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REGISTRATION NO. 333-18507
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WYNDHAM HOTEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 7011 75-263-6072
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
2001 BRYAN STREET, SUITE 2300
DALLAS, TEXAS 75201
(214) 863-1000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JAMES D. CARREKER
CHIEF EXECUTIVE OFFICER
WYNDHAM HOTEL CORPORATION
2001 BRYAN STREET, SUITE 2300
DALLAS, TEXAS 75201
(214) 863-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
M. CHARLES JENNINGS
LOCKE PURNELL RAIN HARRELL
(A PROFESSIONAL CORPORATION)
2200 ROSS AVENUE, SUITE 2200
DALLAS, TEXAS 75201
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box:[ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering:[ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box:[ ]
PROPOSED PROPOSED
TITLE OF EACH CLASS MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
---------- ---------- --------- -------------- ---
Common Stock, 646,669 $23.312 (1) $15,075,147 $4,568 (2)
$.01 par value
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(d) promulgated under the Securities Act of 1933, and based
upon the average of the high and low prices per share as reported on the New
York Stock Exchange Composite Index on December 3, 1996.
(2) Of this fee, $3,907 was paid by the Company in connection with the original
filing of this Registration Statement on December 20, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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WYNDHAM EMPLOYEES LTD.
Dear WEL Participant:
This letter and the accompanying Prospectus/Consent Solicitation
Statement are being sent to you concerning the proposed distribution by Wyndham
Employees Ltd. ("WEL") of 646,669 shares of Common Stock, $.01 par value per
share, of Wyndham Hotel Corporation to the 91 participants of WEL. The proposed
distribution of the Wyndham Shares is part of a plan (the "Plan of
Distribution") that will result in the dissolution and termination of WEL. The
Plan of Distribution must be approved by WEL participants holding a majority of
the percentage interests in WEL.
If approved, the Plan of Distribution would result in the
distribution to you of the number of Wyndham shares set forth on the individual
account statement included in the accompanying materials. The Wyndham shares
distributed to you will be subject to your pro rata share of the indebtedness
owed by WEL, which is also set forth on your individual account statement.
Prior to receiving your Wyndham shares, you will be required either to (i)
take out a loan (that will be secured by your Wyndham shares) to repay your
WEL indebtedness, (ii) sell a portion of your Wyndham shares to repay your
WEL indebtedness, or (iii) repay your WEL indebtedness through a direct payment
by you to the general partner of WEL.
The accompanying Prospectus and related materials provide a detailed
description of the Plan of Distribution, the business and financial information
of Wyndham and other matters to be considered by you.
The General Partner of WEL is seeking your vote to approve the Plan of
Distribution. Attached to this letter are (i) a Consent Form for your vote;
(ii) a Repayment and Resale Election Form that will be used by you to indicate
how you would like to repay your WEL indebtedness; and (iii) an individual
account statement that shows the number of Wyndham shares that will be
distributed to you in the Plan of Distribution and your pro rata share of WEL
indebtedness. THE GENERAL PARTNER HAS APPROVED THE PLAN OF DISTRIBUTION AND
RECOMMENDS THAT YOU VOTE FOR THE PLAN OF DISTRIBUTION.
PLEASE REVIEW THE ENCLOSED MATERIALS, THEN COMPLETE, SIGN AND DATE THE
CONSENT FORM AND THE REPAYMENT AND RESALE ELECTION FORM AND RETURN THEM IN THE
ENCLOSED POSTAGE PRE-PAID ENVELOPE AT YOUR EARLIEST CONVENIENCE, AND IN ANY
EVENT, BY 12:00 NOON (CENTRAL TIME), FEBRUARY 7, 1997. IT IS VERY IMPORTANT
THAT YOU RETURN THE ENCLOSED CONSENT FORM, BECAUSE FAILURE TO RETURN IT HAS THE
SAME EFFECT AS A VOTE AGAINST THE PLAN OF DISTRIBUTION. WHETHER OR NOT YOU VOTE
FOR THE PLAN, THE REPAYMENT AND RESALE ELECTION FORM MUST BE COMPLETED AND
RETURNED IN ORDER FOR YOU TO RECEIVE YOUR WYNDHAM SHARES IF THE PLAN IS
APPROVED. IN ADDITION, UNLESS YOU RETURN THE REPAYMENT AND RESALE ELECTION FORM
BY THE TIME INDICATED ABOVE, THE COMPANY WILL
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AUTOMATICALLY ARRANGE FOR THE SALE OF A SUFFICIENT NUMBER OF YOUR WYNDHAM
SHARES TO PAY YOUR WEL INDEBTEDNESS AND THE BROKERAGE COMMISSION ON THE SALE
AND ANY TAX OR OTHER COSTS AND EXPENSES ASSOCIATED WITH SUCH SALE.
IF YOU HAVE ANY QUESTIONS REGARDING THE PLAN OF DISTRIBUTION, THE
ENCLOSED MATERIALS OR HOW TO COMPLETE THE CONSENT FORM OR THE REPAYMENT AND
RESALE ELECTION FORM, YOU MAY CALL ELISE TURNER AT THE COMPANY AT (214)
863-1097.
Sincerely yours,
/s/ JAMES D. CARREKER
James D. Carreker
Wyndham Hotel Management Corporation,
General Partner
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WYNDHAM EMPLOYEES LTD.
CONSENT FORM AND POWER OF ATTORNEY
Introduction
This Consent Form and Power of Attorney (this "Consent Form") contains
materials that must be completed by each WEL Participant who has received a
copy of the accompanying Prospectus/Consent Solicitation Statement dated
January 27, 1997 and who wishes to vote FOR or AGAINST the Plan of
Distribution, as more fully described in the Prospectus. Capitalized terms not
otherwise defined herein shall have the meaning set forth in the
Prospectus/Consent Solicitation Statement.
You are asked to complete and return this Consent Form. A WEL
PARTICIPANT WHO FAILS TO RETURN A SIGNED CONSENT FORM OR COMPLETES HIS OR HER
CONSENT FORM IN AN UNINTELLIGIBLE MANNER SHALL BE DEEMED TO HAVE VOTED
"AGAINST" THE PLAN OF DISTRIBUTION. ANY WEL PARTICIPANT WHO RETURNS A SIGNED
CONSENT FORM BUT FAILS TO INDICATE HIS OR HER APPROVAL OR DISAPPROVAL OF THE
PLAN OF DISTRIBUTION SHALL BE DEEMED TO HAVE VOTED "FOR" THE PLAN OF
DISTRIBUTION.
IF YOU HAVE ANY QUESTIONS REGARDING THE PLAN OF DISTRIBUTION, PLEASE
CONTACT ELISE TURNER AT WYNDHAM HOTEL CORPORATION AT (214) 863-1097. THIS
CONSENT FORM MUST BE RETURNED TO AND RECEIVED BY:
WYNDHAM HOTEL MANAGEMENT CORPORATION
2001 BRYAN STREET, SUITE 2300
DALLAS, TEXAS 75201
ATTENTION: ELISE TURNER
TELEPHONE: (214) 863-1097
FACSIMILE: (214) 863-1262
PRIOR TO 12:00 NOON, CENTRAL TIME, ON FEBRUARY 7, 1997, or such later date as
may be designated in a mailing to all WEL Participants (the "Expiration Date").
The Consent Form will be effective only when it is actually received by Wyndham
Hotel Management Corporation. A pre-addressed Federal Express envelope has been
provided for your convenience.
A WEL Participant who executes and delivers a Consent Form will have
the right to withdraw it at any time prior to the Expiration Date by delivering
a written notice of withdrawal or change of vote (which may be delivered by any
means, including telecopy) to Wyndham Hotel Management Corporation at its
address set forth above. Consents and notices of withdrawal or change of vote
received after the Expiration Date will not be valid.
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THE GENERAL PARTNER BELIEVES THAT THE TERMS OF THE PLAN OF
DISTRIBUTION ARE FAIR AND IN THE BEST INTERESTS OF WEL PARTICIPANTS AND
RECOMMENDS THAT WEL PARTICIPANTS VOTE FOR THE PLAN OF DISTRIBUTION.
CONSENT
The undersigned hereby acknowledges receipt of the accompanying
Prospectus/Consent Solicitation Statement dated January 27, 1997 relating
to the Plan of Distribution.
Approval of Plan of Distribution.
Vote FOR or AGAINST the Plan of Distribution as more fully described in the
Prospectus by marking "X" in the appropriate box below. Please note that a vote
to approve the Plan of Distribution operates as a consent to (i) the
distribution of the Wyndham Shares to WEL Participants and (ii) the resulting
dissolution and termination of WEL.
[ ] FOR [ ] AGAINST
---------------------------
Signature
---------------------------
Print Name
---------------------------
Social Security Number
---------------------------
Date
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POWER OF ATTORNEY
The undersigned hereby makes, constitutes and appoints Wyndham Hotel
Management Corporation, a Texas corporation (the "General Partner"), with full
power of substitution, as the true and lawful attorney-in-fact of the
undersigned, in the name, place and stead of the undersigned, to execute, swear
to, acknowledge, certify, deliver, file and record any and all amendments,
assignments, agreements and other documents which may be required by, or to be
filed with, any governmental agency, or which the General Partner deems
advisable or necessary, to implement the Plan of Distribution if it is
approved.
The foregoing grant of authority is a special power of attorney
coupled with an interest and from and after the Expiration Date shall be
irrevocable and shall not terminate upon, but shall survive the death,
bankruptcy, disability or incompetence, mental incapacitation or dissolution of
the undersigned, to the extent the undersigned may legally contract for such
survival.
----------------------------
Signature of WEL Participant
----------------------------
Name (Please type or print)
----------------------------
Date
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WYNDHAM EMPLOYEES, LTD.
REPAYMENT AND RESALE ELECTION FORM
INTRODUCTION
This Repayment and Resale Election Form will serve as your
instructions to the General Partner of WEL as to how you would like to repay
your WEL Indebtedness. In addition, this form permits you to elect to sell a
portion of your Wyndham Shares during the "Resale Window" of three business days
following the solicitation period. It is currently anticipated that the "Resale
Window" will begin on Tuesday, February 11, 1997 and end on Thursday, February
13, 1997. You will be notified if these dates are changed. YOU MUST COMPLETE AND
RETURN THIS FORM TO THE GENERAL PARTNER BY FEBRUARY 7, 1997, THE END OF THE
SOLICITATION PERIOD, REGARDLESS OF WHETHER OR NOT YOU VOTED FOR OR AGAINST THE
PLAN OF DISTRIBUTION. IF THE PLAN OF DISTRIBUTION IS APPROVED AND YOU DO NOT
RETURN THIS FORM BY FEBRUARY 7, 1997, WYNDHAM WILL ARRANGE FOR THE SALE OF A
PORTION OF YOUR WYNDHAM SHARES IN AN AMOUNT SUFFICIENT TO REPAY YOUR WEL
INDEBTEDNESS PLUS THE BROKERAGE COMMISSION INCURRED IN CONNECTION WITH SUCH SALE
AND ANY TAX OR OTHER COSTS AND EXPENSES ASSOCIATED WITH SUCH SALE. SUCH A SALE
WOULD BE AT THE THEN PREVAILING MARKET PRICE FOR WYNDHAM COMMON STOCK, WHICH
COULD BE LOWER THAN THE PRICE THAT MIGHT BE OBTAINED IF YOU HELD THE WYNDHAM
SHARES AND SOLD THEM AT A LATER DATE. ACCORDINGLY, YOU ARE STRONGLY ENCOURAGED
TO COMPLETE AND RETURN THIS FORM TO THE GENERAL PARTNER PRIOR TO FEBRUARY 7,
1997. Capitalized terms used but not defined in this form have the meaning set
forth in the accompanying Prospectus/Consent Solicitation Statement dated
January 27, 1997.
In the event that the Plan of Distribution is approved, you will be
entitled to receive the number of Wyndham Shares set forth on your individual
account statement included in the accompanying materials. As described in the
Prospectus, however, the Wyndham Shares to which you are entitled are subject
to your pro rata allocation of WEL Indebtedness. In order to repay your WEL
Indebtedness (which is a condition to your receiving your shares), you must
choose one of the following three options: (i) You may choose to borrow funds
from Smith Barney under a Participant Loan, (ii) you may choose to have a
portion of your Wyndham Shares sold to repay your WEL Indebtedness, or (iii)
you may include with this form a check made payable to Wyndham Hotel Management
Corporation (the General Partner of WEL) for the amount of your WEL
Indebtedness. The General Partner will then remit the funds to the holders of
the WEL Indebtedness.
You also may elect pursuant to this form to sell a number of Wyndham
Shares beyond what is required to repay your WEL Indebtedness. Such sales will
be made on the open market by Smith Barney during the Resale Window expected to
begin on February 11, 1997 based upon the market price for Wyndham Common Stock
as reported on the New York Stock Exchange. FOLLOWING THE RESALE WINDOW, YOU
WILL NOT BE PERMITTED TO MAKE ANY SALE OF YOUR WYNDHAM SHARES UNTIL MARCH 10,
1997.
You will be charged a brokerage commission that will be discounted
50% from the published Smith Barney rate in connection with all sales made by
Smith Barney, whether or not the sales were made to repay WEL Indebtedness. The
applicable Smith Barney rate varies depending on the number of shares sold. To
obtain the applicable commission rate, contact Smith Barney.
YOU MUST OPEN AN ACCOUNT WITH SMITH BARNEY PRIOR TO TAKING OUT A
PARTICIPANT LOAN OR SELLING ANY WYNDHAM SHARES DURING THE RESALE WINDOW
(WHETHER OR NOT TO REPAY WEL INDEBTEDNESS). IF you have not opened an account
with Smith Barney, contact them immediately.
ALL QUESTIONS CONCERNING SMITH BARNEY SHOULD BE DIRECTED TO HEATHER
HUGHES AT (800) 527-5814 OR (214) 720- 5002. IF YOU HAVE QUESTIONS CONCERNING
THIS FORM CALL ELISE TURNER AT WYNDHAM AT (214) 863-1097.
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This Repayment and Resale Election Form and the accompanying materials
must be returned to Elise Turner at the following address and be received by
February 7, 1997:
Wyndham Hotel Management Corporation
2001 Bryan Street, Suite 2300
Dallas, Texas 75201
WEL INDEBTEDNESS REPAYMENT ELECTION
You may repay your WEL Indebtedness in the following three ways: (i)
Through the proceeds of a Participant Loan from Smith Barney; (ii) from the
proceeds of a sale of a portion of your Wyndham Shares by Smith Barney; or
(iii) by including with this form a check made payable to Wyndham Hotel
Management Corporation (the General Partner) in the amount of your WEL
Indebtedness. Please indicate your election by checking one of the boxes below.
1. Participant Loans
[ ] I elect to repay my WEL Indebtedness by taking out a Participant
Loan with Smith Barney.
By making this election, you are choosing to open up a margin account
with Smith Barney and borrow against the value of your Wyndham Shares the
amount of WEL Indebtedness set forth on your individual account statement
included in the accompanying materials. The proceeds from this loan will be
paid by Smith Barney directly to the General Partner. By making this election,
you will be subject to the risks generally associated with margin borrowing and
the rules set forth by Smith Barney with respect to an individual margin
account. Before choosing this election, you are encouraged to read the
discussion on margin borrowing appearing in the Prospectus under the headings
"Risk Factors -- Risks Associated with Participant Loans" and "Plan of
Distribution -- Repayment of WEL Indebtedness -- Participant Loans." In
addition, you should review Smith Barney's rules governing margin accounts, a
discussion of which is part of your Smith Barney Account Application.
If you choose this election, you must also complete and return the
attached Irrevocable Letter of Authorization, which instructs Smith Barney to
pay the proceeds of the Participant Loan directly to the General Partner, which
will cause the funds to be remitted to the holders of the WEL Indebtedness. If
you choose this election, your Wyndham Shares will be credited to your account
with Smith Barney. Please call Smith Barney at the above number for the current
interest rate and any other questions you may have concerning Participant
Loans.
2. Sale of Wyndham Shares
[ ] I elect to repay my WEL Indebtedness by selling a portion of my
Wyndham Shares through Smith Barney.
By making this election, you are choosing to sell a sufficient number
of Wyndham Shares to repay the amount of WEL Indebtedness set forth on your
individual account statement included in the accompanying materials and the
brokerage commission incurred in connection with such sale. This sale will be
made on the open market on the first day of the "Resale Window" at the
prevailing market price for Wyndham Common Stock as reported on the New York
Stock Exchange. If you are considered an "affiliate" of the Company, you must
comply with certain securities law considerations in connection with any sale.
See "Plan of Distribution -- Resale Restrictions" in the Prospectus.
If you choose this election, you must also complete and return the
attached Irrevocable Letter of Authorization, which instructs Smith Barney to
pay the proceeds from the sale of the Wyndham Shares (less the amount of the
brokerage commission) directly to the General Partner, which will cause the
funds to be remitted to the holders of the WEL Indebtedness. If you choose this
election, the remainder of your
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Wyndham Shares will be credited to your account with Smith Barney.
Please call Smith Barney at the above number for the applicable brokerage
commission and any other questions you may have concerning the sale of Wyndham
Shares.
3. Direct Payment to General Partner
[ ] I elect to repay my WEL Indebtedness by making a
payment from my own resources directly to the General
Partner, which will cause the funds to be remitted to
the holders of the WEL Indebtedness.
By making this election, you are choosing to repay your WEL
Indebtedness from your own resources. If you choose this election, you must
include with this form a check made payable to Wyndham Hotel Management
Corporation (the General Partner) in an amount equal to the amount of WEL
Indebtedness set forth on your individual account statement included in the
accompanying materials. The General Partner will cause the funds to be remitted
to the holders of the WEL Indebtedness. Once the funds have been received by
the holders of the WEL Indebtedness, a stock certificate representing your
Wyndham Shares will be mailed to you by Wyndham's transfer agent, Chemical
Mellon Shareholder Services L.L.C..
RESALE OF WYNDHAM SHARES
Whether or not you elect to make sales to repay WEL Indebtedness, you
may choose to sell some or all of your Wyndham Shares through Smith Barney
during the "Resale Window" following the Solicitation Period, subject to
compliance with the Company's insider trading policy. The Resale Window is
expected to begin on Tuesday, February 11, 1997. At the end of the Resale
Window, no resale of Wyndham Shares will be permitted until March 10, 1997. If
you are considered an "affiliate" of the Company, you must comply with certain
other securities law considerations in connection with any sale. See "Plan of
Distribution -- Resale Restrictions" in the Prospectus.
If you would like to sell Wyndham Shares during the Resale Window,
contact Smith Barney at the number listed above.
Sales made during the Resale Window will be made on the open market
by Smith Barney based upon the market price for Wyndham Common Stock as
reported on the New York Stock Exchange. If you choose to sell shares during
the Resale Window, you also may choose the day in the week of the Resale Window
on which you like such sale to occur. In order to choose the day, you must
notify Smith Barney at the above number by 3:00 p.m., Dallas time, on the day
prior to the day on which you would like to sell your shares.
You will be charged a brokerage commission that will be discounted
50% from the published Smith Barney rate in connection with such sales. The
applicable Smith Barney rate varies depending on the number of shares sold. To
obtain the applicable commission rate, contact Smith Barney at the above
number. Smith Barney will send you a check for the proceeds from the sale less
the amount of the sales commission or will credit such amount to your Smith
Barney Account.
Date: _______________________
_____________________________
Signature of WEL Participant:
_____________________________
Print Name:
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WEL PARTICIPANTS WHO HAVE CHOSEN TO REPAY WEL INDEBTEDNESS THROUGH A
PARTICIPANT LOAN FROM SMITH BARNEY OR FROM THE PROCEEDS OF THE SALE OF WYNDHAM
SHARES MUST COMPLETE AND RETURN THIS IRREVOCABLE LETTER OF AUTHORIZATION TO
WYNDHAM HOTEL MANAGEMENT CORPORATION, 2001 BRYAN STREET, SUITE 2300, DALLAS,
TEXAS 75201, ATTENTION: ELSE TURNER.
IRREVOCABLE LETTER OF AUTHORIZATION
Smith Barney
200 Crescent Court
Suite 1200
Dallas, Texas 75201
Attention: Monk White/Stacy Oelsen
RE: Repayment of "WEL Indebtedness" from Smith Barney Account:
_________________________________________________________
(Fill in your Smith Barney account name and number)
Gentlemen:
The undersigned irrevocably authorizes and directs you, upon the transfer of
shares of Wyndham Hotel Corporation Common Stock to the above-mentioned Smith
Barney brokerage account (the "Account") from Wyndham Employees Ltd., to issue
a check from the Account made payable to Wyndham Hotel Management Corporation
in the amount of $_________ (amount of your WEL Indebtedness). Please have the
check delivered to the following address: C/O Wyndham Hotel Management
Corporation, 2001 Bryan Street, Suite 2300, Dallas, Texas 75201, Attention:
Elise Turner.
The authority conferred by this letter of authorization is irrevocable and
cannot be terminated by any act of the undersigned or by operation of law,
whether by the death or incapacity of the undersigned or by the occurrence of
any other event or events. If, however, no shares of Wyndham Common Stock are
transferred to the Account by April 1, 1997, the authority conferred pursuant
to this letter shall terminate automatically.
Very Truly Yours,
____________________________________ If joint Account, signature of spouse:
(Signature of WEL Participant)
Print Name: ________________________ ______________________________________
Print Name: __________________________
Date: ______________________________ Date: ________________________________
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ALL WEL PARTICIPANTS MUST SIGN AND RETURN THIS ACKNOWLEDGEMENT AND
RELEASE PRIOR, TO RECEIVING ANY WYNDHAM SHARES, TO WYNDHAM HOTEL MANAGEMENT
CORPORATION, 2001 BRYAN STREET, SUITE 2300, DALLAS, TEXAS 75201, ATTENTION:
ELISE TURNER.
ACKNOWLEDGEMENT AND RELEASE
In accordance with the Plan of Distribution, you hereby agree to
release WEL, other WEL Participants, the General Partner and its officers and
directors, and the Company and its officers and directors (collectively, the
"Released Parties"), effective automatically upon distribution of the Wyndham
Shares by WEL, from all claims and demands of any kind or nature that you may
have arising from or related to your interest in WEL. This release includes,
but is not limited to, a waiver and release by you of all claims and demands
concerning (i) the value of your ownership interest in WEL, (ii) the number of
Wyndham Shares to which you are entitled in the Plan of Distribution and the
methodology used to determine such number, and (iii) the fairness of the Plan
of Distribution. This also includes, but is not limited to, a release of all
claims concerning the General Partner's past management of the affairs of WEL,
including the WEL Investments, and the valuation of the Other Assets. By
signing this release and accepting your Wyndham Shares, you are (i)
acknowledging that you are entitled only to the number of Wyndham Shares
appearing on your individual account statement accompanying these materials and
(ii) agreeing not to make or pursue any of the foregoing claims against the
Released Parties and not to file or become a party to a lawsuit advancing such
claims. This release covers both known and unknown claims.
This release shall by governed by the laws of the State of Texas.
Capitalized terms that are used herein but not defined have the meanings set
forth in the Prospectus/Consent Solicitation Statement dated January 27, 1997
relating to the distribution by Wyndham Employees Ltd., a Texas limited
partnership, of shares of common stock of Wyndham Hotel Corporation, a Delaware
corporation.
ACCEPTED AND AGREED TO:
Print Name:
- --------------------------------- --------------------------
(Name of WEL Participant)
Date:
----------------------------
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PROSPECTUS/CONSENT SOLICITATION STATEMENT
646,669 SHARES
WYNDHAM HOTEL CORPORATION
COMMON STOCK
This Prospectus/Consent Solicitation Statement (this "Prospectus")
relates to the proposed distribution of 646,669 shares of Common Stock, $.01
par value per share (the "Wyndham Shares"), of Wyndham Hotel Corporation (the
"Company") to the 91 participants ("WEL Participants") of Wyndham Employees
Ltd. ("WEL"). The proposed distribution of the Wyndham Shares is part of a plan
(the "Plan of Distribution" or the "Plan") that will result in the dissolution
and termination of WEL. The Plan of Distribution must be approved by WEL
Participants holding a majority of the percentage interests in WEL.
This Prospectus also constitutes a solicitation by Wyndham Hotel
Management Corporation, the General Partner of WEL (the "General Partner"), of
consents of WEL Participants to the Plan of Distribution, as more particularly
described herein. No special meeting of WEL Participants has been scheduled to
vote upon the Plan of Distribution. For instructions regarding the voting
procedures required to approve the Plan of Distribution, see "Plan of
Distribution -- Required Vote."
The Wyndham Shares will be distributed to WEL Participants as soon as
practicable following the General Partner's receipt of approval of the Plan of
Distribution by the WEL Participants, at which time certificates representing
the shares will be issued and delivered to each WEL Participant or his or her
duly authorized representative. The Wyndham Shares will be distributed in
accordance with the provisions of the Amended and Restated Agreement of Limited
Partnership of WEL (the "WEL Agreement") and will be subject to each WEL
Participant's pro rata share of WEL indebtedness.
Each WEL Participant will be permitted to borrow funds (the
"Participant Loans") from Smith Barney Inc. pursuant to a margin loan in an
amount equal to such participant's share of outstanding WEL indebtedness. The
Participant Loans will be used to repay such indebtedness in connection with
the distribution of the Wyndham Shares. The Participant Loans will be payable
on demand, will bear interest at a floating rate and will be secured by Wyndham
Shares with a market value that initially must equal 2.0 times the outstanding
balance of the Participant Loan. If a WEL Participant elects not to take out a
Participant Loan or to have Wyndham Shares sold to repay his or her share of
outstanding WEL indebtedness, such participant will be required to otherwise
repay his or her WEL indebtedness prior to receipt of any Wyndham Shares.
After the Wyndham Share distribution and the winding up of WEL's
business, any remaining assets will be distributed to WEL Participants and WEL
will be terminated. The assets of WEL currently consist of only the Wyndham
Shares and cash. WEL will reimburse the Company for certain costs incurred in
connection with the liquidation and dissolution of WEL. The costs and expenses
of registration of the Wyndham Shares under the Securities Act of 1933, as
amended, will be borne by the Company.
THE GENERAL PARTNER BELIEVES THAT THE TERMS OF THE PLAN OF
DISTRIBUTION ARE FAIR AND IN THE BEST INTERESTS OF WEL PARTICIPANTS. THE
GENERAL PARTNER HAS APPROVED THE PLAN OF DISTRIBUTION AND RECOMMENDS THAT WEL
PARTICIPANTS VOTE FOR THE PLAN OF DISTRIBUTION.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED BY WEL PARTICIPANTS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JANUARY 27, 1997
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TABLE OF CONTENTS
Prospectus Summary........................................................................................... 2
Risk Factors................................................................................................. 14
The Plan of Distribution..................................................................................... 22
Dividend Policy.............................................................................................. 34
Price Range of Common Stock.................................................................................. 35
Capitalization............................................................................................... 36
Pro Forma Consolidated Financial Data........................................................................ 37
Selected Consolidated Financial Data......................................................................... 43
Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 45
Business..................................................................................................... 56
Management................................................................................................... 89
Certain Relationships and Transactions....................................................................... 100
Principal Stockholders....................................................................................... 108
Shares Eligible for Future Sale.............................................................................. 109
Description of Capital Stock................................................................................. 110
Legal Matters................................................................................................ 115
Experts...................................................................................................... 115
Additional Information....................................................................................... 115
Index to Financial Statements................................................................................ F-1
Amended and Restated Agreement of Limited Partnership of Wyndham Employees Ltd............................... A-1
Plan of Distribution......................................................................................... B-1
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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PROSPECTUS SUMMARY
On May 24, 1996, immediately prior to the consummation of the initial
public offering of the Common Stock of Wyndham Hotel Corporation ("Wyndham" or
the "Company"), the Company succeeded to the hotel management and related
businesses of Wyndham Hotel Company Ltd. ("Old Wyndham"), ownership of 6
Wyndham brand hotels and leasehold interests relating to 12 additional Wyndham
brand hotels. Concurrent with the Company's initial public offering and as part
of its financing plan, the Company issued $100,000,000 aggregate principal
amount of 10 1/2% Senior Subordinated Notes due 2006 (the "Notes"). Unless the
context otherwise requires, the term "Company" or "Wyndham" when used in this
Prospectus refers to Wyndham Hotel Corporation and its combined subsidiaries,
and for the periods prior to May 24, 1996, includes the operations of Old
Wyndham and the Company's other predecessors. The following summary is
qualified in its entirety by the more detailed information and combined
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus.
INTRODUCTION
Wyndham Hotel Corporation is a national hotel company operating
upscale hotels primarily under the Wyndham brand name. Wyndham hotels are
located in 26 states, the District of Columbia, Ontario, Canada and on 5
Caribbean islands. Wyndham hotels compete with national hotel chains such as
Marriott, Hyatt and Hilton. The Company offers three distinct full service
hotel products under the Wyndham brand designed to serve its core upscale
customers in urban, suburban and select resort markets. At January 15, 1997,
the Company's hotel portfolio consisted of 80 hotels operated by the Company
and 2 franchised hotels (the "Portfolio"). The Company's Portfolio consists of
76 upscale hotel properties (which includes four properties under renovation)
and 6 extended-stay hotel properties, which the Company began managing in
September 1996.
This Prospectus relates to the proposed distribution by WEL of 646,669
Wyndham Shares held by WEL to 91 WEL Participants. The proposed distribution of
the Wyndham Shares is part of a Plan of Distribution that would result in the
dissolution and termination of WEL. The Plan of Distribution must be approved
by the holders of a majority of the percentage interests held by all WEL
Participants.
THE PLAN OF DISTRIBUTION
GENERAL
WEL was established in 1990 by Old Wyndham as an equity participation
program designed to enable WEL Participants to receive indirect equity
interests in Old Wyndham, certain hotels managed by Old Wyndham and certain
hotel-related assets (collectively, the "WEL Investments"). Each WEL
Participant received his or her interest in WEL in connection with the
performance of services. In connection with the Company's initial public
offering, WEL received the Wyndham Shares in exchange for WEL's ownership
interest in certain of the WEL Investments. Wyndham Hotel Management
Corporation, as the General Partner of WEL, is proposing the distribution of
the Wyndham Shares to WEL Participants as part of the Plan of Distribution. The
Plan of Distribution must be approved by the holders of a majority of the
percentage interests held by all WEL Participants. Following the Wyndham Share
distribution, the business of WEL will be wound up and WEL will be terminated.
Any assets remaining in WEL following the winding up will be distributed to WEL
Participants. A copy of the Plan of Distribution is attached as Appendix B to
this Prospectus.
The Wyndham Shares will be distributed to WEL Participants as soon as
practicable following the date (the "Plan Effective Date") of the General
Partner's receipt of approval of the Plan of Distribution by WEL Participants.
In accordance with the provisions of the WEL Agreement, the Wyndham Shares will
be distributed to WEL Participants according to the balance in each WEL
Participant's capital account as adjusted in accordance with the WEL Agreement.
In accordance with 1996 amendments to the WEL Agreement, which established the
"EVBS Value" of Wyndham Shares at the initial public
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offering price, or $16.00 per share, Wyndham Shares will be distributed based
on a share price of $16.00. A WEL Participant should refer to the individual
account statement included in the materials accompanying this Prospectus for
the number of Wyndham Shares to be distributed to him or her. The Wyndham
Shares also will be distributed subject to each participant's pro rata share of
"WEL Indebtedness," as described below. For a discussion of the methodology
used to determine the number of Wyndham Shares to be distributed to each WEL
Participant, see "Plan of Distribution -- Distribution Methodology."
As a result of the Wyndham Share distribution, each WEL Participant
will receive directly (subject to payment of his or her share of WEL
Indebtedness) the Wyndham Shares represented by his or her ownership interest
in WEL. As part of the Plan of Distribution, WEL Participants will be permitted
for a period of three business days (the "Resale Window") following the share
distribution to sell his or her Wyndham Shares, subject to compliance with the
Company's Insider Trading Policy and to repayment of any WEL Indebtedness or
Participant Loan secured by the Wyndham Shares being sold. Each WEL Participant
will be restricted under the Plan of Distribution from making any public sale
of his or her Wyndham Shares for a period (the "Lock-Up Period") of three weeks
following the Resale Window. The Resale Window and the Lock-Up Period are
designed to facilitate the resale of the Wyndham Shares on the open market. WEL
Participants who are considered "affiliates" of the Company will also be
required to comply with certain other securities law restrictions in connection
with any such sale. See "Plan of Distribution -- Resale Restrictions." No WEL
Participant is entitled to appraisal or similar rights in connection with the
Plan of Distribution.
REPAYMENT OF WEL INDEBTEDNESS
Since WEL's inception, WEL Investments have been purchased through
loans made to WEL by Wyndham Finance Limited Partnership or its predecessors
("WFLP"). In connection with the Company's initial public offering, the Company
purchased from WFLP the promissory notes evidencing such loans at their face
value, plus accrued interest, as of December 31, 1995. As of November 30, 1996,
the aggregate outstanding balance under such loans was $3,070,654. In addition,
WEL has issued promissory notes in connection with purchasing the interests of
former WEL Participants, the outstanding balance of which was $169,522 as of
November 30, 1996 and has incurred obligations to other former WEL
Participants, which total approximately $520,000. The total indebtedness owed
by WEL from time to time is referred to herein as the "WEL Indebtedness."
In order to facilitate the repayment of the WEL Indebtedness (without
WEL's having to sell any Wyndham Shares to provide funds), the Plan of
Distribution requires that the Wyndham Shares be distributed subject to each
participant's pro rata allocation of WEL Indebtedness. Each WEL Participant
will be permitted to borrow funds under a Participant Loan from Smith Barney
Inc. ("Smith Barney") to repay the WEL Indebtedness. Alternatively, WEL
Participants can elect to have a portion of their Wyndham Shares sold on the
first day of the Resale Window to repay their WEL Indebtedness. If a WEL
Participant elects not to take out a Participant Loan or to have a portion of
his or her Wyndham Shares sold, such participant will be required to otherwise
repay his or her share of WEL Indebtedness prior to receipt of any Wyndham
Shares. IN ORDER FOR A WEL PARTICIPANT TO RECEIVE HIS OR HER WYNDHAM SHARES,
SUCH PARTICIPANT MUST REPAY HIS OR HER SHARE OF WEL INDEBTEDNESS THROUGH A
PARTICIPANT LOAN, BY HAVING A PORTION OF HIS OR HER WYNDHAM SHARES SOLD OR BY
MAKING PAYMENT OF SUCH AMOUNT FROM OTHER SOURCES DIRECTLY TO THE GENERAL
PARTNER WHO WILL THEN REMIT THE FUNDS TO THE HOLDERS OF WEL INDEBTEDNESS. See
"Plan of Distribution -- Repayment of WEL Indebtedness."
The Participant Loans will be margin loans payable on demand and will
be secured by Wyndham Shares with a market value that initially must equal 2.0
times the outstanding balance of the Participant Loan. The Participant Loans
will bear interest at a floating interest rate that will fluctuate based on
short term interest rates. For purposes of illustration, the rate would be 8%
per annum as of the date of this Prospectus. WEL Participants may obtain the
actual rate by contacting Smith Barney. Each WEL Participant who takes out a
Participant Loan will become personally obligated to repay to Smith Barney the
proceeds of such loan and will be subject to the risks generally associated
with margin borrowing. For a discussion of these risks, see "Risk Factors --
Risks Associated with Participant Loans." For a summary of certain terms and
conditions of the Participant Loans, see "The Plan of Distribution -- Repayment
of WEL Indebtedness -- Participant Loans."
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REASONS FOR PLAN OF DISTRIBUTION
WEL was established to enable WEL Participants to receive indirect
equity interests in WEL Investments. The primary purpose of WEL was to attract
and retain key executive and managerial employees and to motivate such
employees to achieve Old Wyndham's long range goals by granting them indirect
equity interests in WEL Investments. In connection with the Company's initial
public offering, the Company adopted the 1996 Wyndham Hotel Corporation
Long-Term Incentive Plan (the "1996 Incentive Plan"), which is a standard
long-term incentive compensation program for key employees of a publicly held
company. The 1996 Incentive Plan has replaced WEL as the Company's primary
ongoing incentive compensation program.
The General Partner believes that the Plan of Distribution is in the
best interests of WEL Participants. There are legal restrictions on the number
of persons who can become WEL Participants without subjecting WEL to
substantial regulatory compliance burdens. In addition, the Company has
determined, for a number of reasons, that WEL will not receive interests in
assets acquired by the Company in the future. Accordingly, the General Partner
believes that WEL's effectiveness as an ongoing incentive compensation program
has become limited. The General Partner also believes, however, that WEL has
served its purpose effectively by assisting in motivating and retaining key
Wyndham personnel that have contributed greatly to the Company's growth since
WEL was established in 1990.
The General Partner also decided to propose the Plan of Distribution
because of the numerous expressions of interest, directly and through the WEL
Steering Committee, by WEL Participants in receiving a distribution of the
Wyndham Shares, and because the distribution is not expected to result in the
recognition of taxable income or loss by WEL Participants until a participant
elects to sell all or any portion of his or her Wyndham Shares. See "Plan of
Distribution -- Federal Income Tax Considerations."
For additional information concerning reasons for the Plan of
Distribution, see "The Plan of Distribution -- Reasons for Plan of
Distribution."
REQUIRED VOTE
As of the date of this Prospectus, based upon a price per share of
$16.00, the Wyndham Shares represent approximately 98% of the overall economic
value of WEL. The WEL Agreement, a copy of which is attached as Appendix A to
this Prospectus, requires approval of the "transfer" of all or substantially
all of WEL's assets by the General Partner and the holders of a majority of the
percentage interests held by all WEL Participants. Because the term "transfer"
is broadly defined under the WEL Agreement, the General Partner has determined
to consider the Plan of Distribution to involve a "transfer" within the meaning
of the WEL Agreement and, therefore, is seeking approval of the Plan of
Distribution by WEL Participants. The Plan of Distribution also will constitute
an event of dissolution under the WEL Agreement. Accordingly, by voting in
favor of the Plan of Distribution, WEL Participants will be voting for (i) the
distribution of the Wyndham Shares to WEL Participants and (ii) the resulting
dissolution and termination of WEL.
VOTING PROCEDURES
This Prospectus, together with the accompanying materials, constitute
the "Solicitation Materials" being distributed to WEL Participants to obtain
their votes for or against the Plan of Distribution. (The power of attorney and
participant consent form included in the Solicitation Materials are referred to
collectively as the "Consent Form.") No special meeting of WEL Participants has
been scheduled to discuss the Solicitation Materials or vote upon the Plan of
Distribution. Only WEL Participants who are limited partners of WEL of record
as of the date of this Prospectus will receive notice of, and will be entitled
to vote with respect to, the Plan of Distribution.
The Solicitation Period is the time period during which WEL
Participants may vote for or against the Plan of Distribution. The Solicitation
Period will commence upon delivery of the Solicitation Materials to WEL
Participants
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(on or about January 29, 1997) and will continue until the later of (a)
February 7, 1997 or (b) such later date as may be selected by the General
Partner and as to which notice is given to WEL Participants. In its discretion,
the General Partner may elect to extend the Solicitation Period. Any Consent
Form received by the General Partner prior to 12:00 noon, Central time, on the
last day of the Solicitation Period will be effective provided that such
Consent Form has been properly completed and signed. If you fail to return a
signed Consent Form by the end of the Solicitation Period, your WEL interest
will be counted as voting AGAINST the Plan of Distribution. WEL Participants
who return a signed Consent Form but fail to indicate their approval or
disapproval of the Plan of Distribution will be deemed to have voted FOR the
Plan. Consent Forms may be withdrawn at any time prior to the expiration of the
Solicitation Period.
CONDITIONS TO PLAN OF DISTRIBUTION
The Plan of Distribution is subject to certain conditions. In
accordance with the terms of the WEL Agreement, the Plan must receive the
approval of WEL Participants holding a majority of the percentage interests in
WEL. In addition, the Plan is conditioned upon the General Partner's not
withdrawing its recommendation of the Plan prior to the distribution of the
Wyndham Shares. The General Partner reserves its right to withdraw its
recommendation in its own discretion at any time prior to such distribution.
See "Plan of Distribution -- Conditions to Plan of Distribution."
DISSOLUTION OF WEL
In connection with the dissolution of WEL, the General Partner, as the
liquidating trustee, will establish a cash reserve in an amount believed to be
sufficient to discharge any remaining liabilities of WEL. Cash held by WEL in
excess of the reserve will be used to retire WEL Indebtedness in conjunction
with the Plan of Distribution. Following the distribution of the Wyndham
Shares, the General Partner will apply the cash reserve from time to time in
payment of, or provision for, WEL's remaining liabilities. WEL will be
terminated upon the earlier of (i) the application of all such cash in payment
of, or provision for, such liabilities, or (ii) 24 months following the Plan
Effective Date (or such other period as may be deemed appropriate by the
General Partner), at which time any cash remaining in WEL will be distributed
to WEL Participants. Because the amount of the cash reserve is expected to be
relatively small, however, the General Partner does not anticipate that there
will be cash remaining for distribution in connection with the dissolution of
WEL.
If the assets of WEL are insufficient to pay all liabilities of WEL
following the distribution of the Wyndham Shares and any cash, then each WEL
Participant may be personally liable to creditors of WEL for such liabilities
(including any unpaid or unmatured liabilities on the termination of WEL) to
the extent of the aggregate of an amount equal to (i) the fair market value of
the Wyndham Shares (net of WEL Indebtedness) received by the WEL Participant in
connection with the Plan of Distribution and (ii) other distributions received
by the WEL Participant from WEL in connection with its dissolution. With
respect to the satisfaction of any such remaining liabilities, however, the
General Partner has agreed to apply first the Wyndham Shares (net of WEL
Indebtedness and taxes) distributed to the General Partner in the Plan of
Distribution. Therefore, WEL Participants should not be exposed to any of the
foregoing liabilities (if any) until the General Partner's Wyndham Shares (net
of WEL Indebtedness and taxes) are exhausted.
RELEASE BY WEL PARTICIPANTS
As part of the Plan of Distribution, WEL Participants agree to release
WEL, other WEL Participants, the General Partner and its officers and
directors, and the Company and its officers and directors from all claims and
demands of any kind or nature that WEL Participants may have arising from or
related to their interest in WEL. This includes, but is not limited to, a
release by WEL Participants of all claims concerning (i) the value of their
ownership interests in WEL, (ii) the number of Wyndham Shares to which they are
entitled in the Plan of Distribution and the methodology used to determine such
number, and (iii) the fairness of the Plan of Distribution. This also includes,
but is not limited to, a release of all claims concerning the General Partner's
past management of the affairs of WEL, including the WEL Investments, and the
valuation of the Other Assets.
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SALE OF OTHER WEL ASSETS
Other than the Wyndham Shares, WEL's assets as of November 30, 1996
consisted of approximately $215,000 in cash. Prior to the proposed Plan of
Distribution, WEL owned 5% limited partnership interests in nine partnerships
that own hotels managed by Wyndham, and five partnerships and one corporation
that own hotel-related assets (the "Other Assets"). Because of the relatively
low aggregate economic value of WEL's interests in these entities, as well as
the relative illiquidity of such interests, effective as of October 15, 1996,
the General Partner transferred the Other Assets to affiliates of the Company
in consideration for the assumption of $619,200 in indebtedness owed by WEL
with respect to such assets. The valuation and transfer of the Other Interests
was approved by a committee (the "WEL Steering Committee") composed of seven
WEL Participants selected by the Company. See " -- Conflicts of Interest."
CONFLICTS OF INTEREST
The Plan of Distribution was proposed and structured by the General
Partner in consultation with the WEL Steering Committee. Trammell S. Crow and
James D. Carreker are the sole stockholders and are on the Board of Directors
of the General Partner. The General Partner owns a 1% interest in WEL.
Consequently, in the event the Plan of Distribution is approved, Messrs. Crow
and Carreker will receive indirectly an aggregate of 6,466 Wyndham Shares,
which may cause a conflict of interest in the General Partner's recommendation
of the Plan of Distribution. In resolving any conflicts of interest, the
General Partner must act in accordance with its fiduciary duties to the WEL
Participants.
The Other Assets were transferred to Mr. Carreker, Leslie V. Bentley,
Anne L. Raymond and Stanley M. Koonce (collectively, the "Senior Executive
Officers") and entities in which Mr. Trammell S. Crow and Mr. Harlan R. Crow,
who also is on the Board of Directors of the General Partner, have an ownership
interest. The valuation of the Other Assets was determined according to
negotiations between the General Partner on behalf of WEL, and representatives
of the Crow Family and the Senior Executive Officers. WEL was represented by
Anne L. Raymond, who is an officer of the General Partner and Executive Vice
President and Chief Financial Officer of the Company. Ms. Raymond holds no
ownership interest in WEL, but received an ownership interest in the Other
Assets. WEL also was represented by the WEL Steering Committee. During the
course of the negotiations, the WEL Steering Committee proposed the transfer of
the Other Assets in consideration for the assumption of $619,200 in debt owed
by WEL. This proposal was accepted by representatives of the Senior Executive
Officers and Messrs. Trammell S. Crow and Harlan R. Crow. Nevertheless, no
independent third party was engaged to value the Other Assets. Furthermore,
while Messrs. Trammell S. Crow and Carreker indirectly have ownership interests
in WEL, Messrs. Crow and Carreker may not have the same interests in the Plan
of Distribution as WEL Participants. There are no assurances that if the
purchase of the Other Assets were the result of completely arm's-length
negotiations the resulting purchase price would not be higher than the purchase
price that was actually paid.
TAX CONSEQUENCES OF PLAN OF DISTRIBUTION
For a discussion of the federal income tax considerations in
connection with the Plan of Distribution, see "Plan of Distribution -- Federal
Income Tax Considerations."
THE COMPANY
Wyndham Hotel Corporation is a national hotel company operating
upscale hotels primarily under the Wyndham brand name. Wyndham hotels are
located in 26 states, the District of Columbia, Ontario, Canada and on 5
Caribbean islands. Wyndham hotels compete with national hotel chains such as
Marriott, Hyatt and Hilton. The Company offers three distinct full service
hotel products under the Wyndham brand designed to serve its core upscale
customers in urban, suburban and select resort markets. At January 15, 1997,
the Company's hotel portfolio consisted of 80 hotels operated by the Company
and 2 franchised hotels (the "Portfolio"). The Company's Portfolio consists of
76 upscale hotel properties (which includes four properties under renovation)
and 6 extended-stay hotel properties, which the Company began managing in
September 1996.
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WYNDHAM BRAND
Wyndham has focused on developing a brand name that is nationally
recognized in the upscale hotel market, and on earning the loyalty of its core
upscale customers: individual business travelers, business groups and other
group customers, and leisure travelers. Because Wyndham has operating control
over more than 98% of the hotels operated under the Wyndham brand name, it is
able to consistently deliver quality products and services throughout its hotel
system and generate the marketing programs necessary to maintain the quality
associated with the Wyndham name. According to written guest surveys conducted
by Wyndham at its hotels during 1995, 91% of Wyndham guests surveyed rated the
overall quality of Wyndham hotel products and services good or excellent, and
94% of the guests surveyed indicated that they would return to that Wyndham
hotel on their next trip to the same city. The Company believes that growing
national recognition of the Wyndham brand, together with the quality and
efficiency of Wyndham hotel operations, has facilitated the Company's
historical growth and will enhance its ability to realize its future growth
objectives.
MULTIPLE UPSCALE HOTEL PRODUCTS
Wyndham offers three distinct full service hotel products under a
single brand name that are tailored to urban, suburban and select resort
markets, the primary markets that serve its core upscale customers.
o Wyndham Hotels. In urban markets, the Company operates or
franchises 22 large upscale hotels under the Wyndham brand
("Wyndham Hotels"), which contain an average of approximately 400
hotel rooms, generally between 15,000 and 250,000 square feet of
meeting space, and a full range of guest services and amenities.
Wyndham Hotels are targeted principally at business groups and
other group customers, as well as individual business travelers.
o Wyndham Garden Hotels. In suburban markets, Wyndham operates 40
mid-size hotels under the name "Wyndham Garden"R ("Wyndham Garden
Hotels"), which were created by the Company to cater to
individual business travelers and small business groups. (The
Company operates four additional hotels under brand names other
than the Wyndham brand, which are scheduled to become Wyndham
Garden Hotels following renovations that are currently underway.
Two of these hotels are scheduled to be converted by the first
quarter of 1997, and two are scheduled to be converted by the
second quarter of 1997.) With guest services, hotel finishings
and landscaping comparable to Wyndham Hotels, Wyndham Garden
Hotels are designed to provide a guest experience similar to that
enjoyed at Wyndham Hotels, but at a price that is competitive in
suburban markets. The Company locates Wyndham Garden Hotels
primarily near suburban business centers and airports and, where
possible, seeks to cluster these hotels in a "hub-and-spoke"
distribution pattern around one or more Wyndham Hotels in order
to achieve operating and marketing efficiencies and enhance local
name recognition. Wyndham Garden Hotels are full service upscale
hotels containing between approximately 150 and 225 hotel rooms
that offer a package of services and amenities focused on the
needs of the business traveler, including generally between 1,500
and 5,000 square feet of meeting space, restaurants that serve
three meals a day, exercise rooms, and laundry and room service.
o Wyndham Resorts. Wyndham's Portfolio also includes seven resort
hotels ("Wyndham Resorts") that are full service destination
resorts targeted at upscale leisure and incentive travelers and
are located both domestically and on five Caribbean islands.
Through Wyndham Resorts, the Company is able to offer guest
rewards and other cross-promotional benefits to its domestic
customers, thus improving Wyndham's competitiveness and brand
loyalty.
EXTENDED-STAY HOTEL PRODUCT
The Company manages six extended-stay hotel properties, which
following planned renovations will be operated under the Homegate Studios &
Suites brand name. These hotels are located in Texas and are targeted at
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business travelers, professionals on temporary work assignments, persons
between domestic situations and persons relocating or purchasing a home, who
often desire accommodations for an extended duration. These midprice hotels
contain approximately 125 rooms and feature a fully equipped kitchen, upscale
residential-quality finishes and accessories, and separation between cooking,
living and sleeping areas.
PORTFOLIO OF OWNED, LEASED AND MANAGED HOTELS
Wyndham believes that the stability of its Portfolio of owned, leased
and managed hotels provides a strong foundation for the implementation of its
growth strategy. Wyndham's Portfolio consists of 10 owned hotels, 13 leased
hotels, 57 managed hotels and 2 franchised hotels. Of the Company's 13 leased
hotels, 12 are leased from an unaffiliated third party pursuant to one or more
long-term leases with an initial term of approximately 16 years and renewals
for 48 additional years that the Company may elect to exercise. The remaining
leased hotel is leased from an unaffiliated third party pursuant to a lease
with a remaining term of 22 years. The average remaining term at November 30,
1996 of the Company's 46 management contracts for Wyndham brand hotels was 14
years (including renewals that the Company may elect to exercise), with shorter
terms for 2 of the Company's 3 non-branded upscale hotel management contracts.
The management contracts relating to the Company's six extended-stay hotel
properties have ten-year terms. See "Business -- Management Contracts." The
Company believes that the stability of its management contracts is enhanced by
the fact that 16 of the upscale hotel management contracts for hotels operated
by the Company relate to hotels in which Mr. and Mrs. Trammell Crow, various
descendants of Mr. and Mrs. Trammell Crow and various corporations,
partnerships, trusts and other entities beneficially owned or controlled by
such persons (collectively, the "Crow Family Members") have interests. Crow
Family Members own approximately 47.3% of the outstanding Common Stock.
Seventeen additional upscale hotel management contracts for hotels managed by
the Company relate to hotels owned by entities (together with certain
affiliates, "Bedrock") and an institutional investor organized by the Hampstead
Group L.L.C. ("Hampstead"), which owns approximately 11.4% of the outstanding
Common Stock. The Company's six extended-stay hotel management contracts relate
to hotels owned by Homegate Hospitality, Inc., of which affiliates of Crow
Family Members, Trammell Crow Residential Company ("Trammell Crow Residential")
and Greystar Capital Partners, L.P. ("Greystar") were founders and remain
principal stockholders. See "Risk Factors -- Dependence on Management Contracts
and on Certain Hotel Owners" and "Principal Stockholders."
OPERATING AND FINANCIAL PERFORMANCE
The Company seeks to maximize revenues through its comprehensive
marketing strategy and the delivery of high quality accommodations and hotel
services that result in satisfied, loyal hotel guests. The Company believes
that this strategy has resulted in strong operating performance. During 1995,
the average occupancy rates, average daily room rates (total room revenues
divided by the total number of rooms occupied) ("ADR") and revenue per
available room (ADR multiplied by the average occupancy percentage) ("REVPAR")
for upscale Portfolio hotels were 69%, $88.79 and $60.96, respectively,
compared with an average during this period of 69%, $80.38 and $55.06,
respectively, in the upscale segment of the lodging industry. See "Business --
The Company's Hotels." During the nine months ended September 30, 1996 (the
"1996 First Nine Months"), average occupancy rates, ADR and REVPAR for upscale
Portfolio hotels were 70%, $92.24 and $64.93, respectively, compared with an
average during this period of 70%, $85.74 and $60.33, respectively, in the
upscale segment of the lodging industry.
The Company believes that its experience as a hotel owner makes it a
better hotel manager by keeping it focused on controlling each element of
operating expenses, which is essential to achieving attractive returns for both
the Company's hotels and managed hotels. The gross operating profit margins for
the 30 Wyndham brand hotels that have been operated by the Company since
January 1, 1993 ("Comparable Hotels") for 1993, 1994 and 1995 were 32%, 34% and
36%, respectively, and for the nine months ended September 30, 1995 (the "1995
First Nine Months") and the 1996 First Nine Months were 36% and %,
respectively. In comparison, the average for the upscale full service segment
of the lodging industry was 30%, 31% and 33%, respectively, during 1993, 1994
and 1995. (Gross operating profit margin statistics for the lodging industry
are not yet available for 1996.) Gross operating profit per available room for
Comparable Hotels in 1993, 1994 and 1995 was $9,612, $11,417 and $12,547,
respectively, compared to the average for the upscale full service segment of
the lodging industry of $8,397, $9,364 and $10,470, respectively, during 1993,
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1994 and 1995. (Gross operating profit per room statistics for the lodging
industry also are not yet available for 1996.) For a presentation of certain
financial data for the Company's entire hotel Portfolio, see " -- Summary
Combined Financial and Other Data" below. See "Business -- Operating Strategy."
MARKETING STRATEGY
Wyndham has a full complement of sales and marketing capabilities
designed to maximize hotel revenues and brand awareness. The Company's direct
sales program at the hotel level, implemented by a sales force of almost 500
representatives, is designed to "pull" local business into each hotel and in
1995 accounted for over 60% of room revenues at Wyndham brand hotels. The
Company also has a national sales team that focuses on major corporate, group
and association accounts and seeks to "push" business into Wyndham hotels on a
nationwide basis. Over 35% of Wyndham's hotel room revenues in 1995 were booked
through Wyndham's central reservations system, which features a single
telephone number for all Wyndham brand hotels (800-WYNDHAM). See "Business --
Customers and Marketing."
GROWTH STRATEGY
The Company intends to continue focusing on both internal
growth--enhancing the revenues, cash flow and profitability of its existing
hotels, and external growth--increasing the number of hotels in its Portfolio.
The Company believes that the primary factors contributing to internal growth
include (i) revenue increases resulting from continuing improvements in the
upscale segment of the lodging industry and continuing maturation of 41 hotels
added since the beginning of 1995 (including 14 Wyndham Garden Hotels and four
additional hotels under renovation that will be converted to the Wyndham Garden
brand), and (ii) improved operating margins resulting from operating leverage
and Wyndham's continued emphasis on controlling operating expenses.
The Company's external growth strategy is to continue to increase the
number of Wyndham brand hotels in the upscale full service segment of the
lodging industry. In addition, the Company expects to increase the number of
management contracts for extended-stay hotel properties in its Portfolio
operated under the Homegate Studios and Suites brand name. The near-term focus
of the Company's external growth strategy will be to increase the Wyndham
Portfolio through additional management contracts, "like new" renovations of
acquired properties, other acquisitions and joint ventures. The Company also
will consider franchising and hotel construction, depending on market
conditions. In addition, the Company expects to continue its evaluation of
other new hotel products that may be offered under the Wyndham brand. In
executing this growth strategy, the Company will continue to rely on its senior
executive officers (James D. Carreker, Leslie V. Bentley, Anne L. Raymond and
Stanley M. Koonce) (the "Senior Executive Officers").
See " -- Portfolio Additions."
The Company's strategic business relationships with Crow Family
Members and Bedrock, which collectively own approximately 58.7% of the
Company's Common Stock, have played an important role in the Company's growth
to date. The Company believes that these and other business relationships will
facilitate future growth by providing potential management contract,
acquisition, renovation and development opportunities. See "Business -- Growth
Strategy." The Company believes that its ability to achieve both internal and
external growth will help attract third party debt and equity capital to help
fund the growth of the Company's Portfolio. The Company has substantial capital
available for growth from a $100 million revolving credit facility (the
"Revolving Credit Facility"). As of November 30, 1996, $35.7 million was
available for borrowings under the Revolving Credit Facility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
PORTFOLIO ADDITIONS
Since the Company's initial public offering, the Company has added on
a net basis four hotel management contracts to its base of 47 managed upscale
hotel properties and acquired a third property that has been managed by the
Company since it was built in 1988. This property, the 159 room Wyndham Garden
Hotel -- Vinings, was acquired from an unaffiliated third party in May 1996.
- 9 -
22
The Company has acquired three additional upscale hotels since its
initial public offering. In July 1996, the Company acquired from an
unaffiliated third party a 181 room hotel located in the Overland Park, Kansas
metropolitan area. This hotel is currently being operated by the Company as a
Best Western Hotel during renovations that are underway. The Company expects
that this hotel will be converted to a Wyndham Garden Hotel in the first
quarter of 1997. In August 1996, the Company acquired from an unaffiliated
third party a 230 room hotel located in Dallas, Texas. This hotel is currently
being operated by the Company as a Quality Inn Hotel during renovations that
are underway. The Company expects that this hotel will be converted to a
Wyndham Garden Hotel in the first quarter of 1997. In August 1996, the Company
also acquired the Wyndham Bristol Hotel at Toronto Airport. This Wyndham Hotel,
which was acquired from an unaffiliated third party, contains 287 rooms and is
located in the Toronto, Canada Metropolitan area.
In August 1996, a subsidiary of the Company entered into a master
management assistance agreement (the "Homegate Agreement") with Homegate
Hospitality, Inc. ("Homegate"), a newly formed public company, pursuant to
which the Company is to provide to Homegate hotel management, purchasing,
marketing and technical services for mid-price extended-stay hotel properties
to be developed by Homegate. The hotel properties will be operated under the
name Homegate Studios and Suites and are targeted principally at business
travelers, professionals on temporary work assignments, persons between
domestic situations and persons relocating or purchasing a home, who often
desire accommodations for an extended period of time. The Homegate Agreement
provides for the Company to manage up to 60 extended-stay properties pursuant
to separate 10-year management contracts. Affiliates of Crow Family Members,
Trammell Crow Residential and Greystar were founders and remain principal
stockholders of Homegate. In addition, James D. Carreker and Harlan R. Crow
serve on the board of directors of Homegate. Since its initial public offering,
the Company has added six management contracts for extended-stay hotel
properties. Following planned renovations, five of these properties will be
converted to the Homegate Studios and Suites brand. See "Business."
In January 1997, Hospitality Properties Trust, a publicly traded real
estate investment trust, purchased the Doubletree Hotel in Salt Lake City from
City Hotels, S.A., a Belgian real estate Company, for $44 million. Hospitality
Properties Trust leased the property back to a subsidiary of the Company
pursuant to a lease with an initial term ending December 31, 2012 plus renewals
for 48 additional years that the Company may elect to exercise. The 381 room
hotel will be operated as a Wyndham Hotel. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
All statistics set forth in this Prospectus relating to the lodging
industry (other than Wyndham statistics) are from, or have been derived from,
information published or provided by Smith Travel Research, an industry
research organization. Smith Travel Research has not provided any form of
consultation, advice or counsel regarding any aspect of the proposed Plan of
Distribution, and Smith Travel Research is in no way associated with the
proposed Plan of Distribution.
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23
SUMMARY CONSOLIDATED FINANCIAL AND OTHER
DATA (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING,
MARGIN AND RATIO DATA)
The following table sets forth summary financial data for the Company.
The table also sets forth summary pro forma financial data for the Company as
if the Company's initial public equity offering and the issuance of the Notes
and the other transactions described under "Pro Forma Consolidated Financial
Data" had occurred at the beginning of 1995.
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------- ------------------------------------
(UNAUDITED)
PRO
PRO FORMA FORMA
1993 1994 1995 1995 1995 1996 1996
---- ---- ---- ---- ---- ---- ----
Portfolio Hotel Revenues(1) $ 345,733 $ 394,949 $ 534,204 N/A $ 379,625 $ 489,639 N/A
Statement of Income Data:
Revenues:
Hotel Revenues $ 43,921 $ 51,799 $ 54,673 $ 132,001 $ 41,685 $ 71,302 $ 105,461
Management Fees 10,731 13,302 16,921 14,274 11,909 16,546 15,426
Service Fees 2,127 2,904 4,120 3,391 2,823 2,961 2,616
Reimbursements 4,164 8,004 10,836 9,095 7,735 10,812 10,341
Other income 334 257 1,340 1,500 1,349 320 320
--------- ---------- ---------- ---------- ---------- ---------- ----------
Total Company Revenues 61,277 76,266 87,890 160,261 65,501 101,941 134,164
Operating costs and expenses 54,183 63,929 73,264 139,574 53,474 84,444 113,058
Operating income 7,094 12,337 14,626 20,687 12,027 17,497 21,106
Interest Expense, net (7,075) (7,526) (8,021) (13,278) (6,167) (6,944) (8,683)
Income before income taxes and
extraordinary item 1,654 6,265 7,949 8,193 6,901 11,172 13,013
Income taxes benefit(2) -- -- -- -- -- 10,388 --
Pro forma income taxes(2) -- -- -- (3,235) -- -- (5,140)
Net income 1,654 6,265 7,949 4,958 6,901 20,429 7,873
Historical net income as adjusted for pro
forma income tax 4,809 4,175 N/A
Historical net income as adjusted per
common share(3) .24 .21 1.02
Common shares outstanding(3) 20,018 20,018 20,018
Pro forma net income per share -- -- -- .25 -- -- .39
Pro forma common shares outstanding -- -- -- 20,018 -- -- 20,018
Portfolio Hotel Operating Data:(4)
Number of hotels(5) 47 53 66 64 74
Number of rooms(5) 12,116 12,866 17,604 17,186 18,601
Occupancy percentage(6) 65% 68% 69% 71% 70%
ADR(7) $ 80.60 $ 86.13 $ 88.79 $ 88.50 $ 92.24
REVPAR(8) $ 52.45 $ 58.84 $ 60.96 $ 62.65 $ 64.93
Gross operating profit margin(9) 26% 30% 29% 30% 32%
Food and beverage margin(10) 25% 25% 26% 24% 24%
Gross operating profit per available
room(11) $ 8,254 $ 10,628 $ 10,978 $ 8,225 $ 9,417
Comparable Hotel Operating Data:(12)
Number of hotels 30 30 30 30 30
Number of rooms 7,334 7,334 7,334 7,334 7,334
Occupancy percentage(6) 67% 70% 72% 74% 73%
ADR(7) $ 76.39 $ 80.16 $ 84.38 $ 84.18 $ 91.96
REVPAR (8) $ 51.31 $ 56.09 $ 60.99 $ 61.94 $ 66.85
Gross operating profit margin(9) 32% 34% 36% 36% 37%
Food and beverage margin(10) 29% 31% 31% 30% 28%
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24
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------- ------------------------------------
(UNAUDITED)
PRO
PRO FORMA FORMA
1993 1994 1995 1995 1995 1996 1996
---- ---- ---- ---- ---- ---- ----
Gross operating profit per available
room(11) $ 9,612 $ 11,417 $ 12,547 $ 9,379 $ 10,306
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
1995 1996
ACTUAL ACTUAL
------ ------
Balance Sheet Data:
Cash and cash equivalents $ 4,160 $ 20,147
Total assets 133,403 240,091
Long-term obligations including current
portion 90,978 130,664
Total partners' capital and
stockholders' equity 17,557 71,916
(1) Represents unaudited revenues of hotels owned, leased or managed by
the Company, as distinguished from Total Company Revenues.
(2) For the years 1993 through 1995 and the first five months of 1996,
Wyndham made no provision for income taxes because the combined
company was a combination of partnerships, S corporations and a
nontaxable Bermuda corporation that are not subject to U.S. federal
income taxes. Since the Company's formation in late May 1996, income
taxes have been provided. The provision for income taxes to arrive at
pro forma net income assumes a combined federal and state effective
income tax rate of 39.5% computed as follows:
Federal income tax rate 35.0%
Weighted average state income tax rate (net of federal benefit) 4.5%
----
39.5%
The income tax benefit reflects the recognition of deferred income tax
associated with the change in tax status of the Company that occurred
in connection with the Company's initial public offering in May 1996.
(3) Historical net income as adjusted per common share is based on
historical net income as adjusted for pro forma income tax divided by
the number of shares issued in the initial public offering of the
Company as if the Company had been a corporation prior to its
formation in May 1996.
(4) Includes hotels owned, leased, managed or franchised during the
periods presented, except data for gross operating profit margin, food
and beverage margin and gross operating profit per available room
excludes the Company's franchised property, for which the information
is not available. The number of hotels listed in 1994 does not include
7 hotels for which the Company had signed management contracts that
were closed for renovations or construction in that period. Occupancy,
ADR, REVPAR, margin data and gross operating profit per available room
exclude extended-stay hotels. Annual changes in occupancy percentage,
ADR and REVPAR and fluctuations in gross operating profit margins for
the Company's Portfolio of hotels have been affected by the addition
of newly opened or renovated Wyndham brand hotels, which typically
begin operations with lower occupancy rates, ADR, REVPAR and margins
than mature hotels and improve over time as the hotels benefit from
Wyndham's operating standards and become integrated into Wyndham's
sales and marketing programs and central reservations system. There
can be no assurance that the Company's hotels opened or renovated
subsequent to January 1, 1993 will achieve occupancy rates, ADR,
REVPAR or operating results comparable to the Comparable Hotels.
(5) At end of period.
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25
(6) Occupancy percentage represents total rooms occupied divided by total
available rooms. Total available rooms represents the number of rooms
available for rent multiplied by the number of days in the reported
period.
(7) ADR represents total room revenues divided by the total number of
rooms occupied.
(8) REVPAR represents total room revenues divided by total available rooms.
(9) Gross operating profit margin represents gross operating profit as a
percentage of total revenues. "Gross operating profit" represents
gross revenues less department expenses and undistributed operating
expenses. Gross operating profit margins are included herein because
management uses them as a measure of hotel operating performance and
because management believes that these items are useful in making
industry comparisons.
(10) Food and beverage margin represents food and beverage operating profit
as a percentage of food and beverage revenues.
(11) Gross operating profit per available room represents gross operating
profit divided by total available rooms for the period. Gross
operating profit per available room for Portfolio Hotel Operating Data
has been calculated by dividing the gross operating profit for the
hotels operated by the Company during the entire period presented by
the total available rooms for such hotels.
(12) The Company has chosen a Comparable Hotel data set based on Wyndham
brand hotel properties operated by the Company since January 1, 1993
because the Company believes that these 30 hotels have been operated
by the Company for a sufficient period of time to provide meaningful
period-to-period comparisons and that these hotels fully reflect the
Company's operating capabilities.
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26
RISK FACTORS
In addition to the other information contained in this Prospectus, WEL
Participants should consider carefully the following factors in evaluating and
determining whether to vote for the Plan of Distribution.
RISKS ASSOCIATED WITH PARTICIPANT LOANS
A WEL Participant who chooses to borrow funds from Smith Barney
(referred to herein as a "Margin Borrower") through a Participant Loan will be
subject to the risks generally associated with margin borrowing. The margin
loan must be secured by the pledge of a portion of the Margin Borrower's
Wyndham Shares. The Wyndham Shares must have an initial market value of at
least 2.0 times the outstanding balance of the Participant Loans. In addition,
the value of the Wyndham Shares serving as collateral must remain at least 1.7
times the outstanding Participant Loan balance throughout the term of the loan.
The latter requirement is referred to as a "Margin Maintenance Requirement."
The market price of Wyndham Common Stock could be subject to significant
fluctuations in response to a number of factors. See " -- Price Volatility." A
decrease in the market value of Wyndham Common Stock may cause a Margin
Borrower's equity in the margin account to fall below the "Margin Maintenance
Requirement," triggering a "Margin Maintenance Call." Under such circumstances,
a Margin Borrower must immediately deposit cash or securities to restore the
value of the margin account to above the "Margin Maintenance Requirement."
There can be no assurance that the value of a Margin Borrower's Wyndham Shares
will not decrease in the future. THEREFORE, ONLY THOSE WEL PARTICIPANTS WHO ARE
PREPARED TO WEATHER PRICE FLUCTUATIONS AND WHO HAVE THE FINANCIAL RESOURCES AND
LIQUIDITY TO MEET "MARGIN MAINTENANCE CALLS" SHOULD TAKE OUT A PARTICIPANT LOAN
TO REPAY THEIR SHARE OF WEL INDEBTEDNESS. If a Margin Borrower has insufficient
liquid financial resources to satisfy a Margin Maintenance Call, some or all of
such borrower's Wyndham Shares that are pledged will be sold in order to reduce
the Participant Loan and satisfy the Margin Maintenance Requirement. Such
shares may be sold at a substantial loss to the Margin Borrower.
A Margin Borrower will be personally liable to repay the Participant
Loan. In addition, Participant Loans are due ON DEMAND. Therefore, if a demand
is made, a Margin Borrower must repay the entire Participant Loan balance,
together with accrued interest, regardless of the value of the Wyndham Shares
in the margin account. If the collateral in a Margin Borrower's account is
insufficient in value to repay the outstanding loan balance, Smith Barney may
pursue other assets of the Margin Borrower to satisfy repayment. For a summary
description of certain terms and conditions of the Participant Loans, see "The
Plan of Distribution -- Participant Loans."
Smith Barney may elect to increase the Margin Maintenance Requirement
at any time. The possibility for such an increase is greater when the
collateral in a margin account consists of a single equity security, such as
Wyndham Common Stock, and there is a resulting lack of diversity in the
collateral. Unless a WEL Participant decides to substitute collateral, his or
her Participant Loan will be secured only by Wyndham Shares.
FEDERAL INCOME TAX RISKS
No Internal Revenue Service Rulings. WEL has not and will not seek any
rulings from the IRS concerning federal income tax issues considered in this
Prospectus and discussed under "Plan of Distribution -- Federal Income Tax
Considerations", including, but not limited to, the classification of WEL as a
partnership for federal income tax purposes. Therefore, the IRS may take
positions contrary to those taken by WEL or the WEL Participants.
Possible Legislative or Other Developments. All representations made
in this Prospectus concerning federal income tax consequences of the Plan of
Distribution are based on the Internal Revenue Code and administrative and
judicial interpretations thereof as they exist today. No assurance can be given
that the currently anticipated income tax treatment of the Plan of Distribution
will not in the future be modified by legislative, administrative or judicial
changes, possibly having retroactive effect, to the detriment of the WEL
Participants.
- 14 -
27
Other Tax Issues. Other tax matters are discussed under "Plan of
Distribution -- Federal Income Tax Considerations." This discussion does not
take into account any WEL Participant's unique financial or tax situation.
Therefore, it is urged that WEL Participants consult with their own tax
advisors regarding the possible federal and state and local tax consequences of
the Plan of Distribution.
RISKS ASSOCIATED WITH THE LODGING INDUSTRY
The Company's business is subject to the operating risks inherent in
the lodging industry. These risks include changes in general and local economic
conditions, cyclical overbuilding in the lodging industry, varying levels of
demand for rooms and related services, competition from other hotels, changes
in travel patterns, the recurring need for renovation, refurbishment and
improvement of hotel properties, changes in governmental regulations that
influence or determine wages, prices and construction and maintenance costs,
changes in interest rates, the availability of financing for operating or
capital needs and changes in real estate taxes and other operating expenses.
There can be no assurance that regulatory compliance or downturns or prolonged
adverse conditions in real estate or capital markets or national or local
economies will not have a material adverse effect on the Company's results of
operations.
COMPETITION IN THE LODGING INDUSTRY
The lodging industry is highly competitive. The Company's upscale
hotels compete with other national limited and full service hotel companies, as
well as with various regional and local hotels. Some of the larger hotel chains
with which the Company's upscale hotels compete include Marriott, Sheraton,
Hyatt, Hilton and Embassy Suites. The Company's extended-stay hotels compete on
a local level. The Company anticipates that competition within the
extended-stay industry segment will increase substantially in the foreseeable
future. In the midprice category of the extended-stay industry segment, a
number of other lodging chains and developers have recently announced plans to
develop or are currently developing extended-stay hotels which may compete with
the Company's hotels. A number of the Company's competitors for both upscale
and extended-stay hotel properties are larger, operate more hotels and have
substantially greater financial and other resources than the Company. In
addition, some of the Company's competitors operate hotel properties that have
locations superior to those of the Company's hotels. Competitive factors in the
lodging industry include room rates, quality of accommodations, name
recognition, service levels and convenience of location. There can be no
assurance that demographic, geographic or other changes in markets in which the
Company's hotels are located will not adversely affect the convenience or
desirability of certain of the Company's hotels. Furthermore, there can be no
assurance that new or existing competitors will not significantly lower rates
or offer greater conveniences, services or amenities or significantly expand or
improve facilities in a market in which the Company's hotels compete, thereby
adversely affecting the Company's results of operations. See "Business --
Competition."
RISKS ASSOCIATED WITH EXPANSION
Growth Risks. The Company's revenues and net income have grown
substantially during the past several years as a result of adding new
management contracts, acquiring, renovating and developing additional hotels,
and from increases in revenues and net income at existing hotels. The Company
intends to continue to pursue an aggressive growth strategy for the foreseeable
future, but there can be no assurance that the Company will successfully
achieve its growth objectives. The Company is subject to a variety of business
risks generally associated with growing companies. The Company's ability to
pursue successfully new growth opportunities will depend on many factors,
including, among others, the Company's ability to identify suitable growth
opportunities, finance acquisitions and renovations and successfully integrate
new hotels into its operations. While the Company believes that it has
sufficient capital to fund its growth strategy in the near term, this belief is
primarily premised on adequate cash being generated from operations and the
Company's Revolving Credit Facility. There can be no assurance that the Company
will generate adequate cash from operations. In addition, the Company may seek
an increase in the capital available to it under the Revolving Credit Facility
or otherwise obtain additional debt or equity financing, depending upon the
amount of capital required to pursue future growth opportunities or address
other needs. There can be no assurance that such increase or additional
financing will be available to the Company on acceptable terms, if at all. As
of November 30, 1996, the available balance under
- 15 -
28
the Revolving Credit Facility was $35.7 million. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
In addition, there can be no assurance that the Company will be able
to integrate successfully new hotels or new hotel products into its operations,
that new hotels or new hotel products will achieve revenue and profitability
levels comparable to the Company's existing hotels or that the combined
business will be profitable. Newly acquired or developed hotels typically begin
with lower occupancy and room rates. Furthermore, the Company's expansion
within its existing markets could adversely affect the financial performance of
the Company's existing hotels or its overall results of operations. Expansion
into new markets may present operating and marketing challenges that are
different from those currently encountered by the Company in its existing
markets. There can be no assurance that the Company will anticipate all of the
changing demands that expanding operations will impose on its management,
management information and reservation systems, and the failure to adapt its
systems and procedures could have a material adverse effect on the Company's
business. See "Business -- Growth Strategy."
