EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") is made and entered into this
3rd day of May, 1995, by and among Embassy Suites, Inc. ("Embassy"), a Delaware
corporation, FelCor Suite Hotels, Inc. (the "Company"), a Delaware corporation,
and FelCor Suites Limited Partnership (the "Partnership"), a Delaware limited
partnership.
WITNESSETH:
WHEREAS, Embassy owns, operates and franchises hotels under the trademark
and service xxxx Embassy Suites-Registered Trademark- ("Embassy Suites hotels");
WHEREAS, the Company owns an approximate 73.6% general partner interest in
the Partnership which owns nine Embassy Suites-Registered Trademark- hotels,
all of which hotels are leased by the Partnership to DJONT Operations, L.L.C.
(the "Lessee");
WHEREAS, all of the hotels owned by the Partnership are operated by the
Lessee under franchise licenses from Embassy pursuant to franchise license
agreements between the Lessee and Embassy (the "Existing Franchise Agreements")
and eight of the hotels are managed on behalf of the Lessee by Embassy pursuant
to management agreements between the Lessee and Embassy (the "Existing
Management Agreements");
WHEREAS, the Company, through the Partnership, is in the business of
acquiring hotels and, in connection therewith, expects to undertake a public
offering of its common stock, $0.01 par value (the "Common Stock"), pursuant to
a registration statement to be filed with the Securities and Exchange Commission
(the "SEC") on or shortly after May 4, 1995 (the "Public Offering"), all of the
proceeds of which will be contributed by the Company to the Partnership for use
by the Partnership, in part, to acquire additional hotels that may be converted
to, or are, Embassy Suite hotels;
WHEREAS, in order to induce the Partnership to acquire Qualifying Hotels
(as defined herein), Embassy desires to subscribe for the purchase of up to
$25,000,000 in units of limited partner interest (the "Units") of the
Partnership and the Partnership desires to sell such Units to Embassy, upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
1. SUBSCRIPTION. Embassy hereby subscribes for and agrees to purchase,
from time to time, up to an aggregate of $25,000,000 in Units at the purchase
price determined in accordance with Section 2 below. Embassy shall close the
purchase of the Units in increments of $5,000,000 in price upon receipt of
notice from the Partnership that the Partnership is acquiring a Qualifying
Hotel. Each Unit shall be redeemable by Embassy, at any time following one year
after the date of first issuance of such Units hereunder, for one share of
Common Stock, subject to the restrictions contained Section 7.5 of the Amended
and Restated Agreement of Limited Partnership of the Partnership (the
"Partnership Agreement"), a copy of which agreement is attached hereto as
EXHIBIT A; provided, that if Embassy is subject to Section 16 of the Securities
Exchange Act of 1934, as amended, the Partnership shall not satisfy such
redemption in whole or in part with cash without the consent of Embassy.
2. PURCHASE PRICE. The purchase price (the "Purchase Price") for each of
the Units shall be equal to the public offering price per share at which shares
of Common Stock are sold in the Public Offering.
3. CONDITIONS TO PURCHASE.
(a) The following shall be conditions precedent to the obligations of
Embassy to effect each purchase of Units subscribed for herein, and of the
Partnership to sell and issue any Units to Embassy subscribed for herein;
(i) The Public Offering shall have been completed and the
Partnership shall have received the proceeds thereof in an amount of not
less than $65 million, without material waiver or amendment of the
conditions to closing of the underwriters therein.
(ii) The Partnership shall have entered into a definitive
agreement for the acquisition of a Qualifying Hotel in connection with each
incremental purchase obligation of Embassy arising hereunder and shall have
provided written notice thereof to Embassy, which notice shall contain a
description of the hotel and the basis for the Partnership's belief that
such hotel is a Qualifying Hotel, and shall further contain a specific
request from the Partnership that Embassy purchase $5,000,000 in Units in
accordance with its subscription obligation hereunder. For purposes
hereof, a "Qualifying Hotel" shall mean either (i) a hotel that,
immediately prior to the acquisition thereof by the Partnership, is not an
Embassy Suites hotel but meets the minimum standards (subject to any
waivers approved or improvements required by Embassy) then in effect for
the conversion of a hotel to an Embassy Suites hotel
-2-
and for which the Lessee has been granted a franchise license or commitment
agreement from Embassy and for which Embassy has been engaged as manager
upon the terms prescribed herein, or (ii) a hotel that, immediately prior
to the acquisition thereof by the Partnership, is an existing Embassy
Suites hotel that is not then managed by Embassy and for which the Lessee
has been granted a franchise license or commitment agreement from Embassy
and for which Embassy has been engaged as manager upon the terms prescribed
herein. The terms under which Embassy will be engaged to manage such
hotels shall be substantially similar to the Existing Management
Agreements, except for the modifications contemplated by subparagraph (c)
below.
