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EXHIBIT 1
10,200,000 Shares
FELCOR SUITE HOTELS, INC.
COMMON STOCK, PAR VALUE $.01 PER SHARE
UNDERWRITING AGREEMENT
June 24, 1997
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June 24, 1997
Morgan Stanley & Co. Incorporated
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Montgomery Securities
PaineWebber Incorporated
Salomon Brothers Inc
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Montgomery Securities
PaineWebber International (U.K.) Ltd.
Salomon Brothers International Limited
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
FelCor Suite Hotels, Inc., a Maryland corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters"), an aggregate of 10,200,000 shares of the common
stock, $.01 par value per share of the Company (the "Firm Shares").
It is understood that, subject to the conditions hereinafter stated,
8,160,000 Firm Shares (the "U.S. Firm Shares") will be sold to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. Underwriters") in connection
with the offering and sale of such U.S. Firm Shares in the United States and
Canada to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. and International Underwriters of even date herewith),
and 2,040,000 Firm Shares (the "International Shares") will be sold to the
several International Underwriters named in Schedule II hereto (the
"International Underwriters") in connection with the offering and sale of such
International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. Morgan Stanley & Co. Incorporated, Smith
Barney Inc., Alex. Brown & Sons Incorporated, Montgomery Securities,
PaineWebber Incorporated and Salomon Brothers Inc shall act as representatives
(the "U.S. Representatives") of the several U.S. Underwriters, and Morgan
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Stanley & Co. International Limited, Smith Barney Inc., Alex. Brown & Sons
Incorporated, Montgomery Securities, PaineWebber International (U.K.) Ltd. and
Salomon Brothers International Limited shall act as representatives (the
"International Representatives") of the several International Underwriters. The
U.S. Underwriters and the International Underwriters are hereinafter
collectively referred to as the Underwriters.
The Company also proposes to issue and sell to the several U.S.
Underwriters not more than an additional 1,530,000 shares of its common stock,
par value $.01 per share (the "Additional Shares") if and to the extent that
the U.S. Representatives shall have determined to exercise, on behalf of the
U.S. Underwriters, the right to purchase such shares of common stock granted to
the U.S. Underwriters in Section 2 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "Shares." The shares of
common stock, par value $.01 per share, of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the "Common Stock."
Upon consummation of the transactions contemplated hereby and upon the
Company's contribution of the net proceeds from the sale of the Firm Shares, in
exchange for units of partnership interest (the "Units") in FelCor Suites
Limited Partnership, (the "Partnership"), a Delaware limited partnership, the
Company will own an approximate 92.5% general partnership interest in the
Partnership. As of June 1, 1997, the Partnership, directly or indirectly, owned
interests in 59 hotels as described in the Prospectus, as defined herein
(collectively, the "Current Hotels"). The Partnership has entered into
agreements (the "Acquisition Agreements") as described in the Prospectus to
acquire interests in eleven additional hotels from various sellers (such eleven
additional hotels being hereinafter referred to as the "Acquisition Hotels")
(the Current Hotels and the Acquisition Hotels hereinafter referred to as the
"Hotels"). The Company also has entered into an agreement (the "Repurchase
Agreement") with Promus Hotels, Inc. ("Promus") pursuant to which the Company
will use a portion of the proceeds from the sale of the Shares to repurchase
(the "Repurchase") 1,200,000 shares of Common Stock currently owned by Promus
(the "Promus Shares") at a price per share as set forth in Prospectus.
The Partnership leases the Current Hotels, and upon the purchase
thereof will lease the Acquisition Hotels, to DJONT Operations, L.L.C. or a
subsidiary thereof (collectively, the "Lessee"), pursuant to separate leases
providing for the payment of certain base amounts (the "Percentage Leases").
The Current Hotels are managed pursuant to separate management agreements
(collectively, the "Management Agreements"). The Partnership will lease the
Acquisition Hotels to the Lessee pursuant to leases substantially similar to
the Percentage Leases. The Current Hotels are operated, and the Acquisition
Hotels will be operated, by the Lessee pursuant to the terms of the Percentage
Leases. Other capitalized terms used herein and not otherwise defined herein
shall have the meaning set forth in the Registration Statement (as hereinafter
defined).
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to
debt securities, preferred stock, Common Stock and common stock warrants and
has filed with, or transmitted for filing to, or shall promptly hereafter file
with or transmit for filing to, the Commission a prospectus supplement (the
"Prospectus Supplement") specifically relating to the Shares pursuant to Rule
424 under the Securities Act of
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1933, as amended (the "Securities Act"). The Prospectus Supplement contains two
prospectus supplements to be used in connection with the offering and sale of
the Shares: the U.S. prospectus supplement to be used in connection with the
offering and sale of Shares in the United States and Canada to United States
and Canadian Persons, and the international prospectus supplement to be used in
connection with the offering and sale of Shares outside the United States and
Canada to persons other than United States and Canadian Persons. The
international prospectus supplement is identical to the U.S. prospectus
supplement except for the outside front cover page. The term "Registration
Statement" means the registration statement, including the exhibits thereto, as
amended to the date of this Agreement. The term "Basic Prospectus" means the
prospectus included in the Registration Statement. The term "Prospectus" means
the Basic Prospectus together with the Prospectus Supplement, which includes
the U.S. prospectus supplement and the international prospectus supplement. The
term "Preliminary Prospectus" means a preliminary prospectus supplement
specifically relating to the Shares, which includes the preliminary U.S.
prospectus supplement and the preliminary international prospectus supplement,
together with the Basic Prospectus. As used herein, the terms "Basic
Prospectus," "Prospectus" and "Preliminary Prospectus" shall include in each
case the documents, if any, incorporated by reference therein. The terms
"supplement" and "amendment" or "amend" as used herein shall include all
documents deemed to be incorporated by reference in the Prospectus that are
filed subsequent to the date of the Basic Prospectus by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). As used herein, the term "Incorporated Documents" means the
documents which at the time are incorporated by reference in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto.
1. REPRESENTATIONS AND WARRANTIES. The Company and the
Partnership, jointly and severally, represent and warrant to and agree with
each of the Underwriters that:
(a) The Registration Statement has become
effective; no order preventing or suspending the use of any Preliminary
Prospectus has been issued and no proceeding for that purpose has been
instituted or threatened by the Commission or the securities authority of any
state or other jurisdiction. No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued and no proceeding
for that purpose has been instituted or threatened or, to the best knowledge of
the Company, contemplated by the Commission or the securities authority of any
state or other jurisdiction.
(b) The Company and the transactions contemplated
by this Agreement meet the requirements and conditions for using a registration
statement on Form S-3 under the Securities Act, set forth in the General
Instructions to Form S-3. When any Preliminary Prospectus was filed with the
Commission it (i) contained all statements required to be stated therein in
accordance with, and complied in all material respects with the requirements
of, the Securities Act and the rules and regulations of the Commission
thereunder and (ii) did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. When the Registration Statement or any amendment thereto was
declared effective, and on the Closing Date (or the Option Closing Date, as the
case may be, both as defined below) it (i) contained or will contain all
statements required to be stated therein in accordance with, and complied or
will comply in all material respects
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with the requirements of, the Securities Act and the rules and regulations of
the Commission thereunder and (ii) did not or will not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading. When the Prospectus or any
amendment or supplement thereto is filed with the Commission pursuant to Rule
424(b) and at the Closing Date (or the Option Closing Date, as the case may
be), the Prospectus, as amended or supplemented at any such time, (i) contained
or will contain all statements required to be stated therein in accordance
with, and complied or will comply in all material respects with the
requirements of, the Securities Act and the rules and regulations of the
Commission thereunder and (ii) did not or will not include any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The representation and warranty in this paragraph
(b) does not apply to statements in or omissions from the Registration
Statement or the Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of any
Underwriter through you expressly for use therein.
