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EXHIBIT 10.15
April 24, 1996
Winston Hotels, Inc.
WINN Limited Partnership
c/o Mr. Robert W. Winston, III
2209 Century Drive
Raleigh, NC 27612
Re: Amended and Restated $125,000,000 Secured Line of Credit
Dear Ladies/Gentlemen:
This letter constitutes the commitment of Wachovia Bank of North
Carolina, N.A. ("Wachovia"), Branch Banking & Trust Company ("BB&T"),
SouthTrust Bank of Alabama, N.A. ("SouthTrust"), and NationsBank, N.A.
("NationsBank") (Wachovia, BB&T, SouthTrust, and NationsBank being collectively
referred to as the "Banks") to make a line of credit available (the "Line"), on
a pro rata basis as set out below under Paragraph II.1, to the borrower
described below (the "Borrower") under the following terms and conditions. As
between Wachovia and the Borrower, this commitment, upon consummation of the
transaction herein referenced (the "Closing"), amends and restates in its
entirety the prior commitment of Wachovia dated April 13, 1995, to make a
$50,000,000 Line of Credit available to the Borrower (the "Prior Commitment").
Upon the Closing, this commitment (the "Commitment") shall amend and restate in
its entirety the Prior Commitment.
I. GENERAL PROVISIONS
1. Borrower: Winston Hotels, Inc., a North Carolina corporation (the
"Company"), and WINN Limited Partnership, a North Carolina limited partnership
(the "Partnership"). The Company and the Partnership shall be jointly and
severally liable for all obligations of the "Borrower."
2. Maximum Line Amount; Line Availability Amount:
A. Generally. $125,000,000.00 (the "Maximum Line Amount"). The
amount of credit available to be drawn upon from time to time under this Line,
including credit used and credit unused, and subject to the Line Availability
Amount limitations set out below, is hereinafter referred to as the "Line
Availability Amount."
B. Line Availability Amount. The amount of credit available to
be drawn upon from time to time shall at no time, however, exceed that amount
which is the lesser of the "Loan to Value Amount" [as hereinafter defined in
Paragraph I.2.B(1) below] and the "Cash Flow Amount" [as hereinafter defined in
Paragraph I.2.B(2) below]. During the one-year period following the date of
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April 24, 1996
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Closing and any remaining period of the fiscal quarter in which such one-year
anniversary occurs (the "Interim Borrowing Base Credit Period"), such amount
shall be increased by adding the Interim Borrowing Base Credit (as hereinafter
defined) to such lesser amount.
(1) Loan to Value Amount. The "Loan to Value Amount" shall be
determined as follows:
a. Net Operating Income (as hereinafter defined) of all
the Primary Hotels (as defined in Paragraph I.10.C)
shall be divided by the capitalization rate of 13%.
b. The resulting number from a. above shall be
multiplied by 45%.
c. The resulting number from b. above is the "Loan to
Value Amount."
NOI / .13 = Value x .45 = Loan to Value Amount
"Net Operating Income" shall mean (i) all income derived by
the Lessee (hereinafter defined) from the operation of all the
applicable hotels (specifically including all room, food,
beverage and other revenues but specifically excluding all
sums collected on behalf of taxing authorities and required to
be forwarded to such taxing authorities) less (ii) "Deductions
from Income" for such hotels.
"Deductions from Income" for the applicable hotels shall be
limited to the following: (i) all operating expenses in fact
incurred in the operation of such hotels, specifically
including franchise fees, insurance premiums, real estate
taxes and personal property taxes but specifically excluding
lease payments paid pursuant to the Lease for such hotel; (ii)
management fees in an amount equal to 4% of gross room
revenues for each such hotel, even though management fees may
not be in fact paid or payable and even though management fees
may be greater or less than that in fact incurred for such
hotel; (iii) capital expenditures incurred in connection with
each such hotel (which, for purposes of such calculation shall
be an amount equal to 4% of gross room revenues, even though
such amount of capital expenditures may be greater or less
than that in fact incurred for such hotel).
(2) Cash Flow Amount. The Cash Flow Amount shall be determined by
multiplying the Cash Available for Distribution (hereinafter
defined) for the Primary Hotels by 4.0.
Cash Available for Distribution with respect to any hotel or
group of hotels shall be determined as follows:
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From Total Lease Revenues (Base Rent plus Percentage
Rent) derived by the Borrower from the Lessee with
respect to such hotel or hotels, subtract the
required Room Reserves (hereinafter defined) for such
hotel or hotels, property taxes and casualty
insurance premiums for such hotel or hotels and
actual "general and administrative" expenses for the
Borrower (prorated among all the hotels owned by the
Borrower in a manner satisfactory to the Banks),
defined in accordance with generally accepted
accounting principles, consistently applied.
(3) Calculation of Loan to Value Amount and Cash Flow Amount.
Both the Loan to Value Amount and the Cash Flow Amount shall
be calculated from time to time in accordance with the
following procedure:
a. The Borrower shall provide to the Banks, together
with the quarterly financial statements required by
Paragraph II.19 of this Commitment, a financial
statement with respect to the operations of the
Primary Hotels during the preceding twelve calendar
months ending as of the last day of such preceding
fiscal quarter. If a Primary Hotel has not been
operated as a hotel for twelve calendar months, such
lesser period during which the Borrower or such other
operator has operated the Primary Hotel shall be
included in the calculation of the Loan to Value
Amount and the Cash Flow Amount. Such calculations
shall be made on a pro forma basis for operations by
a prior owner as if such operations were subject to a
lease having terms and conditions as those set out in
the Lease in fact entered into by the Borrower and
approved by the Banks for such Primary Hotel. During
the Interim Borrowing Base Credit Period, the Recent
Acquisition Hotels identified in Paragraph I.2.B(5)
below shall be excluded from the Primary Hotels for
purposes of calculating the Loan to Value Amount and
the Cash Flow Amount. The Delayed Acquisition Hotels
shall be excluded from such calculations until all
conditions for inclusion of such hotels as Primary
Hotels (such as, but not limited to, the recordation
of a Deed of Trust securing the Line, the issuance of
a title policy, the satisfaction of all documentation
matters required to be satisfied for Initial Hotels)
have been satisfied. Such financial statements shall
be delivered no later than 55 days after the end of
the preceding fiscal quarter. Such financial
statement shall be in form and detail satisfactory to
the Banks with respect to each Primary Hotel
individually and with respect to all Primary Hotels
in the aggregate.
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b. Simultaneously with the submission of the financial
statements required in a., the Borrower shall provide
a certification, signed by the chief financial
officer of the Borrower, providing its calculation of
the Loan to Value Amount and the Cash Flow Amount,
such certification to be in a form satisfactory to
the Banks (the "Borrowing Base Certificate").
c. The Banks shall be entitled to review such
information and to request such additional
information as they deem necessary to verify and
assess such calculations. Within twenty-five (25)
days of receipt of the certified Borrowing Base
Certificate, the Banks shall notify the Borrower (i)
whether they have accepted the Borrower's Borrowing
Base Certificate determinations, and (ii) if not, the
Banks' computation of the Loan to Value Amount and
the Cash Flow Amounts. The Banks' determination of
the Loan to Value Amount and the Cash Flow Amount
shall be conclusive, absent manifest error.
d. Such Loan to Value Amount and Cash Flow Amount shall
be effective as of the first day of the next fiscal
quarter commencing after such determination. [For
example, for the fiscal quarter ending March 31, the
Borrower would supply financial statements and the
Borrowing Base Certificate on or before May 25; the
Banks would review and respond to the Borrowing Base
Certificate (and establish the Loan to Value Amount
and Cash Flow Amount) on or before June 20, with such
computations to be effective on July 1, the first day
of the next fiscal quarter.]
e. Prior to the time that a Primary Hotel is released or
added, the Borrower shall supply a new Borrowing Base
Certificate. In the case of a reduction in the Line
Availability Amount, such reduction shall be
effective immediately subject to review and
adjustment by the Banks as described in c. above. In
the case of an increase in the Line Availability
Amount, such an increase shall be effective only
following review and approval of the Borrowing Base
Certificate by the Banks as set out above.
(4) Required Paydown Due to a Reduction in the Line Availability
Amount. If, upon a reduction in the Line Availability
Amount as a result of a reduction in the Loan to Value Amount
or the Cash Flow Amount, the outstanding principal balance of
the Note exceeds the permitted Line Availability Amount
available as of the first day of the next fiscal quarter, then
on or before such date the Borrower shall pay down the
principal balance to that amount available under the new Line
Availability Amount. No prepayment premium shall be due and
payable in connection with such paydown,
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regardless of which interest rate option or options
have been selected by the Borrower. In addition, the Borrower
at any time (but subject to the limitations for approval set
out in Paragraph I.10.C entitled Primary Hotels) may request
the Banks to add one or more hotels to the list of Primary
Hotels. If, after reviewing the information to which they are
entitled to review in connection with their determination of
Primary Hotels, the Banks consent to such addition or
additions, the Borrower shall provide a replacement Borrowing
Base Certificate that includes such additional Primary Hotels.
The recomputed Line Availability Amount shall be effective as
of the date on which the Banks establish the recomputed Line
Availability Amount.
(5) Interim Inclusion of Credit for Four Hotels. During the
Interim Borrowing Base Credit Period, the Borrower shall be
entitled to receive the following credit (the "Interim
Borrowing Base Credit") to the Line Availability Amount for
the following four hotels (which are collectively referred to
as the "Recent Acquisition Hotels"):
Hotel Credit
----- ------
a. Marriott - Wilmington $2,550,000.00
b. Gwinette $2,822,000.00
c. Perimeter* $2,788,000.00
d. Homewood Suites Houston $2,351,000.00
(The Interim Borrowing Base Credit for the Perimeter Hotel,
noted with an asterisk in the chart provided above, is subject
to adjustment once the purchase price for that hotel is
finally determined. The credit shall be calculated by
multiplying the purchase price for the hotel by .34.) Such
Interim Borrowing Base Credit shall be effective throughout
the Interim Borrowing Base Credit Period, subject to the
following limitations and conditions. If one or more of such
hotels have not yet been acquired (i.e., the Delayed
Acquisition Hotels) or are no longer subject to a Deed of
Trust securing the Line (i.e., as a result of a release), no
credit shall be given for such hotel. During the Interim
Borrowing Base Credit Period, these hotels shall be excluded
from the calculations of the Loan to Value Amount and the Cash
Flow Amount. During the Interim Borrowing Base Credit Period,
however, the amount of Interim Borrowing Base Credit for each
of these hotels shall be added to the Line Availability
Amount, provided such hotel continues to serve as a Primary
Hotel. Following the Interim Borrowing Base Credit Period,
the Interim Borrowing Base Credit shall no longer be
applicable, and these hotels shall be included in the
calculations of the Loan to Value Amount and the Cash Flow
Amount. The Interim Borrowing Base Credit Period expires
approximately one year from the date of
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April 24, 1996
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closing of the Line, even though the Delayed Acquisition
Hotels have not been owned by the Borrower for a full year. If
the Interim Borrowing Base Credit Period would otherwise expire
during a fiscal quarter, the Interim Borrowing Base Credit
Period shall nevertheless be extended automatically to the end
of such fiscal quarter.