(iii) The Lessee shall have offered to Embassy an agreement
between the Lessee and Embassy which shall provide that, notwithstanding
that certain Commitment to Amend Management Agreement dated as of May 19,
1994 between Embassy, the Lessee and others, the form of management
agreement to be entered into between the Lessee and Embassy, effective
beginning with the tenth Embassy Suites hotel for which Embassy is engaged
as manager on behalf of the Lessee and continuing through the next nine
Embassy Suites hotels for which Embassy is engaged as manager on behalf of
Lessee thereafter, shall provide that the incentive management fee payable
to Embassy by Lessee of such hotel shall be equal to the lesser of (i) 3%
of adjusted gross revenues of the hotels, or (ii) 50% of the Lessee's net
income from the managed hotel after percentage lease payments, but before
Lessee's overhead expenses.
(b) The obligations of Embassy to consummate each closing of the
purchase of Units hereunder shall be subject to the following additional
conditions:
(i) To the extent set forth in Section 7 hereof, the
representations and warranties of the Company and the Partnership set forth
herein shall be true and accurate in all material respects as of the date
of such closing; and Embassy shall have received a certificate, in
reasonably satisfactory form, of an officer of the Company, on behalf of
itself and as general partner of the Partnership, to that effect.
(ii) Prior to the date of the first closing, Embassy shall have
received a letter from counsel to the Company and the Partnership entitling
it to rely on the opinion delivered to the underwriters in connection with
the consummation of the Public Offering, as if addressed to it.
-3-
(iii) On the date of the first closing, Embassy shall have
received an opinion from counsel to the Company and the Partnership to the
effect of paragraphs (b) through (e) of Section 7 hereof, subject to
reasonable and customary assumptions, exceptions, qualifications and
limitations.
(c) The obligations of each of the Company and the Partnership to
consummate each closing of the purchase of Units hereunder shall be subject
to the following additional conditions:
(i) To the extent set forth in Section 6 hereof, the
representations and warranties of Embassy set forth herein shall be true
and accurate in all material respects as of the date of each such closing;
and the Partnership and the Company shall have received a certificate, in
reasonably satisfactory form, of an officer of Embassy to the effect.
4. PURCHASE CLOSINGS.
(a) Each closing of the incremental purchase of Units hereunder shall
be in connection with a closing of the acquisition of a Qualifying Hotel
and shall occur concurrently with the completion of such acquisition
provided that the first such closing shall not occur prior to July 15,
1995. At each such closing, Embassy shall pay to the Partnership, by wire
transfer or by certified or bank cashiers check, (i) on July 15, 1995, the
amount determined by multiplying $5,000,000 by the number of Qualifying
Hotels, if any, theretofore acquired by the Partnership, and (ii) on each
closing of the acquisition of a Qualifying Hotel by the Partnership
occurring subsequent to July 15, 1995, the amount of $5,000,000. At each
closing with Embassy hereunder, the Partnership shall issue to Embassy one
or more certificates representing the whole number of Units equal to the
quotient of (i) $5,000,000, divided by (ii) the Purchase Price per Unit.
The Partnership shall not be required to issue fractional Units in
connection with any such purchase and, in lieu thereof, the Partnership
shall refund to Embassy the cash amount represented by the fractional Unit
based upon the Purchase Price per Unit.