(c) The Incorporated Documents heretofore filed,
when they were filed (or, if any amendment with respect to any such document
was filed, when such amendment was filed), conformed in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder, any further Incorporated Documents so filed will, when they are
filed, conform in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder; no such document when it was
filed (or, if an amendment with respect to any such document was filed, when
such amendment was filed), contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and no such further
document, when it is filed, will contain an untrue statement of a material fact
or will omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
(d) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the state
of Maryland with all requisite corporate power and authority to own and lease
its properties and to conduct its business. The Company has been duly qualified
to do business and is in good standing as a foreign corporation in each other
jurisdiction in which the ownership or leasing of its properties or the nature
or conduct of its business as now conducted requires such qualification, except
where the failure to do so would not have a material adverse effect on the
Company, the Partnership or the Hotels taken as a whole. The Company will be
duly qualified (at the time of the closing of the acquisition of the
Acquisition Hotels) in each jurisdiction in which the ownership or leasing of
its properties or the nature or conduct of its business requires such
qualification, except where the failure to do so would not have a material
adverse effect on the Company, the Partnership or any Hotels, taken as a whole.
Except for the entities listed on Schedule III hereto, the Company does not own
or control, directly or indirectly, any corporation, association or other
entity.
(e) The Partnership has been duly formed and is
validly existing as a limited partnership in good standing under the Delaware
Revised Uniform Limited Partnership Act (the "Delaware Act") with all requisite
partnership power and authority to own and lease its properties and to conduct
its business. Each subsidiary of the Partnership has been duly formed and is
validly
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existing as a corporation, limited partnership or limited liability company in
good standing under the laws of its respective jurisdiction of formation,
except where the failure to do so would not have a material adverse effect on
the Company, the Partnership or the Hotels, taken as a whole. The Partnership
and its subsidiaries have been duly qualified or registered to do business and
are in good standing as foreign partnerships in each other jurisdiction in
which the ownership or leasing of their properties or the nature or conduct of
their business as now conducted requires such qualification, except where the
failure to do so would not have a material adverse effect on the Company, the
Partnership or the Hotels taken as a whole. The Partnership will be duly
qualified (at the time of the closing of the acquisition of the Acquisition
Hotels) in each jurisdiction in which the ownership or leasing of its
properties or the nature or conduct of its business requires such
qualification, except where the failure to do so would not have a material
adverse effect on the Company, the Partnership or the Hotels, taken as a whole.
The Company is the sole general partner of the Partnership, and at the Closing
Date, will be the sole general partner of the Partnership and will own an
approximate 92.5% interest in the Partnership (assuming no exercise of the
option to purchase the Option Shares).
(f) DJONT Operations, L.L.C. has been duly formed
and is validly existing as a limited liability company in good standing under
the Delaware Limited Liability Company Act. FCOAM, Inc. has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the State of Texas. The Lessee has all requisite limited liability
company or corporate power and authority to own, lease and operate its
properties and conduct its business. Each subsidiary of DJONT Operations,
L.L.C. has been duly formed, is validly existing and is in good standing under
the laws of the State of Delaware. The Lessee and its subsidiaries have been
duly qualified to do business and are in good standing as a foreign limited
liability company or corporation in each other jurisdiction in which the
ownership or leasing of their properties or the nature or conduct of their
business as now conducted requires such qualification, except where the failure
to do so would not have a material adverse effect on the Lessee. The Lessee
will be duly qualified (at the time of the closing of the acquisition of the
Acquisition Hotels) in each jurisdiction in which the ownership or leasing of
its properties or the nature or conduct of its business requires such
qualification, except where the failure to do so would not have a material
adverse effect on the Lessee or the Hotels, taken as a whole.
(g) The Company has full legal right, power and
authority to enter into this Agreement, to issue, sell and deliver the Shares
as provided herein and to consummate the transactions contemplated herein. This
Agreement has been duly authorized, executed and delivered by the Company.
(h) The Partnership has full legal right, power
and authority to enter into this Agreement and to consummate the transactions
contemplated herein. This Agreement has been duly authorized, executed and
delivered by the Partnership.
(i) The Company, the Partnership, and to the
knowledge of the Company and the Partnership, each of the other parties to the
Amended and Restated Agreement of Limited Partnership of the Partnership (the
"Partnership Agreement"), the Percentage Leases and the Management Agreements
has full legal right, power and authority to enter into each such agreement and
to consummate the transactions contemplated therein. Each such agreement has
been duly
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authorized, executed and delivered by the Company, the Partnership, and to the
knowledge of the Company and the Partnership, each of the other parties. (This
Agreement, the Partnership Agreements, the new Percentage Leases and the
Management Agreements sometimes are hereinafter referred to collectively as the
"Operative Documents").
(j) The Partnership and, to the knowledge of the
Company and the Partnership, each of the other parties to the Acquisition
Agreements has full legal right, power and authority to enter into such
agreements and to consummate the transactions contemplated thereby. To the
knowledge of the Company and the Partnership, the Acquisition Agreements have
been duly authorized, executed and delivered by the Partnership and, to the
Company's and the Partnership's knowledge, the other parties thereto and
constitute valid and binding agreements, enforceable in accordance with their
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws of general applicability relating to
or affecting creditors' rights or by general equity principles.
(k) Each consent, approval, authorization, order,
license, certificate, permit, registration, designation or filing by or with
any governmental agency or body necessary for the valid authorization,
issuance, sale and delivery of the Shares, the execution, delivery and
performance of this Agreement and the consummation by the Company and the
Partnership of the transactions contemplated hereby and thereby has been made
or obtained and is in full force and effect.
(l) Neither the issuance, sale and delivery by
the Company of the Shares, nor the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby will
conflict with or result in a breach or violation of any of the terms and
provisions of, or (with or without the giving of notice or the passage of time
or both) constitute a default under, any of the Operative Documents, the
articles of incorporation, bylaws, certificate of limited partnership or
partnership agreement, as the case may be, of the Company or the Partnership;
any indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the Company or the Partnership is a party or
to which they, any of them, any of their respective properties or other assets
or any Current Hotel or the Acquisition Hotels is subject; or any applicable
statute, judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to any of the foregoing or any of their
respective properties; or result in the creation or imposition of any lien,
charge, claim or encumbrance upon any property or asset of any of the
foregoing.
(m) The Shares to be issued and sold to the
Underwriters hereunder have been validly authorized by the Company. When issued
and delivered against payment therefor as provided in this Agreement, the
Shares will be duly and validly issued, fully paid and nonassessable. No
statutory or other preemptive rights of shareholders exist with respect to any
of the Shares. No person or entity holds a right to require or participate in
the registration under the Securities Act of the Shares pursuant to the
Registration Statement other than those persons who have expressly waived such
rights; and, except for Cleveland Finance Associates Limited Partnership,
Robert E. Woolley, Charles M. Sweeney, MarRay-Lex Green, Inc.,
Piscataway-Centennial Associates Limited Partnership and PMB Associates, Ltd.
or as set forth in the Prospectus, no person holds a right to
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require registration under the Securities Act of any shares of Common Stock of
the Company at any other time. No person or entity has a right of participation
or first refusal with respect to the sale of the Shares by the Company. The
form of certificates evidencing the Shares complies with all applicable
requirements of Maryland law.
(n) The Company's authorized, issued and
outstanding capital stock is as disclosed in the Prospectus. All of the issued
shares of capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the description of the
Common Stock and the Series A Preferred Stock contained in the Prospectus. None
of the issued and outstanding shares of capital stock of the Company has been
issued or is owned or held in violation of any preemptive rights of
shareholders. The Company has no other issued and outstanding capital stock.
Except as disclosed in the Prospectus, there is no outstanding option, warrant
or other right calling for the issuance of, and no commitment, plan or
arrangement to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable for capital stock of the Company.
(o) All offers and sales of the Company's capital
stock prior to the date hereof were at all relevant times duly registered under
the Securities Act or exempt from the registration requirements of the
Securities Act by reason of Sections 3(b), 4(2) or 4(6) thereof and were duly
registered or were issued pursuant to an available exemption from the
registration requirements of the applicable state securities or blue sky laws.
(p) All of the issued Units have been duly and
validly authorized and issued and are fully paid and nonassessable. None of the
issued Units has been issued or is owned or held in violation of any preemptive
right. The Units to be issued to the Company at the Closing Date have been duly
and validly authorized by the Partnership. At the Closing Date, such Units will
be validly issued, fully paid and nonassessable. All of the outstanding Units
have been issued, offered and sold in compliance with all applicable laws
(including, without limitation, federal and state securities laws). The Units
to be issued to the Company at the Closing Date will be issued, offered and
sold in compliance with all applicable laws (including, without limitation,
federal and state securities laws).