3. Sub-Line Restrictions:
A. Working Capital Sub-Line. The Line shall include a sub-line
(the "Working Capital Sub-Line") amount of up to seventeen percent (17%) of the
Line Availability Amount, as such Line Availability Amount is determined from
time to time (the "Working Capital Line Amount"), the proceeds of which may be
utilized for the four uses set out below. The Borrower may utilize funds
otherwise available in the Working Capital Sub-Line for any other use permitted
under Paragraph II.15A (Line Use Restrictions) if such funds are not being
utilized for such four purposes, but such borrowings shall not be deemed to be
drawings under the Working Capital Sub-Line.
(1) Working Capital: The Working Capital Sub-Line may be
used to fund those costs and expenses associated with
the normal day-to-day operations of the Borrower's
business of owning multiple hotel properties located
in multiple states.
(2) Dividends: The Borrower intends to make dividend
payments on a quarterly basis. The Borrower may draw
under the Working Capital Sub-Line to make its
dividend payments.
(3) Capital Expenditures: The Borrower may utilize the
Working Capital Sub-Line to pay for "Capital
Expenditures," as that term is defined in accordance
with generally accepted accounting principles,
subject to the limitations herein set out.
As used herein, Capital Expenditures shall not
include "Renovations" and also shall not include
capital expenditures incurred in the construction and
development of new hotels. "Renovations" are the
renovation and equipping of a hotel so as to bring
the hotel up to the quality, standard and condition
the Borrower deems appropriate and which are
typically capitalized on the Borrower's balance
sheet. The cost of ongoing renovations typically
required in the year-to-year operation of a hotel
(such as replacement and repair of furniture,
fixtures and equipment, replacement of carpeting,
etc.) shall not constitute Renovations.
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(4) Swing Sub-Line Payout. The Borrower may utilize the
Working Capital Sub-Line to pay off the Swing
Sub-Line.
At any one time, no more than the Working Capital Line Amount may be
outstanding under the Working Capital Sub-Line for cumulative payments
associated with the four uses identified above. DURING EACH TWELVE (12)-MONTH
PERIOD OF THE LINE, THE WORKING CAPITAL SUB-LINE MUST BE FULLY PAID OUT TO A
ZERO BALANCE FOR 30 CONSECUTIVE CALENDAR DAYS UTILIZING THE BORROWER'S
INTERNALLY GENERATED CASH FLOW OR PROCEEDS FROM EQUITY OFFERINGS (THE "REQUIRED
CLEAN-UP"). The first twelve-month period shall commence on the first day
funds are originally drawn under the Working Capital Sub-Line. Each subsequent
twelve-month period shall commence on the first day funds are readvanced under
the Working Capital Sub-Line following the Required Clean-Up. The Borrower's
failure to comply with the Required Clean-Up shall constitute an event of
default under the loan documents.
For each draw made under the Working Capital Sub-Line or the Swing Sub-Line,
the Borrower shall identify the amount associated with each of the four
allowable categories.
B. Development/Construction Sub-Line. The Line shall also
include a development/construction sub-line (the "Development Sub-Line") amount
of up to fifty percent (50%) of the Line Availability Amount, as such Line
Availability Amount shall be determined from time to time, the proceeds of
which may be utilized for the following two uses. The Borrower may utilize
funds otherwise available in the Development Sub-Line for any other use
permitted under Paragraph II.15A (Line Use Restrictions) if such funds are not
being utilized for such two purposes, but such borrowings shall not be deemed
to be drawings under the Development Sub-Line.
1. Acquisition of real estate and construction costs
incurred by the Borrower in constructing any hotel (a
"Construction Hotel").
2. Acquisition of any land and improvements constructed
by a third party and not operated as a hotel for a
continuous 12 month period prior to such acquisition
by the Borrower (a "Development Hotel").
A hotel may be a Primary Hotel (if accepted as a Primary Hotel
by the Banks) even though it is still considered a Development Hotel
or a Construction Hotel.
For each draw made under the Development Sub-Line, the
Borrower shall identify the amount associated with each of the two
allowable categories and shall identify the name and address of the
hotel for such drawing is being made.
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If such drawing is made for the acquisition of undeveloped
real estate for anticipated construction of a hotel in the future,
then in addition, the Borrower shall specify the amount of such draw
utilized for such purpose. The Borrower shall not be entitled to have
more than $5,000,000 outstanding at any one time for such purpose
where "Hotel Development" is not in process on such site within
eighteen months following the acquisition by the Borrower of such
site. "Hotel Development" means active, continuous and diligent
undertaking of the construction of a hotel on such site. Any amount
allocated towards such calculation of the maximum limitation hereof
shall be deducted therefrom once and so long as the Borrower actively
undertakes Hotel Development for such site.
Amounts borrowed for expenditures relating to a Construction
Hotel or a Development Hotel shall continue to be allocated under the
Development Sub-Line until all amounts for such hotel have been
deducted from the Development Sub-Line as set out below. The
computation of the amount to be deducted from the Development Sub-Line
for a hotel for which the Development Sub-Line is still being
allocated shall be calculated as follows: During any period that Line
proceeds remain allocated for a Construction Hotel or a Development
Hotel, the Borrower shall supply the Banks with a
"Development/Construction Sub-Line Sheet" at the same time the
Borrowing Base Certificate is provided. Such Development/Construction
Sub-Line Sheet shall provide information concerning the Net Operating
Income [as defined in Paragraph I.2.b.(1)] derived during the
preceding fiscal quarter from each Construction Hotel and Development
Hotel on a hotel-by-hotel basis. Such Net Operating Income for each
of such hotels shall be divided by the capitalization rate of 13%,
rounded to the nearest one thousand dollar. For each such hotel, the
resulting amount less any amount deducted in the prior quarters (but
never a negative number) shall be deducted from the Development
Sub-Line allocated to such hotel as of the beginning of the next
fiscal quarter and shall again be available for draws under the
Development Sub-Line, subject to the requirements of the Line
generally and such Development Sub-Line in particular. An example of
such computation is provided in Exhibit B attached hereto and
incorporated by reference.
C. Swing Sub-Line. Up to $5,000,000 of the $50,000,000 available
from Wachovia shall be available to the Borrower as a "Swing Sub-Line," which
may be used for any of the purposes for which the Working Capital Sub-Line may
be utilized. Borrowings under the Swing Sub-Line may only be pursuant to
Option C (Base Rate Option) or Option D (7-Day LIBOR Option). At the election
of Wachovia, each Bank shall purchase a participating interest in such Swing
Sub-Line loans in an amount equal to its ratable share of such Swing Sub-Line
loans.
4. Term: The term of this Line shall expire on June 1, 1998. The
Borrower may request one-year annual extensions of the term no sooner than 45
days and no later than 30 days prior to June 1, 1997, June 1, 1998, or the end
of any granted extension year. The Banks may, in their sole
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WINN Limited Partnership
April 24, 1996
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discretion, determine whether to grant such an extension and shall be entitled
to receive whatever information the Banks deem necessary for the consideration
of such request. In particular (without limiting the foregoing), any extension
is subject to the Banks' prior review and written approval of the Borrower's
financial condition. In order for the Banks to complete their financial review
and as a condition for any extension of term, Borrower must have delivered to
the Banks the financial information required herein to be supplied on a
quarterly and/or annual basis. Upon request by the Borrower and approval by
the Banks of each annual extension, Borrower shall pay to the Banks a Line
Extension Fee in accordance with the Paragraph I.8., entitled Line Extension
Fee.
5. Loan Interest Rate Options:
The Borrower shall have the option, as of the end of any Interest
Period (hereinafter defined) to choose among the following interest rate
options; provided, however, if no choice is made by the Borrower, the Borrower
shall be deemed to have chosen the Base Rate Option (as hereinafter defined).
"Interest Period," for purposes hereof, shall be each successive 30-day period
(if Option A is selected), each successive 90-day period (if Option B is
selected), each successive 7-day period (if Option D is selected) or each
successive one-day period (if Option C is selected) in each case commencing on
the date following the expiration of the preceding Interest Period. The
Borrower may have no more than an aggregate of eight borrowings outstanding
under Option A, Option B, or Option D at any one time. Each borrowing (other
than a Swing Sub-Line borrowing) under Option A, Option B, Option C or Option D
must be in a principal amount equal to or in excess of $1,000,000 provided any
amount in excess of $1,000,000 is in any incremental multiple of $100,000.00.
Each borrowing under the Swing Sub-Line must be in a principal amount equal to
or in excess of $100,000, provided any amount in excess of $100,000 is in any
incremental multiple of $50,000.00.
Provisions Applicable to Only Options A, B and D Described Below. "Adjusted
London Interbank Offered Rate" applicable to any Interest Period, as selected
from time to time by the Borrower, means a rate per annum equal to the quotient
obtained by dividing (i) the applicable London Interbank Offered ("LIBO") Rate
for such Interest Period by (ii) 1.00 minus the Eurodollar Reserve Percentage.