(b) Notwithstanding, subparagraph (a) above, if the proposed
distribution (the "Distribution") by The Promus Companies Incorporated
("Promus"), as described in the proxy statement for the Annual Meeting of
Stockholders of Promus to be held on May 26, 1995, is not completed
substantially in accordance with the terms set forth therein, the dates of
the incremental closings, and the amount of Units to be purchased at each
such
-4-
closing, shall be as follows: (i) on July 15, 1995, the amount determined
by multiplying $5,000,000 by the number of Qualifying Hotels, if any,
theretofore acquired by the Partnership, up to the maximum amount of
$10,000,000, (ii) on August 1, 1995, the amount determined by multiplying
$5,000,000 by the number of Qualifying Hotels, if any, theretofore acquired
by the Partnership for which incremental closings were not held on July 15,
1995, up to the maximum amount, including all amounts previously purchased,
of $15,000,000, (iii) on August 15, 1995, the amount determined by
multiplying $5,000,000 by the number of Qualifying Hotels, if any,
theretofore acquired by the Partnership for which incremental closings were
not held by August 1, 1995, up to the maximum amount, including all amounts
previously purchased, of $25,000,000, and (iv) if the full amount of
$25,000,000 in Units has not been purchased by August 15, 1995, on each
closing of the acquisition of a Qualifying Hotel by the Partnership
occurring subsequent to August 15, 1995, the amount of $5,000,000.
5. TERM. This Agreement shall terminate when Embassy shall have
completed its subscription obligation hereunder or sooner if the Partnership
shall deliver written notice to Embassy that it has terminated Embassy's
obligations hereunder; provided, however, that this Agreement shall terminate
and be of no further force or effect if the Company has not completed the Public
Offering by September 30, 1995.
6. REPRESENTATIONS AND WARRANTIES OF EMBASSY. Embassy hereby represents
and warrants to the Company and the Partnership as follows:
(a) The execution, delivery and performance of this Agreement by
Embassy has been duly authorized by all necessary corporate action. This
Agreement constitutes a valid and binding obligation of Embassy,
enforceable in accordance with its terms.
(b) It is familiar with the business and financial condition of the
Company and the Partnership, and is not relying upon any representations
made to it by the Company, the Partnership or any of the officers,
employees or agents of either of them that are not contained herein.
(c) It is aware of the risks involved in making an investment in the
Units and in the Common Stock for which such Units are redeemable. It has
had an opportunity to ask questions of, and to receive answers from, the
Partnership and the Company, or a person or persons authorized to act on
their behalf, concerning the terms and conditions of this investment.
Embassy confirms that all documents, records and books pertaining to its
investment in the Partnership
-5-
that have been requested by it have been made available or delivered to it
prior to the date hereof.
(d) It understands that neither the Units nor the shares of Common
Stock for which the Units may be redeemed have been registered under the
Securities Act of 1933, as amended, or any state securities acts and are
instead being offered and sold in reliance on an exemption from such
registration requirements. The Units for which Embassy hereby subscribes
are being acquired solely for its own account, for investment, and are not
being purchased with a view to, or for resale in connection with, any
distribution, subdivision or fractionalization thereof, in violation of
such laws and Embassy has no present intention to enter into any contract,
undertaking, agreement or arrangement with respect to any such resale.
(e) It is an accredited investor as that term is defined in Rule 501
and Regulation D of the Securities Act of 1933, as amended.
The foregoing representations and warranties are true and accurate as of
the date hereof and shall be true and accurate as of the date of each purchase
closing and shall survive each such closing. If in any respect such
representations and warranties shall not be true and accurate as of any purchase
closing, Embassy shall give written notice of such fact to the Company and the
Partnership prior to such closing, specifying which representations and
warranties are not true and accurate and the reasons therefor.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARTNERSHIP.
Each of the Company and the Partnership hereby jointly and severally
represents and warrants to Embassy that the representations and warranties
set forth in EXHIBIT B hereto, shall be true and correct in all material
respects as of the date of the consummation of the Public Offering, and each
of the Company and the Partnership further jointly and severally represents
and warrants to Embassy as follows:
(a) The disclosure to be contained in the registration statement with
respect to the Public Offering, in the form in which it is filed and in the
form in which it becomes effective, and the final prospectus relating to
the Public Offering, shall not be materially different from the disclosure
previously provided to Embassy relating to the Public Offering;
(b) The Company and the Partnership each have full legal right,
powers and authority to enter into this Agreement and the registration
rights agreement referred to in Section 8 hereof and to consummate the
transactions
-6-
contemplated herein and therein. This Agreement has been, and the
registration rights agreement referred to in Section 8 hereof will be, duly
authorized by all necessary corporate and partnership action and each will
constitute the valid and binding obligation of each of the Company and the
Partnership, enforceable in accordance with their terms. The Partnership
Agreement constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms.
