisfactory inter-creditor
documentation).
III. SENIOR FIXED CHARGE RATIO
The Company shall initially maintain a minimum Senior
Fixed Charge Ratio of 2.0x, with a step-up to 2.25x
after 12 months from closing and a step-up to 2.50x
after 24 months from closing. Senior Fixed Charge Ratio
is defined as Consolidated EBITDA divided by
Consolidated Senior Interest Expense plus scheduled
principal amortization payments on all debt obligations
of the Company and its subsidiaries (excluding any
balloon payments), plus all preferred stock dividends.
Consolidated Senior Interest Expense is defined as
Consolidated Total Interest Expense minus interest
expense on any subordinated or inter-company debt.
IV. TOTAL FIXED CHARGE RATIO
The Company shall initially maintain a minimum Total
Fixed Charge Ratio of 1.75x, with a step-up to 2.0x
after 12 months from closing and
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MERISTAR HOSPITALITY CORPORATION SG
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a step-up to 2.25x after 24 months from closing. Total
Fixed Charge Ratio is defined as Consolidated EBITDA
divided by Consolidated Total Interest Expense plus
scheduled principal amortization payments on all debt
obligations of the Company and its subsidiaries
(excluding any balloon payments), plus all preferred
stock dividends. Consolidated Total Interest Expense is
defined as actual interest expense incurred by the
Company on all debt whether it is accrued, paid, or
capitalized.
V. SENIOR INTEREST COVERAGE RATIO
The Company shall initially maintain a minimum Senior
Interest Coverage Ratio of 2.5x, with a step-up to
2.75x after 12 months from closing. Senior Interest
Coverage Ratio is defined as Consolidated EBITDA
divided by Consolidated Senior Interest Expense.
VI. TOTAL INTEREST COVERAGE RATIO
The Company shall initially maintain a minimum Total
Interest Coverage Ratio of 2.0x, with a step-up to
2.50x after 12 months from closing. Total Interest
Coverage Ratio is defined as Consolidated EBITDA
divided by Consolidated Total Interest Expense.
Financial Reporting: The Borrower shall provide the Administrative Agent and
the Lenders with the following:
a) Delivery of the Company's annual audited financial
statements (within 95 days of fiscal year end) and
reports including an officer's certificate to
demonstrate compliance with the covenants of the
Credit Facilities and the covenants of the
Company's public debt issue(s), if any.
b) Delivery of quarterly financial statements (within
50 days of fiscal quarter end with the exception of
fiscal year end). Quarterly statements may be
internally prepared but not required to be audited
or reviewed by a third-party accounting firm. Along
with the quarterly and annual financial statements,
the Borrower shall provide a summary report on its
properties that details EBITDA for the trailing
four quarters by quarter and in sum total.
c) Quarterly, a certificate detailing all covenant
calculations and all supporting details.
d) Copies of any written information provided to the
shareholders.
e) Such other information as the Agents shall
reasonably require.
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MERISTAR HOSPITALITY CORPORATION SG
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Management Either (i) Xxxx X. Xxxxxxxx or (ii) Xxxxxx X. Xxxxx
Restrictions: shall at all times be required to be the chairman and
chief executive officer of the Company.
Representations and & Usual and customary for this size and type of
Warranties: Facility, including but not limited to the following:
a) Valid existence;
b) Governmental authorization;
c) No contravention of laws or contracts;
d) Financial information is true and correct;
e) Compliance with laws and regulations, including
zoning, fire safety and building requirements,
ERISA, ADA, and laws;
f) Maintenance of required licenses and permits with
respect to the properties;
g) No material litigation, casualty or condemnation
proceedings pending;
h) Payment of taxes when due;
i) No defaults or Event of Default (defined herein)
under the Facility.
Conditions Precedent Usual and customary for this size and type of Facility,
to Facility: including but not limited to successful completion of
the merger between CapStar Hotel Company and American
General Hospitality Corporation and a spin-off of the
Borrower therefrom.
Other Covenants: Usual and customary for this size and type of Facility,
including but not limited to the following:
a) Compliance with laws;
b) Limitations on sale of assets, mergers and other
corporate activity;
c) Management contract investments restricted to the
lodging sector;
d) Satisfactory insurance coverage; and
e) Limitation on dividends.
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MERISTAR HOSPITALITY CORPORATION SG
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Events of Default: Usual and customary for credit facilities for this size
and type, including, without limitation:
(a) Non-payment when due of any payment of principal
in respect of any recourse indebtedness;
(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) The Facility will be cross-defaulted to any non-
recourse or recourse indebtedness of the Company,
its subsidiaries, or any Guarantors;
(d) Default in the performance or observance of any
covenants;
(e) Restrictions on change of control at the Company.
Governing Law: The law of the State of Texas for the credit agreement
and other Facility documents.
Waiver of Jury Trial Required.
and Consent to Texas
Jurisdiction:
6