Competition for Expansion Opportunities. The Company competes for
management contract, acquisition, development, lease, franchise and other
expansion opportunities. The Company competes for these expansion opportunities
with national and regional hotel companies, some of which have greater
financial and other resources than the Company. Competitive factors for
expansion opportunities include relationships with hotel owners and investors,
the availability of capital, financial performance, management fees, lease
payments, brand name recognition, marketing support, reservation system
capacity and the willingness to provide funds in connection with new management
and lease arrangements. The Company's failure to compete successfully for
expansion opportunities or to attract and maintain relationships with hotel
owners and investors could adversely affect the Company's results of
operations. See "Business -- Competition."
Acquisition and Development Risks. The Company expects that it may
acquire additional hotels in the future. Acquisitions entail the risk that
investments will fail to perform in accordance with expectations. The Company
also intends to continue redevelopment and conversion of other acquired hotels
to Wyndham Garden Hotels. The Company has entered into a management contract
with respect to one new hotel that is currently under construction pursuant to
which the Company has undertaken certain obligations to provide furniture,
fixtures and equipment at a specified price. In addition, the Company has
acquired two hotels that will remain open during renovations and that will be
converted to Wyndham Garden Hotels. The Company also has entered into
management contracts for two hotels that will remain open during renovations
and that will be converted to Wyndham Garden Hotels. In addition, the Company
may develop new hotels in the future, depending on market conditions.
Significant hotel renovations and new project development are subject to a
number of risks, including risks of construction delays or cost overruns, risks
that the properties will not achieve anticipated performance levels and new
project commencement risks such as receipt of zoning, occupancy and other
required governmental permits and authorizations. These and other risks could
result in the incurrence of substantial costs for a project that is never
completed. The Company anticipates that most acquisitions, substantial
renovations and development will be financed under the Revolving Credit
Facility, through joint ventures or with other forms of short-term secured or
unsecured financing. See "Business -- Growth Strategy" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources." Permanent financing for these projects,
however, might not be available or might be available only on disadvantageous
terms. If permanent debt or equity financing were not available on acceptable
terms to refinance projects undertaken without permanent financing, such
projects could be curtailed and the Company's working capital could be
adversely affected.
DEPENDENCE ON MANAGEMENT CONTRACTS AND ON CERTAIN HOTEL OWNERS
Management contracts are acquired, terminated, renegotiated or
converted to franchise agreements in the ordinary course of the Company's
business. Crow Family Members, who own approximately 47.3% of the Company's
issued and outstanding Common Stock, have interests in 16 hotels that the
Company manages pursuant to management contracts. The Company also operates 17
hotels owned by Bedrock, which owns approximately 11.4% of the Company's issued
and outstanding Common Stock. See "Principal Stockholders." In addition, Crow
Family Members, Trammell Crow Residential and Greystar were founders and remain
principal stockholders of Homegate, which owns
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29
the six extended-stay hotel properties managed by the Company. While the
average remaining term of the Company's management contracts for Wyndham brand
hotels as of November 30, 1996 was 14 years (including renewals that the
Company may elect to exercise), these management contracts generally may be
terminated by the owner of the hotel property if the Company fails to meet
certain performance standards, if the property is sold to a third party, if the
property owner defaults on indebtedness encumbering the property and/or upon a
foreclosure of the property. The terms of the 3 non-Wyndham brand upscale hotel
management contracts range from one month to fifteen years, and the Company's
extended-stay hotel management contracts are for a term of 10 years. Other
grounds for termination of the Company's upscale hotel management contracts
include a hotel owner's election to close a hotel and certain business
combinations involving the Company in which the Wyndham name or current
management team does not survive. The Company's extended-stay management
contracts generally can be terminated if certain performance standards are not
met or upon a sale or foreclosure of the property. In addition, the contracts
can be terminated upon payment of a cancellation fee without cause if Homegate
desires to manage the hotels internally. There can be no assurance that the
Company will be able to replace terminated contracts or that the terms of
renegotiated or converted contracts will be as favorable as the terms that
existed before such renegotiation or conversion. The Company also is subject to
the risk of deterioration in the financial condition of a hotel owner and such
owner's ability to pay management fees to the Company. In addition, in certain
circumstances, the Company makes or may be required to make loans to or capital
investments in hotel properties in connection with management contracts. See
"Business -- Management Contracts." A material deterioration in the operating
results of one or more of these hotel properties and/or a loss of the related
management contracts could adversely affect the value of the Company's
investment in such hotel properties. In addition, the Company historically has
relied on Crow Family Members, Bedrock and other hotel owners and investors for
various acquisition, renovation, development and other expansion opportunities.
Although the Company believes that it enjoys satisfactory relationships with
such hotel owners and investors, there can be no assurance that such
relationships will remain satisfactory or that such owners and investors will
continue to provide expansion opportunities in the future. See "
-- Growth Strategy."
CONFLICTS OF INTEREST
Future Dealings with Affiliates of the Company. Crow Family Members,
certain of their affiliates and Bedrock are, collectively, parties to 33
management contracts as well as other business arrangements with the Company.
See "Certain Relationships and Transactions." In addition, affiliates of Crow
Family Members, Trammell Crow Residential and Greystar were founders and remain
principal stockholders of Homegate. The foregoing relationships, coupled with
the ownership of Common Stock by Crow Family Members and Bedrock, as well as
their representation on the Company's Board of Directors, could give rise to
conflicts of interest. Although the Company believes that its management
contracts with these persons are on terms no less favorable to the Company than
those that could have been obtained from unaffiliated third parties, there can
be no assurance that these parties will continue to transact business with the
Company or that they will not attempt to use their ownership positions with the
Company to influence the terms on which they transact business with the Company
in the future. In addition, the Company's senior executive officers have
ownership interests in hotels that are managed but not owned by the Company. An
entity owned by Crow Family Members and the Senior Executive Officers has
developed a new central reservations system for the Company, and is continuing
to develop the integrated property management component of such system. The
timing, performance and continued availability of such system is not fully
within the Company's control. The outside interests of the Senior Executive
Officers could give rise to certain conflicts of interest that may result in
decisions that do not fully reflect the interests of all stockholders. See
"Business -- Growth Strategy -- III. Ability to Execute Growth Strategy --
Relationships with Hotel Investors" and "Certain Relationships and
Transactions."
Conflicts Involving Certain Board Members. Robert A. Whitman and
Daniel A. Decker, who are directors of the Company, are principals of
Hampstead, which is related to an entity that has an ownership interest in
Bedrock and through other entities also has interests in another hotel company
that in the past has competed, and in the future may compete, with the Company
for both guests and hotel acquisitions. Hampstead is an investment firm and may
from time to time acquire interests in other hotel companies or assets.
Consequently, Messrs. Whitman and Decker may have conflicts of interest with
respect to certain matters potentially or actually involving or affecting the
Company and such
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other hotel-related investments, such as acquisition, development, financing
and other corporate opportunities that may be suitable for the Company and such
other hotel companies. In addition, such directors also may have conflicts of
interest with respect to corporate opportunities suitable for both the Company
and Hampstead or related entities. To the extent such opportunities arise, such
directors will make a determination after consideration of a number of factors,
including whether such opportunity is presented to any such director in his
capacity as a director of the Company or as an affiliate of such other hotel
company or of Hampstead, whether such opportunity is within the Company's line
of business or consistent with its strategic objectives and whether the Company
will be able to undertake or benefit from such opportunity. The Company and
Bedrock have agreed that the Company will be permitted to manage for a term of
15 years any hotel that is sourced by Bedrock and contains 250 or fewer rooms.
See "Growth Strategy -- Primary Growth Opportunities -- Wyndham Garden Hotel
Redevelopment and Conversion Program" and "Certain Relationships and
Transactions -- Bedrock Investment Program."
Policy with Respect to Related Party Transactions. The Company has
implemented a policy requiring any material transaction (or series of related
transactions) between the Company and related parties to be approved by a
majority of the directors not affiliated with the Company (the "Independent
Directors"), if any, upon such directors' determination that the terms of the
transaction are no less favorable to the Company than those that could have
been obtained from unrelated third parties. The policy defines a material
related party transaction (or series of related transactions) as one involving
a purchase, sale, lease or exchange of property or assets or the making of any
investment with a value to the Company in excess of $1.0 million or a service
agreement (or series of related agreements) with a value in excess of $1.0
million in any fiscal year. There can be no assurance that this policy always
will be successful in eliminating the influence of conflicts of interest. See
"Management -- Directors and Executive Officers" and "Certain Relationships and
Transactions -- Policy with Respect to related Party Transactions."
For a discussion of certain conflicts of interest relating to the Plan
of Distribution, see "Plan of Distribution -- Conflicts of Interest."
RISKS ASSOCIATED WITH OWNING OR LEASING REAL ESTATE
The Company owns or leases 23 of the 82 hotels in its Portfolio.
Accordingly, the Company will be subject to varying degrees of risk generally
related to owning and leasing real estate. These risks include, among others,
changes in national, regional and local economic conditions, local real estate
market conditions, changes in interest rates and in the availability, cost and
terms of financing, liability for long-term lease obligations, the potential
for uninsured casualty and other losses, the impact of present or future
environmental legislation and compliance with environmental laws, adverse
changes in zoning laws and other regulations, many of which are beyond the
control of the Company and inclement regional weather conditions. In addition,
real estate investments are relatively illiquid; therefore, the ability of the
Company to vary its Portfolio in response to changes in economic and other
conditions may be limited.
SHARES ELIGIBLE FOR FUTURE SALE
The Company has 20,018,299 shares of Common Stock outstanding of which
4,197,500 shares are freely tradeable by persons other than "affiliates" of the
Company without restriction or limitation under the Securities Act of 1933, as
amended (the "Act"). Following the Plan of Distribution and the Lock-Up Period,
the 646,669 shares of Common Stock distributed to WEL Participants also will be
freely tradable by persons other than "affiliates" of the Company without
restriction or limitation under the Act. The remaining 15,174,130 shares are
"restricted securities" within the meaning of Rule 144 adopted under the Act
and may not be sold in the absence of registration under the Act unless an
exemption from registration is available, including the exemption contained in
Rule 144. The holders of the remaining 15,174,130 shares of Common Stock
possess registration rights with respect to such shares. See "Description of
Capital Stock -- Registration Rights. Future sales of shares of Common Stock
registered under the Act or pursuant to Rule 144 or otherwise, or the
perception that such sales could occur, could have an adverse effect upon the
market price for the Common Stock. See "Shares Eligible for Future Sale."
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CONTROL BY PRINCIPAL STOCKHOLDERS
Crow Family Members beneficially own an aggregate of approximately
47.3% of the outstanding shares of the Company's Common Stock, and Bedrock
beneficially owns approximately 11.4% of the Company's issued and outstanding
Common Stock. See "Principal Stockholders." In addition to the ability of Crow
Family Members, either independently or together with Bedrock, to block certain
actions requiring stockholder approval by virtue of the substantial number of
shares of Common Stock held by them, the terms of a stockholders' agreement
among the Company, Crow Family Members, Bedrock, the Company's senior executive
officers, WEL and Susan T. Groenteman, a director of the Company (the
"Stockholders' Agreement"), has the effect of concentrating control of the
Company among these parties. Under the terms of the Stockholders' Agreement,
Crow Family Members (together with the Senior Executive Officers, WEL and Ms.
Groenteman) and Bedrock have agreed, among other things, to allocate between
themselves the right to nominate members of the Board of Directors of the
Company as long as they continue to own a substantial number of shares of the
Company's Common Stock. In addition, pursuant to the terms of the Stockholders'
Agreement, Crow Family Members and Bedrock have allocated among themselves the
right to designate the Chairman of the Board so long as either party owns
shares of Common Stock covered by the Stockholders' Agreement that represents
at least 30% of the Company's outstanding Common Stock. Such provisions in the
Stockholders' Agreement will ensure such parties' ability to control the
election of the members of the Board of Directors and will enable such parties
to control the management and affairs of the Company. Following the Plan of
Distribution, neither WEL nor WEL Participants will be party to the
Stockholders' Agreement. See "Description of Capital Stock -- Stockholders'
Agreement."
SIGNIFICANT DEBT AND LEASE OBLIGATIONS
At September 30, 1996, the Company's long term consolidated debt was
approximately $109.7 million, its total stockholders' equity was approximately
$71.9 million and its ratio of earnings to fixed charges on a pro forma basis
for the nine months ended September 30, 1996 was 1.9 to 1. The Company's
indebtedness is substantial in relation to its stockholders' equity. In
addition, the Company has significant lease obligations with respect to the 12
hotel properties operated pursuant to long-term leases. See "Business --
Long-Term Hotel Leases." For the year ended December 31, 1995 and the nine
months ended September 30, 1996, the Company's rent expense was approximately
$15.5 million and $10.2 million, respectively. The degree to which the Company
is leveraged, as well as its rent expense, could have important consequences to
holders of Common Stock, including: (i) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions or general corporate purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations may be dedicated to the
payment of principal and interest on its indebtedness and rent expense, thereby
reducing the funds available to the Company for its operation; and (iii)
certain of the Company's indebtedness, including the Revolving Credit Facility
contains financial and other restrictive covenants, including those restricting
the incurrence of additional indebtedness, the creation of liens, the payment
of dividends and sales of assets and imposing minimum net worth requirements.
There can be no assurance that the Company's operating results will be
sufficient for the payment of the Company's indebtedness. In addition, the
Company's indebtedness could increase the Company's vulnerability to adverse
general economic and lodging industry conditions (including increases in
interest rates) and could impair the Company's ability to take advantage of
significant business opportunities that may arise.
DEPENDENCE ON SENIOR MANAGEMENT
The Company's success will depend largely on the efforts and abilities
of senior management. The loss of the services of the Senior Executive Officers
could have a material adverse effect on the Company's business. The Company has
not entered into employment agreements with any member of senior management.
See "Management."
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
The lodging industry is seasonal in nature. Quarterly earnings may be
adversely affected by events beyond the Company's control, such as poor weather
conditions, economic factors and other considerations affecting travel.
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In addition, the loss of one or several management contracts, the timing of
achieving incremental revenues from additional hotels and the realization of a
gain or loss upon the sale of a hotel also may adversely impact earnings
comparisons. If the Company loses a management contract that has capitalized
acquisition costs, the Company will record a write-off of the remaining book
value (less any termination fees received) of such capitalized costs, which
could have a material adverse effect on the operating results during the period
in which the write-off occurred. In addition, the Company's quarterly earnings
could be adversely affected by the loss of a hotel investment made in
connection with a management contract or other investment arrangement. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "-- Seasonality."
ENVIRONMENTAL MATTERS
Under various federal, state, local and foreign environmental laws,
ordinances and regulations ("Environmental Laws"), a current or previous owner
or operator of real property may be liable for the cost of removal or
remediation of hazardous or toxic substances on, under or in such property.
Such laws often impose liability without regard to whether the owner or
operator knew of, or was responsible for, the release of such hazardous or
toxic substances. The presence of contamination from hazardous or toxic
substances, or the failure to remediate such contaminated property properly,
may adversely affect the owner's ability to sell or rent such real property or
to borrow using such real property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances also may be liable for
the cost of removal or remediation of such substances at the disposal or
treatment facility, whether or not such facility is or ever was owned or
operated by such person. The operation and removal of certain underground
storage tanks also are regulated by federal and state laws. In connection with
the ownership and operation of its hotel properties, including properties
owned, as well as leased, managed or franchised by the Company, the Company
could be held liable for the cost of remedial action with respect to such
regulated substances and storage tanks and claims related to them. In addition
to clean-up actions brought by federal, state and local agencies, the presence
of hazardous or toxic substances on a hotel property also could result in
personal injury or similar claims by private plaintiffs. The Company has
received environmental information covering its owned and leased properties and
certain of its managed and franchised properties; however on many of the
managed and franchised properties, the Company has not performed or received
the results from any environmental investigations. As a result of the foregoing
limitations on performing environmental investigation and due to the fact that
Environmental Laws and conditions are subject to frequent change, there can be
no assurance that environmental liabilities or claims will not adversely affect
the Company in the future. See "Business -- Environmental Matters" for further
information germane to environmental issues relating to the Company.
ANTI-TAKEOVER MATTERS
The Company's Certificate of Incorporation and By-laws contain
provisions that may have the effect of delaying, deterring or preventing a
takeover of the Company that the Company's stockholders may consider to be in
their best interest. The Company's Certificate of Incorporation and By-laws
provide for a classified Board of Directors serving staggered terms of three
years, the prohibition of stockholder action by written consent and advance
notice requirements for stockholder proposals and director nominations. The
Company's Certificate of Incorporation also grants the Board of Directors the
authority to issue up to 5,000,000 shares of preferred stock, having such
rights, preferences and privileges as designated by the Board of Directors
without stockholder approval. In addition, Section 203 of the Delaware General
Corporation Law, which is applicable to the Company, contains provisions that
restrict certain business combinations with interested stockholders, which may
have the effect of inhibiting a non-negotiated merger or other business
combination involving the Company. (The Company believes that by its terms,
Section 203 does not restrict transactions with C.F. Securities L.P., a
partnership owned by Crow Family Members, or any other party to the
Stockholders' Agreement that becomes an Interested Stockholder (for purposes of
Section 203) as a result of the exercise of the right of first offer described
under "Description of Capital Stock -- Stockholders' Agreement.") Finally, the
Stockholders' Agreement may have the effect of delaying, deterring or
preventing a takeover of the Company, as it restricts the transfer of shares of
Common Stock held by Crow Family Members, the Senior Executive Officers, WEL,
Bedrock and Ms. Groenteman, and also provides for an agreed allocation of
director nominations among such parties. The Stockholders' Agreement permits
the Plan of Distribution. Following the Plan of Distribution, neither
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WEL nor WEL Participants will be party to the Stockholders' Agreement. See
"Description of Capital Stock -- Anti-Takeover Provisions" and
"-- Stockholders' Agreement."
The indenture governing the Notes provides that, upon the occurrence
of (i) the sale of a majority of the fair market value of the assets of the
Company, on a consolidated basis, (ii) any person or group not affiliated with
the Company's current stockholders becoming the beneficial owner of more than
45% of the total voting power of the Company or (iii) certain changes in a
majority of the Board of Directors of the Company during a two-year period
(collectively, a "Change of Control"), the holders of the Notes will have the
right to require the Company to repurchase their Notes at a price equal to 101%
of the aggregate principal amount thereof, plus accrued and unpaid interest.
Should a Change of Control occur and a substantial amount of the Notes be
presented for purchase, there can be no assurance that the Company or the
acquiring party would have sufficient financial resources to enable it to
purchase such Notes. In addition, the Change of Control purchase feature of the
Notes may make more difficult or discourage a takeover of the Company, and,
thus, the removal of incumbent management. The terms of the Revolving Credit
Facility prohibit such a Note repurchase. In addition, certain "changes of
control," as defined in the Revolving Credit Facility, constitute a default
thereunder.
PRICE VOLATILITY
The market price of the Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results and other
factors. In addition, the securities markets have experienced significant price
and volume fluctuations from time to time in recent years that often have been
unrelated or disproportionate to the operating performance of particular
companies. These broad fluctuations may adversely affect the market price of
the Common Stock.
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34
THE PLAN OF DISTRIBUTION
GENERAL
WEL was established in 1990 by Old Wyndham as an equity participation
program designed to enable WEL Participants to receive indirect equity
interests in the WEL Investments. In connection with the Company's initial
public offering, WEL received the Wyndham Shares in exchange for WEL's
ownership interest in certain of the WEL Investments. The General Partner of
WEL is proposing the distribution of the Wyndham Shares to WEL Participants as
part of the Plan of Distribution, which would result in the dissolution and
termination of WEL. The Plan of Distribution must be approved by the holders of
a majority of the percentage interests held by all WEL Participants. Following
the Wyndham share distribution, the business of WEL will be wound up and WEL
will be terminated. Any assets remaining in WEL will be distributed to WEL
Participants. A copy of the Plan of Distribution is attached as Appendix B to
this Prospectus.
The Wyndham Shares will be distributed to WEL Participants as soon as
practicable following the Plan Effective Date, which is the date of the General
Partner's receipt of approval of the Plan of Distribution by WEL Participants.
In accordance with the provisions of the WEL Agreement, the Wyndham Shares will
be distributed to WEL Participants, first, according to the balance in each WEL
Participant's capital account and, second, in accordance with each
participant's percentage interest in WEL. The Wyndham Shares also will be
distributed subject to each participant's pro rata share of WEL Indebtedness,
as described below under " -- Repayment of WEL Indebtedness." A WEL Participant
should refer to the individual account statement included in the materials
accompanying this Prospectus for an estimate of the number of Wyndham Shares
expected to be distributed to him or her.
As a result of the Wyndham Share distribution, each WEL Participant
will receive directly (subject to payment of his or her share of WEL
Indebtedness) the Wyndham Shares represented by his or her ownership interest
in WEL. As part of the Plan of Distribution, WEL Participants who are not
considered "affiliates" of the Company will be permitted during the "Resale
Window" of three business days following the share distribution to sell his or
her Wyndham Shares, subject to compliance with the Company's Insider Trading
Policy and to repayment of any WEL Indebtedness or Participant Loan secured by
the Wyndham Shares to be sold. Each WEL Participant will be restricted under
the Plan of Distribution from making any public sale of his or her Wyndham
Shares during a three-week "Lock-Up Period" following the Resale Window. WEL
Participants who are considered "affiliates" of the Company will also be
required to comply with certain other securities law restrictions in connection
with any such sale. See " -- Resale Restrictions." No fractional shares of
Common Stock will be distributed, and payment will be made in cash of any
distribution amount that would otherwise be represented by a fractional share.
Certificates for Wyndham Shares will be issued and delivered to each WEL
Participant or his or her duly authorized representative as soon as practicable
following the Plan Effective Date, together with payment for any fractional
shares. No WEL Participant is entitled to appraisal or similar rights in
connection with the Plan of Distribution.
DISTRIBUTION OF WYNDHAM SHARES
Prior to the distribution of Wyndham Shares, in accordance with
Section 3.4 of the WEL Agreement, as of January 30, 1997, the General Partner
will adjust the gross asset value of WEL's assets to reflect the increase in
value of WEL's assets over the gross asset value as of January 1, 1996. As with
previous annual revaluations, the WEL Agreement provides that the value of
WEL's assets will be determined according to the "EVBS Value" methodology for
all "interests" held by WEL in "WHC Persons" and the fair market value of all
cash items held by WEL. As of November 30, 1996, WEL's assets consisted of the
Wyndham Shares and approximately $215,000 in cash. In accordance with 1996
amendments to the WEL Agreement, the EVBS Value of the Wyndham Shares is equal
to the initial public offering price of Wyndham Common Stock, which is $16.00
per share.
As set forth in the WEL Agreement, following the adjustment to the
gross asset value of WEL's assets, each WEL Participant's capital account will
be adjusted (the "Adjusted Capital Account") upward to reflect the increase in
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WEL's gross asset value as of January 30, 1997 over the value as of January 1,
1996. In accordance with Section 7.3 of the WEL Agreement, the assets of WEL
will then be allocated to the WEL Participants (i) first, according to the
positive balance in each WEL Participant's Adjusted Capital Account and, (ii)
second, in accordance with each WEL Participant's percentage interest in WEL.
For purposes of adjusting capital accounts and allocating the Wyndham Shares
for distribution to the WEL Participants, such shares will be valued based upon
their EVBS Value of $16.00 per share.
As a result of the Plan of Distribution, therefore, each WEL
Participant will receive a number of Wyndham Shares equal to the total number
of Wyndham Shares multiplied by a fraction, the numerator of which is such
participant's Adjusted Capital Account balance and the denominator of which is
the total Adjusted Capital Account balances of all WEL Participants. Similarly,
each WEL Participant's pro rata portion of the WEL Indebtedness will be
determined by multiplying the total amount of WEL Indebtedness outstanding at
the time of the Plan of Distribution by the same fraction discussed above. Each
WEL Participant should refer to the individual account statement included in
the materials accompanying this Prospectus for the number of Wyndham Shares to
be distributed and the amount of WEL Indebtedness to be allocated to him or
her. The foregoing illustration does not take into account the reserve to be
established by the General Partner. See " -- Dissolution of WEL."
REPAYMENT OF WEL INDEBTEDNESS
General. Since WEL's inception, WEL Investments have been purchased
with loans made to WEL by WFLP or its predecessors. In connection with the
Company's initial public offering, the Company purchased from WFLP the
promissory notes evidencing such loans at their face value, plus accrued
interest, as of December 31, 1995. As of November 30, 1996, the aggregate
outstanding balance under such loans was $3,070,654. In addition, WEL has
issued promissory notes in connection with purchasing the interests of former
WEL Participants, the outstanding balance of which was $169,522 as of November
30, 1996 and has incurred obligations to other former WEL Participants, which
total approximately $520,000. The total indebtedness owed by WEL from time to
time is referred to herein as the "WEL Indebtedness." Each WEL Participant
should refer to the individual account statement included in the materials
accompanying this prospectus for a discussion of his or her pro rata share of
the WEL Indebtedness.
In order to facilitate the repayment of the WEL Indebtedness (without
WEL's having to sell any Wyndham Shares to provide funds), the Plan of
Distribution requires that the Wyndham Shares be distributed subject to each
participant's pro rata allocation of WEL Indebtedness. Each WEL Participant
will be permitted to borrow funds through the Participant Loans from Smith
Barney to repay the WEL Indebtedness. Alternatively, WEL Participants can elect
to have a portion of their Wyndham Shares sold on the first day of the Resale
Window to repay their WEL Indebtedness. A brokerage commission that will be
discounted 50% from the published Smith Barney rate will be charged in
connection with any such sale, and the sale will be a taxable transaction to
the WEL Participant. (The applicable Smith Barney rate varies depending on the
number of shares sold.) See " -- Federal Income Tax Considerations -- Repayment
of WEL Indebtedness." If a WEL Participant elects not to take out a Participant
Loan or to have a portion of his or her Wyndham Shares sold, such participant
will be required to otherwise repay his or her share of WEL Indebtedness prior
to receipt of any Wyndham Shares.
The Company's WEL Indebtedness is secured by 181,698 Wyndham Shares.
The Company will release its security interest in the Wyndham Shares upon
repayment of the WEL Indebtedness. Under the Plan of Distribution and prior to
actual delivery to a WEL Participant of any Wyndham Shares, such WEL
Participant's pro rata share of WEL Indebtedness must be repaid (i) through the
proceeds of the Participant Loans, (ii) from the sale proceeds of elections by
individual participants to have a portion of their Wyndham Shares sold or (iii)
from a direct payment by WEL Participants from other sources to the General
Partner who will then remit such funds to the holders of WEL Indebtedness.
THEREFORE, IN ORDER FOR A WEL PARTICIPANT TO RECEIVE ANY WYNDHAM
SHARES, SUCH PARTICIPANT MUST REPAY HIS OR HER SHARE OF WEL INDEBTEDNESS
THROUGH ONE OF THE THREE OPTIONS DESCRIBED ABOVE. IF THE PLAN OF DISTRIBUTION
IS APPROVED AND A WEL PARTICIPANT DOES NOT MAKE A DECISION WITH RESPECT TO THE
REPAYMENT OF HIS OR HER WEL INDEBTEDNESS BY FEBRUARY 7, 1997 (THE ANTICIPATED
PLAN EFFECTIVE DATE), THE COMPANY WILL ARRANGE
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FOR THE SALE OF A PORTION OF SUCH WEL PARTICIPANT'S WYNDHAM SHARES (EVEN IF
SUCH PARTICIPANT VOTED AGAINST THE PLAN) IN AN AMOUNT SUFFICIENT TO REPAY HIS
OR HER WEL INDEBTEDNESS AND THE BROKERAGE COMMISSION INCURRED IN CONNECTION
WITH SUCH SALE AND ANY TAX OR OTHER COSTS AND EXPENSES ASSOCIATED WITH SUCH
SALE. SUCH A SALE WILL BE AT THE THEN PREVAILING MARKET PRICE FOR WYNDHAM
COMMON STOCK, WHICH COULD BE LOWER THAN THE PRICE THAT MIGHT BE OBTAINED IF THE
WYNDHAM SHARES WERE HELD BY THE WEL PARTICIPANT AND SOLD AT A LATER DATE.
ACCORDINGLY, WEL PARTICIPANTS ARE URGED TO MAKE A TIMELY DECISION WITH RESPECT
TO REPAYMENT OF THEIR WEL INDEBTEDNESS REGARDLESS OF WHETHER THEY VOTED FOR OR
AGAINST THE PLAN OF DISTRIBUTION.
Repayment Election. If a WEL Participant chooses to borrow funds from
Smith Barney, such participant must indicate that election on the enclosed
"Repayment and Resale Election Form" by checking the appropriate box. Before
making this election, the WEL Participant should read the following general
description of the Participant Loans, the Client Agreement included as part of
each WEL Participant's Smith Barney Account Application and related materials,
and the discussion set forth under "Risk Factors -- Risks Associated with
Participant Loans." In order to establish a Participant Loan, a WEL Participant
must first open an account with Smith Barney. IF YOU HAVE NOT OPENED A
BROKERAGE ACCOUNT WITH SMITH BARNEY, PLEASE CALL HEATHER HUGHES OF SMITH BARNEY
AT (800) 527-5814 OR (214) 720-5002.
If a WEL Participant chooses to have a portion of such participant's
Wyndham Shares sold on the first day of the Resale Window to repay his or her
WEL Indebtedness, he or she must indicate that election on the Repayment and
Resale Election Form by checking the appropriate box. By choosing this
election, a sufficient number of Wyndham Shares will be sold, at the market
price prevailing at the time of sale, to repay the participant's WEL
Indebtedness plus the brokerage commission incurred in connection with such
sale. In order to arrange for the sale of Wyndham Shares to repay WEL
Indebtedness, it is necessary to first establish a brokerage account with Smith
Barney. IF YOU HAVE NOT OPENED A BROKERAGE ACCOUNT WITH SMITH BARNEY, PLEASE
CALL HEATHER HUGHES OF SMITH BARNEY AT (800) 527-5814 OR (214) 720-5002.
Wyndham Shares sold pursuant to this election will be sold in accordance with
the procedures described under " -- Resale Restrictions."
If a WEL Participant chooses to repay his or her share of WEL
Indebtedness through such participant's own financial resources, he or she must
indicate that election by checking the appropriate box on the Repayment and
Resale Election Form. In addition, such participant must include a check made
payable to the General Partner for the total amount of WEL Indebtedness
specified on the participant's individual account statement. The General
Partner will then cause the funds to be remitted to the holders of WEL
Indebtedness.
Participant Loans. In connection with the Plan of Distribution, each
WEL Participant will be permitted to borrow funds under a Participant Loan from
Smith Barney to repay such participant's share of WEL Indebtedness. The
Participant Loans will be payable on demand and will bear interest at a
floating interest rate that will fluctuate based on short-term interest rates.
For purposes of illustration, the rate would be 8% per annum as of the date of
this Prospectus. WEL Participants may obtain the actual rate by contacting
Smith Barney at the number listed below. Interest is compounded daily on the
outstanding balance (including any unpaid interest) and is recorded on the loan
account monthly. There are no scheduled principal or interest payments. A WEL
Participant may repay the loan at any time. WEL Participants must repay the
entire loan balance before participants may sell or otherwise transfer the
Wyndham Shares serving as collateral to secure the loan. As described below,
Participant Loans must be secured by Wyndham Shares with an initial market
value of at least 2.0 times the outstanding balance of the loan. In addition,
the value of the Wyndham Shares serving as collateral must remain at least
approximately 1.7 times the outstanding Participant Loan balance throughout the
term of the loan.
WEL Participants who elect to take out Participant Loans must first
open a "margin account" with Smith Barney. A margin account permits WEL
Participants to borrow against the value of their Wyndham Shares. By using
Wyndham Shares as loan collateral, WEL Participants can repay their share of
WEL Indebtedness at an interest rate that historically has been lower than
rates charged by lenders for unsecured loans. In addition, the Participant
Loans permit WEL Participants to repay WEL Indebtedness and retain ownership of
their Wyndham Shares without having to sell a portion of such shares or obtain
funds from other sources. HOWEVER, WEL PARTICIPANTS WHO ELECT TO TAKE OUT A
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PARTICIPANT LOAN WILL BE SUBJECT TO THE RISKS GENERALLY ASSOCIATED WITH MARGIN
BORROWING AND THE RULES SET FORTH BY SMITH BARNEY WITH RESPECT TO AN INDIVIDUAL
MARGIN ACCOUNT. FOR A DISCUSSION OF THE RISKS OF MARGIN LOANS, SEE "RISK
FACTORS -- RISKS ASSOCIATED WITH PARTICIPANT LOANS." The general rules
governing a Smith Barney margin account are summarized below. This summary is
qualified in its entirety by reference to the Client Agreement included as part
of each WEL Participant's Smith Barney Account Application, which each WEL
Participant should read before taking out a Participant Loan.
Initially, a WEL Participant who elects to take out a Participant Loan
will be required to establish an "equity balance" (the market value of the
Wyndham Shares minus the loan balance) of at least 50% of the amount of the
Participant Loan. This is called the "Initial Margin Requirement." A WEL
Participant establishes the Initial Margin Requirement by depositing in a
margin account with Smith Barney Wyndham Shares with a market value that
initially must equal 2.0 times the amount of the Participant Loan. Because the
value of the Wyndham Shares will fluctuate throughout the term of the loan
based upon the market price as reported on the New York Stock Exchange, a WEL
Participant must maintain a minimum level of "equity" of 40% of the Participant
Loan at all times while the loan is outstanding. This is referred to as the
"Margin Maintenance Requirement." The Margin Maintenance Requirement is
typically less than the Initial Margin Requirement. The Margin Maintenance
Requirement would require WEL Participants to maintain a value of Wyndham
Shares in their margin account of approximately 1.7 times the outstanding
balance of the Participant Loan at any given time. Specific Margin Maintenance
Requirements may be changed at any time at the discretion of Smith Barney.
If during the term of the Participant Loan, Wyndham Common Stock
decreases in price, the value of the "equity" in the margin account would
decrease as well. If the level of equity falls below the Margin Maintenance
Requirement, the WEL Participant will be subject to an immediate Margin
Maintenance Call. If this occurs, the Participant will be notified that he or
she must immediately restore the equity balance of the account above the Margin
Maintenance Requirement. This can be accomplished in one of three ways: (1) by
depositing additional cash into the margin account; (2) by depositing
additional collateral (for example, additional securities) into the margin
account; or (3) by selling securities in the account. If new securities are
deposited into an account in response to a Margin Maintenance Call, only a
percentage of their market value may be used toward the Margin Maintenance
Requirement.
A Margin Maintenance Call must be met within the time frame set forth
in the notification. If not, industry regulations require Smith Barney to sell
securities in the margin account until the Margin Maintenance Requirement is
met. If securities in the margin account are sold, they will be sold at then
prevailing market prices and could be sold at a substantial loss to the
participant. THEREFORE, ONLY THOSE WEL PARTICIPANTS WHO ARE PREPARED TO WEATHER
PRICE FLUCTUATIONS AND WHO HAVE THE FINANCIAL RESOURCES AND LIQUIDITY TO MEET
"MARGIN MAINTENANCE CALLS" SHOULD TAKE OUT A PARTICIPANT LOAN TO REPAY THEIR
SHARE OF WEL INDEBTEDNESS.
Smith Barney may elect to increase the Margin Maintenance Requirement
at any time. The possibility for such an increase is greater when the
collateral in a margin account consists of a single equity security, such as
Wyndham Common Stock, and there is a resulting lack of diversity in the
collateral. Unless a WEL Participant decides to substitute collateral, his or
her Participant Loan will be secured only by Wyndham Shares. An increase in the
Margin Maintenance Requirement also could subject a WEL Participant to a Margin
Maintenance Call. In addition, factors that could cause a Margin Maintenance
Call before the Margin Maintenance Requirement is reached include situations
that affect a security adversely, such as a bankruptcy filing or generally
adverse market conditions.
Each WEL Participant who elects to take out a Participant Loan must
first open an account with Smith Barney. If you have not opened an account with
Smith Barney or have questions regarding the Participant Loans, please call
Heather Hughes of Smith Barney at (800) 527-5814 or (214) 720-5002.
RESALE RESTRICTIONS
The Plan of Distribution imposes certain resale restrictions on the
Wyndham Shares for approximately four weeks following the distribution of the
shares to WEL Participants. As part of the Plan of Distribution, WEL
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Participants will be permitted during the "Resale Window" of three business
days following the share distribution to sell their Wyndham Shares subject to
compliance with the Company's Insider Trading Policy and to repayment of any
WEL Indebtedness or Participant Loan secured by the Wyndham Shares being sold.
At the end of the Resale Window, no sale of Wyndham Shares will be permitted
for a "Lock-Up Period" of three weeks. The Resale Window and the Lock-Up Period
are designed to facilitate the resale of Wyndham Shares on the open market.
Following the Lock-Up Period, Wyndham Shares will be freely tradeable by
persons other than "affiliates" of the Company, subject to compliance with the
Company's Insider Trading Policy. WEL Participants who are considered
"affiliates" must comply with certain other securities law considerations in
connection with any such sale. The Resale Window is expected to begin on
Tuesday, February 11, 1997 and end on Thursday, February 13, 1997. The Lock-Up
Period is expected to end March 10, 1997. You will be notified if these dates
are changed.
WEL Participants who desire to sell Wyndham Shares during the Resale
Window must indicate that election on the enclosed Repayment and Resale
Election Form by checking the appropriate box and following the instructions
contained on the form. Such sales will be made on the open market by Smith
Barney during the Resale Window based upon the market price for Wyndham Common
Stock as reported on the New York Stock Exchange. EACH WEL PARTICIPANT WHO
CHOOSES TO SELL WYNDHAM SHARES MUST NOTIFY SMITH BARNEY BY 3:00 P.M., DALLAS
TIME, ON THE DAY PRIOR TO THE DAY SUCH PARTICIPANT WANTS HIS OR HER SHARES TO
BE SOLD. Such decision may be made by contacting a representative of Smith
Barney, BUT IT MUST BE MADE BY 3:00 P.M., DALLAS TIME, ON THE DAY BEFORE THE
SALE.
A brokerage commission that will be discounted 50% from the published
Smith Barney rate will be charged in connection with all sales made by Smith
Barney. (The applicable Smith Barney rate varies depending on the number of
shares sold. To obtain the applicable commission rate, contact Smith Barney at
the number listed below.) In general, such sales will be taxable to the WEL
Participant. See " -- Federal Income Tax Considerations -- Plan of
Distribution."
WEL Participants who are considered "affiliates" of the Company are
required to comply with certain securities law restrictions in addition to the
resale restrictions described above. Such persons must sell their Wyndham
Shares pursuant to an effective registration statement under the Securities Act
of 1933, as amended, or pursuant to an exemption from registration, including
the exemption found under Rule 144. For a discussion of the exemption available
under Rule 144, see "Shares Available for Future Sale."
WEL Participants who desire to sell Wyndham Shares during the Resale
Window must first establish a brokerage account with Smith Barney. If you have
not opened an account with Smith Barney or have any questions concerning the
resale of Wyndham during the Resale Window, contact Heather Hughes of Smith
Barney at (800) 527- 5814 or (214) 720-5002.
REASONS FOR PLAN OF DISTRIBUTION
WEL was established to enable WEL Participants to receive indirect
equity interests in WEL Investments. The primary purpose of WEL was to attract
and retain key executive and managerial employees and to motivate such
employees to achieve Old Wyndham's long range goals by granting them indirect
equity interests in the WEL Investments. In connection with the Company's
initial public offering, the Company adopted the 1996 Incentive Plan, which is
a standard long-term incentive compensation program for key employees of a
publicly held company. The 1996 Incentive Plan has replaced WEL as the
Company's primary ongoing incentive compensation program. In addition, the
continuation of WEL could subject the Company to significant potential
compensation expense charges in the future based solely on increases in the
value of assets held by WEL.
The General Partner believes that the Plan of Distribution is in the
best interests of WEL Participants. There are legal restrictions on the number
of persons who can become WEL Participants without subjecting WEL to
substantial regulatory compliance burdens. In addition, the Company has
determined, for a number of reasons, that WEL will not receive interests in
assets acquired by the Company in the future. Accordingly, the General Partner
believes that WEL's effectiveness as an ongoing incentive compensation program
has become limited. The General Partner also believes,
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however, that WEL has served its purpose effectively by assisting in motivating
and retaining key Wyndham personnel that have contributed greatly to the
Company's growth since WEL was established in 1990.
Furthermore, the General Partner believes that the assets currently
owned by WEL, principally Wyndham Shares, are appropriate for distribution to
individual WEL Participants. The Wyndham Shares are listed on the New York
Stock Exchange and, in general, will be freely tradeable during the Resale
Window and after the Lock-Up Period. Assuming a public market for the shares
continues to exist following the Plan of Distribution, WEL Participants may
elect to dispose of some or all of their Wyndham Shares in the public
securities markets. In contrast, WEL units and the WEL Investments, which were
minority interests in private partnerships, were essentially illiquid
investments and not readily marketable. By placing the Wyndham Shares in the
hands of WEL Participants, the Plan of Distribution enables each WEL
Participant to take individual control of the value in his or her WEL account.
The Plan of Distribution also continues to align the interests of WEL
Participants with those of the Company by transferring to them a direct equity
interest in the Company.
Finally, the General Partner decided to propose the Plan of
Distribution because of the numerous expressions of interests by WEL
Participants, directly and through the WEL Steering Committee, in receiving a
distribution of the Wyndham Shares and because the distribution is not expected
to result in the recognition of taxable income or loss by WEL Participants
until a participant elects to sell all or any portion of his or her Wyndham
Shares. See "Plan of Distribution -- Federal Income Tax Considerations."
EFFECTS OF PLAN DISTRIBUTION
The Plan of Distribution will change the nature of each WEL
Participant's interest in the Wyndham Shares. Currently, WEL Participants hold
an indirect interest through their percentage interests in WEL in the cash and
Wyndham Shares held by WEL, and these investments are managed by the General
Partner. Accordingly, WEL Participants are not required to make any decision
with respect to the acquisition, disposition, valuation or encumbrance of WEL's
assets. Following the Plan of Distribution, each WEL Participant will receive a
direct ownership interest in his or her Wyndham Shares. Accordingly, investment
decisions will no longer be made by the General Partner with respect to such
shares. Each WEL Participant will be responsible for making his or her own
decision as to the retention or disposition of Wyndham Shares and as to the
timing or pricing of any disposition.
There are no dissenters' rights or other rights of appraisal in
connection with the Plan of Distribution. If the Plan of Distribution is
approved, all WEL Participants will be entitled to the Wyndham Shares
represented by their ownership interest in WEL, subject to such participants'
pro rata allocation of WEL Indebtedness. Furthermore, in order to actually
receive Wyndham Shares, WEL Participants must make a decision with respect to
the method of repayment of WEL Indebtedness. If the Plan of Distribution is
approved, and a WEL Participant does not make a decision with respect to the
repayment of his or her WEL Indebtedness by February 7, 1997 (the anticipated
Plan Effective Date), the Company will arrange for the sale of a portion of
such WEL Participant's Wyndham Shares (even if such participant voted against
the Plan) in an amount sufficient to repay his or her WEL Indebtedness and the
brokerage commission incurred with respect to such sale and any tax or other
costs and expenses associated with such sale. Such sale will be at the then
prevailing market price for Wyndham Common Stock, which could be lower than the
price that might be obtained if the Wyndham Shares were held by the WEL
Participant and sold at a later date.
While the Plan of Distribution will change the nature of a WEL
Participant's ownership interest in the Wyndham Shares, the Plan generally will
not affect the risks associated with owning such shares. Currently, WEL's
assets consist almost entirely of a single security, Wyndham Common Stock.
Following the Plan of Distribution, WEL Participants will directly hold the
same security and generally will be subject to the same risks. The market price
of the Common Stock could be subject to significant price fluctuations in
response to various factors. For a discussion of these and other risks
associated with holding Wyndham Common Stock, see "Risk Factors."
As part of the Plan of Distribution, WEL Participants agree to release
WEL, other WEL Participants, the General Partner and its officers and
directors, and the Company and its officers and directors (collectively, the
"Released
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Parties") from all claims and demands of any kind or nature that WEL
Participants may have arising from or related to their interest in WEL. This
release includes, but is not limited to, a waiver and release by WEL
Participants of all claims and demands concerning (i) the value of their
ownership interest in WEL, (ii) the number of Wyndham Shares to which they are
entitled in the Plan of Distribution and the methodology used to determine such
number, and (iii) the fairness of the Plan of Distribution. This also includes,
but is not limited to, a release of all claims concerning the General Partner's
past management of the affairs of WEL, including the WEL Investments, and the
valuation of the Other Assets. By acknowledging and accepting their Wyndham
Shares, therefore, each WEL Participant agrees not to make or pursue any of the
foregoing claims against the Released Parties and not to file or become a party
to any lawsuit advancing such claims. This waiver and release covers both known
and unknown claims.
In the past, WEL Participants have received annual cash distributions
to cover payment of participants' income taxes. No cash distributions will be
made in 1997 to cover participants' income tax expenses, whether in connection
with the Plan of Distribution or otherwise.
REQUIRED VOTE
As of the date of this Prospectus, based upon a price per share of
$16.00, the Wyndham Shares represent approximately 98% of the overall economic
value of WEL. The WEL Agreement, a copy of which is attached as Appendix A to
this Prospectus, requires approval of the "transfer" of all or substantially
all of WEL's assets by the General Partner and the holders of a majority of the
percentage interests held by all WEL Participants. Because the term "transfer"
is broadly defined under the WEL Agreement, the General Partner has determined
to consider the Plan of Distribution a "transfer" within the meaning of the WEL
Agreement and, therefore, is seeking approval of the Plan of Distribution by
WEL Participants. The Plan of Distribution also will constitute an event of
dissolution under the WEL Agreement. Accordingly, by voting in favor of the
Plan of Distribution, WEL Participants will be voting in favor of (i) the
distribution of the Wyndham Shares to WEL Participants and (ii) the resulting
dissolution and termination of WEL. In the event that the Plan of Distribution
is not approved, WEL will continue in existence under the terms of the WEL
Agreement, and no Wyndham Shares would be distributed to WEL Participants.
VOTING PROCEDURES
This Prospectus, together with the accompanying materials, constitute
the "Solicitation Materials" being distributed to WEL Participants to obtain
their votes for or against the Plan of Distribution. (The power of attorney and
participant consent form included in the Solicitation Materials are referred to
collectively as the "Consent Form.") No special meeting of WEL Participants has
been scheduled to discuss the Solicitation Materials or vote upon the Plan of
Distribution. Only WEL Participants who are limited partners of WEL of record
on the date of this Prospectus will receive notice of, and will be entitled to
vote with respect to, the Plan of Distribution.
The Solicitation Period is the time period during which WEL
Participants may vote for or against the Plan of Distribution. The Solicitation
Period will commence upon delivery of the Solicitation Materials to WEL
Participants (on or about January 29, 1997) and will continue until the later
of (a) February 7, 1997 or (b) such later date as may be selected by the
General Partner and as to which notice is given to WEL Participants. In its
discretion, the General Partner may elect to extend the Solicitation Period.
Any Consent Form received by the General Partner prior to 12:00 noon, Central
time, on the last day of the Solicitation Period will be effective provided
that such Consent Form has been properly completed and signed. If a WEL
Participant fails to return a signed Consent Form by the end of the
Solicitation Period or completes his or her consent form in an unintelligible
manner, his or her WEL interest will be counted as voting AGAINST the Plan of
Distribution. WEL Participants who return a signed Consent Form but fail to
indicate their approval or disapproval as to the Plan of Distribution will be
deemed to have voted FOR the Plan of Distribution.
Consent Forms may be withdrawn at any time prior to the expiration of
the Solicitation Period. In addition, subsequent to the submission of a Consent
Form, but prior to the expiration of the Solicitation Period, a WEL Participant
may change his or her vote. For a withdrawal or change of vote to be effective,
however, a written or facsimile
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transmission notice of withdrawal or change of vote must be timely received by
the General Partner prior to the end of the Solicitation Period.
WEL Participants are requested to complete and sign each part of the
Consent Form in accordance with the instructions contained therein. A WEL
Participant may mark the Consent Form to vote "for" or "against" the Plan of
Distribution. (In addition, WEL Participants must complete and sign the
Repayment and Resale Election Form, the instructions for which are discussed
above under " -- Repayment of WEL Indebtedness -- Repayment Election.") Once a
WEL Participant has completed all portions of the Consent Form and the
Repayment and Resale Election Form, he or she should return them to the General
Partner in the enclosed self-addressed envelope. If a WEL Participant has any
questions regarding the forms or how to fill them out, the questions should be
directed to Elise Turner of the Company at (214) 863-1097. Questions regarding
the Participant Loans or the resale of Wyndham Shares should be directed to
Heather Hughes of Smith Barney at (800) 527-5814 or (214) 720-5002. The method
of delivery of the Consent Form and Repayment and Resale Election Form is at
the election and risk of the WEL Participant. A pre-addressed Federal Express
envelope has been included for your convenience.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal (if permitted) of Consent Forms and
Repayment and Resale Election Forms will be determined by the General Partner,
whose determination will be binding and final. The General Partner reserves the
right to reject any or all Consent Forms or Repayment and Resale Election Forms
that are not in proper form or that, in the opinion of counsel to the General
Partner, would be unlawful. The General Partner also reserves the right to
waive any irregularities or conditions of a particular Consent Form or
Repayment and Resale Election Form.
CONDITIONS TO PLAN OF DISTRIBUTION
The Plan of Distribution is subject to certain conditions. In
accordance with the terms of the WEL Agreement, the Plan must receive the
approval of WEL Participants holding a majority of the percentage interests in
WEL. In addition, the Plan is conditioned upon the General Partner's not
withdrawing its recommendation of the Plan prior to the distribution of the
Wyndham Shares. The General Partner reserves the right to withdraw its
recommendation in its own discretion at any time prior to such distribution.
DISSOLUTION OF WEL
The WEL Agreement requires that in the event of dissolution, a
liquidating trustee be elected by the vote of WEL Participants holding a
majority of the percentage interests in WEL. The role of the liquidating
trustee is to wind up the affairs of, and ultimately, terminate WEL. The Plan
of Distribution provides that the General Partner will serve as the liquidating
trustee.
In connection with the dissolution of WEL, the liquidating trustee
will establish a cash reserve in an amount believed to be sufficient to
discharge any remaining liabilities of WEL. Cash held by WEL in excess of the
reserve will be used to retire WEL Indebtedness in conjunction with the Plan of
Distribution. Following the distribution of the Wyndham Shares to WEL
Participants, the liquidating trustee will apply the cash reserve from time to
time in payment of, or provision for, WEL's remaining liabilities. WEL will be
terminated upon the earlier of (i) the application of all such cash in payment
of, or provision for, such liabilities, or (ii) 24 months following the Plan
Effective Date (or such other period as may be deemed appropriate by the
General Partner), at which time any cash remaining in WEL will be distributed
to WEL Participants. Because the amount of the cash reserve is expected to be
relatively small, however, the General Partner does not anticipate that there
will be cash remaining for distribution in connection with the dissolution of
WEL.
If the assets of WEL are insufficient to pay all liabilities of WEL
following the distribution of the Wyndham Shares and any cash, then each WEL
Participant may be personally liable to creditors of WEL for such liabilities
(including any unpaid or unmatured liabilities on the termination of WEL) to
the extent of the aggregate of an amount equal to (i) the fair market value of
the Wyndham Shares (net of WEL Indebtedness) received by the WEL Participant
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in connection with the Plan of Distribution and (ii) other distributions
received by the WEL Participant from WEL in connection with its dissolution.
With respect to the satisfaction of any such remaining liabilities, however,
the General Partner has agreed to apply first the Wyndham Shares (net of WEL
Indebtedness and taxes) distributed to the General Partner in the Plan of
Distribution. Therefore, WEL Participants should not be exposed to any of the
foregoing liabilities (if any) until the General Partner's Wyndham Shares (net
of WEL Indebtedness and taxes) were exhausted.
RELEASE BY WEL PARTICIPANTS
As part of the Plan of Distribution, WEL Participants agree to release
WEL, other WEL Participants, the General Partner and its officers and
directors, and the Company and its officers and directors from all claims and
demands of any kind or nature that WEL Participants may have arising from or
related to their interest in WEL. This includes, but is not limited to, a
release by WEL Participants of all claims concerning (i) the value of their
ownership interest in WEL, (ii) the number of Wyndham Shares to which they are
entitled in the Plan of Distribution and the methodology used to determine such
number, and (iii) the fairness of the Plan of Distribution. This also includes,
but is not limited to, a release of all claims concerning the General Partner's
past management of the affairs of WEL, including the WEL Investments, and the
valuation of the Other Assets.
SALE OF OTHER WEL ASSETS
Other than the Wyndham Shares, WEL's assets as of November 30, 1996
consisted of approximately $215,000 in cash. Prior to the proposed Plan of
Distribution, WEL owned 5% limited partnership interests in nine partnerships
that own hotels managed by Wyndham, and five partnerships and one corporation
that own hotel-related assets (the "Other Assets"). Because of the relatively
low aggregate economic value of WEL's 5% interest in these entities, as well as
the relative illiquidity of such interests, effective as of October 15, 1996,
the General Partner transferred the Other Assets to affiliates of the Company
in consideration for the assumption of $619,200 in indebtedness owed by WEL to
such affiliates. The valuation of the Other Interests was approved by the WEL
Steering Committee. See " -- Conflicts of Interest."
CONFLICTS OF INTEREST
The Plan of Distribution was proposed and structured by the General
Partner in consultation with the WEL Steering Committee, which was established
by the Company and consists of seven WEL Participants. Trammell S. Crow and
James D. Carreker are the sole stockholders and are on the Board of Directors
of the General Partner. The General Partner owns a 1% interest in WEL.
Consequently, in the event the Plan of Distribution is approved, Messrs. Crow
and Carreker will receive indirectly an aggregate of 6,466 Wyndham Shares,
which may cause a conflict of interest in the General Partner's recommendation
of the Plan of Distribution. In resolving any conflicts of interest, the
General Partner must act in accordance with its fiduciary duties to the WEL
Participants.
The Other Assets were transferred to the Senior Executive Officers and
entities in which Mr. Trammell S. Crow and Mr. Harlan R. Crow, who also is on
the Board of Directors of the General Partner, have an ownership interest. The
valuation of the Other Assets was determined according to negotiations between
the General Partner on behalf of WEL and representatives of the Crow Family and
the Senior Executive Officers. WEL was represented by Anne L. Raymond, who is
an officer of the General Partner and the Executive Vice President and Chief
Financial Officer of the Company. Ms. Raymond holds no ownership interest in
WEL, but received an ownership interest in the Other Assets. WEL also was
represented by the WEL Steering Committee. During the course of the
negotiations, the WEL Steering Committee proposed the transfer of the Other
Assets in consideration for the assumption of $619,200 in debt owed by WEL.
This proposal was accepted by representatives of the Senior Executive Officers
and Messrs. Trammell S. Crow and Harlan R. Crow. Nevertheless, no independent
third party was engaged to value the Other Assets. Furthermore, while Messrs.
Trammell S. Crow and Carreker indirectly have ownership interests in WEL,
Messrs. Crow and Carreker may not have the same interests in the Plan of
Distribution as WEL Participants. There are no assurances that if the purchase
of the Other Assets were the result of completely arm's-length negotiations the
resulting purchase price would not be higher than the purchase price that was
actually paid.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of some of the federal income tax
consequences to the WEL Participants with respect to the Plan of Distribution.
The following discussion does not address, and no representations are made as
to, state and local tax consequences or estate and gift tax issues. This
summary is not a substitute for careful tax planning by each WEL Participant,
particularly since the federal, state and local income tax consequences of the
Plan of Distribution may not be the same for all WEL Participants. ACCORDINGLY,
WEL PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE SPECIFIC
TAX CONSEQUENCES TO THEM OF THE PLAN OF DISTRIBUTION, INCLUDING THE APPLICATION
AND EFFECT OF FEDERAL AND STATE AND LOCAL TAX LAWS AND POTENTIAL CHANGES IN THE
APPLICABLE TAX LAWS WITH POSSIBLE RETROACTIVE EFFECT.
This discussion of the federal income tax consequences of the Plan of
Distribution is based upon existing law contained in the Internal Revenue Code
of 1986, as amended (the "Code"), the Treasury Regulations promulgated under
the Code, administrative rulings and other pronouncements, and court decisions
as of the date hereof. The existing law, as currently interpreted, is subject
to change by either new legislation, or by differing interpretations of
existing law in Treasury Regulations, administrative pronouncements or court
decisions, any of which could, by retroactive application or otherwise,
adversely affect the federal income tax consequences described herein.
Classification as a Partnership. Final Treasury Regulations issued on
December 18, 1996 and effective January 1, 1997 (the "Check the Box
Regulations") pertain to the classification of business entities for federal
income tax purposes. According to the Check the Box Regulations, certain
noncorporate entities ("Eligible Entities"), including limited partnerships,
formed after December 31, 1996 may elect to be treated as partnerships for
federal income tax purposes. Eligible Entities in existence prior to January 1,
1997 will have the same classification that such entity claimed under Treasury
Regulations in effect prior to the promulgation of the Check the Box
Regulations. Moreover, Eligible Entities in existence prior to January 1, 1997
that claim to be classified as a partnership for federal income tax purposes
will be respected as such for all periods prior to January 1, 1997 provided
that (i) the Eligible Entity had a reasonable basis for its claimed
classification, (ii) the Eligible Entity and all members thereof recognized the
federal income tax consequences of any change in the entity's classification
within the sixty month period prior to January 1, 1997 and (iii) neither the
entity nor any of its members was notified in writing on or before May 8, 1996
that the classification of the entity was under examination.
WEL was formed as a limited partnership in 1990 and is an Eligible
Entity. WEL has not changed its classification as a partnership for federal
income tax purposes since its inception. WEL has not received written notice
that WEL's classification as a partnership is or will be subject to examination
and WEL has no knowledge of such written notification having been received by
any WEL Participant. Moreover, WEL believes that it has a reasonable basis for
claiming its status as a partnership pursuant to Treasury Regulations in effect
prior to the Check the Box Regulations since its inception. For these reasons,
WEL believes that it is, always has been and will continue to be properly
classified as a partnership for federal income tax purposes. Nevertheless, no
ruling has been sought or will be obtained from the Internal Revenue Service
(the "IRS") regarding the status of WEL as a partnership for federal income tax
purposes.
If WEL were classified as an association taxable as a corporation,
either initially or due to a change in the way it has been operated, WEL would
be subject to federal income tax on any taxable income at regular corporate tax
rates, reducing amounts available for distribution to the WEL Participants. In
this event, the distributions contemplated by the Plan of Distribution would be
considered distributions in complete liquidation of the WEL Participants'
interest in WEL. Characterized as a complete liquidation of an association
taxable as a corporation, WEL would be required to recognize gain upon the
distribution of its assets in kind to the WEL Participants to the extent the
fair market value of the assets distributed exceeds WEL's adjusted basis in
such assets. Conversely, no loss may be recognized by WEL upon such
distribution. Moreover, each WEL Participant would be required to recognize
gain (or loss) to the extent the cash and fair market value of the Wyndham
Shares received by such WEL Participant in the liquidation exceeds (or is less
than) the adjusted basis of such WEL Participant in his or her interest in WEL.
Overall, this treatment would
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substantially reduce the anticipated benefits of the Plan of Distribution by
subjecting the Plan of Distribution to two levels of tax: one at the WEL level
and the other at the WEL Participant level.
The balance of this discussion of "Federal Income Tax Considerations"
assumes that WEL is properly classified as a partnership for federal income tax
purposes.
Plan of Distribution. Each WEL Participant received his or her
interest in WEL in connection with the performance of services. Generally,
Section 83(a) of the Code requires one who receives property in connection with
the performance of services to include in gross income, as ordinary income, the
excess of the fair market value of the property received over the amount paid,
if any, for such property once such property is transferable or not subject to
a substantial risk of forfeiture (i.e. once the property "vests"). However, one
who receives unvested property in connection with the performance of services
may elect under Section 83(b) of the Code ("83(b) Election") to include in
gross income for the taxable year during which such property was transferred
the excess of the fair market value of the property at the time of transfer
over the amount paid, if any, for such property. In the event a service
provider makes a valid 83(b) Election, such person obtains a basis in the
property equal to the amount paid for such property, if any, plus the amount
included in gross income as a result of the 83(b) Election. The vesting of the
property is not a taxable event if an 83(b) Election has been made. WEL
believes that each WEL Participant made a valid 83(b) Election upon receipt of
his or her interest in WEL. Therefore, for purposes of the remainder of this
discussion, it is assumed that each WEL Participant made a valid 83(b) Election
in connection with the acquisition of his or her interest in WEL.
Presently, the assets of WEL consist of cash and the Wyndham Shares. A
portion of the cash held by WEL will be used to repay a portion of the WEL
Indebtedness and the remainder will be held as reserves to pay expenses
relating to the termination of WEL and any liabilities of WEL that may arise.
Therefore, pursuant to the Plan of Distribution, WEL will distribute to each
WEL Participant the number of Wyndham Shares to which such participant is
entitled under the WEL Agreement, subject to his or her pro rata portion of the
WEL Indebtedness. It is anticipated that no cash will be transferred to the WEL
Participants pursuant to the Plan of Distribution.
Subject to certain exceptions not relevant for purposes of this
discussion, the distribution of property in kind by a partnership in complete
liquidation of a partner's interest in the partnership should not result in
gain or loss to either the partnership or the partner. Similarly, the
distribution of cash to a partner by a partnership in complete liquidation of
such partner's interest generally does not result in gain or loss to either the
partnership or the partner. However, to the extent a partner receives cash in
excess of his or her adjusted basis in the partnership interest, such partner
must recognize gain in the amount of such excess. Such gain is generally
characterized as capital gain provided the partnership interest is held as a
capital asset. A partner's beginning tax basis in his or her partnership
interest includes the amount of money and the adjusted basis of any property
that the partner initially contributed to the partnership. In addition, as
described above, a partner's beginning tax basis in his or her partnership
interest acquired in connection with the performance of services includes the
amount paid for such interest, if any, plus the amount included in such
partner';s gross income as a result of an 83(b) Election. A partner's beginning
tax basis in his or her partnership interest is subsequently increased
principally by (i) the amount of any additional contributions of cash and the
tax basis of any additional contributions of property made by the partner to
the partnership, (ii) the partner's distributive share of any partnership
income, and (iii) the amount, if any, of the partner's share of partnership
indebtedness; and decreased, but not below zero, principally by (x)
distributions from the partnership to the partner, (y) the amount of the
partner's distributive share of partnership losses, and (z) any reduction in
the partner's share of partnership indebtedness.
A partner is considered to receive a distribution of cash from the
partnership to the extent of any decrease in the partner's share of partnership
liabilities and to the extent the partnership assumes a liability of the
individual partner. Conversely, any increase in a partner's share of
partnership liabilities and the assumption of a partnership liability by a
partner is considered a contribution of cash to the partnership by the partner.
It is anticipated that the amount of the WEL Indebtedness required to be
discharged by some WEL Participants pursuant to the Plan of Distribution may be
less than such participant's share of the WEL Indebtedness under the WEL
Agreement prior to the Plan of Distribution. These WEL Participants will be
deemed to receive a cash distribution from WEL in an amount equal to the excess
of such participant's decrease in his or her share of the WEL Indebtedness over
the amount of the WEL Indebtedness
- 32 -
45
required to be discharged by the participant. This deemed distribution of cash
may result in the recognition of gain by the participant as described in the
preceding paragraph.
For purposes of determining whether a partner has received a cash
distribution in excess of his or her basis in the partnership interest such
that the partner must recognize gain with respect to the distribution, Section
731(c)(1)(A) of the Code generally provides that marketable securities are to
be treated as cash in the amount of the fair market value of such securities on
the date of distribution. The Wyndham Shares are traded on the New York Stock
Exchange and, therefore, are considered marketable securities for purposes of
Code Section 731(c)(1)(A). However, on December 26, 1996 final Treasury
Regulations were issued under Code Section 731(c) (the "731(c) Regulations")
according to which the distribution of a marketable security will not be
considered a distribution of cash in the event that the security was acquired
by the partnership in a nonrecognition transaction and the following conditions
are met: (i) the value of the marketable securities and cash exchanged by the
partnership in the nonrecognition transaction is less than 20% of the value of
all of the assets exchanged by the partnership in the nonrecognition
transaction and (ii) the security is distributed within five years of either
the date on which the security was acquired by the partnership, or if later,
the date on which the security became marketable (the "Nonrecognition
Exception").
WEL acquired the Wyndham Shares in exchange for its interest in Old
Wyndham and interests in various partnerships that own certain hotels and
certain hotel assets in a transaction qualifying for nonrecognition treatment
pursuant to Code Section 351. The assets exchanged by WEL in the nonrecognition
transaction were not marketable securities as defined in Section 731(c) of the
Code. Moreover, the Wyndham Shares will be distributed within five years of
acquisition by WEL. For these reasons, the Nonrecognition Exception should
apply to the Plan of Distribution such that WEL Participants will recognize no
gain as a result of the distribution of the Wyndham Shares in the Plan of
Distribution.
As noted above, WEL will establish a cash reserve for the purpose of
satisfying remaining liabilities of WEL, if any, and to cover expenses incurred
in connection with the termination of WEL. For this purpose, WEL may continue
to exist for a period not expected to exceed 24 months (the "Reserve Period").
WEL anticipates that no cash will be available for distribution to the WEL
Participants upon termination of the Reserve Period; however, it is possible
there could be a small amount of cash available for distribution by WEL at such
time. As discussed above, a partner who receives a distribution in liquidation
of his or her interest in the partnership generally recognizes gain only to the
extent the amount of money received exceeds such partner's adjusted basis in
the partnership interest. The basis of the property received by the partner in
kind pursuant to the liquidating distribution will equal such partner's
adjusted basis in his or her partnership interest immediately before the
distribution reduced by any cash distributed in the liquidation. Section 761(d)
of the Code defines the term "liquidation of a partner's interest" as the
termination of a partner's entire interest in a partnership by means of a
distribution, or series of distributions, to the partner by the partnership.
Therefore, the distribution of the Wyndham Shares should be considered a
distribution in liquidation of each WEL Participant's interest in WEL whether
or not cash is subsequently distributed following the Reserve Period.
The proper determination of the adjusted basis of each WEL Participant
in the Wyndham Shares is not clear in light of the cash reserve established by
WEL to pay expenses relating to the winding up of WEL and unascertained
liabilities, if any. It is anticipated that WEL will expend all cash held in
reserve during its taxable year ending December 31, 1997. However, it is
possible that some expenditures may occur in later years or that the cash
reserve may not be fully expended leaving a small amount of cash for
distribution in 1998 or thereafter. In the event the cash reserve is fully
expended in 1997, then each WEL Participant should be able to include his or
her distributive share of the deductions generated by such expenditures in his
or her individual income tax return. Consequently, the adjusted basis in each
WEL Participant's interest in WEL would be reduced by such participant's
distributive share of such deductions, thereby reducing the amount of basis
allocable his or her Wyndham Shares.
Conversely, if cash is distributed to WEL Participants or expended by
WEL in years subsequent to 1997, then the proper determination of the adjusted
basis of the Wyndham Shares with respect to each WEL Participant is unclear. On
one hand, a WEL Participant may take the position that the adjusted basis of
his or her Wyndham Shares should be reduced by his or her allocable share of
the amount of cash held in reserve subsequent to 1997, since such cash will
- 33 -
46
either be distributed in the future or expended resulting in the generation of
deductions that should flow through to such participant. On the other hand, a
WEL Participant may take the position that the adjusted basis of his or her
Wyndham Shares should not be reduced by his or her allocable share of the
amount of cash held in years subsequent to 1997, since it has not been
distributed. AS A RESULT OF THE LACK OF AUTHORITY ON THIS ISSUE, EACH WEL
PARTICIPANT IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE
PROPER DETERMINATION OF SUCH PARTICIPANT'S ADJUSTED BASIS IN THE WYNDHAM SHARES
RECEIVED PURSUANT TO THE PLAN OF DISTRIBUTION AND THE EFFECT OF THE
EXPENDITURES BY WEL DURING THE RESERVE PERIOD AND/OR THE DISTRIBUTION OF CASH,
IF ANY, AT THE END OF THE RESERVE PERIOD.
It should also be noted that a WEL Participant will generally be
required to recognize gain (or loss) upon disposition, if any, of the Wyndham
Shares received pursuant to the Plan of Distribution to the extent the amount
realized upon such disposition exceeds (or is less than) such participant's
adjusted basis in the shares disposed, irrespective of application of the Non
Recognition Exception. The holding period for the Wyndham Shares should include
the period for which a WEL Participant held his or her interest in WEL.
Provided the Wyndham Shares are considered to be held for more than a year such
gain (or loss) should be long term capital gain provided such shares are
considered to be capital assets in the hands of the WEL Participant making such
disposition. Furthermore, each WEL Participant will be required to include his
or her distributive share of WEL income, gain, loss, deduction or credit from
the operation of WEL through termination of WEL in his or her individual tax
return.
Repayment of WEL Indebtedness. Pursuant to the Plan of Distribution,
WEL Participants will receive their portion of the Wyndham Shares subject to
their pro rata portion of the WEL Indebtedness. WEL Participants may satisfy
their portion of the WEL Indebtedness by refinancing such indebtedness with a
Participant Loan or by having a portion of their Wyndham Shares sold and using
the sale proceeds to satisfy the indebtedness. WEL Participants not choosing
either of these two options must otherwise pay their portion of the WEL
Indebtedness prior to receipt of any Wyndham Shares. The refinancing of the WEL
Indebtedness allocable to a WEL Participant with a Participant Loan or other
loan should result in no tax consequences to such WEL Participants. Conversely,
a WEL Participant who opts to satisfy his or her portion of the WEL
Indebtedness with proceeds from the sale of Wyndham Shares should recognize
gain (or loss) on the sale of the Wyndham Shares to the extent the amount
realized from the sale exceeds (or is less than) his or her basis in the
Wyndham Shares sold. Such gain (or loss) should be capital in nature provided
such shares are considered to be capital assets in the hands of the WEL
Participant.
DIVIDEND POLICY
The Company intends to retain any future earnings for use in its
business and does not intend to pay cash dividends in the foreseeable future.
Furthermore, the terms of the Revolving Credit Facility prohibit the Company
from paying, and the indenture governing the Notes limits the Company's ability
to pay, dividends on the Common Stock. See "Management's Discussion and
Analysis of Results of Operations -- Liquidity and Capital Resources." The
payment of future dividends, if any, will be at the discretion of the Company's
Board of Directors and will depend upon, among other things, future earnings,
operations, capital requirements, restrictions in future financing agreements,
the general financial condition of the Company and general business conditions.
- 34 -
47
PRICE RANGE OF COMMON STOCK
The Company effected its initial public offering of Common Stock on
May 20, 1996, at a price to the public of $16.00 per share. Since that date,
the Company's Common Stock has traded on the New York Stock Exchange under the
symbol WYN. As of January 17, 1997, there were 67 record holders of Common
Stock, although the Company believes that the number of beneficial owners of
its Common Stock is substantially greater. The table below sets forth for the
fiscal periods indicated the high and low sales prices per share of the Common
Stock as reported on the New York Stock Exchange.
1996 HIGH LOW
- ---- ---- ---
Second quarter (from May 20, 1996).................... $ 24 $ 19
Third quarter......................................... $ 22 1/8 $ 16 3/4
Fourth quarter........................................ $ 24 1/8 $ 18
1997
First quarter (through January 23, 1997).............. $ 24 7/8 $ 23 1/8
On January 23, 1997, the closing price of the Common Stock, as
reported on the New York Stock Exchange was $24 1/4.
- 35 -
48
CAPITALIZATION
The following table sets forth at September 30, 1996 the historical
capitalization of the Company. The information set forth in the table should be
read in conjunction with the Consolidated Financial Statements and the Notes
thereto, included elsewhere in this Prospectus.
September 30, 1996
------------------
(dollars in thousands)
(unaudited)
Cash and cash equivalents ...................................... $ 20,147
=========
Long-term debt, including current maturities ................... 109,675
Capitalized lease obligations, including current portion ....... 20,989
Partners' capital and stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares authorized;
no shares outstanding .................................... --
Common Stock, $.01 par value, 45,000,000 shares authorized;
20,018,299 shares outstanding ............................ 200
Additional paid-in capital .................................. 84,342
Retained earnings ........................................... 7,894
Receivables from affiliates ................................. (1,352)
Notes receivable from stockholders .......................... (19,168)
---------
Total partners' capital and stockholders' equity ....... 71,916
---------
Total capitalization ................................... $ 202,580
=========
- 36 -
49
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated statements of income
for the year ended December 31, 1995 and the nine months ended September 30,
1996 reflect the effects of the transactions described below as if such
transactions had occurred at the beginning of 1995.
On May 24, 1996, immediately prior to the consummation of the initial
public equity offering of the Company, the Company succeeded to the hotel
management and related businesses of Old Wyndham, ownership of six Wyndham
brand hotels and leasehold interests relating to 12 additional Wyndham brand
hotels (the "Formation"). Concurrent with the Company's initial public equity
offering and as part of its financing plan, the Company issued $100,000,000
aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2006 (the
"Notes"). As a result of the initial public equity offering and the offering of
the Notes, the Company generated aggregate net proceeds in the amount of $163.9
million (including a contribution of $10 million from Bedrock). The foregoing
transactions are referred to as the "Formation and the Financing Plan."
Prior to the Company's initial public equity offering, Garden Hotel
Associates L.P. ("GHALP") owned 11 Wyndham Garden Hotels managed by the Company
(the "GHALP Properties"). A 30% interest in GHALP was held by a partnership
owned by certain Crow Family Members and the Senior Executive Officers, and the
remaining 70% was held by an unaffiliated third party. In May 1996, Crow Family
Members and the Senior Executive Officers acquired the remaining 70% ownership
interest from the third party. The purchase price was funded from the proceeds
of the sale of the GHALP Properties to Hospitality Properties Trust (including
its subsidiaries, "HPT"), a publicly traded REIT, which properties were leased
back pursuant to one or more long-term leases with an initial term of
approximately 17 years (the "GHALP Lease") to a new partnership ("GHALP II"),
the ownership of which mirrors the ownership of GHALP. As part of the formation
of the Company, the Company succeeded to GHALP II's leasehold interest in the
GHALP Properties and continues to manage the hotels. The pro forma consolidated
statements of income reflect (i) the acquisition of the 70% interest in GHALP,
(ii) the sale/leaseback of the GHALP Properties to an unaffiliated REIT and
(iii) the repayment of indebtedness resulting from the Company's initial public
equity and Notes offerings. Pro forma adjustments related to the GHALP
transactions have been set forth in a separate column under "Pro Forma
Adjustments."
The unaudited pro forma consolidated statements of income also reflect
the Company's acquisition of four hotel properties since the Company's initial
public offering: the Wyndham Garden Hotel - Vinings; a 181 room hotel located
in the Overland Park, Kansas metropolitan area (which is currently being
operated as a Best Western and which will be converted to a Wyndham Garden
Hotel following renovations that are underway); a 230 room hotel located in
Dallas, Texas (which is currently being operated as a Quality Inn and which
will be converted to a Wyndham Garden Hotel following renovations that are
underway); and the Wyndham Bristol Place Hotel at Toronto Airport.
The unaudited pro forma consolidated financial data of the Company are
presented for informational purposes only and may not reflect the Company's
future results of operations and financial position or what the results of
operations and financial position of the Company would have been had such
transactions occurred as of the dates indicated. The unaudited pro forma
consolidated financial statements and accompanying notes of the Company should
be read in conjunction with the combined financial statements and notes thereto
contained elsewhere in this Prospectus.