(c) The Units, when issued, will have been duly and validly
authorized and issued, free of any preemptive or similar rights, and be
fully paid and nonassessable, without any obligation to restore capital
except as required by the Delaware Revised Uniform Limited Partnership Act
(the "Delaware Act"). As a holder thereof, Embassy shall be admitted as a
limited partner of the Partnership entitled to all of the rights and
protections of limited partners under the Delaware Act and the provisions
of the Partnership Agreement, with the same rights, preferences and
privileges as all existing limited partners on a pari passu basis. The
shares of Common Stock for which the Units may be redeemed have been
validly authorized and, when issued, will be duly and validly issued, fully
paid and nonassessable, free of preemptive or similar rights. Authorized
and unissued shares of Common Stock sufficient to permit such redemption
shall at all times be reserved by the Company, and the Company shall take
no action to prevent the redemption of the Units by virtue of Section
7.5(c)(v) of the Partnership Agreement.
(d) Assuming the accuracy of the representations of Embassy set forth
in Section 6 hereof, (i) the Units will have been issued, offered and sold
in compliance with all applicable laws (including, without limitation,
federal and state securities laws), (ii) upon redemption of the Units for
shares of Common Stock, such shares will have been issued, offered and
sold in compliance with all applicable laws (including, without limitation,
federal and state securities laws) and (iii) each consent, approval,
authorization, order, license, certificate, permit, registration,
designation or filing by or with any governmental agency or body necessary
for the valid authorization, issuance, sale and delivery of the Units, the
valid authorization, issuance, sale and delivery of such shares upon
redemption of the Units, the execution, delivery and performance of this
Agreement and the registration rights agreement referred to in Section 8
hereof, and the consummation by the Company and the Partnership of the
transactions contemplated hereby and thereby, has been made or obtained and
is in full force and effect.
-7-
(e) Neither the issuance, sale and delivery by the Partnership of the
Units, nor the issuance, sale and delivery by the Company of the shares of
Common Stock upon redemption of the Units, nor the execution, delivery and
performance of this Agreement and the registration rights agreement
referred to in Section 8 hereof, nor the consummation of the transactions
contemplated hereby or thereby by the Company or the Partnership as
applicable, will conflict with or result in a breach or violation of any of
the terms and provisions of, or (with or without the giving of notice or
passage of time or both) constitute a default under, any of the Operative
Documents (as defined in Exhibit B hereto), the certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, or limited liability company agreement, as the case may be, of
the Company, the Partnership or the Lessee; any indenture, mortgage, deed
of trust, loan agreement, note, lease or other agreement or instrument to
which the Company, the Partnership or the Lessee is a party or to which any
of them, any of their respective properties or other assets or any hotel is
subject; or any applicable statute, judgement, decree, rule or regulation
of any court or governmental agency or body applicable to any of the
foregoing or any of their respective properties; or result in the creation
or imposition of any lien, charge, claim or encumbrance upon any property
or asset of any of the foregoing.
The foregoing representations and warranties are true and accurate as of
the date hereof, or such other date as of which they are deemed to be made, and
shall be true and accurate on the date of the first purchase closing, and shall
survive such closing; and the representations and warranties set forth in
paragraphs (d), (e), (m) and (o) of EXHIBIT B hereto, and paragraphs (a) through
(e) above, shall also be true and accurate on each subsequent purchase closing,
and shall survive each such closing.
8. REGISTRATION RIGHTS. In connection with the first purchase of Units
hereunder, the Company shall enter into with Embassy a registration rights
agreement, providing, among other things, for the following:
(a) On or before one year after the date of first issuance of Units
hereunder, the Company shall file and use its best efforts to cause to
become effective, a registration statement under the Securities Act of
1933, as amended, and necessary qualifications or registrations under the
securities laws covering the issuance of shares of Common Stock necessary
for the redemption of all of the Units issued to Embassy under and pursuant
to this Subscription Agreement, and the resale of such shares by Embassy.
The Company shall use its best efforts to maintain the effectiveness of
such registration statement and such qualifications or registrations
(except during periods when Embassy shall be
-8-
restricted from selling shares hereunder) until the earlier of (i) such
time as all of the shares of Common Stock issuable upon redemption of the
Units have been issued to and sold by Embassy, (ii) such time as all
remaining shares of Common Stock issuable upon redemption of the Units have
been issued to and may be resold by Embassy without restriction under the
Securities Act of 1933, as amended, and (iii) December 31, 2000.