"LIBO Rate" means for an Interest Period the rate per annum at which United
States dollars of amounts equal to or comparable to the principal amount of the
borrowing for which such LIBO Rate has been selected are offered for a term
comparable to the Interest Period in the London interbank market, which rate
appears on the display designated as Page "3750" of the Telerate Service in the
case of the 30-day LIBOR Option or 90-day LIBOR Option and "Page 3875" of the
Telerate Service in the case of the 7-day LIBOR Option or, in the case of any
LIBOR Option, such other page as may replace such page of that service or such
other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying the London Interbank Offered Rates
for
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United States dollar deposits (the "Telerate Service") determined as of
11:00 a.m. London time, as that rate is set three (3) Eurodollar business days
(i.e., any day on which dealings in United States dollar deposits are carried
out in the London interbank market except Saturday, Sunday, or other day on
which commercial banks in North Carolina are authorized by law to close) prior
to the first day of the Interest Period provided that (i) if more than one such
offered rate appears on the applicable Telerate Service, the LIBO Rate will be
the arithmetic average of such offered rates; (ii) if no such offered rates
appear on such page or if there is no such service nominated by the British
Bankers' Association, the LIBO Rate for such Interest Period will be the
arithmetic average of rates (rounded upward, if necessary, to the next higher
1/100 of 1%) quoted by not less than two (2) major banks in the United States,
selected by the Agent at approximately 10:00 a.m., New York City time, two (2)
Eurodollar business days prior to the first day of such Interest Period, for
deposits in United States dollars offered in the London Interbank market in
amounts comparable to the principal amount of the borrowing for which such LIBO
Rate has been selected and for a term comparable to the Interest Period.
"Eurodollar Reserve Percentage" means for any day that percentage (expressed as
a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement for a member bank of the Federal Reserve System in
respect of "Eurocurrency liabilities". The Eurodollar Reserve Percentage shall
be adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
If, as a result of any Regulatory Change (as defined below):
(a) The basis of taxation of the payments to any of the Banks of the
principal of, or interest on, such LIBO Rate loan, as applicable
(other than taxes imposed on the overall net income of such Bank or of
any of its lending offices) is changed; or
(b) Any reserve, special deposit or similar requirements (other than any
change by way of imposition or increase in the Eurodollar Reserve
Percentage) relating to such loan is imposed or modified;
and as a result thereof, the cost to any Bank of making, maintaining, or
funding such loan is increased (the "Increased Cost"), then the Borrower shall
pay to such Bank such additional amount or amounts as will compensate the Bank
for the Increased Cost, subject to the conditions set forth below. Each Bank
will notify the Borrower of the nature and effective date of the applicable
Regulatory Change and calculation of the Increased Cost resulting therefrom as
soon as is reasonably possible. The effective date of such Regulatory Change
will not be applied retroactively but will be applied at the beginning of the
applicable Interest Period.
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"Regulatory Change" shall mean the adoption or making after the date of this
Commitment of any laws or regulations (or a written interpretation or ruling as
to the effect or application of such laws or regulations having the force of
law) by any federal, state, or foreign government or governmental agency having
authority over the administration thereof, which are applicable to any LIBO
Rate loans made pursuant to this Commitment.
If at any time the Banks determine in good faith that the effective LIBO Rate
for any loan is unascertainable, or that the making or continuance of such loan
at the LIBO Rate would be unlawful, the Banks shall not be required to make or
continue such loan at such Rate. In such event, such loan shall be made or
continued, as applicable, at the Base Rate Option (as defined below).
Option A: 30-Day LIBOR Option. A rate per annum equal to the 30-day
"Adjusted London Interbank Offered Rate" plus 1.75%.
Option B: 90-Day LIBOR Option. A rate per annum equal to the 90-day
"Adjusted London Interbank Offered Rate" plus 1.75%.
Option C: Base Rate Option: The rate per annum equal to the higher as
of such day of (i) the Prime Rate, or (ii) one-half of one percent above the
"Federal Funds Rate" for such day. For purposes of determining the Base Rate
for any day, changes in the Prime Rate shall be effective on the date of each
such change.
As used herein, "Prime Rate" refers to that interest rate denominated
by Wachovia Bank of Georgia, N.A., as its "Prime Rate" and set by Wachovia Bank
of Georgia, N.A., from time to time as an interest rate basis for borrowings,
changes in the Prime Rate to be effective on the date of each such change.
Wachovia Bank of Georgia, N.A., lends at rates above and below the Prime Rate,
which is but one of several interest rate bases used by Wachovia Bank of
Georgia, N.A. As used herein, "Federal Funds Rate" means, for any day, the
rate per annum (rounded, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if such rate is not
so published for any day, the Federal Funds Rate for such day shall be the
average rate charged to Wachovia Bank of Georgia, N.A., on such day on such
transactions determined by Wachovia Bank of Georgia, N.A.
Option D: 7-Day LIBOR Option (Working Capital Sub-Line and Swing
Sub-Line Only) . For the Working Capital Sub-
Line and Swing Sub-Line only, the Borrower may select a 7-day LIBOR
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Option, which is a rate per annum equal to the 7-day "Adjusted London Interbank
Offered Rate" plus 1.75%.
6. Non-Refundable Commitment Fee: A non-refundable commitment fee of
$375,000.00 shall be due and payable to the Agent, for the pro rata benefit of
the Banks, in full at the time of the Closing, but there shall be deducted
therefrom a credit of $62,500 representing a portion of the commitment fee paid
in connection with the Prior Commitment. In the event that the Closing does
not occur, no portion of the commitment fee shall be due and payable.
7. Unused Line Fee: Beginning on July 10, 1996, and on the 10th day of
each October, January, April and July thereafter, a fee of 1/16 of one percent
(.0625%) per quarter of the average unused portion of the Maximum Line Amount
for the preceding quarter shall be due and payable to the Agent, for the pro
rata benefit of the Banks. For example, if the Maximum Line Amount is
$125,000,000 but the Line Availability Amount is $100,000,000, and the average
used portion of the Maximum Line Amount is $50,000,000, the Unused Line Fee
shall be calculated on the Maximum Line Amount of $125,000,000, less the
average used portion of the Maximum Line Amount of $50,000,000, and would be
$75,000,000 x .0625% = $46,875.00. In the case of any period not constituting
a full fiscal quarter (specifically including both the initial and final fiscal
quarters within which the Line is available), the amount of the Unused Line Fee
shall be prorated and shall be payable only for the period in which the Line
was available.
8. Line Extension Fee: Upon the request by the Borrower that the Line be
further extended in accordance with the terms and conditions contained in
Paragraph I.4 entitled Term, within 10 days of the Banks' written approval of
such request, the Borrower shall pay to the Agent, for the pro rata benefit of
the Banks, a non-refundable Line extension fee of 1/10 of one percent (.100%)
of the Maximum Line Amount for the first extension and thereafter 1/8 of one
percent (.125%) of the Maximum Line Amount, irrespective of any limitations
concerning the Line Availability Amount then applicable. This extension fee
shall be due and payable with each annual extension requested by the Borrower
and approved by the Banks.
9. Loan Purpose: Proceeds of the Line shall be utilized in accordance
with the terms and conditions contained in Paragraph II.15.A (Line Use
Restrictions) and Paragraph I.3 (Sub-Line Restrictions) of this Commitment.
10. Security/Collateral:
A. Initial Hotels (the "Initial Hotels"): At the time of the
Closing, the Banks shall have received a first lien on twenty-six of the
twenty-eight hotels described in Exhibit A attached hereto and incorporated by
reference (the "Initial Hotels"). Two of the hotels identified in Exhibit A
have not yet been completed (and thus have not been acquired by the Borrower)
but are under contract
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Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 13
for such acquisition by the Borrower (the "Delayed Acquisition Hotels"). Those
hotels are, however, to be subject to such a first-priority lien in favor of
the Banks upon acquisition. These hotels are to be approved by the Banks as
Primary Hotels at the Closing, subject to such acquisition, along with the
other Initial Hotels. Until such acquisition and the satisfaction of all
requirements specified herein for Initial Hotels, (e.g., title policy, recorded
Deed of Trust) for a Delayed Acquisition Hotel(s), the Borrowing Base
Certificate shall exclude such Delayed Acquisition Hotel. It shall not
constitute an event of default under the Loan Agreement if one or more of the
Delayed Acquisition Hotels are not acquired.
With respect to all the Initial Hotels, the Banks shall be
entitled to require submission of whatever supplemental or new information or
data as they may deem appropriate, and shall have the right to review and
approve such additional information, as well as the information tendered in
connection with the previous closings, even though some of such items have been
previously approved by Wachovia in connection with such closings.
B. Subsequent Hotels: Subsequent to the Closing, Borrower may
utilize the Line proceeds to purchase in the name of the Borrower additional
hotel properties subject to those terms and conditions contained in Paragraph
II.15.A (Line Use Restrictions). All such hotels (with the exclusion of hotels
listed on Exhibit A that have become Primary Hotels), all hotels now or
hereafter acquired with equity proceeds or cash flow of the Borrower, all
existing hotels that are not Primary Hotels and any other hotel now or
hereafter acquired by the Borrower in its own name (specifically excluding any
hotel acquired by a partnership or joint venture in which the Borrower or any
subsidiary is a partner or joint venturer) are hereinafter referred to as
"Subsequent Hotels."
The Borrower shall be entitled to draw down on the Line at the
time of acquisition of the Subsequent Hotel, without contemporaneously granting
a first lien to the Banks on such Subsequent Hotel and without providing to the
Banks any information with respect to such Subsequent Hotels. If the Borrower
elects to submit such Subsequent Hotel for consideration as a Primary Hotel,
however, the Borrower shall provide to the Banks the information and
documentation (e.g., survey, title commitment, environmental report,
appraisals, etc.), in form and scope meeting the requirements for Initial
Hotels as herein specified, for each such Subsequent Hotel at the time of such
request by the Borrower.
If the Banks agree that such Subsequent Hotel is to be
considered a Primary Hotel, the Borrower shall cause a Deed of Trust (as
hereinafter defined) to be recorded with respect to such Subsequent Hotel and
shall thereafter promptly provide such other related documentation (for
example, the title policy) that can be obtained only after recordation of the
Deed of Trust.
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Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 14
The real property for Initial Hotels and all other Primary
Hotels (hereinafter defined) (the "Land") and the above-described buildings and
improvements for such Hotels (collectively the "Improvements") are hereinafter
referred to as the "Primary Hotel Properties." The Land and Improvements for
the Subsequent Hotels are hereinafter referred to as the "Subsequent Hotel
Properties." The Primary Hotel Properties are also sometimes hereinafter
collectively referred to as the "Properties." Such definition of "Properties"
does not include any Subsequent Hotel upon which the Banks do not receive a
lien.