(q) The financial statements of the Company, the
Lessee, Promus/GE EPT Combined Limited Partnership, EPT Meadowlands Limited
Partnership, AEW Doubletree Portfolio, PSH Master L.P. I, DS Hotels, and
Barshop- HII Joint Venture incorporated by reference in the Registration
Statement and Prospectus, together with related schedules and notes (and any
amendment or supplement thereto), present fairly the financial position of each
entity, as of the dates indicated, and the results of operations and cash flows
of such entity for the periods specified, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods specified. No other financial statements or schedules are required by
Form S-3 or otherwise to be included or incorporated by reference in the
Registration Statement, the Prospectus, or any Preliminary Prospectus.
(r) Each of Coopers & Lybrand L.L.P., Deloitte &
Touche LLP, Arthur Andersen LLP and Ernst & Young, LLP, who have examined and
are reporting upon the audited
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financial statements and schedules included or incorporated by reference in the
Registration Statement, are and were, during the periods covered by their
reports included in the Registration Statement and the Prospectus, independent
public accountants within the meaning of the Act.
(s) Since January 28, 1997, neither the Company,
the Partnership, nor the Lessee has sustained any material loss or interference
with its business from fire, explosion, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
arbitrators' or court or governmental action, order or decree; and, since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as otherwise stated in the Registration
Statement and Prospectus, there has not been (i) any material change in the
capital stock or partnership interests, as applicable, long-term debt,
obligations under capital leases or short-term borrowings of the Company, the
Partnership, or the Lessee, (ii) any material adverse change, or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company, the Partnership or the Lessee and their respective subsidiaries, taken
as a whole, from that set forth in the Prospectus, exclusive of any amendments,
or supplements thereto subsequent to the date of this Agreement, (iii) any
liability or obligation, direct or contingent, incurred or undertaken by the
Company, the Partnership or the Lessee which is material to the business or
condition (financial or other) of such entity, except for liabilities or
obligations incurred in the ordinary course of business, (iv) any declaration
or payment of any dividend or distribution of any kind on or with respect to
the capital stock or partnership interests, as applicable, of the Company or
the Partnership, or (v) any transaction that is material to the Company, the
Partnership or the Lessee, except transactions in the ordinary course of
business or as otherwise disclosed in the Registration Statement and the
Prospectus.
(t) The Partnership has good and indefeasible
title in fee simple to all real property and the improvements thereon owned by
it free and clear of all liens, encumbrances, claims, security interests,
restrictions and defects except (i) such as are described in the Prospectus,
(ii) such matters reflected in the owner's title insurance policies relating to
such properties and (iii) such as do not materially adversely affect the value
of the properties or the use proposed to be made of the property by the
Partnership. Upon consummation of the transactions contemplated by the
Acquisition Agreements, the Partnership will have good and indefeasible title
in fee simple to the Acquisition Hotels, and all related real property, free
and clear of all liens, encumbrances, claims, security interests, restrictions
and defects except such as are described in the proposed title commitments for
the Acquisition Hotels or which do not materially adversely affect the value of
the property or the use proposed to be made of the property by the Partnership.
Except as disclosed in the Prospectus, neither the Company nor the Partnership
owns or leases any real property as lessee other than (i) the Partnership is
the owner of a leasehold interest in certain air space related to its Current
Hotel in New Orleans, Louisiana, (ii) FelCor/CSS Holdings, L.P. ("Holdings") is
the lessee for two hotels leased under ground leases, located in Burlingame (SF
Airport), California and Phoenix, Arizona and the lessee of certain room space
in the hotel located in Cleveland, Ohio; (iii) FelCor/St. Paul Holdings, L.P.
is the lessee for one hotel and one restaurant leased under ground leases
located in St. Paul, Minnesota; (iv) EPT Kansas City (Country Club Plaza),
Missouri L.P. is the lessee for a hotel, leased under a ground lease, located
in Kansas City, Missouri; (v) EPT Meadowlands Limited Partnership is the lessee
for a hotel, leased under a ground lease, located in
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Secaucus, New Jersey; (vi) EPT San Antonio Limited Partnership is the lessee
for a hotel, leased under a ground lease, located in San Antonio, Texas; (vii)
the Partnership is the lessee of a parking lot relating to a hotel in San
Antonio, Texas; and (viii) the Company and/or the Partnership are lessees of
office space in which the Company's executive offices are located. Except as
disclosed in the Prospectus, no person other than the Partnership has an option
or right of first refusal to purchase all or part of any Current Hotel or any
interest therein other than certain rights of first refusal contained in
partnership agreements to which the Partnership or its subsidiaries are
parties. Each of the Hotels complies with all applicable codes, laws and
regulations (including, without limitation, building and zoning codes, laws and
regulations and laws relating to access to the Hotels), except if and to the
extent disclosed in the Prospectus and except for such failures to comply that
would not in the aggregate have a material adverse impact on the condition,
financial or otherwise, or on the earnings, assets, business affairs or
business prospects of the Partnership, the Company or the Hotels, taken as a
whole. Neither the Company nor the Partnership has knowledge of any pending or
threatened condemnation proceedings, zoning change, or other proceeding or
action that will in any manner affect the size of, use of, improvements on,
construction on or access to the Hotels, except such proceedings or actions
that would not have a material adverse effect on the condition, financial or
otherwise, or on the earnings, assets, business affairs or business prospects
of or with respect to the Partnership, the Company or the Hotels, taken as a
whole.
(u) Neither the Company nor the Partnership is in
violation of its respective articles of incorporation, bylaws, certificate of
limited partnership or partnership agreement, as the case may be, and no
default exists, and no event has occurred, nor state of facts exists, which,
with notice or after the lapse of time to cure or both, would constitute a
default in the due performance and observance of any obligation, agreement,
term, covenant, consideration or condition contained in any indenture,
mortgage, deed of trust, loan agreement, note, lease or other agreement or
instrument to which any such entity is a party or to which any such entity or
any of its properties is subject. Neither the Company nor the Partnership is in
violation of, or in default with respect to, any statute, rule, regulation,
order, judgment or decree, except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in the
future have a material adverse effect on the financial position, results of
operations or business of each such entity, respectively.
(v) Except as described in the Prospectus, there
is not pending or, to the knowledge of the Company or the Partnership,
threatened, any action, suit, proceeding, inquiry or investigation against the
Company, the Partnership, the Lessee or any of their respective officers and
directors or to which the properties, assets or rights of any such entity are
subject, before or brought by any court or governmental agency or body or board
of arbitrators, which could result in any material adverse change in the
business, prospects, properties, assets, results of operations or condition
(financial or otherwise) of any such entity or which could adversely affect the
consummation of the transactions contemplated by this Agreement.
(w) The descriptions in the Registration
Statement and the Prospectus of the contracts, leases and other legal documents
therein described present fairly the information required to be shown, and
there are no contracts, leases, or other documents of a character required to
be described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration
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Statement which are not described or filed as required. To the best knowledge
of the Company and the Partnership, there are no statutes or regulations
applicable to the Company or the Partnership or certificates, permits or other
authorizations from governmental regulatory officials or bodies required to be
obtained or maintained by the Company or the Partnership of a character
required to be disclosed in the Registration Statement or the Prospectus which
have not been so disclosed and properly described therein. All agreements
between the Company, the Partnership, the Lessee, respectively, and third
parties expressly referenced in the Prospectus are legal, valid and binding
obligations of the Company, the Partnership and the Lessee, respectively,
enforceable against such parties in accordance with their respective terms,
except to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general applicability relating to or affecting
creditors' rights and by general equitable principles.
(x) Except as described in the Prospectus, the
Company, the Partnership or the Lessee owns, possesses or has obtained or has
taken all necessary action to obtain (and will obtain) all material permits,
licenses, franchises (including, with respect to the Lessee, the franchises
relating to the Hotels), certificates, consents, orders, approvals and other
authorizations of governmental or regulatory authorities or other entities as
are necessary to own or lease, as the case may be, and to operate its
respective properties and to carry on its business, and neither the Company,
the Partnership nor the Lessee has received any notice of proceedings relating
to revocation or modification of any such licenses, permits, franchises,
certificates, consents, orders, approvals or authorizations.