- 37 -
50
WYNDHAM HOTEL CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
-----------------------------------------------
THE COMPANY FORMATION AND OTHER THE COMPANY
HISTORICAL FINANCING PLAN GHALP ACQUISITIONS PRO FORMA
----------- -------------- ----- ------------ -----------
Revenues
Hotel revenues $ 54,673 $ $ 56,642 (j) $ 20,686 (q) $ 132,001
Management fees 7,354 132 (a) 7,486
Management fees - affiliates 9,567 538 (a) (3,317)(k) 6,788
Service fees 2,192 2,192
Service fees - affiliates 1,928 (729)(l) 1,199
Reimbursements 4,378 4,378
Reimbursements - affiliates 6,458 (1,741)(m) 4,717
Other 1,340 160 (a) 1,500
--------- --------- --------- --------- ---------
Total revenues 87,890 830 50,855 20,686 160,261
--------- --------- --------- --------- ---------
Operating costs and expenses:
Hotel expenses 37,125 48,915 (n) 15,703 (r) 101,743
Selling, general and administrative
expenses 15,001 1,300 (b) 16,301
Equity participation compensation 3,992 3,992
Reimbursable expenses 4,378 4,378
Reimbursable expenses - affiliates 6,458 (1,741)(m) 4,717
Depreciation and amortization 6,311 947 (c) 1,185 (s) 8,443
--------- --------- --------- --------- ---------
Total operating costs and expenses 73,265 2,247 47,174 16,888 139,574
--------- --------- --------- --------- ---------
Operating income 14,625 (1,417) 3,681 3,798 20,687
Interest income 344 (d) 344
Interest income - affiliates 100 100
Interest expense (8,465) (4,704)(e) (553) (t) (13,722)
Equity in earnings of affiliate's hotel 0
partnership 1,664 (1,664)(o) 0
Foreign currency gain 405 (347)(f) 58
Amortization of deferred gain -- 726 (p) 726
--------- --------- --------- --------- ---------
Income before minority interests 8,673 (6,468) 2,743 3,245 8,193
Income attributable to minority interests 724 (724)(g)
--------- --------- --------- --------- ---------
Income before income taxes 7,949 (5,744) 2,743 3,245 8,193
Provision for income taxes -- (1,954)(h) (1,281)(u) (3,235)
--------- --------- --------- --------- ---------
Net income $ 7,949 $ (7,698) $ 2,743 $ 1,964 $ 4,958
========= ========= ========= ========= =========
Pro forma net income per common $ 0.25 (i)
share =========
Pro forma common shares outstanding 20,018 (i)
=========
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51
WYNDHAM HOTEL CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
---------------------------------------------
THE
COMPANY FORMATION AND OTHER THE COMPANY
HISTORICAL FINANCING PLAN GHALP ACQUISITIONS PRO FORMA
---------- -------------- ---------- ------------- ------------
Revenues:
Hotel Revenues $ 71,302 $ $ 21,495 (j) $ 12,664(q) $ 105,461
Management fees 6,434 6,434
Management fees - affiliates 10,112 168(a) (1,288)(k) 8,992
Service fees 1,111 1,111
Service fees - affiliates 1,850 (345)(l) 1,505
Reimbursements 4,636 4,636
Reimbursements - affiliates 6,176 (471)(m) 5,705
Other 320 320
--------- --------- --------- --------- ---------
Total revenues 101,941 168 19,391 12,664 134,164
--------- --------- --------- --------- ---------
Operating costs and expenses:
Hotel expenses 52,227 17,165 (n) 10,383(r) 79,775
Selling, general and administrative
expenses 12,877 438(b) 13,315
Equity participation compensation 2,919 2,919
Reimbursable expenses 4,636 4,636
Reimbursable expenses - affiliates 6,176 (471)(m) 5,705
Depreciation and amortization 5,609 416(c) 683(s) 6,708
--------- --------- --------- --------- ---------
Total operating costs and 84,444 854 16,694 11,066 113,058
--------- --------- --------- --------- ---------
expenses
Operating income 17,497 (686) 2,697 1,598 21,106
Interest income 982 (d) 982
Interest income - affiliates 536 536
Interest expense (8,462) (1,509)(e) (231)(t) (10,202)
Equity in earnings of affiliate's hotel 0
partnership 870 (870)(o) 0
Foreign currency gain -- 0
Amortization of deferred gain 320 271 (p) 591
--------- --------- --------- --------- ---------
Income before minority interests 11,743 (2,195) 2,098 1,367 13,013
Income attributable to minority interests 571 (571)(g) 0
--------- --------- --------- --------- ---------
Income before income taxes and
extraordinary item 11,172 (1,624) 2,098 1,367 13,013
Provision for income taxes 10,388 (14,988)(h) (540)(u) (5,140)
--------- --------- --------- --------- ---------
Income before extraordinary item $ 21,560 $ (16,612) $ 2,098 $ 827 $ 7,873
========= ========= ========= ========= =========
Pro forma net income per common share $ 0.39(i)
=========
Pro forma common shares outstanding 20,018(i)
=========
- 39 -
52
PRO FORMA COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ ------------
FORMATION AND FINANCING PLAN
(a) Adjustment to reflect an increase in management fee revenues and other
income due to the release and discharge of the Company from its obligation
to make payments to CHMC under CHMC Agreement, which payments have
historically been offset against management fee revenues from the
management agreements to which they relate:
Unaffiliated-- Management Fees ............................................................ $ 132 $ 19
============ ============
Affiliated-- Management Fees .............................................................. $ 538 $ 149
============ ============
Unaffiliated-- Other ...................................................................... $ 160 $ --
============ ============
Total ..................................................................................... $ 830 $ 168
============ ============
(b) Adjustment to reflect an increase in selling, general and administrative expenses related to
managing and administering a publicly held company ........................................... $ 1,300 $ 438
============ ============
(c) Adjustments to reflect a net increase in depreciation and amortization expense:
Amortization of loan costs relating to the Notes and the $100.0 million Revolving Credit ..... $ 1,294 $ 541
Facility
Elimination of amortization of deferred loan costs upon repayment of existing indebtedness ... $ (250) $ (85)
Depreciation expense reduction resulting from purchase of the 37.5% minority partnership
interest in Rose Hall Associates from an unrelated third party. Rose Hall Associates owns
one of the six Wyndham brand hotels acquired in the Formation ............................. (97) (40)
------------ ------------
$ 947 $ 416
============ ============
(d) The pro forma combined statements do not include any estimated interest
earned on $45 million cash and cash equivalents arising from proceeds of
the Company's initial public equity offering, representing the estimated
pro forma cash balance. At a simple interest rate of 5%, annual and five
months interest earned would be approximately $2,250 and $938,
respectively .................................................................................
(e) Pro Forma interest expense consists of the following:
Interest expense on the Notes ............................................................. $ 10,500 $ 7,875
Interest expense on the hotel property accounted for as a capital lease ................... 2,110 1,529
Interest expense on affiliated borrowings and other capital leases ........................ 84 163
Commitment fee of .375% per annum on the unused portion of the $100.0 million
Revolving Credit Facility and administration fee ...................................... 475 404
------------ ------------
Total Company Pro Forma interest expense .............................................. $ 13,169 $ 9,971
============ ============
Adjustments to reflect a net increase in interest expense consisting of:
Pro Forma expense set forth immediately above ............................................. $ (13,169) $ (9,971)
Less historical interest expense, which is replaced by the Notes and the $100.0 million
Revolving Credit Facility ............................................................. 8,465 8,462
------------ ------------
$ (4,704) $ (1,509)
============ ============
Pro forma interest on the Notes is calculated based on a rate of 10 1/2%
Bank fees are calculated based on an assumed administration fee and an
assumed .375% fee charged on the unused portion of the $100.0 million
Revolving Credit Facility ....................................................................
(f) Adjustment to reflect a reduction of the foreign currency gain as a result of the repayment of
foreign indebtedness to which the foreign currency gain is attributable ...................... $ (347) $ --
============ ============
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53
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ ------------
(g) Adjustment to eliminate 100% of the reduction in earnings attributable to a 37.5% minority
interest in a resort hotel as a result of the purchase of that minority partnership
interest from an unaffiliated third party ................................................. $ (724) $ (571)
============ ============
(h) Adjustment to record the income tax expense associated with operating as
a corporation using an effective income tax rate of 39.5%. The pro forma
consolidated statements of income for the year ended December 31, 1995
and the nine months ended September 30, 1996 do not include the initial
recording of estimated deferred income tax benefits of $14,000 associated
with the change in tax status. This amount was recorded by the Company subsequent to the
closing of its initial public equity offering ............................................. $ (1,954) $ (14,988)
============ ============
(i) Pro forma net income per share is based on 20,018 shares of Common Stock
outstanding after the Offering
GHALP
(j) Adjustment to reflect the addition of revenue from 11 hotels upon combination of
GHALP as a result of acquisition of 70% partnership interest in GHALP from an
unrelated third party ..................................................................... $ 56,642 $ 21,495
============ ============
(k) Adjustments to reflect elimination of management fees earned by the Company from the
11 GHALP hotels upon combination as a result of acquisition of 70% partnership
interest in GHALP from an unrelated third party ........................................... $ (3,317) $ (1,288)
============ ============
(l) Adjustment to reflect elimination of service fees earned by the Company from the 11
GHALP hotels upon combination as a result of acquisition of 70% partnership interest
in GHALP from an unrelated third party .................................................... $ (729) $ (345)
============ ============
(m) Adjustment to reflect elimination of reimbursements between the 11 GHALP
hotels and the Company as a result of acquisition of 70% partnership
interest in GHALP from an unrelated third party:
Reimbursements include but are not limited to reimbursements for services
provided, such as accounting, legal, tax, finance and national sales and
marketing fund. Elimination of reimbursement income .................................. $ (1,741) $ (471)
============ ============
Elimination of reimbursement expense ................................................... $ (1,741) $ (471)
============ ============
(n) Adjustments to reflect net increase in hotel expenses from the 11 hotels
upon combination of GHALP as a result of acquisition of 70% partnership
interest in GHALP from an unrelated third party
Addition of the hotel expenses upon combination of GHALP, consisting of the following
expenses as of December 31, 1995 and September 30, 1996, respectively: Departmental
operating expenses of $19.6 million and $7.2 million; undistributed operating
expenses of $13.7 million and $4.9 million; management fees of $3.3 million and $1.3
million, rent, taxes and insurance expenses of $2.6 million and approximately $884;
and lease expenses of $13.6 million and $4.5 million ................................. $ 52,826 $ 18,788
Elimination of management and service fee expenses of GHALP, net of deferred gain on
sale of GHALP Properties ........................................................... (3,911) (1,623)
------------ ------------
$ 48,915 $ 17,165
============ ============
(o) Adjustment to reflect elimination of 30% equity interest in earnings of GHALP as a result
of acquisition of 70% partnership interest in GHALP from an unrelated third party, which
resulted in the combination of GHALP ...................................................... $ (1,664) $ (870)
============ ============
(p) Adjustment to reflect amortization of the deferred gain recognized from the GHALP
sale/leaseback transaction. The deferred gain is being recognized over the initial
term of the GHALP Lease ................................................................... $ 726 $ 271
============ ============
- 41 -
54
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ ------------
OTHER ACQUISITIONS
(q) Adjustments to reflect addition of hotel revenues from the following
acquisitions not included in The Company Historical:
Vinings Wyndham Garden Hotel .......................................... $ 4,939 $ 2,249
Dallas Market Center .................................................. 1,726 1,726
Overland Park ......................................................... 3,717 2,156
The Bristol Place in Toronto .......................................... 10,304 6,533
------------ ------------
$ 20,686 $ 12,664
============ ============
(r) Adjustments to reflect addition of hotel expenses from the following
acquisitions not included in The Company Historical:
Vinings Wyndham Garden Hotel .......................................... $ 2,529 $ 1,434
Dallas Market Center .................................................. 1,299 1,275
Overland Park ......................................................... 2,774 1,778
The Bristol Place in Toronto .......................................... 9,101 5,896
------------ ------------
$ 15,703 $ 10,383
============ ============
(s) Adjustments to reflect addition of depreciation expense on the following
acquisitions based on their purchase prices at the date of acquisition not
included in The Company Historical:
Vinings Wyndham Garden Hotel .......................................... $ 332 $ 138
Dallas Market Center .................................................. 182 106
Overland Park ......................................................... 110 64
The Bristol Place in Toronto .......................................... 561 375
------------ ------------
$ 1,185 $ 683
============ ============
(t) Adjustments to reflect the addition of interest expense on Vinings Wyndham
Garden Hotel industrial revenue bond indebtedness in the amount of $9.7
million that the Company assumed
at acquisition, calculated based on an interest rate of 5.72% per annum .. $ (553) $ (231)
============ ============
(u) Adjustments to record the income tax expense resulting from the addition
of operating results of new hotel properties ............................. $ (1,281) $ (540)
============ ============
- 42 -
55
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected consolidated financial data of
Wyndham Hotel Corporation. The selected combined statement of operations data
of the Company for the fiscal years ended December 31, 1991 and 1992 and the
selected combined balance sheet data as of December 31, 1991, 1992 and 1993 are
derived from the Company's unaudited Combined Financial Statements. The
selected combined statement of operations data of the Company for the fiscal
years ended December 31, 1993, 1994 and 1995 and the selected combined balance
sheet data as of December 31, 1994 and 1995 are derived from the Company's
audited Combined Financial Statements included elsewhere in this Prospectus.
The selected consolidated statement of operations data of the Company presented
for the nine months ended September 30, 1995 and 1996 have been derived from
unaudited consolidated financial statements and, in the opinion of the Company,
reflect all adjustments (which include only normal recurring adjustments)
necessary to present fairly the information set forth therein. The interim
results are not necessarily indicative of the operating results for a full
year. The summary pro forma financial data set forth below reflect the
Company's initial public equity offering, the issuance of the Notes and the
other transactions described under "Pro Forma Consolidated Financial Data" as
if they had occurred at the beginning of 1995.
The selected consolidated financial data set forth below should be
read in conjunction with, and are qualified in their entirety by, the Combined
Financial Statements and related Notes, Pro Forma Consolidated Financial Data,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other financial information included elsewhere in this
Prospectus.
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1991 1992 1993 1994 1995 PROFORMA
---- ---- ---- ---- ---- --------
1995
----
Portfolio Hotel Revenues (1) $269,557 $315,151 $345,733 $394,949 $534,204 $ N/A
======== ======== ======== ======== ======== ========
Statement of Operations Data:
Revenues:
Hotel Revenues $ 34,859 $ 41,604 $ 43,921 $ 51,799 $ 54,673 $132,001
Management fees 8,472 10,130 10,731 13,302 16,921 14,274
Service fees 784 782 2,127 2,904 4,120 3,391
Reimbursements 3,650 4,130 4,164 8,004 10,836 9,095
Other income 253 156 334 257 1,340 1,500
-------- -------- -------- -------- -------- --------
Total Company Revenues 48,018 56,802 61,277 76,266 87,890 160,261
Operating costs and expenses 42,988 48,383 54,183 63,929 73,264 139,574
Operating income 5,030 8,419 7,094 12,337 14,626 20,687
Interest expense, net (8,449) (7,831) (7,075) (7,526) (8,021) (13,278)
Income (loss) before income
taxes (2,049) 163 1,654 6,265 7,949 8,193
Income tax benefit (2) -- -- -- -- -- --
Pro forma income taxes(2) -- -- -- -- -- (3,235)
Net income (loss) (2,049) 163 1,654 6,265 7,949 4,958
Historical net income as adjusted
for pro forma income tax -- -- -- -- 4,809
Historical net income as adjusted
per common .24
share (3)
Common shares outstanding(5) 20,018
Pro forma net income per share -- -- -- -- -- .25
Pro forma common shares
outstanding -- -- -- -- -- 20,018
NINE MONTHS ENDED SEPT. 30,
--------------------------------
1995 1996 PROFORMA
---- ---- --------
1996
----
Portfolio Hotel Revenues (1) $379,625 $489,639 $ N/A
======== ======== ========
Statement of Operations Data:
Revenues:
Hotel Revenues $ 41,685 $ 71,302 $105,461
Management fees 11,909 16,546 15,426
Service fees 2,823 2,961 2,616
Reimbursements 7,735 10,812 10,341
Other income 1,349 320 320
-------- -------- --------
Total Company Revenues 65,501 101,941 134,164
Operating costs and expenses 53,474 84,444 113,058
Operating income 12,027 17,497 21,106
Interest expense, net (6,167) (6,944) (8,683)
Income (loss) before income
taxes 6,901 11,172 13,013
Income tax benefit (2) -- 10,388
Pro forma income taxes(2) -- -- (5,140)
Net income (loss) 6,901 20,429 7,873
Historical net income as adjusted
for pro forma income tax 4,175 N/A
Historical net income as adjusted
per common .21 1.02
share (3)
Common shares outstanding(5) 20,018 20,018
Pro forma net income per share -- -- .39
Pro forma common shares
outstanding -- -- 20,018
- 43 -
56
AS OF DECEMBER 31, AS OF
-------------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ---------
Balance Sheet Data:
Cash and cash $ 3,086 $ 682 $ 827 $ 3,619 $ 4,160 $ 20,147
equivalents
Total assets 113,426 108,647 113,465 113,276 133,403 240,091
Long-term obligations,
including current 90,881 87,064 88,410 84,161 90,978 130,664
portion
Total partners' capital
and stockholders' (9,075) (7,303) (1,488) 1,716 17,557 71,916
equity (deficit)
(1) Represents unaudited revenues of hotels owned, leased or managed by
the Company, as distinguished from Total Company Revenues.
(2) For the years 1993 through 1995 and the 1996 first five months,
Wyndham made no provision for income taxes because the combined
Company was a combination of partnerships, S corporations and a
nontaxable Bermuda corporation that are not subject to U.S. federal
income taxes. Since the Company's formation in late May 1996, income
taxes have been provided. The provision for income taxes to arrive at
pro forma net income assumes a combined federal and state effective
income tax rate of 39.5% computed as follows:
Federal income tax rate 35.0%
Weighted average state income tax rate (net of federal benefit) 4.5%
----
39.5%
====
(3) Historical net income as adjusted per common share is based on
historical net income as adjusted for pro forma income tax divided by
the number of shares in the initial public offering of the Company as
if the Company had been a corporation prior to its formation in May
1995.
- 44 -
57
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following should be read in conjunction with the Company's
consolidated financial statements, historical combined financial statements and
the summary and selected combined financial and other information located
elsewhere in this Prospectus.
The Company's revenues are derived from the following primary sources:
(1) The Company's hotel revenues are generated from the
hotels owned or leased by the Company during the periods presented and
reflect revenues from room rentals, food and beverage sales and other
sources, including telephone, guest services, meeting room rentals,
gift shops and other amenities.
(2) The Company derives management fees from the hotels it
manages. These fees are comprised of base and incentive management
fees, as well as trade name fees. Base management fees are typically
calculated based upon a specified percentage of gross revenues from
hotel operations, and incentive management fees are usually calculated
based upon a specified percentage of the hotel's operating profit or
the amount by which the hotel's operating profit exceeds specified
performance targets. Trade name fees are typically calculated based
upon a specified percentage of gross room revenues for hotels operated
under the Wyndham brand name. See "Business -- Management Contracts"
for further information relating to the foregoing fees.
(3) The Company generates service fee revenues from hotels
that it manages or franchises. Service fee revenues include fees
derived from accounting, design, construction and purchasing services,
as well as technical assistance provided to managed or franchised
Portfolio hotels. As a substantial portion of the fees derived from
the provision of design, construction and initial purchasing services
are generated in connection with hotel construction and renovation
activities, the amount of these fees varies depending upon the level
of the Company's external growth activities, including new hotel
management contracts and construction projects.
(4) The Company derives reimbursement revenues from hotels
that it manages or franchises. These revenues are intended primarily
to match corresponding expenses and serve to reimburse the Company for
the expenses associated with providing advertising and promotion
(through the Company's Marketing Fund), sales and marketing,
centralized reservations and other services.
The Company's total revenues grew from $61.3 million to $87.9 million
from 1993 through 1995. The Company's revenue growth is attributable to both
the improving financial performance of the existing upscale hotels in its
Portfolio, as well as the addition of new upscale hotels to its Portfolio.
During this period, the occupancy rates for Comparable Hotels (upscale hotels
that have been operated by the Company since January 1, 1993) improved from
year to year 67%, 70% and 72% in 1993, 1994 and 1995, respectively), while the
ADR of Comparable Hotels also increased $76.39, $80.16 and $84.38 for the same
periods). These improvements led to year to year improvements in REVPAR for the
Comparable Hotels of 9.3% and 8.7% in 1994 and 1995, respectively. The
Company's revenue growth continued in the 1996 First Nine Months, as revenues
increased 55.6% over revenues generated in the 1995 First Nine Months, from
$65.5 million to $101.9 million. Occupancy rates declined while ADR for
Comparable Hotels improved during the 1996 First Nine Months to 73% and $91.96,
respectively, from 74% and $84.18 in the 1995 First Nine Months. This
performance led to a period over period improvement of 7.9% in REVPAR.
Of the $26.6 million increase in the Company's total revenues from
1993 to 1995, 40.4% is attributable to increases in hotel revenues from the
Company's owned and leased hotels and 59.6% is attributable to managed hotels
within the Company's Portfolio. Revenues derived from managed hotels not only
include management fees, but also service fees and reimbursement revenues paid
to the Company.
- 45 -
58
The Company's operating strengths have also yielded consistently
strong financial results. As a result of continued improvement in the
generation of revenues in the Company's existing Portfolio of upscale hotels,
and the Company's emphasis upon tight control of operating expenses, the gross
operating profit margins for the Company's Comparable Hotels were 32%, 34% and
36% in 1993, 1994 and 1995, respectively, and for both the 1995 First Nine
Months and the 1996 First Nine Months were 36% and 37%, respectively. Gross
operating profit per available room for Comparable Hotels during 1993, 1994 and
1995 was $9,612, $11,417 and $12,547, respectively. In addition, the average
food and beverage margins for the Comparable Hotels during 1993, 1994 and 1995
were 29%, 31% and 31%, respectively, and were 30% in the 1995 First Nine Months
and 28% in the 1996 First Nine Months. For presentation of certain operating
and financial data for the Company's entire Portfolio, see "Summary Prospectus
- -- Summary Combined Financial and Other Data."
The Company effectively held a 30% investment in GHALP during 1993
through 1995. Historically, the results of operations of the GHALP Properties
have been accounted for using the equity method. Consequently, the results of
the GHALP Properties are not included in historical hotel revenues and hotel
expenses for 1993 through 1995. As a result of the acquisition of a 70%
partnership interest in GHALP from an unrelated third party and the
sale/leaseback transaction that occurred on May 2, 1996, the results of the
GHALP Properties are combined into hotel revenue and hotel expenses for the
nine month period ended September 30, 1996.
From time to time, the value of WEL's interests in the WEL Investments
has been revalued, which results in the revaluation of each WEL Participant's
interest in WEL. The increase in value obtained by each WEL Participant by
virtue of this revaluation process is treated by the Company as compensation
expense in a manner similar to the expense associated with a formula unit
incentive plan. The Company recognized equity participation compensation
expenses derived from WEL of $1.5 million, $1.4 million and $2.7 million in
1993, 1994, 1995, respectively, and of approximately $900,000 in the 1996 First
Nine Months. The WEL Agreement was amended effective through February 28, 1996
to provide for a modified method of valuing WEL's investments to reflect the
fact that WEL's interests in certain WEL Investments were exchanged for the
Wyndham Shares as part of the formation and initial public offering of the
Company. The compensation expense incurred in the 1996 First Nine Months
resulted from the revaluation of WEL's ownership interest in the Wyndham
Shares. The Company does not expect to incur any additional compensation
expense attributable to WEL following the Plan of Distribution.
The Senior Executive Officers owned limited partner interests in Old
Wyndham and several affiliates of Old Wyndham. These limited partner interests
were purchased by the Senior Executive Officers for amounts equal to the fair
market value of such interests. The Senior Executive Officers borrowed the
funds used to purchase such limited partner interests from an affiliate and
pledged their limited partner interests to secure such loans. The Senior
Executive Officers' shares of the distributable cash of the limited
partnerships were used to repay such affiliate loans. For financial reporting
purposes, the net appreciation in the Senior Executive Officers' limited
partner interest resulted in compensation expense to the Company. The Company
recognized compensation expense due to the Senior Executive Officers' equity
participation of $1.2 million, $1.4 million and $1.3 million for the years
ended December 31, 1993, 1994, 1995, respectively, and of approximately $2.0
million in the 1996 First Nine Months. As a result of the Company's initial
public offering, this component of compensation expense was fixed at the
initial public offering price; therefore, this component of compensation
expense will not be incurred by the Company in future periods.
The Company's predecessors in interest operated the businesses
acquired by the Company in connection with its formation through a combination
of partnerships, S corporations and a nontaxable Bermuda corporation that are
not subject to U.S. federal income taxes. As a result, the following discussion
of the Company's results of operations does not include a discussion of income
tax expense, and the Company's net income results are presented on a pre-tax
basis. Upon consummation of the transactions constituting the formation of the
Company on May 24, 1996, the Company became fully subject to state and federal
income taxes. (No income tax expense is reflected in the period ended September
30, 1996 because the Company recognized an income tax benefit during this
period as a result of recording deferred income taxes arising in connection
with the formation of the Company.) See Note 2 of Notes to Combined Financial
Statements.
- 46 -
59
RESULTS OF OPERATIONS
The following table sets forth certain financial data expressed as a
percentage of total revenues and certain other data for each of the periods
presented.
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
Revenues:
Hotel revenues 71.7% 67.9% 62.2% 63.6% 70.0%
Management fees 17.5 17.5 19.3 18.2 16.2
Service fees 3.5 3.8 4.7 4.3 2.9
Reimbursement revenues 6.8 10.5 12.3 11.8 10.6
Other 0.5 0.3 1.5 2.1 .3
-------- -------- -------- -------- --------
Total revenues 100.0 100.0 100.0 100.0 100.0
-------- -------- -------- -------- --------
Operating costs & expenses:
Hotel expenses 52.4 48.1 42.2 42.8 51.2
Selling, general and
administrative 16.2 14.0 17.1 15.4 12.6
expense
Equity participation 4.4 3.7 4.5 4.6 2.9
compensation
Reimbursable expense 6.8 10.5 12.3 11.8 10.6
Depreciation and amortization 8.6 7.5 7.2 7.0 5.5
-------- -------- -------- -------- --------
Total operating costs and 88.4 83.8 83.3 81.6 82.8
-------- -------- -------- -------- --------
expenses
Operating income 11.6 16.2 16.7 18.4 17.2
Interest expense, net (11.5) (9.8) (9.1) (9.4) (6.8)
Equity in earnings of affiliate's
hotel 1.3 1.6 1.9 2.1 .9
partnership
Foreign currency gain 1.0 0.5 0.4 .4 --
Amortization of deferred gain -- -- -- -- .3
-------- -------- -------- -------- --------
Income before minority interests 2.4 8.5 9.9 11.5 11.6
Income (loss) attributable to
minority interests (0.3) 0.3 0.9 .9 .6
-------- -------- -------- -------- --------
Income before income tax
benefit and
extraordinary item 2.7% 8.2% 9.0% 10.6% 11.0%
-------- -------- -------- -------- --------
Nine Months Ended September 30, 1996 Compared to
Nine Months Ended September 30, 1995
Total revenues increased by 55.6% , or $36.4 million to $101.9 million
in 1996 from $65.5 million in 1995. Total operating costs and expenses
increased by 57.9%, or $31.0 million to $84.4 million in 1996 from $53.4
million in 1995. The increase in total revenues and operating expenses was
attributable principally to the addition of the
- 47 -
60
GHALP Properties resulting from the consummation of the GHALP Properties
transaction on May 2, 1996 and to an increase in the number of hotels in the
hotel portfolio.
Hotel revenues increased by 71.0%, or $29.6 million, to $71.3 million
in 1996 from $41.7 million in 1995. Approximately 83.6% of the increase, or
$24.8 million was due to the GHALP Properties. The balance of the increase was
the result of an increase in hotel room rental revenues and the acquisition of
four new hotels.
Revenues from management fees increased by 38.9%, or approximately
$4.7 million, to $16.5 million in 1996 from $11.9 million in 1995.
Approximately $2.5 million of this increase resulted from 20 new managed hotels
added between September 30, 1995 and September 30, 1996. Approximately $3.7
million of the increase was attributable to increased management fees as a
result of improved operating results of managed hotels. The increase also
reflected management fee revenues of approximately $624,000 as a result of the
release and discharge of the Company from its obligation to make payments to an
affiliate under an agreement. The increase was offset by $876,000 from the loss
of certain management contracts and $1.2 million which was attributable to the
elimination of management fees earned from GHALP Properties as a result of the
consolidation of the results of operations of GHALP Properties.
Revenues from service fees increased by 4.9%, or approximately
$137,000 to $3.0 million in 1996 from $2.8 million in 1995. The increase was
primarily due to increased central accounting fees. The increase was offset by
approximately $201,000 attributable to the elimination of service fees earned
from GHALP Properties, reflecting the consolidation of the results of GHALP
Properties.
Reimbursable revenues increased by 39.8%, or $3.1 million, to $10.8
million in 1996 from $7.7 million in 1995. The increase was due to growth of
the hotel portfolio for 1996 as noted previously in comparison to 1995,
resulting in increased payments to the Company's Marketing Fund. The increase
was partially offset by approximately $818,000 reflecting the elimination of
reimbursable revenues earned from the GHALP Properties as a result of the
consolidation of the results of operations of GHALP Properties.
Other income decreased by 76.3%, or $1.0 million in 1996. Other income
included $1.0 million and approximately $250,000 in fees recognized from
termination of management contracts in 1995 and 1996, respectively.
Hotel expenses increased by 86.1%, or $24.1 million, to $52.2 million
in 1996 from $28.1 million in 1995, reflecting the additional hotel expenses
from GHALP Properties as a result of the consolidation of the results of
operations of the GHALP Properties. Approximately 93.1% of the increase, or
$22.5 million, was a result of the consolidation of the GHALP properties. The
increase also reflected an increase in room expenses and food and beverage
expenses commensurate with revenue increases. These increases were offset by a
$544,000 reduction in hotel expense resulting from the write-off of a reserve
for contingent liabilities as a result of the final settlement of contract
assignments on one of the Company's hotel properties.
As a percentage of hotel revenues, hotel expenses increased to 73.2%
in 1996 from 67.3% in 1995. The increase in hotel expense percentage was
primarily attributable to a $5.7 million lease expense associated with the
GHALP Properties. Excluding the GHALP Properties lease payment and the reversal
of contingent liabilities, the percentage of hotel expenses to hotel revenues
would have been 65.3%.
SG&A expenses increased by 27.2%, or $2.8 million, to $12.9 million in
1996 from $10.1 million in 1995. As a percentage of total revenues, SG&A
expenses decreased to 12.6% in 1996 from 15.4% in 1995. Of the increase in SG&A
expenses, 79.2% of the increase, or $2.2 million was due to increased wage,
contract labor and benefit costs arising from the addition of corporate
management and staff personnel related to the general growth of the Company. In
addition, 10.2% of the increase, or approximately $281,000, is due to the
establishment of a provision for bad debt expense for management fees on an
unaffiliated hotel, and 11.7%, or approximately $321,000, is due to the
establishment of a provision for bad debt related to certain receivables. The
increase also reflected additional costs of managing and administering a
publicly held company.
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61
Equity participation compensation expenses decreased by 2.5%, or
approximately $75,000, to $2.9 million in 1996 from $3.0 million in 1995. The
primary component of the compensation expenses, which is that attributable to
the senior executive officers, was fixed at the initial public offering price,
and the Company will not incur additional expense for such component for period
subsequent to the equity offering.
Reimbursable expenses grew by 39.8%, or $3.1 million, to $10.8 million
in 1996 from $7.7 million in 1995. These increases were primarily due to
increased advertising and promotional expense, as well as costs associated with
expanding the Company's national sales staff to support both individual
business and group sale as a result of growth of the hotel portfolio in 1996 as
noted previously in comparison to 1995. Offsetting the increase was a decrease
of $818,000 reflecting the elimination of reimbursable expenses from the GHALP
Properties as a result of the consolidation of the results of the operations of
GHALP Properties. As a percentage of total revenues, reimbursable expenses
decreased to 10.6% in 1996 from 11.8% in 1995.
Depreciation and amortization expense increased by 23.1%, or $1.0
million, to $5.6 million in 1996 from $4.6 million in 1995, due to the net
acquisition of property and equipment and the amortization of the acquisition
costs of management contracts. Also included in the increase was approximately
$441,000 from the amortization of deferred debt issue costs relating to the
Notes and the Revolving Credit Facility.
Interest income increased by $1.3 million to $1.5 million in 1996 from
approximately $240,000 in 1995. The increase was primarily attributable to
approximately $671,000 income earned on unused cash generated from the initial
public offerings and approximately $557,000 income on notes receivable.
Interest expense increased by 32.1%, or approximately $2.1 million, to
$8.5 million in 1996 from $6.4 million in 1995, reflecting the additional
interest from the Notes, capital leases, less the elimination of interest
expense from the retired debt and affiliated borrowings.
Earnings from the Company's equity investment in hotel partnership
ceased following the May 2, 1996 consolidation of the results of operations of
the GHALP Properties.
Income attributable to minority interest was eliminated as a result of
the acquisition of the minority interest as part of the Company's formation.
As a result of the changes noted above, income before income tax
benefits increased by 61.9%, or $4.3 million, to $11.2 million in 1996 from
$6.9 million in 1995.
Income tax benefits of $10.7 million reflected the effect of recording
deferred income taxes arising as a result of incorporation in the amount of
$13.0 million, net of $2.3 million for the provision for the result of the
operations since incorporation.
The extraordinary item of $1.1 million was a write-off of the
unamortized debt costs of $1.4 million as the Company's pre-existing debt was
paid off at the Company's formation, net of applicable tax of approximately
$270,000.
1995 Compared to 1994
Total revenues increased by 15.2%, or $11.6 million, to $87.9 million
in 1995 from $76.3 million in 1994. Hotel revenues increased by 5.6%, or $2.9
million, to $54.7 million in 1995 from $51.8 million in 1994. Approximately 69%
of this increase in hotel revenues was due to a $2.0 million increase in
existing hotel room rental revenues, while 35% of the increase was due to a
$1.0 million increase in existing hotel food and beverage revenues, which
increases were offset by minor decreases in other hotel revenue categories. The
increase in hotel room rental revenue is due to a 1% increase in ADR and a 3%
increase in occupancy percentage.
- 49 -
62
Revenues from management fees increased by 26%, or $3.5 million, to
$16.8 million in 1995 from $13.3 million in 1994. Approximately 64% of this
increase resulted from the addition of 14 new managed hotels in 1995, while 20%
of the increase resulted from increases in base management fees and trade name
fees and 16% of the increase resulted from increases in incentive management
fees derived from existing managed hotels.
Revenues from service fees increased by 41.8%, or $1.2 million, to
$4.1 million in 1995 from $2.9 million in 1994. Design fees relating to the
conversion of hotels to Wyndham brand hotels accounted for 31% of the increase,
while 29% of the increase was derived from new central accounting fees
resulting from Portfolio hotels added in 1995. The balance of the increase
reflected increased service fees from existing hotels.
Reimbursable revenues increased by 35.4%, or $2.8 million, to $10.8
million in 1995 from $8.0 million in 1994. Of this increase, 39% resulted from
increased payments to the Company's Marketing Fund from both new and existing
Portfolio hotels, while 29% of the increase resulted from fees generated from
room sales booked by the Company's National Sales Offices.
During 1995, the Company received $1.0 million for a terminated
management agreement that is included in other income. This termination
occurred as a result of a third party owner terminating the Company's
management agreement due to the third party owner's affiliation with another
hotel management company. This termination fee is offset by a payment of
approximately $160,000 relating to the CHMC Agreement. The remaining
approximately $500,000 of other income was derived from franchise fees and
miscellaneous income sources.
Hotel expenses increased by 1.0%, or approximately $381,000, to $37.1
million in 1995 from $36.7 million in 1994. This increase reflects a 9%
increase in room expenses and a 3.7% increase in food and beverage expenses.
These increased expenses were offset by a drop in other hotel expenses. Hotel
expenses decreased as a percentage of hotel revenues to 67.9% in 1995 from
70.9% in 1994, primarily as a result of operating leverage and increased
operating efficiencies. The operating profit margin on hotels owned or leased
by the Company improved to 32.1% in 1995 from 29.1% in 1994, due primarily to
increases in hotel occupancy rates and inflation (partially offset by a
decrease in rental income at one hotel).
SG&A expenses increased 40.9%, or $4.4 million, to $15.0 million in
1995 from $10.6 million in 1994. As a percentage of total revenues, SG&A
expenses increased to 17.1% in 1995 from 14.0% in 1994. Of the $4.4 million
increase in SG&A expenses, 64% of the increase, or $2.8 million, is due to
increased wages, contract labor and benefit costs arising from the addition of
corporate management and staff personnel in anticipation of the Company's need
to manage and provide services to the substantially larger number of hotels it
anticipates operating as it executes its growth strategy. In addition, 10% of
the increase, or approximately $426,000, is due to costs associated with
improved management information systems support and 8% of the increase, or
approximately $356,000, is due to development costs incurred in connection with
possible acquisitions of management contracts.
Equity participation compensation expenses increased by 42.5%, or $1.2
million, to $4.0 million in 1995 from $2.8 million in 1994. This increase
reflects the improved operating performance of the Company and affiliated
entities and the consequent increased valuation of WEL's and the Senior
Executive Officers' investments in the Old Management Company and affiliates.
Reimbursable expenses grew by 35.4%, or $2.8 million, to $10.8 million
in 1995 from $8.0 million in 1994. As a percentage of total revenues,
reimbursable expenses constituted 12.3% of total revenues in 1995, compared
with 10.5% in 1994. These increases were primarily due to increased advertising
and promotional expense, as well as costs associated with expanding the
Company's national sales staff to support both individual business and group
sales.
Depreciation and amortization expense increased by 10.0%, or
approximately $576,000, to $6.3 million in 1995 from $5.7 million in 1994 due
to the net acquisition of $3.3 million in property and equipment and the
addition of amortization of the Bedrock Options. See Note 13 of Notes to
Consolidated Financial Statements.
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63
Interest expense, net, increased by 6.6%, or approximately $495,000,
to $8.0 million in 1995 from $7.5 million in 1994. Interest expense, net, as a
percentage of total revenues decreased to 9.1% in 1995 from 9.8% in 1994,
reflecting relatively static interest expense while the Company's revenues grew
over this period.
Earnings from the Company's equity investment in GHALP grew by 34.6%,
or approximately $427,000, to $1.7 million in 1995 from $1.2 million in 1994,
reflecting improvements in the operating performance of the GHALP Properties.
As a result of the changes noted above, net income (exclusive of
income taxes) increased by 26.9%, or $1.7 million, to $7.9 million in 1995 from
$6.3 million in 1994.
1994 Compared to 1993
Total revenues increased by 24.5%, or $15.0 million, to $76.3 million
in 1994 from $61.3 million in 1993. Of this increase, hotel revenue generated
by the hotels owned or leased by the Company increased by 17.9%, or $7.9
million, to $51.8 million in 1994 from $43.9 million in 1993. Approximately 42%
of this increase in hotel revenues resulted from an increase of $3.3 million in
existing hotel room rental revenues, while 30% of the increase resulted from an
increase of $2.4 million in existing hotel food and beverage revenues. The
increase in hotel room rental revenue is due to a 5% increase in ADR and a 5%
increase in occupancy percentage. The remaining portion of the increase is
primarily attributable to the effects of a full year of operations generated by
the Wyndham Garden Hotel in Schaumburg, Illinois, which the Company acquired in
May 1993.
Revenues from management fees increased by 24%, or $2.6 million, to
$13.3 million in 1994 from $10.7 million in 1993. Of this increase, 33% is
attributable to fees earned from 11 new management contracts executed in 1994,
32% is from increases in base management and trade name fees and 35% is from
increases in management incentive fees derived from existing managed hotels.
Service fee revenues increased by 36.5%, or approximately $777,000, to
$2.9 million in 1994 from $2.1 million in 1993, due primarily to increased
central accounting fees and higher revenues derived from the provision of
purchasing services.
Reimbursement revenues increased by 92.2%, or $3.8 million, to $8.0
million in 1994 from $4.2 million in 1993. The Company established a Marketing
Fund in January 1994 to which all Portfolio hotels pay a percentage of room
revenues. Payments to the new Marketing Fund accounted for approximately 87% of
the increase in reimbursement revenues.
Hotel expenses increased by 14.4%, or $4.6 million, to $36.7 million
in 1994 from $32.1 million in 1993. Approximately 24% of the increase is
attributable to the effect of operating the Wyndham Garden Hotel in Schaumburg,
Illinois during all of 1994, and the balance is due to normal increases in
hotel operating expenses arising from increased hotel revenues (the most
important components of which were an increase in room expense of 11% and an
increase in food and beverage expense of 16%, which represented 12% and 31% of
the total increase in hotel expenses, respectively). Hotel expenses as a
percentage of hotel revenues decreased to 70.9% in 1994 from 73.1% in 1993,
primarily as a result of operating leverage and increased operating
efficiencies.
SG&A expenses increased by 7.4%, or approximately $732,000, to $10.6
million in 1994 from $9.9 million in 1993. This increase in SG&A expenses is
primarily attributable to an increase of approximately $872,000 in corporate
staffing and office expenses, partially offset by the non-recurrence in 1994 of
various 1993 expenses (approximately $250,000 established for a then pending
lawsuit, approximately $156,000 for a terminated employee and the remainder
relating to the reclassification of certain expenses). SG&A expenses as a
percentage of total revenues decreased to 14.0% in 1994 compared to 16.2% in
1993, as the growth in total revenues more than offset increased SG&A expenses.
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64
Equity participation compensation expenses increased by 5.0%, or
approximately $93,000, to $2.8 million in 1994 from $2.7 million in 1993. This
increase reflects the improved operating performance of the Company and
affiliated entities and the consequent increased valuation of WEL's and the
Senior Executive Officers' investments in the Old Management Company and
affiliates.
Reimbursable expenses increased by 92.2%, or $3.8 million, to $8.0
million in 1994 from $4.2 million in 1993. Approximately 87% of this increase
is due to increased advertising and promotional expenses associated with the
operation of the Company's Marketing Fund, which was established in January
1994.
Depreciation and amortization expense increased by 8.8%, or
approximately $466,000, due to the effect of a full year of ownership in 1994
of the Wyndham Garden Hotel in Schaumburg, Illinois and increased amortization
of management contract costs.
Interest expense, net, increased by 6.4%, or approximately $451,000,
to $7.5 million in 1994 from $7.1 million in 1993 primarily as a result of
increases in interest rates.
Earnings from the equity investment in GHALP increased by 59.1%, or
approximately $459,000, to $1.2 million in 1994 from approximately $777,000 in
1993 due to increased gross operating profits from the GHALP Properties.
As a result of the changes noted above, net income (exclusive of
income taxes) increased by 278.8%, or $4.6 million, to $6.3 million in 1994
from $1.7 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital and liquidity needs include cash to
finance operations, capital requirements relating to ongoing hotel maintenance
and improvements at the Company's owned and leased hotels, capital requirements
associated with the Company's entry into new management contracts and
improvements to the related hotel properties, hotel acquisition financing and
the repayment of indebtedness.
The Company has historically satisfied its capital and liquidity needs
through cash generated by operations, mortgage indebtedness and commercial debt
financing. In the 1996 First Nine Months, the Company generated cash from
operations of $2.5 million, as compared with the generation of $8.5 million in
cash from operations in the 1995 First Nine Months. This decrease in the
generation of cash from operations is primarily attributable to the payment of
$13.7 million in security deposits, as required under the GHALP Lease. The
Company intends to retain any future earnings for use in its business and does
not intend to declare any cash dividends in the foreseeable future. See
"Dividend Policy." The Company therefore anticipates that any cash provided by
operations in the foreseeable future will be available to fund the Company's
liquidity and capital needs.
The Company completed its initial public equity offering and offering
of the Notes in May 1996, and generated net proceeds in the aggregate amount of
$163.9 million (including a contribution of $10.0 million from Bedrock). These
proceeds have so far been used to fund the cash payments associated with the
formation of the Company in the amount of $53.8 million, to repay certain
mortgage and other indebtedness in the amount of $64.8 million that was assumed
in connection with the formation of the Company, to pay approximately $5.1
million in fees and expenses incurred in connection with the GHALP transactions
and consummating certain financings associated with the formation of the
Company, to fund certain improvements to the Wyndham Rose Hall Resort in the
approximate amount of $879,000 and to fund the cash portion of the acquisition
costs of four hotel properties totaling $33.5 million.
The $100.0 million of Notes issued in May 1996 will mature on May 15,
2006, are unsecured obligations of the Company and are guaranteed by each of
the Company's subsidiaries (except for a number of insignificant subsidiaries).
The Notes bear interest at 10 1/2% per annum, and such interest is payable
semi-annually in arrears on May
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15 and November 15, commencing November 15, 1996. Except in the event of a
Change of Control, there is no principal due on the Notes prior to final
maturity.
The Indenture relating to the Notes contains certain covenants
restricting the Company's ability to incur indebtedness and otherwise limiting
the Company's activities. The ability of the Company and its Restricted
Subsidiaries (as defined in the Indenture) to incur indebtedness is limited by
the Indenture unless the Company would, after giving effect to such incurrence,
have a Consolidated Fixed Charge Coverage Ratio (as defined in the Indenture)
greater than 1.75:1 with respect to any incurrence prior to May 31, 1997, or
2:1 with respect to any incurrence on or after May 31, 1997, provided that the
Company and any Restricted Subsidiary will be permitted to incur (A)
indebtedness of up to $150 million under the Revolving Credit Facility or any
replacement facility, (B) indebtedness owed to the Company or a Restricted
Subsidiary, (C) refinancings of indebtedness permitted by clauses (B), (D),
(F), (H) and (I) hereof, (D) indebtedness under (x) performance or similar
bonds provided in the ordinary course of business, (y) currency or interest
rate protection agreements or (z) indemnity or purchase price adjustment
obligations entered into in connection with asset dispositions, which
obligations do not exceed the proceeds of the related disposition, (E)
indebtedness under letters of credit and bankers' acceptances issued in the
ordinary course of business, (F) acquired indebtedness if, after giving effect
to such incurrence, the Company could incur at least $1.00 of additional
indebtedness (other than pursuant to clauses (A) through (J) hereof), (G)
indebtedness of up to $3 million incurred in connection with certain
retirements for value of Company securities held by employees or former
employees, (H) guarantees of indebtedness of the Company or a Restricted
Subsidiary, (I) indebtedness incurred in connection with the acquisition of the
Vinings Wyndham Garden Hotel and (J) other indebtedness of up to $25 million.
The Indenture also contains covenants limiting (A) the ability of the Company
and its Restricted Subsidiaries to pay dividends on or repurchase any capital
stock (including the Common Stock) not held by the Company or a wholly-owned
Restricted Subsidiary that is a guarantor of the Notes, (B) limiting the
ability of the Company and its Restricted Subsidiaries to voluntarily prepay or
repay any indebtedness that is not senior in right of payment to the Notes and
(C) limiting the ability of the Company to incur indebtedness that is senior in
right of payment to the Notes but junior in right of payment to the Company's
senior indebtedness.
The Company is also a party to an agreement with Bankers Trust, as
agent for a group of financial institutions (the "Lenders"), pursuant to which
the Lenders have agreed, subject to certain conditions, to provide the
Revolving Credit Facility. The Revolving Credit Facility provides for up to
$100.0 million of revolving loan borrowings. The Revolving Credit Facility is a
direct obligation of the Company and is fully and unconditionally guaranteed by
each of the Company's subsidiaries. Such obligations and guaranties rank senior
in right or payments to the Notes and are secured by substantially all of the
assets of the Company and subsidiaries. While no amounts had been drawn under
the Revolving Credit Facility at November 30, 1996, approximately $35.7
million aggregate principal amount was available for borrowings at such date in
accordance with the terms of the Revolving Credit Facility. (In January of
1997, the Company borrowed approximately $10.8 million in connection with
entering into the lease for the Wyndham Salt Lake City Hotel.) Availability
under the Revolving Credit Facility is subject, among other things, to a
borrowing base test calculated with reference to the cash flow from the hotel
properties and management contracts pledged to secure the obligations of the
Company under the Revolving Credit Facility, the location of certain of such
properties, the terms of such management contracts, the relative contribution
to the borrowing base of the different values attributed to such properties and
the values attributable to both the properties taken as a whole and the
management contracts taken as a whole and other factors. Under the terms of the
Revolving Credit Facility, no further borrowings will be made available to the
Company following the third anniversary of the closing of the Revolving Credit
Facility. The Revolving Credit Facility will mature four years from its closing
date.
The Revolving Credit Facility may be used for (a) the acquisition,
renovation, management and operation of certain hotel properties, (b) the
provision of equity and debt investments in joint ventures to acquire, renovate
and manage certain hotel properties, (c) equity and debt investments in and
credit support for owners of certain hotel properties managed by the Company
and its subsidiaries which are made in connection with the acquisition,
extension, renewal or modification of management agreements and (d) other
corporate purposes of the Company. The Revolving Credit Facility bears interest
at a rate equal to, at the election of the Company, (a) the Bankers Trust base
rate plus one percent (1.0%) per annum, or (b) one-, two-, three- or six-month
LIBOR plus two percent (2.0%) per annum, payable
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monthly in arrears; provided however, subject to the Company's satisfaction of
certain conditions, the aforementioned interest rates will be subject to a
reduction of 0.25% per annum. The Company paid customary fees in connection
with structuring the Revolving Credit Facility and continues to pay the Lenders
an unused commitment fee equal to 0.375% per annum of the unused portion of the
Revolving Credit Facility, payable quarterly in arrears. Under certain
circumstances, the Company may be required to obtain interest rate protection.
The Company is permitted to use up to $15.0 million of the amount available
under the Revolving Credit Facility for the issuance of letters of credit,
which is subject to a fee of 2.0% per annum on the maximum amount which may be
drawn under each letter of credit.
The Revolving Credit Facility contains covenants requiring the Company
to maintain certain financial ratios. The primary effect of these covenants are
to limit the Company's ability to obtain or maintain borrowings under the
Revolving Credit Facility, as well as to limit the Company's activities in a
number of other respects. Among the covenants contained in the Revolving Credit
Facility, are covenants requiring the Company to maintain a minimum net worth
of $55.0 million and to maintain the following financial ratios:
(a) the market value of the outstanding capital stock of the
Company shall not be less than 50% of the market value of such stock
on the date of the closing of the Revolving Credit Facility, unless
there shall have occurred a corresponding decrease in the market value
of the capital stock of a selected group of comparable companies;
(b) Total Consolidated Indebtedness (as defined in the
Revolving Credit Facility) and imputed indebtedness attributable to
the Company's ground lease obligations ("Imputed Debt") entered into
following the closing of the Revolving Credit Facility shall not
exceed the lesser of (i) the Adjusted Stockholders' Equity (as defined
in the Revolving Credit Facility) or (ii) 50% of Total Consolidated
Indebtedness plus Imputed Debt plus the market value of the
outstanding capital stock of the Company, unless the failure to meet
the ratio with respect to clause (ii) is attributable to a decrease in
the market value of the capital stock of a selected group of
comparable companies of more than 50% since the date of the closing of
the Revolving Credit Facility;
(c) an annually increasing ratio of Consolidated EBITDA (as
defined in the Revolving Credit Facility) plus total lease payments
under permitted sale-leaseback transactions (the "Lease Payments") to
Consolidated Fixed Charges (as defined in the Revolving Credit
Facility) plus the greater of the Lease Payments or an interest factor
on the Imputed Debt;
(d) an annually increasing ratio of Consolidated EBITDA minus
capital expenses incurred plus Lease Payments to Consolidated Fixed
Charges plus Lease Payments and an interest factor on the Imputed
Debt;
(e) an annually decreasing ratio of Total Consolidated
Indebtedness plus Imputed Debt to Consolidated EBITDA plus the Lease
Payments; and
(f) an annually decreasing ratio of Total Consolidated
Indebtedness plus Imputed Debt to Consolidated EBITDA minus capital
expenses incurred plus Lease Payments.
The Revolving Credit Facility also contains covenants that (a) impose
certain limitations on the right of the Company in respect of (i) the payment
of dividends and other distributions, (ii) the making of investments in,
guaranties for the benefit of or payments to subsidiaries, persons owning or
leasing hotels managed by the Company or otherwise, (iii) acquisitions of
additional hotel properties, (iv) the creation or incurrence of liens, (v) the
incurrence of indebtedness, lease obligations or contingent liabilities, (vi)
the issuance of preferred stock and (vii) sale leaseback transactions involving
any of its hotel properties, (b) require the Company to maintain a capital
reserve account of 3.5% of the gross revenues for each of the hotels owned or
leased by it (the GHALP Lease will require the Company to make deposits into a
capital reserve account in amounts equal to 5% of the gross revenues for each
of the GHALP Properties and the lease relating to the Wyndham Harbour Island
will require the Company to allocate amounts equal to 4% of the gross revenues
of the Wyndham Harbour Island for replacement and repair of furniture,
fixtures, equipment and other
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improvements relating to such property), (c) require the Company to make
certain expenditures in connection with deferred maintenance and (d) require
the Company to undertake certain capital expenditures for the renovation of one
hotel property (the Wyndham Rose Hall Resort) and possibly other hotel
properties.
In connection with the Company's acquisition of the Vinings Wyndham
Garden Hotel, which was consummated in late May 1996, the Company assumed
industrial revenue bond indebtedness in the amount of $9.7 million with
interest payments to be based upon a rate of 7.625% per annum. Such industrial
bond indebtedness was in default and had been accelerated by the bondholders,
as the credit enhanced for such indebtedness was operating under court
supervised rehabilitation. As a condition to the Company's purchase of the
hotel, the trustee for the bondholders executed a forbearance agreement
pursuant to which it agrees not to exercise any remedies under the documents
relating to the indebtedness for a period of 15 months (which period will end
in August 1997). Notwithstanding the terms of the forbearance agreement, the
Company is required under the terms of the contract of sale to refinance the
industrial revenue bond indebtedness within nine months of the date of
acquisition of the hotel. The Company may need to obtain approval from the
Lenders under the Revolving Credit Facility in connection with such
refinancing. There can be no assurance as to the Company's ability or the terms
upon which it can refinance the industrial revenue bond indebtedness.
In connection with the Company's entering into the lease with respect
to the Wyndham Salt Lake City Hotel, the Company paid approximately $10.8
million in rental and related deposits. See "Business -- Long-Term Hotel
Leases." The Company borrowed these funds under the Revolving Credit Facility.
The Company has the following anticipated capital commitments.
Pursuant to the terms of an interim management agreement for a resort hotel
property, the Company has undertaken, subject to certain contingencies, certain
commitments to provide approximately $1.3 million (of which $________ was
funded in __________), approximately $750,000 of which shall be used for
preopening expenses and the purchase of furniture, fixtures and equipment and
the remainder of which shall be used to fund working capital for the hotel.
Finally, the Company is obligated pursuant to the terms of certain hotel
management agreements to fund loans for hotel acquisition and improvements in
the aggregate amount of $6.1 million.
The Company believes that cash generated by operations will be
sufficient to fund the Company's operating strategy for the foreseeable future,
and that any remaining cash generated by operations, together with capital
available under the Revolving Credit Facility and the remaining proceeds from
the Company's initial public equity and Notes offerings will be adequate to
fund the Company's growth strategy in the near term. The Company may seek an
increase in the capital available to it under the Revolving Credit Facility or
otherwise obtain additional debt or equity financing, depending upon the amount
of capital required to pursue future growth opportunities or address other
needs. No assurance can be given that the amount available under the Revolving
Credit Facility will be increased, or such additional financing will be
available, on acceptable terms, if at all.
SEASONALITY
The lodging industry is affected by normally recurring seasonal
patterns. Demand in the lodging industry is traditionally higher in the second
and third calendar quarters than in the first and fourth calendar quarters.
However, higher demand at most Wyndham Resorts during the first and fourth
quarters and the recognition of incentive fees in the fourth quarter offsets
the impact of reduced demand at other Wyndham brand hotels during these
quarters. See "Risk Factors -- Quarterly Fluctuations in Operating Results."
INFLATION
The effect of inflation, as measured by fluctuations in the Consumer
Price Index, has not had a material impact on the Company's revenues or net
income during the periods under review.
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BUSINESS
Wyndham Hotel Corporation is a national hotel company operating
upscale hotels primarily under the Wyndham brand name. Wyndham hotels are
located in 26 states, the District of Columbia, Ontario, Canada and on 5
Caribbean islands. Wyndham hotels compete with national hotel chains such as
Marriott, Hyatt and Hilton. The Company offers three distinct full service
hotel products under the Wyndham brand designed to serve its core upscale
customers in urban, suburban and select resort markets. At January 15, 1997,
the Company's hotel Portfolio consisted of 80 hotels operated by the Company
and 2 franchised hotels. The Company's Portfolio includes 76 upscale hotel
properties (which includes four properties under renovation) and 6
extended-stay hotel properties, which the Company began managing in September
1996.
OPERATING STRATEGY
The Company's goal is to continue the expansion of Wyndham Hotels,
Wyndham Garden Hotels and Wyndham Resorts in order to become one of the largest
brand hotel companies operating in North America while continuing to maintain
the quality of the Wyndham brand. In addition, the Company expects to increase
the number of management contracts for extended-stay hotel properties operated
under the Homegate Studios & Suites brand name. To achieve this goal, the
Company has developed an operating strategy designed to achieve high levels of
satisfaction and loyalty from both hotel guests and owners of managed hotels.
The Company believes that the successful implementation of this strategy will
facilitate the expansion of its Portfolio of owned, leased, managed and
franchised hotels. The principal elements of the Company's strategy are as
follows:
Capitalize on Strong Brand Image. Wyndham has focused on
developing a brand name that is nationally recognized as being
synonymous with quality, full service lodging in the upscale hotel
market. Because Wyndham has operating control over more than 98% of
the hotels operated under the Wyndham brand name, it is able to
consistently deliver quality hotel products and services throughout
its hotel system and support the marketing programs necessary to
maintain the quality associated with the Wyndham name. By developing
the Wyndham brand through upscale hotel products, the Company is able
to focus on earning the loyalty of its core upscale customers:
individual business travelers, business groups and other group
customers, and leisure travelers. According to written guest surveys
conducted by Wyndham at its hotels during 1995, 91% of Wyndham guests
surveyed rated the overall quality of Wyndham hotel products and
services good or excellent, and 94% of the guests surveyed indicated
that they would return to that Wyndham hotel on their next trip to the
same city. The Company believes that hotel owners and investors have
come to associate the Wyndham brand name with cost efficient
operations and the delivery of exceptional value to hotel properties.
The Company also believes that growing national recognition of the
Wyndham brand, together with the quality and efficiency of its hotel
operations, has facilitated the Company's historical growth and will
enhance its ability to realize its future growth objectives.
Multiple Upscale Hotel Products. Wyndham offers three
distinct full service hotel products under a single brand name that
are tailored to urban, suburban and select resort markets, the primary
markets that serve its core upscale customers.
o Wyndham Hotels. In urban markets, the Company operates or
franchises 22 Wyndham Hotels, which contain an average of
approximately 400 hotel rooms, generally between 15,000 and
250,000 square feet of meeting space, and a full range of
guest services and amenities. Wyndham Hotels are targeted
principally at business groups and other group customers, as
well as individual business travelers.
o Wyndham Garden Hotels. In suburban markets, Wyndham operates
40 Wyndham Garden Hotels, which were created by the Company
to cater to individual business travelers and small business
groups. (The Company operates four additional hotels under
brand names other than the Wyndham brand, which are scheduled
to become Wyndham Garden Hotels in the second quarter of 1997
following renovations that are currently underway. Two of
these hotels are scheduled to be converted
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by the first quarter of 1997, and two of these hotels are
scheduled to be converted by the second quarter of 1997) With
guest services, hotel finishings and landscaping comparable
to Wyndham Hotels, Wyndham Garden Hotels are designed to
provide a guest experience similar to that enjoyed at Wyndham
Hotels, but at a price that is competitive in suburban
markets. The Company locates Wyndham Garden Hotels primarily
near suburban business centers and airports and, where
possible, seeks to cluster these hotels in a "hub-and-spoke"
distribution pattern around one or more Wyndham Hotels in
order to achieve operating and marketing efficiencies and
enhance local name recognition. Wyndham Garden Hotels are
mid-size full service upscale hotels containing between
approximately 150 and 225 hotel rooms that offer a package of
services and amenities focused on the needs of the business
traveler, including generally between 1,500 and 5,000 square
feet of meeting space, restaurants that serve three meals a
day, exercise rooms, and laundry and room service.
o Wyndham Resorts. Wyndham's Portfolio also includes seven
Wyndham Resorts that are full service destination resorts
targeted at upscale leisure and incentive travelers and are
located both domestically and on five Caribbean islands.
Through Wyndham Resorts, the Company is able to offer guest
rewards and other cross-promotional benefits to its domestic
customers, thus improving Wyndham's competitiveness and brand
loyalty.
The Company believes that its strategy of offering multiple hotel
products under a single brand name enables it to achieve, through efficient
hotel distribution, strong penetration of the primary markets that serve its
core upscale customers. The Company also believes that this strategy enables it
to compete effectively for expansion opportunities covering a wide variety of
upscale hotel properties, thereby providing a competitive advantage over hotel
companies with fewer products. The Company expects to continue evaluating
opportunities for new hotel products that it may offer under the Wyndham brand.
See " -- Growth Strategy -- II. Additional Growth Opportunities -- New Lodging
Products."
Extended-Stay Hotel Product. The Company manages SIX extended stay
hotel properties, which following planned renovations, will be operated under
the Homegate Studios & Suites brand name. These hotels are located in Texas and
are targeted at business travelers, professionals on temporary work
assignments, persons between domestic situations and persons relocating or
purchasing a home, who often desire accommodations for an extended duration.
These midprice hotels contain approximately 125 rooms each and feature a fully
equipped kitchen, upscale residential- quality finishes and accessories, and
separation between cooking, living and sleeping areas.
Operating and Financial Performance. The Company seeks to maximize
revenues through its comprehensive marketing strategy and the delivery of high
quality accommodations and hotel services that result in satisfied, loyal hotel
guests. The Company believes that its experience as a hotel owner makes it a
better hotel manager by keeping it focused on controlling each element of
operating expenses, which is essential for achieving attractive returns for
both the Company's hotels and managed hotels. In addition, through yield
management of its room inventory, the Company seeks to maximize REVPAR during
periods of high occupancy by giving first priority for available rooms to
guests that will pay the full amount of the applicable room rate.
The Company has a proven track record of achieving strong operating
and financial results. During 1995, average occupancy rates, ADR and REVPAR for
upscale Portfolio hotels were 69%, $88.79 and $60.96, respectively, compared
with an average during this period of 69%, $80.38 and $55.06, respectively, in
the upscale segment of the lodging industry. During the 1996 First Nine Months,
average occupancy rates, ADR and REVPAR for upscale Portfolio hotels were 70%,
$92.24 and $64.93, respectively, compared with an average during this period of
70%, $85.74 and $60.33, respectively, in the upscale segment of the lodging
industry. During 1995 and the 1996 First Nine Months, respectively, REVPAR for
upscale Portfolio hotels outperformed the upscale segment of the lodging
industry by 11% and 8%, respectively.
The following table compares certain historical operating and
financial data of the Company's Comparable Hotels with the lodging industry.
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UPSCALE
SEGMENT
OF THE
COMPARABLE LODGING
HOTELS(1) INDUSTRY(2)
--------- -----------
Occupancy percentage:(3)
1993 ..................................... 67% 67%
1994 ..................................... 70% 68%
1995 ..................................... 72% 69%
1996 First Nine Months ................... 73% 70%
ADR:(4)
1993 ..................................... $ 76.39 $ 74.19
1994 ..................................... 80.16 77.19
1995 ..................................... 84.38 80.38
1996 First Nine Months ................... 91.96 85.74
REVPAR:(5)
1993 ..................................... 51.31 49.71
1994 ..................................... 56.09 52.57
1995 ..................................... 60.99 55.06
1996 First Nine Months ................... 66.85 60.33
Gross operating profit margin:(6)
1993 ..................................... 32% 30%
1994 ..................................... 34% 31%
1995 ..................................... 36% 33%
1996 First Nine Months ................... 37% *
Food and beverage margin:(7)
1993 ..................................... 29% 17%
1994 ..................................... 31% 18%
1995 ..................................... 31% 21%
1996 First Nine Months ................... 28% *
Gross operating profit per available room:(8)
1993 ..................................... $ 9,612 $ 8,397
1994 ..................................... 11,417 9,364
1995 ..................................... 12,547 10,470
1996 First Nine Months ................... 10,306 *
- -------------------
* 1996 First Nine Months lodging industry statistics are not available
for gross operating profit margin, food and beverage margin and gross
operating profit per available room.
(1) Comparable Hotels consists of the 30 Wyndham brand hotels that have
been operated by the Company since January 1, 1993.
(2) Occupancy percentage, ADR and REVPAR comparisons are to the upscale
segment of the lodging industry, which the Company believes is the
appropriate segment for comparing operating data based on the
competitive set for the Company's hotels, as measured by ADR. Gross
operating profit and margin comparisons are to the
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upscale full service segment of the lodging industry, which consists
of upscale hotels with restaurants, because the Company believes that
the higher costs associated with restaurant operations provide the
most appropriate comparison of gross operating profits and margins.
(3) Occupancy percentage represents total rooms occupied divided by total
available rooms. Total available rooms represents the number of rooms
available for rent multiplied by the number of days in the reported
period.
(4) ADR represents total room revenues divided by the total number of
rooms occupied.
(5) REVPAR represents total room revenues divided by total available
rooms.
(6) Gross operating profit margin represents gross operating profit as a
percentage of total revenues. "Gross operating profit" represents
gross revenues less department expenses and undistributed operating
expenses. Gross operating profit margins are included herein because
management uses them as a measurement of hotel operating performance
and because management believes that these items are useful in making
industry comparisons.
(7) Food and beverage margin represents food and beverage operating profit
as a percentage of food and beverage revenues.
(8) Gross operating profit per available room represents gross operating
profit divided by total available rooms for the period.
The following table presents certain historical operating data for the
Company's 56 upscale hotels operated by the Company for each of the periods
presented:
NINE MONTHS ENDED NINE MONTHS ENDED PERCENTAGE
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 CHANGE
------------------ ------------------ ------
Occupancy percentage(1)............................... 70.8% 72.3% 2.1%
ADR(2)................................................ $84.76 $91.83 8.3%
REVPAR(3)............................................. $60.04 $66.37 10.5%
(1) Occupancy percentage represents total rooms occupied divided by total
available rooms. Total available rooms represents the number of rooms
available for rent multiplied by the number of days in the reported
period.
(2) ADR represents total room revenues divided by the total number of
rooms occupied.
(3) REVPAR represents total room revenues divided by total available
rooms.
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Fully Integrated, Full Service Hospitality Company. The Company owns,
manages, leases and franchises hotels under the Wyndham brand name. In
addition, the Company is experienced in all aspects of hotel operations,
including purchasing, accounting and asset and risk management, as well as
hotel construction and design. The Company believes that operating as a fully
integrated, full service hospitality company enhances its performance by
enabling it to provide a full range of hotel services in an efficient,
cost-effective manner. In addition, the breadth of the Company's experience
enables it to compete effectively for multiple opportunities in the hospitality
industry. The Company also believes that the Wyndham brand name provides it
with a competitive advantage in its management business over companies without
their own brand because hotel owners might otherwise be required to pay a third
party franchise fee in addition to a management fee, which generally results in
a higher fee than Wyndham's overall fee structure.
Experienced, High Quality Management Personnel. The Company believes
that it has highly qualified, experienced executives in its senior management
positions. The Company's Senior Executive Officers have worked together to
successfully develop, operate and manage hotel properties in various phases of
the industry cycle. The Company was able to attract its executives and senior
management personal with a variety of strong incentives, including an equity
sharing program. The Company's Senior Executive Officers beneficially own an
aggregate of approximately 12.6% of the Company's Common Stock.
Based upon the Company's commitment to promoting managers from within
the system, Wyndham has developed a Managers in Development program that trains
over 150 participants each year. Over 70% of the Company's hotel general
managers have been promoted from another position within the Company. The
Company also provides formal training programs for managers and sales
personnel. The Company believes that by establishing uniform productivity
standards and skill requirements for its personnel, it is able to measure
employee performance effectively and reward high productivity. The Company also
believes that the quality and experience of its key executives and hotel
personnel are important components of its ability to consistently provide
strong financial results to its stockholders and third party hotel owners as
well as outstanding service to hotel guests.
"The Right Way -- The Wyndham Way." The Company's service signature,
"The Right Way -- The Wyndham Way," embodies its commitment to designing and
implementing the innovative practices and programs required to be a successful
hotel operating company. In addition to written guest surveys, Wyndham conducts
frequent personal interviews of its guests and employees. Wyndham responds to
their comments by shaping its products and services to meet or exceed the needs
and expectations of its guests, focusing specifically on the services and
amenities that drive the purchase decision or affect the Company's ability to
adjust room rates. For example, Wyndham has become well-known for its American
Airlines and Avis Rent-A-Car "Triple Upgrade" program and was the first upscale
hotel chain to provide free in-room coffee makers in every domestic Wyndham
brand hotel room. See " -- Customers and Marketing." The Company emphasizes
building the Wyndham brand image by delivering the highest quality guest
services, resulting in strong loyalty from its core upscale customers:
individual business travelers, business groups and other group customers, and
leisure travelers.
GROWTH STRATEGY
Since the beginning of 1990, the number of hotels in the Company's
Portfolio has increased from 25 hotels to 82 hotels. In addition to generating
internal growth through the improved performance of existing hotels, the
Company has developed a flexible external growth strategy designed to increase
the number of hotels in its Portfolio.
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I. PRIMARY GROWTH OPPORTUNITIES
The near-term focus of the Company's growth strategy is as follows:
Growth from Existing Hotels. The Company expects improvements in the
financial performance of the existing hotels in its Portfolio to account for a
substantial portion of its financial growth in the near future. The Company
believes that the primary factors contributing to internal growth include (i)
revenue increases resulting from continuing improvements in the upscale segment
of the lodging industry and continuing maturation of 41 hotels added since the
beginning of 1995 (including 14 Wyndham Garden Hotels and four additional
hotels under renovation that will be converted to the Wyndham Garden brand),
and (ii) improved operating margins resulting from operating leverage and
Wyndham's continued emphasis on controlling operating expenses. For example,
the Company anticipates that management incentive fees, which escalate with
increased operating performance at the Company's managed hotels, will
contribute to internal growth. During the 1996 First Nine Months, the Company
earned incentive fees on 34% of its managed properties, and 19% of the
Company's management fee revenues were derived from incentive fees. The
Company's internal growth strategy has produced Comparable Hotel room revenue
increases of 9% in both 1994 and 1995 and has produced an increase in
Comparable Hotel gross operating profit margins from 32% in 1993 to 36% in
1995. These improvements have led to significant increases in gross operating
profit per available room of 19% and 10% in 1994 and 1995, respectively,
compare to the prior year period. Comparable Hotel gross operating profit
margins increased to 37% in the 1996 First Nine Months from 36% in the 1995
First Nine Months, and gross operating profit per available room increased by
9.9% in the 1996 First Nine Months over the 1995 First Nine Months. The Company
believes that its ability to achieve both internal and external growth will
help attract third party debt and equity capital to help fund the growth of the
Company's Portfolio.
Wyndham Garden Hotel Redevelopment and Conversion Program. The Company
believes that the continued growth of its Wyndham Garden Hotel product will
provide significant opportunities for increasing the number of Wyndham brand
hotels in its Portfolio. Since the beginning of 1990, the Company has added 34
Wyndham Garden Hotels to its Portfolio, 3 of which were developed through new
construction and 31 of which were existing hotels converted to the Wyndham
brand. In 1994, the Company accelerated the expansion of Wyndham Garden Hotels
through an investment program developed in conjunction with Bedrock and other
strategic partners. Together with certain lenders and an institutional
investor, Bedrock organized a development fund (the "Investment Program") for
projects approved by the Company and Bedrock for the purpose of acquiring
existing hotel properties for redevelopment and conversion to Wyndham Garden
Hotels and/or to make related hotel investments. Approximately $196 million of
debt and equity capital had been invested pursuant to the Investment Program as
of December 31, 1996. Although the commitments of certain of the participants
in the Investment Program expire in mid-1977, the Company will be entitled to
manage any Investment Program hotel for a term of 15 years. Bedrock is not
required to invest a minimum amount of capital through the Investment Program,
and Wyndham had not invested in any of the 17 Wyndham Garden Hotels acquired
pursuant to the Investment Program as of the date of this Prospectus. The
Company and Bedrock have agreed that the Company will be permitted to manage
any hotel containing 250 or fewer rooms that is sourced by Bedrock. See "Risk
Factors -- Conflicts of Interest" and "Certain Relationships and Transactions
- -- Bedrock Investment Program." Bedrock also has provided assistance with the
development, design and construction phase of the redevelopment process.
Because many acquired hotels require extensive redevelopment in
connection with their conversion to the Wyndham Garden Hotel brand, the Company
has instituted a program to redevelop these properties to a quality level
consistent with Wyndham's high standards (the "Redevelopment Program"). For
these hotels, the redevelopment process begins by identifying hotel properties
in prime suburban business centers and airport locations that can be
reconfigured to meet the operating model for Wyndham Garden Hotels. Once the
property is acquired, it is typically completely closed to permit extensive
exterior renovation (which often consists of a substantially renovated facade)
and total renovation of guest room, dining and common areas. Upon completion,
the hotel is reopened under the Wyndham Garden Hotel brand and competes in a
strong, visible location as if it were a newly constructed property. The
Company estimates that redeveloping Wyndham Garden Hotels currently costs about
75% of the cost of new construction and takes substantially less time (an
average of approximately nine months from the date of acquisition to the date
that the
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hotel is reopened). The Company has the complete in-house design, development
and operating expertise necessary to manage the entire redevelopment process.
See "Risk Factors -- Risks Associated with Expansion" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
Wyndham intends to continue the Redevelopment Program with Bedrock and
other strategic partners, through direct investment by the Company, or some
combination thereof. The Company has executed a management contract for a
non-Bedrock hotel at La Guardia Airport in New York City, which is currently in
the renovation stage and is scheduled to reopen in the first quarter of 1997.
The Company also has executed two management contracts for non- Bedrock hotels
in Atlanta, Georgia. These hotels, which are open but under renovation, are
expected to be converted to Wyndham Garden Hotels in the second quarter of
1997. The Company has also acquired two hotels that are open but are in the
process of being converted to Wyndham Garden Hotels. One hotel is located in
Dallas, Texas and the other is located in Overland Park, Kansas. The Company
expects renovations to be completed on these hotels by the first quarter of
1997.
Addition of Upscale Management Contracts. The Company believes that a
significant source of potential future growth will be through the addition of
new management contracts for Wyndham Hotels, Wyndham Garden Hotels and Wyndham
Resorts at strategic locations. Since the beginning of 1990 through year-end
1995, the Company has added an average of ten new management contracts per
year, while the Company has lost an average of two management contracts per
year generally as a result of changes in ownership of managed hotels and
attrition resulting from scheduled termination of short-term non-Wyndham brand
management contracts. The Company believes that management contracts provide
stable growth opportunities through a variety of business environments because
of the relatively low capital requirements and short lead times necessary for
conversion to the Wyndham brand. Wyndham believes that it is able to compete
effectively for additional management contracts because of its strong
reputation in the upscale hotel industry, its track record of delivering strong
financial returns for hotel owners and investors and its willingness to
structure key terms of management contracts to satisfy hotel owner objectives.
In particular, the Company believes that its history of achieving strong
operating results for managed properties has led to a significant number of
owner referrals. In addition, by operating multiple upscale products, the
Company increases its opportunities to compete for new contracts. While the
Company anticipates that most new management contracts will be for Wyndham
brand hotels, the Company may enter into contracts to manage non-branded hotels
or to manage hotels under a different hotel brand. See " -- Additional Growth
Opportunities -- New Lodging Products."