C. Primary Hotels. The release provisions and the Banks' right
to review and approve certain matters provided herein differentiate between
those hotels that are "Primary Hotels" and other hotels. "Primary Hotels" are
(i) all Initial Hotels, and (ii) any Subsequent Hotel the Banks in their
discretion deem acceptable as a Primary Hotel. The Banks shall not consider
any hotel as a potential Primary Hotel unless the Banks can be given a
first-priority lien on such hotel, and the Banks shall have sole and absolute
discretion in determining whether to accept the offered hotel as a "Primary
Hotel." In that regard, the Banks can take into consideration their
determination of the appraised value of the hotel, its geographic location, the
Rents (as hereinafter defined) generated by such hotel, its cash flow, the
management company for such hotel, the management contract with the management
company for operation of the hotel, and any other factors the Banks deem
pertinent, in their sole discretion. Prior to determining whether to accept a
hotel as a Primary Hotel, the Banks (i) shall require all underwriting
documentation for each such hotel received in connection with an Initial Hotel
(appraisal, environmental, title policy, etc.), (ii) shall have the right to
review and approve the lessee, the Rent schedule, and lease associated with
such hotel, and (iii) shall have a right of review/approval over all other
matters for which it has review/approval for an Initial Hotel. The Borrower is
not obligated to offer any Subsequent Hotel tothe Banks for consideration as a
Primary Hotel. If the Borrower has requested that the Banks accept a
Subsequent Hotel as a Primary Hotel and has submitted all documentation
required hereby for such consideration, the Banks shall within 45 days of their
receipt of such request and information inform the Borrower whether they will
accept such hotel as a Primary Hotel. COVENANTS PROVIDED FOR HEREIN WITH
RESPECT TO THE INITIAL HOTELS SHALL BE AUTOMATICALLY APPLICABLE TO ANY
SUBSEQUENT HOTEL THAT BECOMES A PRIMARY HOTEL.
11. Repayment Terms: Interest only, at the interest rate[s] set forth
herein, as selected by the Borrower from time to time as hereinabove described
(subject to the Working Capital Sub-Line clean-up provision and other
provisions contained herein), shall be due and payable in arrears at the end
of each Interest Period with respect to principal outstanding for which
Interest Rate Option A, B or D is chosen. Interest shall be payable in arrears
on the first day of each month with respect to principal outstanding for which
Interest Rate Option C is chosen. All outstanding principal and accrued
interest shall be due and payable in full on June 1, 1998, subject to the
annual extension provision contained herein.
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Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 15
12. Prepayment Privilege: Borrower shall have the right to prepay the
principal and accrued interest in full or in part at anytime without a
prepayment premium. Notwithstanding any contrary provision contained herein,
at anytime any portion of the Line bears interest based on the London Interbank
Offered Rate, that portion of the Line may not be prepaid until maturity of the
then current Interest Period.
13. Line of Credit Administration: The Line will be administered by
Wachovia Bank of Georgia, N.A., as agent acting on behalf of the Banks (the
"Agent"). Each Bank shall retain the Note made payable to such Bank. The
Agent shall have possession of the other original loan documents and shall be
responsible for monthly billing of interest and fees and for certain additional
administrative functions. The Borrower shall submit disbursement requests to
the Agent not less than forty-eight hours prior to the requested disbursement
date (but at least two Eurodollar business days in the case of LIBOR-based
borrowings) specifying: (1) the amount requested; (2) whether or not any funds
will be used for purposes subject to the Sub-Lines described herein and any
other information required hereby to be provided in connection with such
Sub-Line or borrowing; and (3) any other information that the Banks or the
Agent may reasonably request.
II. REQUIRED LOAN DOCUMENTATION AND INFORMATION
Prior to the Closing and the disbursement of any funds thereunder, the
Banks shall require, in form and content satisfactory to the Banks and their
counsel, the following:
1. Note: The Line shall be evidenced by four promissory notes of the
Borrower (the "Notes"), in the amounts set out below for the Banks identified
below:
Wachovia $50,000,000.00
BB&T $35,000,000.00
SouthTrust $20,000,000.00
NationsBank $20,000,000.00
Each Note shall provide that after the Note becomes due, whether by
acceleration or otherwise, the Note shall bear interest at the rate per annum
equal to 150% of the Prime Rate, in lieu of interest at the LIBOR and/or Base
Rate- based interest rate[s] hereinabove provided.
2. Deed of Trust: The Notes shall be initially secured by first lien
deeds of trust (or mortgages or deeds to secure debt, as the case may be) on
the Initial Hotels (all of which are collectively referred to as the "Initial
Hotel Deed of Trust") and all appurtenances thereto. Immediately upon
acquisition of each Delayed Acquisition Hotel, such Delayed Acquisition Hotel
shall also be subject to all collateral documentation herein referenced
(including Deeds of Trust). When the Banks have
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Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 16
determined that all such documentation has been provided as to such Delayed
Acquisition Hotel, it shall confirm such fact to the Borrower. The description
of the Properties contained in or attached to the Initial Hotel Deed of Trust
shall conform to the description in the title policies referred to below. The
Initial Hotel Deed of Trust and any deed of trust, mortgage, or deed to secure
debt given with respect to any subsequent Primary Hotel (each being hereinafter
referred to as a "Subsequent Hotel Deed of Trust") (the Initial Hotel Deed of
Trust and each Subsequent Hotel Deed of Trust being collectively referred to
as a "Deed of Trust") shall contain a due-on-sale and due-on-encumbrance
clause, an indemnification against liability or loss resulting from hazardous
or toxic wastes, a waiver of any right of appraisement, dower, curtesy and
homestead rights, but shall not contain any limitation on the transfer of stock
of the Company or transfer of the general or limited partnership interest in the
Partnership. The Deed of Trust shall provide, however, that the Company shall
be the sole general partner of the Partnership.
3. Title Insurance: Standard ALTA mortgagee title insurance commitments
(to be issued to and reviewed and approved by the Banks prior to the Closing)
and policies in the amount of the Line issued by a company licensed to do
business in the states in which the Properties are located and acceptable to
the Banks, committing to insure and insuring, respectively, the Banks' first
lien position and all appurtenances thereto. The commitments shall commit to
insure and the policies shall affirmatively insure reasonable means of ingress
and egress to and from the Properties (which means of ingress and egress must
include, without limitation, ingress and egress to the Properties from the
addresses listed under Paragraph I.10 entitled Security/Collateral; and must
otherwise be satisfactory to the Banks). The policies shall contain no matters
objectionable to the Banks, including, without limitation, exceptions with
respect to mechanics' and materialmen's liens, prior years' taxes, matters of
survey, deed restrictions, prior encumbrances of any nature, restrictive
covenants, setback lines, etc. The Banks must be provided with copies of all
exceptions noted in the commitments and policies prior to the Closing. The
policies shall be issued at or after the Closing in accordance with the
commitments and shall contain a revolving credit endorsement in form and
substance satisfactory to the Banks.
4. Survey: Current plats of survey of the Land prepared, certified and
sealed by registered land surveyors, unless the Banks agree to accept a prior
as-built survey otherwise meeting the Banks' criteria. The surveys shall
show, among other things, all boundaries of the Land with a metes and bounds
description (courses and distances indicated), the course and distance to and
names of the nearest intersecting public streets or roads, the dimensions and
location of any and all setback lines, building lines and sidelines, all
existing buildings or improvements, and all streets, roads, rights-of-way,
easements, encroachments, or similar matters affecting the Properties. The
surveys shall include a certification as to the location of the Properties
within any special flood, mudslide or erosion hazard area ("flood hazard
area"). If the Land or any part thereof with respect to the Initial Hotels is
located within a flood hazard area, then, notwithstanding any contrary
provision of this Commitment, this Commitment may be terminated by the Banks at
their sole option.
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Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 17
5. Room Reserves: In accordance with the Leases (as defined in Paragraph
II.20 hereof) between the Borrower and Winston Hospitality, Inc. (the
"Lessee"), the Borrower is obligated to set aside 5% of the gross room revenues
(excluding other revenue) (7% in the case of a "full service hotel") as a room
reserve to be made available to the Lessee for Capital Expenditures (such room
reserves being herein referred to as the "Room Reserves"). The Borrower may or
may not choose to establish a separate account in which the Room Reserves shall
be held.
At least once each calendar year at the time the Line documents
require annual financial statements for the Borrower to be provided to the
Banks, the Borrower shall provide to the Banks a written accounting of all
sums required to be set aside or spent under the Leases and all sums required
to be paid to the Lessee under the Leases. Failure to spend or set aside such
sums or to pay such sums to the Lessee shall be a default under the Line
documents.
6. Hazard Insurance: Hazard insurance policies which must include fire,
vandalism and malicious mischief coverage, in amounts sufficient to avoid
co-insurance liability and equal to the total replacement value of the
Improvements with extended coverage endorsements covering all Improvements
located on the Land.
The Banks shall also require:
Rent loss or rental value insurance in amounts and with coverages (not
less than twelve months) satisfactory to the Banks and in compliance with the
Leases.
All such policies (1) must be issued by a company or companies
approved by the Banks and licensed to transact business in the states in which
such Properties are located; (2) must contain standard mortgagee clauses
designating the Agent, at an address to be specified by the Agent, as mortgagee
and as loss payee; and (3) must contain provisions providing for written notice
to the Banks at least 30 days prior to any cancellation, termination or
modification thereof or of any coverage therein.
7. Flood Insurance: A flood insurance policy for each of the Properties
located in a flood hazard area. The flood insurance policy shall be in an
amount satisfactory to the Banks and shall conform to the last paragraph of
Paragraph II.6 above. An independent flood insurance determination shall be
made by the Banks or their representatives or agents, the costs of which shall
be paid for by the Borrower. The cost of the independent flood insurance
determination is $17.00 per property, which amount is due and payable in full
by the Borrower upon acceptance of this Commitment. If after the Closing the
Properties are remapped and later determined to be located in a flood hazard
area, the Borrower shall be required to obtain and maintain a flood insurance
policy in accordance with the provisions of this paragraph.
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Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 18
8. Liability Insurance: Evidence of liability insurance in form and in
an amount satisfactory to the Banks and in compliance with the Leases issued by
a company or companies approved by the Banks. The Banks shall not be named on
the liability policies.
9. Appraisal: The Banks shall select an appraiser or appraisers to
prepare appraisals of the Initial Hotels. The cost of the appraisals shall be
paid by the Borrower, and the Borrower shall remit to the Banks the estimated
cost of the appraisals prior to the appraisals being ordered by the Banks. If
the actual cost of the appraisals is less than the amount remitted by the
Borrower, the difference shall be returned (without interest) to the Borrower
by the Banks. If the actual cost of the appraisals is greater than the amount
remitted by the Borrower, the Borrower shall pay such difference to the Banks
prior to the Closing. If the Borrower requests the Banks to consider a hotel
to be a Primary Hotel, the foregoing appraisal requirements shall be
applicable to such hotel.