(y) Except as described in the Prospectus, the
Company, the Partnership, and the Lessee own or possess or have the right to
acquire (and will acquire) adequate license or other rights to use all patents,
trademarks, service marks, trade names, copyrights, software and design
licenses, trade secrets, manufacturing processes, other intangible property
rights and know-how (collectively "Intangibles") necessary to entitle the
Company, the Partnership, and the Lessee to conduct their respective businesses
as presently conducted, and neither the Company, the Partnership, nor the
Lessee has received notice of infringement or of conflict with (and knows of no
such infringement of or conflict with) asserted rights of others with respect
to any Intangibles which could materially and adversely affect the business,
prospects, properties, assets, results of operation or condition (financial or
otherwise) of the Company, the Partnership or the Lessee.
(z) The Company's, the Partnership's and to the
best of the Company's and the Partnership's knowledge, the Lessee's, system of
internal accounting controls taken as a whole is sufficient to meet the broad
objectives of internal accounting control insofar as those objectives pertain
to the prevention or detection of errors or irregularities in amounts that
would be material in relation to the Company's, the Partnership's, or the
Lessee's financial statements; and, to the best of the Company's and the
Partnership's knowledge, neither the Company, the Partnership, nor the Lessee,
nor any employee or agent thereof, has made any payment of funds of the
Company, the Partnership, the Lessee, as the case may be, or received or
retained any funds, and no funds of the Company, the Partnership, the Lessee,
as the case may be, have been set aside to be used for any payment, in each
case in violation of any law, rule or regulation.
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(aa) Each of the Company, the Partnership (to the
extent not consolidated with the Company), and the Lessee has filed on a timely
basis all necessary federal, state, local and foreign income and franchise tax
returns required to be filed through the date hereof and has paid all taxes
shown as due thereon; and no tax deficiency has been asserted against any such
entity, nor does any such entity know of any tax deficiency which is likely to
be asserted against any such entity and which if determined adversely to any
such entity, could materially adversely affect the business, prospects,
properties, assets, results of operations or condition (financial or otherwise)
of any such entity, respectively. All tax liabilities are adequately provided
for on the respective books of such entities.
(bb) The Company, the Partnership, and the Lessee
maintain insurance (issued by insurers of recognized financial responsibility)
of the types and in the amounts generally deemed adequate for their respective
businesses and, to the best of the Company's and the Partnership's knowledge,
consistent with insurance coverage maintained by similar companies in similar
businesses, including, but not limited to, insurance covering real and personal
property owned or leased by the Company, the Partnership and the Lessee against
theft, damage, destruction, acts of vandalism, and all other risks customarily
insured against, all of which insurance is in full force and effect.
(cc) To the best of the Company's knowledge, no
general labor problem exists or is imminent with the employees of the Company
or Lessee. The Partnership has no employees.
(dd) The Company has obtained the agreement of
Messrs. Feldman and Corcoran that, for a period of 90 days after the date of
the Prospectus, such persons will not, without Morgan Stanley & Co.
Incorporated's prior written consent (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of such shares
of Common Stock.
(ee) Each of the Company, the Partnership, and
their officers, directors or affiliates has not taken and will not take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in or constitute the stabilization or manipulation
of any security of the Company or to facilitate the sale or resale of the
Shares.
(ff) The Shares are and the Common Stock is
registered pursuant to Section 12(b) of the Exchange Act, and the Common Stock
is, and the Shares will be upon issuance, listed on the New York Stock
Exchange.
(gg) The Company has not incurred any liability
for a fee, commission or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by this
Agreement other than as contemplated hereby or as described in the Registration
Statement.
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(hh) Except as otherwise disclosed in the
Prospectus, neither the Company, the Partnership, Holdings, nor, to the best
knowledge of the Company and the Partnership, any entity from whom the
Partnership acquired or will acquire the Hotels has authorized or conducted or
has knowledge of the generation, transportation, storage, presence, use,
treatment, disposal, release, or other handling of any hazardous substance,
hazardous waste, hazardous material, hazardous constituent, toxic substance,
pollutant, contaminant, asbestos, radon, polychlorinated biphenyls ("PCBs"),
petroleum product or waste (including crude oil or any fraction thereof),
natural gas, liquefied gas, synthetic gas or other material defined, regulated,
controlled, or potentially subject to any remediation requirement under any
environmental law (collectively, "Hazardous Materials"), on, in, under, or
affecting any real property currently leased or owned (or proposed to be leased
or owned) or by any means controlled by the Company or the Partnership,
including the Hotels (the "Real Property"), except as in material compliance
with applicable laws; to the knowledge of the Company and the Partnership, the
Real Property and the Company's and the Partnership's operations with respect
to the Real Property are in compliance with all federal, state and local laws,
ordinances, rules, regulations and other governmental requirements relating to
pollution, control of chemicals, management of waste, discharges of materials
into the environment, health, safety, natural resources, and the environment
(collectively, "Environmental Laws"), and the Company and the Partnership have
complied with, and are in compliance with, all licenses, permits,
registrations, and government authorizations necessary to operate under all
applicable Environmental Laws. Except as otherwise disclosed in the Prospectus,
neither the Company nor the Partnership has received any written or oral notice
from any governmental entity or any other person, and there is no pending or
threatened claim, litigation, or any administrative agency proceeding that
alleges a violation of any Environmental Laws by the Company or the
Partnership; alleges that: the Company or the Partnership is a liable party or
a potentially responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., or any state
superfund law; has resulted in or could result in the attachment of an
environmental lien on any of the Real Property; or alleges that the Company or
the Partnership is liable for any contamination of the environment,
contamination of the Real Property, damage to natural resources, property
damage, or personal injury based on their activities or the activities of their
predecessors or third parties (whether at the Real Property or elsewhere)
involving Hazardous Materials, whether arising under the Environmental Laws,
common law principles, or other legal standards.
(ii) The Company is organized in conformity with
the requirements for qualification as a real estate investment trust under the
Internal Revenue Code of 1986, as amended (the "Code"), and the Company's
method of operation enables it to meet the requirements for taxation as a real
estate investment trust under the Code. The Partnership is treated as a
partnership for federal income purposes and not as a corporation or an
association taxable as a corporation.
(jj) None of the Company, the Partnership, or the
Lessee is, will become as a result of the transactions contemplated hereby, or
will conduct its respective business in a manner in which any such entity would
become, "an investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
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(kk) No real estate appraisal firm which prepared
appraisals of the Hotels, nor any environmental engineering firm which prepared
Phase I environmental assessment reports with respect to the Hotels, was
employed for such purpose on a contingent basis or has any substantial interest
in the Company, the Partnership, the Lessee, or any selling entity.
(ll) The Repurchase will not (i) render the
Company unable to pay its indebtedness as such indebtedness becomes due in the
ordinary course of business or (ii) result in the Company's total assets being
less than the sum of the Company's total liabilities plus the amount that would
be needed, if the Company were to be dissolved at the time of the Repurchase,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights on dissolution are superior to those of Promus.
(mm) Neither the Repurchase nor the execution,
delivery and performance of the agreement between the Company and Promus will
conflict with or result in a breach or violation of any of the terms and
provisions of, or (with or without the giving of notice or the passage of time
or both) constitute a default under, any of the Operative Documents, the
articles of incorporation, by-laws, certificate of limited partnership or
partnership agreement, as the case may be, of the Company or the Partnership;
any indenture, mortgagee, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the Company or the Partnership is a party or
to which they, any of them, any of their respective properties or other assets
or any Current Hotel or the Acquisition Hotels is subject; or any applicable
statute, judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to any of the foregoing or any of their
respective properties; or result in the creation or imposition of any lien,
charge, claim or encumbrance upon any property or asset of any of the
foregoing.
(nn) The Company and, to the knowledge of the
Company and the Partnership, Promus have full legal right, power and authority
to enter into the Repurchase Agreement and to consummate the transactions
contemplated thereby. The Repurchase Agreement has been duly authorized,
executed and delivered by the Company and, to the Company's and the
Partnership's knowledge, Promus and constitutes the valid and binding
agreement, enforceable in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization or
other laws of general applicability relating to or affecting creditors' rights
or by general equity principles.