Hotel Acquisitions and Joint Ventures. The Company anticipates that it
will be able to grow through the acquisition of hotels with attractive economic
prospects that are suitable for application of the Company's operating
strategy. In particular, the Company expects to focus on the selective
acquisition of Wyndham Hotels offering a full range of meeting and conference
capabilities that are located in new strategic markets or in existing urban
markets capable of supporting multiple Wyndham brand hotels. The Company also
will continue to assess the acquisition of other hotel chains that operate
hotel properties suitable to integrate into the Company's Portfolio as well as
the possible acquisition of resort hotels. The Company anticipates that it also
may make partial investments in hotel properties through joint ventures with
strategic business partners or through equity contributions or secured loans.
The Company may make such investments solely as an investor or in connection
with entering into a management contract. The Company also may issue equity
securities to finance future acquisitions in whole or in part. Notwithstanding
the foregoing, there can be no assurance that the Company will have adequate
capital resources to fund its growth. In addition, there can be no assurance
that the Company will be able to identify suitable acquisition or investment
opportunities or successfully integrate acquired properties. See "Risk Factors
- -- Risks Associated with Expansion" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Addition of Extended-Stay Management Contracts. The Company believes
that it will be able to achieve additional growth by adding new management
contracts for Homegate Studios and Suites hotels. In August 1996, a subsidiary
of the Company entered into a master management assistance agreement (the
"Agreement") with Homegate, to provide hotel management, purchasing, marketing
and technical services for Homegate Studios and Suites extended-
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stay hotels pursuant to and during the two-year term thereof. The Agreement
provides for the Company to manage up to sixty hotels pursuant to separate
10-year management contracts. See "-- Management Contracts" and "Certain
Transactions." The Company believes that the extended-stay program will provide
an opportunity to generate revenues by extending its management expertise and
operating programs into a new segment of the lodging industry without requiring
significant investment of the Company's capital. Homegate was founded by
affiliates of Crow Family Members, Trammell Crow Residential and Greystar,
which remain the principal stockholders.
II. ADDITIONAL GROWTH OPPORTUNITIES
Depending on market conditions in the lodging industry, the Company
also may pursue the following expansion opportunities:
Franchise Program. As of January 15, 1997, the Company franchised two
Wyndham brand hotels, and entered into a franchise agreement for a third hotel
that is currently being operated as a Best Western and is expected to be
converted to a Wyndham Hotel in February 1997. The Company plans to pursue
selective franchise opportunities with well-qualified owner/operators such as
American General Hospitality, Inc. and Starwood Lodging. The Company believes
that growth through selective franchise opportunities will add revenues through
royalties and increased brand awareness, without requiring significant capital
investment by the Company. The Company is in the process of developing a full
franchise program that it expects to have complete in advance of the next hotel
construction cycle in the upscale full service segment of the lodging industry.
The Company believes that this program will enable it to pursue franchise
opportunities on a broader scale, given appropriate market conditions.
In January 1997, the Company entered into an agreement with American
General Hospitality Corporation ("American General") relating to a strategic
alliance (the "Alliance") between the Company and American General. Pursuant to
the Alliance (i) the Company will have the non-exclusive right to franchise new
hotel acquisitions that American General has determined should undergo a brand
conversion; (ii) in connection with the conversion of hotels owned by American
General to the Wyndham brand, Wyndham will acquire American General common
stock or partnership units ("OP Units") in American General Hospitality
Operating Partnership L.P. (the "Alliance Securities"), in an amount equal to
nine times the estimated franchise fee payable to the Company during the first
twelve months such hotel is operated as a Wyndham brand; and (iii) American
General will be given the opportunity to bid on any hotels to be acquired by
the Company that it intends to sell to a REIT or any hotel with respect to
which it intends to enter into a sale or leaseback arrangement with a REIT
simultaneously with the hotel's purchase. The Company's purchase of the
Alliance Securities is subject to the satisfaction of certain conditions,
including the consent of the Company's lenders under the Revolving Credit
Facility, and will be at a price per share of common stock or OP Unit equal to
the average closing sale price of American General Common Stock on the NYSE for
the 30 trading days preceding the earlier of (i) the date on which the Company
consents to the conversion of an American General hotel to a Wyndham brand or
(ii) the date on which American General publicly announces its proposed
acquisition of the hotel that is ultimately converted to the Wyndham brand. Any
such purchase of Alliance Securities will occur within 30 days after an
American General hotel is converted to the Wyndham brand. No purchase of
Alliance Securities will occur in connection with the planned conversion of the
Albuquerque Airport Hotel. The Alliance will expire on December 31, 1999.
New Lodging Products. The Company intends to continue evaluating new
lodging products that it may offer under the Wyndham brand. These products may
include both new products within the full service upscale hotel segment, as
well as new products in other segments of the lodging industry. In particular,
the Company will seek to introduce new lodging products where, in the judgment
of management, the product can benefit from, and further enhance, the Wyndham
brand, as well as benefit from the Company's operating experience and business
strengths.
New Construction. Depending on market conditions, the Company will
continue to review opportunities to construct new Wyndham Hotels, Wyndham
Garden Hotels and possibly Wyndham Resorts in those strategic markets where
acquisition and conversion of existing properties at a substantial discount to
replacement cost is not possible.
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Currently, however, construction costs for new hotels in most markets remain
substantially higher than the costs of acquiring and converting existing
hotels.
III. ABILITY TO EXECUTE GROWTH STRATEGY
The Company believes that it has the in-house capabilities and
strategic business relationships with which to implement each aspect of its
growth strategy. These capabilities and relationships include the following:
In-House Development Expertise. The Company has a full in-house
development staff dedicated to identifying, evaluating and pursuing growth
opportunities. The development staff generally works in teams consisting of a
vice president of development, a development manager and an analyst. The
Company's in-house capabilities enable it to make an in-depth assessment of a
potential management, acquisition or other opportunity, including an analysis
of the surrounding market, the potential for increasing hotel performance and
value through the implementation of the Company's operating strategy, the
condition of the hotel property and the estimated renovation costs of achieving
Wyndham's standards for a fresh appearance and updated accommodations. The
Company's development staff also underwrites redevelopment and new construction
projects by analyzing estimated project costs and preparing market studies and
long-term projections of revenues and profitability. Each opportunity is also
assessed in terms of the contribution that the potential hotel will make to the
Wyndham brand identity.
The Company also maintains a highly qualified in-house construction
and design department, which enables it to manage all phases of redevelopment
and new construction projects. In 1994 and 1995, the Company managed more than
$135 million in redevelopment, remodeling and new construction projects. The
Company believes that its in-house capabilities provide a competitive advantage
by providing a strong network for identifying potential growth opportunities
and maintaining tight control over hotel quality standards.
Relationships with Hotel Investors. Wyndham believes that its strong
business relationships with various strategic partners will continue to
facilitate growth by providing hotel acquisition, renovation and development
opportunities as well as potential new management contract and franchise
opportunities. Currently, Crow Family Members, who own an aggregate of
approximately 47.3% of the Company's outstanding Common Stock, have interests
in 16 Wyndham brand hotels that are managed by the Company. Seventeen
additional Wyndham brand hotels that are managed by the Company are owned by
Bedrock, which owns approximately 11.4% of the Company's Common Stock. See
"Principal Stockholders." In addition, the Company's six extended-stay hotel
management contracts relate to hotels owned by Homegate, of which affiliates of
Crow Family Members, Trammell Crow Residential, one of the country's largest
apartment builders, and Greystar, a private investment company with substantial
multi-family housing development and construction expertise, were founders and
remain principal stockholders. Messrs. Carreker and Harlan R. Crow also serve
on the board of directors of Homegate. See "Certain Relationships and
Transactions."
In July 1996, certain Crow Family Members sold two Wyndham brand
hotels to Patriot American Hospitality, Inc., a publicly traded REIT ("Patriot
American"). These hotels were leased back to a new partnership controlled by
the Crow Family Members pursuant to a lease having a term of ten years, with
two extensions of five years each. The Company has continued to manage these
hotels on economic terms substantially identical to the terms upon which they
had been managed. Pursuant to the letter of intent relating to the sale of the
two hotels, the Company and Patriot American contemplate a future arrangement
whereby proposed additions to the Company's Portfolio of Wyndham brand hotels
will be presented to Patriot American on a preferred basis. There can be no
assurance that the transactions or arrangements contemplated by the letter of
intent will be consummated or otherwise definitively determined.
In addition to providing potential growth opportunities, the Company
believes that its successful track record with these and other hotel owners and
investors provides stability to the Company's management contracts with hotels
owned by such entities. The Company also believes that its relationship with
the Trammell Crow Company, one of the largest national real estate companies,
will continue to facilitate the Company's ability to identify and evaluate
potential acquisition, renovation and development opportunities.
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Sales of Mature Hotels; Long-Term Leases. The Company has developed
business relationships with certain publicly traded REITS. Generally, a REIT
cannot operate hotels because 75% of the gross income of a REIT must be derived
from certain defined categories of qualifying income derived directly or
indirectly from investments relating to real property or mortgages on real
property. Certain REITs, however, have purchased hotel properties that they
lease to a hotel management company because the income stream from leases is
generally regarded as qualifying income.
Prior to the Company's initial public offering, Garden Hotel
Associates L.P. ("GHALP") owned 11 Wyndham Garden Hotels managed by the Company
(the "GHALP Properties"). A 30% interest in GHALP was held by a partnership
owned by certain Crow Family Members and the Senior Executive Officers, and the
remaining 70% was held by an unaffiliated third party. In May 1996, Crow Family
Members and the Senior Executive Officers acquired the remaining 70% ownership
interest from the third party. The purchase price was funded from the proceeds
of the sale of the GHALP Properties to Hospitality Properties Trust ("HPT"), a
publicly traded REIT. HPT leased the GHALP Properties back to another entity,
the ownership of which mirrored the ownership of GHALP. As part of the
formation of the Company, the Company succeeded to such entity's leasehold
interest in the GHALP Properties. The Company continues to manage the hotels.
The Company anticipates that in the future, it may enter into similar
transactions whereby it would sell mature hotel properties to REITs, lease the
hotels back and manage them as Wyndham brand hotels. The Company believes that
this strategy permits it to participate in the initial growth phase of the
hotel properties that it acquires, while eventually freeing the Company's
balance sheet of real property upon disposition of the related hotels. Pursuant
to a long-term lease arrangement, the Company can retain long-term operating
control over the property and continue to benefit from any increases in the
operating performance of the hotel. The Company anticipates that it also may
enter into long-term leases with REITs with respect to hotel properties that
such REITs may acquire from unaffiliated third parties.
THE COMPANY'S HOTELS
General
Over 95% of the Company's upscale hotels are operated under the
Wyndham brand name, which is synonymous with high quality lodging facilities
and excellent service. The Wyndham name represents the high standards of the
Company's hotels, which present a casually elegant decor and emphasize fresh,
updated accommodations. Wyndham places great emphasis on maintaining hotel
properties in first-rate condition and providing consistently high quality
guest services at all of its hotels, and has designed numerous programs to
ensure that Wyndham guests receive the highest quality lodging experience
possible.
Amenities common to almost all Wyndham brand hotels include
restaurants, exercise rooms, swimming pools and cable television channels.
Services common to all Wyndham brand hotels include room service, laundry and
valet service and safe deposit boxes. Wyndham believes that by focusing
attention on guest room details it creates an attractive room package that is
appreciated by its upscale guests, particularly business travelers. Therefore,
all domestic Wyndham brand hotels provide in-room coffee makers with
complimentary coffee, comfortable and efficient workspace, generous guest room
lighting, a shower massager and a "Toiletries You Forgot" program, which
provides frequently forgotten travel items, such as toothpaste, deodorant and
razors, at no cost. During 1995, Wyndham Hotels, Wyndham Garden Hotels and
Wyndham Resorts generated 50.2%, 34.5% and 15.3%, respectively, of room
revenues from Wyndham brand hotels.
Wyndham Hotels
Wyndham Hotels are typically large, architecturally distinctive
properties located primarily in major urban locations. These hotels are
targeted principally at upscale business groups and other group customers, as
well as upscale business travelers. Total guest room revenues for Wyndham
Hotels in 1995 by customer mix consisted of 54.6% group meetings, 32.6%
individual business travelers and 12.8% leisure travelers.
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The Company operates or franchises 22 Wyndham Hotels containing an
aggregate of 8,562 guest rooms. Wyndham Hotels contain an average of
approximately 400 hotel rooms and generally between 15,000 and 250,000 square
feet of meeting space. The considerable meeting and catering capabilities of
Wyndham Hotels attract major corporate groups and numerous national, regional
and local associations for business conventions, sales meetings, conferences,
banquets, receptions, training sessions and private celebrations. Meeting
services offered at most Wyndham Hotels include comprehensive business centers
with private offices, a library, state-of-the-art audiovisual equipment and
secretarial and telecopy services.
Mid-week room rates at Wyndham Hotels range from $99 to $225 per
night, depending on location and season. Guests at these hotels are offered a
variety of services and amenities, including room and concierge service, same
day laundry and dry cleaning, valet parking, individual room climate control,
voice-mail, in-room minibars and often a spa and choice of restaurants. Four
hotels offer elegant four-star dining, and the restaurants at the remaining
Wyndham Hotels feature similar menus containing high quality food selections at
affordable prices that are updated frequently to maintain freshness and to
reflect the identity of the hotel and the surrounding region. The Company has
invested significant time, talent and capital in its hotel restaurants, and
believes that the quality of its restaurants makes a substantial contribution
to its hotel guests' total lodging experience.
Wyndham Garden Hotels
The Company created and designed Wyndham Garden Hotels to cater
primarily to upscale individual business travelers and small business groups in
suburban markets. Wyndham Garden Hotels are mid-size, full service hotels
located primarily near suburban business centers and airports. The Company
generally seeks to cluster Wyndham Garden Hotels in a "hub-and-spoke"
distribution pattern around one or more Wyndham Hotels in order to achieve
operating and marketing efficiencies and enhance local name recognition.
Through market studies, the Company has determined that its target business
customer generally selects a hotel within an approximate five mile radius of
his or her business destination. Therefore, the Company selects individual
Wyndham Garden Hotel sites based on its evaluation of the local business market
surrounding a potential hotel location.
Through its Wyndham Garden Hotels, the Company strives to provide
upscale individual business travelers and small business groups with a first
class guest experience in a suburban setting. The Company believes that the
business travelers who stay at Wyndham Garden Hotels are similar to the
business travelers at Wyndham Hotels and that their business destination is the
primary factor that draws them to a Wyndham Garden Hotel. Accordingly, with
guest services, hotel finishings and landscaping comparable to Wyndham Hotels,
Wyndham Garden Hotels are designed to provide a guest experience similar to
that enjoyed at Wyndham Hotels, but at a price that is competitive in suburban
markets. Mid-week room rates range between $79 and $129 at Wyndham Garden
Hotels, depending on location. Total guest room revenues for Wyndham Garden
Hotels in 1995 by customer mix consisted of 64.6% individual business
travelers, 19.2% small group meetings and 16.2% leisure travelers.
The Company operates 40 Wyndham Garden Hotels containing an aggregate
of 7,296 guest rooms. (The Company operates four additional hotels under brand
names other than the Wyndham brand, which are scheduled to become Wyndham
Garden Hotels following renovations that are currently underway. Two of these
hotels are scheduled to be converted by the first quarter of 1997, and two are
scheduled to be converted by the second half of 1996.) Each Wyndham Garden
Hotel contains between approximately 150 and 225 rooms and generally between
1,500 to 5,000 square feet of meeting space. The amenities and services
provided in Wyndham Garden Hotels are designed to meet the needs of the upscale
business traveler. Amenities and services in each room include desks large
enough to accommodate personal computers, longer phone cords, high wattage
light bulbs for reading, room service and access to 24-hour telecopy and
mail/package service. The meeting facilities at Wyndham Garden Hotels generally
can accommodate groups of between 10 and 200 people and include a flexible
meeting room design, exterior views, additional phone lines and audiovisual
equipment. Wyndham Garden Hotels also feature a lobby lounge, most of which are
appointed with a fireplace, a library typically overlooking a beautifully
landscaped garden, and a swimming pool. In addition, many Wyndham Garden Hotels
contain a whirlpool and an exercise facility.
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Dining services at Wyndham Garden Hotels are an important feature.
Unlike many mid-priced hotels, each Wyndham Garden Hotel contains a cafe
restaurant that serves a full breakfast, lunch and dinner daily. Wyndham has
designed a uniform food program that features delicious, healthful meals with
minimum delay. By implementing the same menus, preparation process and
purchasing program throughout the Wyndham Garden Hotel system, the Company has
achieved significant operating efficiencies. The Company believes that the
breadth and quality of the dining services offered at Wyndham Garden Hotels
distinguish these hotels from other hotel chains that target the upscale
individual business traveler in suburban markets.
Wyndham Resorts
Wyndham Resorts are full service destination resorts that are located
both domestically and on five Caribbean islands. Wyndham Resorts are targeted
at upscale leisure travelers and incentive travelers. Total guest room revenue
for Wyndham Resorts in 1995 by customer mix consisted of 73.0% individual
leisure travelers and 22.0% group travelers and 5.0% individual business
travelers.
The Company operates or franchises seven resort hotels containing an
aggregate of 2,263 guest rooms. Each Wyndham Resort contains between
approximately 200 and 500 hotel rooms and, with the exception of the Wyndham
Morgan Bay Resort, generally between 6,000 and 20,000 square feet of meeting
space. Room rates at Wyndham Resorts range between $135 and $210, depending on
location and season.
Wyndham Resorts are designed to provide a memorable guest experience.
They feature spacious, luxurious guest rooms that are air conditioned and
typically contain private balconies. Most resorts have swimming pools, health
and fitness centers and tennis courts. In addition, two resorts offer golf and
two resorts contain casinos. Guest amenities include room service, concierge
and valet service and tour information. Guests can choose from a variety of
restaurants and menus, and most resorts provide a variety of live nightly
entertainment. In addition, Wyndham Resorts offer or arrange a full range of
activities, including sailing, snorkeling, windsurfing, waterskiing,
parasailing, horseback riding, scuba diving, deep-sea fishing and cruises.
Wyndham Resorts seek to capitalize on national recognition of the
Wyndham brand name. Through its resort division, the Company is able to offer
guest rewards and other cross-promotional benefits to its domestic customers,
thus improving Wyndham's competitiveness and brand loyalty. The Company's
national sales team targets Wyndham customers as well as travel agents and
meeting planners for leisure and group sales in an effort to take advantage of
their familiarity with the Wyndham hotel system.
Management Service Hotels
The Company provides hotel management services pursuant to management
contracts relating to three hotels that are owned by third parties and operated
under unaffiliated hotel brands. Each of these hotels is an upscale hotel
offering services and amenities consistent with Wyndham's quality standards.
The Company entered into these management contracts in order to take advantage
of opportunities to develop relationships with third party hotel owners, as
well as to generate revenues in circumstances that would not permit conversion
of the hotels to the Wyndham brand. See " -- Growth Strategy -- I. Primary
Growth Opportunities."
Homegate Studios and Suites
The Homegate Studios & Suites prototype has been designed and
developed to offer consistent, high quality accommodations in a standard
format, providing much of the value offered by limited service hotels with many
of the added features and comforts of apartment living. Homegate Studios &
Suites hotels will offer three functional room configurations, studio, deluxe
and one bedroom. Each room will feature a fully equipped kitchen, upscale
residential- quality finishes and accessories, and separation between the
cooking, living, and sleeping areas, and other amenities, such as weekly maid
service, twice-weekly linen service, resident laundry facilities, direct
telephone service with voice mail messaging and dataport capabilities, cable
TV, a business center and an exercise facility.
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The Company currently manages six extended-stay hotels containing an
aggregate of 751 rooms. Following planned renovations, these hotels are
expected to be converted to the Homegate Studios and Suites brand in the first
quarter of 1997. These properties contain approximately 125 rooms each and will
compete in the midprice segment of the extended-stay industry. In general, it
is expected that average weekly room rates will range between $280 and $350,
but room rates at specific hotels may vary significantly depending on local
market factors.
Hotels Closed for Renovation or Under Construction
The Company has entered into management contracts to operate three
hotels that are scheduled to open in 1997. In addition, the Company has entered
into a franchise agreement for a fourth hotel. The franchised hotel is located
at the Albuquerque International Airport in Albuquerque, New Mexico. The hotel
contains 266 rooms and approximately 8,000 square feet of meeting space. The
hotel is currently being operated as a Best Western, and the Company expects
that it will be converted to the Wyndham brand in February of 1997.
The first managed hotel will be located at La Guardia Airport in New
York City and will contain 225 hotel rooms and approximately 4,000 square feet
of meeting space. This hotel is under renovation, and the Company anticipates
that it will open in the first quarter of 1997.
The Company currently is subject to a temporary restraining order that
prevents it from operating Wyndham brand hotels or advertising the Wyndham name
in connection with the operation of any hotel within a 50 mile radius (within
the State of New York) of the "Mados Wyndham Hotel" (as defined below under "
- -- Legal Proceedings") pending resolution of a lawsuit concerning the Company's
use of the Wyndham name within such area. (See " -- Legal Proceedings.") An
adverse decision in such lawsuit or a delay in the resolution of the litigation
beyond the anticipated opening date of the La Guardia hotel would require the
Company to open such hotel under a brand name other than Wyndham or Wyndham
Garden.
The second managed hotel, the Wyndham International Trade Center,
which is currently under construction, will be a Wyndham Garden Hotel located
in Mt. Olive, New Jersey that will contain 141 hotel rooms and approximately
3,700 square feet of meeting space. The Company anticipates that this hotel
will be open by the second quarter of 1997. The third managed hotel, Wyndham
Old San Juan Hotel & Casino (the "San Juan Hotel"), which is currently under
construction, will be a Wyndham Resort located in San Juan, Puerto Rico that
will contain 242 hotel rooms and approximately 6,200 feet of meeting space. The
Company anticipates that this hotel will open by the second quarter of 1997.
Pursuant to the terms of the management contract, the Company made certain
commitments to provide furniture, fixtures and equipment for the San Juan Hotel
at a fixed price of $6.0 million. There can be no assurance, however, that
these hotels will be completed as scheduled.
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SUMMARY OF HOTELS
The following table sets forth, as of January 15, 1997, certain
information with respect to the Company's hotels.
OWNED, LEASED,
MANAGED OR NUMBER OF
HOTELS HOTEL LOCATION FRANCHISED(1) ROOMS
------ -------------- ------------- -----
WYNDHAM HOTELS
Wyndham Anatole Dallas, TX Managed 1,620
Wyndham Bel Age West Hollywood, CA Managed 199
Wyndham Bristol Washington, DC Managed 239
Wyndham Bristol Place Hotel Toronto, Canada Owned 287
Wyndham Checkers Hotel Los Angeles, CA Managed 188
Wyndham Dublin Hotel Columbus, OH Managed(2) 217
Wyndham Emerald Plaza San Diego, CA Managed 436
Wyndham Five Seasons Cedar Rapids, IA Managed 283
Wyndham Fort Lauderdale Airport Fort Lauderdale, FL Franchised 250
Wyndham Franklin Plaza Philadelphia, PA Managed 758
Wyndham Greenspoint Houston, TX Managed 472
Wyndham Harbour Island Tampa, FL Leased(3) 300
Wyndham Kingston Kingston, Jamaica Managed 303
Wyndham Hotel at Los Angeles
International Airport Los Angeles, CA Managed 591
Wyndham Hotel at Metrocenter Phoenix, AZ Managed 284
Wyndham Milwaukee Center Milwaukee, WI Managed 221
Wyndham Northwest Chicago Itasca, IL Managed 408
Wyndham Palm Springs Palm Springs, CA Managed 410
Wyndham Playhouse Square Cleveland, OH Managed 205
Wyndham Riverfront New Orleans, LA Managed 202
Wyndham Salt Lake City Salt Lake City, Utah Leased 381
Wyndham Warwick Houston, TX Managed 308
-----
TOTAL WYNDHAM HOTELS 22
TOTAL WYNDHAM HOTEL ROOMS 8,562
=====
WYNDHAM GARDEN HOTELS
Albuquerque Albuquerque, NM Managed 150
Annapolis Annapolis, MD Managed 197
Atlanta Gwinnet(4) Atlanta, GA Managed 131
Atlanta North Lake(4) Atlanta, GA Managed 131
Atlanta Perimeter Center Atlanta, GA Leased 143
Bloomington Minneapolis, MN Leased 209
Bothell Seattle, WA Leased 166
Brookfield Lakes Milwaukee, WI Owned 178
Buckhead Atlanta, GA Managed 221
Burlington Burlington, MA Managed 180
Chandler Phoenix, AZ Leased 159
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OWNED, LEASED,
MANAGED OR NUMBER OF
HOTELS HOTEL LOCATION FRANCHISED(1) ROOMS
------ -------------- ------------- -----
Charlotte Charlotte, NC Owned 173
Commerce Los Angeles, CA Owned(3) 201
Culver City Culver City, CA Managed 199
Dallas Market Center(4) Dallas, TX Owned 230
Denver Denver, CO Managed 240
Detroit Metro Romulus, MI Managed 153
Indianapolis Indianapolis, IN Owned 171
Kansas City Plaza Kansas City, MO Managed 241
Lake Buena Vista Orlando, FL Managed 167
Las Colinas Dallas, TX Managed 168
Lexington Lexington, KY Managed 177
Marin/San Rafael Marin County, CA Managed 235
Midtown Atlanta Atlanta, GA Managed 191
Monrovia Monrovia, CA Managed 148
Naperville Chicago, IL Leased 143
Nashville Airport Nashville, TN Leased 180
North Phoenix Phoenix, AZ Leased 166
North San Diego San Diego, CA Leased 180
Novi Detroit, MI Managed 148
Oakbrook Oakbrook Terrace, IL Managed 222
O'Hare Chicago, IL Managed 225
Orange County Airport Costa Mesa, CA Managed 238
Overland Park(4) Overland Park, KS Owned 181
Phoenix Airport Phoenix, AZ Leased 210
Piscataway/Somerset Piscataway, NJ Managed 165
Pittsburgh Pittsburgh, PA Managed 140
Pleasanton Pleasanton, CA Managed 171
Schaumburg Schaumburg, IL Owned 188
Seattle-Tacoma Airport Seattle, WA Leased(3) 204
Sunnyvale San Jose, CA Leased 180
Vinings Atlanta, GA Owned 159
Waltham Waltham, MA Managed 148
Wood Dale Chicago, IL Managed 162
-----
TOTAL WYNDHAM GARDEN HOTELS 44
TOTAL WYNDHAM GARDEN HOTEL ROOMS 7,969
=====
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OWNED, LEASED,
MANAGED OR NUMBER OF
HOTELS HOTEL LOCATION FRANCHISED(1) ROOMS
------ -------------- ------------- -----
WYNDHAM RESORTS
Inn at Semi-Ah-Moo--A Wyndham
Resort Blaine, WA Managed 198
The Village at Breckenridge--A
Wyndham Resort Breckenridge, CO Franchised 235(5)
Wyndham Aruba Beach Resort &
Casino Palm Beach, Aruba Managed 444
Wyndham Morgan Bay Resort Choc Bay, St. Lucia Managed 238
Wyndham Palmas del Mar Humacao, Puerto Rico Managed 359
Wyndham Rose Hall Resort Montego Bay, Jamaica Owned(3) 489
Wyndham Sugar Bay Resort St. Thomas, U.S.V.I. Managed 300
------
TOTAL WYNDHAM RESORTS 7
TOTAL WYNDHAM RESORT HOTEL ROOMS 2,263
======
MANAGEMENT SERVICE HOTELS
Dedham Hilton Dedham, MA Managed 247
Pruneyard Inn Campbell, CA Managed 117
Confidential Confidential Managed 692
------
TOTAL MANAGEMENT SERVICE HOTELS 3
TOTAL MANAGEMENT SERVICE HOTEL ROOMS 1,056
======
EXTENDED-STAY HOTELS(6)
Westar Suites - Amarillo Amarillo, TX Managed 124
Westar Suites - El Paso El Paso, TX Managed 124
Westar Suites - Fiesta Park San Antonio, TX Managed 124
Studio Suites - Grand Prairie Grand Prairie, TX Managed 139
Westar Suites - Irving Irving, TX Managed 124
Westar Suites - San Antonio Airport San Antonio, TX Managed 116
------
TOTAL EXTENDED-STAY HOTELS 6
TOTAL EXTENDED-STAY HOTEL ROOMS 751
------
TOTAL PORTFOLIO 82
TOTAL PORTFOLIO HOTEL ROOMS 20,601
======
HOTELS CLOSED FOR RENOVATION OR UNDER
CONSTRUCTION(7)
Wyndham Albuquerque Airport Albuquerque, N.M. Franchised 266
La Guardia Airport New York, NY Managed 225
Wyndham International Trade Center Mt. Olive, New Jersey Managed 141
Wyndham San Juan (Wyndham Resort) San Juan, Puerto Rico Managed 242
------
TOTAL HOTELS UNDER RENOVATION OR 4
CONSTRUCTION
TOTAL HOTEL ROOMS UNDER RENOVATION OR
CONSTRUCTION 874
------
TOTAL HOTELS 86
TOTAL HOTEL ROOMS 21,475
======
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(1) Ownership Interest Key:
Owned = Wholly owned (100%) and managed by the Company.
Leased = Long-term lease with unaffiliated third party and
managed by the Company. See " -- Long-Term Hotel
Leases."
Managed = Operated under management contracts. See " --
Management Contracts."
Franchised = Franchised to a third party. See " -- Franchising
Program."
(2) The Company owns a partial interest in this hotel.
(3) The Company's interests in these hotel properties (and in the case of
the Wyndham Rose Hall Resort, the golf course adjacent to the hotel
property) are subject to ground leases which, including renewal
options, expire between 2018 and 2077.
(4) These hotels are currently being managed by the Company under a brand
other than the Wyndham brand name. Following renovations that are
currently underway, these hotels will be converted to Wyndham Garden
Hotels. The Atlanta Gwinnet and Atlanta North Lake hotels are
scheduled to be converted by the second quarter of 1997. The Dallas
Market Center and Overland Park hotels are scheduled to be converted
by the first quarter of 1997.
(5) The actual room inventory at The Village at Breckenridge fluctuates
because approximately 70 rooms at such hotel are owned privately, and
the availability of such rooms to the general public depends upon the
election of the private owners thereof as to the use of such rooms.
(6) The Company expects that five of these hotels will be converted to the
Homegate Studios and Suites brand in the first quarter of 1997.
(7) The Albuquerque Airport hotel is currently being operated as a Best
Western hotel and is scheduled to convert to the Wyndham brand in
February 1997. The anticipated dates of operation for the La Guardia,
International Trade Center and San Juan hotels are first, second and
third quarter 1997, respectively.
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The following table presents certain comparative information with
respect to the Company's hotels:
WYNDHAM MANAGEMENT EXTENDED-
WYNDHAM GARDEN WYNDHAM SERVICE STAY TOTAL
HOTELS HOTELS(1) RESORTS HOTELS HOTELS HOTELS
--------- --------- --------- --------- --------- ---------
Total number of properties(2) 22 44 7 3 6 82
Total number of rooms(2) 8,562 7,969 2,263 1,056 751 20,601
Average number of rooms per
hotel(2) 390 181 323 352 127 251
Percentage of hotels to 27% 54% 8% 4% 7% 100%
total(2)
Percentage of rooms to 41% 39% 11% 5% 4% 100%
total(2)
1995 Occupancy 68% 70% 65% 73% * 69%
percentage(4)
1995 ADR(4) $ 94.58 $ 73.67 $ 122.75 $ 85.24 * $ 88.79
1995 REVPAR(5) $ 64.01 $ 52.75 $ 79.76 $ 62.45 * $ 60.96
- ---------------------
* Operating data are not available for these hotels for 1995.
The Company began operating these hotels in September 1996.
(1) Number of properties and rooms include four hotels that are currently
being managed by the Company under a brand other than the Wyndham
brand name. Following renovations that are currently underway, these
hotels will be converted to Wyndham Garden Hotels. Two of these hotels
are scheduled to be converted by the first quarter of 1997, and two
are scheduled to be converted by the second quarter of 1997. Operating
data include one hotel (Wyndham Garden Hotel - Denver) that was
managed by the Company as a Ramada Inn while being converted to the
Wyndham Garden Hotel brand.
(2) As of January 15, 1997.
(3) Occupancy percentage represents total rooms occupied divided by total
available rooms. Total available rooms represents the number of rooms
available for rent multiplied by the number of days in the reported
period.
(4) ADR represents total room revenues divided by the total number of
rooms occupied.
(5) REVPAR represents total room revenues divided by total available
rooms.
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CUSTOMERS AND MARKETING
The Company's target core customers are upscale business travelers and
business groups, as well as upscale leisure travelers. Total guest room revenue
for Wyndham brand hotels in 1995 by customer mix consisted of 39.5% individual
business travelers, 36.9% group customers, 11.6% resort leisure travelers and
12.0% leisure travelers. To increase revenues at its hotels, the Company has
developed a "push-pull" sales and marketing program as well as various other
promotional, guest service and advertising programs. The key components of
these programs are as follows:
Direct Local Sales Efforts
Wyndham started in 1982 as a hotel management company for a small
group of hotels without a recognized brand name and a very limited marketing
budget. Consequently, Wyndham developed a "backyard" marketing program designed
to "pull" revenues into these hotels from surrounding businesses. Wyndham has
continued to develop and refine its direct local marketing programs and
currently employs a direct sales force of almost 500 highly trained
representatives who generally are assigned to individual hotels and who focus
their sales efforts primarily on the local businesses and organizations
surrounding each hotel. The Company motivates its sales force with an
aggressive incentive based compensation structure that ties compensation to
hotel performance at all levels of the hotel sales and management structure.
In 1995, the Company's direct sales program accounted for over 60% of
room revenues at Wyndham brand hotels. The direct sales efforts at Wyndham
Hotels focus primarily on group business. The direct sales efforts at Wyndham
Garden Hotels focus primarily on the market within a three-to-five mile radius
of the hotel because the Company has determined through market research that
most of its guests do business within this area. The Company's local sales
programs include direct solicitation of local businesses, special programs,
such as its Wyn Club program, which provides certain incentives for repeat
bookings at Wyndham brand hotels, participation in local and regional trade
shows, and local promotional and advertising campaigns.
National Sales Efforts
The Company's national sales program, which is split into a national
group sales force and a national negotiated rate team, is designed to "push"
revenues into Wyndham Hotels on a chain-wide basis. The national group sales
force consists of 23 national account managers assigned to six national sales
offices located in New York City, Washington, D.C., Chicago, Los Angeles, San
Jose and Phoenix. The purpose of this sales force is to develop national group
and association business primarily for Wyndham Hotels and Wyndham Resorts. The
national sales team consists of five national account managers and focuses on
identifying, obtaining and maintaining major corporate accounts whose employees
do business across the nation. The Company has developed its corporate
clientele by offering special rate programs applicable to all Wyndham brand
hotels. The Company currently has national rate programs with approximately 400
different companies as well as the nation's top 20 travel agencies.
Wyndham Service Programs
Wyndham's service signature, "The Right Way -- The Wyndham Way,"
characterizes Wyndham's entire approach to doing business and embodies
Wyndham's commitment to designing and implementing the innovative practices and
programs required to be a successful hotel operating company. The Right Way --
The Wyndham Way also embodies the Company's focus on understanding and
providing the guest services and amenities that are most important to its core
customers. Wyndham conducts frequent guest surveys and personal interviews in
an effort to identify the services and amenities valued by upscale business
travelers and responds with various programs designed to meet or exceed such
travelers' expectations. For example, Wyndham has established a unique training
program for its hotel personnel, entitled "ACE" (Attentive, Courteous,
Efficient), which stresses the importance of a great service attitude at its
hotels. Wyndham recognizes that beyond training its personnel to provide the
standard services required by its discerning guests, it is necessary to cater
to special guest needs, and, accordingly, Wyndham provides its employees with
the authority to address guest complaints and requests on the spot.
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Through its business traveler research, Wyndham also seeks to identify
those guest room amenities that most affect the purchase decision of its
customers. For example, in response to frequent business traveler surveys,
Wyndham was the first upscale hotel chain to provide a coffee maker and
complimentary coffee or tea in every domestic Wyndham brand hotel room. Wyndham
also has added larger desks, extra long phone cords, high wattage light bulbs
for reading, real hook hangers, comfortable pillows and a shower massager as
standard features of each room. To accommodate the desire of its business
customers to be able to obtain quickly a healthful breakfast or lunch, Wyndham
implemented a breakfast bar and a luncheon pasta bar at all Wyndham Garden
Hotels and most Wyndham Hotels, which is designed to provide delicious meals
efficiently at a value price. Wyndham also has implemented similar guest room
amenities and quality standards in all Wyndham brand hotels. Wyndham believes
that its commitment to providing an outstanding guest experience throughout its
hotel system has contributed greatly to the development and clarity of the
Wyndham brand while earning strong loyalty from its core customers, upscale
business travelers and business groups. For example, according to written guest
surveys conducted by Wyndham at its hotels in 1995, 91% of Wyndham guests
surveyed rated the overall quality of Wyndham hotel products and services good
or excellent, and 94% of the guests surveyed indicated that they would return
to that Wyndham hotel on their next trip to the same city.
Guest Rewards and Other Programs
The Company participates in both the American Airlines AAdvantage
program, the largest airline mileage program, and the Midwest Express frequent
flier program. These programs provide the Company with ongoing promotional
access to over 28 million members and enable the Company to target frequent
business travelers and increase name recognition. Through an alliance with
American Airlines and Avis Rent-A-Car, Wyndham developed its popular "Triple
Upgrade" R program, which provides American Airlines AAdvantage members that
are Wyndham guests with an airline upgrade, a room upgrade and a rental car
upgrade, plus up to 1,500 AAdvantage miles. The rewards are given at checkout
and are provided for each stay at any Wyndham hotel for guests that pay a
regular or corporate room rate. Wyndham designed the program to provide guests
with meaningful rewards for each hotel visit. Wyndham's Triple Upgrade program
is currently in effect during six months of each calendar year.
Wyndham developed the first "Rate Integrity Guarantee" program in the
hotel industry, which is a corporate travel program designed to ensure that
corporate travel planners and travel agents receive the lowest available
Wyndham room rates for their individual business travelers. The program enables
travel planners and agents to obtain each rate in every category for Wyndham
brand hotels through the major airline reservation systems and provides a
complimentary night stay if a better rate was available. The Company also runs
other promotional programs periodically for individual business travelers,
weekend leisure customers and resort customers. In addition to providing
incentives for its guests to select Wyndham, the Company believes that its
promotional programs increase national recognition of the Wyndham brand.
Advertising
Wyndham's national advertisements, which have been featured on CNN,
CNN "Headline News," ESPN and in major in-flight magazines, primarily target
the upscale business customer and are designed to enhance the consumer's
awareness of Wyndham as an upscale, full service, national hotel chain. These
advertisements promote "The Right Way -- The Wyndham Way" and emphasize
attitude, comfort and location. The Company also promotes its services,
programs and individual hotel locations in the major hotel reference
directories used by travel and meeting planners, and in major trade magazines
and major metropolitan newspapers.
Central Reservations System
In 1995, over 35% of all Wyndham brand hotel room revenues were booked
through Wyndham's central reservations system. The Company uses a single
central reservation number (800-WYNDHAM) for all Wyndham brand hotels, which is
accessible to customers throughout the United States and Canada. The
reservation system provides Wyndham's reservation agents with information about
hotel locations, available rooms and rates in order to assist customers in
booking rooms. In addition, the Company uses special marketing programs in
conjunction with its central
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reservations system in order to target the individual upscale business
traveler, who the Company believes is strongly influenced by brand recognition
and preference.
In 1995, approximately 50% of all Wyndham reservations made through
its central reservations system were received electronically by means of
airline reservation systems. In 1995, the last year for which comparative
industry information is available, according to an industry report in which the
Company participated, the Company's percentage of automated reservations was
among the highest in the industry. The Company believes that its volume of
electronic reservations reflects the Company's commitment to investing in
technology in order to create cost-effective, efficient operations.
ISIS 2000, a limited partnership currently owned by Crow Family
Members and the Senior Executive Officers, has developed an integrated real
time central reservations system designed to handle all of the Company's
central reservations requirements. ISIS 2000 is continuing to develop the
integrated property management component of such system. ISIS 2000 will provide
such central reservations and hotel property management services to Wyndham and
Wyndham brand hotels pursuant to a five-year service contract (which services
will be provided to Wyndham on an exclusive basis for a two-year period). The
reservation services are being provided for a fee comprised of an initial
link-up charge plus a per reservation fee. The property management services
will be provided on a charge per hotel basis. In addition, the Company has
guaranteed equipment leases on behalf of ISIS 2000 in the approximate amount of
$2.0 million. The Company may in the future invest in ISIS 2000. See "Certain
Relationships and Transactions" and "Risk Factors -- Conflicts of Interest --
Future Dealings with Affiliates of the Company."
The central reservations and property management system, when fully
implemented, will include, among other enhancements, complete connectivity with
all Wyndham brand hotels, a single data base for all hotel information, a
direct interface with airlines and real time/last available room inventory.
Wyndham believes that the new system will improve substantially the Company's
ability to manage the yield from its room inventory. In addition, the Company
believes the new system will significantly enhance the Company's direct
marketing, guest recognition and revenue forecasting capabilities, as well as
its ability to monitor its corporate rate programs. The central reservations
system also will provide point of sale information for all Wyndham brand
hotels. The Company implemented the central reservations system during the
third quarter of 1996.
Wyndham also participates in all four of the major airline reservation
systems, "SABRE," "APOLLO," "WORLDSPAN" and "SYSTEM ONE." These airline
reservation systems have an aggregate of approximately 190,000 computer
terminals on line at approximately 41,000 locations, allowing travel agents to
book Wyndham hotel reservations when guests are making other travel
arrangements.
HOTEL OPERATIONS
Wyndham's corporate management structure and centralized support
services are designed to permit the Company to control operations and costs, as
well as allocate departmental expertise efficiently among operating divisions.
The Company's organizational structure emphasizes direct accountability through
vertical integration in order to maintain Wyndham's high standards for guest
services and hotel operations throughout its hotel system. The Company has
established certain uniform productivity standards and skill requirements for
hotel employees, which the Company believes increase operating efficiencies by
enhancing the Company's ability to measure performance and interchange certain
employees within the hotel system.
Hotel Management. Each Wyndham brand hotel is managed by a general
manager and supported by a regional and corporate management organization. The
size of each management team and its hourly staff varies, depending on the type
of hotel, its size and its business volume.
General Managers; Hotel Management Personnel. Wyndham has an
experienced team of general managers, and over 70% of these managers have been
promoted from an existing position within the Company. Each general manager is
responsible for supervising the day-to-day operations of a single hotel.
Because of the Company's emphasis
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on taking an owner's approach to the hotel business, each general manager also
has been specially trained to understand the financial side of hotel
operations, including cash flow, gross operating margins, debt service and
return on investment. Each general manager can receive up to 75% of his or her
base salary in the form of cash bonuses and equity participation based largely
on the financial performance and quality of hotel operations at the hotel he or
she manages. The Company believes that by emphasizing financial accountability
and performance-based compensation at the general manager level, it is able to
achieve the appropriate balance between providing high quality guest services
and strong returns, to both the Company and owners of managed hotels. Each
Wyndham Hotel and Wyndham Resort is run by an executive committee that oversees
a management team of approximately 16 managers. The executive committees
typically consist of a general manager, a director of sales and marketing, a
controller, a director of food and beverage operations, a director of rooms
operations, a human resources director and a director of engineering. A typical
Wyndham Garden Hotel management committee consists of a general manager, a
director of sales, two sales managers, a guest services manager, a food and
beverage manager, a catering manager, a food production manager and a
housekeeping manager.
Regional Operations. Wyndham's general managers report directly to a
regional director of operations, who, in turn, reports to one of five vice
presidents of operations. These vice presidents of operations report to the
head of either the Wyndham Hotel and Resort Division or the Wyndham Garden
Division. The regional management teams provide management support and
direction to the general managers and their staff, coordinate communications
between the properties and the Company's centralized corporate departments and
assist in establishing and administering corporate policies, procedures and
standards.
Centralized Corporate Services. The Company's hotel operations are
divided into two operating divisions, consisting of a Wyndham Hotel and Resort
Division and a Wyndham Garden Division. The head of each operating division
reports to the Company's Chief Executive Officer. The Company's Senior
Executive Officers have worked together to successfully operate, manage and
develop the Company's hotels in various phases of the industry cycle. The
Company also has a centralized corporate staff located in Dallas, Texas, which
provides a variety of managerial and support services to both hotel divisions.
The Company believes that the experience of its corporate management team
enables it to provide strong, central leadership in all areas of operations,
including marketing, development, design and construction, purchasing, finance,
accounting, legal and human resources. The Company believes that the quality
and experience of management are important components of its ability to provide
consistently strong financial results to owners and outstanding service to
hotel guests. In addition to the foregoing areas of operations, the Company's
centralized corporate staff provides technical assistance and training to each
hotel's employees for administrative operations, room and guest services,
reservations, maintenance and engineering, retail services, and human resources
and benefits.
Recruiting and Training. The Company is strongly committed to
developing and promoting its management personnel from within the Wyndham
system. Wyndham believes that it has developed one of the largest and most
visible college recruiting programs in the industry. Over the past five years,
the Company has hired over 400 new college graduates through its on-campus
recruiting program at 15 universities with four-year hotel management programs.
The Company believes that it has been quite successful at recruiting top
college graduates and providing them with outstanding training and experience.
The Company will continue to emphasize college recruiting as an important
source of management talent. In 1995, the Company recruited 90 new college
graduates. New campus recruits receive up to 12 months training and are then
generally assigned to the sales or operations departments at a Wyndham operated
hotel.
The Company has developed a Managers in Development program that
trains over 150 participants each year and contains ten separate training
modules. The Company also provides formal training programs for general
managers and sales personnel. Wyndham believes that by creating meaningful,
measurable goals for each key position within the Company, it is able to track
individual performance, reward productivity and assist in developing the
careers of its personnel. Wyndham believes that this approach has contributed
significantly to high labor productivity and employee retention, as evidenced
by the fact that 70% of the Company's existing general managers were promoted
from within the Company.
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MANAGEMENT CONTRACTS
Upscale Hotels. Wyndham operates 51 upscale hotels for third parties
pursuant to management contracts under which it is responsible for the
day-to-day operations of the hotels. These operations include managing hotel
accommodations, meeting rooms and food and beverage services as well as hiring
and training each hotel's staff, planning and providing sales and marketing
services, purchasing operating supplies, inventories and furniture, fixtures
and equipment, providing routine repairs and maintenance and performing hotel
accounting functions, including the preparation of monthly financial statements
and budgeting.
The hotel owner generally is responsible for all costs and expenses
incurred in connection with operating the hotel, including reimbursing the
Company for the expenses associated with salaries and benefits of all hotel
employees. The hotel owner also generally is required to contribute an amount
equal to a specified percentage of gross revenues to a reserve fund on a
monthly basis to fund replacement and substitution of furniture, fixtures and
equipment and the costs of certain non-routine repairs and maintenance. Under
certain management contracts, Wyndham has agreed to make loans for the benefit
of the hotel to cover shortfalls in operating cash flow and also has agreed
under certain management contracts to make loans or capital contributions for
hotel renovations, conversion costs and other purposes.
Under nearly all management contracts, the hotel owner has agreed to
indemnify the Company against liabilities arising from the management and
operation of the hotel, typically including environmental and general tort
liabilities. These indemnities generally exclude various degrees of negligent
conduct by the Company as well as the Company's willful misconduct or willful
violation of legal requirements. Under most management contracts, the Company
generally has agreed to indemnify the hotel owner against liabilities caused by
the Company's negligence, willful misconduct, willful violation of legal
requirements or breach of the management contract. A few management contracts,
however, give broader protection to the hotel owner with regard to liabilities
arising from the operation of the hotel, and one management contract provides
protection to the hotel owner from claims that the hotel owner is the employer
of certain hotel employees when the management contract provides otherwise.
As compensation for its management services, Wyndham receives a base
management fee under each management contract. Wyndham also may receive an
incentive fee, as well as a trade name fee, for hotels operated under the
Wyndham brand name. The average base management fee for the Company's
management contracts is in excess of 3% of gross revenues from hotel
operations, and the average trade name fee is in excess of 1% of gross room
revenues. The average base management fee for the Company's management
contracts entered into after January 1, 1994 is in excess of 3% of gross
revenues from hotel operations, and the average trade name fee is in excess of
1.6% of gross room revenues. The Company believes that the increase in trade
name fees since January 1, 1994 generally reflects increased recognition in the
past two years of the Wyndham brand name and the Company's operating
capabilities. The actual percentage of base fees and trade name fees for any
given contract may vary from these averages depending on the size and location
of a particular hotel, the market in which it competes and other factors. The
Company also receives an incentive management fee under most management
contracts. The calculation of incentive management fees varies from management
contract to contract, but is generally based on a percentage of a hotel's
operating profit or the amount by which the hotel's operating profit exceeds
specified performance targets.
In addition to property-specific marketing and promotional services
that Wyndham provides at the hotel owner's expense for each hotel that it
operates, Wyndham also provides marketing services to Wyndham brand hotels
consisting of chain-wide and/or division level marketing programs, research
services, advertising and public relations efforts. The costs of these
marketing services are paid by the hotel owners pursuant to a marketing
contribution made to Wyndham in an amount generally equal to a specified
percentage of gross room revenues. In addition to marketing services, owners of
Wyndham brand hotels receive group and/or individual traveler sales services
provided by Wyndham's national and/or local sales offices. The cost of national
sales and marketing services generally are allocated among all hotels for which
the services are provided. The cost of local sales services generally are
allocated directly to each individual hotel. Wyndham also provides centralized
reservations services to Wyndham brand hotels, with the costs being allocated
to each hotel generally based on reservations made at that hotel. For Wyndham
Garden Hotels
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and smaller Wyndham Hotels, Wyndham also typically provides off-site accounting
services at the hotel owner's expense.
In addition to the services described above that are provided pursuant
to management contracts, Wyndham also makes available to hotel owners design,
construction, purchasing and technical services for an additional fee. These
services generally are provided pursuant to separate technical services
management contracts and purchasing agreements.
The terms of Wyndham's upscale management contracts vary from hotel to
hotel. The terms of the management contracts for the 46 Wyndham brand hotels
managed by the Company generally range between 10 and 20 years. The terms for
the non-Wyndham brand hotels range from one month to fifteen years. At November
30, 1996, the average remaining term for Wyndham brand hotel management
contracts was 14 years (including renewals that the Company may elect to
exercise). Each management agreement is subject to early termination in
connection with a default by either party. In addition, the management
contracts generally are subject to termination by the hotel owner for Wyndham's
failure to achieve certain performance standards, in connection with the
owner's sale of the hotel to a third party, upon the owner's default on
indebtedness encumbering the property and/or upon a foreclosure of the
property. Other grounds for termination for certain contracts include the hotel
owner's election to close the hotel and certain business combinations involving
the Company in which the Wyndham name or its current management team does not
survive. In the event a management contract is terminated for certain reasons,
most management contracts require the owner to pay a termination fee that is
generally based upon a multiple of the average monthly management fees under
the contract depending on the remaining term of the contract, hotel performance
and other factors.
A majority of the management contracts include a provision restricting
the Company from managing, operating or investing in other hotels within a
competitive geographical region, usually within a five mile radius of the hotel
subject to the management contract. While some of these non-competition clauses
restrict the Company's involvement in any hotel within the covered region, many
of the clauses limit competition only with respect to hotels similar to the
hotel subject to the restriction.
EXTENDED-STAY PROPERTY MANAGEMENT CONTRACTS
A subsidiary of the Company has entered into a master management
assistance agreement (the "Agreement") with Homegate, which provides for the
Company to manage up to 60 extended-stay hotels as well as to provide Homegate
with market research, a preferred vendor program, a proprietary property
management software package and national and local marketing efforts. Under the
Agreement, the Company has agreed not to own, operate or develop a competing
extended-stay facility within certain specified states that include Homegate's
target markets (subject to certain exceptions), for the term of the Agreement.
Unless extended, the Agreement terminates upon the earlier of the execution of
a management contract with respect to the 60th extended-stay hotel or December
31, 1998.
Pursuant to each property-specific management contract, Wyndham will
manage and operate the specific Homegate studios and suites hotel in exchange
for the payment of a base management fee of 3% of the hotel's gross revenues
for the applicable period, and an incentive management fee that varies from 1%
to 3% depending upon the return on cost realized by Homegate for the particular
property. In addition, Homegate will pay Wyndham a monthly fee (adjusted
annually for inflation) for Wyndham's accounting services, and will reimburse
Wyndham for reimbursable expenses incurred by Wyndham with respect to the
hotel. Each management contract also provides that to the extent Homegate
elects to establish a marketing fund and contributes 1.5% of the gross room
revenues to such fund, Wyndham will manage such fund. Each contract also
provides that Wyndham will not own, develop, manage or lend money to an
extended-stay facility that is similar in operation and format to Homegate's
hotel within a five-mile radius thereof, subject to certain exceptions. This
non-competition covenant survives for the duration of the applicable management
contract. Individual management contracts can be terminated in connection with
additions to the Company's portfolio that otherwise might violate the
non-competition covenant. Homegate has the right to terminate the
property-specific management contract if certain performance standards are not
met. In addition, Homegate may terminate such contracts without cause with the
payment of a cancellation fee if Homegate desires to manage the hotel
internally. In addition,
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the management contracts are generally subject to termination (upon payment of
a cancellation fee) in connection with the sale of the hotels to a third party,
upon Homegate's default on indebtedness encumbering the properties and/or upon
a foreclosure of the property or upon a default by the Company.
Under each extended-stay property management contract, Homegate has
agreed to indemnify the Company against liabilities arising from the
construction, renovation, management or operation of the hotel, typically
including environmental and general tort liabilities. These indemnities
generally exclude various degrees of negligent conduct by the Company as well
as the Company's willful misconduct or willful violation of legal requirements.
Under each extended-stay property management contract, the Company generally
has agreed to indemnify Homegate against liabilities arising from the
management and operation of the hotel caused by the Company's demonstrable
negligence, willful misconduct or willful violation of legal requirements.
LONG-TERM HOTEL LEASES
The Company leases and operates 13 hotels. The initial term of the
lease relating to the 11 GHALP Properties (the "GHALP Lease") is approximately
16 years with renewals for four consecutive 12 year terms exercisable at the
Company's option for all, but not less than all, 11 hotels. While the lessor
has retained the right to sell one or more of these leased hotels to third
parties (subject to the GHALP Lease), the Company has a right of first refusal
to acquire such property, which terms are set forth in the GHALP Lease.
Rental payments under the GHALP Lease consist of minimum rent (the
"Minimum Rent"), payable monthly, and, commencing January 1997, additional rent
(the "Additional Rent"), which is based upon growth in revenues at the leased
hotels. The Minimum Rent for all of the leased hotels is $1,133,334 per month.
The Additional Rent is equal to 8% of the amount, if any, by which the
consolidated total hotel sales (as defined in the GHALP Lease) for the 11
leased hotels for the then current year to date exceeds the consolidated total
hotel sales for the corresponding period in 1996. The GHALP Lease allows the
Company to retain all of the benefit from any increase in operating income from
these properties during the term of the GHALP Lease, subject to the payment of
Additional Rent. All management fees due to the Company from these hotels are
subordinated to rent due to the lessor.
The GHALP Lease is a triple net lease that requires the Company to
maintain the leased hotels in good condition and repair and in conformity with
all applicable legal requirements and to make or cause to be made all items of
maintenance, repair, replacement and alteration to the leased hotels as
necessary for such purposes. The Company has established a reserve account (the
"FF&E Reserve") and, throughout the lease term, the Company must add to the
FF&E Reserve at the end of each month an amount equal to 5% of total hotel
sales during such month to be used for maintenance, repair, replacements and
alterations that are proposed by the Company and approved by the lessor. Under
certain circumstances, the lessor may be required to fund major repairs, in
which event the Minimum Rent will be increased by at least 10% of the amount
funded. In addition, the Company is required to pay substantially all expenses
associated with the operation of the leased hotels, including all ground rent,
if applicable, real estate taxes and insurance. All personal property (except
motor vehicles and liquor licenses and permits) owned by the Company and used
in connection with the operation of the leased hotels, including personal
property purchased with funds from the FF&E Reserve, is pledged to the lessor
to secure the Company's obligations under the GHALP Lease. At the termination
of the GHALP Lease, any funds remaining in the FF&E Reserve and property
purchased with funds from the FF&E Reserve will be paid and title delivered to
the lessor as additional charges. In addition, the lessor has the option to
purchase any personal property of the Company located at, or used in connection
with, the leased hotels at its then net market value.
In connection with the acquisition of its leasehold interest in the
GHALP Properties the Company succeeded to a $13.6 million Retained Fund that
was established to secure the lessor's rights under the GHALP Lease. The
Company's interest in the Retained Fund is subject to offset if the Company
fails to perform its obligations under the GHALP Lease. The Retained Fund,
which will earn no interest on the Company's behalf, will be paid to the
Company upon the end of the GHALP Lease term provided that the Company has not
defaulted under the GHALP Lease. In addition, the Company has pledged to the
lessor a security interest that is subordinate to that of the lenders under the
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Revolving Credit Facility of all of the capital stock of its subsidiary that is
the lessee under the GHALP Lease to secure the obligations under the GHALP
Lease.
Under the GHALP Lease, the Company has agreed to indemnify the lessor,
the hotel mortgagees and their agents and assigns against costs resulting from
the presence during the lease term of any hazardous substances in, upon or
under the soil or groundwater of the leased property or any properties
surrounding the leased property in violation of any law or regulation, provided
that the costs arise due to the failure by the Company to perform or comply in
accordance with all laws and orders applicable to the storage, use,
maintenance, spillage, disposition or transfer of hazardous substances or
certain lease provisions requiring notice of environmental-related events and
activities to be given to the lessor, except to the extent such costs arise
from the acts or omissions of the lessor or any other indemnified party or
during any period that the lessor is in possession of the leased property. The
Company also has agreed to indemnify the lessor against liabilities due to the
Company's failure to perform or comply with the lease agreement, any claims
relating to the use, misuse or condition of the property caused by the Company,
the imposition of any taxes or assessments, or claims arising from accidents,
death or personal injury occurring at the leased premises. The lessor may
terminate the lease upon an event of default, which includes: the failure to
pay rent; failure to maintain required insurance; an uncured default by the
Company of any of the terms of the lease agreement; an uncured default under
any of the leases constituting the GHALP Lease, the management contracts
relating to the properties and certain other related documents; the loss of any
material license or permit; any false or misleading material representation or
warranty made by the Company contained in the GHALP Lease or certain other
related documents; the Company not paying debts as they become due or making a
general assignment for the benefit of creditors; filings under any federal or
state bankruptcy or insolvency laws with respect to the Company; levy upon or
attachment of the Company's interest in the leased property; or the tenant
under the GHALP Lease at any time ceasing to be a wholly owned direct or
indirect subsidiary of the Company. The lessor may cancel the Company's
management agreements related to these hotels in the event the GHALP Lease is
in default. Upon a termination due to an event of default, the Company is
liable for the rental payments that would have been payable for the remainder
of the unexpired term. If the lessor re-lets the properties, however, the
Company is liable for only the difference between the proceeds from re-letting
and proceeds that would have been payable had the GHALP Lease remained in
effect for the duration of the term. In addition to damages that the lessor may
receive pursuant to the preceding sentence as a result of the Company's
default, the lessor may elect to require the Company to pay as final liquidated
damages the amount of the excess of the lease payments that would have been
payable from the date of termination through the unexpired term over the fair
rental value of the properties for the same period.
Under the purchase contract relating to the sale of the GHALP
Properties to the lessor, GHALP undertook to indemnify the lessor against any
liabilities arising out of GHALP's actions in connection with the ownership or
operation of the GHALP Properties and any third party claims in connection with
such properties occurring prior to the consummation of the sale. In addition,
the lessor undertook to indemnify GHALP against any liabilities arising out of
the lessor's actions in connection with the ownership or operation of the GHALP
Properties and any third party claims in connection with such properties
occurring after the sale. In connection with the formation of the Company, the
Company assumed GHALP's rights and obligations under the purchase contract. The
Company also assumed the representations and warranties made by GHALP under the
purchase contract, including that, to GHALP's knowledge, at the time of the
agreement: no undisclosed conditions, agreements, litigation or environmental
liabilities existed that would materially and adversely affect the properties
or result in the imposition of a lien upon any of the GHALP Properties; no
taxes were delinquent; the properties had access to sufficient utilities and
services; the properties and the use and operation thereof did not violate any
material law; all material licenses and permits necessary to the operation of
the GHALP Properties were in effect; and the copies of the ground leases
delivered to the lessor were true, valid and not in default. Liability with
respect to the representations and warranties survive through April of 1997.
The GHALP Lease restricts the Company from owning, building,
franchising, managing or operating any Wyndham Garden Hotel within a designated
area surrounding each respective GHALP Property during the lease term. Hotel
products other than Wyndham Garden Hotels are expressly excluded from this
restriction.
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In connection with the entry by a subsidiary of the Company into the
lease relating to the Wyndham Hotel property in Salt Lake City (the "Salt Lake
City Lease"), the Company has entered into a Limited Guaranty Agreement (the
"Limited Guaranty") pursuant to which the Company has guaranteed the
obligations of the lessee under the Salt Lake City Lease and has deposited with
the lessor a guaranty deposit in the amount of $5,275,000. Provided that no
event of default occurs, the deposit balance accumulates interest at the rate
of 11.11% per annum. Accrued interest on this deposit will be credited against
the monthly Minimum Rent to be paid by the Company under the Salt Lake City
Lease. In general, the unapplied balance of the guaranty deposit will be
returned to the Company at such time that, after January 1, 1998, for a period
of 12 consecutive months the hotel property meets or exceeds certain cash flow
targets set forth in the Limited Guarantee and satisfies certain other
requirements (the "Performance Criteria"). In the event that the Performance
Criteria are not met, the guarantee deposit will be returned upon the Company's
satisfaction of all obligations under the Salt Lake City Lease.
The terms of the Salt Lake City Lease by and between HPTSLC
Corporation, a Delaware corporation, and a subsidiary of the Company, are
generally similar to those of the GHALP lease set forth above but vary as to
the following provisions. The Minimum Rent under the Salt Lake City Lease is
$4,400,004 per month and Additional Rent for the 1998 fiscal year is equal to
5% of the amount, if any, by which the Total Hotel Sales (as defined in the
Salt Lake City Lease) for the then current year to date exceed total hotel
sales (the "Excess Total Hotel Sales") for the equivalent period in 1997 and 8%
of the Excess Total Hotel Sales for the equivalent period in 1998 for each
fiscal year thereafter during the term of the Lease.
The Salt Lake City Lease requires a cash security deposit of
$4,725,000 (the "Security Deposit") that cannot be mortgaged, assigned,
transferred or otherwise encumbered by the lessee without prior written consent
except for certain authorized leasehold mortgages. Provided that the Company
complies with all terms, covenants and conditions of the Salt Lake City Lease,
the Security Deposit will be returned to the Company at the end of the term of
the lease. Improvement advances in an aggregate amount of up to $3,250,000 may
be advanced by the lessor for certain improvements to the hotel.
The Company has agreed that under the following circumstances, in
addition to the events of default outlined under the GHALP Lease, the lessor
under the Salt Lake City Lease may terminate the lease: in the case of any
false or misleading material representation or warranty made by the Company or
any Affiliated Person as to the Company contained in the lease or certain other
related documents, or if the Limited Guaranty is disaffirmed, disavowed or
challenged by the Company. The Salt Lake City lease also reserves the option
for HPTSLC Corporation, exercisable on or before the fifth anniversary of the
date of the lease, to require amendments to both the GHALP Lease and the Salt
Lake City Lease providing that (i) an event of default under either of such
leases would constitute an event of default under the other lease; (ii) that
the renewal option under the GHALP Leases could not be declined unless the
renewal option under the Salt Lake City Lease were also declined; and (iii)
that amounts in the FF&E Reserves under each of the GHALP Leases and the Salt
Lake City Lease be pooled and consolidated.
The Salt Lake City Lease restricts the Company from owning, building,
franchising, managing or operating any full-service Wyndham Hotel within a
designated area surrounding the hotel during the lease term. Wyndham Garden and
Resort Hotels are expressly excluded from this restriction.
The remaining leased hotel is leased to the Company from an
unaffiliated third party pursuant to a capitalized lease with a remaining term
of 22 years. The lease requires payment of base rent of $2,300,000 per year
plus contingent rent through 1999 of 20% of the amount net operating income
before management fees exceeds base rent plus the management fee and
thereafter, 50% of such amount.
FRANCHISING PROGRAM
As of January 15, 1997, the Company franchised two Wyndham hotels, and
entered into a franchise agreement for a third hotel that is currently being
operated as a Best Western and is expected to be converted to a Wyndham Hotel
in February 1997. See " -- The Company's Hotels." The Company plans to pursue
selective franchise opportunities with well-qualified owner/operators such as
American General Hospitality, Inc. and Starwood Lodging.
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The Company is in the process of developing a comprehensive franchise
program that it expects to have complete in advance of the next hotel
construction cycle in the upscale full service segment of the lodging industry.
The Company believes that this program will enable it to pursue franchise
opportunities on a broader scale, given appropriate market conditions.
COMPETITION
The lodging industry is highly competitive. The Company's upscale
hotels compete with other national limited and full service hotel companies, as
well as with various regional and local hotels. Some of the larger hotel chains
with which the Company competes include Marriott, Sheraton, Hyatt, Hilton and
Embassy Suites. The Company's extended-stay hotels compete on a local level.
The Company anticipates that competition within the extended-stay industry
segment will increase substantially in the foreseeable future. In the midprice
category of the extended-stay industry segment, a number of other lodging
chains and developers have recently announced plans to develop or are currently
developing extended-stay hotels which may compete with the Company's hotels. A
number of the Company's competitors for both upscale and extended-stay hotel
properties are larger, operate more hotels and have substantially greater
financial and other resources than the Company. In addition, some of the
Company's competitors operate hotel properties that have locations superior to
those of the Company's hotels. Competitive factors in the lodging industry
include room rates, quality of accommodations, name recognition, service levels
and convenience of location. There can be no assurance that demographic,
geographic or other changes in markets in which the Company's hotels are
located will not adversely affect the convenience or desirability of certain of
the Company's hotels. Furthermore, there can be no assurance that new or
existing competitors will not significantly lower rates or offer greater
conveniences, services or amenities or significantly expand or improve
facilities in a market in which the Company's hotels compete, thereby adversely
affecting the Company's results of operations. See "Risk Factors -- Competition
in the Lodging Industry."
The Company also competes for management contract, acquisition,
development, lease, franchise and other expansion opportunities. The Company
competes for these expansion opportunities with national and regional hotel
companies, some of which have greater financial and other resources than the
Company. Competitive factors for expansion opportunities include relationships
with hotel owners and investors, the availability of capital, financial
performance, management fees, lease payments, brand name recognition, marketing
support, reservation system capacity, and the willingness to provide funds in
connection with new management and lease arrangements. The Company's failure to
compete successfully for expansion opportunities or to attract and maintain
relationships with hotel owners and investors could adversely affect the
Company's results of operations. See "Risk Factors -- Risks Associated with
Expansion -- Competition for Expansion Opportunities."
EMPLOYEES
At November 30, 1996, Wyndham had approximately 170 employees at the
corporate level and approximately 11,240 employees (including part-time and
seasonal employees) at hotel properties managed by the Company.
Employees at five of the Company's managed hotels currently are
represented by a labor union. Management believes its ongoing labor relations
to be good.
TRADEMARKS
The service marks "Wyndham" and "Wyndham Garden" are material to the
Company's business. The Company has filed an application with the United States
Patent and Trademark Office (the "USPTO") for registration of the Wyndham
service mark. The Company also has filed an application with the USPTO for
registration of the "The Right Way, The Wyndham Way" slogan, the Company's
800-WYNDHAM reservation number and certain other marks as service marks. In
addition, the Company has registered "Wyndham Garden," the Wyndham "W" logo and
"Triple Upgrade" as service marks with the USPTO. The Company also claims
common law service mark rights in the Wyndham "W" logo, the foregoing marks as
well as certain other marks. The Company has registered "Wyndham" and
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"Wyndham Garden" as service marks in various states and "Wyndham" and "Wyndham
Garden" as service marks in Puerto Rico and various foreign countries.
The Company's application to register "Wyndham" also claims exclusive
use of this mark with the exception of two limited areas in which the Company
is aware of prior uses of the "Wyndham" mark by hotel operators that have no
existing or historical relationship with the Company. One of these hotels is
located in Ambler, Pennsylvania, and the other is located in Manhattan (the
"Mados Wyndham Hotel"). The Company has not used the Wyndham name in connection
with the operation of a Wyndham hotel in either of these areas.
In June 1992, the managers and lessees of the Mados Wyndham Hotel,
John and Suzanne Mados (the "Madoses"), registered the name "Wyndham Hotel"
with the New York Secretary of State pursuant to a New York State statute that
provides that the owner or operator of a hotel in the State of New York may
register the name of a hotel and such registration grants, prima facie, the
exclusive right to use the name in the State of New York. However, this
presumption of exclusive use can be rebutted, and the registration may be
revoked at the time enforcement is sought if the registrant never had exclusive
use of the mark in New York State.
In February 1995 and June 1995, respectively, the current owners of
the Mados Wyndham Hotel, Yassky-Wyndham Partnership ("Yassky"), filed Notices
of Opposition to the Company's applications with the USPTO for registration of
"Wyndham" and "Wyndham Garden" as service marks, claiming prior use of the
"Wyndham" mark and requesting that the Company's applications be denied. The
Company subsequently entered into a settlement agreement with Yassky pursuant
to which Yassky assigned to the Company all of its rights (to the extent it had
any) in the "Wyndham" mark throughout the world with the exception of 11 New
York State counties, including New York County and Queens County. The Company
believes that it and Yassky each have non-exclusive rights to use the mark
"Wyndham" in these 11 counties. In addition, Yassky withdrew its Oppositions to
the Company's federal applications for registration of the "Wyndham" and
"Wyndham Garden" marks. Pursuant to the settlement agreement, the Company must
pay a royalty to Yassky if it undertakes the operation of a Wyndham brand hotel
in any of the 11 counties identified in the Settlement Agreement.
In June 1995, the Madoses filed a Notice of Opposition to the
Company's application for federal registration of the "Wyndham" mark, also
claiming prior use of the "Wyndham" mark and requesting that Wyndham's
registration be denied. The Trademark Trial and Appeal Board has suspended the
Opposition Proceeding pending resolution of the New York Action.
In July 1996, the Madoses filed a Petition to Cancel the Company's
registration for the mark "Wyndham Garden." The Company filed its Answer to the
Petition to Cancel in August 1996, and the Madoses filed a Motion to Suspend
Proceedings until a final determination is made regarding the action described
below under " -- Legal Proceedings."
The Company does not believe that the Madoses' narrow common law
rights to use the Wyndham name will prevent the Company's registration of its
exclusive right to use the "Wyndham" mark throughout the country with the
exception of the limited area surrounding the Mados Wyndham Hotel in Manhattan
and Ambler, Pennsylvania. Because of national recognition of the Wyndham name
as a result of the Company's operations, the Company believes that it has
substantial common law rights to use the mark "Wyndham." It is likely, however,
that the Madoses' prior operation of the Mados Wyndham Hotel will prevent the
Company from operating Wyndham brand hotels or advertising the Wyndham brand
name in connection with the operation of a Wyndham brand hotel within a
geographic area within the borough of Manhattan or possibly within a larger
radius of the Mados Wyndham Hotel. For further information relating to disputes
involving the "Wyndham" mark, see " -- Legal Proceedings" below.
LEGAL PROCEEDINGS
On June 29, 1992, the Madoses filed a lawsuit in the New York Supreme
Court, County of New York, against Wyndham Hotel Company, Wyndham Hotel
Company, Ltd., Wyndham Hotel Management Corporation d/b/a
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Wyndham Hotels & Resorts (referred to herein as "The Old Management Company")
and Yassky. The lawsuit seeks a declaratory judgment that, based on their prior
use of the Wyndham name, the Madoses possess the exclusive right to use the
Wyndham name and mark in connection with the operation of a hotel in New York
City or within a 50 mile radius thereof. The Old Management Company
acknowledges that use of the Wyndham name in connection with the operation of
the Mados Wyndham Hotel has created certain service mark rights in a limited
geographic area within the borough of Manhattan, but denies the Madoses' claim
to exclusive use of the Wyndham name within a 50 mile radius of the Mados
Wyndham Hotel. The suit also seeks an injunction enjoining The Old Management
Company from using the "Wyndham" mark in connection with the advertisement,
promotion, management or operation of a hotel in New York City or within a 50
(subsequently amended to 100) mile radius thereof.
On January 29, 1996, the court issued a temporary restraining order
that is limited to the borough of Manhattan or within a 50 mile radius (within
the State of New York), which, as modified in a subsequent opinion of February
13, 1996, prohibits The Old Management Company from operating or managing a
hotel using the "Wyndham" name pending the resolution of the lawsuit and from
advertising the Company's property at LaGuardia Airport (which is currently
under renovation).
Post trial filings have been completed for the trial on the above
proceedings that occurred from May 14 to May 31, 1996, and The Old Management
Company is awaiting the Court's decision. After the trial, the Madoses sought
to increase the radius of the requested injunction from 50 to 100 miles.
The Old Management Company has appealed the Trial Court's modification
of the temporary restraining order subsequent to the trial to permit The Old
Management Company to use the word "Wynd" in connection with its property at La
Guardia Airport under certain conditions unacceptable to The Old Management
Company. It is not known when a decision will be rendered by the Trial Court or
the Appellate Court.
It is possible that the Company could be named as a defendant in this
litigation or that additional proceedings could be instituted against the
Company. An adverse decision in the litigation could prevent the Company from
operating Wyndham brand hotels or advertising the Wyndham name in connection
with the operation of a Wyndham brand hotel within a limited geographic area in
the borough of Manhattan or within a 50 to 100 mile radius of the Mados Wyndham
Hotel. In addition, an adverse decision in the litigation or a delay in the
resolution of the lawsuit beyond the opening date for the Company's hotel at La
Guardia Airport would require the Company to open this hotel under a brand name
other than "Wyndham" or "Wyndham Garden." It is management's opinion that the
losses resulting from the ultimate resolution of the aforementioned lawsuit are
not currently ascertainable. For further information relating to disputes
involving the "Wyndham" mark, see " -- Trademarks" above.
The Tampa Region of the Florida Department of Revenue (the "FDR") has
asserted that the Company may be liable for sales and use tax as a result of
the Company's management of the Wyndham Harbour Island Hotel ("Harbour Island")
in Tampa, Florida. The FDR recently performed an audit of Harbour Island
covering the period from August 1990 through June 1995. On the basis of the
audit, the FDR made a determination that the Company owed approximately $1
million (including penalties and interest) in taxes for such period. The
Company believes that it has meritorious defenses with respect to the amount
claimed by the FDR and is providing information with respect to the FDR's
assertion for the audit period. The owners of Harbour Island have agreed to
indemnify the Company with respect to any additional sales and use tax paid by
the Company for the audit period. The Company does not believe that the outcome
of this matter will have a material adverse effect on its financial condition.
See Note 13 to the Company's Combined Financial Statements.
In addition to the above proceedings, the Company is involved in
various lawsuits arising in the normal course of business. The Company believes
that the ultimate outcome of such lawsuits and proceedings will not,
individually or in the aggregate, have a material adverse effect on the results
of operations or financial condition of the Company; however, there can be no
assurance that this will be the case.
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INSURANCE
Each of the Company's hotels is covered by comprehensive insurance
policies, including liability, fire and extended coverage and, where
applicable, flood and earthquake coverage. The Company believes that such
coverage is of the type and amount customarily obtained by hotel owners. In
addition, the Company has the types of insurance coverage, including
comprehensive general liability and excess umbrella liability insurance, that
it believes are appropriate for a company in the hotel management business.