Notwithstanding the foregoing, the Banks have agreed that no
additional appraisals for Initial Hotels 1 - 20 listed on Exhibit A shall be
required, unless the Banks determine that new appraisals are required by
applicable law.
10. Assignment of Leases, Rents and Profits: The Line shall be further
secured by an Assignment of Leases, Rents and Profits on the Properties.
11. Security Agreement and UCC Financing Statements: A Security Agreement
and Uniform Commercial Code Financing Statements, properly filed, providing the
Banks with a valid first lien on all furnishings, fixtures, equipment, and
other items and types of personal property now owned or hereafter acquired by
the Borrower and located upon the Properties and used or useable in the
construction, operation and maintenance of the Improvements.
12. Director's Resolution; Certificate of Incumbency; Good Standing
Certificate: (1) a Director's Resolution authorizing the Line or the guarantee
thereof, as the case may be, and the execution of the Line or guaranty
documents by the appropriate officers of the Company, (2) a certificate of
incumbency evidencing the appropriate officers of the Company and specimen
signatures of such officers, and (3) good standing certificates from the state
of its incorporation and from the states in which the Properties are located.
13. Partnership Agreement: A certified true copy of the Partnership
Agreement (with all amendments thereto) of the Partnership, and certified true
copies of its Certificate of Limited Partnership and its Agreement of Limited
Partnership (with all amendments thereto), together with evidence that (a) the
partners executing the loan documents or the guarantee thereof, as the case may
be, have appropriate authority to bind the Partnership and (b) the Partnership
is in good standing in the state wherein it was formed and in the states
wherein the Properties are located.
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Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 19
14. Disbursements: Individual draws made under the Line (with the
exception of the Swing Line described above, which is subject to other
limitations hereinabove specified) shall be limited to amounts of $1,000,000 or
more, and in increments of $100,000 for borrowings in excess of $1,000,000.
Disbursements shall be subject to a mutually acceptable draw request procedure.
For each draw, Borrower agrees to provide the Banks with satisfactory written
documentation supporting the purpose and amount being requested.
15. Revolving Loan Agreement: The Banks shall require a Revolving Loan
Agreement (the "Loan Agreement") whose terms and conditions must be fully
satisfactory to the Banks. The terms, conditions, covenants, warranties and
representations shall include but not be limited to the following:
A. Line Use Restrictions
(i) Line proceeds for the purchase of Subsequent Hotels
shall be limited to properties located in the following states: North
Carolina, South Carolina, Virginia, West Virginia, Maryland, Georgia,
Florida, Tennessee, Mississippi, Alabama, Ohio, Kentucky, Louisiana,
Texas and the District of Columbia. Notwithstanding the preceding
sentence, proceeds from the Line may be used to purchase Subsequent
Hotels located outside of these states without the Banks' prior
written approval so long as the cumulative amount outstanding under
the Line used to purchase, renovate or equip properties outside of the
states listed above does not exceed fifty percent (50%) of the Line
Availability Amount, as such Line Availability Amount shall be
determined from time to time. Should the Borrower desire to exceed
this amount, the Banks' prior written approval shall be required, and
such approval may be withheld by the Banks in their sole discretion.
(ii) Proceeds may not be used to fund debt service
(principal; interest; principal and interest) on any other debt other
than debt service due under this Line. The foregoing, however, shall
not preclude the Borrower from paying such debt service with funds
other than Line proceeds.
(iii) Other than those uses allowed under the Working
Capital Sub-Line, the Development Sub-Line, and the Swing Sub-Line,
proceeds may be used solely to purchase fee simple title to Subsequent
Hotels or leasehold interests in Subsequent Hotels (subject to the
limitations set out in the following sentence) in the name of the
Borrower along with furniture, fixtures and equipment ancillary to the
proper operation and management of such Subsequent Hotels.
Notwithstanding the foregoing, the Borrower may use Line proceeds to
acquire leasehold estates on which Subsequent Hotels are located,
provided: (x) the amount outstanding for such purposes does not at any
one time exceed $10,000,000, (y) the Banks have reviewed and approved
the ground leases for such hotel sites, and (z) the ground
20
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 20
lessor agrees in such ground lease to subordinate its fee simple
interest to the lien of any deed of trust subsequently encumbering the
leased property in favor of the Banks. Should the Borrower desire to
exceed this amount, the Banks' prior written approval shall be
required, and such approval may be withheld by the Banks in their
sole discretion.
(iv) Under the Working Capital Sub-Line, a maximum of the
Working Capital Line Limitation Amount may be outstanding at any one
time associated with the funding of working capital, Capital
Expenditures, dividends and/or swing line payouts, all as described in
the Paragraph I.3 entitled Working Capital Sub-Line.
(v) Proceeds may be used for Renovations, as defined
herein, associated with the refurbishment and/or renovation of a
Subsequent Hotel or a Primary Hotel subject to the limitations on the
use of the Working Capital Sub-Line for any Renovations.
(vi) The Borrower may not use Line proceeds for the
acquisition or renovation of a hotel if that hotel is to remain
subject to pre-existing secured indebtedness. Notwithstanding the
foregoing, the Borrower may utilize the Line for such purposes so long
as the aggregate amount outstanding under the Line used to purchase
such hotels and to effect Renovations of such hotels with pre-existing
secured indebtedness does not exceed $10,000,000.
(vii) Proceeds may not be used for the pre-development,
development or construction of hotel properties without the Banks'
prior written approval, except to the extent of the Development
Sub-Line.
B. Non-Financial Loan Covenants
(i) The Borrower must maintain its status as a Real Estate
Investment Trust (REIT) at all times.
(ii) The Borrower's Articles of Incorporation, Bylaws and
Charter Documents must be satisfactory to the Banks and shall not be
materially modified during the term or any approved extension. The
Borrower shall not change its fiscal year (and fiscal quarters)
without the prior written consent of the Banks.
(iii) The Borrower shall not make any significant or
material modifications or amendments to the Leases for the Primary
Hotels.
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Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 21
C. Financial Loan Covenants
(i) The Borrower may incur additional debt other than this
Line and may incur normal trade debt, in each case subject to the
limitations contained in subparagraph (iii) below and compliance with
the financial covenant ratios contained in subparagraphs (viii) and
(ix) below. Such additional debt, however, may not be secured by a
lien on the Primary Hotels. Unless the Banks consent in writing to
such additional debt being so secured (which consent may be granted or
withheld by the Banks, in their sole discretion), any additional debt
may not be secured by a lien on any of the Subsequent Hotels.
Each Subsequent Hotel shall be subject to a negative
pledge/non-encumbrance covenant precluding the Borrower from
encumbering each Subsequent Hotel at any time unless the Banks agree
in writing that such Subsequent Hotel shall not be subject to such a
restriction. The Banks may elect to withhold such agreement in their
sole discretion without specifying any reason for the withholding of
such consent. The Borrower may request the Banks to release any
Subsequent Hotel from this restriction, but the Banks shall be
entitled to grant or withhold its consent to such a release, in their
sole discretion. Violation of the negative pledge covenant shall be a
default under the Loan Agreement.
(ii) The Public Offering and a private placement with
Promus Hotels, Inc., both being presently undertaken by the Borrower,
must provide the Borrower with proceeds, net of closing and
transaction expenses, of at least $45,000,000.
(iii) Consolidated indebtedness of the Borrower, excluding
normal trade debt, shall not exceed 45% of the Borrower's aggregate
investment in hotel properties, at Borrower's cost, as defined in the
Company's existing charter documents.
(iv) The Banks must approve the Base Rent and Percentage
Rent Schedule (attached hereto as Exhibit C for the Initial Hotels)
under the Leases for the Primary Hotels. The Borrower shall not
adjust the Base Rent and Percentage Rent Schedule as to the Primary
Hotels without the Banks' prior written consent.
(v) During the term of the Line, Borrower agrees to
provide quarterly non-audited and annual audited financial statements
for the Borrower within 45 days of each quarter end and 90 days of
each fiscal year end, together with 10-K and 10-Q reports and any
other typical shareholder correspondence.
(vi) All net proceeds generated from any and all subsequent
stock issuances must be used to reduce and/or pay out the Line as the
proceeds will allow, except where the proceeds of such sale are used to
acquire additional properties or where common stock is
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Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 22
issued in exchange for total equity/ownership interest in a Subsequent
Hotel(s) or an entity owning a Subsequent Hotel(s).
(vii) Borrower shall make available to Lessee on
all of its Hotels, on an annual basis, Room Reserves of at least 5% of
gross room revenues (excluding other revenue) ("full service hotels,"
however, being subject to a 7% reserve) for each lease year.
(viii) Total Funded Debt (as hereinafter defined) of the
Borrower and its subsidiaries divided by "Cash Available for
Distribution" shall be no greater than 5.00 tested quarterly on a
rolling twelve calendar month basis. Cash Available for Distribution,
as used herein, has the same meaning as used in calculating the Cash
Flow Amount, but for purposes of such calculation shall include all
hotels now or hereafter owned by the Borrower from time to time
(Primary and Subsequent Hotels). For purposes hereof, "Total Funded
Debt," as used herein, means the sum of the following: (i) all
indebtedness and any other direct liability for third party debt
(including liability as a general partner for partnership debt) for
borrowed money, (ii) all capital leases, and (iii) all guarantees of
indebtedness of third parties, specifically including guarantees of
subsidiary indebtedness, but specifically excluding contingent
liability arising under franchise agreements. Total Funded Debt,
however, shall exclude normal trade debt.
(ix) Borrower shall maintain at all times a minimum
Tangible Net Worth of at least $70,000,000, which amount shall be
increased by not less than eighty-five percent of the net proceeds of
any future offerings of the Company's capital stock, including the
offering described in (ii) above. In the event that any subsequent
Public Offering is oversubscribed, this minimum Tangible Net Worth
requirement shall be increased by an amount equal to 85% of the net
proceeds of such oversubscription.
(x) The Loan Agreement shall also contain a provision in
form and substance satisfactory to the Banks precluding the Borrower
and any subsidiaries or related corporate or partnership entities from
incurring contingent liabilities other than contingent liability
associated with franchise agreements. The foregoing shall not
preclude the Borrower from incurring direct or contingent liabilities
in connection with any partnership or joint venture with Buckhead
Strategic Corp. II, a Delaware corporation, or its assigns, but such
direct or contingent liabilities of the Borrower and its subsidiaries
shall be included within the Total Funded Debt calculation in (viii)
above.