(oo) Holdings is not currently prohibited,
directly or indirectly, from making distributions to the Company, from repaying
to the Company any loans or advances to Holdings, or from transferring any of
Holdings' property or assets to the Company, except as disclosed in the
Prospectus.
(pp) The Company has not, directly or indirectly
(i) taken any action designed to cause or to result in, or that has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares or (ii) since the filing of the Registration Statement
(A) sold, bid for, purchased, or paid anyone any compensation for soliciting
purchases of, the Shares or (B) paid or agreed to pay
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to any person any compensation for soliciting another to purchase any other
securities of the Company.
(qq) To the Company's knowledge, neither the
Company nor any of its subsidiaries nor any employee or agent of the Company or
any Subsidiary has made any payment of funds of the Company or any Subsidiary
or received or retained any funds in violation of any law, rule, or regulation,
which payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.
Any certificate signed by any officer of the Company on behalf of the
Company, or the Partnership and delivered to you or to counsel for the
Underwriters shall be deemed a representation and warranty by such entity to
each Underwriter as to the matters covered thereby.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedules I and II
hereto opposite its name at U.S. $34.755 a share (the "Purchase Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall
have a one-time right to purchase, severally and not jointly, up to 1,530,000
Additional Shares at the Purchase Price. If the U.S. Representatives, on
behalf of the U.S. Underwriters, elect to exercise such option, the U.S.
Representatives shall so notify the Company in writing not later than 30 days
after the date of this Agreement, which notice shall specify the number of
Additional Shares to be purchased by the U.S. Underwriters and the date on
which such shares are to be purchased. Such date may be the same as the Closing
Date (as defined below) but not earlier than the Closing Date nor later than
ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the U.S. Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule
I hereto opposite the name of such Underwriter bears to the total number of
U.S. Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise.
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The foregoing sentence shall not apply to (A) the Shares to be sold hereunder,
(B) the issuance by the Company of shares of Common Stock upon the exercise of
outstanding options or additional stock options granted under the Company's
stock option plans consistent with past practices, the conversion of
outstanding shares of the Company's $1.95 Series A Cumulative Convertible
Preferred Stock, the redemption of Units outstanding as of the date of the
Prospectus, (C) the issuance of Common Stock and/or Units in connection with
the acquisition of hotels or (D) transactions by any person other than the
Company relating to shares of Common Stock or other securities acquired in open
market transactions after the completion of the offering of the Shares.
3. TERMS OF PUBLIC OFFERING. The Company is advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Company
is further advised by you that the Shares are to be offered to the public
initially at U.S. $36.625 a share (the "Public Offering Price") and to certain
dealers selected by you at a price that represents a concession not in excess
of U.S. $1.13 a share under the Public Offering Price, and that any Underwriter
may allow, and such dealers may reallow, a concession, not in excess of U.S.
$.10 a share, to any Underwriter or to certain other dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares to
be sold by the Company shall be made in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on June 30, 1997, or at such other time on the same or such other date,
not later than July 8, 1997, as shall be designated in writing by you. The time
and date of such payment are hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such
other date, in any event not later than August 7, l997, as shall be designated
in writing by you. The time and date of such payment are hereinafter referred
to as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Shares to the Underwriters duly
paid, against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The
obligations of the Company to sell the Shares to the Underwriters and the
several obligations of the Underwriters to purchase and pay for the Shares on
the Closing Date are subject to the following conditions:
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(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations of
the Company, the Partnership and their respective subsidiaries, taken
as a whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and that
makes it, in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date (i) a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in clause (a)(i) above and (ii) a certificate,
dated the Closing Date and signed by an executive officer of the Company and
the general partner of the Partnership to the effect that the representations
and warranties of the Company and the Partnership contained in this Agreement
are true and correct as of the Closing Date and that the Company and the
Partnership have complied with all of the agreements and satisfied all of the
conditions on their part to be performed or satisfied hereunder on or before
the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date, an
opinion of Bracewell & Patterson, L.L.P., counsel for the Company and the
Partnership, dated the Closing Date and addressed to the Underwriters, to the
effect that:
(i) The Company has been duly
incorporated and is validly existing as a corporation in good standing under
Maryland law with all requisite corporate power and authority to own, lease and
operate its properties and to conduct its business. The Company has been duly
qualified to do business and is in good standing as a foreign corporation in
the states of Arizona, California, Colorado, Florida, Georgia, Illinois,
Indiana, Kentucky, Louisiana, Massachusetts, Minnesota, Nebraska, New Jersey,
North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Utah. To such
counsel's knowledge, there are no other jurisdictions in which the ownership or
leasing the Company's properties or the nature or conduct of its business
requires such qualification, except where the failure to do so would not have a
material adverse effect on the financial condition, business, prospects, net
worth or results of operations of the Company and the Partnership, taken as a
whole. To such counsel's knowledge, except for the entities listed on Schedule
II to this
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Agreement, the Company does not own or control, directly or indirectly, any
corporation, association or control, directly or indirectly, any corporation,
association or other entity.
(ii) The Partnership has been
duly formed and validly existing under the Delaware Revised Uniform Limited
Partnership Act (the "Delaware Act") with all requisite partnership power and
authority to own, lease and operate its properties and to conduct its business.
The Partnership has been duly qualified or registered to do business and is in
good standing as a foreign partnership in the states of Arizona, California,
Colorado, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana,
Massachusetts, Minnesota, Nebraska, New Jersey, North Carolina, Oklahoma, South
Carolina, Tennessee, Texas and Utah. To such counsel's knowledge, there are no
other jurisdictions in which the ownership or leasing of the Partnership's
properties or the nature or conduct of its business requires such
qualification, except where the failure to do so would not have a material
adverse effect on the financial condition, business, prospects, net worth or
results of operations of the Company and the Partnership, taken as a whole.
The Company is the sole general partner of the Partnership and upon its
delivery to the Partnership of the net proceeds from the sale of the Shares
pursuant hereto, will own an approximate 92.5% interest in the Partnership
(92.7% if the Additional Shares are sold).
(iii) DJONT Operations, L.L.C. has
been duly formed and is validly existing as a limited liability company in good
standing under the Delaware Limited Liability Company Act. FCOAM, Inc. has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Texas. DJONT Operations, L.L.C. has all
requisite limited liability company or corporate power and authority to own,
lease and operate its properties and conduct its business. DJONT Operations,
L.L.C. has been duly qualified to do business and is in good standing as a
foreign limited liability company or corporation in the states of Alabama,
Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Kansas,
Kentucky, Louisiana, Massachusetts, Minnesota, Missouri, New Jersey, North
Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Utah. To such
counsel's knowledge, there are no other jurisdictions in which the ownership or
leasing of its properties or the nature or conduct of its business requires
such qualification, except where the failure to do so would not have a material
adverse effect on the financial condition, business, prospects, net worth or
results of the Lessee.
(iv) Holdings has been duly
formed and is validly existing as a limited liability company in good standing
under the Delaware Limited Liability Company Act. It has all requisite limited
liability company or corporate power and authority to own, lease and operate
its properties and conduct its business. It has been duly qualified to do
business and is in good standing as a foreign limited liability company or
corporation in the states of Delaware, Alabama, Arizona, California, Florida,
Louisiana, Minnesota, Ohio and Texas. To such counsel's knowledge, there are no
other jurisdictions in which the ownership or leasing of its properties or the
nature or conduct of its business requires such qualification, except where the
failure to do so would not have a material adverse effect on the financial
condition, business, prospects, net worth or results of it or the Lessee.
(v) FCH/DT Leasing, L.L.C. has
been duly formed and is validly existing as a limited liability company in good
standing under the Delaware Limited Liability Company Act. It has all requisite
limited liability company or corporate power and authority to own, lease and
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operate its properties and conduct its business. It has been duly qualified to
do business and is in good standing as a foreign limited liability company or
corporation in the states of Delaware, Maryland, Michigan and Texas. To such
counsel's knowledge, there are no other jurisdictions in which the ownership or
leasing of its properties or the nature or conduct of its business requires
such qualification, except where the failure to do so would not have a material
adverse effect on the financial condition, business, prospects, net worth or
results of it or the Lessee.