Subject to the requirements of any management contracts and the Revolving
Credit Agreement to maintain certain levels of insurance, the Board of
Directors will use its discretion in determining the amounts, coverage limits
and deductibility provisions of insurance, with a view to maintaining
appropriate insurance coverage on the Company's hotel properties at a
reasonable cost and on suitable terms. This might result in insurance coverage
that, in the event of a substantial loss, would not be sufficient to pay the
full current market value or current replacement cost of a damaged property.
The Company operates seven Wyndham brand hotel properties (six managed
and one leased) in the Los Angeles, California area that are currently insured
against earthquake damage under an insurance policy maintained by the Company.
The Company has been advised by its insurance underwriters, however, that if
the Company were to add an additional hotel in the Los Angeles area, it is
possible that the Company would not be able to obtain earthquake insurance for
such hotel under the Company's current policy. In such event, the Company would
seek to obtain separate earthquake coverage for the additional hotel, which may
not be economically feasible.
ENVIRONMENTAL MATTERS
Under various federal, state, local and foreign environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the cost of removal or remediation of hazardous or
toxic substances on, under or in such property. Such laws often impose
liability without regard to whether the owner or operator knew of, or was
responsible for, the release of such hazardous or toxic substances. The
presence of contamination from hazardous or toxic substances, or the failure to
remediate such contaminated property properly, may adversely affect the owner's
ability to sell or rent such real property or to borrow using such real
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances also may be liable for the cost of removal or
remediation of such substances at the disposal or treatment facility, whether
or not such facility is or ever was owned or operated by such person. The
operation and removal of certain underground storage tanks also are regulated
by federal and state laws. In connection with the ownership and operation of
its hotel properties, including properties owned, as well as leased, managed,
or franchised by the Company, the Company could be held liable for the cost of
remedial action with respect to such regulated substances and storage tanks and
claims related thereto. In addition to clean-up actions brought by federal,
state and local agencies, the presence of hazardous or toxic substances on a
hotel property also could result in personal injury or similar claims by
private plaintiffs. As the current owner or long-term lessee of 22 hotel
properties, manager of 55 hotel properties and franchisor of 1 hotel property
Wyndham, and any subsidiary involved in the ownership, leasing, management or
franchising of hotel properties, will be subject to this full range of
environmental issues and potential liability.
To manage some of these risks, Wyndham provides in nearly all of its
management contracts that the owner of the hotel indemnifies Wyndham against
any environmental liabilities, except any caused by varying degrees of
Wyndham's negligence or by Wyndham's willful misconduct or willful violation of
legal requirements. See " -- Management Contracts."
Under the GHALP Lease, the Company has agreed to indemnify the lessor,
the hotel mortgagees and their agents and assigns against costs resulting from
the presence during the lease term of any hazardous substances in, upon or
under the soil or groundwater of the leased property or any properties
surrounding the leased property in violation of any law or regulation, provided
that the costs arise due to the failure by the Company to perform or comply in
accordance with all laws and orders applicable to the storage, use,
maintenance, spillage, disposition or transfer of hazardous substances or
certain lease provisions requiring notice of environmental-related events and
activities to be
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given to the lessor, except to the extent such costs arise from the acts or
omissions of the lessor or any other indemnified party or during any period
that the lessor is in possession of the leased property.
Periodically, the Company may agree to indemnify lenders of
non-recourse indebtedness secured by certain hotel properties against
liabilities arising from violations of environmental laws or regulations.
In connection with its initial public offering, the Company received
environmental site assessments, which generally include a physical inspection,
but in most instances no soil or groundwater analyses, on the 18 owned or
leased hotel properties acquired by the Company in connection with its
formation (the "Recent Environmental Assessments"). In addition, the Company
previously received other environmental information with respect to some but
not all of the 18 hotel properties prior to acquiring an interest in the
property, and the Company also received environmental information concerning
some, but not all, of the managed or franchised properties prior to entering
into management or franchising contracts with respect to these properties.
(collectively, the "Prior Environmental Information").
Asbestos-containing building materials ("ACM") are present in several
of the hotel buildings owned, operated, or managed by the Company. The Company
has an operations and maintenance plan in place, or is in the process of
implementing a plan, establishing operating procedures with respect to such
ACMs. The Company believes that these materials are currently adequately
managed and contained and that any cost related to managing or disposing of ACM
will not have a material adverse effect on the Company.
Some of the properties owned, operated or managed by the Company are
on, adjacent to or near properties that have contained in the past or currently
contain underground and/or above-ground storage tanks used to store regulated
substances such as petroleum products or other hazardous or toxic substances.
Some of the properties owned, operated or managed by the Company are in the
vicinity of properties which are currently or have been subject to releases of
regulated substances and remediation activity, and the Company is currently
aware of several properties owned, operated or managed by the Company which may
be impacted by regulated substances which may have migrated from adjacent or
nearby properties or which may be within the borders of areas suspected to be
impacted by regional groundwater contamination. In addition, the Company is
aware of the presence or the potential presence of regulated substances in the
soil or groundwater at several properties owned, operated or managed by it
which may have resulted from historical or ongoing activities on those
properties. Based on the information available to date, the Company believes
that the environmental issues described above will not have a material adverse
effect on the Company.
The Recent Environmental Assessments and the Prior Environmental
Information do not constitute an assurance or guarantee by the Company or any
other person as to the presence or absence of any type of environmental problem
in, on, under or around the hotel properties. Also, on many of the managed and
franchised properties, the Company has not performed or received the results
from any environmental investigations. Given the specific nature and limited
scope of the environmental information obtained by the Company to date, the
environmental issues described above may be more severe than indicated, and
environmental problems may exist that have not been uncovered.
As a result of the foregoing limitations on performing environmental
investigation and due to the fact that Environmental Laws and conditions are
subject to frequent change, there can be no assurance that environmental
liabilities or claims will not adversely affect the Company in the future.
The Company has no current plans to undertake further steps, other
than those described in the Recent Environmental Assessments, to assess
environmental liabilities with respect to hotel properties owned, leased,
managed or franchised by it. These Recent Environmental Assessments were
performed by a qualified environmental engineering firm, and were performed in
accordance with a scope of work that meets and exceeds the "Standard Practice
for Environmental Site Assessments: Phase I Environmental Site Assessment
Process," Designation E1527, promulgated by the American Society for Testing
and Materials. In the majority of the reports, the consultant concluded that no
further investigation of any material environmental issue is warranted and the
Company concurs with this conclusion. The Company does intend to follow the
recommendations contained in the Recent Environmental Assessments
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concerning management practices and on-site conditions at two sites,
implementation of an operations and maintenance plan with respect to asbestos
containing materials at two sites, and registration of drywells at several
sites. The Company does not believe that any of these issues are material.
The Company has no current plans to assess any potential environmental
liabilities at managed or franchised properties. The Company believes that no
assessment is warranted because the risk of environmental liability being
imposed on it for environmental issues at hotel properties that it does not own
or lease, but merely manages or franchises, is lower. The Company believes the
risk of environmental liability is lower for three principal reasons. First,
because the nature of hotel management does not involve the handling of
hazardous substances, except in small, manageable quantities found in consumer
products and used for janitorial or maintenance purposes, the Company's
management activities are unlikely to create or contribute to an environmental
problem. The possibility of creating or contributing to an environmental
problem is even more remote in connection with a franchised hotel property
because the Company is not even present on the property. Second, because the
Company is unlikely to have created or contributed to an environmental problem
at a hotel property, the Company believes that, from a legal standpoint, it
would either have a defense to any claim for liability arising from an
environmental problem not caused or contributed to by it, or it would have an
effective right of contribution under various environmental statutes against
the owner of the managed or franchised property. In addition, in nearly all of
its management agreements, the Company is indemnified by the owner against all
environmental problems not caused or created by the Company. Third, the Company
believes that the managed and the franchised hotels are being operated in
material compliance with environmental laws. Based on its experience with
managing many of the properties over a number of years, the Company believes
that it is aware of the environmental conditions at these sites and of the
types of issues that may arise at other sites, and that it can appropriately
manage any environmental issues that may arise from operations in the future.
Therefore, because the risk of liability arising from the existence of an
environmental problem at a managed or franchised property is lower, the Company
does not believe that the assessment of these properties is warranted.
GOVERNMENT REGULATION
The hotel industry is subject to numerous federal, state and local
government regulations, including those relating to the preparation and sale of
food and beverages (such as health and liquor license laws) and building and
zoning requirements. The Company also is subject to laws governing its
relationship with employees, including minimum wage requirements, overtime,
working conditions and work permit requirements. In addition, the Company is
subject to federal regulations and certain state laws that govern the offer and
sale of franchises. The Company believes that it has the necessary permits and
approvals to operate each of its hotels and their respective businesses.
Under the Americans with Disabilities Act of 1990 (the "ADA"), all
public accommodations are required to meet certain federal requirements related
to access and use by disabled persons. While the Company believes that its
hotels are substantially in compliance with these requirements, a determination
that the Company is not in compliance with the ADA could result in the
imposition of fines or an award of damages to private litigants. While the
Company may be required to incur additional costs of complying with the ADA in
the future, the Company does not expect such costs to have a material adverse
effect on the Company's financial condition or results of operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information concerning the directors and executive
officers of the Company:
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
James D. Carreker(1)(2) 49 President, Chief Executive Officer and Director
Leslie V. Bentley 45 Executive Vice President, Wyndham Garden Division President and
Director
Anne L. Raymond(2) 38 Executive Vice President, Chief Financial Officer and Director
Stanley M. Koonce, Jr. 48 Executive Vice President--Marketing, Planning and Technical
Services and Director
Charles E. Griffin 63 Senior Vice President--Human Resources
Carla S. Moreland 37 Vice President--General Counsel and Secretary
Glen H. Griffith 62 Vice President--Chief Information Officer
Edward L. Stahl 52 Vice President--Marketing
John P. Klumph 41 Vice President--Corporate Controller
John J. Kelly 48 Vice President--Technical Services
Harlan R. Crow(1) 47 Director
Daniel A. Decker 44 Director
Susan T. Groenteman 42 Director
James C. Leslie(3)(4) 40 Director
Philip J. Ward(3)(4) 48 Director
Robert A. Whitman(1) 43 Director
- -------------------
(1) Member of Executive Committee.
(2) Member of the Retainer Stock Plan Committee.
(3) Member of the Compensation Committee.
(4) Member of the Audit Committee.
JAMES D. CARREKER has served as President and Chief Executive Officer
of the Company since May 1988 and as a director of the Company since February
1996. He also served as Chief Executive Officer of Trammell Crow Company, an
affiliated entity and national real estate company, from August 1994 to
December 1995. Prior to 1988, Mr. Carreker served as President of Burdine's,
the Miami based division of Federated Department Stores. Mr. Carreker has been
a Director of Homegate Hospitality, Inc. since October 1996.
LESLIE V. BENTLEY has been employed by the Company since March 1985,
has served as Executive Vice President and Wyndham Garden Division President of
the Company since May 1990 and was elected a director of the Company in January
1997. From January 1987 to June 1988, Mr. Bentley served as Regional Vice
President of the Company. From June 1988 to December 1988, Mr. Bentley served
as Vice President of Operations of the Company, and from December 1988 to May
1990, he served as Senior Vice President of Operations of the Company. Prior to
joining the Company, Mr. Bentley was employed by Marriott Hotels for eight
years.
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ANNE L. RAYMOND joined the Company in 1983 as Controller and served in
that and other financial capacities through September 1987. From September 1987
to July 1994, she served as Investment Manager for Crow Family Holdings, an
affiliated entity, where her responsibilities included managing and overseeing
Crow Family Holdings' interests in the Trammell Crow Company, an affiliated
entity, and Wyndham. Upon the formation of the Crow Investment Trust in August
1994, Ms. Raymond was named Director--Capital Markets thereof and had
responsibility for developing and maintaining investment relationships with
real estate capital sources. In March 1995, Ms. Raymond officially rejoined the
Company as Executive Vice President and Chief Financial Officer, and was
elected a director of the Company in April 1996.
STANLEY M. KOONCE, JR. has served as Executive Vice
President--Marketing, Planning and Technical Services of the Company since
October 1994, was elected a director of the Company in January 1997 and served
as Senior Vice President of Sales and Marketing of the Company from October
1989 to October 1994. Mr. Koonce served as President of CUC Travel Services, a
division of CUC International, in Stamford, Connecticut from 1986 to 1989, as
Vice President of the Marketing Department with American Express from 1979 to
1986 and as a Director of Finance and Planning for American Airlines from 1976
to 1979.
CHARLES E. GRIFFIN has served as Senior Vice President--Human
Resources of the Company since October 1996. From September 1994 to October
1996, Mr. Griffin served as Executive Vice President of Rocco Originals, Inc.,
a sunglasses manufacturer and wholesaler in San Antonio, Texas, and from March
1994 to July 1994 as Executive Vice President of Catherine Dial Easley, Inc., a
women's accessory company in San Antonio, Texas. From 1993 to 1994, Mr. Griffin
was a retail consultant with Strategic Retail Ventures in Dallas, Texas and
from 1991 to 1993 was a retail search consultant of executive talent with P.R.
Associates of Dallas, Texas. From 1990 to 1991, Mr. Griffin served as President
of Suzanne's off-price retail stores in Dallas, Texas, and from 1985 to 1990
served as President and Consultant to Ginnie Johansen Designs, Inc., a women's
accessory company in Dallas, Texas. Prior to 1985, Mr. Griffin served in
various positions with divisions of Federated Department Stores.
CARLA S. MORELAND has served as Vice President--General Counsel of the
Company since April 1994 and as Secretary since March 1996. From 1988 to 1994,
Ms. Moreland practiced law with Weil, Gotshal & Manges in Dallas, Texas, and
from 1984 through 1987, she practiced law with Freytag, Perry, LaForce,
Rubinstein & Teofan in Dallas, Texas.
GLEN H. GRIFFITH has served as Vice President--Chief Information
Officer of the Company since March 1995. He has also served as Chief
Information Officer of Trammell Crow Company, an affiliated entity, and
national real estate company, since March 1995. From March 1994 to March 1995
Mr. Griffith was retired from Federated Department Stores and performed
independent consulting services. From 1985 to March 1994, Mr. Griffith served
as Chief Executive Officer of Federated Systems Group, a division of Federated
Department Stores. From 1983 to 1985, Mr. Griffith served as Senior Vice
President--MIS for both Sanger Harris Department Stores in Dallas, Texas and
Burdine's Department Stores in Miami, Florida, and from 1974 to 1983, he served
as Senior Vice President of Sanger Harris Department Stores in Dallas, Texas.
EDWARD L. STAHL has served as Vice President--Marketing of the Company
since December 1995. From 1986 to 1995, Mr. Stahl served as Vice President of
Advertising and Marketing Programs for the Sheraton Corporation, where he
directed Sheraton's corporate advertising, Frequent Traveler and Partner
Marketing Programs. From 1979 to 1986, Mr. Stahl served as Vice President of
Consumer Marketing for Epsilon Data Management in Burlington, Massachusetts.
From 1975 to 1979, Mr. Stahl held several marketing management positions with
both Holiday Inns, Inc. and United Airlines.
JOHN P. KLUMPH has been employed by the Company since February 1988
and has served as Vice President- Corporate Controller of the Company since
1989. Prior to joining the Company, Mr. Klumph served as Director of Hotel
Accounting for Lincoln Hotel Company in Dallas, Texas from 1986 to 1988 and as
Controller and Assistant Controller for the Sheraton Corporation in Washington
D.C. from 1982 to 1986.
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JOHN J. KELLY has served as Vice President--Technical Services since
February 1996. From 1992 to January 1996, Mr. Kelly was Vice President of
Marketing for the Orlando office of McDevitt Street Bovis, Inc., a national
construction company, where he had responsibility for managing the marketing
and operations of the hospitality group. Mr. Kelly served as Director of
Construction for ITT Sheraton Corporation from 1989 to 1992, and as Vice
President of Design & Construction for Ramada International from 1987 until
1989. Mr. Kelly served in a variety of positions within Holiday Corporation
from 1973 until 1987, and was the Vice President of Construction Management for
Holiday Corporation from 1983 to 1987.
HARLAN R. CROW is a director of the Company. Mr. Crow is the chief
executive officer of Crow Family Holdings, an investment company managing
investments in a variety of real estate related and other businesses, a
position he has held since 1986. Prior to 1986, Mr. Crow was a Regional Partner
in the office building unit of Trammell Crow Company, a commercial real estate
management and development company. Mr. Crow is a former member of the Board of
Directors of Texas Commerce Bancshares, a banking institution. In any given
year within the past five years, Mr. Crow has indirectly owned interests in
over 1,000 partnerships (or affiliates of partnerships) or corporations. In the
past five years, Mr. Crow was a general partner, officer or director in
approximately 90 partnerships or corporations, or affiliates of such
partnerships or corporations, that filed for protection under federal
bankruptcy laws. In addition, in the past five years, Mr. Crow was a general
partner, executive officer or director in approximately 15 partnerships or
corporations, or affiliates of such partnerships or corporations, that were
placed in receivership. Mr. Crow has been a Director of Homegate Hospitality,
Inc. since October 1996.
DANIEL A. DECKER is a director of the Company. Since 1990, Mr. Decker
has been a partner of Hampstead, an investment firm, which indirectly through
Bedrock is a significant stockholder of the Company, as well as being a
stockholder of Bristol, and other companies not involved in the lodging
business. See "Risk Factors -- Conflicts of Interest," "Business -- Growth
Strategy," "Certain Relationships and Transactions" and "Principal
Stockholders." Prior to 1990, Mr. Decker was a partner in the Dallas law firm
of Decker, Hardt, Kopf, Harr, Munsch & Dinan, P.C. Mr. Decker was a director of
Forum Group from June of 1993 until March of 1996. Mr. Decker is a past
director of Bristol and is presently a director of Mountasia Entertainment
International, Inc. ("Mountasia").
SUSAN T. GROENTEMAN is a director of the Company. Ms. Groenteman is
the Director (chief operating officer) of Crow Family Holdings, an investment
company managing investments in a variety of real estate related businesses,
along with other industries, a position she has held since 1988. From 1986
through 1988, Ms. Groenteman was Controller of Crow Family Holdings. Ms.
Groenteman served in a variety of positions for Crow Hotel Company, a
predecessor to the Company. In any given year within the past five years, Ms.
Groenteman has served as an executive officer or director in over 1,000
partnerships (or affiliates of partnerships) or corporations. In the past five
years, Ms. Groenteman has served as an executive officer or director of
approximately 90 partnerships or corporations, or for affiliates of such
entities, that filed for protection under federal bankruptcy laws. In addition,
in the past five years, Ms. Groenteman served as an executive officer or
director in approximately 15 partnerships or corporations, or affiliates of
such partnerships or corporations, that were placed in receivership.
JAMES C. LESLIE has served as President and Chief Operating Officer of
The Staubach Company since March 1996. Mr. Leslie served as Chief Financial
Officer of the company from 1982 to 1992 and President - Staubach Financial
Services from January 1992 to March 1996. Mr. Leslie is also President and a
board member of Wolverine Holding Company and serves on the boards of Columbus
Realty Trust, FM Properties, Inc., Forum Retirement Partners, L.P., and The
Staubach Company. Mr. Leslie is a certified public accountant. Mr. Leslie was
an officer in the corporate general partner of McCallum, Ltd., which filed for
protection under the federal bankruptcy laws in 1990. In addition, Mr. Leslie
was an officer in the corporate general partner of Retail, Ltd., which filed
for protection under the federal bankruptcy laws in 1994.
PHILIP A. WARD is a director of the Company. Mr. Ward is the Senior
Managing Director in charge of the Real Estate Investment Division of CIGNA
Investments, Inc., a division of CIGNA Corporation, a position he has held
since December 1985. Mr. Ward joined Connecticut General's Mortgage and Real
Estate Department (a predecessor of CIGNA) in 1971 and became an officer in
1976. Since joining CIGNA, Mr. Ward has held real estate investment
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assignments in Mortgage and Real Estate Production and in Portfolio Management.
Mr. Ward is also a Director of the Simon DeBartolo Group, Inc., of
Indianapolis, Indiana, and a Director of the Connecticut Housing Investment
Fund.
ROBERT A. WHITMAN is a director of the Company. Mr. Whitman has since
1991 been President and Co-Chief Executive Officer of Hampstead. Prior to 1991,
Mr. Whitman served as the Managing Partner and Chief Executive Officer of
Trammell Crow Ventures, the real estate investment, banking and investment
management unit of Trammell Crow Company, and, from 1988 to 1992, Mr. Whitman
also served as Chief Financial Officer for Trammell Crow Company, an affiliated
entity. Mr. Whitman is a director of Forum Group, Inc., a company traded on the
Nasdaq Stock Market that is engaged in the ownership and operation of senior
living facilities and is also a director of Mountasia. Mr. Whitman is a past
Director and Vice Chairman of the Board of Bristol.
Pursuant to the terms of the Stockholders' Agreement, the Crow Family
Members, Senior Executive Officers, WEL and Ms. Groenteman on the one hand, and
Bedrock on the other hand, have agreed to allocate between themselves the right
to nominate directors to serve on the Company's Board of Directors (and its
constituent committees) based on their proportionate ownership of shares of
Common Stock. Following the Plan of Distribution, WEL will not be a party to
the Stockholders' Agreement. See "Description of Capital Stock -- Stockholders'
Agreement."
The Company's Certificate of Incorporation and By-laws provide for
three classes of directors. Messrs. Crow, Carreker and Leslie are the Class I
directors and will serve until the meeting of stockholders in 1997; Ms.
Groenteman and Messrs. Ward and Whitman are the Class II directors and will
serve until the meeting of stockholders in 1998; and Ms. Raymond and Messrs.
Decker, Bentley and Koonce are the Class III directors and will serve until the
meeting of stockholders in 1999. After these directors' initial terms expire,
newly elected directors shall serve for a three year term or until their
successors are duly elected and qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit Committee, an Executive Committee, a
Compensation Committee and a Retainer Stock Plan Committee. The Audit Committee
is responsible for (i) assisting in the selection of the Company's independent
auditors, (ii) reviewing the arrangements for and the scope of the auditors'
examination of the Company's financial statements and (iii) meeting with the
auditors, the Board of Directors and officers of the Company to review the
adequacy of the Company's internal controls. The Executive Committee has the
authority, between meetings of the Board of Directors, to take all actions with
respect to the management of the Company's business that require action by the
Board of Directors, except with respect to matters (i) that by law, contract or
other express Board policy must be approved by the entire Board of Directors or
certain specified directors, (ii) that are delegated to other committees of the
Board of Directors or (iii) that involve the acquisition or disposition of
assets for total consideration exceeding $25 million or the creation of a
liability of the Company exceeding $25 million. The Compensation Committee
assists in the determination of the salaries and incentive bonuses of the
executive officers of the Company and administers the Company's 1996 Long Term
Incentive Plan. The Retainer Stock Option Committee is responsible for
administering the Company's Non-Employee Directors' Retainer Stock Plan.
Messrs. Leslie and Ward serve on the Audit Committee; Mr. Decker and Ms.
Groenteman serve on the Compensation Committee; Mr. Carreker and Ms. Raymond
serve on the Retainer Stock Plan Committee; and Messrs. Carreker, Crow and
Whitman serve on the Executive Committee.
COMPENSATION AND OTHER COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the Company had no Compensation Committee or other
committee of the Board of Directors performing similar functions. Decisions
concerning the compensation of executive officers, including that of Mr.
Carreker, were collectively made by Messrs. Carreker and Crow.
During 1996, Ms. Groenteman, who is an executive officer of Trammell
Crow Interests Company, served on the Compensation Committee of the Company's
Board of Directors. During 1996, Mr. Carreker served on an advisory board of
directors of Trammell Crow Interests Company and in such capacity served on the
Compensation Committee of such board.
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Certain directors are parties to transactions with the Company, as
described under the caption "Certain Relationships and Transactions" below.
EXECUTIVE COMPENSATION
The following table sets forth summary information for 1996 regarding
the compensation awarded to, earned by, or paid to (i) the Chief Executive
Officer of the Company, (ii) the four other most highly compensated executive
officers of the Company whose total annual salary and bonus earned during such
period exceeded $100,000 and (iii) one additional executive officer of the
Company who would have been included under category (ii) above but who as not
an executive officer of the Company at the end of 1996 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1)
----------------------
LONG-TERM
COMPENSATION
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS (#) COMPENSATION(3)
------------------ ---- ------ ----- ------------- ------------
James D. Carreker 1996 $ 349,998 $ 182,852 130,000 $ 2,102
President, Chief Executive Officer
and Director
Leslie V. Bentley 1996 $ 200,000 $ 129,750 60,000 $ 1,135
Executive Vice President and
Wyndham Garden Division
President
Anne L. Raymond 1996 $ 200,000 $ 100,000 60,000 $ 867,180(4)
Executive Vice President, Chief
Financial Officer and Director
Stanley M. Koonce, Jr 1996 $ 175,000 $ 90,253 60,000 $ 1,498
Executive Vice
President--Marketing,
Planning and Technical Services
Carla S. Moreland 1996 $ 171,923 $ 45,000 27,500 $ 1,631
Vice President -- General Counsel
and Secretary
Eric A. Danziger(5) 1996 $ 119,231 $ 35,917 60,000 $ 1,107,983(4)
Executive Vice President and
Wyndham Hotels and Resorts
Division President
(1) None of the named executive officers received any perquisites or other
personal benefits in 1996 that in the aggregate exceeded the lesser of
$50,000 or 10% of such named executive officer's salary and bonus for
such year.
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(2) Bonuses have not been declared yet for 1996. The amounts reflected
represent bonus advances made to the Named Executive Officers in 1996.
These advances will be offset by the actual bonuses once declared. It
is expected that actual bonuses will be equal to or in excess of the
bonus advances.
(3) Unless otherwise noted, consists of contributions by the Company to
the Company's 401(k) plan.
(4) Non-cash compensation was reported and recorded for Mr. Danziger and
Ms. Raymond in the amounts of $1,107,983 and $866,642, respectively,
reflecting compensation relating to equity participation in Old
Wyndham and other affiliated entities, which equity was purchased at
fair market value. In accordance with generally accepted accounting
principles, in 1996 no equity participation compensation expense was
required to be reported or recorded for Messrs. Carreker, Bentley or
Koonce or Ms. Moreland.
(5) Mr. Danziger resigned from the Company in July 1996. Amount reflected
in salary column represents actual salary earned in 1996. Due to his
resignation from the Company in 1996, Mr. Danziger will not receive a
1996 bonus. The amount advanced to him is owed to the Company.
1996 LONG TERM INCENTIVE PLAN
Scope. The Board of Directors and stockholders of the Company have
approved the Wyndham Hotel Corporation 1996 Long Term Incentive Plan (the
"Incentive Plan"). The Incentive Plan authorizes the granting of incentive
stock options and non-qualified stock options to purchase Common Stock, stock
appreciation rights, restricted stock and performance units, to key executives
and other key employees of the Company, including officers of the Company and
its subsidiaries. The purpose of the Incentive Plan is to attract and retain
key employees, to motivate key employees to achieve long-range goals and to
further identify the interests of key employees with those of the other
stockholders of the Company.
The Incentive Plan authorizes the award of 2,133,811 shares of Common
Stock to be used for stock options, stock appreciation rights or restricted
stock. If an award made under the Incentive Plan expires, terminates or is
forfeited, canceled or settled in cash, without issuance of shares of Common
Stock covered by the award, those shares will be available for future awards
under the Incentive Plan. The Incentive Plan will terminate on December 31,
2005.
Administration. The Incentive Plan will be administered by the Board
of Directors or, if directed by the Board of Directors, the Compensation
Committee or any successor thereto of the Board of Directors of the Company
(the Board of Directors or, if applicable, the Compensation Committee is
referred to herein as the "Compensation Committee"). Subject to the provisions
of the Incentive Plan, the Compensation Committee has the authority to select
employees to receive awards, to determine the time or times of receipt, to
determine the types of awards and the number of shares covered by the awards,
to establish the terms, conditions and provisions of such awards, to determine
the value of performance units, and to cancel or suspend awards. In making such
award determinations, the Compensation Committee may take into account the
nature of services rendered by the employee, his or her present and potential
contribution to the Company's growth and success and such other factors as the
Compensation Committee deems relevant. The Compensation Committee is authorized
to interpret the Incentive Plan, to establish, amend and rescind any rules and
regulations relating to the Incentive Plan, to determine the terms and
provisions of any agreements made pursuant to the Incentive Plan and to make
all other determinations that may be necessary or advisable for the
administration of the Incentive Plan.
Eligibility. Executive and other key employees of the Company and its
subsidiaries may be selected by the Compensation Committee to receive awards
under the Incentive Plan. The Incentive Plan provides that no more than 500,000
shares of Common Stock may be subject to awards granted per year to any one
employee participating in the Incentive Plan. In the discretion of the
Compensation Committee, an eligible employee may receive an award in the form
of a stock option, stock appreciation right, restricted stock award or
performance unit or any combination thereof, and more than one award may be
granted to an eligible employee.
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Stock Options. The Incentive Plan authorizes the award of both
incentive stock options ("ISOs") and nonqualified stock options. Under the
Incentive Plan, an option may be exercised at any time during the exercise
period established by the Compensation Committee, except that: (i) no option
may be exercised prior to the expiration of six months from the date of grant;
(ii) no option may be exercised more than three months after employment with
the Company or any of its subsidiaries terminates by reason other than death,
disability or authorized leave of absence for military or government service;
and (iii) no option may be exercised more than one year after employment with
the Company or any of its subsidiaries terminates by reason of death or
disability. The aggregate fair market value (determined at the time of the
award) of the Common Stock with respect to which ISOs are exercisable for the
first time by any employee during any calendar year may not exceed $100,000.
The term of each option is determined by the Compensation Committee, but in no
event may such term exceed 10 years from the date of grant (or 5 years in the
case of ISOs granted to stockholders owning 10% or more of the Company's
outstanding shares of Common Stock). The exercise price of options is
determined by the Compensation Committee, but the exercise price of ISOs cannot
be less than the fair market value of the Common Stock on the date of the grant
(or 110% of the fair market value of the Common Stock on the date of grant in
the case of ISOs granted to stockholders owning 10% or more of the Company's
outstanding shares of Common Stock). The exercise price of options may be paid
in cash or, with the Compensation Committee's approval, in shares of Common
Stock. Grants of options do not entitle any optionee to any rights as a
stockholder, and such rights will accrue only as to shares actually purchased
through the exercise of an option.
In connection with the Company's initial public offering, the Board of
Directors granted options to purchase an aggregate of 797,700 shares of Common
Stock under the Incentive Plan to certain key personnel. The exercise price of
all such options is equal to the initial public offering price of the Company's
Common Stock. The Board of Directors granted options covering 130,000 shares of
Common Stock to Mr. Carreker, options covering 60,000 shares of Common Stock to
each of Messrs. Bentley and Koonce, and Ms. Raymond and options covering 27,500
shares to Ms. Moreland, as part of the foregoing grant of options. The Company
granted additional options to purchase 20,000 shares of Common Stock in
November in conjunction with hiring an executive officer. All such options will
vest 20% on the third anniversary of the date of grant, 50% on the fourth
anniversary of the date of grant and 100% on the fifth anniversary of the date
of grant.
Stock Appreciation Rights. The Incentive Plan authorizes the grant of
both primary stock appreciation rights ("SARs") and additional SARs. Primary
SARs may be granted either separately or in tandem with options. Primary SARs
entitle the holder to receive an amount equal to the difference between the
fair market value of a share of Common Stock at the time of exercise of the SAR
and the option price (or deemed option price in the event of an SAR that is not
granted in tandem with an option), multiplied by the number of shares of Common
Stock subject to the option or deemed option as to which the SAR is being
exercised (subject to the terms and conditions of the option or deemed option).
An SAR may be exercised at any time when the option to which it related may be
exercised and will terminate no later than the date on which the right to
exercise the tandem option (or deemed option) terminates (or is deemed to
terminate). The participating employee has the discretion to determine whether
the exercise of an SAR will be settled in cash, in Common Stock (valued at its
fair market value at the time of exercise) or in a combination of the two,
subject to the approval of the Compensation Committee in certain circumstances.
The exercise of an SAR requires the surrender of the tandem option, if any, and
the exercise of a stock option requires the surrender of the tandem SAR, if
any.
Additional SARs may be granted only in tandem with stock options and
entitle the holder to receive an amount equal to the difference between the
fair market value of a share of Common Stock on the date of exercise of the
related option and the option price, multiplied by the number of shares of
Common Stock subject to the option as to which the SAR is being exercised
(subject to the terms and conditions of the option), multiplied by a percentage
factor ranging from 10% to 100% (as determined either by the Compensation
Committee at the date of grant or by the formula established by the
Compensation Committee at the date of grant).
If an SAR, or the corresponding option with which the SAR was awarded,
is not exercised prior to the date that it ceases to be exercisable, then such
SAR generally shall be deemed exercised as of such date and shall be paid to
the employee in cash. No SAR may be exercised more than three months after
employment with the Company or any of its subsidiaries terminates by reason
other than death, disability or authorized leave of absence for military or
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government service. No SAR may be exercised more than 12 months after the
holder's employment with the Company and its subsidiaries terminates by reason
of death or disability.
Restricted Stock. Restricted stock awards are grants of Common Stock
made to employees subject to a required period of employment following the
award (the "Restricted Period") and any other conditions established by the
Compensation Committee. An employee will become the holder of shares of
restricted stock free of all restrictions if he or she completes the Restricted
Period and satisfies any other conditions; otherwise, the shares will be
forfeited. Under the Incentive Plan, the Restricted Period may not be more than
ten years. The employee will have the right to vote the shares of restricted
stock and, unless the Compensation Committee determines otherwise, will have
the right to receive dividends on the shares during the Restricted Period. The
employee may not sell, pledge or otherwise encumber or dispose of restricted
stock until the conditions imposed by the Compensation Committee have been
satisfied. The Compensation Committee may accelerate the termination of the
Restricted Period or waive any other conditions with respect to any restricted
stock.
Performance Units. Performance units are awards that entitle the
holder to receive a specified value for the units at the end of a performance
period established by the Compensation Committee if performance measures
established by the Compensation Committee at the beginning of the performance
period are met. Although the performance measures and performance period will
be determined by the Compensation Committee at the time of the award of
performance units, they may be subject to such later revision as the
Compensation Committee deems appropriate to reflect significant events or
changes. If the employment of a holder of a performance unit with the Company
or a subsidiary terminates by reason of death, disability or retirement, then
the Company will pay the employee or his or her beneficiary or estate the
amount of the performance unit earned as of the date of termination. If the
employment of a holder of a performance unit with the Company or a subsidiary
terminates for any other reason, then the performance units held by such holder
will automatically be forfeited.
Adjustments. In the event of any change in the outstanding shares of
Common Stock by reason of any stock dividend, split, spinoff, recapitalization,
merger, consolidation, combination, exchange of shares or other similar change,
the aggregate number of shares with respect to which awards may be made under
the Incentive Plan, and the terms and the number of shares of any outstanding
option, SAR, performance unit or restricted stock, may be equitably adjusted by
the Compensation Committee in its sole discretion.
Business Combinations. Unless provision is otherwise made in the terms
of the award granted by the Compensation Committee, or by the terms of the
agreement with respect to the business combination, in the event of a change in
control of the Company (as defined), all outstanding stock options, SARs,
restricted stock and performance units shall terminate, provided that the
holders of any options or SARs may exercise such awards to the extent then
vested immediately prior to any such event and the holders of any performance
units shall be entitled to the then vested values of such units as of such
date.
Termination and Amendment. The Incentive Plan may be suspended,
terminated or amended by the Board of Directors, provided that, in the absence
of stockholder approval, no amendment of the Incentive Plan or action of the
Board of Directors may materially increase the total number of shares of Common
Stock with respect to which awards may be made under the Incentive Plan (except
as discussed in "Adjustments" above), change the exercise price of a stock
option or the base price of an SAR, materially modify the requirements as to
eligibility for participation in the Incentive Plan or materially increase the
benefits accruing to participants under the Incentive Plan. No amendment,
suspension or termination of the Incentive Plan may alter or impair any option,
SAR, share of restricted stock or performance unit previously awarded under the
Incentive Plan without the consent of the holder thereof.
Awards in Connection with Initial Public Offering. The amounts that
were paid pursuant to the Incentive Plan during fiscal 1996, as stock option
awards to the Named Executive Officers and in total are reflected in the
following table.
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NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS
STOCK GRANTED IN
NAME AND POSITION OPTIONS(1) FISCAL YEAR
----------------- ---------- -----------
James D. Carreker.................................................................. 130,000 16%
President, Chief Executive Officer and Director
Leslie V. Bentley.................................................................. 60,000 7%
Executive Vice President, Wyndham Garden Division President and Director
Eric A. Danziger(2)................................................................ 60,000 7%
Executive Vice President and Wyndham Hotels and Resorts Division President
Anne L. Raymond.................................................................... 60,000 7%
Executive Vice President, Chief Financial Officer and Director
Stanley M. Koonce, Jr.............................................................. 60,000 7%
Executive Vice President--Marketing, Planning and Technical Services and
Director
Carla S. Moreland 27,500 3%
Vice President -- General Counsel and Secretary..................................
Named Executive Officers as a Group................................................ 370,000
------------
Remainder of Company Employees..................................................... 447,700
------------
- ----------------------
(1) The per share exercise price of all options granted to the Named
Executive Officers is equal to $16.00, the initial public offering
price of the Company's Common Stock. The options expire on the tenth
anniversary from the date of grant and vest 20% on the third
anniversary, 50% on the fourth anniversary and 100% on the fifth
anniversary.
(2) Mr. Danziger resigned from the Company in July 1996. Consequently,
such stock options were forfeited.
Federal Income Tax Consequences. The following summary of the federal
income tax consequences of the Incentive Plan is not comprehensive and is based
on current income tax laws, regulations and rulings. Optionees are urged to
consult their own tax advisors concerning the federal income tax consequences
of the Incentive Plan.
Incentive Stock Options. An optionee does not recognize
income on the grant of an incentive stock option. Subject to the
effect of the alternative minimum tax, discussed below, if an optionee
exercises an ISO stock option in accordance with the terms of the ISO
and does not dispose of the shares acquired within two years from the
date of the grant of the ISO nor within one year from the date of
exercise, the optionee will not realize any income by reason of the
exercise and the Company will be allowed no deduction by reason of the
grant or exercise. The optionee's basis in the shares acquired upon
exercise will be the amount paid upon exercise. Provided the optionee
holds the shares as a capital asset, at the time of sale or other
disposition of the shares, his gain or loss, if any, recognized on the
sale or other disposition will be capital gain or loss. The amount of
his gain or loss will be the difference between the amount realized on
the disposition of the shares and his basis in the shares.
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If an optionee disposes of the shares within two years from
the date of grant of the option or within one year from the date of
exercise (an "Early Disposition"), the optionee will realize ordinary
income at the time of such Early Disposition, which will equal the
excess, if any, of the lesser of (1) the amount realized on the Early
Disposition or (2) the fair market value of the shares on the date of
exercise, over the optionee's basis in the shares. The Company will be
entitled to a deduction in an amount equal to such income. The excess,
if any, of the amount realized on the Early Disposition of such shares
over the fair market value of the shares on the date of exercise will
be long-term or short-term capital gain, depending upon the holding
period of the shares, provided the optionee holds the shares as a
capital asset at the time of Early Disposition. If an optionee
disposes of such shares for less than his basis in the shares, the
difference between the amount realized and his basis will be a
long-term or short-term capital loss, depending upon the holding
period of the shares, provided the optionee holds the shares as a
capital asset at the time of disposition.
The excess of the fair market value of the shares at the time
the incentive stock option is exercised over the exercise price for
the shares is an item of "tax preference" as such term is used in the
Code (the "Stock Option Preference").
Nonqualified Stock Options. Nonqualified stock options do not
qualify for the special tax treatment accorded to incentive stock
options under the Code. Although an optionee does not recognize income
at the time of the grant of the option, he recognizes ordinary income
upon the exercise of a nonqualified option in an amount equal to the
difference between the fair market value of the stock on the date of
exercise of the option and the amount of the exercise price. The
optionee's basis in the shares acquired will be the amount paid upon
exercise. When the optionee disposes of such shares, his gain or loss,
if any, will be long-term or short-term capital gain or loss,
depending on the holding period of his shares. The amount of his gain
or loss will be the difference between the amount realized on the
disposition of the shares and his basis in the shares.
As a result of the optionee's exercise of a nonqualified
stock option, the Company will be entitled to deduct as compensation
an amount equal to the amount included in the optionee's gross income.
The Company's deduction will be taken in the Company's taxable year in
which the option is exercised.
The excess of the fair market value of the stock on the date
of exercise of a nonqualified stock option over the exercise price is
not an item of tax preference.
Appreciation Rights. Recipients of SARs do not recognize
income upon the grant of such an award. When a participant elects to
receive payment under an SAR, he recognizes ordinary income in an
amount equal to the cash and/or fair market value of shares received,
and the Company is entitled to a deduction equal to such amount.
Restricted Stock; Performance Units. Grantees of restricted
stock and performance units do not recognize income at the time of the
grant of such stock or units. However, when shares of restricted stock
become free from any restrictions or when performance units are paid,
grantees recognize ordinary income in an amount equal to the cash and
the fair market value of the stock on the date all restrictions are
satisfied. Alternatively, the grantee of restricted stock may elect to
recognize income upon the grant of the stock and not at the time the
restrictions lapse.
Taxation of Preference Items. Section 55 of the Code imposes
an alternative minimum tax equal to the excess, if any, of (1) 26% of
the optionee's "alternative minimum taxable income" that does not
exceed $175,000, plus 28% of his "alternative minimum taxable income"
in excess of $175,000, over (2) his "regular" federal income tax.
Alternative minimum taxable income is determined by adding the
optionee's Stock Option Preference and any other items of tax
preference to the optionee's adjusted gross income and then
subtracting certain allowable deductions and an exemption amount. The
current exemption amount is $33,750 for single taxpayers, $45,000 for
married taxpayers filing jointly, and $22,500 for married taxpayers
filing separately.
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However, these exemption amounts are phased out beginning at certain
levels of alternative minimum taxable income.
Change of Control. If there is an acceleration of the vesting
of benefits and/or an acceleration of the exercisability of stock
options upon a change of control (as defined in the Incentive Plan),
all or a portion of the accelerated benefits may constitute "excess
parachute payments" under Section 280G of the Code. The employee
receiving an excess parachute payment incurs an excise tax of 20% of
the amount of the payment in excess of the employee's average annual
compensation over the five calendar years preceding the year of the
change of control, and the Company is not entitled to a deduction for
such payment.
401(K) SAVINGS PLAN
The Company sponsors a retirement plan called the Wyndham Employee
Savings & Retirement Plan (the "401(k) Plan"). The total 401(k) Plan assets as
of December 31, 1996 were valued at $15,494,797. The trustee for the 401(k)
Plan is CG Trust Company. The 401(k) Plan permits employees to direct
investments of their accounts among a selection of 6 mutual funds. The Company
intends to amend the 401(k) Plan in the near future to also permit employees to
direct the investment of some or all of their accounts to purchase shares of
Common Stock, and to permit the Company to make any contributions to the 401(k)
Plan in the form of Common Stock. Employees (including members of management)
are eligible to make voluntary contributions of up to fifteen percent (15%) of
their compensation under the 401(k) Plan. The Company is permitted to make a
discretionary contribution to the 401(k) Plan each fiscal quarter which will be
allocated among participants as a matching contribution based on their
contributions under the 401(k) Plan. The 401(k) Plan is intended to qualify as
a profit sharing plan under Sections 401(a) and 401(k) of the Code.
DIRECTOR COMPENSATION
Each member of the Company's Board of Directors who is not an employee
of the Company (a "Non-Employee Director") is paid an annual retainer of
$25,000, plus $1,000 for each committee meeting attended ($1,200 for each
committee meeting attended as a committee chairman). As described below, a
Non-Employee Director may elect to receive the annual retainer fee in cash or
in the form of shares of Common Stock, or to defer receipt of all or a portion
of such fee and have the deferred amount treated as if it were invested in
shares of Common Stock.
The Board of Directors and stockholders of the Company have adopted
the Wyndham Hotel Corporation Non-Employee Directors' Retainer Stock Plan (the
"Retainer Plan") for its Non-Employee Directors, and 50,000 shares of Common
Stock have been reserved for use under the Retainer Plan. The purpose of the
Retainer Plan is to provide to Non-Employee Directors of the Company the
opportunity to elect to receive all or a portion of their annual retainer fees
in the form of shares of Common Stock, or to defer receipt of all or a portion
of such fees and have the deferred amounts treated as if invested in shares of
Common Stock. Only a Non-Employee Director who on January 1 of any calendar
year or such later date as such director is first elected or appointed to the
Board of Directors is eligible to participate in the Retainer Plan.
Participation in the Retainer Plan is voluntary. To participate in the Retainer
Plan, a Non-Employee Director must file an irrevocable election with the
Company no later than the later of (i) six months prior to the date the annual
retainer or, if applicable, the first portion thereof, is to be paid to the
Non-Employee Director or (ii) the last day of the calendar year. Each election
or change of election will be effective as of the later of (i) six months
following the election, or (ii) January 1 following the election. The
Non-Employee Director may elect to either receive shares of Common Stock in
lieu of cash for part or all of such Non-Employee Director's annual retainer or
to defer receipt of all or a portion of such retainer. A Non-Employee Director
also may file an election within 30 days after the date that such director is
elected or appointed to the Board of Directors, to be effective six months
following the election.
The Board of Directors will from time to time appoint two or more
persons who are members of the Board of Directors to administer the Retainer
Plan (the "Retainer Plan Committee") who are not eligible to participate in the
Retainer Plan. The Retainer Plan Committee will administer the Retainer Plan in
accordance with its terms.
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Each Non-Employee Director who elects to participate in the Retainer
Plan for any year must irrevocably elect, until such time as a subsequent
election is made, (i) whether to receive payment of 0, 50% or 100% of his or
her annual retainer in the form of shares of Common Stock under the Retainer
Plan, (ii) whether to defer payment of any whole percentage up to 100% of his
or her annual retainer, to be credited to the participant's account, to be
deemed to be invested in shares of Common Stock and paid in accordance with the
Retainer Plan, and (iii) whether dividend equivalents, if any, on any amounts
credited to such account will be paid directly to the participant or credited
to the participant's account to be reinvested in shares of Common Stock. The
combined percentage of the annual retainer to be paid in shares of Common Stock
and deferred under the Retainer Plan must not exceed 100% of the annual
retainer for any Retainer Plan year. In the event the annual retainer is
increased during any year, a participant's elections in effect for such year
will apply to the amount of such increase. The annual retainer consists of
amounts paid to Non-Employee Directors as a retainer for services as a
director, but does not include meeting fees, discretionary bonuses or
reimbursement for expenses.
In compliance with the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), neither the Retainer Plan Committee nor any other person
(other than a participant acting in conformity with the terms of the Retainer
Plan) has any discretionary authority to make determinations regarding (i)
eligibility to become a participant, (ii) the times when elections can be made,
when shares of Common Stock will be issued or its equivalents credited to the
participants' accounts, or when distributions will be made, (iii) the portion
of a participant's annual retainer that may be allocated to the acquisition of
shares of Common Stock or its equivalents by participants under the Retainer
Plan, the calculation of the number of shares of Common Stock or its
equivalents by participants under the Retainer Plan, the calculation of the
number of shares of Common Stock or its equivalents to be acquired thereby, and
the payment or deemed reinvestment of dividend equivalents, or (iv) any other
decisions under the Retainer Plan required by Rule 16b-3(b) under the Exchange
Act to be afforded exclusively to "disinterested persons" as defined
thereunder.
The Company will transfer to a participant who elects to receive all
or a portion of the annual retainer in the form of shares of Common Stock a
number of shares of Common Stock having a fair market value equal to such
portion of the annual retainer on the last trading day prior to the date or
dates on which the cash portion of the participant's annual retainer is due. No
fractional shares will be issued; however, in lieu thereof, the cash fair
market value of any fractional share will be paid to participants.
Non-Employee Directors will receive payment in shares of Common Stock
in an amount equal to the number of Common Stock equivalents credited to their
accounts under the Retainer Plan upon the date that is three years following
the date that the annual retainer would have been paid to such Directors in
cash absent their election. Such payment will be made in a lump sum. Upon a
change of control of the Company, the Company will pay to the participating
Non-Employee Directors in cash a lump sum equal to the fair market value of the
Common Stock equivalents credited to all accounts under the Retainer Plan.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
GENERAL
On May 24, 1996, immediately prior to the consummation of the
Company's initial public offering, the Company succeeded to the hotel
management and related business of Old Wyndham, ownership of 6 Wyndham brand
hotels and leasehold interests relating to 12 additional Wyndham brand hotels.
The following discussion of certain relationships and transactions assumes that
the formation of the Company occurred on January 1, 1994 and includes (i) hotel
management and related fees paid to the Company by certain affiliates, (ii)
capital contributions, loans and other payments made by the Company to certain
affiliates in connection with the Company's entry into hotel management
contracts with related parties, (iii) transactions between the Company (which
includes its predecessors and combined subsidiaries) on the one hand, and Crow
Family Members, the "Senior Executive Officers" (James D. Carreker, Leslie V.
Bentley, Anne L. Raymond and Stanley M. Koonce, Jr.) or Bedrock, on the other
hand, relating to the transactions
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comprising the formation of the Company and (iv) loans made to the Senior
Executive Officers of the Company that the Company purchased in connection with
its formation.
RELATED PARTY TRANSACTIONS
During 1994, 1995 and 1996, the Company received hotel management fees
in the aggregate amounts of $4,972,921, $6,797,761 and $11,413,315,
respectively, from the partnerships owning Wyndham hotels ("Hotel
Partnerships") listed below, in which Crow Family Members (which includes
Harlan R. Crow, a director of the Company) have an interest. Some or all of the
Senior Executive Officers of the Company have an ownership interest in six of
such Hotel Partnerships. The terms of the agreements pursuant to which the
Company provides hotel management services to Wyndham hotels are described
generally under "Business -- Management Contracts."
During 1994, 1995 and 1996, the Company received payments in the
aggregate amounts of $2,926,786, $3,803,162 and $6,741,861, respectively, from
the Hotel Partnerships listed below, in which Crow Family Members have an
interest. Some or all of the Senior Executive Officers have an ownership
interest in seven of such Hotel Partnerships. The payments were received as
reimbursements for certain administrative, tax, legal, accounting, finance,
risk management, sales and marketing services provided by the Company to such
entities.
HOTEL PARTNERSHIP(1) HOTEL
-------------------- -----
Anatole Hotel Investors, L.P. Wyndham Anatole
Hotel Bel Age Associates, L.P. Wyndham Bel Age
Bristol Hotel Associates, Ltd. Wyndham Bristol
Playhouse Square Hotel Limited Partnership Wyndham Playhouse Square
Franklin Plaza Associates Wyndham Franklin Plaza
Houston Greenspoint Hotel Associates Wyndham Greenspoint
MTD Associates Wyndham Milwaukee Center
Itasca Hotel Company Wyndham Northwest Chicago
Hotel and Convention Center Partners I-XI, Ltd. Wyndham Palm Springs
CLC Limited Partnership Wyndham Las Colinas
Atlanta Midtown Associates Wyndham Garden Hotel-Midtown Atlanta
Novi Garden Hotel Associates Wyndham Garden Hotel-Novi
Amgreen-Heritage Hotel Partnership, Ltd. Wyndham Garden Hotel-Orange County Airport
Pleasanton Hotel Associates, Ltd. Wyndham Garden Hotel-Pleasanton
Wood Dale Garden Hotel Partnership Wyndham Garden Hotel-Wood Dale
Convention Center Boulevard Hotel, Limited Wyndham Riverfront
- -------------------
(1) Management fees, reimbursements and design and construction fees were
not received from all of the Hotel Partnerships in all three years.
During 1994, 1995 and 1996, the Company received payments in the
aggregate amounts of $211,321, $759,895 and $429,978 respectively, from the
Hotel Partnerships listed above, in which Crow Family Members have an interest.
Some or all of the Senior Executive Officers have an ownership interest in
seven of such Hotel Partnerships. The payments were received as fees for
certain design and construction services provided by the Company to such
entities.
During 1994, 1995 and 1996, the Senior Executive Officers incurred
indebtedness to Wyndham Finance Limited Partnership ("WFLP"), a partnership
owned by Crow Family Members. In addition, WEL, in which certain executive
officers of the Company have an interest, incurred indebtedness to WFLP. The
purpose of the loans was to
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finance such officers' and WEL's capital contributions to Old Wyndham and
various Hotel Partnerships in which the officers and WEL acquired ownership
interests. In addition, one Senior Executive Officer used a portion of the
indebtedness to finance housing and education expenses. Notes representing such
loans were purchased by the Company in May of 1996 in connection with its
Formation for a cash payment to WFLP in the amount of $15,873,461, which is
equivalent to the aggregate outstanding principal and accrued interest
severally owing by the Senior Executive Officers and WEL to WFLP. Such
promissory notes, which are made payable to the Company, accrue interest at 6%
per annum and are fully secured by the pledge of shares of Common Stock held by
the note obligors. The outstanding principal and accrued interest (compounded
quarterly) is payable in a single lump sum in May 2001. The aggregate principal
amounts of such loans made to each Senior Executive Officer and WEL in 1993,
1994 and 1995, and the aggregate balance of the notes representing such loans
that were purchased by the Company in connection with its formation, are as
follows:
AGGREGATE
1994 1995 BALANCE(1)
---- ---- ----------
James D. Carreker $ 669,634 $ 1,867,627 $ 5,135,155
Leslie V. Bentley $ 218,594 $ 767,104 $ 1,890,000
Anne L. Raymond $ 0 $ 4,417,588 $ 4,625,275
Stanley M. Koonce, Jr. $ 207,995 $ 547,207 $ 1,925,465
WEL $ 323,405 $ 881,488 $ 3,043,838
(1) The aggregate balances are as of December 31, 1996, include principal
and accrued interest and reflect indebtedness incurred prior to
January 1, 1994.
In 1995, the Company made loans to WHC-LG Hotel Partners L.P.,
Pleasanton Hotel Partners, L.P. and New Orleans Hotel I, L.P., each of which is
owned directly or indirectly by Crow Family Members and the Senior Executive
Officers (the "Investing Partnerships"). The purpose of the loans was to
finance such Investing Partnerships' acquisition, construction and renovation
of hotels owned by the following three Hotel Partnerships: WHC-LG Hotel
Associates, L.P. (La Guardia Airport), Pleasanton Hotel Associates, Ltd.
(Pleasanton Garden) and Convention Center Boulevard Hotel Limited (Wyndham
Riverfront). The aggregate amount of such loans was $6,431,263, all of which
was outstanding as of December 31, 1996. The loans are secured by the Investing
Partnerships' partnership interests in the Hotel Partnerships. The loans accrue
interest at 9%, are payable in May, October and December of 2005 and are
reduced by any cash distributions by such Hotel Partnerships to the Investing
Partnerships.
During 1995, WFLP incurred indebtedness to the Company in the amount
of $1,253,754 for the purpose of acquiring or developing hotel properties, to
be managed by the Company, in which the Senior Executive Officers have
ownership interests. The loan is evidenced by a promissory note, bears an
adjustable rate of interest based on the prime rate and is due and payable on
April 15, 2000.
During 1994, 1995 and 1996, the Company received hotel management fees
in the aggregate amounts of $514,472, $2,043,087 and $4,165,217, respectively,
from the Hotel Partnerships listed below (other than Bedrock Kingsway
Investment Partners Level I, L.P.), in which Bedrock has an ownership interest
(Messrs. Whitman and Decker, directors of the Company, have ownership interests
in Bedrock).
During 1994, 1995 and 1996, the Company made cash advances in the
aggregate amounts of $1,092,537, $1,380,702 and $328,650, respectively, to the
Hotel Partnerships listed below, in which Bedrock has an ownership interest.
The advances were used to pay certain renovations costs for Wyndham Garden
Hotels that were redeveloped by Bedrock. The advances are repaid through
Bedrock's redevelopment fund. At December 31, 1996, no amounts were
outstanding.
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During 1994, 1995 and 1996, the Company received payments in the
aggregate amounts of $798,503, $976,980 and $139,318, respectively, from the
Hotel Partnerships listed below, in which Bedrock has an ownership interest.
The payments were received as fees for certain design and construction services
provided by the Company to such entities.
During 1994, 1995 and 1996, the Company received payments in the
aggregate amounts of $170,669, $831,553 and $1,584,726, respectively, from the
Hotel Partnerships listed below, in which Bedrock has an ownership interest.
The payments were received as reimbursements for certain administrative, tax,
legal, accounting, finance, risk management, sales and marketing services
provided by the Company to such entities.
HOTEL PARTNERSHIP(1) HOTEL
-------------------- -----
Grand Avenue Partners L.P. Wyndham Checkers Hotel
Bedrock Metrolux Investment Partners Wyndham Hotel at Metrocenter
Level I, L.P.
Bedrock Annapolis Investment Partners Wyndham Garden Hotel-Annapolis
Level I, L.P.
Burlington Garden Partners Level I, L.P. Wyndham Garden Hotel-Burlington
CC Bedrock Investment Partners Level I, L.P. Wyndham Garden Hotel-Culver City
BRP Denver Garden Partners Level I, L.P. Wyndham Garden Hotel-Denver
Detroit Metro Partners Level I, L.P. Wyndham Garden Hotel-Detroit
Airport
Bedrock Marin Investment Partners Wyndham Garden Hotel-Marin/San
Level I, L.P. Rafael
BR Partners--Monrovia Level I, L.P. Wyndham Garden Hotel-Monrovia
Bedrock Oakbrook Investment Partners Wyndham Garden Hotel-Oakbrook
Level I, L.P.
O'Hare Garden Partners Level I, L.P. Wyndham Garden Hotel-O'Hare
Garden LBV Investment Partners I, L.P. Wyndham Garden Hotel-Lake Buena
Vista
Bedrock Kingsway Investment Partners Wyndham Garden Hotel-Piscataway
Level I, L.P.
BR Pittsburgh Airport Level I, L.P. Wyndham Garden Hotel-Pittsburgh
BRP Waltham Investment Partners Wyndham Garden Hotel-Waltham
Level I, L.P.
KC Plaza Investment Partners, Level I L.P. Wyndham Garden-Kansas City
Bed Lex Investment Partners, Level I L.P. Wyndham Garden-Lexington
- ---------------------
(1) Management fees, reimbursements and design and construction fees were
not received from all of the Hotel Partnerships in both years. In
addition, cash advances were not made by the Company to all of the
Hotel Partnerships in both years.
During 1994, 1995 and 1996, the Company made payments in the aggregate
amounts of $1,352,468, $1,739,804 and $1,742,369, respectively, to Wyndham
Travel Management Ltd., an entity owned by Lucy Billingsley (the daughter of
Trammell Crow), for travel services provided to the Company.
During 1994 and 1995, the Company made payments in the aggregate
amounts of $701,203 and $830,164, respectively, to CHMC, which is owned by Crow
Family Members, pursuant to the an agreement pursuant to which the Company
acquired in 1988 a number of management agreements relating to Wyndham brand
hotels then in operation.
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The Company's payment obligations under the agreement were released and
discharged in connection with the formation of the Company in exchange for a
cash payment paid by the Company to CHMC.
During 1994, 1995 and 1996, the Company made payments in the aggregate
amounts of $743,922, $875,122 and $850,330, respectively, as lease payments for
its corporate office space to Tower 2001 Limited Partnership, a partnership in
which Crow Family Members have an ownership interest. The Company's current
lease on its corporate office space expires in April 1997. Following this
period, the lease reverts to a month-to-month term.
During 1994 and 1995, the owners of hotels owned or leased by the
Company made contributions to a loss prevention fund in the amounts of $620,006
and $624,422, which funds were deposited to WFLP pending the use of such
contributions by the loss prevention fund. The contributions were used to cover
a portion of the deductible on insurance policies for such hotels in connection
with insured claims made against the hotels.
In 1995, the Company made payments in connection with entering into a
management contract for the Wyndham Anatole Hotel, in which Crow Family Members
have an ownership interest. The amount of such payment was $523,360 and the
purpose was to pay costs associated with converting the property to the Wyndham
brand.
During 1994, 1995 and 1996, the Company received payments in the
aggregate amounts of $175,366, $176,210 and $182,720, respectively, from
Crow-Los Patios Limited, a senior assisted living facility in which certain
Crow Family Members have an ownership interest. The payments were received as
management fees.
During 1994, 1995 and 1996, the Company made payments in the aggregate
amounts of $321,333, $332,113 and $288,577, respectively, to GHMB, Inc., an
entity owned by Mr. Bentley for the operation of liquor concessions at the
Wyndham Garden Commerce.
In 1994, the Company paid $155,000 to Rochelle Charter, Inc.
("Rochelle"), an entity in which Trammell Crow, his spouse and Harlan R. Crow
have an interest. The payment was made to charter a boat that was operated by
Rochelle and used by the Company to entertain business associates.
During 1995 and 1996, the Company received payments in the aggregate
amount of $72,593 and $514,232 from Convention Center Boulevard Hotel Limited,
Waterfront Hotel Associates, S.E. and WHC-LG Hotel Associates, L.P., Hotel
Partnerships in which Crow Family Members and some or all of the Senior
Executive Officers have an interest. The payments were received as construction
and renovation fees for the Wyndham Riverfront and Wyndham San Juan Hotels and
for the Company's La Guardia Airport hotel.
The Company is a guarantor of the obligations of Playhouse Square
Hotel Limited Partnership (the owners of which include Crow Family Members and
the Senior Executive Officers, except for Ms. Raymond) to fund operating
deficits relating to such Hotel Partnership. The guarantee requires the
guarantors (including the Company) to advance up to $600,000 per year to the
extent the Hotel Partnership experiences operating deficits, with maximum
required advances of $2.3 million over the term of the guarantee extending from
1995 to 2000. Playhouse Square Hotel Limited Partnership has caused to be
deposited the sum of $1,000,000 as a reserve to secure the payment of the
guaranteed obligations and to fund operating deficits. The Company has not to
date been required to make any advance under the guarantee.
Pursuant to the terms of the management contract for the San Juan
hotel, the Company has made a commitment to provide furniture, fixtures and
equipment at a fixed price of $6.0 million. In addition, with respect to the
Riverfront hotel, the Company has entered into an operating deficit guaranty,
which requires the Company to fund up to $230,000 in working capital per year
for three years after the hotel is opened in the event that the hotel generates
inadequate cash flow. In addition, the Company has guaranteed $875,000 in
indebtedness relating to the Riverfront hotel. The Company also made a
commitment to provide furniture, fixtures and equipment for the Riverfront
hotel at a fixed price of $2.1 million. The actual cost of such furniture,
fixtures and equipment (including certain other expenses) was approximately
$2.4 million. The Company has indirectly paid the excess amount of
approximately $300,000 hotel by contributing
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such amount to Convention Center Boulevard Hotel Limited, the partnership that
owns the Riverfront hotel (the "Riverfront Partnership"). The contribution is
treated as having been made on behalf of Crow Family Members and the Senior
Executive Officers, who have an indirect ownership interest in the Riverfront
Partnership. The Company is entitled to repayment of the contributed amount
out of distributions made by the Riverfront Partnership in respect of the
contributed amount. The Company also paid certain pre-opening expenses for the
Riverfront hotel in the amount of $495,000.
Pursuant to the terms of its management agreement relating to the
Wyndham Hotel at Los Angeles Airport (the "LAX"), Wyndham agreed to loan
$4,560,000 to be applied to costs of refurbishment of the LAX. The
refurbishment loan is evidenced by a promissory note (the "Note Receivable"),
which has been partially funded in the amount of $3,973,736 as of December 31,
1996. The Company's obligation to make the remaining advances under the
refurbishment loan is secured by a letter of credit, which, in turn, is
collateralized by $865,439 as of December 31, 1996 in cash. Prior to the
formation of the Company, WHC LAX Associates, L.P. ("WHC LAX"), a limited
partnership owned by Crow Family Members and the Senior Executive Officers,
paid to Wyndham $4,560,000 in return for Wyndham's agreement to pay to WHC LAX
all payments that Wyndham receives under the Note Receivable. Wyndham also
agreed that, insofar as the WHC LAX's $4,560,000 payment to the Company exceeds
advances that Wyndham is obligated to make, but has not yet made, under the
Note Receivable, it would pay to WHC LAX interest at a variable rate that has
ranged from 5.25% to 5.81% per annum on the unfunded amounts. As of December
31, 1996, the Company has accrued such interest in the amount of $31,779.
In 1996, James D. Carreker received a $100,000 consulting fee for
services provided as a consultant to Trammell Crow Company, an entity in which
Crow Family Members have an interest.
The Company has entered into a five year service agreement with ISIS
2000, an entity owned by Crow Family Members and the Senior Executive Officers,
whereby ISIS 2000 will provide centralized reservations and property management
services to all Wyndham brand hotels. The services will be provided for a fee
comprised of an initial link-up charge plus a per reservation fee and a per
hotel charge for the property management system. The service fee payable by the
Company totaled $772,372 in 1996. The Company has entered into an asset
management agreement with ISIS 2000 providing for human resource, finance,
accounting, payroll, legal and tax services. In addition, the Company has
guaranteed operating leases on behalf of ISIS 2000 in the approximate amount of
$2.0 million as of December 31, 1996.
In 1995 and 1996, the Company made payments to Trammell Crow Company
in the amounts of $386,759 and $937,051, respectively, for contract labor
(including related costs) provided to the Company for management information
services.
The Company has made insurance premium payments to Wynright Insurance
("Wynright"), an entity owned by Crow Family Members and the Senior Executive
Officers, with respect to certain insurance policies maintained for the benefit
of the Company and hotels owned or leased by the Company. Such payments totaled
$592,774 in 1996. The Company also will enter into an asset management
agreement with Wynright providing for human resource, finance, accounting,
payroll, legal and tax services.
In 1996, a subsidiary of the Company entered into a master management
agreement (the "Agreement") with Homegate, an entity in which Crow Family
Members have an interest, which provides for the Company to manage up to 60
extended-stay hotel properties and to provide Homegate with market research, a
preferred vendor program, a proprietary property management software package,
and national and local marketing efforts. In addition, Messrs. Carreker and
Harlan R. Crow serve on the board of Homegate. The Company and Homegate have
agreed that Homegate will pay Wyndham or an affiliate a one-time fee of $25,000
for Wyndham's provision of design services in developing the initial prototype,
certain other fees for the provision of software and other services, and a
commission of 5% of the aggregate purchase price of all items that Homegate
purchases through Wyndham's purchasing department. Homegate also must reimburse
Wyndham for up to $100,000 for the costs incurred in developing Homegate's
payroll and accounts payable software and for developing a marketing database,
which costs will be reimbursed ratably upon
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the signing of the first 10 management contracts. Wyndham and Homegate will
agree upon any fees to be paid with respect to ongoing systems support and
maintenance services.
The Company currently manages six extended-stay hotel properties for
Homegate pursuant to separate management agreements, as provided for by the
Agreement. The aggregate amount of management, technical service, purchasing
and other fees paid to Wyndham totaled $206,849 in 1996.
In connection with the execution of the Agreement, certain Crow Family
Members have agreed to grant Wyndham a right of first refusal affording Wyndham
a preferential right to purchase their shares in connection with any proposed
sale by any of such parties or their affiliates of shares of Homegate Common
Stock into the public market pursuant to Rule 144 under the Securities Act or
pursuant to a shelf registration statement filed pursuant to such Act.
BEDROCK INVESTMENT PROGRAM
In May 1994, the Company entered into an Investment Agreement and an
Option Agreement (collectively, the "Bedrock Agreements") with Bedrock pursuant
to which, as amended, Bedrock agreed to provide up to $335 million in equity
and debt capital (the "Investment Program") to acquire hotels or hotel
management companies and to make hotel related investments that are approved by
both the Company and Bedrock. Approximately $196 million of debt and equity
capital had been invested pursuant to the Investment Program as of December 31,
1996. Although the commitments of certain of the participants in the Investment
Program expire in mid-1997, the Company will be entitled to manage any
Investment Program hotel for a term of 15 years. Pursuant to the terms of the
Investment Agreement, Bedrock is not required to invest a minimum amount of
capital through the Investment Program, and Wyndham had not invested in any of
the 17 hotels acquired pursuant to the Investment Program. Pursuant to the
Investment Agreement, as amended, the Company and Bedrock have agreed that the
Company will be permitted to manage any hotel with 250 or fewer rooms that is
sourced by Bedrock. Subject to certain limitations, certain Crow Family Members
have the right to co-invest with Bedrock in the Investment Program. The Company
also has certain limited rights to co-invest with Bedrock in the Investment
Program; provided, however, that once the Company elects to co-invest in
Investment Program projects, it must co-invest in each subsequent project or it
would forfeit additional rights to co-invest. At December 31, 1994, 1995 and
1996, the Company had executed management contracts with Bedrock for 11, 15 and
17 Wyndham brand hotels, respectively, through the Investment Program.
Bedrock has certain registration rights with respect to 2,276,055
shares of Common Stock. See "Description of Capital Stock -- Registration
Rights." Bedrock also entered into the Stockholders' Agreement with the
Company, Crow Family Members, the Senior Executive Officers and WEL, which
provides for, among other things, representation on the Company's Board of
Directors. See "Management -- Directors and Executive Officers" and
"Description of Capital Stock -- Stockholders' Agreement."
The Bedrock Agreement provides for a contingent payment (the
"Contingent Option Payment") to Old Wyndham, for distribution to the
non-Bedrock owners of Old Wyndham, at such time as all hotels financed by the
Investment Program achieve an investment return target of 15% on all equity
capital invested through such program plus certain overhead costs. The amount
of the Contingent Option Payment is 10% of all cash proceeds realized in excess
of the investment return target. The Contingent Option Payment is due 70% upon
the achievement of the investment target return and 30% upon Bedrock's
disposition of its entire interest in Wyndham. A separate entity owned by Crow
Family Members, the Senior Executive Officers and WEL has purchased the right
to the Contingent Option Payment for $10,000 from the owners of Old Wyndham in
connection with the Company's initial public offering (WEL's interest in the
Contingent Option Payment was subsequently transferred to certain Crow Family
Members and the Senior Executive Officers).
POLICY WITH RESPECT TO RELATED PARTY TRANSACTIONS
With respect to future material transactions (or series of related
transactions) between the Company and related parties, the Company has
implemented a policy requiring any such transaction to be approved by a
majority of the
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Independent Directors, if any, upon such directors' determination that the
terms of the transaction are no less favorable to the Company than those that
could be obtained from unrelated third parties. The policy defines a material
related party transaction (or series of related transactions) as one involving
a purchase, sale, lease or exchange of property or assets or the making of any
investment with a value to the Company in excess of $1.0 million or a service
agreement (or series of related agreements) with a value in excess of $1.0
million in any fiscal year. There can be no assurance that this policy always
will be successful in eliminating the influence of conflicts of interest.
BENEFITS OF THE FORMATION OF THE COMPANY TO RELATED PARTIES
In connection with their participation in the transactions related to
the formation of the Company, certain major stockholders, directors and
executive officers of the Company received the following benefits.
At the closing of the initial public offering of the Company, Crow
Family Members received, collectively, 9,487,391 shares of Common Stock and
$19.6 million in cash in exchange for their interests in the businesses
acquired by the Company in connection with its formation (of which 31,250
shares were transferred indirectly to Ms. Groenteman shortly following the
initial public offering). See "Principal Stockholders." In addition, Crow
Family Members received $3.8 million in cash as a result of the repayment of
certain loans that they made to certain of the businesses acquired by the
Company in connection with its formation. WFLP, a partnership owned by Crow
Family Members, received $18.6 million in cash for the sale of promissory notes
that represented obligations of the Senior Executive Officers and WEL. CHMC,
which is owned by certain Crow Family Members, received $6.0 million, in cash,
as consideration for the release and discharge of the Company's payment
obligations under the CHMC Agreement.
The Senior Executive Officers of the Company received the following
number of shares of Common Stock in exchange for their respective interests in
the businesses acquired by the Company in connection with its formation:
- James D. Carreker: 1,173,416 shares;
- Leslie V. Bentley: 330,377 shares
- Anne L. Raymond: 380,151 shares; and
- Stanley M. Koonce, Jr.: 388,001 shares.
Bedrock (in which Messrs. Whitman and Decker have ownership interests)
received 2,276,055 shares of Common Stock in consideration of Bedrock's
transfer to the Company of the certain options owned by Bedrock and to purchase
Wyndham Common Stock and contribution by Bedrock in the amount of $10.0
million.
WEL (in which certain executive officers and employees of the Company
participate) received 646,669 shares of Common Stock in exchange for its
interests in the businesses acquired by the Company in connection with its
formation.
TCI, which is owned by certain Crow Family Members and the Senior
Executive Officers, received a payment of approximately $250,000 from the
Company as a commission that was paid to an employee of TCI for his efforts in
facilitating the sale of the 11 Wyndham Garden Hotels to Hospitality Properties
Trust.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock for (i) each director of the Company, (ii)
each of the Named Executive Officers, (iii) all directors and executive
officers of the Company as a group and (iv) each person or group who was on
such date the beneficial owner of more than five percent of the outstanding
Common Stock.
SHARES OWNED SHARES OWNED AFTER
BEFORE PLAN OF DISTRIBUTION PLAN OF DISTRIBUTION
--------------------------- --------------------
NAME(1) NUMBER PERCENT NUMBER PERCENT
------- ------ ------- ------ -------
CF Securities, L.P.(2)(3).................. 9,447,745 47.20% 9,447,745 47.20%
Harlan R. Crow(3)(4) 100 * 100 *
James D. Carreker(5)....................... 1,365,309 6.82% 1,371,775 (6) 6.85%
Wyndham Employees, Ltd.(7)............... 646,669 3.31% -- --
Leslie V. Bentley(8)....................... 392,057 1.96% 392,057 1.96%
Anne L. Raymond ........................... 380,151 1.90% 380,151 1.90%
Stanley M. Koonce, Jr...................... 388,001 1.92% 388,001 1.92%
Carla S. Moreland.......................... 600 * 9,887 *
Eric A. Danziger(9)........................ 381,234 1.90% 381,234 1.90%
Bedrock(10)................................ 2,276,055 11.37% 2,276,055 11.37%
Daniel A. Decker(11)
Robert A. Whitman(11)
Susan T. Groenteman(12).................... 31,250 * 31,250 *
James C. Leslie............................ 3,000 * 3,000 *
Philip J. Ward............................. -- -- -- --
Directors and executive officers
as a group (16 persons).................. 14,937,637(13) 74.62% 14,347,549 (14) 71.67%
* Less than 1%.
(1) The address of each beneficial owner, with the exception of CF
Securities, L.P., Bedrock and Susan T. Groenteman, is 2001 Bryan
Street, Suite 2300, Dallas, TX 75201.
(2) When the shares held by CF Securities, L.P. are aggregated with the
shares held separately by Harlan R. Crow and a single Crow Family
Member, the total number of shares held by Crow Family Members would
be 9,456,241 shares (47.3% of the outstanding Common Stock). The
address of CF Securities, L.P. is 2001 Ross Avenue, Dallas, TX 75201.
(3) Harlan R. Crow directly holds 100 shares of Common Stock. Mill Springs
Holdings, Inc. ("Mill Springs") is the general partner of CF
Securities, L.P. Mr. Crow is a principal stockholder of Mill Springs
and its sole director. Mr. Crow disclaims beneficial ownership of all
Common Stock held by CF Securities, L.P.
(4) Mr. Crow is a director of Wyndham Hotel Management Corporation
("WHMC"), which holds 114,222 shares of Common Stock. WHMC is the
General Partner of WEL, which, prior to the Plan of Distribution, held
646,669 shares of Common Stock. Mr. Crow disclaims beneficial
ownership of all shares of Common Stock held by WHMC or WEL.