(xi) Such other covenants, warranties and representations
that are customary to transactions of this type as may be required by
the Banks prior to closing.
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Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 23
D. Agency Provisions in the Loan Agreement. The Loan Agreement will
contain customary provisions addressing, among other things, the following: (1)
the Agent's duties and responsibilities under the Loan Agreement; (2) the
Agent's reliance upon certifications, notices and other communications believed
by it to be genuine and correct; (3) disclaiming any responsibility or
liability for any punitive, exemplary or consequential damages; (4) confirming
that each Bank has independently and without reliance on the Agent, conducted
such Bank's own credit analysis of the transaction; and (5) the procedures
under which the Agent may resign.
The Loan Agreement will also contain standard provisions to indemnify
the Agent and the Banks against and compensate them for all losses,
liabilities, claims, damages or expenses relating to their loans, the
Borrower's use of loan proceeds, including excise and withholding taxes, or the
payment of any loan bearing interest based upon the "Adjusted London Interbank
Offered Rate" on any day other than the last day of the Interest Period
applicable thereto (except to the extent explicitly provided herein to the
contrary) or any failure to borrow a loan bearing interest based upon the
"Adjusted London Interbank Offered Rate" on the date of the borrowing specified
therefor, including without limitation, reasonable attorneys fees and
settlement costs and other reasonable and related expenses (except such as
result from the indemnities' gross negligence or willful misconduct).
Any agency provisions of the Loan Agreement shall be consistent with
the terms of this Commitment, but the Borrower acknowledges that the
consummation of and agreement among the Banks upon the agency provisions of the
Loan Agreement is a condition precedent to the consummation of the Line
described herein. The agency provisions of the Loan Agreement are for the
benefit of the Banks alone, and the Banks alone shall negotiate such agency
provisions (specifically including which required bank approvals require
unanimous consent and which bank approvals require only lesser percentage
approvals by the Banks). In lieu of including some or all of such agency
provisions within the Loan Agreement, the Banks may elect, in their sole
discretion, to have such agency provisions and intercreditor provisions in a
separate agreement to which the Borrower is not a party.
16. Legal Opinion: A legal opinion from an attorney acceptable to the
Banks to the effect that (a) the loan documents have been duly authorized,
executed and delivered, are valid and enforceable according to their terms
under all applicable laws and regulations and are not in violation of
applicable usury laws, (b) the Line and the execution of the several documents
required in connection therewith have been authorized by all necessary
corporate and partnership action, and the person or persons executing said
documents on behalf of such entities are authorized to do so, (c) the financing
statements together with the Deeds of Trust and/or Security Agreements
constitute a valid and prior first lien on the personal property therein
described, (d) if the Borrower or any general partner of the Borrower is a
corporation, such corporation is a corporation duly formed, validly existing
and in good standing under the laws of the state of its formation and, in the
case of the Borrower and any general partner of the Borrower, if not formed
under the laws of the states in which the Properties are located, is qualified
to transact business and is in good standing in such states, (e) if the
Borrower, any general partner of the Borrower or any guarantor is a
partnership, such partnership is a partnership duly formed, validly existing
and in good standing under the laws of the state of its formation and, in the
case of
24
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 24
the Borrower and any general partner of the Borrower, if not formed under the
laws of the states in which the Properties are located, has taken all steps
necessary to qualify in and is in good standing in such states, and (f) to the
knowledge of such counsel, no litigation is pending or threatened which, if
adversely determined, would have a material adverse effect on the Borrower.
The Banks may also require a satisfactory legal opinion to the effect that each
Bank, by virtue of encumbering the Initial Hotel Property or the Subsequent
Hotel Property, as the case may be, is not required in order to avail itself of
the remedies in the loan documents or otherwise to qualify to transact business
initially in the state in which the Property is located (if such Bank is not
conducting business in such state). The Banks also reserve the right to
require such other opinion(s) as the Banks or their counsel may reasonably
request.
17. Zoning: Written evidence that the Properties and their intended uses
are in compliance with all applicable zoning ordinances and land use laws and
regulations without regard to any conditional or non-conforming use permit.
Such evidence may consist of a certification from the appropriate governmental
authority(ies), a legal opinion from an attorney satisfactory to the Banks, or
a zoning endorsement to the title insurance policies referred to in Paragraph
II.3 above.
18. Environmental Protection: Evidence that the Properties comply with
all applicable laws and regulations pertaining to the protection and
preservation of the environment and that none of the Improvements contain
asbestos containing material or any other material subject to regulation by
local, state or federal environmental authorities. In the case of Holiday
Select (Dallas, Texas) and Comfort Inn (Greenville, South Carolina), both of
which are known to have improvements containing asbestos, the Borrower shall
develop and implement an operations and maintenance plan acceptable to the
Banks for observing and maintaining the Improvements in such a manner so as to
reduce risks resulting from such asbestos and shall provide information from
time to time as requested by the Banks regarding compliance (including, if
requested by the Banks, testing and further analysis of compliance). Such
evidence shall include (without limitation) an inspection report by an
environmental engineer satisfactory to the Banks, who shall conduct soil and
chemical testing, addressing the probability of toxic or hazardous wastes on,
at or adjacent to the Land (in soil or water), taking into consideration the
history of the Land, including an identification of all owners for at least the
most recent forty (40) years, and its uses, adjacent land uses and the result
of a site inspection by such engineer, and certifying that there are no
hazardous or toxic wastes on or at the Land. In addition, if fill dirt is at
any time to be brought to the Land from another tract of land, the Banks shall
require similar evidence regarding such other tract prior to such fill dirt
being placed on the Land. If any such evidence discloses the existence or
probable existence of any toxic or
25
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 25
hazardous wastes of any quantity on or at the Land, the Banks reserve the
right, in their sole discretion, to void this commitment.
19. Financial Statements: The Closing is subject to receipt by the Banks
of current satisfactory financial statements on the Borrower. The Line
documents shall provide that financial statements on the Borrower be submitted
to the Banks during the life of the Line as follows:
In the case of a corporation or partnership, annual financial
statements within 90 days after each fiscal year-end of such corporation and
partnership and quarterly financial statements within 45 days after the end of
each fiscal quarter of such corporation and partnership.
In addition, the Line documents shall require submission of financial
statements on the Lessee, as provided in Paragraph II.20 below.
20. Tenant Leases: As used herein, the term "Lease" refers to any lease
of the real property and improvements thereon, whether of a Primary Hotel or a
Subsequent Hotel. All Leases affecting the Primary Hotels between the Borrower
and the Lessee must be satisfactory to the Banks in all respects. No Lease on
a Primary Hotel may be assigned or sublet by the Lessee without the Banks'
prior written approval. The Borrower agrees to submit true copies of all
Leases and modifications and extensions of such Leases affecting the Primary
Hotels and Subsequent Hotels. The Banks reserve the right to determine whether
the Lease for a Primary Hotel is subordinate to the lien of the Deed of Trust.
Any subordination agreement shall entitle the Banks to terminate such Lease
upon the occurrence of an event of default under the Line documents.
The Borrower also agrees to deliver to the Banks annual and quarterly
financial statements on the Lessee within 90 days after Lessee's fiscal
year-end or within 45 days after the Lessee's fiscal quarter, as the case may
be. Lessee must acknowledge that if there are any discrepancies between the
terms of the Line documents and the Leases, the terms of the Line documents
shall govern such discrepancy during the term of the Line.
21. Hotel/Motel Management: The Banks have approved Winston Hospitality,
Inc., as the lessee of the Initial Hotels (the "Lessee"). The Banks have also
approved the following entities as the franchisors of the Initial Hotels:
Promus Hotels, Inc., Holiday Inns Franchising, Inc., Marriott International,
Inc., and Choice International Hotels, Inc. Robert W. Winston, III and/or
John B. Harris, Jr. shall at all times maintain a majority ownership interest
and voting control of the Lessee unless the Banks consent in advance and in
writing to such a change in ownership interest and voting control of the Lessee
(such consent to be within the sole discretion of the Banks). The agreements
pursuant to which the Lessee operates the Primary Hotels as a franchise (the
"Franchise Agreements") must be satisfactory to the Banks and shall be
collaterally assigned to the Banks, if the Franchise Agreement does not
prohibit such collateral assignment. If the Franchise Agreement
26
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 26
prohibits such assignment, the Borrower shall provide to the Banks a "comfort
letter" executed by such franchisor and providing (a) permission for the Banks
to preserve the franchise following default by the Borrower in the Line
documents and (b) the agreement by the franchisor to give the Banks notice of
any default under the agreements between the franchisor and the Lessee and a
reasonable opportunity to cure such default. The provisions of the "comfort
letter" must be satisfactory to the Banks, which shall not unreasonably
withhold its approval of such comfort letter. The Line documents shall provide
that a "default" (default, as used in this sentence, being one either (i)
declared by the franchisor under the franchise agreement, or (ii) resulting in
the exercise of remedies by the franchisor upon the occurrence of a default by
the Lessee under such franchise agreement) by the Lessee in any of the
Franchise Agreements which, in the judgment of the Banks might adversely affect
the operation of the Primary Hotels, shall constitute a default in the Line.
Such franchisor of the Primary Hotels may not be replaced by the Lessee without
the Banks' prior written consent.
The Banks have approved Interstate Management & Investment Corporation
("Interstate Management"), Promus Hotels, Inc. ("Promus"), Winston Hospitality,
Inc., and Impac Hotel Group, Inc. (as the management company for Holiday Inn -
Select in Dallas, Texas, but only for a one-year period following Closing) as
the management companies for the Initial Hotels. Any management agreement
entered into for the management of any Subsequent Hotel, however, is subject to
the prior review and approval of the Banks. Such management agreements for
Primary Hotels other than those managed by Promus shall be subordinate to the
Deeds of Trust in favor of the Banks. Such subordination with respect to
Primary Hotels other than those managed by Promus or Interstate Management
shall entitle the Banks to terminate the management agreement upon the
occurrence of an event of default under the Line documents. In the case of
Promus and Interstate Management, the management agreement shall provide that
the management agreement is terminable by the Lessee (or its assigns) upon
foreclosure, deed in lieu of foreclosure, or the taking of possession of the
hotel in connection with remedial measures undertaken by the Banks. Any rights
of the Lessee under the management agreement shall be collaterally assigned to
the Banks. The Banks have reviewed and approved the form of the Promus
management agreement.