(b) During any consecutive three month period, Embassy shall be
prohibited, unless the Company shall otherwise consent thereto in writing,
from selling more than 3% of the outstanding shares of Common Stock,
whether pursuant to said registration statement or otherwise, except in an
underwritten public offering in which the managing underwriterg is one
reasonably acceptable to the Company.
(c) All expenses of such registration statement, other than any
underwriting discounts or commissions or transfer taxes, but including the
reasonable fees and expenses of all separate counsel for Embassy, shall be
borne by the Company.
(d) (i) Embassy shall refrain from the sale of any shares for one or
more periods of not more than sixty (60) days following written notice from
the Company that the registration statement is not then current, due to the
existence of material non-public information disclosure of which would
materially adversely affect the business interests of the Company, and
prior to Embassy's receipt from the Company of written notice that such
registration statement is again current, provided that Embassy shall not be
precluded from effecting sales pursuant to this clause (i) for more than 90
days during any 360-day period.
(ii) Following written notice from the Company that it has filed
and caused to become effective a registration statement including an
offering of shares of Common Stock for sale by the Company to the public in
an underwritten public offering, Embassy shall enter into agreements with
the underwriters of such public offering, substantially in the same form as
agreements entered into by the officers and directors of the Company,
precluding the sale of Common Stock by Embassy for a period not to exceed
180 days following such notice, provided that Embassy was given the
opportunity to include its shares for sale in such public offering.
The registration rights agreement shall otherwise be in customary form,
containing, to the extent applicable, provisions consistent with those contained
in the
-9-
Registration Rights Agreement dated as of July 21, 1994, among the Company and
certain holders named therein.
9. USE OF PROCEEDS. The Company and the Partnership agree with Embassy
that (i) the proceeds of the sale of Units hereunder will be used to acquire
hotels that may be converted to, or are, Embassy Suites hotels, as provided
herein; and (ii) the proceeds of the Public Offering, together with any
borrowings made in conjunction therewith, will be used to acquire such hotels,
renovate or construct additions to hotels currently owned by the Partnership,
repay outstanding indebtedness under the line of credit of the Company and for
working capital purposes.
10. MISCELLANEOUS.
(a) All notices or other communications given or made hereunder shall
be in writing and shall be delivered or mailed by registered or certified
mail, return receipt requested, postage prepaid, to Embassy at 0000 Xxxxxx
Xxx., Xxxxx 000, Xxxxxxx, Xxxxxxxxx 00000, and to the Company or the
Partnership at 0000 X. X'Xxxxxx Xxxx., Xxxxx 000, Xxxxxx, Xxxxx 00000.
(b) NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL OF THE
TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS, APPLICABLE TO AGREEMENTS MADE
AND TO BE WHOLLY PERFORMED THEREIN.
(c) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may be
amended only by an instrument in writing executed by all parties.
Embassy may assign and transfer its rights and obligations hereunder, and
the Units it acquires, to any direct or indirect subsidiary thereof,
including any subsidiary directly or indirectly distributed by Promus in
connection with the Distribution, provided that its obligations shall
only be assigned to a subsidiary which conducts or owns a substantial
portion of the Embassy Suites hotel business and which assumes such
obligations in writing.
(d) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the parties hereto.
-10-
(e) All terms used herein shall be deemed to include the masculine
and the feminine and the singular and the plural as the context requires.
Captions herein are for convenience of reference only and shall not alter
or affect the meaning or construction of the paragraphs hereof to which
they relate.
(f) The parties hereto agree to take all actions, including the
entering into of any documents, agreements or instruments, or amendments
thereof, as may be necessary or appropriate to effectuate the intents and
purposes hereof and consummate and make effective the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the date first above written.
EMBASSY SUITES, INC.
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------------
Xxxxxxx Xxxxxxxx, Assistant Secretary
FELCOR SUITE HOTELS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
-------------------------------------
Xxxxxx X. Xxxxxxxx, Xx., President
FELCOR SUITES LIMITED PARTNERSHIP
By: FelCor Suite Hotels, Inc.,
General Partner
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
-------------------------------------
Xxxxxx X. Xxxxxxxx, Xx., President
-11-