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(5) James D. Carreker directly holds 1,173,416 shares of Common Stock,
including 100 shares issued to Mr. Carreker in the initial formation
of the Company. Shares listed in the table include 77,671 shares held
in a trust for which Mr. Carreker is the special trustee and has full
voting rights. Mr. Carreker disclaims beneficial ownership of all
Common Stock held in the trust. Shares listed also include 114,222
shares held by WHMC, but exclude the 646,669 shares held by WEL prior
to the Plan of Distribution. Mr. Carreker is a director and principal
stockholder of WHMC, which is the General Partner of WEL. Mr. Carreker
disclaims beneficial ownership of all Common Stock held by WHMC beyond
his percentage ownership therein and disclaims beneficial ownership of
all Common Stock held by WEL beyond the percentage ownership held
therein by WHMC.
(6) Includes 6,466 shares to be distributed to WHMC in th Plan of
Distribution. Mr. Carreker is a director and principal stockholder of
WHMC, which is the General Partner of WEL. Mr. Carreker disclaims
beneficial ownership of all Common Stock held by WHMC beyond his
percentage ownership therein.
(7) Mr. Carreker is a director and principal stockholder of WHMC, which is
the General Partner of WEL. Mr. Crow is a director of WHMC. Both
Messrs. Carreker and Crow disclaim beneficial ownership of all Common
Stock held by WEL.
(8) Includes 61,680 shares held in trusts for which Mr. Bentley is the
special trustee and has full voting rights. Mr. Bentley disclaims
beneficial ownership of all Common Stock held in the trusts.
(9) Mr. Danziger resigned from the Company in July 1996.
(10) The address of Bedrock is 2200 Ross Avenue, Suite 4200 West, Dallas,
Texas 75201.
(11) Robert A. Whitman and Daniel A. Decker directly hold no shares of
Common Stock. Messrs. Whitman and Decker are principals of Hampstead,
an affiliate of Bedrock. Messrs. Whitman and Decker disclaim
beneficial ownership of all Common Stock held by Bedrock.
(12) Ms. Groenteman's address is 2001 Ross Avenue, Dallas, TX 75201.
(13) Includes shares held by WEL. WHMC is the corporate general partner of
WEL. Mr. Carreker is a director and a principal stockholder of WHMC,
and Mr. Crow is a director of WHMC, but each disclaims beneficial
ownership of all Common Stock held by WEL. Excludes shares held by
Eric A. Danziger, who resigned from the Company in July 1996.
(14) Reflects shares distributed by WEL in Plan of Distribution to
executive officers and entities owned by directors and executive
officers, assuming no executive officer sells shares immediately
following the Plan of Distribution, based on the number of shares
allocable as of June 30, 1996. Excludes shares held by Eric A.
Danziger, who resigned from the Company in July 1996.
SHARES ELIGIBLE FOR FUTURE SALE
The Company has outstanding 20,018,299 shares of Common Stock, of
which 4,197,500 shares are freely tradeable without restriction under the
Securities Act unless purchased by "affiliates" of the Company. Following the
Plan of Distribution and the Lock-Up Period, the 646,669 shares of Common Stock
distributed to WEL Participants also will be freely tradeable without
restriction under the Securities Act by persons other than "affiliates" of the
Company.
The remaining 15,174,130 shares of Common Stock are "restricted
securities" under the Securities Act. These shares may not be sold unless they
are registered under the Securities Act or unless an exemption from
registration, such as the exemption provided by Rule 144 under the Securities
Act, is available. The Company has granted certain registration rights to Crow
Family Members, the Senior Executive Officers, Bedrock, Ms. Groenteman and Mr.
Danziger covering the 15,316,667 restricted shares of Common Stock issued in
the formation of the Company. In addition, the Company has granted certain
registration rights to General Electric with respect to 504,032 restricted
shares issued to General Electric in connection with the formation of the
Company. See "Description of Capital Stock -- Registration Rights."
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In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated), including an affiliate of the Company,
who has beneficially owned restricted shares for at least two years, will be
entitled to sell in any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of the Common Stock
(approximately 200,000 shares) or (ii) the average weekly trading volume of the
Common Stock on the New York Stock Exchange during the four calendar weeks
immediately preceding the date on which notice of the sale is filed with the
Commission. Sales pursuant to Rule 144 are also subject to certain other
requirements relating to manner of sale, notice and availability of current
public information about the Company. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the three months immediately preceding the sale is entitled to sell
restricted shares pursuant to Rule 144(k) without regard to the limitations
described above, provided that three years have expired since the later of the
date on which such restricted shares were acquired from the Company or the date
they were acquired from an affiliate of the Company.
The Company has adopted the Incentive Plan and the Retainer Plan for
the purpose of attracting, retaining and motivating executive officers of the
Company, other key employees and directors. The Company has reserved 2,133,811
shares of Common Stock for future issuance under the Incentive Plan and 50,000
shares of Common Stock for future interest under the Retainer Plan. The
Company's Board of Directors granted options to purchase an aggregate of
797,700 shares of Common Stock under the Incentive Plan to certain key
personnel in connection with the formation of the Company at the initial public
offering price. The Company has filed a registration statement under the
Securities Act to register shares of Common Stock issuable upon the exercise of
stock options granted under the Incentive Plan or shares of Common Stock
issuable under the Retainer Plan. See "Management -- 1996 Long Term Incentive
Plan" and " -- Director Compensation." Shares issued upon the exercise of stock
options after the effective date of such registration statement generally will
be available for sale in the open market.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED SHARES
The authorized capital stock of the Company consists of 45,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock, $.01 par value
per share ("Preferred Stock"), issuable in series.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Accordingly, holders of a
majority of shares of Common Stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
Common Stock are entitled to receive dividends and other distributions when, as
and if declared from time to time by the Board of Directors out of funds
legally available therefor subject to any preferential rights of, and sinking
fund or redemption or purchase rights with respect to, any Preferred Stock that
may be issued. In the event of voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
subject to prior distribution rights of any Preferred Stock then outstanding.
Holders of the Common Stock have no preemptive or conversion rights and the
Common Stock is not subject to further calls or assessment by the Company.
There are no redemption or sinking fund provisions applicable to the Common
Stock.
PREFERRED STOCK
The Company's Certificate of Incorporation ("Certificate") authorizes
5,000,000 shares of Preferred Stock, none of which is outstanding. The Board of
Directors has the authority, without any further vote or action by the
stockholders, to issue Preferred Stock in one or more series and to fix the
number of shares, designations, relative rights (including voting rights),
preferences and limitations of such series to the full extent now or
hereinafter permitted by Delaware law. The Company has no present intention to
issue shares of Preferred Stock.
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DIRECTORS' LIABILITY
As authorized by the Delaware General Corporation Law ("DGCL"), the
Certificate limits the liability of Directors to the Company for monetary
damages. The effect of this provision in the Certificate is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a Director
for breach of fiduciary duty as a Director (including breaches resulting from
negligent behavior), except in certain limited situations. This provision does
not limit or eliminate the rights of the Company or any stockholder to seek
non-monetary relief such as an injunction or rescission in the event of a
breach of a Director's fiduciary duty. These provisions will not alter the
liability of Directors under federal securities law.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the DGCL.
That section provides, with certain exceptions, that a Delaware corporation may
not engage in any of a broad range of business combinations with a person or an
affiliate or associate of such person who is an "Interested Stockholder" (as
defined below) for a period of three years from the date that such person
became an Interested Stockholder unless: (i) the business combination or the
transaction resulting in a person's becoming an Interested Stockholder is
approved by the board of directors of the corporation before the person becomes
an Interested Stockholder, (ii) upon consummation of the transaction which
resulted in the person becoming an Interested Stockholder, the Interested
Stockholder owned 85% or more of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares owned by
persons who are both officers and directors of the corporation and shares held
by certain employee stock ownership plans) or (iii) on or after the date the
person became an Interested Stockholder, the business combination is approved
by the corporation's board of directors and by the holders of at least 66 2/3%
of the corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the Interested Stockholder. An "Interested
Stockholder" is defined as any person that is (i) the owner of 15% or more of
the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an Interested Stockholder. The Company believes that by
its terms, Section 203 does not restrict transactions with CF Securities, L.P.,
which became an Interested Stockholder in connection with the formation of the
Company, or any other party to the Stockholders' Agreement that becomes an
Interested Stockholder (for purposes of Section 203) as a result of the
exercise of the right of first offer described under " -- Stockholders'
Agreement." In such cases, the Company's Board of Directors has approved the
transactions pursuant to which such parties will or may become Interested
Stockholders.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Certificate could have an anti-takeover
effect. These provisions are intended to enhance the likelihood of continuity
and stability in the composition of the Board of Directors of the Company and
in the policies formulated by the Board of Directors and to discourage certain
types of transactions, described below, which may involve an actual or
threatened change in control of the Company. The provisions are designed to
reduce the vulnerability of the Company to an unsolicited proposal for a
takeover of the Company that does not contemplate the acquisition of all of its
outstanding shares, or an unsolicited proposal for the restructuring or sale of
all or part of the Company. The provisions are also intended to discourage
certain tactics that may be used in proxy fights. The Board of Directors
believes that, as a general rule, such takeover proposals would not be in the
best interests of the Company and its stockholders. See "Risk Factors --
Anti-Takeover Matters."
Classified Board of Directors. The Certificate provides for the Board
of Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of
Directors will be elected each year.
The Board of Directors believes that a classified Board of Directors
will help to assure the continuity and stability of the Board of Directors and
the business strategies and policies of the Company as determined by the Board
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of Directors, because the likelihood of continuity and stability in the
composition of the Company's Board of Directors and in the policies formulated
by the Board will be enhanced by staggered three-year terms.
The classified board provision could have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain
control of the Company, even through such an attempt might be beneficial to the
Company and its stockholders. In addition, the classified board provision could
delay stockholders who do not agree with the policies of the Board of Directors
from removing a majority of the Board for two years. See " -- Number of
Directors; Removal; Filling Vacancies."
Number of Directors; Removal; Filling Vacancies. The Certificate will
provide that the Board of Directors will consist of between 5 and 13 members,
the exact number to be fixed from time to time by resolution adopted by a
majority of the directors then in office. The Company's board currently
consists of eight directors. Further, subject to the Stockholders' Agreement
and the rights of the holders of any series of Preferred Stock then
outstanding, the Certificate authorizes only the Board of Directors to fill
vacancies, including newly created directorships. Accordingly, this provision
could prevent a stockholder from obtaining majority representation on the Board
of Directors by enlarging the Board of Directors and filling the new
directorships with its own nominees. Subject to the Stockholders' Agreement and
the rights of the holders of any series of Preferred Stock then outstanding,
the Certificate also provides that directors of the Company may be removed only
for cause and only by the affirmative vote of holders of a majority of the
outstanding shares of voting stock.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Certificate establishes an advance notice procedure for the
nomination, other than by or at the discretion of the Board of Directors or a
committee thereof, of candidates for election as director as well as for other
stockholder proposals to be considered at annual stockholders' meetings.
Notice of stockholder proposals and director nominations must be
timely given in writing to the Secretary of the Company prior to the meeting at
which the matters are to be acted upon or the directors are to be elected. To
be timely, notice must be received at the principal offices of the Company not
less than 60, nor more than 90, days prior to the meeting of stockholders;
provided, that in the event that less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the 10th day following the day on which notice of the date of
the meeting was mailed or the day on which public disclosure was made,
whichever first occurs.
The purpose of requiring advance notice is to afford the Board of
Directors an opportunity to consider the qualifications of the proposed
nominees or the merits of other stockholder proposals and, to the extent deemed
necessary or desirable by the Board of Directors, to inform stockholders about
those matters.
Written Consent; Special Meetings of Stockholders . The Certificate
prohibits the taking of stockholder action by written consent without a
meeting. The Certificate provides that special meetings of the stockholders of
the Company may be called only by the Chairman, or a majority of the members of
the Board of Directors. These provisions will make it more difficult for
stockholders to take action opposed by the Board of Directors.
Amendment of Certain Provisions of the Certificate. The Certificate
generally requires the affirmative vote of the holders of at least 662/3% of
the outstanding voting stock in order to amend any provisions of the
Certificate concerning (i) the classified board, (ii) the amendment of Bylaws,
(iii) any proposed compromise or arrangement between the Company and its
creditors, (iv) the authority of stockholders to act by written consent, (v)
the liability of directors, (vi) certain mergers, consolidations and sales,
leases and exchanges of all or substantially of the Company's property and
assets, (vii) the required vote to amend the Certificate, (viii) the call of a
special meeting of stockholders, (ix) stockholder proposals concerning business
to be conducted at an annual meeting of stockholders, (x) director nominations
by stockholders, (xi) what considerations the Board, a committee of the Board
and each director may take into account when discharging their respective
duties, (xii) indemnification of directors and (xiii) authorization of the
Board to pursue or take action with respect to transactions that would result
in a change of control of the Company.
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125
These voting requirements will make it more difficult for minority stockholders
to make changes in the Certificate which could be designed to facilitate the
exercise of control over the Company. In addition, the requirement for approval
by at least a 662/3% stockholder vote will enable the holders of a minority of
the voting stock of the Company to prevent the holders of a majority or more of
such securities from amending such provisions of the Certificate.
In addition, the Stockholders' Agreement described below may have the
effect of delaying, deterring or preventing a takeover of the Company. See " --
Stockholders' Agreement."
STOCKHOLDERS' AGREEMENT
In connection with its formation, the Company entered into a
stockholders' agreement (the "Stockholders' Agreement") with various affiliates
of Bedrock (for purposes of this section of the Prospectus, the "Bedrock
Stockholders") and certain Crow Family Members, the Senior Executive Officers,
WEL and Ms. Groenteman (the "Crow/Wyndham Stockholders"), which imposes certain
restrictions on the transfer of Common Stock held by such stockholders (the
"Stockholders") and entitles such Stockholders to certain rights regarding
corporate governance. Following the Plan of Distribution, neither WEL nor WEL
Participants will be a party to the Stockholders' Agreement.
Pursuant to the Stockholders' Agreement, each of the Stockholders
agree not to sell, transfer, pledge or otherwise dispose of ("Transfer") its
Common Stock otherwise than as permitted by the provisions of the Stockholders'
Agreement. The Stockholders' Agreement permits the following Transfers: (i)
open-market sales not exceeding the volume limitations imposed by Rule 144
under the Act, (ii) sales in the Offering and (iii) Transfers of Common Stock
by WEL to the direct or indirect owners of equity interests in WEL. The
Stockholders' Agreement also provides that any Stockholder may Transfer any
Common Stock, provided that the transferee agrees to be bound by the
Stockholders' Agreement, (a) to any wholly-owned affiliate of the selling
Stockholder, (b) to certain selling Stockholder family members, trusts or, if
the selling stockholder is a corporation, partnership or other entity, its
equity owners, (c) to certain Crow Family Members or their lineal descendants
(the "Crow Interests"), (d) to the Company or to any then-existing Crow/Wyndham
Stockholder or to any full time senior executive officer of the Company, (e) as
a pledge to secure indebtedness, provided that the pledgee agrees to offer a
right of purchase, in the event of any foreclosure of the pledge, to the other
Stockholders in accordance with the Stockholders' Agreement, and (f) to the
owners of equity interests in a Stockholder upon a partial or complete
liquidation or dissolution of such Stockholder.
The Stockholders' Agreement further provides that except with respect
to a permitted Transfer described above, the proposed Transfer by a Stockholder
to a third party of Common Stock shall be subject to a first right of purchase
in favor of the Stockholders in the other Stockholder Group (as defined below)
at the price and on the other terms of the proposed third-party sale. Wyndham
has a prior right to purchase Common Stock subject to a proposed Transfer if
the offered Common Stock represents all of the Common Stock held by the Crow
Interests, but only to the extent the purchase by the Bedrock Stockholders of
the Common Stock would cause the Bedrock Stockholders to own more than 40% of
the outstanding Common Stock. A similar first right of purchase requirement
applies in the event of third-party sales in connection with a shelf
registration or an underwritten public offering in which Stockholders propose
to sell Common Stock.
Under the Stockholders' Agreement, the Bedrock Stockholders and the
Crow/Wyndham Stockholders (each, a "Stockholder Group") are each entitled to
nominate a portion of the Company's Board of Directors, such portion to be
based upon the proportionate number of shares of Common Stock held by each
Stockholder Group and to be allocated as proportionately as practicable between
Independent Directors and other directors. Each Stockholder Group is also
entitled to nominate directors to serve on each of the Board's Committees on a
similar proportionate basis. Subject to certain conditions set forth in the
Stockholders' Agreement, each Stockholder Group agrees to use its best efforts
to elect the directors nominated in accordance with the Stockholders' Agreement
and to remove directors under certain circumstances. The Stockholders'
Agreement further provides that as long as the Crow Interests own at least 30%
of the outstanding Common Stock (excluding any shares acquired from a third
party after the date of the Stockholders' Agreement), the Chairman of the Board
of Wyndham shall be a person designated by the Crow Interests. In the event the
Bedrock Stockholders own at least 30% of the outstanding Common Stock
(excluding any shares
-113-
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acquired from a third party after the date of the Stockholders' Agreement ) and
the Crow Interests no longer own at least such percentage, the Chairman of the
Board shall be a person designated by the Bedrock Stockholders.
The Stockholders' Agreement terminates upon the earliest to occur of
(a) the sixth anniversary of the date of the Stockholders' Agreement, (b) the
Bedrock Stockholders and the Crow/Wyndham Stockholders collectively owning less
than 37.5% of the outstanding Common Stock of the Company, (c) the termination
of management contracts under the Investment Program below a specified level,
(d) certain changes in control of the Bedrock Stockholders, (e) the Bedrock
Stockholders owning less than 50% of the number of shares of Common Stock held
by them immediately following the Offering and (f) any distribution of Common
Stock by the Bedrock Stockholders to direct or indirect owners of equity
interests in the Bedrock Stockholders that results in such Common Stock being
held by anyone other than a Bedrock principal or an entity controlled by such a
principal.
REGISTRATION RIGHTS
In connection with the formation of the Company, the Company entered
into a registration rights agreement with Crow Family Members, the Senior
Executive Officers, WEL, Ms. Groenteman and Bedrock (the "Registration Rights
Agreement"), pursuant to which the Company agreed, subject to certain
limitations and under certain circumstances, to register for sale any shares of
Common Stock of the Company (and other securities of the Company that are
exercisable to purchase, convertible into or exchangeable for shares of capital
stock of the Company) that are held by the parties thereto (collectively, the
"Registrable Securities"). Following the Plan of Distribution, neither WEL, nor
WEL Participants will be a party to the Registration Rights Agreement. All of
the 15,316,667 shares of Common Stock issued in the initial public offering of
the Company are Registrable Securities. The Registration Rights Agreement
provides that any holder of Registrable Securities may require the Company upon
written notice to register for sale such Registrable Securities (a "Demand
Registration"), provided that the total amount of Registrable Securities to be
included in the Demand Registration has a market value of at least $20 million
and provided that notice is not given prior to six months after the effective
date of the previous Demand Registration. If Registrable Securities are going
to be registered by the Company pursuant to a Demand Registration, the Company
must provide written notice to the other holders of Registrable Securities and
permit them to include any or all Registrable Securities that they hold in the
Demand Registration, provided that the amount of Registrable Securities
requested to be registered may be limited by the underwriters in an
underwritten offering based on such underwriters' determination that inclusion
of the total amount of Registrable Securities requested for registration would
materially and adversely affect the success of the offering. Upon notice of a
Demand Registration, the Company is required to file a Registration Statement
within 60 days of the date on which notice is given, although the Company may
postpone the filing for up to 90 days under certain circumstances. Subject to
the conditions stated or referred to above, the holders of Registrable
Securities may request an unlimited number of Demand Registrations. Crow Family
Members, the Senior Executive Officers, Ms. Groenteman and Bedrock agree not to
exercise any Demand Registration Rights for a period of six months from the
date of execution of the Registration Rights Agreement. The Registration Rights
Agreement provided for the registration of the Wyndham shares in connection
with the Plan of Distribution at the expense of the Company.
The Registration Rights Agreement also provides that, subject to
certain exceptions, in the event the Company proposes to file a registration
statement with respect to an offering of any class of equity securities, with
the exception of certain other types of registrations, the Company will offer
the holders of Registrable Securities the opportunity to register the number of
Registrable Securities they request to include (the "Piggyback Registration"),
provided that the amount of Registrable Securities requested to be registered
may be limited by the underwriters in an underwritten offering based on such
underwriters' determination that inclusion of the total amount of Registrable
Securities requested for registration would materially and adversely affect the
success of the offering. The Company is generally required to pay all of the
expenses of Demand Registrations and Piggyback Registrations, other than
underwriting discounts and commissions. In the event of a Demand Registration
within one year of the date of the Registration Rights Agreement, the holders
of the Registrable Securities being registered must pay up to $250,000
($125,000 in the case of a shelf registration) of such expenses.
-114-
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As required by the terms of a credit agreement (the "GE Credit
Agreement") between the Company and General Electric Pension Trust ("General
Electric"), the Company entered into a registration rights agreement with
General Electric (the "GE Registration Rights Agreement"). The GE Registration
Rights Agreement provides General Electric with a one time right, exercisable
during the eighteen-month period starting November 16, 1996, to effect a demand
registration of the 504,032 shares of Common Stock of the Company that it
holds. The GE Registration Rights Agreement also provides General Electric with
certain piggyback registration rights during the 18 month period, although the
securities requested to be registered may be limited or excluded by the
underwriters in an underwritten offering based on such underwriters'
determination that the inclusion of such securities (or a portion thereof)
would adversely affect the marketing of the securities to be sold by the
Company. The demand registration rights will be exercisable only if the shares
of Common Stock to be registered have a market value of at least $1.0 million.
Registration expenses (other than underwriting discounts and commissions)
relating to a piggyback registration will be borne solely by the Company and
one-half of the registration expenses relating to a demand registration will be
paid by General Electric, up to $25,000.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by
this Prospectus will be passed upon for the Company by Locke Purnell Rain
Harrell (A Professional Corporation), Dallas, Texas.
EXPERTS
The financial statements and schedule included in this Prospectus and
elsewhere in the registration statement to the extent and for the periods
indicated in their reports have been audited by Coopers & Lybrand L.L.P.
independent accountants, and are included in this Prospectus in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on
Form S-1 (as amended and together with all exhibits and schedules thereto, the
"Registration Statement") under the Securities Act of 1933 with respect to the
shares of Common Stock offered in the Plan of Distribution. As permitted by the
rules and regulations of the Commission, this Prospectus does not contain all
of the information set forth in the Registration Statement. For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement. Statements contained in this Prospectus
concerning the provisions of any contract, agreement, or other documents are
not necessarily complete. With respect to each contract, agreement, or other
document filed as an exhibit to the Registration Statement, reference is made
to the exhibit for the complete contents of the exhibit, and each statement
concerning its provisions is qualified in its entirety by such reference. The
Registration Statement may be inspected and copied at the offices of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its
regional offices at 7 World Trade Center, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661-2551. Copies of such materials may also be obtained by mail at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
at http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year.
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128
WYNDHAM HOTEL CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
----
WYNDHAM HOTEL CORPORATION--COMBINED FINANCIAL STATEMENTS:
Report of Independent Accountants F-2
Combined Balance Sheets at December 31, 1994, 1995 and September 30, 1996 (unaudited) F-3
Combined Statements of Income for the years ended December 31,1993, 1994 and 1995 and the
nine months ended September 30, 1995 and 1996 (unaudited) F-5
Combined Statements of Partners' Capital and Stockholders' Equity for the years ended
December 31, 1993, 1994 and 1995 and the nine months ended September 30, 1996 F-6
(unaudited)
Combined Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and
the nine months ended September 30, 1995 and 1996 (unaudited) F-7
Notes to Combined Financial Statements F-9
GARDEN HOTELS ASSOCIATES LIMITED PARTNERSHIP
Report of Independent Accountants F-26
Balance Sheets at December 31, 1994 and 1995 F-27
Statements of Income for the years ended December 31, 1993, 1994 and 1995 F-28
Statements of Partners' Capital for the years ended December 31, 1993, 1994 and 1995 F-29
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 F-30
Notes to Financial Statements F-31
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL--
THE BRISTOL PLACE HOTEL TORONTO F-35
Report of Independent Accountants F-36
Balance Sheet at December 31, 1995 F-37
Statement of Operations for the year ended December 31, 1995 F-38
Statement of Partners' Deficit for the year ended December 31, 1995 F-39
Statement of Cash Flows for the year ended December 31, 1995 F-40
Notes to Financial Statements F-41
F-1
129
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners and Shareholders
Wyndham Hotel Corporation:
We have audited the accompanying combined balance sheets of Wyndham
Hotel Corporation (as identified in Note 1) (collectively the "Company") as of
December 31, 1994 and 1995 and the related combined statements of income,
partners' capital and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
the Company as of December 31, 1994 and 1995 and the combined results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 8, 1996
F-2
130
WYNDHAM HOTEL CORPORATION
COMBINED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
DECEMBER 31, SEPTEMBER 30,
---------------------- -------------
1994 1995 1996
---------- ---------- -------------
(UNAUDITED)
Current assets:
Cash and cash equivalents $ 3,620 $ 4,160 $ 20,147
Cash, restricted 271 3,053 857
Accounts receivable, less allowance of $146 in 1994, $267 in
1995 and $840 at September 30, 1996 (unaudited) 9,261 10,838 13,441
Due from affiliates 3,447 3,584 14,066
Inventories 1,043 1,020 1,437
Deferred income taxes -- -- 1,448
Other 730 769 1,964
---------- ---------- ----------
Total current assets 18,372 23,424 53,360
Investment in an affiliate's hotel partnership 2,969 2,597 --
Notes and other receivables from affiliates -- 7,674 7,685
Notes receivable -- 2,450 726
Property and equipment, net 89,426 87,604 129,689
Management contract costs, net 1,181 7,579 7,073
Security deposits -- -- 14,398
Deferred income taxes -- -- 14,749
Other 1,328 2,075 12,411
---------- ---------- ----------
Total assets $ 113,276 $ 133,403 $ 240,091
---------- ---------- ----------
LIABILITIES, PARTNERS' CAPITAL AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 8,922 8,454 23,646
Accounts payable and accrued expenses due to affiliates 4,036 1,578 198
Deposits 1,315 1,667 1,073
Deposits from affiliates 253 354 344
Current portion of long-term debt and capital lease obligation 4,939 16,035 499
Due to affiliates 1,037 2,592 --
---------- ---------- ----------
Total current liabilities 20,502 30,680 25,760
---------- ---------- ----------
Payable to affiliates 4,979 2,627 --
Payable to minority interest 203 218 --
Long-term debt and capital lease obligation 79,222 74,943 130,165
Deferred gain -- -- 12,250
---------- ---------- ----------
84,404 77,788 142,415
---------- ---------- ----------
Minority interest 6,654 7,378 --
---------- ---------- ----------
Commitments and contingencies
F-3
131
DECEMBER 31, SEPTEMBER 30,
------------ -------------
1994 1995 1996
--------- --------- ---------
(UNAUDITED)
Partners' capital and stockholders' equity:
Common stock -- -- 200
Additional paid-in capital -- -- 84,342
Retained earnings -- -- 7,894
Notes receivable from stockholders -- -- (19,168)
Receivables from affiliates (2,205) (2,303) (1,352)
Partners' capital 3,921 19,860 --
--------- --------- ---------
Total partners' capital and stockholders' equity 1,716 17,557 71,916
--------- --------- ---------
Total liabilities and equity $ 113,276 $ 133,403 $ 240,091
========= ========= =========
The accompanying notes are an integral part of the combined
financial statements.
F-4
132
WYNDHAM HOTEL CORPORATION
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
Revenues:
Hotel revenues $ 43,921 $ 51,799 $ 54,673 $ 41,685 $ 71,302
Management fees 4,414 5,930 7,354 5,439 6,434
Management fees--affiliates 6,317 7,372 9,567 6,470 10,112
Service fees 1,058 1,671 2,192 1,494 1,111
Service fees--affiliates 1,069 1,234 1,928 1,329 1,850
Reimbursements 1,215 3,110 4,378 3,833 4,636
Reimbursements--affiliates 2,949 4,893 6,458 3,902 6,176
Other 334 257 1,340 1,349 320
--------- --------- --------- --------- ---------
Total revenues 61,277 76,266 87,890 65,501 101,941
--------- --------- --------- --------- ---------
Operating costs and expenses:
Hotel expenses 32,127 36,744 37,125 28,060 52,227
Selling, general and administrative
expenses 9,913 10,644 15,001 10,127 12,877
Equity participation compensation 2,710 2,802 3,992 2,994 2,919
Reimbursable expenses 1,215 3,110 4,378 3,833 4,636
Reimbursable expenses--affiliates 2,949 4,894 6,458 3,902 6,176
Depreciation and amortization 5,269 5,735 6,311 4,558 5,609
--------- --------- --------- --------- ---------
Total operating costs and 54,183 63,929 73,265 53,474 84,444
expenses --------- --------- --------- --------- ---------
Operating income 7,094 12,337 14,625 12,027 17,497
Interest income 140 178 344 231 982
Interest income--affiliates -- -- 100 9 536
Interest expense (7,215) (7,705) (8,465) (6,407) (8,462)
Equity in earnings of affiliate's hotel
partnership 777 1,237 1,664 1,395 870
Foreign currency gain 647 404 405 253 --
Amortization of deferred gain -- -- -- -- 320
--------- --------- --------- --------- ---------
Income before minority interests 1,443 6,451 8,673 7,508 11,743
Income (loss) attributable to minority
interests (211) 186 724 607 571
--------- --------- --------- --------- ---------
Income before income taxes and
extraordinary item 1,654 6,265 7,949 6,901 11,172
Income tax benefit -- -- -- -- 10,388
--------- --------- --------- --------- ---------
Income before extraordinary item 1,654 6,265 7,949 6,901 21,560
Extraordinary item (less applicable
income -- -- -- -- (1,131)
tax benefit of $270) --------- --------- --------- --------- ---------
Net income $ 1,654 $ 6,265 $ 7,949 $ 6,901 $ 20,429
========= ========= ========= ========= =========
Pro forma income tax adjustment
(unaudited) 3,140 2,726 --
Historical net income as adjusted for
pro forma income tax (unaudited) 4,809 4,175 --
Earnings per share:
Historical income before
extraordinary
item as adjusted common share $ .24 $ .21 $ 1.08
========= ========= =========
(unaudited)
Extraordinary item $ -- $ -- $ (.06)
========= ========= =========
Historical net income as adjusted
(unaudited) $ .24 $ .21 $ 1.02
========= ========= =========
Common shares outstanding before the
issuance (unaudited) $ 20,018 $ 20,018 $ 20,018
========= ========= =========
The accompanying notes are an integral part of the combined
financial statements.
F-5
133
WYNDHAM HOTEL CORPORATION
COMBINED STATEMENTS OF PARTNERS' CAPITAL AND STOCKHOLDERS' EQUITY
(IN THOUSANDS)
PARTNERS' CAPITAL
AND STOCKHOLDERS'
EQUITY
--------
Balance January 1, 1993 $ (6,039)
Capital contributions 6,799
Capital distributions (4,662)
Equity participation compensation 2,710
Net income 1,654
--------
Balance December 31, 1993 462
Capital contributions 2,120
Capital distributions (7,728)
Equity participation compensation 2,802
Net income 6,265
--------
Balance December 31, 1994 3,921
Capital contributions 14,795
Capital distributions (10,931)
Distribution made to withdrawing partner (2,577)
Bedrock options 2,711
Equity participation compensation 3,992
Net income 7,949
--------
Balance December 31, 1995 19,860
Capital contributions (unaudited) 4,801
Capital distributions (unaudited) (29,593)
Equity participation compensation (unaudited) 2,919
Issuance of common stock (unaudited) 76,386
Payment to affiliate for release from obligations under an agreement (unaudited) (6,000)
Notes receivable from stockholders and affiliates (unaudited) (20,520)
Deferred income taxes from incorporation (unaudited) 3,240
Accrued interest on notes receivable from stockholders (unaudited) 394
Net income (unaudited) 20,429
--------
Balance September 30, 1996 (unaudited) $ 71,916
========
The accompanying notes are an integral part of the combined
financial statements.
F-6
134
WYNDHAM HOTEL CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
Cash flows from operating activities:
Net income $ 1,654 $ 6,265 $ 7,949 $ 6,901 $ 20,429
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,269 5,735 6,311 4,558 5,168
Provision for bad debt 50 84 265 78 628
Deferred income taxes -- -- -- -- (12,958)
Amortization of deferred debt issuance costs -- -- -- -- 441
Write-off of predecessor deferred debt issuance costs -- -- -- -- 1,401
Amortization of deferred gain -- -- -- -- (312)
Equity in earnings (loss) of affiliate's hotel partnership 922 (36) 372 61 --
Foreign currency translation gain (647) (404) (405) (253) --
Equity participation compensation 2,710 2,802 3,992 2,994 2,919
Minority interest (211) 186 724 607 571
Net (deposits to)/withdrawals from restricted cash 74 360 (485) (128) 2,196
Changes to operating assets and liabilities:
Accounts receivable (1,302) (1,487) (1,842) (4,225) (3,887)
Due from affiliates (36) (850) (137) 105 (3,901)
Inventories 59 (40) 23 49 (67)
Other 49 (169) (39) (77) (2,846)
Current income taxes -- -- -- -- 2,569
Accounts payable and accrued expenses (941) (758) (63) (3,909) 10,409
Accounts payable and accrued expenses due to affiliates -- 4,036 (2,458) 976 (2,309)
Deposits 200 70 352 (251) (1,672)
Deposits from affiliates 85 (25) 101 (253) (10)
Security deposits -- -- -- -- (13,676)
Due to affiliates 330 (684) 1,555 1,301 (2,564)
--------- --------- --------- --------- ---------
Net cash provided by operating activities 8,265 15,085 16,215 8,534 2,529
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (8,901) (2,101) (3,556) (2,753) (4,964)
Proceeds from sale of property and equipment -- -- -- -- 136,374
Investments in management contracts (688) (285) (4,346) (3,730) (575)
Notes and other receivables from affiliates -- -- (7,674) (2,184) (11)
Notes receivable -- -- (2,451) (911) 1,724
Payments for purchase of hotels, net of cash acquired -- -- -- -- (33,470)
Acquisition of minority interest -- -- -- -- (5,479)
Other (169) 1,770 (3,316) (907) --
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities: (9,758) (616) (21,343) (10,485) 93,599
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Partners' contributed capital 6,799 2,120 14,795 12,844 4,801
Partners' capital contributions (4,662) (7,728) (10,932) (5,891) (29,593)
Distribution made to withdrawing partner -- -- (2,577) (2,577) (982)
Increase in receivables from affiliates (679) (255) (98) (73) 996
Decrease in payable to affiliates (682) (597) (2,353) (1,192) (2,627)
Increase in payable to minority interest -- 24 15 12 (218)
F-7
135
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
Proceeds from issuance of common stock -- -- -- -- 69,504
Proceeds from long-term borrowings 5,400 51 13,600 7,069 94,383
Repayments on long-term debt and capital lease (4,538) (5,291) (6,782) (5,670) (197,516)
obligation
Notes receivable from stockholders -- -- -- -- (18,889)
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing 1,638 (11,676) 5,668 4,522 (80,141)
--------- --------- --------- --------- ---------
Increase in cash and cash equivalents 145 2,793 540 2,571 15,987
Cash and cash equivalents at beginning of period 682 827 3,620 3,620 4,160
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ 827 $ 3,620 $ 4,160 $ 6,191 $ 20,147
========= ========= ========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 7,221 $ 7,694 $ 8,154 $ 5,925 $ 5,638
========= ========= ========= ========= =========
Cash paid for income taxes $ -- $ -- $ -- $ -- $ 2,629
========= ========= ========= ========= =========
The accompanying notes are an integral part of the combined
financial statements.
F-8
136
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
1. COMPANY DESCRIPTION AND BASIS OF PRESENTATION:
Wyndham Hotel Corporation ("WHC") was incorporated in Delaware in
February 1996 and intends to enter into the Formation Agreement in 1996 with
Wyndham Hotel Company, Ltd. and four related management entities ("Wyndham" or
the "Old Management Company"), six wholly owned, one 62.5% owned and one 30%
owned related hotel entities (the "Hotel Entities") and seven related general
and limited partner entities of the hotel entities ("Partner Entities")
(collectively, the "Assigned Businesses"), (the Assigned Businesses and WHC
will be referred to collectively as the "Company"). The Company will effect
certain exchanges, a merger and other transactions (collectively the
"Formation"). The Formation will accomplish the exchange of all the Assigned
Businesses' equity interest held by their partners, including the five Senior
Executive Officers, who are promoters of the Company, and stockholders to the
Company for consideration of common stock and the payment of cash. The
Formation transaction will be accounted for in a manner similar to that of a
pooling of interests. As a result, the combination has been accounted for
using the historical cost for the Assigned Businesses. Concurrent with the
Formation, the Company intends to offer approximately $150,000,000 of equity
and debt in an initial public offering.
The accompanying combined financial statements include the accounts of
the Company which consist of the following majority owned entities (except
Garden Hotel Associates LP which is 30% owned):
Management Entities:
Wyndham Hotel Company, Ltd. (a Texas limited partnership)
Pleasanton Hotel Management Ltd. (a Texas limited partnership)
Wyndham Hotels and Resorts Ltd. (a Bermuda corporation)
Wyndham Hotel Canada II, Inc. (a Texas S-corporation)
Old San Juan Management, Ltd. (a Texas limited partnership)
Hotel Entities:
Brookfield Lakes Partners Limited (a Texas limited partnership)
Commerce Hotel Partners Ltd. (a Texas limited partnership)
Indianapolis Partners Ltd. (a Texas limited partnership)
Rose Hall Associates (a Texas limited partnership)
Schaumburg Hotel Partners LP (a Texas limited partnership)
WHI Limited Partnership (a Texas limited partnership)
Wyndham Charlotte Garden Hotel Limited Partnership (a Texas
limited partnership)
Garden Hotel Associates L P (a Texas limited partnership)
Partner Entities:
Garden Hotel Corp. No. 1 (a Texas S-corporation)
Garden Hotel Corp. No. 2 (a Texas S-corporation)
Garden Hotel Partners L P (a Texas limited partnership)
Schaumburg Hotel, Inc. (a Texas S-corporation)
Schaumburg Hotel Partners L P (a Texas limited partnership)
WH Interest, Inc. (a Texas S-corporation)
WHC Caribbean Limited (a Jamaican corporation)
F-9
137
A controlling interest in each of the above entities, with the exception
of Garden Hotel Associates LP, is owned by Crow Family Members. In addition,
these entities are all managed by Wyndham. As a result, the Company has both
voting and operational control over these entities. All significant
intercompany balances and transactions have been eliminated in combination.
The stockholders' equity balances of Wyndham Hotel Canada II, Inc. and Wyndham
Hotels and Resorts Ltd. have been included with Partners' Capital.
The Company has a 30% investment in an affiliate, Garden Hotel
Associates LP ("GHALP") which owns eleven Wyndham Garden Hotels located
throughout the United States. The Company does not have voting or operational
control over GHALP; therefore, the entity is accounted for using the equity
method in the accompanying financial statements. Profits and losses of GHALP
are allocated to the partners in accordance with its partnership agreement.
(See Note 17)
At December 31, 1995, minority interest represented the 37.50% interest
in Rose Hall Associates held by two unaffiliated entities.
Wyndham, which was formed effective January 1, 1988, provides management
and development services to hotel property owners. As of December 31, 1995, 70
properties, located in 22 states, the District of Columbia and five Caribbean
islands were under management or franchise contracts.
Wyndham operates 19 Wyndham Hotels, 38 Wyndham Garden Hotels and six
Wyndham Resort hotels. The Company provides management services to four
non-Wyndham brand hotels and provides construction and development services for
three hotels under renovation or construction.
The Hotel Entities, which own 17 hotels and lease one hotel, were formed
for the purpose of acquiring, owning, leasing and operating hotels throughout
the United States, and the Caribbean. Hotel revenues are primarily dependent
upon the individual business traveler and small business groups.
The Partner Entities, which are comprised of five corporate general
partners and three limited partner partnerships, were formed for the purpose of
managing and investing in certain Hotel Entities.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Interim Financial Information
The consolidated balance sheet as of September 30, 1996, the
consolidated statement of partners' capital for the nine months then ended, and
the consolidated statements of operations and cash flows for the nine months
ended September 30, 1995 and 1996, have been prepared by the Company without
audit. The financial statements at September 30, 1996 and for the period since
the Formation and through September 30, 1996 include the accounts of WHC and
its wholly owned subsidiaries resulting from the Formation. In the opinion of
management, all adjustments (which included only normal, recurring adjustments)
necessary to present fairly the financial position at September 30, 1996, and
the results of operations and cash flows for all periods presented have been
made. The results of operations for the interim periods are not necessarily
indicative of the operating results for the full year.
F-10
138
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash
For purposes of reporting cash flows, all highly liquid debt instruments
with original maturities of three months or less are considered to be cash
equivalents.
Restricted cash consists of reserves for quarterly cash flow payments
and property tax escrows at hotels under management. As of December 31, 1995,
restricted cash also includes a depository account balance of $2,595,112 which
collateralizes a letter of credit. Management anticipates the deposit will be
reduced concurrent with reductions in the letter of credit commitment.
The Company participates in a centralized cash management system with
affiliates who are excluded from these financial statements. A portion of net
cash flow of the Company is held in a central bank account from which operating
expenses and other disbursements are paid. Each entity's share of pooled cash
has been properly reflected on the individual entity's financial statements.
The Company maintains cash and cash equivalents in accounts with various
financial institutions in excess of the amount insured by the Federal Deposit
Insurance Corporation. The Company has not experienced any losses in such
accounts.
Inventories
Inventories consist of food, beverages, china, linen, glassware,
silverware, uniforms, and supplies and are stated at cost which approximates
market, with cost determined using the first-in, first-out method.
Property and Equipment
Buildings are carried at cost and depreciated over forty years using the
straight-line method. Furniture and equipment are recorded at cost and
depreciated using the straight-line method over the estimated useful lives,
which range from three to nine years. Assets recorded under capital leases and
leasehold improvements are amortized over the shorter of the lives of the
assets or the terms of the related leases. Normal repairs and maintenance are
charged to expense as incurred.
In 1995, the Company adopted Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of." Impairment losses are recognized in operating income as
they are determined. The Company periodically reviews its property and
equipment to determine if its carrying cost will be recovered from future
operating cash flows. In cases when the Company does not expect to recover its
carrying cost, the Company recognizes an impairment loss. No such losses have
been recognized to date.
Management Contracts
Wyndham has entered into management agreements which required payment of
certain costs associated with the change in the management of hotels. These
costs have been recorded as deferred management contract costs and are being
amortized on a straight-line basis over the terms of the agreements. The
Company periodically evaluates the recoverability of management contract costs
to determine whether such costs will be recovered from future operations.
Certain management agreements include repayment provisions if
termination occurs prior to the term of the agreement. During 1995, the
Company received $1,000,000 for a terminated agreement that is included in
other revenues.
F-11
139
Other Assets
Other assets consist primarily of loan costs totaling approximately
$491,450 and $745,951 and restricted cash of $317,181 and $615,919 at December
31, 1994 and 1995, respectively. Amortization of loan costs is computed using
the level yield method over the lives of the related loans. Restricted cash
consists of amounts reserved for replacement of fixed assets on several of the
hotel entities.
Deposits
Deposits represent cash received from guests for future hotel
reservations for the Hotel Entities and cash received from the owners of
certain hotels managed by Wyndham for various operating expenses paid by
Wyndham on behalf of managed properties. Upon termination of the management
contracts, the excess, if any, of the deposits over the actual operating
expenses owed to Wyndham would be refunded to the owners.
Income Taxes
Each of the combined companies is either a partnership, an S corporation
or a nontaxable Bermuda corporation, and consequently, is not subject to
federal income taxes. Thus, taxable income or loss is allocated directly to
the taxable income of the individual partners and stockholders. The Company's
tax returns and the amount of allocable income or loss are subject to
examination by federal and state taxing authorities. If such examinations
result in changes to income or loss, the tax liability of the partners and
stockholders could be changed accordingly.
Revenue Recognition
Hotel revenue, management fees, service fees, reimbursements and other
income are recognized when earned.
Foreign Currency Translation
The books of record of one of the Hotel Entities are maintained using
the U.S. dollar as the functional currency. Assets and liabilities of non-U.S.
operations are translated into U.S. dollars at the exchange rate in effect as
of the balance sheet date. Revenues and expenses on non-U.S. operations are
translated at the weighted average exchange rate during the year. Realized
foreign currency gains and losses are included in results of operations.
Self Insurance
The Company is self insured for various levels of general liability,
workers' compensation and employee medical coverages. Accrued expenses include
the estimated cost from unpaid incurred claims.
Income per share (unaudited)
Historical pro forma income per share is based on the number of shares
of common stock outstanding immediately prior to the issuance. Proceeds from
the exercise of dilutive stock options are assumed to be used to repurchase
outstanding shares of the Company's common stock at the average fair market
value during the period. Historical pro forma income per common share is based
on net income per share as adjusted for a pro forma provision for income taxes
based on an assumed tax rate of 39.5%.
3. ACQUISITIONS:
During 1993, the Company purchased substantially all the assets of one
hotel from an unrelated party for a cash purchase price of $6,750,000. The
acquisition was accounted for using the purchase method and, accordingly, the
acquired assets, which consisted primarily of property and equipment, were
recorded based on their estimated fair values at the date of acquisition.
4. INVESTMENT IN AN AFFILIATE'S HOTEL PARTNERSHIP:
The summary of the significant financial information of GHALP is as
follows (in thousands):
F-12
140
ASSETS
DECEMBER 31,
------------
1994 1995
------------ ------------
Total current assets $ 6,209 $ 6,770
Property and equipment, net 105,947 103,798
Other 2,737 1,947
------------ ------------
$ 114,893 $ 112,515
============ ============
LIABILITIES AND PARTNERS' EQUITY
DECEMBER 31,
------------
1994 1995
------------ ------------
Total current liabilities $ 4,373 $ 5,049
Long-term debt, excluding current portion 93,000 93,000
Partners' equity 17,520 14,466
------------ ------------
$ 114,893 $ 112,515
============ ============
YEARS ENDED DECEMBER 31,
------------------------
1993 1994 1995
----------- ------------ ------------
Revenues $ 45,299 $ 50,917 $ 56,976
Expenses 42,708 46,795 51,429
----------- ------------ ------------
Net Income $ 2,591 $ 4,122 $ 5,547
=========== ============ ============
A reconciliation of the investment in GHALP to the underlying assets is
as follows (in thousands):
1994 1995
------------ ------------
Investment in an affiliate
Hotel partnership $ 2,969 $ 2,597
============ ============
Initial capital contributions $ 7,000 $ 7,000
Contributions 149 149
Distributions (3,052) (5,088)
Net income (loss) (1,128) 536
------------ ------------
$ 2,969 $ 2,597
============ ============
The Company's initial contribution upon formation of GHALP was
$7,000,000 of the total initial aggregate contributions of $36,000,000.
Pursuant to the Partnership agreement, the Company has a 30% ownership interest
in the Partnership.
The promissory notes represent loans made to affiliated entities to
acquire hotels which then have executed management agreements with the Company.
The loans are collateralized by the partnership interests in the respective
entities. Interest income of $100,377 was earned for the year ended December
31, 1995.
6. NOTES RECEIVABLE
Pursuant to the terms of a management agreement obtained during 1995,
Wyndham is obligated to provide $4,560,000 for renovation of this hotel. As of
December 31, 1995, $2,344,974 of this obligation, classified as a note
F-13
141
receivable, has been funded. The note bears interest at prime plus .5% and is
due March 15, 2005. The payment of interest associated with this note
receivable is subject to payment priorities including a cumulative preferred
priority return to the owner.
7. MANAGEMENT SERVICES AND RELATED REVENUES:
Wyndham has entered into management agreements for hotels. The owners
of certain hotels Wyndham manages are affiliates related by common ownership or
control. Management fees earned for hotels owned by affiliates in 1993, 1994
and 1995 were $6,316,897, $7,371,893 and $9,528,374, respectively.
Various operating expenses have been paid by Wyndham on behalf of
managed properties. As of December 31, 1993, 1994 and 1995, accounts
receivable from hotels owned by affiliates were $1,825,419, $2,519,881 and
$3,002,315, respectively.
Wyndham provides centralized accounting services such as accounts
payable, payroll and financial statement preparation for certain managed
hotels. Wyndham charges an accounting fee to these hotels for such services.
Design fees are additional service fees paid to Wyndham for the development,
design and construction of new hotels as well as for the refurbishment of
existing hotels. In addition, Wyndham receives purchasing fees based on a
percentage of cost of goods ordered for purchasing various items. Service fees
earned for hotels owned by affiliates in 1993, 1994 and 1995 were $1,069,443,
$1,233,641 and $1,927,669, respectively.
Reimbursements represent revenues recognized for the reimbursement of
expenses associated with providing sales and marketing, centralized
reservations, partnership accounting and other support services. Included in
reimbursable expenses are advertising and promotional expenses of $3,654,929
and $4,905,191 for the years ended December 31, 1994 and 1995. Advertising and
promotional expenses were not included in reimbursable expenses in 1993, since
the expenses were incurred by each hotel. Reimbursable revenues recognized for
hotels owned by affiliates in 1993, 1994 and 1995 were $2,948,704, $4,893,584
and $6,458,554, respectively.
8. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following (in thousands):
December 31,
------------
1994 1995
------------ ------------
Property and equipment, at cost:
Land $ 9,955 $ 9,955
Buildings and improvements 76,802 77,108
Furniture, fixtures and equipment 24,807 28,057
Leasehold improvements 247 247
------------ ------------
111,811 115,367
Less accumulated depreciation and amortization (22,385) (27,763)
------------ ------------
$ 89,426 $ 87,604
============ ============
F-14
142
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following (in
thousands):
December 31,
------------
1994 1995
------------ ------------
Accounts payable $ 4,449 $ 3,648
Taxes 1,509 1,486
Payroll and related costs 1,650 2,055
Accrued interest 569 880
Other 745 385
------------ ------------
$ 8,922 $ 8,454
============ ============
10. LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
December 31,
------------
1994 1995
---- ----
Mortgage loan, a hotel property is pledged as collateral,
interest payable monthly at prime (8.50% at December
31, 1995) plus .5% and principal due in installments
based on cash flow maturing May 2, 1996 $ 13,425 $ 12,607
Mortgage loan, a hotel property is pledged as collateral,
interest payable monthly at LIBOR (5.44% at December
31, 1995) plus 1.75% and principal due in installments
based on cash flow maturing December 31, 1999 10,600 10,034
Mortgage loan, a hotel property is pledged as collateral,
interest payable monthly at LIBOR plus 1.5% and
principal due in installments based on cash flow 10,275 10,115
maturing December 31, 1999
Mortgage loan, a hotel property is pledged as collateral,
interest payable monthly at LIBOR plus 3.25%, and
principal maturing May 21, 2000 5,400 5,400
Mortgage loan, a hotel property is pledged as collateral,
interest payable monthly at prime plus 1.25%, and
principal due in installments based on cash flow 8,959 8,734
maturing August 28, 1997
Mortgage loan, a hotel property is pledged as collateral,
interest payable quarterly at 86% of LIBID, and
principal payable quarterly and maturing November 15, 6,902 5,870
1999
Revolving credit agreement, substantially all of the assets of
Wyndham are pledged as collateral, interest payable
quarterly at 9%, and principal maturing June 30, 2002 -- 12,500
Note payable to seller of a hotel, partnership interest
pledged as collateral, interest payable quarterly at
8%, principal payable quarterly and maturing May 21, 3,845 2,392
1997
Development loan, a hotel property is pledged as collateral,
interest payable monthly at 7%, principal matured April 814 --
28, 1995
F-15
143
December 31,
------------
1994 1995
---------- ----------
Note payable to seller of a hotel, interest payable quarterly
at 11.5%, principal due quarterly and maturing November 2,761 2,348
15, 1999
Note payable to bank interest payable quarterly at Jamaican
prime plus 1.5%, principal payable quarterly and
maturing November 15, 1999 272 195
---------- ----------
63,253 70,195
Current portion of long-term debt 4,613 15,653
---------- ----------
Long-term debt, excluding current portion $ 58,640 $ 54,542
========== ==========
The annual principal requirements for the five years subsequent
to December 31, 1995 are as follows (in thousands):
1996 $ 15,653
1997 11,038
1998 1,479
1999 24,126
2000 5,400
Thereafter 12,500
------------
$ 70,196
============
The revolving credit agreement which has an unfunded commitment of $7.5
million contains various covenants including limitations on distributions and
fixed charge ratios. The lender has 20 business days, in the event of a public
offering, to exercise an option to convert 50% of the debt to restricted common
stock at the Option Price, as defined in the agreement as the initial public
offering price per share less the underwriting discounts and commissions per
share. The option also contains a provision to effect a registration of the
restricted common stock for a 24 month period following the registration.
The Company has an outstanding letter of credit of $2,595,112
collateralized by a depository account balance of $2,595,112.
11. LEASES:
The Company leases various types of property including land and
buildings of hotel properties, office facilities and equipment under agreements
ranging from 1 to 30 years. Leased capital assets included in property and
equipment at December 31, 1994 and 1995 are as follows (in thousands):
December 31,
------------
1994 1995
----------- -----------
Property $ 14,529 $ 14,530
Equipment 3,151 3,434
----------- -----------
17,680 17,964
Accumulated amortization (4,731) (5,721)
----------- -----------
$ 12,949 $ 12,243
=========== ===========
The future minimum lease payments required under the capital lease
(together with the present value of net minimum lease payments) and future
minimum lease payments required under operating leases that have an initial
term or remaining noncancelable lease term in excess of one year at December
31, 1995 are as follows (in thousands):
F-16
144
Capital Operating
Leases Leases
------------- -----------
Year ending December 31:
1996 $ 2,431 $ 904
1997 2,438 252
1998 2,376 111
1999 2,300 63
2000 2,300 24
Thereafter 40,250 --
------------- -----------
Total minimum lease payments 52,095 $ 1,354
===========
Less imputed interest 31,313
-------------
Present value of net minimum lease payments 20,782
Less current portion 382
-------------
Long term portion of net minimum lease payments $ 20,400
=============
WHI Limited Partnership ("WHI") has a lease agreement for the property
which is accounted for as a capital lease. This agreement provides for
payments of contingent rent based on a percentage of net operating income, as
defined, less basic rent and the management fee (base amount). For lease years
1990 through 1999, contingent rent payable to the landlord is 20% of the excess
of net operating income, as defined, over the base amount and 50% of the excess
for lease years thereafter. Contingent rent expense for the years ended
December 31, 1993, 1994 and 1995 was $119,609, $107,735 and $58,789,
respectively.
This capital lease agreement provides for a reserve for capital
expenditures equal to 4% of the gross income of the respective hotel. At the
end of the lease term, WHI is required to refund to Wyndham the excess of
amounts reserved over actual capital expenditures. At December 31, 1994 and
1995, the reserved amount exceeded expenditures by $973,051 and $1,038,577,
respectively.
The lease requires WHI to meet a minimum net worth requirement. The
initial net worth requirement was $5,000,000 and is reduced upon achievement of
certain operating results. WHI demonstrated the initial net worth requirements
by obtaining a letter of credit in the amount of $4,000,000 and a personal
guarantee from one of the partners in the amount of $1,000,000. The letter of
credit was collateralized by a $2,000,000 certificate of deposit and a
$2,000,000 personal guarantee of one of the partners.
The lease agreement provides for a reduction of the $5,000,000 required
net worth upon achievement of certain operating results. If net operating
income exceeds $2,875,000 per year for two consecutive years, the net worth
requirement is reduced to $2,500,000. If net operating income exceeds
$2,875,000 per year for three consecutive years, the net worth requirement is
reduced to zero. During 1993, 1994 and 1995, WHI's net operating income, as
defined, exceeded $2,875,000.
12. RECEIVABLES FROM AFFILIATES:
Management fees for one managed hotel, owned by a partner of the
Company, are deferred until certain operating criteria, as defined in the
partnership's management agreement and loan agreement, are met. As of December
31, 1994 and 1995, this deferred balance, a receivable from an affiliate
included in partners' capital, was $1,125,240 and $1,223,302, respectively.
These management fees will be collected upon meeting the operating criteria as
defined in the agreement.
In addition, included in partners' capital are receivables from
affiliates which include certain partner capital contributions and accrued
interest of $1,080,046 and $1,080,046 as of December 31, 1994 and 1995,
respectively.
13. COMMITMENTS AND CONTINGENCIES:
Litigation has been initiated against the Company pertaining to the
right to use the Wyndham name for hotel service in the New York metropolitan
area. On January 29, 1996, a temporary restraining order was issued by the
Supreme Court of the State of New York which, pending the outcome of a trial,
prevents the Company from operating
F-17
145
or managing a hotel using the Wyndham name within a 50 mile radius (within the
State of New York) of an existing Wyndham hotel that has no existing or
historical relationship with the Company and, as subsequently modified, from
advertising the Company's property at La Guardia Hotel (which is currently
under renovation). An adverse decision in the litigation could prevent the
Company from operating Wyndham brand hotels or advertising the Wyndham name in
connection with the operation of a Wyndham brand hotel within a limited
geographic area in the borough of Manhattan or within a 50 to 100 mile radius
of the Mados Wyndham Hotel, which owns certain service mark rights to use the
Wyndham name in a limited geographic area in the borough of Manhattan. It is
management's opinion, based on legal counsel, that the range of losses
resulting from the ultimate resolution of the aforementioned claim cannot be
determined.
The Company received a Notice of Intent to make Sales and Use Tax audit
changes from the Tampa Region of the Florida Department of Revenue for the
period from July 31, 1990 through June 30, 1995. The audit assessed additional
taxes of $584,399, penalty of $223,494 and interest of $201,024 for a total
assessment of $1,008,917. Management, after review and consultation with
counsel, believes the Company has meritorious defenses to this matter and that
any potential liability in excess of the $189,000 recorded would not materially
effect the Company's combined financial statements.
The Company has pending several other claims incurred in the normal
course of business which, in the opinion of management, based on the advice of
legal counsel, will not have a material effect on the combined financial
statements.
In May 1994, the Company entered into an Investment Agreement and an
Option Agreement (collectively, the "Bedrock Agreements") with Bedrock pursuant
to which, as amended, Bedrock agreed to provide up to $335 million in capital
(the "Investment Program") to acquire hotels or hotel management companies and
to make hotel related investments that are approved by both the Company and
Bedrock. Pursuant to the terms of the Investment Agreement, Bedrock is not
required to invest a minimum amount of capital through the Investment Program,
but the Company is entitled to manage any Investment Program hotel properties
for a term of 15 years and for a market-based management fee. At December 31,
1994 and December 31, 1995, the Company had executed management contracts with
Bedrock for 11 Wyndham brand hotels and 15 Wyndham brand hotels, respectively,
through the Investment Program.
Pursuant to the Option Agreement, the Company granted to Bedrock options
(the "Bedrock Options") to purchase up to a 37.5% limited partnership interest
in Wyndham at a price equal to the percentage interest purchased multiplied by
the applicable strike price defined for each year of the option period, as
determined pursuant to the Bedrock Agreements. (Under the terms of the Bedrock
Agreements, Bedrock is entitled to purchase a 1% interest in Wyndham for each
$320,000 of projected annual management fees generated by the management
contracts relating to hotels owned by Bedrock, and at December 31, 1994 and
December 31, 1995, Bedrock was entitled to purchase a 17.4% and 24.3% interest
in Wyndham, respectively.) As additional consideration for the grant of the
Bedrock Options, Bedrock granted to the Company the right to require Bedrock to
invest up to $20 million from the Investment Program in the amount of a $10
million contribution to the Company (the "Direct Contribution") in exchange for
a percentage interest therein (not to exceed the 37.5% ownership limitation)
and a $10 million contribution to affiliated partnerships the "Indirect
Contribution" in which some or all of the Company, Crow Family Members and the
Senior Executive Officers invest. The Direct Contribution took the form of the
Bedrock Contribution. The Indirect Contribution was eliminated in connection
with the Bedrock Exchange Agreement.
Wyndham performed a valuation analysis of the Option Agreement. Wyndham
used the Black Scholes method and the Intrinsic Value method to calculate the
value of the Option Agreement and the Direct Contribution, respectively. The
calculations were adjusted for subsequent changes in the expected or actual
outcome of the contingent condition that determines the amount of the limited
partnership interest to be earned by Bedrock. The adjusted calculations
resulted in a net value of zero and approximately $2.7 million in 1994 and
1995, respectively, amortized on a straight-line basis over the terms of the
management agreements of the hotels owned by Bedrock.
The Option Agreement also provides for a contingent payment (the
"Contingent Option Payment") to the Old Management Company, for distribution to
the non-Bedrock owners of the Old Management Company, at such time as all
hotels financed by the Investment Program achieve an investment return target
of 15% on all equity capital invested through such program plus certain
overhead costs. The amount of the Contingent Option Payment is 10% of all cash
proceeds realized in excess of the investment return target. The Contingent
Option Payment is due 70% upon the achievement of the investment target return
and 30% upon Bedrock's disposition of its entire interest in Wyndham.
F-18
146
During 1994 and 1995, the Company received hotel management fees from
Bedrock of $514,472 and of $2,043,087, respectively.
During 1994 and 1995, the Company made cash advances of $1,092,532 and
$1,380,702, respectively, to certain hotel partnerships in which Bedrock has an
interest. The advances were used to pay certain renovation costs of these
hotel partnerships. At December 31, 1994 and 1995, the outstanding receivables
from the hotel partnerships were $27,842 and $686,749, respectively.
During 1994 and 1995, the Company received payments of $798,503 and
$976,980, respectively, from certain hotel partnerships in which Bedrock has an
interest for design, purchasing and construction service fees.
During 1994 and 1995, the Company received payments of $170,669 and
$831,553, respectively, from certain hotel partnerships in which Bedrock has an
interest for services and reimbursements provided by the Company.
Pursuant to the terms of the management agreements of two
affiliated-owned hotels under construction, the Company has undertaken certain
commitments to provide furniture, fixtures and equipment for each hotel at a
fixed price totaling $8.1 million. Additionally, for one of these hotels the
Company provided certain pre-opening services at a fixed price of $420,000; the
Company has guaranteed to fund up to $230,000 in working capital per year for
three years after the hotel is opened in the event that the hotel generates
inadequate cash flow; and, the Company has guaranteed $875,000 in indebtedness.
Pursuant to the terms of a management agreement of a hotel owned by an
affiliate, the Company has guaranteed to the Hotel Partnership to fund up to
$600,000 of working capital per year to the extent the entity experiences
operating deficits, with a maximum required contribution of $2.3 million over
the term of the guarantee extending from 1995 to 2000. The Company has not to
date been required to make any capital contribution under the guarantee.
The Company is subject to environmental regulations related to the
ownership, management, development and acquisition of real estate (hotels).
The cost of complying with the environmental regulations was not material to
the Company's combined statements of income for any of the years in the
three-year period ended December 31, 1995. The Company is not aware of any
environmental condition on any of its properties which is likely to have a
material adverse effect on the Company's financial statements.
14. EMPLOYEE BENEFIT PLANS:
The Company sponsors a 401(k) retirement savings plan. Employees who
are over 21 years of age and have completed one year of service are eligible to
participate in the plan. The Company matches employee contributions up to 4%
of an employee's salary. The aggregate expense under the plans amounted to
approximately $129,035, $166,415 and $202,115 for the years ended December 31,
1993, 1994 and 1995, respectively.
Wyndham maintains a self-insured group health plan through a Voluntary
Employee Benefit Association ("VEBA") for certain partnerships and
corporations. This plan is funded to the limits provided in the Internal
Revenue Code, and liabilities have been recorded for estimated incurred but
unreported claims. Aggregate and stop loss insurance exists at amounts which
limit exposure to the partnerships. The Company has recognized expenses
related to the plan of $742,814, $686,580 and $832,212 for the years ended
December 31, 1993, 1994 and 1995, respectively.
Certain management employees are partners in an equity participation
plan, Wyndham Employees, Ltd. ("WEL"). The Company has accounted for WEL in a
manner similar to a formula unit incentive plan. Partners are admitted into
WEL and partnership units are awarded at the discretion of Wyndham's Senior
Executive Officers. Units vest five years after award date and are payable by
WEL upon certain events. Unit values are determined by formulas related to
appreciation in value of Wyndham and other affiliated entities. In addition,
the Senior Executive Officers own limited partner interests in Wyndham and
several affiliates of Wyndham. These limited partner interests were purchased
by these Senior Executive Officers for amounts equal to the fair value of such
interests. The Senior Executive Officers borrowed the funds used to purchase
such limited partner interests from an affiliate of Wyndham and collateralized
such borrowings with their limited partner interests. The Senior Executive
Officers' shares of the distributable cash of the limited partnerships is used
to repay such affiliate loans. For financial reporting purposes, the Company
has recognized compensation expense under WEL and the Senior Executive Officer
equity participation of $2,709,770, $2,802,387 and $3,992,143 for the years
ended December 31, 1993, 1994 and 1995, respectively.
F-19
147
15. FAIR VALUE:
The Company has estimated the fair value of its financial instruments at
December 31, 1995 as required by Statement of Financial Accounting Standards
No. 107. The carrying values of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses are reasonable estimates of
their fair values. The carrying values of variable and fixed rate debt are
reasonable estimates of their fair values based on their discounted cash flows
at discount rates currently available to the Company for debt with similar
terms and remaining maturities.
16. TRANSACTIONS WITH RELATED PARTIES:
Effective January 1, 1988, Wyndham acquired certain hotel management
contracts previously held by an affiliate. At the date of the transfer, there
was no step-up in basis of these management contracts as a result of common
control of the entities. In exchange for the contracts, Wyndham agreed to pay
an affiliate 16% of management fees earned from the acquired contracts
(exclusive of contracts entered into during 1988). The fees became payable
quarterly in arrears beginning in 1989; however, payment is limited to 50% of
net cash flows, as defined in the agreement. Net cash flow was sufficient to
make full payment during the years ended December 31, 1993, 1994 and 1995 of
$698,498, $701,203 and $830,164, respectively.
In 1995, the Company paid $523,360 in management contract costs in
connection with entering into a management agreement for the Wyndham Anatole
Hotel. These costs are being amortized over the management agreement term.
During 1993, 1994 and 1995, the Company made lease payments totaling
$638,039, $743,922 and $875,122, respectively, to an affiliate for the
Corporate office space.
The Company subleases land from a related party which is accounted for
as an operating lease. Contingent rent is payable to the related party at 50%
of Adjusted Net Income, as defined in the sublease agreement. Contingent rent
expense as of December 31, 1993 and 1994 was $278,000 and $487,000
respectively. There was no contingent rent expense for the year ended December
31, 1995.
During 1993, 1994 and 1995, Wyndham made payments in the aggregate
amounts of $310,412, $321,333 and $332,113, respectively, to GHMB, Inc., an
entity owned by a senior executive officer for the operation of liquor
concessions at one of the Hotel Entities.
During 1993, 1994 and 1995, the Company made payments of $1,098,270,
$1,352,468 and $1,739,804, respectively, to an entity owned by an affiliate for
travel services provided to the Company.
In 1995, the Company made payments to Trammell Crow Company in the
amount of $386,759 for contract labor (including related costs) provided to the
Company for management information services. The Company anticipates that in
1996, it will pay approximately $810,000 to Trammell Crow Company for these
contract labor services (including related costs).
17. SUBSEQUENT EVENTS:
On May 2, 1996, GHALP entered into a sale/leaseback agreement with an
unaffiliated real estate investment trust ("REIT"). The sale/leaseback
agreement stipulated the sale of eleven hotels containing 1,940 rooms for
$135,320,000 to the REIT and eleven long-term operating leases back to the
Company each with an initial term of seventeen years and four optional
twelve-year renewals exercisable at the Company's option for all hotels. Under
terms of these leases, yearly base rent aggregates $13,600,000 plus a
contingent rent paid based on a percentage of excess revenue over base year
revenues. The leases require the Company to pay substantially all expenses
associated with the operation of the leased hotels, real estate taxes and
insurance.
As part of the formation of the Company, the Company entered into the
Bedrock Exchange Agreement with various affiliates of Bedrock, which replaces
the Bedrock Agreements, pursuant to which Bedrock transferred certain options
owned by Bedrock and the Bedrock contribution (in the amount of $10 million) in
exchange for 2,276,055 (unaudited) shares of Common Stock. In addition, the
Bedrock Exchange Agreement eliminated the $10 million indirect contribution.
Prior to the formation of the Company, a separate entity owned by Crow Family
Members, the Senior
F-20
148
Executive Officers and WEL purchased the right to the Contingent Option Payment
for $10,000 from the owners of Wyndham (Crow Family Members, the Senior
Executive Officers and WEL).
18. RECENT TRANSACTIONS AND ACQUISITIONS (UNAUDITED)
In May 1996, the Company implemented substantially all of its formation
and financing plan. As part of its financing plan, the Company offered
4,197,500 shares of its Common Stock for public trading on the New York Stock
Exchange and concurrently issued $100,000,000 of subordinated notes.
During the quarter ended June 30, 1996, the Company acquired from an
unaffiliated party the Wyndham Vinings Hotel. The acquisition cost was
approximately $12.5 million, comprised of a cash payment of $3.6 million and
the assumption of existing indebtedness encumbering the property.
In July 1996, the Company, in separate transactions, acquired a 181 room
hotel in Kansas and a 254 room hotel in Dallas, Texas for a total purchase
price of $13.7 million.
On August 30, 1996, the Company acquired a 287 room hotel, the Bristol
Place hotel in Toronto, Canada. The total investment approximated $19.9
million with a purchase price of $17.4 million and renovation and other costs
of $2.5 million.
These acquisitions were accounted for using the purchase method and,
accordingly, the acquired assets, which consisted primarily of property and
equipment, were recorded based on their estimated fair values at the date of
acquisition. These acquisitions were funded with a portion of the net proceeds
from the initial public offerings.
The following unaudited pro forma financial information for the nine
months ended September 30, 1996 and 1995 is presented in accordance with
Regulations S-X to reflect the acquisition of Bristol Hotel (the other three
hotel acquisitions have been excluded because they are not significant) as if
it had occurred at January 1, 1995 (in thousands, except per share data):
HISTORICAL PRO FORMA PRO FORMA
DATA ADJUSTMENTS DATA
----------------- ------------------ ----------------
Nine months ended September 30, 1995:
Total revenues $ 65,501 $ 7,597 $ 73,098
Net income 6,901 (9) 6,892
Earnings per share (primary and fully diluted) N/A -- N/A
Nine months ended September 30, 1996:
Total revenues $ 101,941 $ 6,533 $ 108,474
Income before extraordinary item 21,560 (267) 21,293
Net income 20,429 (267) 20,162
Earnings per share (primary and fully diluted)
Income before extraordinary items 1.08 (.01) 1.07
Net Income 1.02 (.01) 1.01
19. CONDENSED COMBINED FINANCIAL INFORMATION OF GUARANTOR SUBSIDIARIES
Pursuant to the Debt Offering, the Company issued $100.0 million
aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2006. All
of the Company's subsidiaries, with the exception of a number of subsidiaries
(which subsidiaries are individually and collectively inconsequential), have
fully and unconditionally guaranteed the Company's obligations under the Notes
on a joint and several basis (the "Guarantor Subsidiaries"). Accordingly, the
condensed combined financial information set forth below summarizes financial
information for all of the Guarantor Subsidiaries on a combined basis.
Separate complete financial statements and other disclosure for the Guarantor
Subsidiaries have not been presented because management does not believe that
such information is material to investors.
F-21
149
Condensed combined financial information of the Guarantor Subsidiaries
(see note to condensed combined financial information) as of December 31, 1994
and 1995 and September 30, 1996, and for the years ended December 31, 1993,
1994 and 1995 and nine months ended September 30, 1996 were as follows:
GUARANTOR SUBSIDIARIES
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
DECEMBER 31, SEPTEMBER 30,
------------ -------------
1994 1995 1996
---------------- ---------------- -------------
(UNAUDITED)
Current assets
Cash and cash equivalents $ 2,469 $ 3,708 $ 5,039
Cash, restricted as to use -- 2,595 857
Accounts receivable, net 8,597 13,732 21,500
Other 5,092 1,606 2,714
---------------- ---------------- -------------
Total current assets 16,158 21,641 30,110
Investment in an affiliate's hotel 2,969 2,597 --
partnership
Notes and other receivables from affiliates -- 7,674 7,685
Notes receivable -- 2,450 726
Property and equipment, net 47,594 47,321 59,041
Management contract costs, net 1,181 7,579 7,073
Security deposits -- -- 14,398
Other 661 1,068 3,314
---------------- ---------------- -------------
Total assets $ 68,563 $ 90,330 $ 122,347
================ ================ =============
LIABILITIES AND PARTNERS' CAPITAL AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities 9,564 $ 6,600 $ 16,371
Deposits 1,401 1,914 1,147
Current portion of long-term debt and
capital lease obligations 3,525 3,428 499
Due to affiliates 1,035 1,454 39,792
---------------- ---------------- -------------
Total current liabilities 15,525 13,396 57,809
---------------- ---------------- -------------
Payable to affiliates 3,842 2,627 --
Payable to minority interest 203 218 --
Long-term debt and capital lease obligations 31,163 40,659 30,083
---------------- ---------------- -------------
35,208 43,504 30,083
---------------- ---------------- -------------
Minority interest 6,654 7,379 --
---------------- ---------------- -------------
Partners' capital and stockholders' equity:
Receivables from affiliates (1,829) (1,927) (1,352)
Partners' capital 13,005 27,978 --
Additional paid-in capital -- -- 31,071
Retained earnings -- -- 4,736
---------------- ---------------- -------------
Total partners' capital and
stockholders'
equity 11,176 26,051 34,455
---------------- ---------------- -------------
Total liabilities and equity $ 68,563 $ 90,330 $ 122,347
================ ================ =============
See note to the condensed combined financial information.
F-22
150
GUARANTOR SUBSIDIARIES
CONDENSED COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
Year Ended December 31, Nine Months Ended September 30,
----------------------- -------------------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(Unaudited)
Revenues $ 44,069 $ 55,611 $ 65,524 $ 48,344 $ 82,280
----------------- ---------------- ---------------- ----------------- ----------------
Operating costs and expenses 35,426 42,659 51,210 37,008 60,778
Depreciation and amortization 2,960 3,328 3,929 2,793 3,352
Other 311 175 105 34 520
----------------- ---------------- ---------------- ----------------- ----------------
Total operating costs and
expenses 38,697 46,162 55,244 39,835 64,650
----------------- ---------------- ---------------- ----------------- ----------------
Operating income 5,372 9,449 10,280 8,509 17,630
Interest expense, net (4,442) (4,194) (3,816) (3,033) (2,128)
Equity in earnings of affiliate's 777 1,237 1,664 1,395 870
hotel partnership
Foreign currency gain 647 404 405 253 --
----------------- ---------------- ---------------- ----------------- ----------------
Income before minority interests 2,354 6,896 8,533 7,124 16,372
Income (loss attributable to
minority interests) (211) 186 724 607 571
----------------- ---------------- ---------------- ----------------- ----------------
Income before income taxes and
extraordinary item 2,565 6,710 7,809 6,517 15,801
Income taxes -- -- -- -- 3,325
----------------- ---------------- ---------------- ----------------- ----------------
Income before extraordinary item 2,565 6,710 7,809 6,517 12,476
Extraordinary item (less applicable
tax benefits) -- -- -- -- (1,028)
----------------- ---------------- ---------------- ----------------- ----------------
Net income $ 2,565 $ 6,710 $ 7,809 $ 6,517 $ 11,448
================= ================ ================ ================= ================
GUARANTOR SUBSIDIARIES
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended December 31, September 30,
------------------- --- -------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(Unaudited)
Net cash provided by operating activities $ 5,022 $ 11,823 $ 13,144 $ 5,634 $ 2,322
------- ------- ------- ------- -------
Cash flows from investing activities
Purchase of property and equipment (1,592) (1,820) (2,917) (2,277) (3,581)
Sale of property and equipment -- -- -- -- 133,778
Investments in management contracts (687) (285) (4,346) (3,478) (575)
Notes and other receivables from affiliates -- -- (7,674) (2,184) (11)
Notes receivable -- -- (2,451) -- --
Payments for purchase of hotels, net of cash acquired -- -- -- -- (2,520)
Acquisition of minority interest -- -- -- -- (5,479)
Other 5 1,903 (3,080) (1,546) 1,674
-------- -------- -------- -------- --------
Net cash used in investing activities (2,274) (202) (20,468) (9,485) 123,286
-------- -------- -------- -------- --------
Cash flows from financing activities:
Partners' contributed capital 4,709 1,781 13,711 11,135 26,502
Partners' capital distributions (3,259) (6,368) (10,672) (7,888) (42,572)
Distribution made to withdrawing partner -- -- (2,577) -- --
Decrease (increase) in receivable from affiliates -- -- -- (73) 5,327
Increase (Decrease) in payable to affiliate 254 (1,035) (1,215) (55) 32,379
Increase (decrease) in payable to minority interest -- -- -- 11 (218)
Proceeds from long-term borrowings -- -- 13,600 7,100 2,500
Repayments on long-term debt and capital lease obligations (4,094) (3,858) (4,201) (3,416) (148,195)
F-23
151
Year Ended December 31, September 30,
----------------------- -------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(Unaudited)
S>
Other (315) (219) (83) -- --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities (2,705) (9,699) 8,563 6,814 (124,277)
-------- -------- -------- -------- --------
Increase in cash and cash equivalents 43 1,922 1,239 2,963 1,331
Cash and cash equivalents at beginning of year 504 547 2,469 2,469 3,708
-------- -------- -------- -------- --------
Cash and cash equivalents at end of year $ 547 $ 2,469 $ 3,708 $ 5,432 $ 5,039
======== ======== ======== ======== ========
(1) The foregoing condensed combined financial information for 1993, 1994 and
1995 includes Wyndham (100%), WHI Limited Partnership (100%) and Rose
Hall Associates (62.5%). Also reflected in this information is an
investment in Garden Hotel Associates L.P. (30%), which is being
accounted for using the equity method.