(vi) FCH/DT Leasing II, L.L.C.
has been duly formed and is validly existing as a limited liability company in
good standing under the Delaware Limited Liability Company Act. It has all
requisite limited liability company or corporate power and authority to own,
lease and operate its properties and conduct its business. It has been duly
qualified to do business and is in good standing as a foreign limited liability
company or corporation in the states of Florida, North Carolina and Tennessee.
To such counsel's knowledge, there are no other jurisdictions in which the
ownership or leasing of its properties or the nature or conduct of its business
requires such qualification, except where the failure to do so would not have a
material adverse effect on the financial condition, business, prospects, net
worth or results of it or the Lessee.
(vii) FCH/SH Leasing, L.L.C. has
been duly formed and is validly existing as a limited liability company in good
standing under the Delaware Limited Liability Company Act. It has all requisite
limited liability company or corporate power and authority to own, lease and
operate its properties and conduct its business. It has made application for
qualification to do business as a foreign limited liability company or
corporation in the states of Arizona, Georgia, Illinois and Texas. To such
counsel's knowledge, there are no other jurisdictions in which the ownership or
leasing of its properties or the nature or conduct of its business requires
such qualification, except where the failure to do so would not have a material
adverse effect on the financial condition, business, prospects, net worth or
results of it or the Lessee.
(viii) DJONT Leasing, L.L.C. has
been duly formed and is validly existing as a limited liability company in good
standing under the Delaware Limited Liability Company Act. It has all requisite
limited liability company or corporate power and authority to own, lease and
operate its properties and conduct its business. It has been duly qualified to
do business and is in good standing as a foreign limited liability company or
corporation in the states of California, Georgia, Kansas, Illinois, Indiana,
Minnesota, Missouri, Nebraska, New Jersey, North Carolina, South Carolina and
Texas. To such counsel's knowledge, there are no other jurisdictions in which
the ownership or leasing of its properties or the nature or conduct of its
business requires such qualification, except where the failure to do so would
not have a material adverse effect on the financial condition, business,
prospects, net worth or results of it or the Lessee.
(ix) The Company has full
corporate right, power and authority to enter into, deliver and perform this
Agreement, to issue, sell and deliver the Shares as provided herein and to
consummate the transactions contemplated herein. This Agreement has been duly
authorized, executed and delivered by the Company.
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(x) The Partnership has full
partnership right, power and authority to enter into this Agreement and to
consummate the transactions contemplated herein. This Agreement has been duly
authorized, executed and delivered by the Partnership.
(xi) The Partnership has full
partnership right, power and authority to enter into, either for itself or on
behalf of a general partnership, each of the Percentage Leases relating to the
Current Hotels acquired since January 28, 1997 and the Acquisition Hotels. Each
Percentage Lease relating to the Current Hotels acquired since January 28, 1997
has been duly authorized, executed and delivered by the Partnership. Each
Percentage Lease should be construed to create a valid leasehold interest in
favor of the Lessee.
(xii) The Lessee has full limited
liability company right, power and authority to enter into each of the
Percentage Leases and the Management Agreements relating to the Current Hotels
acquired since January 28, 1997 and the Acquisition Hotels and to consummate
the transactions contemplated therein. Each such agreement relating to the
Current Hotels acquired since January 28, 1997 has been duly authorized,
executed and delivered by the Lessee.
(xiii) Each consent, approval,
authorization, order, license, certificate, permit, registration, designation
or filing by or with any governmental agency or body necessary for the valid
authorization, issuance, sale and delivery of the Shares, the execution,
delivery and performance of this Agreement and the consummation by the Company
and the Partnership of the transactions contemplated hereby, the execution,
delivery and performance of the other Operative Documents to which either the
Company or the Partnership is a party and the consummation by the Company
and/or the Partnership, as applicable, of the transactions contemplated
thereby, including without limitation the issuance of Units, has been made or
obtained and is in full force and effect, except such (i) as may be necessary
under state securities or real estate syndication laws or by the NASD in
connection with the purchase and distribution of the Shares by the
Underwriters, as to which such counsel need express no opinion, or (ii) solely
as the same may relate to the Operative Documents, the lack of which would not
have a material adverse effect on the financial condition, business, prospects,
net worth or results of operations of the Company and the Partnership, taken as
a whole.
(xiv) Each consent, approval,
authorization, order, license, certificate, permit, registration, designation
or filing by or with any governmental agency or body necessary for the
execution, delivery and performance of the Operative Documents by the Lessee,
and the consummation by the Lessee of the transactions contemplated thereby,
has been made or obtained or filed and is in full force and effect, except such
(i) as may be necessary under state securities or real estate syndication laws
or by the NASD in connection with the purchase and distribution of the Shares
by the Underwriters, as to which such counsel need express no opinion, or (ii)
the lack of which would not have a material adverse effect on the financial
condition, business, prospects, net worth or results of operations of the
lessee.
(xv) Neither the issuance, sale
and delivery by the Company of the Shares, nor the execution, delivery and
performance of this Agreement by the Company and the Partnership, nor the
consummation of the transactions contemplated hereby by the Company or the
Partnership,
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will violate any of the terms and provisions of, or constitute a default under,
any of the Operative Documents, the articles of incorporation, bylaws,
certificate of limited partnership or partnership agreement, as the case may
be, of any such entity, as applicable; or, to such counsel's knowledge, under
any material indenture, mortgage, deed of trust, loan agreement, note, lease or
other agreement or instrument to which the Company or the Partnership is a
party or to which they, either of them, any of their respective properties or
other assets or any Current Hotel owned by the Partnership or Holdings as of
the date hereof is subject, except for violations or defaults under agreements
or instruments which have since been terminated, cured or otherwise satisfied
or such violations or defaults as would not have a material adverse effect on
the financial condition, business, prospects, net worth or results of
operations of the Company and the Partnership, taken as a whole; or, to such
counsel's knowledge, violate any applicable statute, judgment, decree, order,
rule or regulation of any court or governmental agency or body; or, to such
counsel's knowledge, result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property or asset of any of the foregoing, except
for liens, charges, claims or encumbrances which are created by the Operative
Documents or which have since been terminated, cured or otherwise would not
have a material adverse effect on the financial condition, business, prospects,
net worth or results of operations of the Company and the Partnership, taken as
a whole.
(xvi) The Shares to be issued and
sold to the Underwriters hereunder have been validly authorized by the Company.
When issued and delivered against payment therefor as provided in this
Agreement, such Shares will be validly issued, fully paid and nonassessable. No
preemptive rights of shareholders exist with respect to any of the Shares. To
such counsel's knowledge, no person holds a right to require or participate in
the registration under the Securities Act of the Shares pursuant to the
Registration Statement other than persons who have expressly waived such
rights; and, except for Cleveland Finance Associates Limited Partnership,
Robert E. Woolley, Charles M. Sweeney, MarRay-Lex Green, Inc.,
Piscataway-Centennial Associates Limited Partnership and PMB Associates, Ltd.
or as otherwise set forth in the Prospectus, no person holds a right to require
registration under the Securities Act of any shares of Common Stock at any
other time. To such counsel's knowledge, no person or entity has a right of
participation or first refusal with respect to the sale of the Shares by the
Company. The form of certificates evidencing the Shares comply in all material
respects with all applicable requirements of Maryland law. All offers and sales
of the Company's capital stock prior to the date hereof were at all relevant
times duly registered under the Securities Act or exempt from the registration
requirements of the Securities Act by reason of Sections 3(b), 4(2) or 4(6)
thereof, and (with the exception of shares of Common Stock and Series A
Preferred Stock registered under the Securities Act, as to which such counsel
need not opine) were duly registered or the subject of an available exemption
from the registration requirements of the applicable state securities or blue
sky laws.
(xvii) The Company's authorized,
issued and outstanding capital stock is as disclosed in the Prospectus. All of
the issued shares of capital stock of the Company have been duly authorized and
validly issued, fully paid and nonassessable. To the knowledge of such counsel,
except as disclosed in the Prospectus, there is no outstanding option, warrant
or other right calling for the issuance of, and no commitment, plan or
arrangement to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable for capital stock of the Company.