22. Licenses and Permits: To the extent obtainable on or prior to the
Line closing, the Banks shall be furnished copies of all licenses, permits and
approvals from any governmental authorities having jurisdiction over the
construction and/or operation of the Initial Hotels.
23. Itemized List of Chattels: If requested by the Banks, the Borrower
shall furnish the Banks a detailed list of chattels utilized for the operation
and or maintenance of the Initial Hotels. The Borrower shall execute and
deliver Security Agreements and UCC Financing Statements reflecting the Banks'
security interest therein.
27
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 27
24. Release Provisions: If the Borrower seeks to obtain the release of a
Primary Hotel, the Borrower shall provide to the Banks a replacement Borrowing
Base Certificate reflecting the deletion of such hotel from the calculations of
the Loan to Value Amount and the Cash Flow Amount, as previously described in
Paragraph I.2.B.(3)(e). The Banks shall not release such hotel until they have
reviewed and approved such Borrowing Base Certificate. The Borrower may obtain
a release of any Primary Hotel or Primary Hotels, provided (x) such Primary
Hotel is being sold by the Borrower to a third party that is unrelated to the
Borrower, (y) provided there is no existing default in the Line documents, and
also (z) provided one of the following conditions is satisfied:
(i) Substitute Hotel. The Borrower may offer to substitute
another hotel or hotels to serve as a "Primary Hotel" (a
"Substitute Hotel"), in which case the replacement Borrowing
Base Certificate shall reflect the inclusion of such hotel in
the calculations of the Line Availability Amount, and the
Borrower shall provide the documentation necessary for the
Banks to consider such hotel as a Primary Hotel.
(ii) Alternative Collateral. The Borrower may offer alternative
collateral for release of a Primary Hotel. The Banks shall
have full discretion over whether such alternative collateral
is satisfactory.
(iii) Line Availability Amount Reduction. The Borrower shall be
entitled to a release of any Primary Hotel upon a reduction in
the Line Availability Amount as reflected in the revised
Borrowing Base Certificate submitted by the Borrower following
confirmation by the Banks of the new Line Availability Amount.
Should the Line amount then outstanding exceed the Line
Availability Amount as evidenced by the approved replacement
Borrowing Base Certificate, the Borrower shall also reduce the
outstanding principal balance by such excess on or before the
release of such Hotel. The reduction in the Line Availability
Amount shall be effective upon the release of such hotel.
25. Allocation of Principal Payments: At the time of any paydown
of outstanding principal under the Line (a "Principal Paydown"), the
Borrower shall provide to the Banks an allocation of such Principal
Paydown among the various categories or sub-lines for which principal
amounts are outstanding. Such allocation shall be pursuant to a
standard form approved by the Banks and outlining amounts previously
outstanding, amounts applied, and reduced amounts following such
paydown. The Banks shall be entitled to review and confirm such
allocation, and in the event of a dispute as to such amounts and such
calculation, the Banks' determination shall be conclusive.
Such allocation of Principal Paydowns shall be subject to the
following conditions:
28
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 28
1. Certain categories and sublimits are not mutually exclusive.
For example, a Development Hotel located in Montana is to be
included in both the Development Sub-Line calculation
[Paragraph I.3.B.] and the Geographical Proximity Limitation
[Paragraph II.15A(i)]. To the extent that a draw has been so
"double counted" under such sub-lines or categories, a
Principal Paydown with respect to such a draw shall be
likewise "double counted."
2. Any Principal Paydown allocation made by the Borrower as to
hotels shall be made on a hotel-by-hotel basis, and, to the
extent possible, the Borrower shall be required to allocate a
Principal Paydown to all draws for one hotel before making an
allocation for draws for another hotel. The Borrower cannot
allow more than one hotel to have partial outstanding draws
allocated to it. The Borrower may elect to allocate all or
any portion of a Principal Paydown to the Working Capital
Sub-Line or the Swing Sub- Line, and is not required to repay
such a sub-line in its entirety with a Principal Paydown prior
to allocating the balance of a Principal Paydown to a hotel.
Where, for example, $10 million has been drawn down and is still
outstanding with respect to the Montana Development Hotel mentioned above, but
only $5 million of the Development Sub-Line is then allocated to such hotel
(pursuant to a reduction in the Development Sub-Line for such hotel based on
Net Operating Income of such hotel), if the Borrower elects to allocate a
portion of a $11 million Principal Paydown to such hotel, the Borrower could
(i) allocate $10 million of the Principal Paydown to such hotel and allocate
the residue to another hotel or purpose (e.g., Swing- Line or Working Capital
Sub-Line) or (ii) allocate the bulk of such Principal Paydown to another
purpose (e.g., Swing- Line or Working Capital Sub-Line) and apply the residue
to the Montana hotel, provided no other hotel had drawings partially repaid.
26. Additional Items: Such other matters and items as the Banks or their
counsel may reasonably request.
III. OTHER CONDITIONS
1. Costs: The Line herein referenced shall be closed without
cost to the Banks, and all expenses incurred in connection
with the origination of the Line (including, without
limitation, the Banks' counsel's fees) are to be paid by the
Borrower. Such expenses shall be paid by the Borrower whether
or not the Line closes.
2. Modification and Refinance Fees: Any modification or
refinance of the Line may be conditioned by the Banks on the
payment by the Borrower of a nonrefundable fee, which shall be
in addition to any other fee paid by the Borrower to the Banks
in
29
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 29
connection with the Line. Nothing in this paragraph shall
obligate the Banks to modify or refinance the Line, and the
Banks reserve the right to require the Line to be repaid
strictly in accordance with the terms and conditions contained
in the Notes.
3. Subordination Agreement: The Banks, at their option, may
require the Lessee (or any subsequent lessee) of the
Properties pursuant to leases hereafter executed to enter into
and execute, along with the Banks, a Subordination Agreement
satisfactory to the Banks.
4. Participation: The Banks shall have the right, at their sole
discretion, at any time or from time to time, to invite
participants to participate in the Line and the Borrower
agrees to execute any documents reasonably requested by the
Banks in connection with any such participation. The Banks
may disclose to any participants or prospective participants
any information or other data or material in the Banks'
possession relating to the Borrower, the Line, the Properties
or the Improvements without the further consent of, or notice
to, the Borrower.
5. Form of Tenant Lease. The standard form of lease to be used
by the Borrower for Subsequent Hotels shall be submitted to
the Banks for approval prior to closing. Each Lease of the
Primary Hotels is subject to the Banks' prior review and
approval.
6. Cross Default. Any default by the Borrower in any note, deed
of trust or other document evidencing, documenting or securing
a loan from any of the Banks to the Borrower shall, at the
option of the Banks, constitute a default by the Borrower in
any other note, deed of trust or document (including, without
limitation, the Notes and Deed of Trust) evidencing,
documenting or securing the Line.
7. ADA Certification: A certification or other evidence
satisfactory to the Banks shall be submitted to the
Banks that shows the Properties comply with the
Americans with Disabilities Act of 1990.
9. General Conditions:
a. The Borrower understands and agrees that this
Commitment is issued directly to the Borrower and cannot be assigned
without the prior written consent of the Banks. The Commitment is for
the sole and exclusive benefit of the Borrower, and no third party is
intended to be benefited in any respect hereby. If, prior to the
origination of the Line, there is any material adverse change in the
condition (financial, business or otherwise) of the Borrower or if,
prior to closing, Winston Hotels, Inc. ceases to be the sole general
partner of the Partnership, the Banks shall have the right to
terminate their obligations hereunder.
30
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 30
b. If the Borrower (and if either is a partnership, any
partner thereof) at or before the closing of the Line should file a
petition in bankruptcy under any of the provisions of the bankruptcy
laws, or if a petition in bankruptcy should be filed against any one
of them, or if any of them should make an assignment for the benefit
of creditors, or otherwise become insolvent, or if any of them should
become deceased or become mentally incapacitated, this Commitment may
be cancelled at the option of the Banks.
c. The Borrower by accepting this Commitment represents
and warrants to the Banks that except as disclosed to the Banks in
writing on or prior to the date hereof, there are no actions, claims,
suits or proceedings pending, or to the Borrower's knowledge,
threatened or reasonably anticipated against or affecting the Borrower
at law or in equity or before or by any governmental authority and
there is no possibility of any judgment, liability or award which may
reasonably be expected to result in any material and adverse change in
the Borrower's condition (financial, business or otherwise).
d. All the provisions incorporated in this Commitment
shall survive the loan closing and each Deed of Trust shall contain
the following provision:
"All the terms and conditions of the commitment upon
which the loan hereby secured was predicated are
incorporated herein by this reference and made a part
hereof and should Grantor default with respect to any
term or provision thereof, such default shall
constitute a default hereunder and under the Note
hereby secured. To the extent that any provision in
the Loan Agreement conflicts with any provision
of the commitment, the terms of the Loan Agreement
shall prevail. To the extent, however, that any
provision in any of the other Line documents conflicts
with any provision of the commitment, the terms of the
commitment shall prevail."
e. The Borrower understands that the Banks are relying
upon the statements and representations made to the Banks and upon
such additional data as may be supplied to the Banks for the purpose
of evaluating the line request. If any of such information is found
to be inaccurate or to have been misrepresented in any material
respect, this Commitment may be cancelled at the option of the Banks.
f. The Borrower certifies that all information provided
to the Banks by the Borrower is true and complete in all respects to
the best of the Borrower's knowledge and that the same was given to
induce the Banks to make a line of credit available as herein
requested.
31
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 31
g. If this commitment is being signed by less than all
parties (i.e. Borrower, partners of the Borrower), the undersigned
hereby certifies and warrants to the Banks that the undersigned has
been duly authorized to execute and deliver this Commitment for and on
behalf of, and as agent for, any such party whose signature does not
appear below.
h. If this Commitment is acceptable, please so indicate
by signing in the space provided on the enclosed copy of this letter
and return same to us not later than May 10, 1996. If not so
accepted, or if the modification to the Line pursuant to this
Commitment is not closed by July 31, 1996, the Banks may on the
occurrence of either event void this Commitment at their sole option.