The foregoing condensed combined financial information for the 1996
period includes GHALP Corporation, Waterfront Management Corporation,
WHCMB, Inc. Wyndham Management Corporation, Wyndham Hotel & Resort
(Aruba) N.V., WHC Vinings Corporation, WH Interest, Inc., Wyndham IP
Corporation, Rose Hall Associates, L.P., XERXES Limited, WHC Caribbean,
Ltd., WHC Development Corporation, Rodehouse Restaurants of Kansas, Inc.,
WHCMB, Toronto, Inc., WHC Columbus Corporation, Wyndham Hotels & Resorts
Management Ltd. and a subsidiary for a non-branded hotel. They all are
wholly-owned subsidiaries of the Company at September 30, 1996.
F-24
152
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Garden Hotel Associates LP:
We have audited the accompanying balance sheets of Garden Hotel
Associates LP as of December 31, 1994 and 1995 and the related statements of
income, changes in partners' capital, and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Garden Hotel
Associates LP as of December 31, 1994 and 1995, and its results of operations
and its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 27, 1996
F-25
153
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
BALANCE SHEETS
(IN THOUSANDS)
ASSETS
December 31,
------------
1994 1995
---------------- --------------
Current assets:
Cash and cash equivalents $ 4,582 $ 5,027
Accounts receivable, less allowance of $19 in 1994 and $31 in 1995 1,276 1,248
Due from affiliates -- 155
Inventories 200 190
Prepaid expense 151 150
---------------- --------------
Total current assets 6,209 6,770
Property and equipment, net 105,947 103,798
Designated cash 817 605
Other assets, net of accumulated amortization of $4,338 and $4,175 in
1994 and 1995, respectively 1,920 1,342
---------------- --------------
Total assets $ 114,893 $ 112,515
================ ==============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses $ 3,935 $ 4,087
Due to Operator 358 475
Advance deposits 80 487
---------------- --------------
Total current liabilities 4,373 5,049
Long-term debt 93,000 93,000
---------------- --------------
Total liabilities 97,373 98,049
Partners' capital 17,520 14,466
---------------- --------------
Total liabilities and partners' capital $ 114,893 $ 112,515
================ ==============
The accompanying notes are an integral part of the financial statements.
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154
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
(IN THOUSANDS)
Year Ended December 31,
-----------------------
1993 1994 1995
------------- ------------ ------------
Revenues:
Rooms $ 33,181 $ 37,025 $ 42,311
Food and beverage 9,611 11,035 11,532
Operating departments 2,399 2,666 2,799
------------- ------------ ------------
45,191 50,726 56,642
------------- ------------ ------------
Operating costs and expenses:
Departmental expenses:
Room 8,138 8,787 10,088
Food and beverage 7,112 7,868 8,304
Operating departments 1,249 1,225 1,229
Operating expenses:
Administrative and general 4,750 4,941 5,102
Management fees 2,415 2,888 3,317
Sales and Marketing 3,278 3,817 3,953
Property operating costs 4,035 4,207 4,577
Property insurance, rent and taxes 2,085 2,311 2,451
Depreciation and amortization 4,809 4,955 5,059
Other 217 176 204
------------- ------------ ------------
Total operating costs and expenses 38,088 41,175 44,284
------------- ------------ ------------
Operating income 7,103 9,551 12,358
Interest income 108 191 334
Interest expense (4,613) (5,618) (7,145)
------------- ------------ ------------
Net income $ 2,598 $ 4,124 $ 5,547
============= ============ ============
The accompanying notes are an integral part of the financial statements.
F-27
155
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(IN THOUSANDS)
Balance at January 1, 1993 $25,517
Distributions (8,752)
Net income 2,598
---------------
Balance at December 31, 1993 19,363
Contributions 498
Distributions (6,465)
Net Income 4,124
---------------
Balance at December 31, 1994 17,520
Distributions (8,601)
Net income 5,547
---------------
Balance at December 31, 1995 $ 14,466
===============
The accompanying notes are an integral part of the financial statements.
F-28
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GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended December 31,
-----------------------
1993 1994 1995
---- ---- ----
Cash flows from operating activities:
Net income $2,598 $4,124 $5,547
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of interest rate contracts 40 134 134
Depreciation and amortization 4,809 4,955 5,059
Provision for bad debt 98 25 47
Changes to operating assets and liabilities
Accounts receivable 572 (211) (19)
due from affiliates -- -- (155)
Inventories (17) 12 10
Prepaid expenses (3) 14 2
Other assets (393) (431) 93
Accounts payable and accrued expenses 550 (45) 152
Due to Operator (445) 203 117
Advance deposits 41 (4) 407
------------ ---------- ----------
Net cash provided by operating activities 7,850 8,776 11,394
------------ ---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (1,280) (1,663) (2,348)
Proceeds from land sale 17 -- --
------------ ---------- ----------
Net cash used in investing activities (1,263) (1,663) (2,348)
------------ ---------- ----------
Cash flows from financing activities
Other (498) -- --
Partners' contributed capital -- 498 --
Partners' capital distributions (8,752) (6,465) (8,601)
Proceeds from long-term debt 3,000 -- --
------------ ---------- ----------
Net cash used in financing activities (6,250) (5,967) (8.601)
------------ ---------- ----------
Increase (decrease) in cash and cash equivalents 337 1,146 445
Cash and cash equivalents at beginning of period 3,099 3,436 4,582
------------ ---------- ----------
Cash and cash equivalents at end of period $ 3,436 $ 4,582 $ 5,027
============ ========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 4,568 $ 5,292 $ 6,978
============ ========== ==========
The accompanying notes are an integral part of the financial statements.
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GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Garden Hotel Associates LP (the "Partnership") was formed May 11,
1990, for the purpose of acquiring, owning and operating eleven Wyndham Garden
Hotels throughout the United States of which three are located in or near
Phoenix, Arizona.
The partners contributed $36,000,000 upon formation of the
Partnership. The general partner is required to and the limited partner may,
at its discretion, make additional contributions necessary to fund operating
deficits as defined in the Partnership agreement. Profits and losses are
allocated to the partners in accordance with the Partnership agreement.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
For purposes of reporting cash flows, all highly liquid debt
instruments with original maturities of three months or less are considered to
be cash equivalents.
Designated cash totaling $816,858 and $605,250 as of December 31, 1994
and 1995, respectively, consists of amounts designated for repairs and
replacement of property and equipment.
The Partnership maintains cash and cash equivalents in accounts with
various financial institutions in excess of amounts insured by the Federal
Deposit Insurance Corporation.
Inventories
Inventories consist of food, beverages, china, linen, glassware,
silverware, uniforms, and supplies and are stated at cost, which approximates
market, with cost determined using the first-in, first-out method.
Property and Equipment
Buildings are carried at cost and depreciated over forty years using
the straight-line method. Furniture and equipment are recorded at cost and
depreciated using the straight-line method over the estimated useful lives,
which range from three to seven years. Normal repairs and maintenance are
charged to expense as incurred.
In 1995, the Partnership adopted Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of." Impairment losses are recognized in operating income
as they are determined.
F-30
158
The Partnership periodically reviews its property and equipment to
determine if its carrying cost will be recovered from future operating cash
flows. In cases when the Partnership does not expect to recover its carrying
cost, the Partnership recognizes an impairment loss. No such losses have been
recognized to date.
Other Assets
Other assets consist primarily of deferred finance costs totaling
approximately $1,387,243 and $819,759 at December 31, 1994 and 1995,
respectively, and are stated at net cost. Amortization of loan costs is
computed using the effective yield method over the lives of the related loans.
The remaining balance consists primarily of security deposits totaling
approximately $404,189 and $522,613 at December 31, 1994 and 1995,
respectively, and are stated at cost.
Preopening costs, which are classified as other assets, are recorded
at cost and amortized over twelve months using the straight-line method. Fully
amortized preopening expenses of $859,256 were written off in 1995.
Income Taxes
The Partnership is not a taxable entity and the results of its
operations are included in the tax returns of the partners. The Partnership's
tax returns and the amount of allocable income or loss are subject to
examination by federal and state taxing authorities. If such examinations
result in changes to income or loss, the tax liability of the partners could be
charged accordingly.
Revenue Recognition
Room, food and beverage, telephone and other revenues are recognized
when earned.
Self-Insurance
The Partnership is self insured for various levels of general
liability, workers' compensation and employee medical coverages. Accrued
expenses include the estimated cost from unpaid incurred claims.
Interest Rate Contracts
The Partnership enters into interest rate contracts to manage its
exposure to interest rate volatility. These contracts have been interest rate
caps, where the Partnership pays a lump-sum for the right to receive future
payments should interest rates exceed an agreed upon rate. The Partnership is
exposed to credit loss in the event of nonperformance by the counter parties to
its interest rate contracts. The Partnership does not anticipate
nonperformance by the counter parties. The Partnership accounts for interest
rate cap contracts by amortizing the up-front premium to interest expense over
the life of the contract.
Advertising Costs
The Partnership participates in various advertising and marketing
programs with a related party. All costs are expensed in the period incurred.
The Partnership recognized advertising expenses of $1,003,589, $1,198,335 and
$1,148,385 for the years ended December 31, 1993, 1994 and 1995, respectively.
Reclassifications
Certain amounts previously reported have been reclassified to conform
with the current year presentation.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in thousands):
F-31
159
DECEMBER 31,
------------
1994 1995
------------ -----------
Land $ 17,428 $ 17,428
Buildings 91,467 91,467
Furniture, fixtures and equipment 15,494 17,841
------------ -----------
124,389 126,736
Less accumulated depreciation 18,442 22,938
------------ -----------
$ 105,947 $ 103,798
============ ===========
4. MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS:
On May 21, 1990, the Partnership and Wyndham Hotel Company, Ltd. (the
"Operator"), a related party, entered into a management agreement which
provides for a base management fee and chain services fee equal to 5% of gross
revenues plus an incentive fee equal to 15% of total operating cash flow. Due
to Operator includes management fees and other expenses payable to the
Operator. As provided for in the management agreement, cash in excess of
amounts required for on-site operations is held in a central account in the
name of the Operator.
The Partnership receives sales and marketing, centralized
reservations, accounting and other support services from affiliates which are
reimbursed as an adjustment to management fees in the normal course of
business.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following (in
thousands):
DECEMBER 31,
------------
1994 1995
----------- ------------
Accounts payable $ 1,004 $ 977
Taxes 1,052 1,061
Payroll and related costs 1,100 1,176
Accrued interest 564 597
Other 215 276
----------- ------------
$ 3,935 $ 4,087
=========== ============
6. LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
DECEMBER 31,
------------
1994 1995
----------- ----------
Acquisition loan $ 90,000 $ 90,000
Revolver loan 3,000 3,000
----------- ----------
$ 93,000 $ 93,000
=========== ==========
F-32
160
The Acquisition and Revolver loans are payable to an affiliate.
During 1993, two interest rate caps were purchased for $498,000 which fixed
$60,000,000 of the acquisition loan balance at a 6% interest rate effective
September 30, 1994 for the remainder of the loan. The remaining balances of
these loans bear interest at various rates which ranged from 4.63% to 6.5%,
4.5% to 9% and 7.1% to 7.9% during the years ended December 31, 1993, 1994 and
1995, respectively. Interest only is payable for both the Acquisition and
Revolver loans until maturity at May 21, 1997, when the principal is due.
The Partnership's debt is collateralized principally by property and
equipment.
7. EMPLOYEE BENEFIT PLANS:
The Partnership participates in a 401(k) retirement savings plans.
Employees who are over 21 years of age and have completed one year of service
are eligible to participate in the plan. The Partnership matches employee
contributions up to 4% of an employee's salary. The Partnership expensed
$31,628, $44,185, and $77,075 for the years ended December 31, 1993, 1994 and
1995, respectively, related to the plan.
The Partnership participates in a self-insured group health plan
through a Voluntary Employee Benefit Association ("VEBA") for its employees.
This plan is funded to the limits provided in the Internal Revenue Code, and
liabilities have been recorded for unpaid claims. Aggregate and stop loss
insurance exists at amounts which limit exposure to the Partnership. The
Partnership has recognized expenses under the plan of $419,817, $443,277 and
$511,643 for the years ended December 31, 1993, 1994 and 1995, respectively.
8. FAIR VALUE:
The Partnership has estimated the fair value of its financial
instruments at December 31, 1995 as required by Statement of Financial
Accounting Standards No. 107. The carrying values of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses are
reasonable estimates of their fair values. The carrying values of variable and
fixed rate debt are reasonable estimates of their fair values based on their
discounted cash flows at discount rates currently available to the Company for
debt with similar terms and remaining maturities.
9. COMMITMENTS AND CONTINGENCIES:
The Partnership has entered into a land lease for one of the
Partnership's hotels. Future minimum rental payments of $160,000 per year are
required under the operating lease. The lease, which expires March 2052,
includes a renewal option of 25 years and contingent lease payments which are
based on a percentage of the hotel's gross income. The related renewal rental
expense was $160,000 for the years ended 1993, 1994 and 1995, and contingent
rental expense was $75,333, $112,464 and $153,862 for the years ended December
31, 1993, 1994 and 1995, respectively.
The Partnership is subject to environmental regulations related to the
ownership of real estate (hotels). As part of due diligence procedures, the
Partnership has conducted Phase I environmental assessments on each property
prior to acquisition. The cost of complying with the environmental regulations
was not material to the Partnership's statements of income for any of the years
in the three-year period ended December 31, 1995. The Partnership is not aware
of any environmental condition on any of its properties which is likely to have
a material adverse effect on the Partnership's financial statements.
10. SUBSEQUENT EVENT:
It is the intent of an affiliated entity to acquire a 70% ownership
interest in the Partnership. The acquiring entity and the Operator are
affiliated through common ownership. In addition, a letter of intent has been
entered into with a third party real estate investment trust ("REIT"). This
transaction will result in a sale/leaseback that provides for the sale of all
eleven hotels containing 1,940 rooms for $135,320,000 to the REIT and eleven
long-term operating leases back to the Operator. Each lease has an initial
term of seventeen years and four optional twelve-year extensions
F-33
161
exercisable at the Operator's option for all hotels. Annual minimum base rents
aggregate $13,600,000 plus a contingent rent payment is required based on a
percentage of excess revenue over base year revenues. The leases will require
the Operator to pay substantially all expenses associated with the operation of
the leased hotels, real estate taxes and insurance.
F-34
162
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL -
THE BRISTOL PLACE HOTEL TORONTO
(IN RECEIVERSHIP)
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT ACCOUNTANTS
FOR THE YEAR ENDED DECEMBER 31, 1995
F-35
163
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Wyndham Hotel Corporation:
We have audited the accompanying balance sheet of the Wyndham Hotel
Corporation Acquisition Hotel - The Bristol Place Hotel Toronto (described in
Note 1) as of December 31, 1995 and the related statements of operations,
partners' deficit, and cash flows for the year then ended. These financial
statements are the responsibility of management of the Partnership. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying financial statements were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission as described in Note 1 to the financial statements.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Wyndham Hotel Corporation
Acquisition Hotel - The Bristol Place Hotel Toronto as of December 31, 1995
and its results of operations and its cash flows for the year ended December
31, 1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND, LLP
Dallas, Texas
November 7, 1996
F-36
164
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL -
THE BRISTOL PLACE HOTEL TORONTO
(IN RECEIVERSHIP)
BALANCE SHEET
DECEMBER 31, 1995
(IN U.S. DOLLARS)
ASSETS
Investment in hotel property at cost:
Buildings and improvements $ 6,544,826
Furniture, fixtures and equipment 4,060,874
------------
10,605,700
Less accumulated depreciation and amortization (7,478,951)
------------
Net investment in hotel property 3,126,749
Cash and cash equivalents 655,804
Accounts receivable 651,680
Inventories 178,930
Other assets 71,174
------------
Total assets $ 4,684,337
============
LIABILITIES AND PARTNERS' DEFICIT
Mortgages payable and accrued interest $ 27,204,560
Accounts payable, trade 559,537
Accrued expenses and other liabilities 588,370
------------
Total liabilities 28,352,467
Commitments and contingencies
Partners' deficit (23,668,130)
------------
Total liabilities and partners' deficit $ 4,684,337
============
The accompanying notes are an integral part of these statements.
F-37
165
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL -
THE BRISTOL PLACE HOTEL TORONTO
(IN RECEIVERSHIP)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN U.S. DOLLARS)
Revenues:
Rooms $ 5,048,871
Food and beverage 4,747,696
Other 507,098
------------
Total revenue 10,303,665
------------
Expenses:
Property operating costs and expenses 2,032,047
Food and beverage costs and expenses 3,741,512
Selling, general and administrative 1,274,665
Repairs and maintenance 502,394
Utilities 388,291
Receivership expenses 339,079
Management fees 305,273
Franchise cost 84,733
Depreciation and amortization 229,079
Real estate and personal property taxes, and property insurance 1,008,687
Interest expense 2,770,274
Other expense 258,499
------------
Total expenses 12,934,533
------------
Net loss $ (2,630,868)
============
The accompanying notes are an integral part of these financial statements.
F-38
166
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL -
THE BRISTOL PLACE HOTEL TORONTO
(IN RECEIVERSHIP)
STATEMENT OF PARTNERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN U.S. DOLLARS)
Balance at December 31, 1994 $(20,505,040)
Translation adjustment (532,222)
Net loss (2,630,868)
------------
Balance at December 31, 1995 $(23,668,130)
============
The accompanying notes are an integral part of these statements.
F-39
167
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL -
THE BRISTOL PLACE HOTEL TORONTO
(IN RECEIVERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN U.S. DOLLARS)
Cash flows from operating activities:
Net loss $(2,630,868)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 229,079
Changes in assets and liabilities:
Accounts receivable (214,304)
Inventories 34,049
Prepaid expenses 59,270
Other assets (5,861)
Accounts payable, trade (1,063)
Accrued expenses and other liabilities 178,074
Accrued interest recognized in mortgages payable 2,077,287
-----------
Net cash provided by operating activities (274,337)
-----------
Cash flows used in investing activities:
Improvements and additions to hotel property (22,719)
-----------
Cash flows provided by financing activities:
Proceeds from borrowings 732,500
-----------
Effect of exchange rate changes on cash 16,214
Net change in cash and cash equivalents 451,658
Cash and cash equivalents at beginning of periods 204,146
-----------
Cash and cash equivalents at end of periods $ 655,804
===========
Supplement disclosure of cash flow information:
Cash paid during the period for interest $ --
===========
F-40
168
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL -
THE BRISTOL PLACE HOTEL TORONTO
(IN RECEIVERSHIP)
NOTES TO FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Organization - Wyndham Hotel Corporation ("WHC") acquired a 287 room -
hotel, The Bristol Place Hotel ("Bristol"), located in Toronto, Ontario,
Canada from parties controlled by persons unaffiliated with WHC on
August 30, 1996. The hotel was placed into receivership by the mortgage
payable holders on July 25, 1995.
Basis of Presentation - The accompanying financial statements of Bristol
have been presented on a basis consistent with WHC due to the anticipated
common ownership and management since the entity will be the subject of a
business combination with WHC. The financial statements have been
presented in accordance with U.S. generally accepted accounting
principles and using U.S. dollars as the reporting functional currency.
The hotel was owned by an unincorporated joint venture for income tax
purposes and therefore federal and provincial income taxes are the
responsibility of the owners. Substantially all assets and operations of
the joint venture were acquired by WHC on August 30, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Investment in Hotel Property - The hotel property is stated at the lower
of cost or net realizable value and is depreciated using the declining
balance method at a rate of 5% for building and improvements and 20% for
furniture, fixtures and equipment.
The management of Bristol reviews the carrying value of the property to
determine if circumstances exist indicating an impairment in the carrying
value of the investment of the hotel property or that depreciation
periods should be modified. If facts or circumstances support the
possibility of impairment, the owner of the Bristol will prepare a
projection of the discounted future cash flows, without interest charges,
of the specific hotel property and determine if the investment in hotel
property is recoverable based on the discounted future cash flows. The
owner of Bristol does not believe that there are any factors or
circumstances indicating impairment of any of its investment in hotel
property.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized. Upon the sale or disposition of
a fixed asset, the asset and related accumulated depreciation are removed
from the accounts and the gain or loss is included in operations.
F-41
169
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL -
THE BRISTOL PLACE HOTEL TORONTO
(IN RECEIVERSHIP)
NOTES TO FINANCIAL STATEMENTS - (continued)
(IN U.S. DOLLARS)
Cash and Cash Equivalents - For purposes of reporting cash flows, all
highly liquid debt instruments with original maturities of three months
or less are considered to be cash equivalents.
Inventories - Inventories consist primarily of food and beverage items
and are stated at the lower of cost or market, with cost determined using
the first-in, first-out method.
Foreign Currency Translation - Assets and liabilities denominated in
foreign currencies are translated into US dollars at the current rate in
effect at year-end. All foreign income and expenses are translated at the
weighted average exchange rates during the year.
Current year translation loss is reported separately as a component of
partners' capital.
Income Taxes - The hotel is included in an unincorporated joint venture
which is not a taxable entity. The results of operations are included in
the tax returns of the partners. The joint venture's tax return and the
amount of allocable income or loss are subject to examination by federal
and provincial taxing authorities. If such examinations result in changes
to income or loss, the tax liability of the partners could be changed
accordingly.
Revenue Recognition - Room, food and beverage and other revenues are
recognized when earned. Ongoing credit evaluations are performed and an
allowance for potential credit losses is provided against the portion of
accounts receivable which is estimated to be uncollectible.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Advertising Costs - The hotel participates in various advertising and
marketing programs. All advertising costs are expensed in the period
incurred. The hotel recognized advertising expenses of $205,846 for the
year ended December 31, 1995.
F-42
170
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL -
THE BRISTOL PLACE HOTEL TORONTO
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. MORTGAGES PAYABLE:
Mortgages payable at December 31, 1995 consists primarily of four
mortgage note payables totaling $25,961,537, including accrued interest
(as described below) and an escrow account for property taxes paid in the
amount of $459,439, including interest at a rate of 11.50%.
All debt is collateralized by the investment in hotel property.
Mortgage Interest Amount
-------------------- -------------- -----------
First 10.00% $ 2,648,841
Second 11.00% 1,813,051
Third 11.50% 2,691,454
Fourth 11.50% 18,859,275
-----------
Total $26,012,621
===========
The owner defaulted on the mortgage note payables on July 25, 1995 and
the hotel was placed into receivership by the trustee.
A receivers certificate was received on September 8, 1995 in the amount
of $732,500, the liability to the receiver is due upon receivership
termination and Bristol accrued $51,328 interest at a rate of prime plus
2%.
Upon the sale of the hotel to WHC on August 30, 1996, the receiver
anticipates using the proceeds from the sale to repay the receivers
certificate in full and to repay the remainder to the mortgage note
payables holders.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Statements of Financial Accounting Standards No. 107 requires all
entities to disclose the fair value of certain financial instruments in
their financial statements. Accordingly, Bristol reports the carrying
amounts of cash and cash equivalents, accounts receivable, accounts
payable, accrued expenses and other liabilities at cost, which
approximates fair value due to the short maturity of these instruments.
The carrying amount of Bristol's debt approximates fair value due to the
ability to obtain such borrowings at comparable interest rates.
F-43
171
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL -
THE BRISTOL PLACE HOTEL TORONTO
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. COMMITMENTS AND CONTINGENCIES:
The hotel is required to remit 11.5% of gross room revenue to the
franchiser for reservation costs and sales and advertising expenses
incurred to promote the hotel at the national level. Additional sales and
advertising costs are incurred at the local property level.
Participation fees represent the annual expense under the terms of the
lease agreement expiring November 30, 2066. Participation costs are based
upon 8% of the defined gross annual profit up to $582,880 and 4.5% upon
profit exceeding the limit. When the mortgages are repaid these amounts
reduce to 6.5% and 3% respectively.
WHC is subject to environmental regulations related to the ownership of
real estate (hotels). As part of the diligence procedures, WHC has
conducted a Phase I environmental assessment on the hotel prior to
acquisition. The cost of complying with the environmental regulations was
not material to the statements of operations for the year ended December
31, 1995. WHC is not aware of any environmental condition at the hotel
which is likely to have a material adverse effect on the financial
statements.
The aggregate future minimum lease payments for operating leases relating
to the premises and the hotel's operations are as follows:
For the year ending: Amount
----------
December 31, 1996 $ 101,837
December 31, 1997 88,941
December 31, 1998 87,847
December 31, 1999 71,061
December 31, 2000 55,302
Thereafter 2,370,907
----------
Total $2,775,895
==========
F-44
172
WYNDHAM HOTEL CORPORATION ACQUISITION HOTEL -
THE BRISTOL PLACE HOTEL TORONTO
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. RELATED PARTY TRANSACTIONS:
Transactions between related parties included in the financial statements
are as follows:
Bristol Group International--management fees $305,273
Park Plaza Hotel--other operating expenses 25,309
--------
Total $330,582
--------
7. SUBSEQUENT EVENTS:
As discussed in Note 1, Bristol was acquired by WHC on August 30, 1996.
The acquisition will be accounted for by WHC under the purchase method of
accounting. Accordingly, the cost basis of the hotel will change to
reflect the acquisition price of the hotel by WHC. Any post-acquisition
debt will be different than the historical debt reflected in the
accompanying financial statements. The management agreement is expected
to be terminated concurrently with the sale of the hotel to WHC. The
financial statements do not reflect the effects of this transaction.
F-45
173
APPENDIX A
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
WYNDHAM EMPLOYEES LTD.
Dated December 31, 1993
THE PARTNERSHIP INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY JURISDICTION. NO PARTNERSHIP
INTEREST MAY BE SOLD OR OFFERED FOR SALE (WITHIN THE MEANING OF ANY SECURITIES
LAW) UNLESS A REGISTRATION STATEMENT UNDER ALL APPLICABLE SECURITIES LAWS WITH
RESPECT TO THE INTEREST IS THEN IN EFFECT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS IS THEN APPLICABLE TO THE INTEREST. A PARTNERSHIP
INTEREST ALSO MAY NOT BE TRANSFERRED OR ENCUMBERED UNLESS THE PROVISIONS OF
ARTICLE V OF THIS AGREEMENT ARE SATISFIED.
174
TABLE OF CONTENTS
Page
----
I. FORMATION OF PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Places of Business and Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5. Title to Partnership Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. CAPITALIZATION AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Percentage Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Required Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4. Voluntary Contributions and Adjustment of Percentage Interests . . . . . . . . . . . . . . . . . . . 3
2.5. Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6. Interest on and Return of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7. Negative Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8. Adjustment of Gross Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
III. ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS TO THE PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1. Profits, Losses and Distributive Shares of Tax Items . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2. Calculation of Net Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3. Distribution of Net Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4. Revaluation of Partnership Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
IV. MANAGEMENT OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1. The General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2. Specific Authority of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3. Limitations on Power and Authority of the General Partner . . . . . . . . . . . . . . . . . . . . . 15
4.4. Compensation and Expenses of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5. Other Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6. Partnership Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.8. Limitations on Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9. Other Activities of the Partners and Agreements with Related Parties . . . . . . . . . . . . . . . . 17
4.10. Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.11. Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.12. Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
V. NEW PARTNERS, RESTRICTIONS ON TRANSFER OF
PARTNERSHIP INTERESTS AND OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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5.1. Admission of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.2. Procedure for Admission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3. Permitted Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.4. General Partner Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.5. Transfer Upon Termination of Marital Relationship . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.6. Interfamily Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
VI. BUY-OUT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1. Buy-Out Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3. Procedure Upon Buy-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
VII. LIQUIDATION AND DISSOLUTION OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1. Dissolution Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2. Continuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3. Method of Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.4. Date of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5. Death, Dissolution, Legal Incompetency or Bankruptcy of a Limited Partner . . . . . . . . . . . . . 29
VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.3. Reports; Annual Valuation of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.4. Method of Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.5. Representations of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.7. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.8. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.9. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.10. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.11. Governing Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.12. Other Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.13. General Partner with Interest as Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.14. Legal Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.15. Gender, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.16. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.17. Filing of Composite State Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.18. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.19. Involvement of the Partnership in Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . 42
8.20. Waiver of Partition and Certain Other Rights; Nature of Interests in the Partnership . . . . . . . . . . . 42
8.21. Partner Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.22. Partner Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.23. Creditors Not Benefitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.24. Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.25. Mandatory Exchange of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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This Amended and Restated Agreement of Limited Partnership (this
"Agreement") is entered into as of the date set forth on the cover page to this
Agreement among the Persons executing this Agreement. Defined terms in this
Agreement have the meanings assigned to them in Section 8.18.
I. FORMATION OF PARTNERSHIP
1.1. Formation. Pursuant to an Agreement of Limited Partnership
dated April 30, 1990 (the "Original Agreement"), the initial Partners formed
the Partnership as a limited partnership under the Texas Revised Limited
Partnership Act (the "Act"). In accordance with the authority set forth in
Section 8.7 of the Original Agreement, the Partners executing this Agreement
desire to amend and restate the Original Agreement in its entirety.
1.2. Name. The name of the Partnership is Wyndham Employees Ltd.
The General Partner may change the name of the Partnership from time to time.
The General Partner also may adopt one or more fictitious names for use by the
Partnership.
1.3. Places of Business and Registered Office. The principal and
registered office of the Partnership is at Suite 2300, 2001 Bryan Street,
Dallas, Texas 75201. The General Partner, which is a corporation organized
under the laws of the State of Texas and which has a business office at the
Partnership's registered office, is the initial registered agent for the
Partnership. The General Partner may change the principal or registered office
or registered agent of the Partnership from time to time. The General Partner
may establish, maintain and abandon one or more additional places of business
for the Partnership.
1.4. Purpose. The purpose of the Partnership is to conduct any
activity permitted by law, any of which will be permitted regardless of whether
any WHC Person has a direct or indirect interest in the activity.
1.5. Title to Partnership Property. Property may be acquired in
the name of the Partnership or in the name of an agent or nominee on terms and
conditions the General Partner deems appropriate.
1.6. Term. The term of the Partnership will continue until 99
years from the effective date of the formation of the Partnership, subject to
earlier termination under Article VII.
II. CAPITALIZATION AND RELATED MATTERS
2.1. Percentage Interests. Except as otherwise provided in this
Agreement, no Partner shall be obligated to make a Capital Contribution.
Subject to Section 2.4, the Percentage Interest of the General Partner at any
time will be one percent (1%). Subject to Section 2.4, the Percentage Interest
of each Limited Partner at any time will equal the product determined by
multiplying ninety-
177
nine percent (99%) by a fraction, the numerator of which is the number of units
of Partnership interests ("Units") owned by the Limited Partner as set forth on
the records of the Partnership, and the denominator of which is the total
number of Units held by all Limited Partners as of the date of determination.
Percentage Interests may be changed from time to time in accordance with this
Agreement.
2.2. Required Funds. (a) General. Any funds required by the
Partnership to meet its cash requirements will be provided by (i) capital
contributions made by the Partners as provided in this Agreement, or (ii)
borrowings by the Partnership from one or more Persons (including without
limitation TCI Persons and affiliates of TCI Persons) on terms and conditions
the General Partner deems appropriate. No Partner will have an obligation to
advance any funds to the Partnership (either as a loan or a capital
contribution) except as provided in Section 3.3(b).
(b) Certain Deemed Contributions. If a Partner makes a payment
directly to a creditor or another Partner in satisfaction of any indebtedness
of the Partnership or any indemnity or contribution obligation in respect of
Partnership indebtedness for which the Partner bears the ultimate financial
responsibility, the payment will be deemed to be a contribution of money to the
Partnership.
2.3. Borrowings. (a) Third Person Borrowings. Any additional
funds required by the Partnership to meet its cash requirements may, if the
General Partner elects, be borrowed by the Partnership from third Persons upon
the terms and conditions that the General Partner deems appropriate.
(b) Borrowings from Partners. In lieu of borrowings from third
Persons, the General Partner from time to time may cause the Partnership to
borrow required amounts from one or more Partners. Loans made by Partners
under this Section 2.3(b) will not be considered a contribution to the capital
of the Partnership; but will constitute indebtedness of the Partnership to the
advancing Partner, payable from the first available Net Cash Flow of the
Partnership (taking into account, first, all other cash payment obligations of
the Partnership, notwithstanding that any such payment is based upon or
computed with reference to a measure of the Partnership's cash flow) and, to
the extent still unpaid, upon the termination and liquidation of the
Partnership. Each loan by a Partner will bear simple interest on the unpaid
principal balance at 75% of the Interest Rate or at any other rate approved by
the General Partner, but in any case not in excess of the maximum lawful rate.
Payments made to an advancing Partner will be credited first to interest and
then to principal. At the request of the Partner making an advance, the
Partnership will execute a promissory note evidencing the indebtedness. The
General Partner
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will not be personally liable for loans made by Partners under this Section
2.3(b) or be obligated to make a contribution to the capital of the Partnership
to repay those loans. Loans made by Partners under this Section 2.3(b) will be
payable only from the assets of the Partnership.
2.4. Voluntary Contributions and Adjustment of Percentage
Interests. (a) Voluntary Contributions. From time to time the General
Partner may accept, on behalf of the Partnership, capital contributions by
existing Partners.
(b) Adjustment of Percentage Interests. The Percentage Interests
of the Partners may be adjusted by the General Partner in the manner determined
in the sole discretion of the General Partner to be appropriate to compensate
for capital contributions. Each of the Partners irrevocably authorizes the
General Partner from time to time to make adjustments and irrevocably consents
to the adjustments.
(c) Guidelines for Adjustment. In making any adjustment the
General Partner will be guided by the following general principles:
(i) The Partner contributing capital will have his Percentage
Interest increased, based on the proportion that the total Net Value of his
contribution bears to the total Net Value of all assets of the Partnership
after giving effect to the contribution, using the aggregate of the EVBS Values
of the interests held by the Partnership in WHC Persons as of the most recent
June 30 (or such other date deemed appropriate by the General Partner) and the
fair market value of all Cash Items owned or held by the Partnership.
(ii) The remaining Percentage Interests will be allocated among the
Partners not contributing in proportion to their Percentage Interests before
the contribution, provided, however, that the General Partner will have a
Percentage Interest of at least one percent (1%).
(d) Miscellaneous. Each of the Partners (i) waives any right
which he might have to object to any adjustment made under this Section 2.4,
(ii) waives any preemptive or other right he may have arising out of the
acceptance of any capital contribution and consents to adjustments of the
Percentage Interests as provided in this Section 2.4, and (iii) without
limiting the generality of Section 4.10, agrees to execute from time to time
any amendments to this Agreement or the Partnership Certificate which the
General Partner may determine to be advisable to reflect any capital
contributions and adjustments to the Percentage Interests made under this
Section 2.4.
2.5. Capital Accounts. (a) Establishment and Maintenance. A
separate capital account ("Capital Account") will be maintained
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for each Partner. The Capital Account of each Partner will be determined and
adjusted as follows:
(i) Each Partner's Capital Account will be credited with the
Partner's Capital Contributions, the Partner's distributive share of Profits,
any items in the nature of income or gain that are specially allocated to the
Partner under Sections 3.1(c) or 3.1(d), the Partner's share of any Positive
Adjustment under Section 3.4, and the amount of any Partnership liabilities
that are assumed by the Partner or secured by any Partnership property
distributed to the Partner.
(ii) Each Partner's Capital Account will be debited with the amount
of cash and the Gross Asset Value of any Partnership property distributed to
the Partner under any provision of this Agreement, the Partner's distributive
share of Losses, any items in the nature of deduction or loss that are
specially allocated to the Partner under Sections 3.1(c) or 3.1(d), the
Partner's share of any Negative Adjustment under Section 3.4, and the amount of
any liabilities of the Partner assumed by the Partnership or which are secured
by any property contributed by the Partner to the Partnership.
(iii) If any interest in the Partnership is transferred in accordance
with the terms of this Agreement, the transferee will succeed to the Capital
Account of the transferor to the extent it relates to the transferred interest.
(iv) In determining the amount of any liability for purposes of
Sections 2.5(a)(i) and 2.5(a)(ii), Code Section 752 (c) and any other
applicable provisions of the Code and the Treasury Regulations will be taken
into account.
(b) Modifications by the General Partner. The provisions of this
Section 2.5 and the other provisions of this Agreement relating to the
maintenance of Capital Accounts have been included in this Agreement to comply
with Section 704 (b) of the Code and Treasury Regulations Section 1.704-1(b)
and will be interpreted and applied in a manner consistent with those
provisions. Without limiting the generality of this Section 2.5, the General
Partner may modify the manner in which the Capital Accounts are maintained
under this Section 2.5 in order to comply with those provisions, as well as
upon the occurrence of events that might otherwise cause this Agreement not to
comply with those provisions.
2.6. Interest on and Return of Capital. No Partner will be
entitled to any interest on his Capital Account or on his contributions to the
capital of the Partnership. Except as expressly provided in this Agreement, no
Partner will have the right to demand or receive the return of all or any part
of his
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capital or to receive property other than cash from the Partnership.
2.7. Negative Capital Accounts. No Partner will be required to pay
to the Partnership or to any other Partner any deficit or negative balance
which may exist from time to time in the Partner's Capital Account.
2.8. Adjustment of Gross Asset Value. Gross Asset Value, with
respect to any asset, is the adjusted basis for federal income tax purposes of
that asset, except as follows:
(a) The initial Gross Asset Value of any asset
contributed (or deemed contributed under Treasury Regulations Section
1.708-1(b)(1)(iv)) by a Partner to the Partnership will be the fair
market value of the asset on the date of the contribution, as
determined by the General Partner.
(b) The Gross Asset Values of all Partnership assets will
be adjusted to equal the respective fair market values of the assets,
as determined by the General Partner, as of (i) the date required
under Section 3.4, (ii) the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership property as
consideration for an interest in the Partnership if the General
Partner reasonably determines an adjustment is necessary or
appropriate to reflect the relative economic interests of the Partners
in the Partnership within the meaning of Treasury Regulations Section
1.704-1(b)(2)(iv)(g), and (iii) the liquidation of the Partnership
within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g).
(c) The Gross Asset Value of any Partnership asset
distributed to any Partner will be the gross fair market value of the
asset on the date of distribution.
(d) The Gross Asset Values of Partnership assets will be
increased or decreased to reflect any adjustment to the adjusted basis
of the assets under Code Section 734 (b) or 743(b), but only to the
extent that the adjustment is taken into account in determining
Capital Accounts under Treasury Regulations Section 1. 704-1 (b) (2)
(iv) (m), provided that Gross Asset Values will not be adjusted under
this Section 2.8(d)to the extent that the General Partner determines
that an adjustment under Section 2.8(b) is necessary or appropriate in
connection with a transaction that would otherwise result in an
adjustment under this Section 2.8(d).
After the Gross Asset Value of any asset has been determined or adjusted under
Sections 2.8(a), 2.8(b) or 2.8(d), Gross Asset Value
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will be adjusted by the Depreciation taken into account with respect to the
asset for purposes of computing Profits and Losses.
III. ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS TO THE PARTNERS
3.1. Profits, Losses and Distributive Shares of Tax Items.
(a) Profits. Profits for any fiscal year will be allocated to the
Partners in the following order and priority:
(i) First, until the cumulative Profits allocated
pursuant to this Section 3.1(a)(i) are equal to the cumulative Losses,
if any, allocated pursuant to Section 3.1(b)(ii) from the Adjustment
Date to the end of such fiscal year;
(ii) Second, to the Partners in proportion to their
respective Percentage Interests.
(b) Losses. Losses for any fiscal year will be allocated to the
Partners in the following order and priority:
(i) First, until the cumulative Losses allocated pursuant
to this Section 3.1(b)(i) are equal to the cumulative Profits, if any,
allocated pursuant to Section 3.1(a)(ii) from the Adjustment Date to
the end of such fiscal year;
(ii) Second, to the Partners in proportion to their
respective Percentage Interests.
(c) Special Allocations. Except as otherwise provided in this
Agreement, the following special allocations will be made in the following
order and priority:
(i) Partnership Minimum Gain Chargeback.
Notwithstanding any other provision of this Section 3.1, if there is a
net decrease in Partnership Minimum Gain during any Partnership fiscal
year, each Partner will be specially allocated items of Partnership
income and gain for that year (and, if necessary, subsequent years) in
an amount equal to the greater of (A) the portion of that Partner's
share of the net decrease in Partnership Minimum Gain, determined in
accordance with Treasury Regulations Section 1.704-2(g)(2), or (B) if
the Partner would otherwise have an Adjusted Capital Account Deficit
at the end of that year, an amount sufficient to eliminate the
Partner's Adjusted Capital Account Deficit. Allocations pursuant to
the previous sentence will be made in proportion to the respective
amounts required to be allocated to the various Partners pursuant
thereto. The items to be so allocated will be determined in
accordance with Treasury
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Regulations Section 1.704-2(f)(6), 1.740-2(g)(2), and
1.704-2(j)(2)(i). This Section 3.1(c)(i) is intended to comply with
the minimum gain chargeback requirement in that Section of the
Treasury Regulations and will be interpreted consistently therewith.
(ii) Partner Minimum Gain Chargeback. Notwithstanding any
other provision of this Section 3.1 except Section 3.1(c)(i), if there
is a net decrease in Partner Minimum Gain attributable to a Partner
Nonrecourse Debt during any Partnership fiscal year, each Partner with
a share of the Partner Minimum Gain attributable to the Partner
Nonrecourse Debt, determined in accordance with Treasury Regulations
Section 1.704- 2(i)(4), will be specially allocated items of
Partnership income and gain for that year (and, if necessary,
subsequent years) in an amount equal to the greater of (A) the portion
of the Partner's share of the net decrease in Partner Minimum Gain
attributable to the Partner Nonrecourse Debt, determined in accordance
with Treasury Regulations Section 1.704-2(i)(5) or (B) if the Partner
would otherwise have an Adjusted Capital Account Deficit at the end of
that year, an amount sufficient to eliminate the Partner's Adjusted
Capital Account Deficit. Allocations pursuant to the previous
sentence will be made in proportion to the respective amounts required
to be allocated to the various Partners pursuant thereto. The items
to be so allocated will be determined in accordance with Treasury
Regulations Section 1.704-2(i)(5). This Section 3.1(c)(ii) is
intended to comply with the minimum gain chargeback requirement in
that Section of the Treasury Regulations and will be interpreted
consistently therewith.
(iii) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions
described in Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)(4),
(5) or (6), items of Partnership income and gain will be specially
allocated to that Partner in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the
Adjusted Capital Account Deficit of the Partner as quickly as
possible, provided that an allocation pursuant to this Section
3.1(c)(iii) will be made only if and to the extent that the Partner
would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 3.1 have been tentatively
made as if this Section 3.1(c)(iii) were not in the Agreement.
(iv) Gross Income Allocation. In the event any Partner
has a deficit Capital Account at the end of any Partnership fiscal
year which is in excess of the sum of (A) the amount that Partner is
obligated to restore pursuant to any provision of this Agreement and
(B) the amount that Partner is deemed to be obligated to restore
pursuant to Treasury Regulations
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Sections 1.704-2(g)(1) and 1.704-2(i)(5), that Partner will be
specially allocated items of Partnership income and gain in the amount
of the excess as quickly as possible, provided that an allocation
pursuant to this Section 3.1(c)(iv) will be made only if and to the
extent that the Partner would have a deficit Capital Account in excess
of the sum after all other allocations provided for in this Section
3.1 have been made as if this Section 3.1(c)(iv) and Section
3.1(c)(iii) were not in the Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for
any fiscal year or other period will be specially allocated among the
Partners in proportion to their respective Percentage Interests in the
Partnership.
(vi) Partner Nonrecourse Deductions. Any Partner
Nonrecourse Deductions for any fiscal year or other period will be
allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which the Partner
Nonrecourse Deductions are attributable in accordance with Treasury
Regulations Section 1.704-2(i)(1).
(vii) Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset under
Code Sections 734(b) or 743(b) is required to be taken into account in
determining Capital Accounts under Treasury Regulations Section
1.704-1(b)(2)(iv)(m) , the amount of the adjustment to the Capital
Accounts will be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases
the basis), and the gain or loss will be specially allocated to the
Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted under Treasury Regulations
Section 1.704-1(b)(2)(iv)(m).
(viii) Section 38 Property Loss. Any reduction in the tax
basis or cost of Partnership Code Section 38 Property under Code
Section 48(q) will be allocated among the Partners (as an item in the
nature of deduction or loss) in the same proportions as the basis or
cost of the property is allocated under Section 3.1(f).
(ix) Section 38 Property Gain. In the event that the
adjusted tax basis of any Code Section 38 Property that has been
placed in service by the Partnership is increased under Code Section
48(q), the increase will be specially allocated among the Partners (as
an item in the nature of income or gain) in the same proportions as
the investment tax credit that is recaptured with respect to the
property is shared among the Partners.
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(x) Reallocation. To the extent Losses allocated to a
Partner would cause the Partner to have an Adjusted Capital Account
Deficit at the end of any fiscal year, the Losses will be reallocated
among other Partners in accordance with their respective Percentage
Interests, subject to the limitations contained in this Section
3.1(c).
(xi) Interest in Partnership. Notwithstanding any other
provision of this Agreement, no allocation of Profit, Loss or item of
Profit or Loss will be made to a Partner if the allocation would not
have "economic effect" under Treasury Regulations Section
1.704-1(b)(2)(ii) or otherwise would not be in accordance with the
Partner's interest in the Partnership within the meaning of Treasury
Regulations Section 1.704-1(b)(3). The General Partner will have the
authority to reallocate any item in accordance with this Section
3.1(c)(xi).
(d) Curative Allocations. The "Regulatory Allocations" consist of
allocations made to a Partner (or predecessor) under Sections 3.1(c)(i), (ii),
(iii), (iv) and (x), allocations to a Partner (or predecessor) under Section
3.1(c)(v) to the extent the cumulative amount of those allocations exceeds the
cumulative amount of Nonrecourse Deductions allocated to that Partner (or
predecessor), and allocations to a Partner (or predecessor) under Section
3.1(c)(vi) to the extent the cumulative amount of those allocations exceeds the
cumulative amount of Partner Nonrecourse Deductions allocated to that Partner
(or predecessor). Notwithstanding any other provision of this Section 3.1
(other than the Regulatory Allocations), the Regulatory Allocations will be
taken into account in allocating other items of income, gain, loss and
deduction among the Partners so that, to the extent possible, the net amount of
those allocations of other items and the Regulatory Allocations to each Partner
will be equal to the net amount that would have been allocated to the Partner
if the Regulatory Allocations had not occurred.
(e) Tax Allocations--Code Section 704(c). In accordance with Code
Section 704(c) and the related Treasury Regulations, income, gain, loss and
deduction with respect to any property contributed to the capital of the
Partnership, solely for tax purposes, will be allocated among the Partners so
as to take account of any variation between the adjusted basis to the
Partnership of the property for federal income tax purposes and the initial
Gross Asset Value of the Property (computed in accordance with Section 2.8).
If the Gross Asset Value of any Partnership asset is adjusted under Section
2.8, subsequent allocations of income, gain, loss and deduction with respect to
that asset will take account of any variation between the adjusted basis of the
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the related Treasury Regulations.
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Any elections or other decisions relating to allocations under this Section
3.1(e) will be made in any manner that the General Partner determines
reasonably reflects the purpose and intention of this Agreement. Allocations
under this Section 3.1(e) are solely for purposes of federal, state and local
taxes and will not affect, or in any way be taken into account in computing,
any Partner's Capital Account or share of Profits, Losses or other items or
distributions under any provision of this Agreement.
(f) Other Allocation Rules. The following rules will apply to the
calculation and allocation of Profits, Losses and other items:
(i) Except as otherwise provided in the Agreement, all
Profits, Losses and other items allocated to the Partners will be
allocated among them in proportion to their Percentage Interests.
(ii) For purposes of determining the Profits, Losses or
any other item allocable to any period, Profits, Losses and other
items will be determined on a daily, monthly or other basis, as
determined by the General Partner using any permissible method under
Code Section 706 and the related Treasury Regulations.
(iii) Except as otherwise provided in this Agreement, all
items of Partnership income, gain, loss, deduction and other
allocations not provided for in this Agreement will be divided among
the Partners in the same proportions as they share Profits and Losses.
(iv) Except as otherwise provided in this Agreement, all
items that are components of Profits or Losses will be divided among
the Partners in the same proportions as they have been allocated those
Profits or Losses, as the case may be, for the year.
(v) For purposes of determining a Partner's proportionate
share of the "excess nonrecourse liabilities" of the Partnership
within the meaning of Treasury Regulations Section 1.752-3(a)(3),
Partnership profits shall be allocated among the Partners in
accordance with their respective Percentage Interests in the
Partnership.
(g) Partner Acknowledgment. The Partners agree to be bound by the
provisions of this Section 3.1 in reporting their shares of Partnership income
and loss for income tax purposes.
3.2. Calculation of Net Cash Flow. The net cash flow of the
Partnership (the "Net Cash Flow") will be determined as of the end of each
fiscal year and will be the Profit or Loss of the
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Partnership for that year, as determined in accordance with the method of
accounting then in effect for the Partnership, increased by, without
duplication:
(a) Depreciation and other non-cash charges deducted in
computing the Profit or Loss of the Partnership for the year;
(b) Any loan proceeds or capital contributions received
by the Partnership during the year;
(c) Any cash that becomes available during the year by
reason of a sale, refinancing or other capital transaction or a net
reduction in any reserves;
(d) Any decrease under Sections 2.8(b) or 2.8(c) taken
into account in computing Profit or Loss; and
(e) Any net decrease during the year in non-cash working
capital; and
decreased by, without duplication:
(i) Principal payments made by the Partnership on any of
its indebtedness during the year;
(ii) Capital expenditures, including purchases of
property, made by the Partnership during the year which are not
deductible in computing the Partnership's Profit or Loss for the year;
(iii) Additions during the year to reserves deemed appropriate
by the General Partner;
(iv) Any increase under Sections 2.8(b) or 2.8(c) taken
into account in computing Profit and Loss; and
(v) Any net increase during the year in non-cash working
capital.
3.3. Distribution of Net Cash Flow. (a) Regular Distributions.
Except as provided in Section 7.3, the Net Cash Flow of the Partnership for any
fiscal year, as determined under Section 3.2, will be distributable to the
Partners in the following order:
(i) First, an amount up to the sum of the Partners
positive Capital Accounts as of the last day of the fiscal year, will
be distributed to the Partners who have positive Capital Accounts in
proportion to their respective positive Capital Accounts; and
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(ii) The balance, if any, will be distributed to the
Partners in accordance with their Percentage Interests as of the last
day of the fiscal year.
Distributions will be made on the dates that the General Partner determines to
be appropriate.
(b) Special Distributions. In addition to distributions of Net
Cash Flow, the General Partner may authorize other distributions from time to
time, including without limitation distributions to a Partner to be repaid by
the Partner on terms concerning repayment and interest, if any, the General
Partner agrees to with the Partner receiving the distribution, provided that
all disproportionate withdrawals, to the extent they have not already been
repaid, will in all events be payable on demand by the Partnership during the
liquidation of the Partnership.
(c) Effect on Capital. Distributions to a Partner will be
considered a return of capital only to the extent the distributions exceed that
Partner's Proportionate Share of Profits and Losses increased by Depreciation
and other non-cash charges deducted in computing the Profit and Loss of the
Partnership.
3.4. Revaluation of Partnership Assets. Immediately before any
additional Partners are admitted to the Partnership, or additional Units are
issued to existing Partners, under Section 5.1(b), and on January 1 of each
year after 1990 or such other dates as the General Partner shall determine, the
General Partner will adjust the Gross Asset Values of the Partnership's assets
under Section 2.8 by using the EVBS Values of the interests held by the
Partnership in WHC Persons as of the most recent June 30 (or such other date
deemed appropriate by the General Partner) and the fair market value of all
Cash Items owned or held by the Partnership. The Partnership simultaneously
will adjust the Partners' Capital Accounts upward if the aggregate Gross Asset
Values of all Partnership assets, as so adjusted, exceed the aggregate Gross
Asset Values of all Partnership assets immediately prior to such adjustments
("Positive Adjustment") or downward if the aggregate Gross Asset Values of all
Partnership assets, as so adjusted, are less than the aggregate Gross Asset
Values of all Partnership assets immediately prior to such adjustments
("Negative Adjustment"), by the amount of the difference between the aggregate
Gross Asset Values of all Partnership assets immediately prior to such
adjustments and the Gross Asset Values of all Partnership assets, as so
adjusted, such adjustment to be allocated among the Partners' Capital Accounts
in the manner the inherent gain or loss in the Partnership's assets would be
allocated (in accordance with Section 3.1 hereof) if the assets were sold on
that date. In the event additional Partners are admitted to the Partnership,
or additional Units are issued to existing Partners, under Section 5.1(b) on
the date the Partners' Capital Accounts are adjusted
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under this Section 3.4, all adjustments will be completed before the new
Partners are so admitted or the additional Units are so issued.
IV. MANAGEMENT OF THE PARTNERSHIP
4.1. The General Partner. The business and affairs of the
Partnership will be managed by the General Partner. Except as otherwise
expressly provided in this Agreement with respect to matters requiring the
approval of Partners, all determinations relating to the business and affairs
of the Partnership (including without limitation all decisions required or
permitted to be made by the Partnership as a participant in any other Person in
which it may have an interest) will be made by the General Partner in its sole
discretion and will not give rise to any right or claim by any Partner or the
Partnership unless made in violation of an express provision of this Agreement.
The General Partner will have complete authority to take, in its own name or in
the name of the Partnership, any action that the General Partner determines to
be appropriate under this Agreement or for the conduct of the business of the
Partnership, including without limitation the actions specified in Section 4.2.
All decisions and actions taken by the General Partner under the authority of
this Section 4.1 will be binding upon all of the Partners and the Partnership.
The General Partner will not be liable or accountable, in damages or otherwise,
to the Partnership or to any other Partner for anything it may do or refrain
from doing, except in the case of its willful breach of a material provision of
this Agreement or gross negligence in connection with the business and affairs
of the Partnership.
4.2. Specific Authority of the General Partner. (a) Specified
Authority. The authority of the General Partner to manage the business and
affairs of the Partnership will include complete authority:
(i) To borrow money for the Partnership;
(ii) To create an Encumbrance on all or any part of the
Partnership's assets in order to secure loans or advances to the
Partnership or any Person in which the Partnership has a direct or
indirect interest, or any obligation of the Partnership or any Person
in which the Partnership has a direct or indirect interest, or for any
other Partnership purpose;
(iii) To execute and deliver for the Partnership agreements
and other instruments (including without limitation instruments
creating an Encumbrance on Partnership assets for any purpose
authorized by clause (ii)), including without limitation agreements
and instruments in connection with loans or the Transfer of property;
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(iv) To guarantee obligations of any Person;
(v) To acquire, either directly or indirectly, real
property and tangible and intangible personal property and to Transfer
all or any part of the property of the Partnership or any Person in
which the Partnership has a direct or indirect interest;
(vi) To collect all income of the Partnership and to
satisfy all obligations of the Partnership, including without
limitation expenses of the General Partner relating to the Partnership
described in Section 4.4 and indemnification obligations arising under
Section 4.7;
(vii) To prepare and file all tax returns for the Partnership
(but not the tax returns or other reports of the Partners);
(viii) To make all tax elections for the Partnership,
including without limitation any special basis adjustments under
Section 754 of the Code, provided that the Partner requesting any
Section 754 election must agree to reimburse the Partnership for any
costs incurred by the Partnership in making the election or in
maintaining or preparing any additional records or reports in
connection with the election;
(ix) To prosecute, defend and settle legal, arbitration or
administrative proceedings on behalf of or against the Partnership or,
to the extent relating to the Partnership, any of its Partners;
(x) To manage, maintain and operate the assets of the
Partnership or any Person in which the Partnership has a direct or
indirect interest;
(xi) To employ one or more Persons (including without
limitation any TCI Person or any partner, shareholder, officer,
director, agent or advisor of any TCI Person) in connection with the
business of the Partnership;
(xii) To establish arrangements for the deposit of monies
received on behalf of the Partnership in accordance with Section 4.11
and to disburse all funds on deposit on behalf of the Partnership in
amounts and at times as required in connection with the business of
the Partnership;
(xiii) To procure and maintain insurance against risks and in
amounts determined to be appropriate by the General Partner, including
without limitation errors and omissions or other insurance under which
members or the General Partner and
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its shareholders, officers, directors, agents and affiliates are
beneficiaries;
(xiv) To advance funds of the Partnership to any Person in
which the Partnership has a direct or indirect interest;
(xv) To compromise or release the obligation of a Partner
to make a contribution or otherwise pay cash or Transfer property or
to return cash or property paid or distributed to the Partner in
violation of the Act or this Agreement;
(xvi) To do or cause to be done any action referred to in
this Agreement through any designee; and
(xvii) To do or cause to be done any other act which the
General Partner considers to be appropriate to carry out any of its
powers or in furtherance of the purposes or character of the
Partnership.
(b) Certain Transfers of Property. Notwithstanding Section
4.2(a), the General Partner may not Transfer all or substantially all of the
Partnership's assets, or Transfer to a TCI Person all or substantially all of
the Partnership's interest in real property in which the Partnership has an
interest, without in either case the approval of the General Partner and
Limited Partners holding at least a majority of the Percentage Interests held
by Limited Partners.
4.3. Limitations on Power and Authority of the General Partner.
(a) Certain Limitations. Without the consent of all of the Partners, the
General Partner will not have the authority to do any of the following:
(i) Any act in contravention of this Agreement;
(ii) Any act which would make it impossible to carry on
the ordinary business of the Partnership, other than a Transfer of all
or substantially all of the assets of the Partnership;
(iii) Confess a judgment against the Partnership except in
connection with the settlement of an action or proceeding; or
(iv) Possess property of the Partnership or assign the
Partnership's rights in specific property for other than Partnership
purposes.
(b) Authority as to Third Persons. Notwithstanding Sections
4.2(b) and 4.3(a), the signed statement of the General Partner reciting that it
has the authority or necessary approval of
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Partners for any action, as to any third Person, will be conclusive evidence of
the authority of the General Partner to take that action and of compliance with
Section 4.2, if applicable. Each Partner will promptly execute instruments
determined by the General Partner to be appropriate to evidence the authority
of the General Partner to consummate any transaction permitted by this
Agreement.
4.4. Compensation and Expenses of the General Partner. The General
Partner will not receive any compensation from the Partnership for serving as
General Partner, but all expenses incurred by, or allocated by any TCI Person
to, the General Partner in connection with its service as General Partner
(including without limitation charges for property management, off-site
development, architectural, legal, accounting, data processing, administrative,
executive, tax and other services rendered by employees of any TCI Person) will
be paid or promptly reimbursed by the Partnership. Nothing contained in this
Section 4.4 is intended to affect the Percentage Interest of the General
Partner or the amounts that may be payable to the General Partner by reason of
its Percentage Interest.
4.5. Other Partners. The Limited Partners, in their capacities as
Limited Partners, may not act for or bind the Partnership and may not
participate in the general management, conduct or control of the Partnership's
business or affairs. Nothing contained in this Section 4.5 will prohibit any
Limited Partner from acting as an officer, director, employee, agent or other
representative of the General Partner or the Partnership.
4.6. Partnership Liabilities. The General Partner will have no
liability for the return of the Partners' capital. All liabilities of the
Partnership, including without limitation indemnity obligations under Section
4.7, will be liabilities of the Partnership as an entity, and will be paid or
satisfied from Partnership assets. No liability of the Partnership will be
payable in whole or in part by any Partner in his capacity as a Partner (other
than the General Partner and then only in its capacity as such as determined by
a non-appealable order of a court of competent jurisdiction and subject to
Section 4.7) or by any partner, shareholder, director, officer, agent,
affiliate or advisor of any Partner or any other TCI Person.
4.7. Indemnity. Subject to the limitations contained in Article 11
of the Act, the Partnership to the extent of its assets legally available for
that purpose, will indemnify and hold harmless the Partners and any partner,
shareholder, director, officer, agent, affiliate and professional or other
advisor of any of them (collectively, the "Indemnified Persons") , from and
against any and all loss, damage, expense (including without limitation fees
and expenses of attorneys and other advisors and any court costs incurred by
any Indemnified Person) or liability by
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reason of anything any Indemnified Person does or refrains from doing for, or
in connection with the business or affairs of, the Partnership, except to the
extent that the loss, damage, expense or liability results primarily from the
Indemnified Person's gross negligence or willful breach of a material provision
of this Agreement which in either event causes actual material damage to the
Partnership.
4.8. Limitations on Indemnity. (a) Waiver by Partnership. Subject
to the limitations contained in Article 11 of the Act, the Partnership, with
the approval of the General Partner and Limited Partners who hold at least a
majority of the Percentage Interests held by Limited Partners, may indemnify
any of the Indemnified Persons for any loss, damage, expense or liability for
which the Indemnified Persons would not be entitled to mandatory
indemnification under Section 4.7.
(b) Waiver by Partner. A Partner may waive the benefits of
indemnification under Section 4.7.
(c) Certain Related Rights. The rights to indemnification under
Section 4.7 are exclusive of other rights which any Indemnified Person may
otherwise have at law or in equity, including without limitation common law
rights to indemnification or contribution. Nothing in this Section 4.8 will
affect the rights or obligations of any Person (or the limitations on those
rights or obligations) under any other agreement or instrument to which that
Person and any other TCI Person are parties.
4.9. Other Activities of the Partners and Agreements with Related
Parties. Each Partner will be free to own or otherwise participate directly or
indirectly in the ownership or operation of any activity of any Person, whether
or not the activity competes with or is enhanced by any activity of the
Partnership, provided that nothing in this Section 4.9 will affect the rights
or obligations of any Partner under any other agreement or instrument to which
he and any other TCI Person are parties.
4.10. Power of Attorney. (a) General. Each Partner appoints the
General Partner his attorney-in-fact, with full power of substitution and
resubstitution, to execute in the Partner's name and deliver:
(i) A Partnership Certificate and any amendments to the
Partnership Certificate that the General Partner deems appropriate;
(ii) Any instrument that the General Partner deems
appropriate in order to qualify the Partnership to do business in any
jurisdiction and any other instrument relating to the
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qualification or registration of the Partnership that the General
Partner deems appropriate;
(iii) All certificates and other instruments that may be
appropriate to effect the dissolution and termination of the
Partnership under Article VII;
(iv) All reports, forms and schedules that the General
Partner determines appropriate to file with any governmental body in
connection with any Partnership activity;
(v) Any amendment to this Agreement appropriate to
reflect the Transfer of an interest in the Partnership permitted by
this Agreement, or the admission to, or withdrawal from, the
Partnership of a Partner permitted by this Agreement;
(vi) Any amendment to this Agreement authorized under
Section 8.7; and
(vii) Any instrument or agreement determined by the General
Partner to be necessary or appropriate to effect an exchange
authorized under Section 8.25.
(b) Irrevocable Grant. The power of attorney granted under this
Section 4.10 is coupled with an interest and is irrevocable and will survive
the death, dissolution, legal incompetency, bankruptcy and withdrawal from the
Partnership of any Partner or the Transfer of his interest in the Partnership.
4.11. Banking. The funds of the Partnership will be kept in banking
and other accounts from time to time in accordance with policies approved by
the General Partner, including without limitation any master or general account
of TCI or any TCI Person, provided that funds of the Partnership may not be
kept in any master or general account of TCI or any other TCI Person unless
separate entries are made on the records of the Partnership and on the books
and records of TCI or the other TCI Person reflecting that amounts received
from the Partnership have been deposited for the account of the Partnership and
that withdrawals by or for the Partnership have been made for the purpose of
disbursing funds to the Partnership or for paying liabilities of the
Partnership. Withdrawals from any account will be made on the manual or
facsimile signature of one or more individuals designated by the General
Partner. There will be no commingling of the assets of the Partnership with
the assets of any other Person except as permitted by this Agreement.
4.12. Tax Matters Partner. The General Partner is designated as the
"tax matters partner" under Section 6231 of the Code. If an audit of the
Partnership's federal income tax return is commenced,
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the General Partner will promptly advise all Partners of the audit and provide
each Partner with a copy of any final partnership administrative adjustment (as
defined in Section 6223(a) of the Code).
V. NEW PARTNERS, RESTRICTIONS ON TRANSFER OF
PARTNERSHIP INTERESTS AND OTHER MATTERS
5.1. Admission of Partners. (a) Transfers of Partnership
Interests. Except as expressly provided in Sections 5.3, 5.5 and 5.6 and
Article VI, without the prior written consent of the General Partner (which
consent may be given or withheld in its sole discretion) , no Partner may
voluntarily or involuntarily Transfer, or create or suffer to exist any
Encumbrance against, all or any part of his record or beneficial interest in
the Partnership.
(b) Additional Limited Partners; Additional Units. Subject to the
express provisions contained elsewhere in this Agreement, from time to time the
General Partner may admit additional Limited Partners to the Partnership, or
issue additional Units to existing Partners, upon any terms deemed appropriate
by the General Partner. The General Partner will specify the number of Units
acquired by each Partner and that number will be used in computing the
Partner's Percentage Interest under Section 2.1.
(c) Additional General Partners. Except as provided in
Section 7.2, no new General Partner will be admitted to the Partnership
(whether by admission of a new Partner or conversion of all or part of the
Partnership Interest of an existing Limited Partner) except with the approval
of the General Partner and Limited Partners holding a majority of the
Percentage Interests held by all Limited Partners.
5.2. Procedure for Admission. (a) General. No Person will have
title to any interest in the Partnership until he (i) has executed and
delivered all documents deemed appropriate by the General Partner to reflect
his admission to the Partnership and his agreement to be bound by this
Agreement and, to the extent applicable to the transferred interest, any other
agreement or instrument to which the transferor and any other TCI Person are
parties and (ii) has paid all expenses connected with his admission. Any
purported Transfer or Encumbrance will be ineffective until the transferor and
his transferee furnish to the Partnership the instruments and assurances the
General Partner may request, including without limitation, if requested, an
opinion of counsel satisfactory to the General Partner that the Transfer or
Encumbrance of the Partnership interest has been registered or is exempt from
registration under the Securities Act and all applicable securities laws. No
Transfer or Encumbrance will be effective if it would result in the
"termination" of the Partnership under Section 708 of the Code, unless the
General
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Partner gives its prior written consent to the Transfer or Encumbrance.
(b) Effect of Transfers. Upon an effective Transfer of ownership
of all or any part of a Partner's interest in the Partnership, the Partnership
will continue and, upon compliance with the provisions of this Section 5.2, the
transferee of the interest, if the transferee is not already a Partner of the
same class, will be admitted to the Partnership as a Partner of that class or,
if the transferee is already a Partner of the same class, will continue as a
Partner of that class with an additional Percentage Interest reflecting the
Transfer.
5.3. Permitted Transfers. Upon compliance with the provisions of
Section 5.2, any Limited Partner may Transfer all or any portion of his
interest in the Partnership to a Permitted Transferee.
5.4. General Partner Withdrawal. The General Partner will not
cease to be a general partner of the Partnership or be deemed to have withdrawn
from the Partnership as a result of the occurrence of an event described in
Paragraphs (4), (5), (7), (8) or (9) of Section 4.02(a) of the Act, except as
otherwise expressly provided in this Agreement. Any event that causes the
General Partner to cease to be a General Partner under Sections 4.02 and 6.02
of the Act under circumstances not otherwise expressly allowed in this
Agreement will constitute a breach of this Agreement.
5.5. Transfer Upon Termination of Marital Relationship. The
interest in the Partnership of each Partner who is not a current or former WHC
Employee (including without limitation any Partner who receives a Partnership
interest in connection with a marital dissolution to which this Section 5.5
applies) is subject to an option to purchase (the "Marital Option") in favor of
any Associated WHC Person of the Partner. A Marital Option with respect to the
Partnership interest of a Partner may be exercised if the marital relationship
of that Partner and any Associated WHC Person is terminated (whether by death,
divorce or otherwise) unless the Associated WHC Person succeeds to the entire
Partnership interest under this Section 5.5. Upon the exercise of a Marital
Option, the Person who owns the Partnership interest subject to the Marital
Option (the "Spouse Partner") must sell the Partnership interest at the price
and on the other terms and conditions agreed upon by the Spouse Partner and the
Associated WHC Person. If the purchase of a Partnership interest is not
completed (whether by reason of a failure to exercise the Marital Option or to
agree upon price or terms or any other reason) within 60 calendar days after
the Marital Option becomes exercisable, the failure will constitute a Buy-out
Event (as defined in Section 6.1) with regard to the interest in the
Partnership covered by that Marital Option, and the provisions of Article VI
will apply. The Marital Option will expire no later than 21 years after the
death of the last remaining
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child, living as of the date of this Agreement, of any Partner who is a partner
of the Partnership at the time of its formation.
5.6. Interfamily Disputes. This Section 5.6 will apply if the
General Partner determines that orderly conduct of the Partnership's business
or affairs is likely to be impaired by an interfamily dispute between a Partner
who is not a current or former WHC Employee and the Associated WHC Person of
the Partner. When this Section 5.6 applies, the Associated WHC Person will
have 60 calendar days to purchase the entire Partnership interest of the
Associated WHC Person. If the purchase of the Partnership interest is not
completed (whether by reason of a failure to agree on price or terms or for any
other reason) within 60 calendar days after the Associated WHC Person receives
notice of the determination of the General Partner, the failure will constitute
a Buy-Out Event (as defined in Section 6.1) with regard to the interest in the
Partnership of the Partner and the provisions of Article VI will apply,
provided that in no event will the Partner have any right to purchase the
interest in the Partnership of any Person.
VI. BUY-OUT
6.1. Buy-Out Events. (a) Definition of Buy-Out Events. Each of
the following events constitutes a "Buy- Out Event" under this Agreement:
(i) Any withdrawal or retirement from the Partnership by
a Partner;
(ii) Any voluntary or involuntary termination, regardless
of the circumstances giving rise to or the legality of the
termination, by any Partner or Associated WHC Person of a Partner of
all of his employment and agency relationships with WHC;
(iii) The filing of a suit, or delivery of notice, to
terminate or dissolve the Partnership by a Partner;
(iv) The death, declaration of legal incompetence or
dissolution and winding-up of a Partner or any Associated WHC Person
of a Partner;
(v) A judicial determination of the insolvency of, or any
filing under the bankruptcy laws by or against, a Partner or any
Associated WHC Person of a Partner;.
(vi) Any material breach of this Agreement by a Partner,
including without limitation any purported voluntary or involuntary
Transfer or Encumbrance of all or any part of a Partner's interest in
the Partnership in a manner not expressly permitted under this
Agreement;
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(vii) The entry of a final judgment, order or decree of a
court or governmental agency having proper jurisdiction that a Partner
or any Associated WHC Person of a Partner is guilty of a felony
involving moral turpitude, fraud or wrongdoing in connection with any
business activity;
(viii) The occurrence of an event described in Section 5.5
or 5.6, but only to the extent provided in Section 5.5 or 5.6;
(ix) Failure of a Consent of Spouse, in the form approved
by the General Partner, to be in effect for the spouse (other than a
spouse who is a current or former WHC Employee) of a Partner or
Associated WHC Person of a Partner; or
(x) A determination by the General Partner that a Partner
has conducted himself so as to be deemed to have withdrawn from the
Partnership.
(b) Definition of Buy-Out Date. "Buy-Out Date" means the date on
which a Buy-Out Event occurs or, if any waiver has been granted under Section
6.2, the anniversary of the date on which the Buy-Out Event occurred that
coincides with the expiration of the waiver. For purposes of Section
6.1(a)(ii), the Buy-Out Event shall be deemed to occur, unless otherwise
determined by the General Partner, on the date that notice of termination is
given, notwithstanding that employment may be continued for some period
thereafter, whether for purposes of salary continuation, participation in
benefits or otherwise.
(c) Definition of Buy-Out Interest. "Buy-Out Interest" means (i)
all of the Withdrawing Partner's interest in the Partnership if the relevant
Buy-Out Event is not one described in Section 6.1(a)(viii), or (ii) all of the
Withdrawing Partner's interest in the Partnership that, under the terms of
Section 5.5 or 5.6, is subject to purchase, if the Buy-Out Event is one
described in Section 6.1(a)(viii).
(d) Notice of Buy-Out Event. The Withdrawing Partner shall give
notice of the Buy-Out Event to the General Partner within 15 days after its
occurrence.
6.2. Waiver. The General Partner from time to time may waive for
one or more one-year periods a Buy-Out Event. If a waiver is granted, Section
6.3 will not apply to the Buy-Out Event during the waiver period.
6.3. Procedure Upon Buy-Out. (a) Mechanics. Upon the occurrence
of a Buy-Out Event which is not waived as provided in Section 6.2, the Partner
as to whom the event has occurred (the "Withdrawing Partner") will be deemed to
have withdrawn from the Partnership as of the Buy-Out Date as to the Buy-Out
Interest, and
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the Buy-Out Interest will be acquired by the Partnership under the terms and
conditions set forth in this Section 6.3. The Withdrawing Partner will have no
rights in or against the Partnership, other than to receive the amount provided
for in this Section 6.3 on the terms stated in this Section 6.3. As of the
Buy-Out Date, the Buy-Out Interest will be allocated to or among one or more of
the remaining Limited Partners in such manner as the General Partner deems
appropriate.
(b) Value. For the purposes of this Section 6.3, the value
("Value") of a Buy-Out Interest will be determined by calculating the amount
the Withdrawing Partner would receive under Section 7.3 if all interests held
by the Partnership in WHC Persons were disposed of for their respective EVBS
Values determined as of the prior June 30 (or such other date as the General
Partner shall determine) and all Cash Items were reduced to cash of an amount
equal to the fair market value of such Cash Items, and the proceeds were
distributed in accordance with Section 7.3 and by deducting therefrom (i) any
cash distributions made to the Withdrawing Partner since the June 30 (or such
other date determined by the General Partner) as of which the EVBS Values were
determined, and (ii) any other obligation or debt of the Withdrawing Partner to
a WHC Person. The Value of a Buy-Out Interest is subject to adjustment under
Sections 6.3(h) and 6.3(i).