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(xviii) All of the issued Units have
been duly and validly authorized and issued and are fully paid. None of the
issued Partnership Units have been issued or is owned or held in violation of
any preemptive rights. The Partnership Units to be issued to the Company at the
Closing Time has been duly and validly authorized by the Partnership. When
issued and delivered against payment thereof as provided in the Partnership
Agreement, such Units will be duly and validly issued and fully paid. The
outstanding Partnership Units have been issued, offered and sold in compliance
with all applicable laws (including, without limitation, federal and state
securities laws). The Partnership Units to be issued to the Company at the
Closing Time will be issued, offered and sold in compliance with all applicable
laws (including, without limitation, federal and state securities laws).
(xix) To the knowledge of such
counsel and except as disclosed in the Prospectus, neither the Company nor the
Partnership leases any real property as lessee other than (i) the Partnership
is the owner of a leasehold interest in certain air space related to its hotel
in New Orleans, Louisiana; (ii) Holdings is the lessee for two hotels leased
under ground leases, located in Burlingame (SF Airport), California and
Phoenix, Arizona and the lessee of certain room space in the hotel located in
Cleveland, Ohio; (iii) FelCor/St. Paul Holdings, L.P. is the lessee for one
hotel and one restaurant leased under ground leases located in St. Paul,
Minnesota; (iv) EPT Kansas City (Country Club Plaza), Missouri L.P. is the
lessee for a hotel, leased under a ground lease, located in Kansas City,
Missouri; (v) EPT Meadowlands Limited Partnership is the lessee for a hotel,
leased under a ground lease, located in Secaucus, New Jersey; (vi) EPT San
Antonio Limited Partnership is the lessee for a hotel, leased under a ground
lease, located in San Antonio, Texas; (vii) the Partnership is the lessee of a
parking lot relating to a hotel in San Antonio, Texas; and (viii) the Company
and/or the Partnership are lessees of office space in which the Company's
executive offices are located.
(xx) Neither the Company, the
Partnership nor the Lessee is in violation of its respective articles of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, or limited liability company agreement, as the case may be, and to
the knowledge of such counsel no material default exists and no event has
occurred which, with notice or after the lapse of time to cure or both, would
constitute a material default in the due performance and observance of any
obligation, agreement, term, covenant, or condition contained in any indenture,
mortgage, deed of trust, loan agreement, note, lease or other agreement or
instrument known to such counsel to which any such entity is a party or by
which any such entity or any of its properties is subject. To the knowledge of
such counsel, neither the Company, the Partnership nor the Lessee is in
violation of, or in default with respect to, any statute, rule, regulation,
order, judgment or decree, except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in the
future have a material adverse effect on the financial position, results of
operations or business of each such entity, respectively.
(xxi) To such counsel's knowledge
and except as described in the Prospectus, there is not pending or threatened,
any action, suit, proceeding, inquiry or investigation against the Company, the
Partnership, the Lessee or Holdings or any of their respective officers and
directors or to which the properties, assets or rights of any such entity are
subject, which, if determined adversely to any such entity, would individually
or in the aggregate have a material
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adverse effect on the financial position, results of operations or business of
the Company and the Partnership, taken as a whole.
(xxii) There are no contracts,
leases or other documents known to such counsel of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement which are not described or filed as
required. To such counsel's knowledge, there are no statutes or regulations
applicable to the Company, the Partnership or the Lessee or certificates,
permits or other authorizations from governmental regulatory officials or
bodies required to be obtained or maintained by any such entity, known to such
counsel, of a character required to be disclosed in the Registration Statement
or the Prospectus which have not been so disclosed and properly described
therein. To such counsel's knowledge, all material agreements between the
Company, the Partnership or the Lessee, respectively, and third parties
expressly referenced in the Prospectus, assuming due authorization, execution
and delivery thereof by each other party thereto, are legal, valid and binding
obligations of each such entity, respectively, enforceable against such entity
in accordance with their respective terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws of general applicability relating to or affecting creditors' rights and to
general equitable principles.
(xxiii) The Common Stock is listed
for trading on the New York Stock Exchange and the Shares are approved for
listing on the New York Stock Exchange subject to notice of issuance.
(xxiv) The Registration Statement
has become effective under the Securities Act and, to the knowledge of such
counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
instituted or is pending or contemplated under the Securities Act. Other than
financial statements and other financial and operating information data and
schedules contained therein, as to which counsel need express no opinion, the
Registration Statement, all Preliminary Prospectuses, the Prospectus and any
amendment or supplement thereto, appear on their face to conform as to form in
all material respects with the requirements of Form S-3 under the Securities
Act.
(xxv) Such counsel has no reason
to believe that the Registration Statement including the Incorporated
Documents, or any further amendment thereto made prior to the Closing Time, on
its effective date and as of the Closing Time, contained or contains any untrue
statement of a material fact or omitted or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, or any amendment or supplement thereto made
prior to the Closing Time, as of its issue date and as of the Closing Time,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (provided that such counsel need express no belief regarding the
financial statements and related schedules and other financial data contained
in the Registration Statement, any amendment thereto, or the Prospectus, or any
amendment or supplement thereto).
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(xxvi) The Incorporated Documents
(other than the financial statements and related schedules therein, as to which
such counsel need express no opinion), when they were filed with the
Commission, complied on their face as to conform in all material respects with
the requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder; and nothing has come to such counsel's attention which
causes them to believe that any of such Incorporated Documents (other than the
financial statements and related schedules therein, as to which such counsel
need express no belief), when such Incorporated Documents were so filed,
contained an untrue statement of material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made when such documents were so filed, not
misleading.
(xxvii) None of the Company, the
Partnership or the Lessee is, or solely as a result of the consummation of the
transactions contemplated hereby will become, an "investment company," or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
(xxviii) The descriptions in
or incorporated by reference in the Prospectus or the Preliminary Prospectus of
statutes, regulations, legal or governmental proceedings, the Percentage
Leases, and the Management Agreements therein described present fairly a
summary of the information required to be shown under the Act. The descriptions
in the Registration Statement and the Prospectus or the Preliminary Prospectus
of the contracts, leases and other legal documents therein described present
fairly the information required to be shown.
In rendering their opinion as aforesaid, counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel retained by
them or the Company as to laws of any jurisdiction other than the United States
and jurisdictions in which they are admitted, provided that (1) each such local
counsel is acceptable to the Underwriters, (2) such reliance is expressly
authorized by each opinion so relied upon and a copy of each such opinion is
delivered to the Underwriters and is, in form and substance satisfactory to
them and their counsel, and (3) counsel shall state in their opinion that they
believe that they and the Underwriters are justified in relying thereon. In
addition, in rendering the foregoing opinion, such counsel may rely on, as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company, the Partnership and the Lessee and certificates or
other written statements of officers or departments of various jurisdictions,
having custody of documents respecting the existence or good standing of the
Company, the Partnership and the Lessee provided that copies of all such
opinions, statements or certificates shall be delivered to Underwriters'
counsel. The opinion of counsel for the Company shall state that the opinion of
any other counsel, or certificate or written statement, on which such counsel
is relying is in form satisfactory to such counsel and that you and they are
justified in relying thereon.
(d) The Underwriters shall have received on the Closing
Date, an opinion of Hunton & Williams, tax counsel for the Company and the
Partnership, dated the Closing Date and addressed to the Underwriters, to the
effect that the Company is organized in conformity with the requirements for
qualification as a real estate investment trust ("REIT"), pursuant to Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"),
and that the
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Company's proposed method of operation enables it to meet the requirements for
qualification and taxation as a REIT under the Code. The Company has taken all
necessary action to be treated, effective beginning with the year ended
December 31, 1994, as a REIT under the Code. The Partnership will be treated as
a partnership for federal income purposes and not as a corporation or an
association taxable as a corporation. In rendering the foregoing opinion, such
counsel may rely on, as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company, the Partnership and the
Lessee and certificates or other written statements of officers or departments
of various jurisdictions, having custody of documents respecting the existence
or good standing of the Company, the Partnership and the Lessee provided that
copies of all such opinions, statements or certificates shall be delivered to
Underwriters' counsel.
(e) The Underwriters shall have received on the Closing
Date an opinion of King & Spalding, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in subparagraphs (ix), (xvi)
(but only with respect to the due authorization, issuance and delivery of the
Shares), (xxiv) and (xxv) of paragraph (c) above, and to the effect that the
statements in the Prospectus under the captions "Description of Common Stock"
and "Underwriting" fairly present the information called for with respect to
such legal matters, documents and proceedings and fairly summarize the matters
referred to therein.