Very truly yours,
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By: ________________________________
Jeffrey P. Castleberry
Senior Vice President
32
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 32
BRANCH BANKING & TRUST COMPANY
By: ________________________________
Richard E. Fowler
Senior Vice President
SOUTHTRUST BANK OF ALABAMA
By: ________________________________
John D. Pierce
Group Vice President
NATIONSBANK, N.A.
By: ________________________________
Jack M. Wiser
Vice President
33
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 33
ACCEPTED THIS THE _____ DAY OF APRIL, 1996.
WINN LIMITED PARTNERSHIP,
a North Carolina limited partnership (SEAL)
By: WINSTON
HOTELS, INC.
its General Partner
Attest:
By:
- - ------------------------- ---------------------------
Secretary President
- - ------
[CORPORATE SEAL]
WINSTON HOTELS, INC.
Attest:
By:
- - -------------------------------- --------------------------
Secretary President
- - --------------
[CORPORATE SEAL]
34
EXHIBIT A
Address City County State Rooms/Suites Franchise Owner
------- ---- ------ ----- ------------ --------- -----
1. 201 Asheville Ave. Cary Wake NC 130 Hampton Inn Company
2. 1816 Hillandale Rd. Durham Durham NC 136 Hampton Inn Partnership
3. 1675 US Hwy-1 So. Pines Moore NC 126 Hampton Inn Partnership
4. 474 Western Blvd. Jacksonville Onslow NC 120 Hampton Inn Partnership
5. Hwy. 105-208 Linville Rd. Boone Watauga NC 95 Hampton Inn Partnership
6. 8419 US Hwy-29 North Charlotte Mecklenburg NC 125 Hampton Inn Partnership
7. 5107 Market Street Wilmington New Hanover NC 118 Hampton Inn Partnership
8. 151 South College Rd. Wilmington New Hanover NC 146 Comfort Inn Partnership
9. 1533 Southlake Parkway Atlanta Clayton GA 124 Hampton Inn Partnership
10. 112 Tourist Drive Brunswick Glynn GA 127 Hampton Inn Partnership
11. One Airport Road Hilton Head Beaufort SC 125 Hampton Inn Partnership
12. 12610 Chestnut Hill Rd Chester Chesterfield VA 66 Hampton Inn Partnership
13. 2100 West Hundred St Chester Chesterfield VA 123 Comfort Inn Partnership (1)
14. 1922 Skibbo Road Fayetteville Cumberland NC 176 Comfort Inn Partnership
15. 3508 Mount Moriah Rd Durham/Chapel Hill Durham NC 138 Comfort Inn Partnership (2)
16. US Hwy. 1 North Raleigh Wake NC 149 Comfort Inn Partnership
17. 6209 Glenwood Avenue Raleigh Wake NC 141 Hampton Inn Partnership
18. 144 Bee Street Charleston Charleston SC 128 Comfort Inn Partnership
19. 5225 North Atco Lane Charleston Charleston SC 168 Quality Suites Partnership
20. 629 Frontage Rd Augusta Richmond GA 123 Comfort Inn Partnership
21. 11350 LBJ Freeway Garland Dallas TX 244 Holiday Inn Select Partnership
22. 940 East Main Street Abingdon Washington VA 80 Holiday Inn Express Partnership
23. 4154 Preferred Place Duncansville Dallas TX 119 Hampton Inn Partnership
24. 769 Hammond Drive Atlanta Fulton GA 133 Hampton Inn Partnership
25. NE Corner of Pineland Drive Duluth Gwinnett GA 134 Hampton Inn & Suites Partnership
and Crestwood Parkway
26. 151 Van Campen Drive Wilmington New Hanover NC 128 Marriott Courtyard Partnership
27. 100 MacAlyson Court Cary Wake NC 140 Homewood Suites Partnership
28. 401 Bay Area Boulevard Clear Lake Collin TX 92 Homewood Suites Partnership
3554
(1) Includes adjacent restaurant building.
(2) This hotel located at 3508 Mount Moriah Road in Durham has
approximately 3.941 acres of excess land believed to be
unnecessary for the operation of the hotel. Subject to the
satisfaction of the Banks' requirements for release of
property, the Banks agree to release such land without payment
of a release fee (other than for an administrative fee not
exceeding $2,000 and reimbursement of the Banks' actual
out-of-pocket expenses).
Hotels 25 (Duluth) and 26 (Wilmington) are the Two Delayed Acquisition
Hotels.
35
Winston Hotels, Inc.
WINN Limited Partnership
April 24, 1996
Page 35
EXHIBIT B
1ST QUARTER
Calculation and Amount of Deduction
Development Hotel #1 $250,000 NOI / .13 = $1,923,000.00
Construction Hotel #1 $100,000 NOI / .13 = $ 769,000.00
Development Hotel #2 $200,000 NOI / .13 = $1,538,000.00
2D QUARTER (INCLUDES 1ST QUARTER)
Calculation
-----------
Development Hotel #1 $200,000 / .13 = $1,538,000.00
Construction Hotel #1 $250,000 / .13 = $1,923,000.00
Development Hotel #2 $500,000 / .13 = $3,846,000.00
Deductions in Second Quarter
----------------------------
Development Hotel #1 $1,538,000 - 1,923,000 = $ -0-
Construction Hotel #1 $1,923,000 - 769,000 = $1,154,000.00
Development Hotel #2 $3,846,000 - 1,538,000 = $2,308,000.00
-------------
36
EXHIBIT C
The following table sets forth certain unaudited information with respect
to the Hotels and the applicable Percentage Leases (dollar amounts are in
thousands):
YEAR ENDED
DECEMBER 31, 1995
---------------------------------------
ANNUAL PERCENTAGE PRO FORMA
RENT FORMULA(1) -----------------------------------
--------------------------- (IN THOUSANDS)
NUMBER REVENUE LESSEE
OF BASE BREAK FIRST SECOND ROOM LEASE NET INCOME/
ROOMS RENT POINT TIER TIER REVENUE PAYMENTS(2) LOSS(3)
------ ------- ------- ----- ------ ------- ----------- -----------
CURRENT HOTELS(4)
Hampton Inn:
Durham, NC........................... 136 $ 428 $1,628 33.6 % 65.0% $2,594 $ 1,175 $ 236
Raleigh, NC.......................... 141 472 1,900 40.0 65.0 2,287 1,011 82
Charlotte, NC........................ 125 324 1,323 31.8 65.0 2,286 1,047 246
Atlanta, GA.......................... 124 404 1,450 31.0 66.0 2,205 948 228
Cary, NC............................. 130 400 1,374 30.6 69.0 2,175 973 249
Wilmington, NC....................... 118 497 1,496 34.1 64.0 2,126 912 244
Brunswick, GA........................ 127 358 1,348 28.7 66.0 2,033 839 152
Southern Pines, NC................... 126 360 1,476 34.2 66.0 1,955 820 195
Jacksonville, NC..................... 120 367 1,425 33.6 69.0 1,831 759 198
Hilton Head, SC...................... 125 298 1,375 26.0 66.0 1,737 596 80
Boone, NC............................ 95 249 1,150 29.0 66.0 1,557 602 108
Chester (Richmond), VA............... 66 189 950 37.5 64.0 1,259 554 84
Comfort Inn:
Durham/Chapel Hill, NC............... 138 579 1,975 42.5 67.0 2,518 1,203 152
Fayetteville, NC..................... 176 623 1,975 43.0 69.0 2,432 1,164 138
Wilmington, NC....................... 146 493 1,578 33.1 66.0 2,322 1,013 152
Chester (Richmond), VA............... 123 497 1,775 43.0 62.0 2,210 1,059 98
Charleston, SC....................... 128 441 1,825 41.8 66.0 2,190 1,003 85
Raleigh, NC.......................... 149 322 1,527 34.0 62.0(5) 1,908 755 195
Augusta, GA.......................... 123 294 1,100 27.0 66.0 1,418 507 65
Clearwater/St. Petersburg, FL........ 120 277 1,275 28.5 65.0 1,382 433 34
Quality Suites:
Charleston, SC....................... 168 864 2,900 39.3 68.0 3,706 1,687 195
----- ------- ------ ------- -------
Subtotal for Current Hotels.......... 2,704 8,736 44,131 19,060 3,216
----- ------- ------ ------- -------
ACQUISITION HOTELS
Hampton Inn:
Perimeter (Atlanta), GA.............. 131 $ 574 1,700 42.0 % 70.0 -- 574(6) (574)(7)
Duncanville, TX...................... 119 221 1,250 33.0 70.0 1,370 497 (26)
Comfort Inn:
Greenville, SC....................... 191 309 1,600 (8) 25.0 66.0 1,989 656 165
Homewood Suites:
Cary, NC............................. 140 1,015 1,500 (9) 53.0 75.0 3,164 2,043(6) 117
Clear Lake (Houston), TX............. 92 472 1,677 35.0 70.0 320 472 (377)(7)
Hampton Inn & Suites:
Duluth (Atlanta), GA................. 136 581 1,825 42.3 70.0 -- 581(6) (581)(7)
Comfort Suites:
London, KY........................... 62 165 775 37.5 70.0 1,050 483 80
Holiday Inn Select:
Garland (Dallas), TX................. 244 1,036 3,600 40.0 67.0 6,352 (11) 2,084(12) (146)
Holiday Inn Express:
Abingdon, VA......................... 80 187 900 37.5 70.0 1,181 535 131
Courtyard by Marriott:
Wilmington, NC....................... 128 525 1,325 42.3 70.0 -- 525(6) (525)(7)
----- ------- ------ ------ -------
Subtotal for Acquisition Hotels....... 1,323 5,085 15,426 8,450 (1,736)
Lessee interest income not allocated
to the Hotels above.................. 85
Lessee general and administrative
expenses not allocated to the Hotels
above................................ (1,776)
----- ------- ------- ------- -------
Consolidated total for Hotels......... 4,027 $13,901 $59,674 $27,510 $ (211)
===== ======= ======== ======= =======
(1) All Percentage Rent formulas included in the Percentage Leases are based on
room revenue from the related Hotels. See "Business and Properties -- The
Percentage Leases" and "Risk Factors -- Risk that Pending Acquisitions Will
Not Close".
(2) Represents lease payments from the Lessee to the Partnership or the
Company, as applicable, calculated on a pro forma basis by applying the
rent provisions in the Percentage Leases, and for the Acquisition Hotels
the rent provisions in the proposed Percentage Leases, to the historical
room revenue of the Hotels for the year ended December 31, 1995. Under the
terms of the related