(c) Consummation and Payment. The purchase and sale of the
Buy-Out Interest (the "Buy-Out Closing") shall take place within 60 days after
the Buy-Out Date, provided, however, that if the Withdrawing Partner fails to
give the notice required by Section 6.1(d) within the time period therein
specified, the General Partner may elect to defer the Buy-Out Closing to any
date not later than 60 days after the date that the Withdrawing Partner
actually gives such notice. The Partnership will become obligated to pay the
Value upon execution and delivery by the Withdrawing Partner at the Buy-Out
Closing of all agreements and instruments that the General Partner reasonably
determines to be appropriate to evidence and render fully effective the
Transfer of the Buy-Out Interest to the Partnership. The Partnership and the
Withdrawing Partner will each pay one-half of any transfer taxes, recording
fees, legal fees for preparation of agreements and instruments and other fees
and expenses (including legal and accounting fees and expenses of WHC or any
WHC Person allocated to the Partnership in accordance with WHC's allocation
policies in effect from time to time) incurred by the Partnership or any
Partner in connection with the Transfer of any interest in the Partnership
under this Article VI. However, the Partnership, the Withdrawing Partner and,
subject to Section 4.7, each other Partner will be responsible for all legal
and other costs incurred by it or him in connection with any litigation arising
out of this Article VI. The Value will be paid to the Withdrawing Partner in
accordance with the following schedule:
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(i) 10% of the Value, together with accrued interest on
the Value at a rate equal to the lesser of 75% of the Interest Rate
and the maximum lawful rate under applicable law, which interest will
commence to accrue on the date of the Buy-Out Closing, will be paid to
the Withdrawing Partner on the date (the "First Installment Date") 30
days following the end of the fiscal year during which the Buy-Out
Closing shall occur.
(ii) The remainder of the Value will be payable in nine
equal annual installments due and payable on each succeeding
anniversary of the First Installment Date until the ninth anniversary
thereof, each together with accrued interest on the unpaid balance of
the Value payable to the Withdrawing Partner at a rate equal to the
lesser of 75% of the Interest Rate and the maximum lawful rate under
applicable law. The First Installment Date together with each
succeeding anniversary thereof until the ninth anniversary thereof,
are sometimes hereinafter collectively referred to as the "Installment
Dates."
The Partnership's obligation to pay the Value in accordance with this Section
6.3(c) will be evidenced by an unsecured, nonnegotiable promissory note of the
Partnership dated the date of the Buy-Out Closing.
(d) Alternative Payment Methods. If the General Partner so
elects, it may in connection with payment of the Value:
(i) Pay the Value in full on the First Installment Date;
(ii) Prepay any outstanding balance in respect of the
Value at any time without premium or penalty; or
(iii) Adjust the rate of interest payable in respect of the
Value under Section 6.3 (c) upward to such other rate or rates as the
General Partner shall deem appropriate.
(e) Alternate Provisions. Notwithstanding any other provision of
this Article VI, the Partnership and a Withdrawing Partner may agree on the
Value and the terms upon which the Value will be paid, and in such event, their
agreement shall control. Without limiting the foregoing, the Partnership and a
Withdrawing Partner may agree upon payment of a discounted percentage of the
Value at the Buy-Out Closing in full satisfaction of the amount due the
Withdrawing Partner under this Section 6.3.
(f) Nature of Liability. The obligation to pay the Value will be
an obligation of the Partnership as an entity and will be satisfied only from
the assets of the Partnership. The General Partner will not be required to
contribute capital to the Partnership to pay the Value, nor will it otherwise
be liable for
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payment of the Value. The Partnership's obligation to pay the Value to a
Withdrawing Partner shall be subject to a restriction (the "Cash Flow
Restriction") so that in no event shall an installment of the Value payable on
any Installment Date, together with amounts payable on such Installment Date to
all other Withdrawing Partners, exceed an amount (the "Available Buy-Out Cash
Flow") equal to 50% of the Net Cash Flow (determined in accordance with Section
3.2 but without taking into account payments made by the Partnership to
Withdrawing Partners) for the fiscal year immediately preceding the Installment
Date in question. In the event the Available Buy-Out Cash Flow is not
sufficient to make all payments of the Value due to Withdrawing Partners on any
Installment Date, the Available Buy-Out Cash Flow shall be applied
proportionately to the Partnership's obligation to each Withdrawing Partner
based on the amount of the payment due thereto in relation to the amounts due
on such Installment Date to all Withdrawing Partners, and the amount of each
payment not made to Withdrawing Partners by reason of the Cash Flow Restriction
(together with interest thereon at the rate above provided, a "Deferred
Amount") shall be deferred until the next Installment Date; provided, however,
that on any Installment Date the Available Buy-Out Cash Flow shall first be
applied to outstanding Deferred Amounts in the order in which they were
deferred; to the extent that Available Buy-Out Cash Flow is not sufficient to
pay all Deferred Amounts that have been outstanding since the same Installment
Date, it shall be applied proportionately to each such Deferred Amount based on
the amount thereof in relation to the amounts of all other such Deferred
Amounts; and as to each Deferred Amount, the Available Buy-Out Cash Flow shall
be applied first to accrued interest and then to principal.
(g) Exception. If, at the time of a Buy-Out Event, the
Partnership is no longer acquiring interests in WHC Persons, the Withdrawing
Partner will not be entitled to receive the Value but, instead, will be paid in
liquidation of the Buy-Out Interest the amounts that he otherwise would have
received as distributions with respect to the Buy-Out Interest at such times as
such amounts otherwise would have been distributed to him had he not withdrawn
from the Partnership, provided, however, that if such Buy-Out Event occurs
during the Vesting Period for the Withdrawing Partner, the aggregate amount
payable to him shall equal $10 per Unit held by him.
(h) Vesting. The Partners recognize that the appreciation in value
of the Partnership's assets will be dependent, to a large extent, upon efforts
of the Partners to be expended in their work for WHC and that it, therefore, is
appropriate to adjust the Value of a Partner's interest in the Partnership
based upon the period he makes contributions in a significant role at WHC.
Accordingly, if a Buy-Out Event occurs with respect to a Withdrawing Partner
during the Vesting Period (as defined below), the amount payable to him
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shall equal $10 per Unit held by the Withdrawing Partner. As used in this
Section 6.3(h), the "Vesting Period" for a Partner is a period commencing on
the date on which the Partner first acquires an equity interest in the
Partnership and ending on the fifth anniversary of the commencement date;
provided, however, that the General Partner, in its sole discretion, may
shorten or waive the Vesting Period for a Partner without affecting the Vesting
Period for any other Partner; and provided further, that in the event that the
Buy-Out Event shall be caused by the death or permanent disability of the
Withdrawing Partner, then the Buy-Out Event in all cases shall be deemed to
have occurred after the end of the Vesting Period. The determination whether a
Limited Partner has a permanent disability shall be made by the General Partner
in its sole discretion.
(i) Restoration Obligations. The Value, as adjusted pursuant to
Section 6.3(h), will be reduced by the amount that the Withdrawing Partner
would be obligated to pay under Section 3.3(b), assuming that the Partnership
was immediately liquidated. If the Value that would be payable to a
Withdrawing Partner is less than the amount that would be owed by the
Withdrawing Partner under Section 3.3(b), the Withdrawing Partner will pay to
the Partnership, within 90 days after the Buy-Out Date, the amount by which the
payment obligation exceeds the Value.
VII. LIQUIDATION AND DISSOLUTION OF THE PARTNERSHIP
7.1. Dissolution Events. The Partnership will be dissolved upon
the happening of any of the following events:
(a) All or substantially all of the assets of the Partnership,
including its Cash Items, are sold or distributed to the Partners (unless the
General Partner notifies the Partners that it has elected to continue the
business of the Partnership, in which event the Partnership will continue until
the General Partner gives notice that it elects to dissolve the Partnership);
(b) A document is signed by the General Partner and by Limited
Partners holding at least a majority of the Percentage Interests held by
Limited Partners which states their election to dissolve the Partnership;
(c) The entry of a final judgment, order or decree of a court of
competent jurisdiction adjudicating the Partnership to be bankrupt and the
expiration without appeal of the period, if any, allowed by applicable law in
which to appeal;
(d) Any withdrawal or retirement from the Partnership by the
General Partner;
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(e) The making of any general assignment for the benefit of
creditors by the General Partner, or the filing of a voluntary petition in
bankruptcy or a voluntary petition for an arrangement or reorganization under
the Bankruptcy Code by the General Partner, or the appointment of a receiver or
trustee for all or substantially all of the properties or assets of the General
Partner if the receiver or trustee is not removed within 60 calendar days;
(f) The dissolution or liquidation of the General Partner;
(g) The expiration of the term of the Partnership (as set forth in
Section 1.6); or
(h) The completion of a mandatory exchange of Partnership
interests with a Successor Corporation as permitted by Section 8.25.
7.2. Continuation. Upon the withdrawal or retirement from the
Partnership of the General Partner, or the occurrence of an event described in
Section 7.1(e) or 7.1(f) with respect to the General Partner, the business of
the Partnership will be continued if within 90 calendar days the Limited
Partners elect by unanimous written action to continue the business of the
Partnership and designate one or more Persons (including without limitation any
Limited Partner who consents) to be a General Partner of the Partnership, upon
terms consented to by all Limited Partners. If the business of the Partnership
is continued, the interest of the General Partner will be converted to that of
a Limited Partner. If the Limited Partners fail to continue the Partnership's
business as provided in this Section 7.2, the Partnership will be liquidated
under Section 7.3. The election by the Limited Partners to continue the
business of the Partnership will not affect any right to acquire the interest
in the Partnership of the General Partner under Article VI.
7.3. Method of Liquidation. (a) Generally. Upon the happening of
any of the events specified in Section 7.1 (except the event specified in
Section 7.1(h)) and, if applicable, the failure to continue the business of the
Partnership under Section 7.2, a liquidating trustee, elected by Limited
Partners holding at least a majority of the Percentage Interests owned by
Limited Partners, will commence as promptly as practicable to wind up the
Partnership's affairs as promptly as practicable, unless the liquidating
trustee determines that an immediate liquidation of Partnership assets would
cause undue loss to the Partnership, in which event the liquidation may be
deferred for a time determined by the liquidating trustee to be appropriate.
Assets of the Partnership may be liquidated or distributed in kind, as the
liquidating trustee determines to be appropriate. The Partners will continue
to share Net Cash Flow from operations and Profits
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and Losses during the period of liquidation in the manner set forth in Sections
3.1 and 3.3. The proceeds from liquidation of the Partnership, including
repayment of any debts of Partners to the Partnership, will be applied in the
following order of priority:
(i) To payment of the debts and satisfaction of the other
obligations of the Partnership, including without limitation debts and
obligations to Partners;
(ii) To the establishment of any reserves deemed
appropriate by the liquidating trustee for any liabilities or
obligations of the Partnership, which reserves will be held for the
purpose of paying liabilities or obligations and, at the expiration of
a period the liquidating trustee deems appropriate, will be
distributed in the manner provided in Sections 7.3(a)(iii) and
7.3(a)(iv);
(iii) To the payment to the Partners of the positive
balances in their respective Capital Accounts, pro rata, in proportion
to the positive balances in those Capital Accounts after giving effect
to all allocations under Section 3.1 and all distributions under
Section 3.3 for all prior periods, including the period during which
the distribution occurs; and
(iv) To the Partners in proportion to their respective
Percentage Interests.
If the Partnership makes distributions in kind of Partnership property which
secures indebtedness, each of the Partners receiving the distribution of
property subject to the indebtedness will be severally liable (as among each
other, but not for the benefit of others) for his Proportionate Share of the
indebtedness, provided that no Partner will be deemed to have assumed any
liability on any indebtedness secured by property distributed to any Partner
for which the Partner is not liable under the terms of the instrument creating
the indebtedness, and provided that the liability of each Partner to other
Partners for indebtedness secured by property distributed to him will be
limited to the value of his interest in the property. Indebtedness secured by
property distributed to Partners in kind need not be discharged out of the
proceeds of liquidation of the Partnership.
(b) Mandatory Exchange of Partnership Interests. Upon the
happening of the event specified in Section 7.1(h), the General Partner shall
wind up the Partnership's affairs and, in connection therewith, shall have such
authority and shall apply and transfer the assets of the Partnership in such
manner as the agreement with the Successor Corporation shall provide, except to
the extent such agreement is in conflict with the Act, in which event the Act
shall control.
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(c) Compliance with Timing Requirements of Treasury Regulations.
If the Partnership is "liquidated" within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(g), (i) distributions will be made under this Section
7.3 (if the liquidation constitutes a dissolution of the Partnership) or
Section 3.3 (if the liquidation does not constitute a dissolution) to the
Partners who have positive Capital Accounts in compliance with Treasury
Regulations Section 1.704- 1(b)(2)(ii)(b) and (ii) if any Partner is indebted
to the Partnership under Section 3.3(b), the Partner will pay the indebtedness
in accordance with the provisions of Section 3.3(b). In the discretion of the
General Partner, a pro rata portion of the distributions that would otherwise
be made to the Partners under the preceding sentence may be applied as follows:
(i) The distributions may be distributed to a trust
established for the benefit of the Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to the
Partnership, and paying any contingent or unforeseen liabilities or
obligations of the Partnership arising out of or in connection with
the Partnership. The assets of any trust established under this
Section 7.3 (c) (i) will be distributed to the Partners from time to
time, in the reasonable discretion of the General Partner, in the same
proportions as the amount distributed to the trust by the Partnership
would otherwise have been distributed to the Partners under this
Agreement; or
(ii) The distributions may be withheld to provide a
reasonable reserve for Partnership liabilities (contingent or
otherwise) and to reflect the unrealized portion of any installment
obligations owed to the Partnership. The withheld amounts will be
distributed to the Partners as soon as practicable.
7.4. Date of Termination. The Partnership will terminate when all
of the cash and property available for application under Section 7.3 have been
applied in accordance with Section 7.3. The establishment of any reserves in
accordance with the provisions of Section 7. 3 (a) (ii) will not extend the
term of the Partnership, but any reserve will be distributed in the manner
provided in Section 7.3 upon expiration of the period established for the
reserve.
7.5. Death, Dissolution, Legal Incompetency or Bankruptcy of a
Limited Partner. The death, dissolution, declaration of legal incompetence or
bankruptcy of a Limited Partner will not dissolve the Partnership. The
deceased, dissolved, incompetent or bankrupt Limited Partner's interest in the
Partnership will pass to a successor in interest of the Limited Partner, who
will succeed to the deceased, dissolved, incompetent or bankrupt Limited
Partner's
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entire interest in the Partnership and, subject to the applicable provisions of
Article VI, will become a Limited Partner of the Partnership with the same
Percentage Interest, the same rights to distributions made by the Partnership,
the same obligations and the same share of the Partnership's Profits and Losses
as the deceased, dissolved, incompetent or bankrupt Limited Partner.
VIII. MISCELLANEOUS
8.1. Fiscal Year. The fiscal year of the Partnership will end on
December 31, unless another fiscal year- end is selected by the General
Partner.
8.2. Records. The records of the Partnership will be
maintained at the principal place of business of the Partnership or at any
other location the General Partner selects. Appropriate records in reasonable
detail will be maintained to reflect income tax information for the Partners.
The Partnership will pay the expense of maintaining its records, including the
share of the expenses of any TCI Person allocated to it in accordance with
TCI's allocation policies as in effect from time to time for maintenance of
Partnership records. Each Partner may inspect and make copies of the records
maintained by the Partnership during reasonable business hours and upon
reasonable notice. Each Partner, at his expense, may require an audit of the
books of account maintained by the Partnership to be conducted by the
independent accountants for the Partnership or WHC.
8.3. Reports; Annual Valuation of Assets. The General Partner, at
Partnership expense, will cause to be prepared and, distributed to each Partner
after the end of each of the Partnership's fiscal years, a yearly statement of
cash flow and a balance sheet as of the close of the Partnership's fiscal year
(or such other reports or at such other times as the General Partner may
determine) and all pertinent information concerning the Partner's distributive
share of Partnership income and loss for that year, the distributions of cash
for that year and any other information reasonably necessary to enable the
Partner to prepare the Partner's tax return. The Partnership will determine
the aggregate value of its assets annually, as of each June 30, which aggregate
value shall be equal to the aggregate of the EVBS Values of the interests held
by the Partnership in WHC Persons, plus the fair market value of all Cash
Items owned or held by the Partnership.
8.4. Method of Accounting. The Partnership records will be
maintained, and its Profits and Losses will be accounted for, in accordance
with the method of accounting from time to time adopted by the General Partner.
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8.5. Representations of the Partners. (a) Sophistication. Each of
the Partners represents to the Partnership and to each of the other Partners
that (i) he is a WHC Person and is fully aware of, and is capable of bearing,
the risks relating to his interest in the Partnership and (ii) he has acquired
his interest in the Partnership for his own account and without any intention
of participating directly or indirectly in any redistribution or resale of any
portion of the interest in violation of the Securities Act or any applicable
securities law.
(b) Securities Laws. Each of the Partners acknowledges that he is
aware that his interest in the Partnership has not been registered under the
Securities Act or the securities laws of any state. Each of the Partners
acknowledges that he has paid no consideration (including without limitation in
exchange for services rendered to WHC or a WHC Person) for his interest in the
Partnership and therefore, the receipt of an interest in the Partnership does
not constitute a sale of a security within the meaning of the Securities Act or
the securities laws of any state. Each of the Partners further acknowledges
that his representations contained in this Section 8.5 are being relied upon by
the Partnership and by the other Partners as the basis for exemption of the
issuance of the Partner's interest in the Partnership from registration
requirements of the Securities Act and state securities laws. Each of the
Partners further acknowledges that the Partnership has no obligation to
register his interest in the Partnership under the Securities Act or any state
securities law.
(c) Full Disclosure. Each of the Partners acknowledges that
before his execution of this Agreement, he received a copy of this Agreement
and that he has examined this Agreement or caused this Agreement to be examined
by his representative or attorney. Each of the Partners further acknowledges
that he or his representative or attorney is familiar with this Agreement and
with the business and prospective business of the Partnership, and that he does
not desire any further information or data relating to the Partnership, the
other Partners or the Partnership's business or prospective business.
(d) Legend. Each of the Partners agrees that a legend reflecting
the restrictions imposed under Article V and under the Securities Act and
applicable state securities laws may be placed on the first page of this
Agreement and on the Partnership Certificate.
8.6. Notices. The General Partner will notify the Partners of any
change in the name, principal or registered office or registered agent of the
Partnership. Any notice or other communication required by this Agreement must
be in writing. Notices and other communications will be deemed to have been
given when delivered by hand or dispatched by telegraph, telex or other
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means of electronic facsimile transmission, or three business days after being
deposited in the United States mail, postage prepaid, addressed to the Partner
to whom the notice is intended to be given at his address set forth on the
signature pages to this Agreement or on Schedule A to this Agreement or, in the
case of the Partnership or the General Partner, to the Partnership's principal
place of business provided for in Section 1.3. A Person may change his notice
address by notice in writing to the Partnership and to each other Partner given
under this Section 8.6.
8.7. Amendments; Waivers. Except as otherwise expressly provided
in this Section 8.7, no amendment of this Agreement will be valid or binding
upon the Partners unless approved by the General Partner and by Limited
Partners holding at least a majority of the Percentage Interests held by
Limited Partners and no waiver of any term of this Agreement will be effective
unless approved by the General Partner. Notwithstanding the immediately
preceding sentence, any amendment requiring the Partners to make any capital
contributions or loans to the Partnership not provided for in this Agreement
must be approved by each Partner affected by the amendment. Notwithstanding
the first sentence of this Section 8.7, the General Partner may approve
amendments to this Agreement which are necessary or appropriate to reflect (a)
a Transfer of an interest in the Partnership permitted by this Agreement, or
the admission to, or withdrawal from, the Partnership of a Partner permitted by
this Agreement or (b) to satisfy or take advantage of any requirements,
conditions, guidelines, options or elections contained in any federal or state
tax statute or any opinion, directive, order, ruling or regulation of the
Internal Revenue Service or any other state or federal tax authority that is
applicable to the Partnership.
8.8. Binding Effect. This Agreement will inure to the benefit of
and will be binding upon the Partners, their legal representatives,
transferees, heirs, administrators, and other successors and assigns. Each
Person who acquires an interest in the Partnership by Transfer will be bound by
any agreement relating to the business of TCI by which the transferor is bound,
to the extent provided in the agreement.
8.9. Duplicate Originals. Any number of counterparts of this
Agreement may be executed. Each counterpart will be deemed to be an original
instrument and all counterparts taken together will constitute one agreement.
8.10. Construction. The titles of the Articles and Sections in this
Agreement have been inserted as a matter of convenience of reference only and
do not affect the meaning or construction of any of the provisions in this
Agreement.
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8.11. Governing Law; Jurisdiction. This Agreement is to be governed
by the laws of the State of Texas, without giving effect to the principles of
conflict of laws. Each of the Partners consents to the jurisdiction of any
court in Dallas County, Texas with subject matter jurisdiction for any action
commenced by the Partnership or another Partner arising out of matters related
to this Agreement or the Partnership. Each Partner waives the right to
commence an action in connection with this Agreement in any court outside
Dallas County, Texas.
8.12. Other Instruments. The Partners will execute other agreements
and instruments that the General Partner determines to be appropriate to carry
out this Agreement or any provision of this Agreement.
8.13. General Partner with Interest as Limited Partner. If the
General Partner has or acquires an interest as a Limited Partner, the General
Partner, with respect to that Limited Partner's interest, will enjoy all of the
rights and be subject to all of the duties of a Limited Partner. The General
Partner's interest as a Limited Partner, if any, will be included in
determining whether any required approval of Limited Partners has been duly
given.
8.14. Legal Construction. In case any one or more of the provisions
contained in this Agreement for any reason is held to be invalid or
unenforceable, the invalidity or unenforceability will not affect any other
provision of this Agreement, which will be construed as if the invalid or
unenforceable provision had not been contained in this Agreement and, in lieu
of each invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a provision as similar in terms to the invalid or
unenforceable provision as may be possible and be valid and enforceable.
8.15. Gender, Etc. Words used in this Agreement in any gender will
be deemed to include the masculine, feminine or neuter gender; singular words
will include the plural and plural words will include the singular; and the word
"or" will be disjunctive but not necessarily exclusive, unless the context
otherwise requires.
8.16. Confidentiality. (a) Generally. The terms of this Agreement,
its subject matter, the identity of any Person with whom the Partnership may be
holding discussions with respect to any investment, acquisition or other
transaction or in whom the Partnership may invest directly or indirectly, and
all other business, financial or other information relating directly to the
conduct of the business and affairs of the Partnership or the relative or
absolute rights or interests of any of the Partners (collectively, the
"Information") that has not been publicly disclosed by an authorized WHC
employee is confidential and
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proprietary information of the Partnership and of WHC the disclosure of which
would cause irreparable harm to the Partnership and the Partners. Accordingly,
each Partner represents that he has not and agrees that he will not and will
direct his agents, advisors and affiliates not to, disclose to any Person any
Information or confirm any statement made by third Persons regarding
Information until the Partnership has publicly disclosed the Information and
has notified each Partner that it has done so.
(b) Legal Proceedings. Each Partner agrees not to disclose any
Information to any Person (other than a Person agreeing to maintain all
Information in strict confidence, a judge, magistrate or referee) in any
action, suit or proceeding relating to or arising out of this Agreement or
otherwise, and to keep confidential all documents (including without limitation
responses to discovery requests) containing any Information. Each Partner
hereby consents in advance to any motion for any protective order brought by
any other Partner represented as being intended by the movant to implement the
purposes of this Section 8.16, provided that if a Partner receives a request to
disclose any Information under the terms of a valid and effective order issued
by a court or government agency and the order was not sought by or on behalf of
or consented to by the Partner, the Partner may disclose the Information to the
extent required if the Partner as promptly as practicable (i) notifies the
General Partner of the existence, terms and circumstances of the order, (ii)
consults in good faith with the General Partner on the advisability of taking
legally available steps to resist or to narrow the order, and (iii) if
disclosure of the Information is required, exercises his best efforts to obtain
a protective order or other reliable assurance that confidential treatment will
be accorded to the portion of the disclosed Information that the General
Partner designates. The cost (including without limitation attorneys' fees and
expenses) of obtaining a protective order covering Information designated by
the General Partner will be a Partnership cost.
(c) Exceptions. Notwithstanding any other provision of this
Section 8.16, a Partner and each agent, advisor and affiliate of a Partner may
disclose Information required to reflect accurately the EVBS Values of his
interests in WHC Persons to Persons with whom he deals and who have a
legitimate interest in the matter.
(d) Miscellaneous. Without limiting the General Partner's other
rights, power or authority under this Agreement, the General Partner may waive,
on behalf of the Partnership and any or all of the Partners, any of the
covenants contained in this Section 8.16. The covenants contained in this
Section 8.16 will survive the Transfer of the interest in the Partnership of
any Partner and the termination of the Partnership.
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(e) No Effect on Competition. This Section 8.16 will not prevent
a Partner from competing with the Partnership or from using business contacts
and general knowledge of operating procedures in the competing business.
8.17. Filing of Composite State Tax Return. Each Limited Partner
shall be deemed to have authorized the Partnership, or in those states where
required, a designated Partner (which shall be the General Partner), to
prepare, execute and file composite state income tax returns and to make tax
payments, including estimated tax payments, on behalf of such Limited Partner
in each state in which the General Partner, in its sole discretion, considers
the filing of a composite state income tax return to be in the best interest of
any one or more of the Limited Partners. Each Limited Partner shall be deemed
to have elected to be included in the composite state income tax returns. Each
Limited Partner acknowledges that notwithstanding the filing of a composite
state income tax return by the Partnership on his behalf, he remains
responsible for:
(a) The filing of his state income tax returns;
(b) The making of his estimated state income tax payments, if
required;
(c) The payment of his share of the total state income taxes that
are due, including any penalty and interest on any underpayment of estimated
state income taxes; and
(d) The statements made on his behalf in composite state income
tax returns.
Each Limited Partner agrees to waive the right to claim deductions, exemptions
and credits in the composite state income tax returns for those states where
such waiver is required.
8.18. Defined Terms. As used in this Agreement, the following terms
will have the following meanings when used herein with initial capital letters:
"Act" has the meaning assigned to it in Section 1.1.
"Adjusted Capital Account Deficit" means, with respect to a Partner,
the deficit balance, if any, in that Partner's Capital Account as of the end of
the relevant taxable year, after giving effect to the following adjustments:
(a) The Capital Account will be increased by any amount
that the Partner is obligated to restore under Section 3.3(b),
including any amount that he is deemed to be obligated to
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restore under Treasury Regulation Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) The Capital Account will be decreased by the items
described in Treasury Regulations Sections 1.704- 1(b)(2)(ii)(d)(4),
(5) and (6).
This definition of Adjusted Capital Account Deficit is intended to comply with
the provisions of Treasury Regulations Section 1.7041(b)(2)(ii)(d).
"Adjustment Date" means the date of the last revaluation of
Partnership assets under Section 2.8 (b) hereof; provided, however, that in the
absence of a revaluation under Section 2.8(b), "Adjustment Date" means the
effective date of the formation of the Partnership.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership.
"Associated WHC Person" means an individual who is a current or former
WHC Employee and who (a) with respect to a Partner who is an individual, is a
member of the Immediate Family of the individual, (b) with respect to a Partner
who is a corporation, partnership or other legal entity (other than a trust),
is, or is a member of the Immediate Family of, a beneficial owner of an equity
interest in the corporation, partnership or other legal entity, and (c) with
respect to a Partner who is a trust, is the grantor or trustee of the trust.
An individual will not be an Associated WHC Person of any other individual who,
under WHC policies, is or was entitled to receive Partnership interests as a
WHC Employee.
"Available Buy-Out Cash Flow" has the meaning assigned to it in
Section 6.3(f).
"Buy-Out Closing" has the meaning assigned to it in Section 6.3(c).
"Buy-Out Date" has the meaning assigned to it in Section 6.1(b).
"Buy-Out Event" has the meaning assigned to it in Section 6.1(a).
"Buy-Out Interest" has the meaning assigned to it in Section 6.1(c).
"Capital Account" has the meaning assigned to it in section 2.5(a).
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"Capital Contribution" means, with respect to any Partner, the amount
of money and the initial Gross Asset Value of any property (other than money)
contributed to the Partnership with respect to the interest in the Partnership
held by that Partner. Any reference in this Agreement to the Capital
Contribution of a Partner will include a Capital Contribution made by any
prior Partner with respect to the Partnership interest of the Partner.
"Cash Flow Restriction" has the meaning assigned to it in Section
6.3(f).
"Cash Items" means cash and cash equivalent assets.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to sections of the Code include successor provisions to
those sections.
"Code Section 38 Property" means property for which the investment
tax credit is allowed under Code Section 48.
"Deferred Amount" has the meaning assigned to it in Section 6.3(f).
"Depreciation" means, for each taxable year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for the year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of the year or other period, Depreciation
will be an amount which bears the same ratio to the beginning Gross Asset Value
as the federal income tax depreciation, amortization or other cost recovery
deduction for the year or other period bears to the beginning adjusted tax
basis, provided that if the federal income tax depreciation, amortization, or
other cost recovery deduction for the year is zero, Depreciation will be
determined with reference to the beginning Gross Asset Value using any
reasonable method selected by the General Partner.
"Encumbrance" means any lien, pledge, encumbrance, collateral
assignment or hypothecation.
"EVBS Value" means, at a given time, the value of a WHC Person, the
assets of a WHC person or an interest in a WHC Person, as the case may be,
determined in accordance with the valuation methods then generally used by such
WHC Person.
"First Installment Date" has the meaning assigned to it in Section
6.3(c)(i).
"General Partner" means the Person identified as a General Partner on
the signature pages to this Agreement.
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"Gross Asset Value" means, with respect to any asset, the adjusted
basis of the asset for federal income tax purposes, adjusted as provided in
Section 2.8.
"Immediate Family" means the spouse of an individual and the parents,
children and grandchildren of the individual or his spouse. An adopted child
will be treated as the child of his adoptive parent or parents if he was
adopted before he reached 21 years of age.
"Indemnified Persons" has the meaning assigned to it in Section 4.7.
"Information" has the meaning assigned to it in Section 8.16.
"Installment Dates" has the meaning assigned to it in Section
6.3(c)(ii).
"Interest Rate" means the "prime," "reference" or "base" rate of
interest for commercial loans as announced from time to time by Citibank, N.A.
"Limited Partners" means the Persons admitted to the Partnership as
limited partners.
"Losses" has the meaning assigned to it in "Profits" and "Losses."
"Marital Option" has the meaning assigned to it in Section 5.5.
"Negative Adjustment" has the meaning assigned to it in Section 3.4.
"Net Cash Flow" has the meaning assigned to it in Section 3.2.
"Net Value" means, with respect to an asset, the gross fair market
value of that asset less any indebtedness encumbering the asset which the
Partnership has assumed or taken subject to.
"Nonrecourse Debt" has the meaning given to the term "nonrecourse
liability" by Treasury Regulations Section 1.752-1(a)(2).
"Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(1). The amount of Nonrecourse Deductions for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partnership Minimum Gain during that fiscal year over the
aggregate amount of any distributions during that fiscal year of proceeds of a
Nonrecourse Debt that are allocable to an increase in Partnership Minimum Gain,
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determined according to the provisions of Treasury Regulations Section
1.704-2(h).
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
the Partner Nonrecourse Debt were treated as Nonrecourse Debt, determined in
accordance with Treasury Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(i)(1). The amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership fiscal
year equals the excess, if any, of the net increase, if any, in the amount of
Partner Minimum Gain attributable to that Partner Nonrecourse Debt during that
fiscal year over the aggregate amount of any distributions during that fiscal
year to the Partner that bears the economic risk of loss for that Partner
Nonrecourse Debt of proceeds of the Partner Nonrecourse Debt that are allocable
to an increase in Partner Minimum Gain attributable to such Partner Nonrecourse
Debt, determined according to the provisions of Treasury Regulations Section
1.704-2(i)(2).
"Partners" means the General Partner and the Limited Partners.
"Partnership" means the partnership organized under the Original
Agreement.
"Partnership Certificate" means the certificate of limited Partnership
of the Partnership as from time to time amended.
"Partnership Minimum Gain" has the meaning assigned to it in Treasury
Regulations Section 1.704-2(d).
"Percentage Interest" means the interest of a Partner in the
Partnership, expressed as a percentage of the whole.
"Permitted Transferee" means, (a) with respect to a Partner who is an
individual, a member of the Immediate Family of the Partner and of the
Partner's Associated WHC Person, if any, or a trust whose sole beneficiaries
are members of the Immediate Family of the Partner and of the Partner's
Associated WHC Person, if any, (b) with respect to a Partner that is a
corporation, partnership or other entity (other than a trust), an equity owner
of the corporation, partnership or other legal entity, and (c) with respect to
a Partner that is a trust, any member of the Immediate Family of the Associated
WHC Person that is the grantor or trustee of the trust.
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"Person" means an individual or an entity.
"Positive Adjustment" has the meaning assigned to it in Section 3.4.
"Profits" and "Losses" mean, for each taxable year or other period, an
amount equal to the Partnership's taxable income or loss for the year or other
period, determined in accordance with Section 703(a) of the Code (including all
items of income, gain, loss or deduction required to be stated separately under
Section 703 (a) (1) of the Code), with the following adjustments:
(a) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in computing
Profits or Losses will be added to taxable income or loss;
(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Section 705(a)(2)(B) expenditures
under Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profits or Losses, will be
subtracted from taxable income or loss;
(c) Gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is recognized
for federal income tax purposes will be computed by reference to the
Gross Asset Value of the property, notwithstanding that the adjusted
tax basis of the property differs from its Gross Asset Value;
(d) In lieu of depreciation, amortization and other cost
recovery deductions taken into account in computing taxable income or
loss, there will be taken into account Depreciation for the taxable
year or other period;
(e) Any items which are specially allocated under
Section 3.1(c) or 3.1(d) will not affect calculations of Profits or
Losses; and
(f) If the Gross Asset Value of any Partnership asset is
adjusted under Section 2.8(b)(ii), 2.8(b)(iii) or 2.8(c), the
adjustment will be taken into account as gain or loss from disposition
of the asset for purposes of computing Profits or Losses.
"Proportionate Share" means a Partner's share of an item, based upon
the respective Percentage Interest of that Partner as compared to the
Percentage Interests of all Partners entitled to share in the item.
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"Regulatory Allocations" has the meaning assigned to it in Section
3.1(d).
"Securities Act" means the Securities Act of 1933, as amended.
"Spouse Partner" has the meaning assigned to it in Section 5.5.
"Successor Corporation" has the meaning assigned to it in Section
8.25.
"TCI" means Trammell Crow Interests Company, a Texas corporation.
"TCI Person" means any Partner, TCI, WHC or any Person in which
Partners, TCI, WHC and partners, shareholders, directors, officers, employees
and affiliates of Partners, TCI or WHC have a 5% or greater equity interest.
"Transfer" means sell, assign, transfer, lease or otherwise dispose of
property, including without limitation an interest in the Partnership.
"Units" has the meaning assigned to it in Section 2.1.
"Value" has the meaning assigned to it in Section 6.3(b).
"Vesting Period" has the meaning assigned to it in Section 6.3(h).
"WHC" means Wyndham Hotel Company Ltd., a Texas limited partnership.
"WHC Employee" means any employee of a TCI Person who is primarily
engaged in activities related to the operation or management of WHC and WHC
Persons.
"WHC Person" means any Partner, WHC or any Person in which Partners,
WHC or partners, shareholders, directors, officers, employees and affiliates of
Partners or WHC have a 5% or greater equity interest.
"Withdrawing Partner" has the meaning assigned to it in Section
6.3(a).
8.19. Involvement of the Partnership in Certain Proceedings. If any
Partner or any affiliate of a Partner becomes involved in legal proceedings
unrelated to the business of the Partnership in which the Partnership is called
upon to provide information, the Partner will indemnify and hold harmless the
Partnership against all costs and expenses, including without limitation fees
and
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expenses of attorneys and other advisors, incurred by the Partnership in
preparing or producing the required information or in resisting any request for
production or obtaining a protective order limiting the availability of the
information actually provided by the Partnership.
8.20. Waiver of Partition and Certain Other Rights; Nature of
Interests in the Partnership. Each of the Partners irrevocably waives any
right or power that he might have:
(a) To cause the Partnership or any of its assets to be
partitioned;
(b) To cause the appointment of a receiver for all or any
portion of the assets of the Partnership;
(c) To compel any sale of all or any portion of the
assets of the Partnership; and
(d) To file a complaint, or to institute proceedings at
law or in equity, to cause the dissolution or liquidation of the
Partnership.
Each of the Partners has been induced to enter into this Agreement in reliance
upon the waivers set forth in this Section 8.20 and without those waivers no
Partner would have entered into this Agreement. No Partner has any interest in
specific Partnership property. The interests of all Partners in the
Partnership are personal property.
8.21. Partner Approvals. Written approvals by Partners may be given
in lieu of a meeting of Partners. A written approval may be in one or more
instruments each of which may be signed by one or more Partners. A written
approval need not be signed by all Partners or by all Partners of the class of
Partners whose approval is required unless the approval of all Partners or all
Partners of the class in question is required. No notice need be given of
action proposed to be taken by written action, or an approval given by written
action, unless specifically required by the Act.
8.22. Partner Meetings. Meetings of Partners or a class of Partners
may be held on such terms, and after such notice, as the General Partner may
establish. Notice of a meeting of Partners must be given to all Partners
entitled to vote at the meeting at least five days before the date of the
meeting.
8.23. Creditors Not Benefitted. Nothing contained in this Agreement
(including specifically Sections 2.2, 2.3, 2.4 and 3.3(b)) will benefit any
creditor of the Partnership or a Partner. No creditor of the Partnership or a
Partner will be entitled to require the General Partner to solicit or accept
any loan or
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additional capital contribution for the Partnership or to enforce any right
which the Partnership or any Partner may have against a Partner, whether
arising under this Agreement or otherwise.
8.24. Merger or Consolidation. The Partnership may merge or
consolidate with one or more domestic or foreign limited partnerships or other
entities in the manner and with the effect provided in the Act if (i) the
General Partner determines that the merger or consolidation is in the best
interest of the Partnership and (ii) the plan or agreement of merger or
consolidation is approved by Limited Partners holding at least a majority of
the Percentage Interests held by Limited Partners.
8.25. Mandatory Exchange of Partnership Interests. If the General
Partner determines that it is in the best interest of the Partnership that its
business be carried on by a corporation or other entity (a "Successor Entity"),
the General Partner may, with the consent of Limited Partners holding at least
a majority of the Percentage Interests held by Limited Partners, require that
all, but not less than all, of the Partners exchange their entire interests in
the Partnership for equity interests in the Successor Entity or equity
interests in the Successor Entity and other consideration. Distinction shall
not be made with respect to the type of equity interests in the Successor
Entity or other consideration to be received by Partners holding interests in
the Partnership of the same class or as to the method of valuing such interests
for purposes of determining the equity interests or other consideration to be
received. If a proposed exchange is approved as set forth in this Section
8.25, each Limited Partner agrees, on request of the General Partner, to
execute and deliver such instruments and agreements as the General Partner
determines to be necessary or appropriate to effect such exchange.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amended and Restated Agreement of Limited Partnership to be effective as
of December 31, 1993.
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GENERAL PARTNER:
Percentage
Name, Address and Signature Interest
----------
Wyndham Hotel Management 1.00%
Corporation
3200 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
By:
---------------------------------------------------------
Printed Name:
-----------------------------------------------
Title:
------------------------------------------------------
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LIMITED PARTNER:
Number of
Name, Address and Signature Units
- --------------------------- ---------
Name:
---------------------------------------
Address:
------------------------------------
------------------------------------
------------------------------------
- ---------------------------------------------
(Signature)
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AMENDMENT TO AMENDED
AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF
WYNDHAM EMPLOYEES LTD.
THIS AMENDMENT is entered into by and among WYNDHAM HOTEL MANAGEMENT
CORPORATION, a Texas corporation (the "General Partner"), and those persons
whose signatures appear on the signature page of this Amendment, or
counterparts hereof, as limited partners (the "Limited Partners") of WYNDHAM
EMPLOYEES LTD., a Texas limited partnership (the "Partnership).
WHEREAS, the affairs of the Partnership are currently governed by an
Amended and Restated Agreement of Limited Partnership dated as of December 31,
1993 (as previously amended, the "Partnership Agreement"); and
WHEREAS, the General Partner and the Limited Partners desire to amend
the Partnership Agreement to document and reflect certain changes in valuing
the assets of the Partnership;
NOW, THEREFORE, the General Partner and the Limited Partners agree as
follows:
1. Terms not otherwise defined herein shall have the meanings
assigned to them in the Partnership Agreement.
2. The following definition in Section 8.18 of the Partnership
Agreement shall be amended so that, as amended, such
definition shall read in its entirety as follows:
"EVBS Value" means, as of a given date, the value of a WHC
Person, the assets of a WHC Person or an interest in a WHC
Person, as the case may be, determined in accordance with the
valuation methods then generally used by such WHC Person,
provided, however, in the case of an interest in a WHC Person
represented by publicly traded securities, (i) the EVBS Value
of such interest as of any date shall be equal to the average
of the daily closing sales prices of such security, on the
principal national securities exchange on which such security
is listed, for each trading day during the 180-day period
immediately preceding the date in question or (ii) if, as of
such date, 280 days has not elapsed since the class of
securities was first offered and sold to the public by the
issuer thereof, the EVBS Value shall be equal to the price at
which such security was sold to the public in the initial
public offering.
3. The foregoing amendments shall be effective with respect to
any event giving rise to the need to determine the
222
EVBS Value of the assets of the Partnership which occurs on or
after the date of this Amendment.
4. Except as expressly set forth in this Amendment, the
Partnership Agreement remains in full force and effect.
5. This Amendment may be executed in one or more counterparts,
all of which taken together shall constitute one instrument.
IN WITNESS WHEREOF, the General Partner and the Limited Partners have
executed this Amendment as of the 15th day of November, 1996.
GENERAL PARTNER:
WYNDHAM HOTEL MANAGEMENT CORPORATION
By:
---------------------------------
James D. Carreker
President
LIMITED PARTNER:
- ---------------
Name and Signature: Number of Units:
- ------------------ --------------- ------
- ----------------------------------
Printed Name:
---------------------
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APPENDIX B
PLAN OF DISTRIBUTION
FOR
WYNDHAM EMPLOYEES LTD.
1. SCOPE OF THE PLAN.
This Plan of Distribution (the "Plan") provides for the proposed
distribution of 646,669 shares of common stock, $.01 par value per share, of
Wyndham Hotel Corporation (the "Wyndham Shares") to participants of Wyndham
Employees Ltd., a Texas limited partnership ("WEL"), and the resulting
dissolution and termination of WEL.
2. REQUIRED VOTE.
Under the Amended and Restated Agreement of Limited Partnership
of WEL (the "WEL Agreement"), approval of a "transfer" of all or substantially
all of WEL's assets is required of the General Partner and the holders of a
majority of the percentage interests held by all participants of WEL (the "WEL
Participants"). Because the term "transfer" is defined broadly under the WEL
Agreement, the General Partner has determined to consider the Plan to involve a
"transfer" within the meaning of the WEL Agreement and, therefore, is seeking
approval of the Plan by WEL Participants.
3. SOLICITATION PERIOD.
WEL Participants who are limited partners of WEL of record on the
date of the Prospectus/Consent Solicitation Statement relating to the Plan (the
"Prospectus") will receive the Prospectus, together with the accompanying
transmittal letter, consent and other forms (the "Solicitation Materials") and
will be entitled to vote for or against the Plan during the "Solicitation
Period." The Solicitation Period will commence upon delivery of the
Solicitation Materials to WEL Participants and will continue until the later of
(a) February 7, 1997 (a date not less than 10 calendar days from the initial
delivery of the Solicitation
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Materials) or (b) such later date as may be selected by the General Partner and
as to which notice will be given to WEL Participants. In its discretion, the
General Partner may elect to extend the Solicitation Period. A WEL Participant
may change his or her vote with respect to the Plan at any time prior to
expiration of the Solicitation Period.
4. DISTRIBUTION OF WYNDHAM SHARES.
As soon as practicable following, and conditioned upon, the
approval of the Plan by written consent of WEL Participants holding a majority
of the percentage interests in WEL, the Wyndham Shares will be distributed to
WEL Participants. The Wyndham Shares will be allocated to WEL Participants
according to the WEL Agreement. Prior to the distribution of the Wyndham
Shares, the General Partner will adjust the gross asset value of WEL's assets
as of January 1, 1997 to reflect the increase in value of such assets over the
gross asset value as of January 1, 1996. In accordance with the 1996
amendments to the WEL Agreement, the Wyndham Shares will be valued based upon
an "EVBS Value" of $16.00 per share. Following this adjustment, each WEL
Participant's capital account will be adjusted (the "Adjusted Capital Account")
upward to reflect the January 30, 1997 increase in WEL's gross asset value over
January 1, 1996. The Wyndham Shares and the WEL indebtedness (as described
below) will then be allocated to the WEL Participants (i) first, according to
the positive balance in each WEL Participant's Adjusted Capital Account and
(ii) second, in accordance with each WEL Participant's percentage interest in
WEL.
The Wyndham Shares will be distributed subject to each WEL
Participant's pro rata allocation of indebtedness owed by WEL to third parties
(the "WEL Indebtedness"). Such indebtedness will be allocated according to the
previous paragraph. Prior to or simultaneous with and as a precondition to the
receipt by a WEL Participant of any Wyndham Shares, such WEL Participant's pro
rata share of WEL Indebtedness must be
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repaid. In order to repay such indebtedness, each WEL Participant will have
the option of (i) borrowing funds (the "Participant Loans") from Smith Barney,
Inc. pursuant to a margin loan, (ii) electing to have a portion of his or her
Wyndham Shares sold or (iii) otherwise repaying his or her share of WEL
Indebtedness directly to the General Partner who will remit such funds
immediately to the holders of WEL Indebtedness.
5. RESTRICTIONS ON RESALE OF WYNDHAM SHARES.
WEL Participants who are not considered affiliates of Wyndham
Hotel Corporation ("Wyndham") will be permitted during the "Resale Window" of
three business days following distribution of the Wyndham Shares to sell their
Wyndham Shares, subject to compliance with Wyndham's Insider Trading Policy and
to repayment of any WEL Indebtedness or Participant Loan secured by the Wyndham
Shares being sold. At the end of the Resale Window, no sale of Wyndham Shares
will be permitted for a "Lock-Up Period" of three weeks, after which the
Wyndham Shares will be freely tradeable subject to compliance with Wyndham's
Insider Trading Policy by WEL Participants who are not considered affiliates of
Wyndham.
6. RELEASE BY WEL PARTICIPANTS.
As part of the Plan, WEL Participants must agree to release WEL,
other WEL Participants, the General Partner and its officers and directors, and
Wyndham and its officers and directors from all claims and demands of any kind
or nature that WEL Participants may have arising from or related to their
interest in WEL. This release will include, but is not limited to, a release
by WEL Participants of all claims concerning (i) the value of their ownership
interest in WEL, (iii) the number of Wyndham Shares to which they are entitled
in the Plan and the methodology used to determine such number, and (iii) the
fairness of the Plan. This release also will include, but is not limited to, a
release of all
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claims concerning the General Partner's past management of the affairs of WEL,
including the WEL Investments, and the valuation of WEL's interests that were
transferred by the General Partner to affiliates of Wyndham effective as of
October 15, 1996.
7. DISSOLUTION AND WINDING UP.
The Plan will constitute an event of dissolution under the
provisions of the WEL Agreement. At such time as may be deemed appropriate by
the General Partner following distribution of the Wyndham Shares to the WEL
Participants and the satisfaction of existing liabilities, WEL shall wind up
its affairs and be terminated.
a. Liquidating Trustee.
The WEL Agreement provides for the election of a
liquidating trustee in the event of dissolution. The General Partner shall
serve as liquidating trustee to wind up the affairs of, and ultimately
terminate, WEL.
b. Payment of Liabilities.
In its capacity as liquidating trustee, the General
Partner will establish a cash reserve (the "Reserve") in an amount believed to
be sufficient to discharge any remaining liabilities of WEL. Any cash in
excess of the Reserve amount will be applied to pay costs associated with the
Plan and to reduce the WEL Indebtedness to be discharged by the WEL
Participants. Following the distribution of the Wyndham Shares, the
liquidating trustee will apply the Reserve from time to time in payment of, or
provision for, WEL's remaining liabilities. With respect to the satisfaction
of any liabilities in excess of the Reserve, the General Partner shall apply
first the fair market value of the Wyndham Shares (net of WEL Indebtedness and
taxes) received by the General Partner in the Plan.
WEL will be terminated upon the earlier of (i) the application of
the Reserve in payment of, or provision for, such liabilities, or (ii) 24
months following the Plan Effective
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Date (as defined below) (or such other period as may be deemed appropriate by
the General Partner), at which time any cash remaining in WEL will be
distributed to WEL Participants.
On the completion of the winding up of WEL, the General Partner
shall file a certificate of cancellation with the Secretary of State of Texas.
8. EFFECTIVENESS OF THE PLAN.
The Plan shall become effective upon receipt by the General
Partner of the approval of the Plan by written consent of WEL Participants
holding a majority of the percentage interests in WEL (such date being referred
to herein as the "Plan Effective Date"). The Plan is subject to the condition
that the General Partner shall not have withdrawn its recommendation of the
Plan prior to the distribution of the Wyndham Shares to the WEL Participants.
9. ABANDONMENT OF THE PLAN.
The General Partner may, in its discretion, withdraw its
recommendation of the Plan at any time prior to the distribution of the Wyndham
Shares.
10. INTERPRETATION AND ADMINISTRATION.
The General Partner shall have exclusive authority to interpret
and implement the Plan, and determinations made by the General Partner in that
regard shall be final and binding.
B-5
228
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the expenses the Company expects to
incur in connection with the Offering described in this Registration Statement.
SEC Registration Fee $ 4,568
Blue Sky and Related Fees (including counsel fees) 4,000
Accountants' Services and Expenses 50,000
Legal Services and Expenses 150,000
Printing and Engraving Fees 25,000
Miscellaneous 10,000
--------
TOTAL $243,568
--------
- -----------------------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides, in effect, that any person made a party to any action by reason of
the fact that he is or was a director, officer, employee or agent of the
Company may and, in certain cases, must be indemnified by the Company against,
in the case of a non-derivative action, judgments, fines, amounts paid in
settlement and reasonable expenses (including attorney's fees) incurred by him
as a result of such action, and in the case of a derivative action, against
expenses (including attorney's fees), if in either type of action he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company. This indemnification does not apply, in a
derivative action, to matters as to which it is adjudged that the director,
officer, employee or agent is liable to the Company, unless upon court order it
is determined that, despite such adjudication of liability, but in view of all
the circumstances of the case, he is fairly and reasonably entitled to
indemnity for expenses, and, in a non-derivative action, to any criminal
proceeding in which such person had reasonable cause to believe his conduct was
unlawful.
Article 15 of the Company's Amended and Restated Certificate of
Incorporation provides that no director or former director of the Company shall
be liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director to the fullest extent permitted by Delaware Law.
Article 15 of the Company's Amended and Restated Certificate of Incorporation,
which is filed as Exhibit 3.1 to this Registration Statement, is incorporated
herein by reference.
Article 16 of the Company's Amended and Restated Certificate of
Incorporation provides that the Company shall indemnify any and all of its
directors and officers, or former directors and officers, or any person who may
have served at the Company's request as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise. Article 16
of the Company's Amended and Restated Certificate of Incorporation, which is
filed as Exhibit 3.1 to this Registration Statement, is incorporated herein by
reference.
The Company has entered into Indemnification Agreements with each
director of the Company, copies of which are filed as Exhibit 10.15 to this
Registration Statement. Pursuant to such agreements, the Company will, to the
extent permitted by applicable law, indemnify such directors against all
expenses, judgments, fines and penalties incurred in connection with the
defense or settlement of any actions brought against them by reason of the fact
that they were directors of the Company or assumed certain responsibilities at
the direction of the Company. The Company has also purchased directors and
officers liability insurance in order to limit its exposure to liability for
indemnification of directors and officers.
II-1
229
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On February 16, 1996, the Company issued 100 shares of Common Stock to
James D. Carreker, its Chief Executive Officer and a director, for nominal
consideration. The shares were issued without registration under the Securities
Act pursuant to the exemption from registration afforded by Section 4(2) of the
Securities Act or the rules and regulations promulgated thereunder.
Reference is made to "Certain Relationships and Transactions --
Benefits of the Formation of the Company to Related Parties" regarding shares
of Common Stock issued in connection with the formation of the Company, the
purchasers thereof and the consideration therefor. Such issuances occurred
without registration under the Securities Act pursuant to exemptions from
registration afforded by Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
+3.1 -- Amended and Restated Certificate of
Incorporation of the Company.
+3.2 -- Amended and Restated Bylaws of the Company.
+4.1 -- Form of specimen certificate for the Common
Stock.
+4.2 -- Relevant portions of Amended and Restated
Certificate of Incorporation (Reference is
hereby made to Exhibit 3.1).
5.1 -- Opinion of Locke Purnell Rain Harrell (A
Professional Corporation).
+10.1(a) -- Management Agreement dated as of May 10,
1995 by and between Anatole Hotel Investors,
L.P. and Wyndham Hotel Company Ltd.
+10.1(b) -- Form of Management Agreement dated as of
September 27, 1994 by and between Bedrock
Annapolis Investment Partners Level I, L.P.
and Wyndham Hotel Company Ltd. (together
with attachment).
+10.1(c) -- Management Agreement dated as of March 10,
1988 by and between Franklin Plaza
Associates and Wyndham Hotel Company, as
amended by First Amendment dated November
17, 1993.
+10.1(d) -- Service Agreement dated as of November 17,
1993 by and between Franklin Plaza Realty
Limited Partnership and Wyndham Hotel
Company Ltd.
+10.1(e) -- Management Agreement dated as of December 1,
1984 by and between Houston Greenspoint
Hotel Associates and Wyndham Hotel Company.
+10.1(f) -- Management Agreement dated as of December 4,
1991 by and between Itasca Hotel Company and
Wyndham Hotel Company Ltd., as amended by
Amendment dated March 19, 1996.
+10.1(g) -- Management Agreement dated as of June 30,
1994 by and between Waterfront Hotel
Associates, S.E. and Old San Juan
Management, Ltd. S.E.
II-2
230
+10.1(h) -- Management Agreement dated as of May 26,
1995 by and between Convention Center
Boulevard Hotel, Limited and Wyndham Hotel
Company Ltd.
+10.1(i) -- Management Agreement dated as of August 25,
1993 by and between Playhouse Square Hotel
Limited Partnership and Wyndham Hotel
Company Ltd.
+10.1(j) -- Management Agreement dated as of March 1,
1986 by and between CLC Partnership and
Wyndham Hotel Company, as amended by First
Amendment dated June 30, 1988.
+10.1(k) -- Management Agreement dated as of December
22, 1987 by and among Badger XVI Limited
Partnership, Crow Division Partners and
Wyndham Hotel Company, as amended by First
Amendment dated February 26, 1988.
+10.1(l) -- Management Agreement dated as of November
20, 1987 by and between Hotel and Convention
Center Partners I, I.C. Ltd. and Wyndham
Hotel Corporation II, Inc., as amended by
Amendment dated November 1, 1993.
10.1(m) -- [INTENTIONALLY OMITTED]
+10.2 -- Investment Agreement dated as of May 2, 1994
among The Hampstead Group, Inc., Wyndham
Hotel Company Ltd., The Partners in Wyndham
Hotel Company Ltd., and Crow Family
Partnership, L.P., as amended.
10.3(a) -- Lease dated as of April 1, 1996 by and
between Hospitality Properties Trust and
Garden Hotel Associates II Limited
Partnership.
+10.3(b) -- Lease Agreement dated as of March 1, 1988 by
and between Lincoln Island Associates No. 1,
Limited and WH Limited Partnership.
+10.3(c) -- Lease Agreement dated December 19, 1989 by
and between Rose Hall Hotel Limited and Rose
Hall Associates Limited Partnership.
+10.3(d) -- Sublease Agreement dated as of November 17,
1989 by and between Copley-Commerce-
Telegraph #1 Associates, as assignee of
Crow-Staley-Commerce #1 Limited Partnership
and Commerce Hotel Partners Ltd.
+10.3(e) -- Ground Lease dated as of March 26, 1987 by
and between Fred C. Boysen, Dorothy Boysen,
Ted Boysen and Rose Boysen and Garden Hotel
Associates Limited Partnership, as assignee
of Ramada Hotel Operating Company as amended
by First Amendment dated as of May 7, 1990.
+10.3(f) -- Lease Agreement dated as of November 26,
1990 by and between Tower 2001 Limited
Partnership and Wyndham Hotel Company Ltd.,
as amended by Letter Agreement dated March
9, 1994 and Letter Agreement dated March 22,
1995, and as amended by Amendment No. 1
dated as of November 30, 1995.
+10.3(g) -- Lease Agreement dated as of January 1992 by
and between 475 Park Avenue South Co. and
Wyndham Hotel Company Ltd., as amended by
Amendment of Lease dated January 30, 1995.
II-3
231
+10.3(h) -- Sublease dated as of May 31, 1995 between
Banc One Mortgage Corporation and Wyndham
Hotels & Resorts.
+10.3(i) -- Lease Agreement dated as of May 16, 1994 by
and between Wirtz Realty Corporation, as
agent for 333 Building Corporation and
Wyndham Hotel Company Ltd.
+10.3(j) -- Lease Agreement dated as of May 18, 1994 by
and between Columbia Executive Offices, Inc.
and The Inn at Semiahmoo a Wyndham Resort.
10.3(k) -- Lease Agreement dated as of January 8, 1997
by and between HPTSLC Corporation and WHC
Salt Lake City Corporation.
10.4 -- Master Alliance Agreement dated as of
January 9, 1997 by and among American
General Hospitality Corporation, American
General Hospitality Operating Partnership,
L.P., WHC Franchise Corporation and WHC
Development Corporation.
10.5 -- Limited Guaranty Agreement dated as of
January 8, 1997 made by the Company for the
benefit of HPTSLC Corporation.
+10.5(a) -- Form of Asset Management Agreement to be
entered into between the Company and various
Crow Family Real Estate Entities.
10.6(a) -- Service Agreement dated as of May 21, 1996
by and between the Company and ISIS 2000 LP.
10.6(b) -- Service Agreement dated as of May 21, 1996
by and between the Company and Wynright
Insurance.
10.6(c) -- Service Agreement dated as of May 21, 1996
by and between the Company and
CW Synergistech, LP.
10.7 -- INTENTIONALLY OMITTED
10.8 -- INTENTIONALLY OMITTED
10.9 -- INTENTIONALLY OMITTED
10.10 -- Indenture relating to the 10 1/2% Senior
Subordinated Notes due 2006.
10.11 -- INTENTIONALLY OMITTED
10.12 -- INTENTIONALLY OMITTED
10.13 -- Stockholders' Agreement among Wyndham Hotel
Corporation and the Stockholders listed on
the signature pages thereof.
10.14 -- Registration Rights Agreement among Wyndham
Hotel Corporation and the parties identified
on the signature pages thereof.
10.15(a) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and James D.
Carreker.
II-4
232
10.15(b) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Anne L.
Raymond.
10.15(c) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Harlan R.
Crow.
10.15(d) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Daniel A.
Decker.
10.15(e) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Susan T.
Groenteman.
10.15(f) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Stanley M.
Koonce, Jr.
10.15(g) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Leslie V.
Bentley.
10.15(h) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Robert A.
Whitman.
+10.16(a) -- 6% Promissory Note made by James D.
Carreker.
+10.16(b) -- 6% Promissory Note made by Leslie V.
Bentley.
+10.16(c) -- 6% Promissory Note made by Eric A. Danziger.
+10.16(d) -- 6% Promissory Note made by Anne L. Raymond.
+10.16(e) -- 6% Promissory Note made by Stanley M.
Koonce, Jr.
+10.16(f) -- 6% Promissory Note made by Wyndham Employees
Ltd.
10.17 -- [INTENTIONALLY OMITTED]
10.18 -- [INTENTIONALLY OMITTED]
+10.19(a) -- Wyndham Employees Savings & Retirement Plan.
+10.19(b -- Wyndham Hotel Corporation 1996 Long Term
Incentive Plan, as revised.
+10.19(c) -- Non-Employee Directors' Retainer Stock Plan,
as revised.
10.20 -- [INTENTIONALLY OMITTED]
10.21 -- [INTENTIONALLY OMITTED]
+10.22 -- Operating Deficit Guaranty and Reserves
Agreement dated as of August 25, 1993 by and
among Playhouse Square Hotel Limited
Partnership, Society National Bank and the
Lenders.
II-5
233
10.23 -- [INTENTIONALLY OMITTED]
10.24 -- [INTENTIONALLY OMITTED]
+10.25 -- Registration Rights Agreement dated as of
April 29, 1996 between the Company and
General Electric Investment Corporation.
+10.26 -- Form of Promissory Note dated April 15,
1995 between the Company and WFLP.
10.27 -- [INTENTIONALLY OMITTED]
10.28 -- Computerized Reservation Service
Agreement between ISIS 2000 and the
Company.
10.29 -- Indemnification Agreements by and between
Elise Turner as an Officer of GHMB, Inc.;
MBAH, Inc.; CHMB, Inc.; Waterfront
Management Corporation; PSMB, Inc.; MTMB,
Inc.; MDMB, Inc.; AMMB, Inc.; OHMB, Inc.;
WNMB, Inc.; MBWD, Inc.; MBWH, Inc.; and
BHMB, Inc., which Corporations are the
Holders of Liquor Licenses, and Wyndham
Management Corporation.
*10.30 -- Senior Secured Revolving Credit Agreement
among Wyndham Hotel Corporation, The
Lenders Party Thereto and Bankers Trust
Company (incorporated by reference to the
Company's Quarterly Report on Form 10-Q
for the Quarter Ended June 30, 1996).
*10.31 -- Management Contract between Homegate
Hospitality, Inc. and the Company, dated
August 26, 1996 (incorporated by
reference to Exhibit No. 10.1 of the
Company's Quarterly Report on Form 10-Q
for the Quarter ended September 30,
1996).
*11 -- Computation of Earnings Per Share.
21.1 -- List of subsidiaries of the Company.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Locke Purnell Rain Harrell (A
Professional Corporation) (included in
Exhibit 5.1).
*24.1 -- Powers of Attorney (included on signature
page).
*27.1 -- Financial Data Schedule.
- ---------------
+ Incorporated by reference to the corresponding Exhibit Number in
Amendment No. 3 to the Company's Registration Statement on Form S-1
(Registration No. 333-2214) filed with the Securities and Exchange
Commission on May 20, 1996.
* Previously filed.
II-6
234
(b) Financial Statement Schedules.
SCHEDULE PAGE
XI: Real Estate and Accumulated Depreciation.............................................S-1
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the Company, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer, or
controlling person of the Company in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Act,
the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Act, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-7
235
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 27th day of January, 1997.
WYNDHAM HOTEL CORPORATION
By: /s/ JAMES D. CARREKER
----------------------------------
Name: James D. Carreker
Title: President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on January 27th, 1997.
NAME TITLE
---- -----
President, Chief Executive Officer
/s/ James D. Carreker and Director
- ------------------------------- (principal executive officer)
James D. Carreker
Executive Vice President, Wyndham
/s/ Leslie V. Bentley Garden Division
- ------------------------------- President and Director
Leslie V. Bentley
Executive Vice President, Chief
/s/ Anne L. Raymond Financial Officer and
- ------------------------------- Director (principal financial officer)
Anne L. Raymond
Executive Vice President --
/s/ Stanley M. Koonce, Jr. Marketing, Planning
- ------------------------------- and Technical Services and Director
Stanley M. Koonce, Jr.
Vice President--Corporate
/s/ John P. Klumph Controller (principal
- ------------------------------- accounting officer)
John P. Klumph
* Director
- -------------------------------
Harlan R. Crow
* Director
- -------------------------------
Daniel A. Decker
* Director
- -------------------------------
Susan T. Groenteman
* Director
- -------------------------------
James C. Leslie
* Director
- -------------------------------
Philip J. Ward
* Director
- -------------------------------
Robert A. Whitman
- ---------------
* The undersigned has executed this Registration Statement on behalf of
each of the persons named above pursuant to Powers of Attorney filed
with the Securities and Exchange Commission.
/s/ CARLA S. MORELAND
-----------------------------------
Carla S. Moreland, Attorney-in-Fact
II-8
236
SCHEDULE XI
WYNDHAM HOTEL CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
INITIAL COSTS GROSS AMOUNT
BUILDINGS BUILDINGS ACCUMU- DEPRE-
& & ACQUISI- LATED DATE OF CIATION
IMPROVE- SUBSEQUENT IMPROVE- TION DEPRECIA- CONSTRUC- LIFE
DESCRIPTION DEBT LAND MENTS COSTS LAND MENTS TOTAL TION TION (IN YEARS)
Wyndham Garden Hotels
Brookfield Lakes $10,275 $ 985 $ 7,157 $ 70 $ 985 $ 7,227 $ 8,212 $ 1,070 June 90 20-40
Indianapolis 10,600 495 6,845 262 495 7,107 7,602 962 Nov 90 20-40
Commerce 15,000 300 11,966 409 300 12,375 12,675 1,348 Dec. 91 20-40
Charlotte 10,286 595 6,044 489 562 6,533 7,095 1,062 Dec 89 20-40
Schaumburg 5,400 1,613 4,263 0 1,613 4,263 5,876 280 May 93 40
Wyndham Rose Hall
Resort 16,879 6,000 24,628 446 6,000 25,074 31,074 3,976 Jan 90 20-40
Wyndham Harbour Island 20,471 0 14,137 392 0 14,529 14,529 3,746 Mar 88 30
------- ------- ------- ------- ------- ------- ------- -------
$88,911 $ 9,988 $75,040 $ 2,068 $ 9,955 $77,108 $87,063 $12,444
======= ======= ======= ======= ======= ======= ======= =======
(1) Amount represents the capital lease obligation balance as of 12/31/95.
S-1
237
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
+3.1 -- Amended and Restated Certificate of
Incorporation of the Company.
+3.2 -- Amended and Restated Bylaws of the Company.
+4.1 -- Form of specimen certificate for the Common
Stock.
+4.2 -- Relevant portions of Amended and Restated
Certificate of Incorporation (Reference is
hereby made to Exhibit 3.1).
5.1 -- Opinion of Locke Purnell Rain Harrell (A
Professional Corporation).
+10.1(a) -- Management Agreement dated as of May 10,
1995 by and between Anatole Hotel Investors,
L.P. and Wyndham Hotel Company Ltd.
+10.1(b) -- Form of Management Agreement dated as of
September 27, 1994 by and between Bedrock
Annapolis Investment Partners Level I, L.P.
and Wyndham Hotel Company Ltd. (together
with attachment).
+10.1(c) -- Management Agreement dated as of March 10,
1988 by and between Franklin Plaza
Associates and Wyndham Hotel Company, as
amended by First Amendment dated November
17, 1993.
+10.1(d) -- Service Agreement dated as of November 17,
1993 by and between Franklin Plaza Realty
Limited Partnership and Wyndham Hotel
Company Ltd.
+10.1(e) -- Management Agreement dated as of December 1,
1984 by and between Houston Greenspoint
Hotel Associates and Wyndham Hotel Company.
+10.1(f) -- Management Agreement dated as of December 4,
1991 by and between Itasca Hotel Company and
Wyndham Hotel Company Ltd., as amended by
Amendment dated March 19, 1996.
+10.1(g) -- Management Agreement dated as of June 30,
1994 by and between Waterfront Hotel
Associates, S.E. and Old San Juan
Management, Ltd. S.E.
238
+10.1(h) -- Management Agreement dated as of May 26,
1995 by and between Convention Center
Boulevard Hotel, Limited and Wyndham Hotel
Company Ltd.
+10.1(i) -- Management Agreement dated as of August 25,
1993 by and between Playhouse Square Hotel
Limited Partnership and Wyndham Hotel
Company Ltd.
+10.1(j) -- Management Agreement dated as of March 1,
1986 by and between CLC Partnership and
Wyndham Hotel Company, as amended by First
Amendment dated June 30, 1988.
+10.1(k) -- Management Agreement dated as of December
22, 1987 by and among Badger XVI Limited
Partnership, Crow Division Partners and
Wyndham Hotel Company, as amended by First
Amendment dated February 26, 1988.
+10.1(l) -- Management Agreement dated as of November
20, 1987 by and between Hotel and Convention
Center Partners I, I.C. Ltd. and Wyndham
Hotel Corporation II, Inc., as amended by
Amendment dated November 1, 1993.
10.1(m) -- [INTENTIONALLY OMITTED]
+10.2 -- Investment Agreement dated as of May 2, 1994
among The Hampstead Group, Inc., Wyndham
Hotel Company Ltd., The Partners in Wyndham
Hotel Company Ltd., and Crow Family
Partnership, L.P., as amended.
10.3(a) -- Lease dated as of April 1, 1996 by and
between Hospitality Properties Trust and
Garden Hotel Associates II Limited
Partnership.
+10.3(b) -- Lease Agreement dated as of March 1, 1988 by
and between Lincoln Island Associates No. 1,
Limited and WH Limited Partnership.
+10.3(c) -- Lease Agreement dated December 19, 1989 by
and between Rose Hall Hotel Limited and Rose
Hall Associates Limited Partnership.
+10.3(d) -- Sublease Agreement dated as of November 17,
1989 by and between Copley-Commerce-
Telegraph #1 Associates, as assignee of
Crow-Staley-Commerce #1 Limited Partnership
and Commerce Hotel Partners Ltd.
+10.3(e) -- Ground Lease dated as of March 26, 1987 by
and between Fred C. Boysen, Dorothy Boysen,
Ted Boysen and Rose Boysen and Garden Hotel
Associates Limited Partnership, as assignee
of Ramada Hotel Operating Company as amended
by First Amendment dated as of May 7, 1990.
+10.3(f) -- Lease Agreement dated as of November 26,
1990 by and between Tower 2001 Limited
Partnership and Wyndham Hotel Company Ltd.,
as amended by Letter Agreement dated March
9, 1994 and Letter Agreement dated March 22,
1995, and as amended by Amendment No. 1
dated as of November 30, 1995.
+10.3(g) -- Lease Agreement dated as of January 1992 by
and between 475 Park Avenue South Co. and
Wyndham Hotel Company Ltd., as amended by
Amendment of Lease dated January 30, 1995.
239
+10.3(h) -- Sublease dated as of May 31, 1995 between
Banc One Mortgage Corporation and Wyndham
Hotels & Resorts.
+10.3(i) -- Lease Agreement dated as of May 16, 1994 by
and between Wirtz Realty Corporation, as
agent for 333 Building Corporation and
Wyndham Hotel Company Ltd.
+10.3(j) -- Lease Agreement dated as of May 18, 1994 by
and between Columbia Executive Offices, Inc.
and The Inn at Semiahmoo a Wyndham Resort.
10.3(k) -- Lease Agreement dated as of January 8, 1997
by and between HPTSLC Corporation and WHC
Salt Lake City Corporation.
10.4 -- Master Alliance Agreement dated as of
January 9, 1997 by and among American
General Hospitality Corporation, American
General Hospitality Operating Partnership,
L.P., WHC Franchise Corporation and WHC
Development Corporation.
10.5 -- Limited Guaranty Agreement dated as of
January 8, 1997 made by the Company for the
benefit of HPTSLC Corporation.
+10.5(a) -- Form of Asset Management Agreement to be
entered into between the Company and various
Crow Family Real Estate Entities.
10.6(a) -- Service Agreement dated as of May 21, 1996
by and between the Company and ISIS 2000 LP.
10.6(b) -- Service Agreement dated as of May 21, 1996
by and between the Company and Wynright
Insurance.
10.6(c) -- Service Agreement dated as of May 21, 1996
by and between the Company and
CW Synergistech, LP.
10.7 -- INTENTIONALLY OMITTED
10.8 -- INTENTIONALLY OMITTED
10.9 -- INTENTIONALLY OMITTED
10.10 -- Indenture relating to the 10 1/2% Senior
Subordinated Notes due 2006.
10.11 -- INTENTIONALLY OMITTED
10.12 -- INTENTIONALLY OMITTED
10.13 -- Stockholders' Agreement among Wyndham Hotel
Corporation and the Stockholders listed on
the signature pages thereof.
10.14 -- Registration Rights Agreement among Wyndham
Hotel Corporation and the parties identified
on the signature pages thereof.
10.15(a) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and James D.
Carreker.
240
10.15(b) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Anne L.
Raymond.
10.15(c) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Harlan R.
Crow.
10.15(d) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Daniel A.
Decker.
10.15(e) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Susan T.
Groenteman.
10.15(f) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Stanley M.
Koonce, Jr.
10.15(g) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Leslie V.
Bentley.
10.15(h) -- Indemnification Agreement by and between
Wyndham Hotel Corporation and Robert A.
Whitman.
+10.16(a) -- 6% Promissory Note made by James D.
Carreker.
+10.16(b) -- 6% Promissory Note made by Leslie V.
Bentley.
+10.16(c) -- 6% Promissory Note made by Eric A. Danziger.
+10.16(d) -- 6% Promissory Note made by Anne L. Raymond.
+10.16(e) -- 6% Promissory Note made by Stanley M.
Koonce, Jr.
+10.16(f) -- 6% Promissory Note made by Wyndham Employees
Ltd.
10.17 -- [INTENTIONALLY OMITTED]
10.18 -- [INTENTIONALLY OMITTED]
+10.19(a) -- Wyndham Employees Savings & Retirement Plan.
+10.19(b -- Wyndham Hotel Corporation 1996 Long Term
Incentive Plan, as revised.
+10.19(c) -- Non-Employee Directors' Retainer Stock Plan,
as revised.
10.20 -- [INTENTIONALLY OMITTED]
10.21 -- [INTENTIONALLY OMITTED]
+10.22 -- Operating Deficit Guaranty and Reserves
Agreement dated as of August 25, 1993 by and
among Playhouse Square Hotel Limited
Partnership, Society National Bank and the
Lenders.
241
10.23 -- [INTENTIONALLY OMITTED]
10.24 -- [INTENTIONALLY OMITTED]
+10.25 -- Registration Rights Agreement dated as of
April 29, 1996 between the Company and
General Electric Investment Corporation.
+10.26 -- Form of Promissory Note dated April 15,
1995 between the Company and WFLP.
10.27 -- [INTENTIONALLY OMITTED]
10.28 -- Computerized Reservation Service
Agreement between ISIS 2000 and the
Company.
10.29 -- Indemnification Agreements by and between
Elise Turner as an Officer of GHMB, Inc.;
MBAH, Inc.; CHMB, Inc.; Waterfront
Management Corporation; PSMB, Inc.; MTMB,
Inc.; MDMB, Inc.; AMMB, Inc.; OHMB, Inc.;
WNMB, Inc.; MBWD, Inc.; MBWH, Inc.; and
BHMB, Inc., which Corporations are the
Holders of Liquor Licenses, and Wyndham
Management Corporation.
*10.30 -- Senior Secured Revolving Credit Agreement
among Wyndham Hotel Corporation, The
Lenders Party Thereto and Bankers Trust
Company (incorporated by reference to the
Company's Quarterly Report on Form 10-Q
for the Quarter Ended June 30, 1996).
*10.31 -- Management Contract between Homegate
Hospitality, Inc. and the Company, dated
August 26, 1996 (incorporated by
reference to Exhibit No. 10.1 of the
Company's Quarterly Report on Form 10-Q
for the Quarter ended September 30,
1996).
*11 -- Computation of Earnings Per Share.
21.1 -- List of subsidiaries of the Company.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Locke Purnell Rain Harrell (A
Professional Corporation) (included in
Exhibit 5.1).
*24.1 -- Powers of Attorney (included on signature
page).
*27.1 -- Financial Data Schedule.
- ---------------
+ Incorporated by reference to the corresponding Exhibit Number in
Amendment No. 3 to the Company's Registration Statement on Form S-1
(Registration No. 333-2214) filed with the Securities and Exchange
Commission on May 20, 1996.
* Previously filed.