With respect to subparagraph (xxv) of paragraph (c) above, Bracewell &
Patterson, L.L.P. and King & Spalding may state that their opinion and belief
are based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and review
and discussion of the contents thereof, but are without independent check or
verification, except as specified.
The opinions of Bracewell & Patterson, L.L.P. and Hunton & Williams
described in paragraphs (c) and (d) above shall be rendered to the Underwriters
at the request of the Company and shall so state therein.
(f) The Underwriters shall have received, on each of the
date hereof and the Closing Date, a letter dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the
Underwriters, from each of Coopers & Lybrand L.L.P., Deloitte & Touche LLP,
Arthur Andersen LLP and Ernst & Young LLP, independent public accountants,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus; provided that the letter delivered on the Closing
Date shall use a "cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the
form of Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other dispositions of
shares of Common Stock or certain other securities, delivered to you on or
before the date hereof, shall be in full force and effect on the Closing Date.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably
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request with respect to the good standing of the Company, the due authorization
and issuance of the Additional Shares and other matters related to the issuance
of the Additional Shares.
6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with
each Underwriter as follows:
(a) To furnish to you, without charge, seven conformed
copies of the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York City,
without charge, prior to 3:00 p.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
paragraph (c) below, as many copies of the Prospectus and any supplements and
amendments thereto or to the Registration Statement as you may reasonably
request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such proposed
amendment or supplement and not to file any such proposed amendment or
supplement to which you reasonably object, and to file with the Commission
within the applicable period specified in Rule 424(b) under the Securities Act
any prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the
public offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales by
an Underwriter or dealer, any event shall occur or condition exist as a result
of which it is necessary to amend or supplement the Prospectus in order to make
the statements therein, in the light of the circumstances when the Prospectus
is delivered to a purchaser, not misleading, or if, in the opinion of counsel
for the Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the Commission and
furnish, at its own expense, to the Underwriters and to the dealers (whose
names and addresses you will furnish to the Company) to which Shares may have
been sold by you on behalf of the Underwriters and to any other dealers upon
request, either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will comply
with law.
(d) To endeavor to qualify the Shares for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering the
twelve-month period ending June 30, 1998 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to
be paid all expenses incident to the performance of their obligations under
this Agreement, including: (i) the fees, disbursements and
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expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any Preliminary Prospectus, each Preliminary Prospectus
Supplement, the Prospectus Supplement and amendments and supplements to any of
the foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and dealers, in
the quantities hereinabove specified, (ii) all costs and expenses related to
the transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or Legal Investment memorandum in connection with the
offer and sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale under state
securities laws as provided in Section 6(d) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky or Legal
Investment memorandum, (iv) all filing fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification of the
offering of the Shares by the National Association of Securities Dealers, Inc.,
(v) all fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A relating to the Common Stock and all costs
and expenses incident to listing the Shares on the NYSE, (vi) the cost of
printing certificates representing the Shares, (vii) the costs and charges of
any transfer agent, registrar or depositary, (viii) the costs and expenses of
the Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any
such consultants, and the cost of any aircraft chartered in connection with the
road show, and (ix) all other costs and expenses incident to the performance of
the obligations of the Company hereunder for which provision is not otherwise
made in this Section. It is understood, however, that except as provided in
this Section, Section 7 entitled "Indemnity and Contribution", and the last
paragraph of Section 9 below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, stock transfer
taxes payable on resale of any of the Shares by them and any advertising
expenses connected with any offers they may make.
7. INDEMNITY AND CONTRIBUTION. (a) The Company and the
Partnership, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any amendment
thereof, any Preliminary Prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon
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information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Partnership, their respective
directors and officers who sign the Registration Statement and each person, if
any, who controls the Company or the Partnership within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any Preliminary Prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through you expressly for use in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to paragraph (a) or (b) of this Section 7,
such person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (i) the fees and expenses
of more than one separate firm (in addition to any local counsel) for all
Underwriters and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act and (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, the Partnership, their
respective directors and officers who sign the Registration Statement and each
person, if any, who controls the Company or the Partnership within the meaning
of either such Section. In the case of any such separate firm for the
Underwriters and such control persons of any Underwriters, such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated. In the case of any
such separate firm for the Company and the Partnership, and such directors,
officers and control persons of the Company and the Partnership, such firm
shall be designated in writing by the Company. The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
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for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph
(a) or (b) of this Section 7 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party or parties on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Partnership on the one hand and the Underwriters on the
other hand in connection with the offering of the Shares shall be deemed to be
in the same respective proportions as the net proceeds from the offering of the
Shares (before deducting expenses) received by the Company and the Partnership
and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate Public Offering Price of the Shares. The
relative fault of the Company and the Partnership on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company, the Partnership or by the Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective number of Shares they have purchased hereunder, and not
joint.
(e) The Company, the Partnership and the Underwriters agree that
it would not be just or equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (d)
of this Section 7. The amount paid or payable by an indemnified party as a
result of the losses, claims,
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damages and liabilities referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 7 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company and the Partnership contained in this Agreement shall remain operative
and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, or the Company, the Partnership, their
respective officers or directors or any person controlling the Company or the
Partnership and (iii) acceptance of and payment for any of the Shares.
8. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a) (i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable
to market the Shares on the terms and in the manner contemplated in the
Prospectus.
9. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I or Schedule
II bears to the aggregate number of Firm Shares set forth opposite the
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names of all such non-defaulting Underwriters, or in such other proportions as
you may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 9 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased and
arrangements satisfactory to you and the Company for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or
the Company. In any such case either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, on
the Option Closing Date, any Underwriter or Underwriters shall fail or refuse
to purchase Additional Shares and the aggregate number of Additional Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Additional Shares to be purchased, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation hereunder
to purchase Additional Shares or (ii) purchase not less than the number of
Additional Shares that such non-defaulting Underwriters would have been
obligated to purchase in the absence of such default. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
10. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
11. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
12. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
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Very truly yours,
FELCOR SUITE HOTELS, INC.
By:
--------------------------------
Lawrence D. Robinson
Senior Vice President and
General Counsel
FELCOR SUITES LIMITED PARTNERSHIP
By: FELCOR SUITE HOTELS, INC., General
Partner
By:
--------------------------------
Lawrence D. Robinson
Senior Vice President
and General Counsel
33
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Montgomery Securities
PaineWebber Incorporated
Salomon Brothers Inc
Acting severally on behalf
of themselves and the several
U.S. Underwriters named in
Schedule I hereto.
By Morgan Stanley & Co.
Incorporated
By
------------------------------
Name:
Title:
Morgan Stanley & Co. International Limited
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Montgomery Securities
PaineWebber International (U.K.) Ltd.
Salomon Brothers International Limited
Acting severally on behalf
of themselves and the several
International Underwriters
named in Schedule II hereto.
By Morgan Stanley & Co.
International Limited
By
------------------------------
Name:
Title:
34
SCHEDULE I
U.S. Underwriters
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
Morgan Stanley & Co. Incorporated 1,267,200
Smith Barney Inc. 1,267,200
Alex. Brown & Sons Incorporated 806,400
Montgomery Securities 806,400
PaineWebber Incorporated 806,400
Salomon Brothers Inc 806,400
Chase Securities Inc. 400,000
CIBC Wood Gundy Securities Corp. 200,000
EVEREN Securities, Inc. 200,000
Legg Mason Wood Walker, Incorporated 200,000
Lehman Brothers Inc. 400,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 400,000
Morgan Keegan & Company, Inc. 200,000
Societe Generale Securities Corporation 400,000
---------
Total U.S. Firm Shares 8,160,000
=========
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SCHEDULE II
International Underwriters
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
Morgan Stanley & Co. International Limited 448,800
Smith Barney Inc. 448,800
Alex. Brown & Sons Incorporated 285,600
Montgomery Securities 285,600
PaineWebber International (U.K.) Ltd. 285,600
Salomon Brothers International Limited 285,600
---------
Total International Firm Shares 2,040,000
=========
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SCHEDULE III
Subsidiaries of FelCor Suite Hotels, Inc.
Subsidiaries of FelCor Suites Limited Partnership
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Exhibit A
Form of Lockup Agreement